How to Buy a Hot Water Heater

There are two main types of water heaters: units that have an insulated storage tank to hold hot water until it is needed and “tankless” units, which only heat the water as it is needed.

Tankless models tend to be more energy efficient but have lower throughput—that is, produce less hot water in a given amount of time–than models with storage tanks. Both types of water heaters come in versions powered by electricity, natural gas, or liquid propane. In general, electric models cost the most to operate and are the least energy efficient.

Solar water heaters are starting to gain traction in the marketplace. They come in both passive and active configurations and can use several different types of collectors. Currently, solar water heaters are more expensive than other options but are typically cheaper to operate. Solar water heaters depend on line of sight access to sunlight, so carefully evaluate the proposed installation site with a professional before committing to solar.

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Hot Water Heater

Water heaters are made by a wide variety of heating and cooling (HVAC) companies, including:

How Water Heaters Work

Hot water heaters convert energy into heat. This heat is transferred to water, which makes the water hot. A cold water supply pipe connects to the heater and a system of hot water pipes going out from the heater supplies water to various taps or appliances. A thermostat controls the temperature of the water.

Most water heaters use natural gas as fuel to heat the water, while others use propane, electricity or even fuel oil. Natural gas-powered heaters are less expensive than electric water heaters. Conventional water heaters store hot water in a cylindrical tank. If the tank is not insulated properly, heat escapes via the sides of the tank, resulting in energy waste.

Types Of Water Heaters

Storage-tank water heaters use electricity, natural gas, propane, or oil. Water is heated in the tank to the specified temperature. The heater turns on and off to maintain the heat. When hot water is used, the heater switches on to heat the incoming cold water to make up for what you have used. Since the water is being heated continuously, it can waste energy, even if you are not using it — this is called standby loss.

Tankless instant water heaters, or demand water heaters, heat water instantly and do not store hot water. Cold water goes into the unit through a pipe and a gas burner or an electric element heats the water when required. You can get continuous hot water through this type of water heater. Since there are no standby losses, energy is not wasted. If your hot water needs are not much larger than normal, the low flow rate won’t matter to you.

Heat pump water heaters transfer heat from one place to another instead of generating heat directly. They use electricity to do this. Heat pump water heaters can be integral units with built-in water storage tanks or add-ons that can be retrofitted to an existing water heater tank. Initial cost is high and heat pump water heaters must be installed in specific locations.

Tankless coil and indirect water heaters use your home space heating system to heat water. Water heats inside the boiler and then flows through a heat exchanger every time you turn the tap on. Indirect water heaters require a separate storage tank because heated water flows to an insulated storage tank.

Solar water heaters, when properly designed, installed, and maintained, can take care of your hot water needs. They have a storage tank and a collector and use the sun’s energy for heating water. Passive solar heaters don.t use pumps and controls and are said to be more reliable, easy to maintain, and less expensive than active systems. Active solar heaters use pumps and controls to pass the heat transfer fluids from the collectors to the storage tanks, which have an inlet and outlet.

Heat recovery units (HRU) use air conditioners’ hot refrigerant to make hot water. The compressor’s hot refrigerant and the cooler water from the bottom of the water heater enter the HRU. Heat from the air conditioner heats the water.

While choosing a new water heater, you need to consider the capacity, efficiency and cost, as well as the actual usage pattern. Water heaters can use 15-20% of the total energy you use, so it’s important to choose the type of heater that is most appropriate for your needs.

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Water Heater Efficiency

If you are buying a new water heater after April 16, 2015, you will notice a couple of big changes. These changes are a result of updates to the National Appliance Energy Conservation Act (NEACA), and they call for higher efficiency standards on all residential water heaters.

How will these higher efficiency changes affect you as a homeowner? In the long run, it will save you money. Water heating accounts for up to 20 percent of an average home’s energy usage. The new standards will increase efficiency by an average of 4 percent, resulting in approximately $10 billion in energy bill savings as well as preventing the release of up to 164 million metric tons of carbon dioxide for products shipped from 2014-2044, according to the U.S. Department of Energy.

That’s the good news. The bad news is that the price of a new water heater under 55 gallons will increase between 15 and 40 percent. This can result in an increase of $100 or more for a water heater. So while you may actually save money in the long run due to the higher efficiency standards, in the short term the cost increase is quite steep.

Another noticeable change will be in the size of new water heaters. Because of the increased insulation necessary to meet the efficiency standards, new units will increase by approximately 2 inches in height and diameter. While this will not impact installation in many homes, it may cause problems in apartments and mobile homes, where space can be limited.

