Hot Water Heaters: 4 Options to Lower Your Heating Bills

In the war against expanding household expenses and environmental waste, the hot water heater is woefully neglected. Tucked away in a basement corner, it's rarely mentioned as a heavy energy user. But water heating is the second largest household energy cost--around 17 percent. The good news is there are newer, more efficient heaters on the market that can lower that portion of your costs.

Storage Tank Heaters
Most of us don't need an introduction to storage-tank hot water heaters because that's what we've always had. In this type of heater, the water is warmed by electricity, oil, propane or natural gas.

Pros of electric: Tanks have a longer life expectancy than gas units.

Cons of electric: Wastes power by using fuel to keep water hot, even if it isn't needed. Low recovery rate.

Cost of electric: Roughly $150.

Pros of gas: Heats tanks twice as fast as electric models so you can buy a smaller tank.

Cons of gas: Wastes power by using fuel to keep water hot, even if it isn't needed. More wear and tear on tank and shorter life-expectancy than electric. Cost of gas: Roughly $250.

On-Demand or Instantaneous Heaters
On-demand or instantaneous systems heat water as you need it. When you turn on a faucet, a heating element instantly comes on to warm the water passing through the unit. When you turn off the faucet, the heater goes off too, so you're never heating water you don't need. In an on-demand unit, hot water never runs out.

Pros: Longer life expectancy than tank heaters (around 20 years) because there is no rusting or sediment build up. Delivers hot water continuously. Reduces energy consumption by 20 to 30 percent.

Cons: Flow rate is limited. Fewer professionals know how to service.

Cost: About $500 to $1,000.

Tankless Coil and Indirect Heaters
Tankless coil heaters use your home's main space heating system as the source for hot water. There is no separate storage tank; water circulates through heated coils in the boiler and then flows to the tap.

Pros of tankless coil: No separate storage tank.

Cons of tankless coil: Not as energy-efficient during warmer months.

Cost of tankless coil: $200

Pros of indirect: Boiler does not have to fire up as often to heat water.

Cons of indirect: Requires separate storage tank. Suffers standby losses.

Cost of indirect: Approximately $1,200.

Heat Pumps
Heat pump water heaters draw heat from the surrounding air to heat water that is stored in an insulated tank. Ground-source heat pumps work on the same principle, but are more efficient than air-source systems because they draw heat from the ground, which maintains a fairly constant temperature year-round.

Pros for air-source heat pumps: Use half the energy of storage tank heaters.

Cons of air-source heat pumps: Expensive to install; not suitable in cold regions. Heats water more slowly than electric or gas heaters.

Cost of air-source heat pumps: $1,000 to $3,000 (includes installation).

Pros of ground source heat pumps: Less maintenance than traditional heat pumps, increased efficiency. Long life (20 years).

Cons of ground source heat pumps: Require extensive excavation so only suitable for new construction projects. Cost of ground source: About $7,500 (includes installation).

Solar Water Heaters
There are two basic types of solar hot water heaters: passive and active. Passive systems don't require external energy to operate. Active solar heating systems differ from passive in that they use pumps, sensors and heat exchangers to move water and antifreeze. Pros: Environmentally friendly and energy efficient. Long-term savings.

Cons: Higher up-front costs.

Cost: Batch heater as low as $200 and active heaters up to $5,000.