Insulate the Tank

If your water heater is warm to the touch, installing an insulating jacket is one of the most effective do-it-yourself energy-saving projects. The insulating jacket will reduce standby heat loss by about 30%, saving about 5% on your water heating bills. Available at most hardware and home improvement stores, water heater insulation jackets cost $20 to $30.

Some newer water heaters come with fairly high insulation levels, reducing advantages of adding additional insulation. In fact, some manufacturers recommend against installing jackets on their energy efficient models. Always follow directions carefully when installing an insulation jacket. Leave the thermostat accessible. Remember, electric resistance units often have two, one toward the top and one toward the bottom. With gas and oil-fired water heaters, be careful not to restrict the air inlets or allow insulation near the combustion area.

In addition to insulating the tank, you may want to go ahead and insulate the hot water pipe, especially if it is located in unconditioned space. The insulation will reduce the heat loss as hot water travels to its destination at the tap. Also, insulate the first few feet of both water pipes extending from the top of your water heater. Just like a metal spoon in a cup of hot coffee radiates heat, so do both the hot and the cold water pipes. Insulation will reduce this heat loss.