The biggest changes will be with water heaters over 55 gallons. Electric water heaters of this size are now required to be hybrid units, also known as heat pump units. These units transfer heat from the surrounding air to heat the water. And gas water heaters over 55 gallons will now be required to use gas condensing technology.

What do these changes to the larger units mean for you? There will be a higher increase in the cost of these water heaters than the smaller ones, up to 100 percent in some cases. And because of the technology changes, the increase in size of these units will be even greater. The good news is that the efficiency savings will be even greater with these units than those under 55 gallons, saving you more money in the long run.

How much Capacity do you Need?

Capacity is an important factor in choosing a hot water heater. To determine how much capacity you need, estimate your home’s water usage during the heaviest hour of a typical day. Typically showers and faucets have a published flow rate that is measured in gallons (or liters) per minute. If you can’t find the flow rate, you can measure it yourself:

  1. Get a stop watch and a bucket
  2. Place the bucket under the faucet, and turn it on full blast for 10 seconds
  3. Measure how much water is in the bucket, and convert it to gallons (1 cup = .0625 gallons)
  4. Since you only collected water for 10 seconds, you will need to multiply the number of gallons of water you collected by 6 to determine the gallons per minute.

For example, let’s imagine that in 10 seconds, you collected 2.5 cups of water. You would convert that to gallons (2.5 x .0625 = .15625 gallons) for a total of .15625 gallons every 10 seconds. Next, multiply that by 6 to determine the number of gallons per minute (.15625 x 6 = .9375 gallons per minute).

You will need to ask yourself how many faucets and showers you expect to be able to run simultaneously. For most families you might want to be able to use the hot water at the kitchen sink while someone is taking a shower. To determine your estimated total usage, add the flow rate of the shower and the kitchen sink faucet. This will give you a maximum flow rate in gallons per minute.

Multiply the flow rate (in gallons per minute) times 60, to determine the number of gallons per hour you need at the peak hour of the day. This is sometimes known as the “peak hour demand”.

Water heaters have a rating called the first-hour rating (FHR) or first-hour delivery that indicates the number of gallons per hour of hot water your water heater can provide. This number should be very close to your peak hour demand.

Tankless heaters generally produce 3.5 gallons per minute. Heavy users will likely find this insufficient.

Before selecting a hot water heater, it is also important to measure tank sizes and the available space in your home. It does no good to purchase a high capacity heater if it doesn’t fit into your space. And while it is possible to extend plumbing lines to a different location, that can greatly increase the installation costs.

Another factor to consider is the material used to construct the storage tank in units that use them. Stainless steel tanks are expensive but do not rust. Steel tanks coated in ceramic or porcelain are also resistant to corrosion, unless they are scratched or dented. Tank corrosion may require you to replace the entire unit, while problems such as leaky valves or worn out electrical elements can be fixed with replacement parts.

Water Heater Warranties

Many water heaters come with long warranties (anything from 6 to 12 years) but the majority of these warranties cover only defective parts. For example, GE water heaters come with a full replacement warranty for the first year and a defective parts warranty for an additional 5, 8, or 11 years. Many other brands structure their warranties in a similar manner.

Homeowners cite three main reasons for installing a new water heater:

  1. Their water heater has failed and they need an emergency replacement (today!)
  2. They water heater is old, and they want to replace it before it fails
  3. They want to help the environment, and know that a new water heater can make an impact

Reason #1: An Emergency Replacement

This is the toughest of the three situations: there isn’t time to properly research your choices when your water heater has flooded your basement. You don’t care about fuel types, tankless vs. tank, or capacity; you just want to replace what you have so you can do the dishes and take a shower.

If you are good at DIY (doing it yourself), replacing the water heater yourself is an option – especially if you are replacing an electric model with a storage tank. Approximately 40% of water heaters are electric (53% are gas, and the remainder use propane, heating oil, wood or solar). While a handy homeowner may feel comfortable swapping out an electric tank water heater, we recommend leaving the installation of other types of water heaters to the professionals.

If you are planning to replace a water heater during an emergency by yourself, the simplest approach is to buy a copy of the water heater that just failed. Here are some issues to consider:

Hot Water Heater
  • If you choose a water heater with a larger storage tank than your current model, make sure you have space for the additional height
  • Not all brands of water heaters are sold directly to the public. If your current heater was installed by a contractor, it’s possible that it is a brand (such as Bradford White and A.O. Smith) sold only to contractors. If you find yourself in this circumstance, get a recommendation from your local hardware store.
  • A permit is usually needed for water heater installations, so be sure to check with your local municipality to find out whether this applies to you.

