Shop Smart for a New Water Heater

Weighing options up front can pay off over time

By Hannah McKenzie

Shop Smart for a New Water Heater
An electric heat pump water heater

Q:  My home’s 40-gallon electric water heater needs to be replaced. How do I select a water heater and fuel that will keep energy costs as low as possible? 

A: Selecting a water heater can be tricky. Many options are available, and the sticker shock from energy-efficient models may be off-putting at first. However, water heaters use the second-largest amount of energy in most homes (behind heating and air conditioning) and last 10 to 15 years, so it is important to look beyond the purchase price and to long-term operating costs.

Electric Storage Water Heaters

If your budget for a new water heater is tight, conventional electric storage water heaters tend to have the least expensive upfront product and labor costs — ranging from $750 to $820 — but are typically more expensive to operate. The Life Cycle Costs table below can give you an idea of what this means in dollars over a 13-year period.

Gas Storage Water Heaters

The next step up in efficiency are gas storage water heaters, which over 13 years can be up to $1,000 less expensive to install and operate than electric storage water heaters. That said, due to the price of fuel (gas or propane) fluctuating and the possible challenge of getting fuel in rural areas, double-check fuel availability and rates to determine which energy source is best for your budget. Typically, gas water heaters, especially Energy Star® certified models, are an excellent investment when you have a tight budget. 

Other Considerations

Bigger is not better when it comes to storage water heaters. Energy is wasted while hot water is not being used, so understanding your household’s peak hot water use (morning showers, for example) can help you select the smallest model that still keeps people, dishes and clothes happy and clean. The U.S. Department of Energy’s online water heater sizing guide is one handy source.

If purchase price is not a limitation, consider two other energy-efficient water heater options: demand gas and electric heat pump water heaters. While both technologies offer energy savings and benefits, a variety of factors will determine whether either is a good fit for your household. Visit smarterhouse.org for more information about replacing your water heater. 

Next month, we will explore a completely different animal in home water heating: solar water heating systems. 

Water Heater Life Cycle Costs (for 13-year operation)

Water heater type

Storage volume (Gallons)

Efficiency factor (EF)

Cost (1)

Cost over 13 years (2)

Total cost

Minimum efficiency electric storage

50

0.90

$750

$8,550

$9,300

High-efficiency electric storage

50

0.95

$820

$8,245

$9,065

Conventional gas storage

40

0.60

$850

$5,394

$6,244

High-efficiency gas storage

40

0.65

$1,025

$5,220

$6,245

Demand gas (no pilot)

<2

0.82

$1,600

$4,560

$6,160

Electric heat pump water heater

50

2.20

$1,660

$5,210

$6,870

1 Costs are rough estimates that include installation and are based on internal and other surveys.

2 Based on hot water needs for a typical family of four with energy costs of 12 cents/kWh for electricity, $1.40/therm for gas and $2.40/gallon for oil.

Source: American Council for an Energy-Efficient Economy (ACEEE), 2015

About the Author

Hannah McKenzie is a residential building science consultant at Advanced Energy in Raleigh who specializes in working with nonprofit developers like Habitat for Humanity to make new affordable housing energy efficient.

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