Water Heater Energy Efficiency

You may ignore the importance of your water heater until it is dysfunctional or no longer there! Just imagine turning on your shower in a cold winter morning only to find freezing water. Many of us consider our water heater as every other home appliances as it is something we use daily and we often take it for granted.
But once you are with a broken water heater, you should realize its importance to for your daly home comfort and will want it back on service as soon as possible.
If your water heater is over a decade old, the best thing to do will be to replace it. Then starts the search for a professional local water heater company, who know the perfect replacement, considering its fuel type, size and efficiency. And who will also put cost into consideration so you don’t not go above budget.

To understand energy efficiency and water heaters, here are some essential points.

Gas Water Heater Vs Electric Water Heater

Before replacing your water heater, the basic consideration should be the current fuel source of the unit. Natural gas, propane and electricity (listed in order of cost) are the three sources of heating your home. Gas is considered the most affordable source of heat, basically because of the design of a gas water heater and the laws of thermodynamics. Despite being the most affordable, it is not the most efficient, put these facts into consideration.

  • Statistically, it will cost about $500 annually to heat your water with electricity.
  • But using gas water will cost you an average of $250 annually.

This means gas has more advantages, from a saving energy cost prospective. The point here is that if you’re looking to enjoy the comfort of hot water on demand at low energy cot, you should probably convert to using gas water heater.

If you already have a gas water heater that’s great. To keep it simple you have to consider the following factors

1. Standard Gas Tank:

Newer models of water heaters have an efficiency factor (EF) of about .58-.60. This implies about 58-60% of energy consumed is directly converted into heat. This is only a rough estimate as some models are far better insulated and rates as high as .62, this will contribute to about $7 to $8 in cost saving annually.

2. Energy Star Gas Tank

Energy star certified water heaters is considered one of the best with a minimum EF of .67 and as much as.70. Energy star water heaters are well insulated and also comes with an igniter for its pilot light as well as a full damper control. All this features will help you save the cost of gas and helping you save as much as $25-$30 annually. Its efficiency is higher with about 7-10%. If you have the privilege of getting this water heater for a discounted price, don’t let the opportunity pass by. And if not for a discounted price, it is still a great idea to get the heater. It will pay off in long term. The government will regulate all water heater to have a minimum of .67 EF starting from 2015. Don’t be left behind.

3. Tankless

It could be regarded to as “tankless”, “on-demand” or “waterless”. This kind of water heater can be referred to as the next generation water heater. It is a spectacular gas water heater. Already in use across Europe and Japan, but there have just recently been in the US. Most Americans are not very familiar with the tankless water heaters and may not know their advantages. Some of the benefits you will enjoy while using a tankless water heater are;

  • It is energy efficient
  • It saves space
  • It has a longer lifespan about two times longer than tank water heater.

If you want to have numerous access to hot water at the same time, then the tankless water heater is ideal, you can have your showers and laundry running simultaneously. The only downside is it would be expensive.

If you still want to continue using your water heater the way it is, then you should consider the following:

Non-Condensing tankless:

These are the first generation. These unit utilize heat exchanger to heat your water as you wish it can reach an EF of .82-.85. This means you will be saving as much as $75-$80 every year. Some of the downsides of using this generation of water heater are; it has a very hot exhaust meaning that you have to use the very expensive stainless steel venting, and it may under perform when you are using a lot of water in short draws, like when you want to wash your hands.

Condensing tankless:

This is the second generation tankless water heater. This is more improved as it uses a second heat exchanger to help take the heat from your exhaust in turn it helps heat the water resulting in an EF of about .92-.94. This helps to save about $90-$100 every year. The benefit of having this cooler exhaust is that it can be vented in PVC which is not too expensive. While its disadvantage is the unit cost is higher and efficiency is lower from short draws.

Condensing hybrid tankless:

This is the third generation tankless water heater. Although this generation of water heater is not completely tankless because it has although just 2 gallon holding tank in the unit. And since it has a 2 gallon reservoir of hot water, it is more efficient than previous generations. It also means these units can reach an EF of .92-.96. With this water heater, you will be saving up to $120 from gas every year. This is the best among tankless water heater.

