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What is the Most Efficient Type of Water Heater?

Updated May 16, 2024
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In many countries, learning which water heaters are most efficient is fairly straightforward, thanks to regulations that require companies to display Energy Guide labels on water heaters. Originally, Energy Guide label requirements began in the United States in the 1990s, but the program was later adopted by several other countries including Australia, Canada, the European Union, Japan, New Zealand, and Taiwan. Information on the labels indicate the overall efficiency of a water heater and how many gallons of water it can heat on average each hour. These ratings are known as the Energy Factor (EF) and the First Hour Rating (FHR). Additional energy savings information and rankings on some of the most popular brands of water heaters may also be available through consumer organizations and reports.

Energy Guide Labels

The Energy Factor measures a water heater's overall efficiency by comparing the amount of energy coming in to the heater to the amount of energy it puts out. An EF generally ranges from as low as 0.5 to as high as 2.0, but the numbers vary between models; a higher number indicates a more efficient model. A First Hour Rating indicates how many gallons of water the model will produce during peak usage times; in general, most models heat between 50 and 67 gallons of water per hour.

Types of Water Heaters

  • Conventional: This model can run on gas or electricity and uses a storage tank to store water that is heated when it enters; when hot water leaves the tank, it is refilled with cold water, which is heated while it is stored. On average, the Energy Factor is 0.64 and the FHR is 67 gallons per hour. Some people argue that this type of heater is inefficient because of the constant use of energy to keep the water heated.

  • On-demand: Also known as tankless water heaters or spontaneous water heaters, this type of water heater can be fueled by either gas or electricity. Unlike a conventional model, a tankless heater is generally smaller and does not keep a reservoir of heated water on hand for anticipated use. Instead, as soon as the faucet is turned on, the fuel source begins to heat water that runs into the heater, and the hot water is delivered through the faucet. In general, these models average an EF of 0.82 and the FHR is measured per minute, averaging 2.5 gallons each minute.

  • Heat Pump: A heat pump runs on electricity to pull heat out of the surrounding air; the heat is moved into a storage tank where it is used to heat the water. Averaging an EF of 2.0 and an FHR of 50 gallons per hour, a heat pump's efficiency should be considered along with the fact that it is powered only by electricity, which some people may not prefer.

  • Solar: Powered by the sun using sun panels and storage tanks, this type of heater has an EF of 0.5. The FHR, however, has not been averaged because it will vary depending on the heater's location, the time of year, and the overall amount of sun exposure. Obviously, this model will be most efficient in a sunny location during the summer months.

  • Tankless Coil: A tankless coil heater uses heat from the home's heater system to heat water on-demand. When a faucet is turned on, water runs through a heat exchanger that is installed in the heater. At this point, the water is heated and then delivered through the faucet. Its source of power comes from the heater, so it is most efficient when the heater is running, usually during the winter months. The EF and FHR for this particular model are really determined based on the home's heating system; the more a heater is used and the better it runs, the better a tankless coil system will heat water.

Ways to Increase Efficiency

While the average water heater will last about 10 to 15 years, once a water heater begins to leak, it becomes less efficient and most likely needs replaced. Insulation blankets can help keep water in a storage tank warm without expending more energy. Keeping the water heater temperature low means it has to work less, which increases efficiency. It is also possible to add an overnight shutoff timer for conventional models that continuously heat water. Installing heat traps to keep heat in, insulating water pipes, and being diligent about regular maintenance also help to increase efficiency.

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Discussion Comments

By anon352507 — On Oct 23, 2013

Thanks for all the great advice. I need to find a good water heater repair person and this is really great to know.

By anon328602 — On Apr 04, 2013

The drawback to tankless: You have to make sure there is enough water pressure leaving the faucet to activate the relay switch so it can heat. If the tankless system needs two gallons per minute, and your faucet only has 1.5 gpm, guess what? No hot water.

By anon314829 — On Jan 20, 2013

Look at the marathon water heater. It is impressively constructed.

By anon295369 — On Oct 05, 2012

Actually, Energy Guide labels began in Australia in 1986.

By anon153231 — On Feb 16, 2011

What a beautifully crafted article.

At no point did the writer ever answer his own question: which type of water heater *is* most efficient?

Forget the 'tankless' gizmos. Just answer the question: All things being equal, how much hot water can be produced by 10 bucks worth of electricity vs 10 bucks worth of gas?

By anon23793 — On Jan 02, 2009

Tankless water heaters are more efficient energy users, but cost so much more to buy and to install, that for many homes they don't pay off. Check out Consumer Reports Jan 09 issue for details.

By somerset — On Feb 01, 2008

On demand water heater seems like an excellent idea. Smaller size, therefore it will free most of the space that existing water heater uses, but more than that it must save a lot of energy, since it heats water only when needed. I am in the market for a new water heater, it is definitely something to look into.

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