For those who want to hire a contractor, plumbers and heating contractors are generally the right place to start. The overall price will be higher than doing it yourself, but, a qualified contractor will size, install and stand behind the unit. When choosing a contractor, it is a good idea to check for one who offers a labor warranty. Most water heater warranties only cover defective parts and not the labor to replace them. Most contractors treat a failed water heater as an emergency and will replace it within a day.

If you need to find someone to replace your water heater, or you just want to get a few more quotes before you make a decision, we can help you find qualified contractors.

Reason #2: Upgrading an Old Water Heater

Water heaters last an average of 10-20 years, and the average age of replacement is 13 years. Many consumers choose to upgrade sooner to save money on utilities, produce more hot water, or simply peace of mind that their water heater won’t die unexpectedly. Water heaters account for 17 percent of home energy use, so upgrading can result in substantial savings. When considering a water heater upgrade, it is important to understand the different water heater types, fuel types and capacity.

Types of Water Heaters

Storage tank water heaters have an insulated tank where the water is stored and constantly heated until needed. This is the most common type of water heater. Different models and brands vary in efficiency, but the more expensive models tend to have thicker insulation and larger heating elements.

Tankless water heaters (also known as “on-demand” water heaters) heat water with a gas burner or an electric coil as faucets and spiggots are opened. The tankless water heaters themselves can run from several hundred to several thousands of dollars. Installation costs tend to be 2-4 times higher than storage tank heaters. Typically, the higher the capacity, the more the unit costs. Electric tankless water heaters cost 10-20% less to operate than a comparable storage tank model, while a gas unit costs 20-40% less.

Tankless models are smaller and require less space than a storage tank unit. Because they don’t store water, tankless heaters are less subject to corrosion and last longer, an average of 20 years, compared to the 10-15 years of a storage tank heater.

Tankless heaters supply an average of 2-5 gallons of hot water per minute, which often is not enough to use multiple appliances, faucets and showers simultaneously. For this reason, they are often insufficient for large households.

Typical warranties for tankless water heaters are 2 to 5 years for the unit and 7-10 years for the heat exchanger.

Water Heater Fuel Types

Along with the old standards of gas and electricity, solar and hybrid models of water heaters are starting to gain traction in the marketplace.

Electric heaters use one or two electric elements to heat water. Electric heaters heat water quickly, are easy to install and require no venting. The up-front costs are less expensive, but they use more energy than the other models which results in higher utility costs.

Gas water heaters use a burner to heat water. They require venting and cannot be installed near anything combustible. These heaters are more expensive to buy but are more energy efficient than electric tanks, resulting in lower utility bills.

Solar water heaters use heat from the sun to heat water. The efficiency of solar heaters depends largely on location and access to sunlight and they usually need a backup, often an electric tank, on cloudy days. These units can be more expensive to install but can result in much lower utility costs.

Hybrid, or Heat Pump, heaters are a combination of an electric tank and heat pump and use some clever science to extract heat from the surrounding air to heat water. Hybrid units heat water quicker than an electric tank and require no venting. The up-front cost is higher but can result in annual savings of up to 60 percent over electric water heaters.


A storage tank water heater’s capacity is the amount of water it holds (measured in gallons). For example, a 40-gallon tank holds 40 gallons of hot water. It is important to choose the right sized tank for your household. An undersized heater will work too hard and may not supply adequate hot water. As a general rule, a household of 2-4 people will usually require a 40-gallon water heater, while a 50-gallon water heater will supply enough hot water for a household of 3-5 people.

Storage tank water heaters use the first hour rating (FHR) to determine how much water can be heated at the peak hour of hot water usage. A large tank does not necessarily translate to a high FHR. The FHR is listed on the hot water tank’s Energy Guide label and is considered more important than capacity because it tells you if the heater can deliver enough water when you most need it. You will want to estimate peak hour hot water usage and buy a water heater with an FHR that matches or exceeds it. For example, a typical shower uses 10 gallons of hot water, a dishwasher uses 6 gallons per wash, and a washing machine uses approximately 7 gallons per use. If all of these are in-use simultaneously, the total usage is 23 gallons of hot water. Such a household would want to buy a water heater with an FHR of at least 24.