Before you switch to a tankless water heater, the only obstacle you will face is the retrofit cost from gas line change to venting change. But after a long period, you will get payback from energy savings. And if you put into consideration real estate saving due to a much smaller unit then in less than 10 years you will get a payback from the switch. This statistics is based on a switch from a standard tank water heater with an EF of about .60. There are chances that your old water heater is no longer working effectively, so you will not be loosing since it requires change anyway. And after the switch ,you get to enjoy a longer lifespan since you won’t have to replace the tankless water heater for another 20 years unlike the tank water heater that have a lifespan of about 10 years.

Sounds great right? But what If you have an electric water heater.

“$500? No wonder my bills are so high each month!” This might be going through your mind after reading the facts above. The fact remains heating with gas is more logical than using electricity.

Let’s take this perspective, power plants that generate electricity as well as the transmission lines that carry electricity to your home are less efficient when compared to the production and distribution of gas. This definitely will reduce the efficiency of electricity heater when compared to gas heater. In the US, power plants efficiency vary but most electricity generated across the country are between 30-45% efficient, this leads to a large amount of waste energy and negative consequences to our environment, this can be caused by burning of coals and other fossil fuel. Also, the electricity transmitted loses about 5-10% during transmission. And since gas is transmitted through pipeline little or nothing is lost.
However, if you don’t have gas at home, here are some options to consider.

Standard Electric Tank:

Electric water heaters have a rating of about .90 EF so you may want to compare it with the gas tankless water heater but putting the design of electric water heaters and the laws of thermodynamic into consideration you find out that gas tankless water heaters manages to save more. With the electric water heater, two elements gets red hot and transfers heat to your water.

High-Efficiency Electric Tank:

These tanks are simpler to a standard tank but are better insulated. Their EF gets as high as .94-95. Ironically this high EF will help you save only $10-$15 every year.

Hybrid Heat Pump Water Heater:

This changes every perception of electric water heater. This super electric water heater is going to reduce your water heating costs by up to $250-$300 every year, it has an efficiency rating of 2.0. This means it is 200% efficient.

How does it work? In calculating the efficiency of a water heater, we have to put energy inputted vs energy converted into heat for water. Using a hybrid heat pump water heater will help lower the amount of electricity used to heat your water because it takes ambient air temperature and uses it to preheat your water. With the temperature of air in your garage or basement the amount of electricity used to heat your water will be lower when compared to the amount of hot water that you get.

Heat pump water heater are now more advanced technologically in other to solve the problem of complications in installation locations, the amount of sound made, size, recovery rates and efficiency. Don’t just pick a random heat pump water heater, make sure you check the different brands. It is compulsory especially for those living in the North of the US.

Those heat pump water heaters sound kind of cool. If I have gas, should I think about switching back to electric?

My advice for you is, don’t bother switching because typically rebates won’t be available and you will end up spending unnecessarily on modifications. It will be a total waste to switch.


To have vast knowledge about energy efficiency is important because it helps you understand how factors that generate energy works. Also, it helps you understand the percentage of those resource that we use effectively vs those that goes to waste. Using electricity to heat water undergoes this three steps:

First electricity has to be generated, either with coal or oil. Then the electricity have to be transmitted to our homes through power lines. Finally, the transmitted electricity will be converted into heat through some elements. Each of the three stages witness energy loss. But with gas, the fuel is directly transported into our homes and is burnt directly to help heat water. Using gas is more environmentally friendly, it create less waste thanks to the way it is delivered to your home.

Water Heater TypeEfficiency FactorApproximate Annual CostEstimated Lifetime Savings
Standard Tank.58 – .60$250n/a
Energy Star Tank.67 – .70$225$250-$300***
Non-Condensing Tankless.82 – .85**$175$1,150-$1,500****
Condensing Tankless.92 – .94**$150$1,500-$2,000****
Hybrid Condensing Tankless.92 – .96$130$1,800-$2,400****
Standard Tank.90 – .93$500n/a
High-Efficiency Tank.94 – .95$485$150
Hybrid Heat Pump2.0$250$2,500+*****

  • *These are estimates from extensive in-field testing and monitoring. Not all homes will see these precise savings.
  • ** May experience lower efficiency due to short draws – using hot water for 1 minute at a time or less
  • ***Over a 10-year estimated lifetime
  • ****Over a 15-20 year estimated lifetime
  • *****Over a 10-year period. Some Hybrid heat pump water heaters have a lifetime warranty on the tank, so savings will be extended.

Having an adequate knowledge of energy efficiency and water heater, you will be able to handle the problem of puddle in your garage.