Conventional water heater are the most common type of heating system for water in a home. They work by holding a ready reservoir of hot water in a tank that can be anywhere from 40 to 120 gallons. 

When you have a need for hot water in the home – washing dishes, taking a shower, laundry – the system will release the water from the top of the tank and attempt to replenish it by “heating” additional water that is pulled into the bottom. A traditional water heater can operate on a variety of fuel sources, including electricity, propane, natural gas, and fuel oil. 

Most traditional water heaters have a number of common components, including the drain valve, an internal anode rode, dip tube, TPR valve, and pipes and fittings for pressure/overflow relief, and hot water. The internal tank is also insulated to ensure that the water stays hot as long as possible. 

A separate thermostat is included with an electric water heater while this is built into the gas control valve of a gas water heater. Gas water heaters also prevent overheating with a heat limiting device. An internal, central flue helps circulate heat and vent gas, and a thermocouple is installed to shut off the gas in case of an emergency.  

If you’re like most people, you’re unlikely to go out looking for a water heater until your existing one fails. That will happen at the worst possible time — like just after guests arrive for a week-long visit. You’ll have to rush out and put in whatever is available, without taking the time to look for a water heater that best fits your needs and offers real energy efficiency. A much better approach is to do some research now.

Explore the options and decide what type of water heater you want — gas or electric, storage or demand, stand-alone or integrated with your heating system, etc. Figure out the proper size for your household, not just in terms of gallon capacity, but first-hour rating as well. This is particularly important with newer energy-efficient technologies. (See “Sizing Your Water Heater.”)

If possible, replace your existing water heater before it fails. Most water heaters have a lifespan of 10–15 years. If yours is up there in age, have your plumber take a look at it and advise you on how much useful life it has left. If it’s in bad shape, replace it now before it starts leaking or the burner stops working. In fact, it often makes sense to replace an inefficient water heater even if it’s in good shape. The energy savings alone could pay for the new water heater after just a few years, and you’ll be happy knowing that you are dumping fewer pollutants into the air and less money down the drain.

Fuel Options for your water heater

If you are looking to replace your water heater, first determine what type of fuel makes the most sense for your home. If you currently have an electric water heater and natural gas is available in your area, a switch might save you money. Oil- and propane-fired water heaters also may cost less to operate than electric models, although the upfront costs can be substantially higher, particularly for oil-fired models.

Before you rule out electricity, though, check with your utility company. It may offer special off-peak rates that make electricity a more attractive option. With off-peak electricity for water heating, the utility company puts in a separate meter with a timer in it. You can only draw electricity through that meter during off-peak periods, when the utility company has more capacity than it needs and is willing to sell it less expensively.

Selecting a New Water Heater

Whether you’re replacing a worn-out existing water heater or looking for the best model for a new house you’re building, choose carefully. Look for a water heater that satisfies your hot water needs and uses as little energy as possible. Often you can substantially reduce your hot water needs through water conservation efforts (see “Conserve Water”).

Storage Water Heaters

Storage water heaters are by far the most common type of water heater in use in the U.S. today. Ranging in size from 20 to 80 gallons (or larger) and fueled by electricity, natural gas, propane, or oil, storage water heaters work by heating water in an insulated tank. When you turn on the hot water tap, hot water is pulled out of the top of the water heater and cold water flows into the bottom to replace it. The hot water is always there, ready for use. Because heat is lost through the walls of the storage tank (standby heat losses) and in the pipes after you’ve turned the faucet off (distribution losses), energy is consumed even when no hot water is being used. New energy-efficient storage water heaters contain higher levels of insulation around the tank to reduce this standby heat loss. As for distribution losses— a problem common to all types of water heaters, look in the section on “Upgrading Your Existing Water Heater” for tips.

Efficiency and tank size. The energy efficiency of a storage water heater is indicated by its energy factor (EF), an overall measure of efficiency based on the assumed use of 64 gallons of hot water per day, regardless of tank size. The first national appliance efficiency standards for water heaters took effect in 1990. Updated standards, effective in 2015, are summarized in Table 6.1.

All other things being equal, the smaller the water heater tank, the higher the efficiency rating. Compared to small tanks, large tanks have a greater surface area, which increases heat loss from the tank and decreases the energy efficiency somewhat, as mentioned above. If your utility company offers off-peak electric rates and you’d like to use them, you may need to buy a larger water heater to provide carry-over hot water for periods when electricity is not available under this “tariff.”

The most efficient conventional gas-fired storage water heaters are ENERGY STAR models with energy factors between 0.67 and 0.70, corresponding to estimated gas use of 214 to 230 therms/year. No residential-rated condensing water heaters (energy factors 0.80 or higher) are yet available, but small commercial-rated models are marketed for residential use. These have input capacity greater than 75,000 British thermal unit per hour (Btuh). Look for the “thermal efficiency” rating rather than EF, with values of 0.90 and above.

