How to Choose an Energy Efficient Water Heater

Conventional water heaters have a 10 to 15-year life expectancy, so sooner or later, the water heater in your basement or utility room is going to stop working, or worse, stop working and start leaking. When that happens, you’re likely focused on getting the problem fixed as quickly as possible, and not making a careful decision about what type of water heater you want. It’s best to starting thinking about a new water heater before you actually need one.

If you want to trade up to a more energy-efficient model or a bigger unit, do your homework now, so you can better discuss your options with your plumber when it’s time for replacement. If you leave the decision to the plumber, he or she might simply replace your existing water heater with a similar model.

Go for Energy Efficiency

Water heating accounts for 18 to 20 percent of the average household’s energy bill, and is second only to heating and cooling for claiming the biggest chunk of the energy budget. Replacing an old unit with a high-efficiency model will save you money and reduce your home’s overall energy usage.

The savings can really be significant. Thanks to new minimum water heater standards that went into effect last year, even standard models are more efficient than those manufactured in the past. Some models can reduce energy usage by 50% or more. However, those types of savings are only available on heaters that use heat-pump technology. The savings from conventional gas and electric water heaters will only be around 4 percent, according to the Department of Energy. But on a large scale, this shift to new standards will save 2.6 quadrillion BTUs of energy over 30 years and save consumers about $8.7 billion in energy bills. The resulting reduction in CO2 emissions will be like taking 33 million cars off the road for a year.

Read the Label

The easiest way to pick an energy efficient water heater is to read the Energy Guide label that comes with every unit. The label tells you the cost to run a specific unit compared with similar water heaters.  If the label carries the Energy Star logo, the water heater meets additional criteria and is more efficient than standard models.

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There are a number of considerations that help determine the estimated costs on the label. One of those considerations is the energy factor (EF). This number reflects the efficiency of the heater in converting fuel—natural gas, propane and the like—into hot water. The EF is expressed as a decimal, so an EF of 1.0 means that 100% of the energy is converted to hot water. Electric water heaters often have a higher EF, but they can be more expensive to operate than gas-powered models. See the table below for more information.

Requirements for Residential Water Heaters

Type of Water Heater New Minimum EF Requirements Energy Star EF Requirements
50-Gallon Gas Water Heater 0.60 > 0.67
50-Gallon Electric Water Heater 0.95 > 2.0
Tankless Water Heater 0.82 > 0.90

Sources: DOE National Appliance Energy Conservation Act; Energy Star Product Criteria

Know the Hybrid Systems

Hybrid water heaters use electricity and heat pump technology to produce more energy than they consume. That’s why Energy Star products often have an EF of 2.0 and higher—they produce two times the energy that they use in electricity. The heat pump draws heat from the surrounding air and uses it to heat the water in the tank. When the surrounding temperature drops, the unit switches to standard electricity to heat the water.

Heat pump water heaters are very efficient—some models have an EF above 3.0. However, they’re also more expensive.  You can expect to pay a 50 to 70% premium for a heat pump water heater.

Tankless water heaters are another option. These units provide on-demand hot water, so no energy is wasted heating water that’s not being used. Tankless heaters are sized in gallons per minute (GPM) of hot water they provide. It can be tricky to figure out the right size for your family, so if you’re interested in a tankless water heater, discuss your needs with a plumbing professional.

Size Matters

If you are satisfied with the amount of hot water your current water heater provides, there is no need to replace it with a larger model, as prices increase as the tank size grows. But if you do want a larger tank, there are a number of things to consider.

The most important is the First-Hour Rating listed on the Energy Guide label. This is a calculation that tells you the number of gallons of hot water the unit will provide over a set period of time. It’s different from the tank capacity, because as you start using the hot water, cold water rushes into the tank that needs to be heated.  The First-Hour Rating considers the size of the tank, the efficiency of the unit and even the temperature of the cold water entering the tank. A professional plumber can help you arrive at an accurate size.

Don’t wait until a crisis to think about replacing your water heater. Understanding your options now will make the buying process much smoother when it’s time for a new model.


DIY author Fran Donegan is a home improvement specialist who writes online for The Home Depot. Fran is the author of the DIY books Pools and Spas and Paint Your Home. You can find a selection of energy-efficient water heaters, like the ones Fran discusses, available at Home Depot here.


Richard B.
Richard B2 years ago

Superb post!!!Usually we don't know how to choose an energy efficient water heater. Reading this post will definitely give exact idea. In doing a web search I found some post where it was said to take the help of expert professional. A professional is one who can guide us and give proper service for the heating system. The advantages of using heating systems are many. Take a help from commercial heating NJ for the better quality heater.

Siyus Copetallus
Siyus Copetallus2 years ago

Thank you for sharing.

James Maynard
James Maynard3 years ago

Don't need one at the moment, but have been checking out the tankless water heaters.

Randy F.
Past Member 3 years ago


Angela K.
Angela K3 years ago

Thanks for sharing

Jim Ven
Jim Ven3 years ago

thanks for the article.

Scott Simon
Scott S3 years ago


Ba H.
Ba H3 years ago

love my tankless water heater, as long as you can distribute your hot water needs

Scott Simon
Scott S3 years ago


s Gardner
sandy Gardner3 years ago

You really can save a lot of money on your utility bill by getting energy efficient appliances. When we replaced our old Harvest Gold refrigerator we saved about $30.00 per month.