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It’s the second-largest energy expense in your home and accounts for 18% of your utility costs each month. According to the U.S. Department of Energy (DOE), the average household uses 64 gallons of hot water per day taking showers, washing clothing and dishes, and running faucets.

Most households use a conventional storage water heater to bring their water up to temperature. But there are plenty of other options, especially if you’re looking to save on energy costs. Here’s an overview of the five major types of hot water heaters and how they stack up to one another.

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Conventional Storage Water Heater: The Old Standby

  • How to recognize it: Large tank usually located in a closet or basement

The conventional storage water heater is the workhorse of the water heater world. It’s usually the least expensive way to equip a home. The average lifespan of a storage water heater is 8-12 years, assuming the unit is properly maintained. They can run on natural gas, propane, or electricity. Electric water heaters tend to last a bit longer.

Tanks are sized by how many people live in the home and bathe on a regular basis. Running out of hot water can be an issue with a standard tank, and there is another downside:

“The big issue is standby losses,” says John Costello, systems manager at Pearl Certification. “If you have a 50-gallon water heater, it’s going to heat up all 50 gallons. You take your shower in the morning, you leave, it warms that water back up, and it sits there waiting for you to take your next shower or wash your dishes.”

That means you’re spending money to keep 50 gallons of water at the same temperature, whether you are using it or not. Installing a simple timer on an electric heater can help save 5-12% of energy used by turning the heater off when you’re not using it. At about $60, it will pay for itself in a year.

Indirect Water Heater: Make the Most of Your Boiler

  • How to recognize it: Large tank directly connected to a boiler

A boiler and radiator system or a traditional furnace can be put to greater use by adding on an indirect water heater. In this system, a water storage tank sits next to your combustion heater, which heats up coils inside the tank. Those coils heat the water supply. This system works best when the boiler can be set to cold start mode, meaning during warm months, it won’t come on and heat the house — just the coils in the storage tank. The lifespan of an indirect water heater is about 10 years.

“The efficiencies that come from indirect water heaters are in the insulation on the tank,” says Costello. “If I have a bare tank with hot water inside, it’s going to lose its heat really quickly. If I put a layer of fiberglass on it, it’s going to take a while to lose its heat. If I spray foam insulation on it and put a nice case around it, it’s going to take even longer.”

In fact, insulation on any tank-based system is critical to efficiency. When considering water heaters, factor in climate zones, type of fuel available, and budget. New water heaters all come standard with an energy-efficiency rating, and if anything is unclear, ask your contractor for the whole story.

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Tankless Water Heater: Energy on Demand

How to recognize it: Smaller, wall-mounted tank or box-shaped device

What if the tank never ran dry? That’s the thought behind the tankless system. The heating element hangs on a wall with pipes feeding cool water in and hot water out. When hot water is summoned, the element kicks on and your shower heats up.

While a tankless system is generally more expensive to install than a standard tank, it can last for far longer, up to 20 years. It’s also 8-34% more fuel efficient than a tank system, according to the DOE. Depending on how much hot water your household uses, you can save $100 per year over a tank.

Typically, tankless water heaters provide hot water at a rate of 2-5 gallons per minute. Gas-fired tankless water heaters produce higher flow rates than electric ones. Keep in mind that a natural gas-fired tankless system requires a larger gas line to make heat quickly.

“The main tankless advantage is you don’t have standby losses,” says Costello. “Tankless is on demand.”

Heat Pump Water Heaters: Highly Efficient and Durable

  • Heat Pump Water Heater: Large tank usually with a vent on the top

Heat pump water heaters are becoming more and more popular. Unlike the other water heaters on this list, they don’t generate heat but instead move it from the surrounding air to your bath water using the same principle as a refrigerator, but in reverse.

Like a conventional water heater, heat pump systems store water in a tank. But because the tank is not generating heat, it is 2-3 times as efficient. If you’re already using a heat pump to generate heat for your home and a conventional system to generate hot water, you can retrofit the heat pump to work with your existing tank.

“A heat pump water heater takes 10 BTUs from outside your home and converts it to 45 BTUs when it gets to the tank of water,” says Costello. “Combustion safety is not a factor anymore. You don’t have any carbon monoxide to worry about.”

Expect to get 10-15 years of life expectancy from this super-efficient setup, which, like the tankless system, comes with higher upfront costs. That said, a properly sized heat pump water heater system can save homeowners up to $300 per year.

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Solar Water Heaters: Potential for Major Savings

How to recognize it: Large tank and a roof-mounted solar collector

Do you live in a sunny locale? If so, going solar could be an option. A solar water heater combines a roof-mounted collector and a storage tank. They are expensive to install but typically last 20 years and are a whopping 50% more efficient than any type of gas or electric water heating system. That means you could end up paying nothing for the electricity needed to heat your water.

There are two basic types of solar systems. Active systems use circulating pumps to move water from the collector on the roof into a storage tank. Passive systems rely on gravity and a thermosiphon.

“The biggest disadvantage for solar is what happens when the sun isn’t shining,” says Costello. “What’s the backup system for that?”

Unless you’re willing to take your chances with the weather, an electric or gas-fired backup system is a must-have for those using solar hot water heaters.

“Upfront costs are always going to be a factor with any energy-efficient upgrade, but you should think about the return on your investment over the entire span of your time in the home,” says Costello. “High-efficiency systems with higher upfront costs can often net positive returns over the long term."

To receive customized recommendations for updating your hot water heater and other energy assets, log in to Pearl’s free Green Door app. Use the Update Assets tool to add details of your current hot water heater, and then generate a Home Investment Plan full of recommendations for creating a healthier, more energy-efficient home. While you’re there, you can also search for a Pearl Network Contractor to complete the installation and request a Pearl Certification report to capture the value of your project.


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