The minimum efficiency of electric resistance storage water heaters is about 0.90 (depending on tank volume), and the best available are 0.95 EF. We do not recommend the use of electric resistance water heaters due to the high operating costs. A new electric water heater uses about 10 times more electricity than an average new refrigerator! Fortunately, heat pump water heaters using less than half as much electricity as conventional electric resistance water heaters are now available from several manufacturers—use the Enervee Score or check the ENERGY STAR lists for detailed information. If you use electricity for water heating, consider installing a heat pump water heater. Look at how the costs compare over the life of a standard water heater in “Comparing the True Cost of Water Heaters.”

Sealed combustionFor safety concerns as well as energy efficiency, look for gas-fired water heater units with sealed combustion or power venting. Sealed combustion (or “direct vent”) is a two-pipe system — one pipe brings outside air directly to the water heater; and the second pipe exhausts combustion gases directly to the outside. This completely separates combustion air from house air. Power-vented units use a fan to pull (or push) air through the water heater — cooled combustion gases are vented to the outside, typically through a side-of-the-house vent. Power-direct vent units combine a two-pipe system with a fan to assist in exhausting combustion gases.

In very tight houses, drawing combustion air from the house and passively venting flue gases up the chimney can sometimes result in lower air pressure inside the house. In turn, this can lead to “backdrafting,” a situation when the air pressure inside is so low that the chimney air flow reverses and dangerous combustion gases are drawn into the house.

Demand Water Heaters

Demand or instantaneous water heaters do not have a storage tank. A gas burner or electric element heats water only when there is a demand. Hot water never runs out, but the flow rate (gallons of hot water per minute [gpm]) may be limited. By minimizing standby losses from the tank, energy consumption can be reduced by 10–15%. Before buying a demand water heater, though, be aware that they aren’t appropriate for every situation.

The largest readily available gas-fired demand water heaters can supply about 5 gallons of hot water per minute with a temperature rise of 77°F (58° to 135°F, for example). 77°F is the basis for industry calculations. This would support two simultaneous showers, or a bit more if the hot water is “mixed down” with a lot of cold water. If you’ve installed a low-flow showerhead (see “Conserve Water” below) and won’t need to do a load of laundry or dishes while someone is taking a shower, then 4–5 gpm might be fine. But if you have a couple of teenagers in the house, or if you need hot water for several tasks, a demand water heater might require staging some uses.

Newer instantaneous gas water heaters modulate their output over a broad range; typical outputs might range from 15,000 to 180,000 Btuh—a 12:1 range in hot water output, depending on demand (washing hands versus filling a clothes washer). This is an improvement over earlier models. However, there are still some significant issues with tankless water heaters. First, they have a minimum water flow rate of 0.5 to 0.75 gallons/minute, and turn off or don’t start at the lower flow rates used for hand washing and similar tasks. In some situations, this can lead to “cold water plugs” in the hot water supply lines, which leads to alternating delivery of hot and cold water — not regarded as a comfortable way to shower! They also require regular maintenance, and performance in hard water areas is not well studied.

Electric demand water heaters provide less hot water. A standard size model requires about 11 kW per gpm to achieve a 77º F temperature rise. Large units may require 40 to 60 amps at 220 volts, beyond the wired capacity of conventional houses. If you want to consider an electric unit, make sure your electrical wiring can handle the job before you make a purchase. However, a small electric demand unit might make good sense in an addition or remote area of the house, thereby eliminating the heat losses through the hot water pipes to that area. These losses often account for a large percentage of the energy wasted in water heating, regardless of the technology of the water heater. If you’re using energy to heat water that has to make it a hundred feet across the house, a small electric demand water heater placed under the sink to boost the temperature of incoming water locally may be a good idea.

Demand water heaters make the most sense in homes with one or two occupants, and in households with small and easily coordinated hot water requirements. Without modulating temperature control (above), you and your family may find yourselves unhappy with fluctuating water temperatures — particularly if you have your own well water system with varying pressure.

With gas-fired demand water heaters, keep in mind that a pilot light can waste a lot of energy. In gas storage water heaters, energy from the pilot light is not all wasted because it heats the water in the tank. This is not the case with demand water heaters. A 500 Btuh pilot light can consume 20 therms of gas per year, offsetting some of the savings you achieve by eliminating standby losses of a storage water heater. To solve this problem, you can keep the pilot light off most of the time, and turn it on when you need hot water — a routine that should work fine in a vacation home, but not in a regular household. Among new demand water heaters sold in the United States, standing pilots have become very rare as almost all models use electronic ignition.