Heating water accounts for up to 20 percent of the average home's energy budget. Some gas-fired tankless water heaters are claimed to cut energy costs by up to half over regular storage heaters. But their added up-front costs mean it pays to look before you leap. Compare the types of water heaters.
Most of these are essentially steel cylinders fed by a cold-water inlet pipe (the dip tube) that protrudes into the tank (this line includes the shutoff valve). Water is heated in the tank, and hot water exits through a hot-water pipe atop the tank. Another pipe that emerges from the tank includes the temperature and pressure-relief valve, which opens if either exceeds a preset level. You'll also find a drain valve near the tank bottom and a control unit outside for setting temperatures and, on gas models, controlling the pilot-light valve.
Gas is the fuel of choice if you already have natural-gas service or can run a gas line to your home economically. Gas models cost more than electrics. But on the basis of national-average fuel costs, a gas water heater will cost you about half as much to run as a comparable electric model. Thus, a gas heater might amortize the up-front difference in cost in as little as a year. While you'll also find oil-fired storage heaters, they're relatively expensive, because they include the tank and an oil burner. That's why homes with oil heat typically use an electric water heater.
Tankless models (a.k.a. instantaneous water heaters) are suitcase-sized units that heat water only when needed by using an electric coil (typically for low demand) or natural gas (for high demand) to heat water passing through a heat exchanger inside. They eliminate the risk of tank failure and the energy lost by constantly reheating water, though their heat exchanger can clog or fail. What's more, they're expensive to buy and install, and include limitations on hot-water flow rates, a possible issue in large households. And cooler incoming water in winter typically means your hot water may not be as hot as you like.
Hybrid electric heaters
These have a conventional electric storage heater paired with a heat pump that extracts heat from the surrounding air and uses it to help heat the water. Models we tested used about 60 percent less energy than standard electric heaters, which account for about half of all water heaters sold. And while hybrids cost more than electric-only models, installation is similar and payback time is short.
But hybrids also have their downsides. Because the heat pump is usually on top, they need as much as 7 feet from floor to ceiling. You'll also need up to 1,000 cubic feet of uncooled space to capture enough heat from the air, along with a condensate pump (about $150) if there's no drain nearby. Hybrid heaters are noisier than conventional storage-tank heaters, exhaust cool air, and can rob some heated air in winter.
Solar water heaters
All solar heaters supplement an electric heater in basically the same way: A roof-mounted collector absorbs the sun's heat and transfers it to an antifreeze-like fluid in a closed-loop system that runs to the water tank. The collector is typically a flat panel or an array of glass cylinders called evacuated tubes. The best delivered stellar savings in summer, making them an attractive option for warm, sunny areas. But savings suffered on cold and cloudy days. And even with federal and local rebates, the thousands you'll typically spend to buy and install one can mean you'll wait anywhere from 10 to 30 years before their savings pay for their costs.
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