The necessary size of a tankless water heater is determined by gallons per minute (GPM) of flow. A standard dishwasher uses 2.5 GPM of hot water, while a shower uses 2.0 GPM. This means that if you want to shower and used the dishwasher at the same time, you will need a unit that can provide 4.5 GPM. A unit that is undersized will use more energy and not supply enough hot water.

Reason #3: Helping the Environment

Heating water represents about 17 percent of a typical household’s energy consumption. You may consider upgrading to a more efficient water heater to reduce your carbon footprint. Two types of water heaters are dramatically more efficient than standard electric and gas heaters: heat pumps and solar heaters.

Heat pump water heaters are a relatively new technology that is growing in popularity. They use compression to move the heat from the surrounding air into water instead of heating the water with a flame or heating element. They are available with built-in water tanks or as an addition to an existing water tank. Heat pump water heaters work best in warm climates and should be installed in an area that stays between 40 and 90 degrees and provides adequate air supply. The unit costs range from $600 to over $2000, and the installation cost may be between $300 and $700. However, because heat pump water heaters use one-third to one-half less energy than a standard water heater, payback periods may be as low as 2 to 5 years. Warranties on these units range from 1 to 7 years. Because the technology is new and there are installation requirements such as air supply, these water heaters should be installed by an experienced professional.

Heating water with solar power, unlike heat pump water heaters, has been around for many years. All new homes built in Hawaii are required to have solar water heaters, and several countries have similar regulations.

Solar water heaters help the environment by reducing the amount of electricity and gas used to heat water, which introduces less pollutants. There are two types of solar water heating systems – passive and forced circulation. In a passive system, the water is collected and stored inside a collector. As the water warms, water flows by convection to the storage tank. These systems only work in warm climates where there is no risk of freezing. A forced circulation system uses a pump to move water from the collector to the tank. The majority of solar systems in the U.S. are forced circulation.

Depending on factors such as geographic location and access to sunlight, a solar water heating system can meet part or all of your hot water needs. A backup source, usually an electric water heater, is usually installed as well. The initial cost of a forced circulation solar water heating system is between $2500 and $3500 installed. This will produce approximately 80 to 100 gallons of hot water per day. The cost of a passive system, which will produce less hot water, is approximately $1000 to $2000. Depending on the climate and the system, the payback period for these heaters ranges from 3 to 10 years. Warranties range from 3 to 10 years. Solar water heaters should be installed by an experienced contractor and will require occasional maintenance.

High-Efficiency and Energy Star Water Heaters

A water heater’s Energy Factor is determined by an algebraic equation that will baffle most mere mortals (the authors of this article included). Suffice it to say that the EF rating refers to the amount of water the water heater can produce per unit of fuel it consumes. The higher the EF rating, the more efficient a unit is. For long-term savings, it may be worth looking into a high-efficiency or Energy Star-rated water heater. High-efficiency water heaters require approximately 10-50 percent less energy to heat water, saving money while benefitting the environment. Models that have earned the Energy Star label have met government energy efficiency requirements and provide significant energy savings while helping to protect the environment through these savings. Along with these savings, there are many rebates available for installing high-efficiency water heaters, some worth several hundred dollars, both at the state and federal level. Energy Star provides a list of companies on their website that offer rebates on Energy Star products.

To earn an Energy Star label:

An electric water heater must have an Energy Factor (EF) of at least 2.0, a First Hour Rating (FHR) of 50 gallons per hour, and a 6-year warranty.

Gas storage water heaters require an EF of at least 0.67, an FHR of 67 gallons per hour, and a 6- year warranty.

Gas tankless water heaters require an EF of at least 0.82, a Gallons Per Minute (GPM) of 2.5 over a 77 degree rise, and a warranty of 10 years on the heat exchanger and 5 years on parts.

Solar water heaters must have a Solar Energy Factor (SEF) of at least 1.8 for electric backup SEF and at least 1.2 for gas backup, and warranty of 10 years on the collector, 6 years on system, 2 years on controls, and 1 year on parts.

Does Brand Matter

With so many brands out there, deciding which one to buy can be confusing. There are very few differences between brands. Most brands of water heaters are made by the same manufacturers, and often the primary difference is the warranty. Some storage-type heaters with a longer warranty have a better anode rod, which is what keeps a tank from corroding.

If you are purchasing the water heater yourself, the main things to look for are the efficiency rating, the first hour rating, and the warranty. Most components within similar models of different brands are the same. A longer warranty usually means the water heater is made a little better, with thicker insulation and larger elements and anode rods.

If you have a contractor install your water heater, ask which brand they recommend. The contractor works with these things all the time and should be able to tell you which brand they like best, and why.

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