Selecting the Right Water Heater

The first step in choosing a water heater is to determine the appropriate fuel type. Natural gas, oil, and propane water heaters require venting, which may limit where they can be located. Electric units require no venting, which gives more flexibility in locating them. If you are considering electricity, check to be sure you are on off-peak electricity rates if they are offered. If available, heating your water during off-peak hours will cost less.

In mild climates, you may want to consider a heat-pump water heater, which is two or three times more efficient than a direct resistance electric water heater. Though a heat-pump water heater may have a high initial cost, it can save up to 50% of your water-heating bill in moderate climates. Heat pumps can be added on to your water heater or purchased as an integral part of a new water heater.

The efficiency of water heaters is indicated by their energy factor (EF), which is based on recovery efficiency, standby losses, and cycling losses. The higher the EF, the more efficient the water heater. Electric resistance water heaters have EFs ranging from 0.7 and 0.95; gas water heaters from 0.5 and 0.65, with some high-efficiency models ranging around 0.8; oil water heaters from 0.7 and 0.85; and heat-pump water heaters from 1.5 to 2.0. Everything else being equal, select a water heater with the highest energy factor (EF). Also, look for a water heater with at least one-and-a-half inches of tank insulation.

In the United States, all water heaters are sold with EnergyGuide labels to indicate their energy efficiency. These labels provide estimated annual operating costs, and also indicate the cost of operating the models with the highest annual operating cost and the lowest annual operating cost. By comparing a model's annual operating cost with the operating cost of the most efficient model, you can compare their efficiencies.

Although some consumers buy water heaters based on the size of the storage tank, the first-hour rating (FHR), provided on the EnergyGuide label, is actually more important. The FHR is a measure of how much hot water the heater will deliver during a busy hour. Before you buy a water heater, estimate your household's peak-hour hot water use (your water use during morning showers, for instance) and look for a unit with an FHR in that range.