Energy-Efficient Residential Water Heaters

High-efficiency water heaters use 10 to 50 percent less energy than conventional models (see References 1).
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You probably don't give your hot water heater much thought. After all, it delivers years and years of dependable hot water with minimal effort. At some point, though, it will stop working. You could cut down on stress, greenhouse gas emissions and your energy bills by replacing it with a high efficiency model before it breaks down.

Storage Tank

Storage tanks are the most familiar residential water heaters; a 20- to 80-gallon tank powered by gas, propane, fuel oil or electricity keeps your water hot at all times. The problem is standby heat loss -- the energy wasted keeping your water hot when you're not using it. Buying Energy Star models saves 10 to 20 percent over those meeting minimum standards. (See References 1, pages 1-2)

The U.S. Department of Energy recommends insulation R-Values ranging from R-12 to R-25 (see References 2). The tank's temperature affects energy use; for every 10-degree drop in water temperature you realize a 3 to 5 percent savings (see Resources 2). Installing a timer that shuts off your storage tank while you sleep helps, too (see Resources 3).

Tankless or Demand

Demand water heaters are opposites of storage tank heaters: a gas burner or electric element heats water only when you need it. You never run out, but the flow rate is restricted, meaning it might be difficult to run the washing machine while you take a shower. You can get around this by installing additional tankless heaters. The DOE estimates that demand heaters are 8 to 34 percent more energy efficient than conventional storage tank heaters and that installing additional heaters where needed boosts that energy efficiency to as much as 50 percent (see References 3). Some tankless water heaters qualify for a tax credit that expires at the end of 2011 (see References 4).

Heat Pump

Heat pumps pull in surrounding air and use it to heat your water, using 1/3 to 1/2 the electricity of conventional storage tanks, according to the American Council for an Energy-Efficient Economy. They work even better in warmer climates; colder climates have less heat to pull from the surrounding air. Heat pumps are space coolers; in the warm summer months, they exhaust cool, dehumidified air into the surrounding living space. (See References 5) Eligible heat pumps installed before December 31, 2011 earn a $300 tax credit (see References 4).


Harvest the sun's energy to heat your water and you could cut 50 to 85 percent from your home heating bill, according to the Florida Solar Energy Center. Solar heaters circulate cold water through an enclosed insulated collector, heating it and sending it to your back-up storage tank where it is available for use. The initial purchase price is usually higher than a more conventional tank, but federal tax credits boost the cost-effectiveness of solar heaters. (See References 6) Through December 2016, the tax credit covers 30 percent of your installation and purchase expenses (see References 4).

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