If you’re like most people, you don’t think much about your water heater until there’s a puddle of water on your basement floor. For this reason alone, you shouldn’t wait for your current water heater to break down (that’s how you’ll end up with whatever your plumber has on the truck, which might be all wrong for your needs). Even if you’re not ready to replace your water heater, it’s smart to know about your options. There are several types of water heaters that are economical and energy efficient. They include:

  • Conventional storage water heaters that offer a ready reservoir (via the storage tank) of hot water. This is what most have.
  • On-demand (tankless or instantaneous) water heaters that heat water directly, without the use of a storage tank.
  • Heat pump water heaters that move heat from one place to another, instead of generating heat directly for the hot water.
  • Solar water heaters that use the sun’s heat to provide hot water.
  • Tankless coil and indirect water heaters (Superstor tanks) that use a home’s space heating system to heat water.

water heating energy expenditures

All of those are viable options. However, when selecting the best type and model of water heater for your home, you also need to consider the following:

  • Fuel type, availability, and cost. The fuel type or energy source you use for water heating will not only affect the water heater’s annual operating costs, but also its size and energy efficiency.
  • Size. To provide your household with enough hot water and to maximize efficiency, you need a properly sized water heater.
  • Energy efficiency. To maximize your energy and cost savings, you want to know how energy efficient a water heater is before you purchase it.
  • Operating Costs. Before you purchase a water heater, it’s also a good idea to estimate its annual operating costs and compare those costs with other more energy-efficient models.

water heater energy saving potential

So what’s the bottom line? As usual, it depends. But walking through each of the choices I can give you some guidance.

Generally, the first type of tank, the conventional storage tank is like a Honda Accord. It’s fine, and pretty plain vanilla; the up-front cost is pretty low, while the ongoing cost is pretty high. It has a payback of about 12 years–about the life of the tank. Also, when a conventional tank goes, they just go. And you have a puddle of water on the floor.

describe the image

On-demand hot water tanks are great. They’re incredibly efficient; as you’re only heating the water you need at that very point. They are, however, expensive. Also, their capacity isn’t huge. If you’re looking to take a shower, bathe the kids, do a bunch of laundry, etc. I wouldn’t go with an on-demand hot water tank. So under those circumstances what would I go with?

In short, I’d go with a tankless coil or indirect water (a.k.a. Superstor tank). These types of tanks are slave tanks, meaning that the hot water is created by your boiler and then stored in this tank. The advantages are that it’s an integrated system that’s as efficient as your boiler (could be over 90%). It’s great for making a lot of hot water to be used quickly (see kids, dog, and laundry example above). The disadvantage is it can be expensive (though the time to do it is when you change out your HVAC system when money is flowing anyway) and it isn’t great for homes that are not lived in every day. Though the tank is heavily insulated, it still loses a few degrees each day; so you don’t want to keep on heating the water, letting it cool and repeating that process every few days. For a young family it’s my top choice.


Our last two water heaters have similar plusses and minuses: the heat pump water heater and the solar thermal water heater. Solar thermal just means heating up the water with sunlight. Between the two I like the solar thermal system. First off, it makes really cheap hot water; solar thermal technology has really progressed so unlike solar electric, it need not be receiving direct south-western sun. They’re low maintenance and generally have some rebates attached to them.

Heat pump water heaters are highly efficient, and not too expensive, with a payback period of about three years. Heat pump hot water heaters can also serve double duty as dehumidifiers wherever they run, because they really do a nice job of sucking moisture out of the air. The biggest drawback of the heat pump water heaters is that they’re incredibly loud. So if you put one in your basement, good luck watching TV.

My goal in describing these water heaters isn’t to have you rush out and buy a new one. Rather, I want you be prepared when you wake up in the middle of the night with a water heater that’s gone bust (literally) at that point. In short, you should know what you are going to get.