What is the best water heater for efficiency?

Heating water in the average home accounts for up to 15% of a home’s energy use. So what is the best water heater for efficiency?  Should you purchase a conventional water heater with a low up front cost or go to a more efficient unit?

water heater

Demand  (tankless) water heaters circulate water through a large coil that is heated using gas or electricity. There is no storage tank continuously heating water. There is an endless supply of hot water, but there can be limitations on the number of fixtures that can be used at one time.


Heat Pump Water Heaters transfer energy from the surrounding air to the water in the storage tank. They are most effective in warm climates with long cooling seasons. They will cool a room by 1-2 degrees and dehumidify the space.


Solar Water Heating takes heat from the sun to heat water. Solar systems require a conventional water heater as a backup to ensure heated water at night.


So which is the right option for efficiency? The 13 year cost of a minimum efficiency electric storage water heater is $6,800. Most of the costs are in utilities for this option which can be offset with solar PV.

A on-demand gas unit costs more up front, but the 13 year cost is $5,000 with all of the savings being in energy use.

A solar water system with electric backup eliminates most of the electric costs, but the 13 year cost is $7,000 due to high initial costs.

So based on my research the electric heat pump water heater with a 13 year cost of $4,000 is the winner. This is a $2,800 savings over 13 years and the low energy costs can be offset with solar pv.

7 Comments Add yours

  1. Ross says:

    This is such a helpful post! Thanks, Charles, for sharing your knowledge and wisdom.

    Liked by 1 person

  2. Good stuff Charles; Diana and I are hunting this type of info in a long term goal of one day building or renovating. Maybe a meal/coffee next time you’re on this side of the Hill?

    434 989 8024 mbl

    Liked by 1 person

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