Water Heater Cost


An important aspect in helping you decide what type of water heater to buy is the yearly cost of operating of the different types of heaters. Many people prefer to make decisions with the long term in mind and do not mind paying a little more for a water heater that is cost-efficient over a decade’s time.

In this article, the sometimes hidden costs of operating a hot water heater will be discussed, ways to cut those costs will be offered, and a comparison of costs for different models will also be highlighted.

Cost Considerations for Buying a Water Heater

The energy used to heat water can account for up to ¼ of a monthly energy bill, so the operating cost of water heaters is of great significance when buying a hot water heater. This is why we added these tips and information for consumers who want to keep the costs down:

  • Even if you think short term, shop for a heater that has an ENERGY STAR label. The savings over time will be greater than the higher cost for these appliances.
  • Most hot water heaters for sale will have an Energy Guide label that will tell you what it will cost to operate the appliance per year. You might want to take notes to do some math as you compare these long-term costs among models of different prices.
  • As is true for other appliances, the least-expensive are usually the most expensive to operate. Unless you are in a true financial bind and have to replace a heater immediately, consider going a bit above the lowest-priced model. You will make up the increased cost in savings down the road.
  • do not burn your money on water heatingDo not be too swayed by energy efficiency ratings, because electricity costs more than gas right now, for instance. Energy efficiency is one factor to figure in as you make your purchase.
  • Whatever heater you buy, you want to keep the standby heat loss to a minimum. This is the heat loss that occurs when no faucet is turned on in the residence but water is still being heated in the tank. Newer models do a much better job at reducing this heat loss.
    Tankless water heaters completely eliminate this type of heat loss because they are “on demand” heaters, resulting in a 20%-30% boost in energy efficiency overall.
  • As for actual cost differential, these totals vary on the age of the water heater, the type of maintenance that you do, even the type of water that runs through your pipes in your neighborhood.
    In general, gas heaters cost $100-$150 less per year to operate than electric ones; and on-demand heaters cost another $100 less, on average.
    You can save about $25/year when you buy a high-efficiency water heater. Over 10 years, that adds up to $250, so that should figure in to your calculations as you choose a model.
  • As for longevity, gas and electric heaters last 10-15 years, generally, while tankless heaters are said to last up to 20 years, although not enough data has been compiled yet to verify that number.

For an exact calculation on water heater cost we recommend the calculator of the federal energy management program.
(Please note that maintenance and installation costs are not included in the tool and “the comparison assumes a storage tank water heater as the input type. To allow demand (tankless) water heaters as the comparison type, users can specify an input EF of up to 0.85; however, 0.66 is currently the best available EF for storage water heaters.”!)

Tips on Reducing Water Heater Cost


For those who have hot water heaters already in place, or want to know how to maximize energy efficiency once the new one is installed, consider these tips:

  • Conserve water, and thus conserve water heating costs. Buy water-conserving showerheads and take showers instead of baths.
  • Put an insulating jacket on your water heater. This will cut standby heat loss by 25-40%. These jackets are inexpensive and easy to apply.
  • Insulate your hot water pipes as well to cut standby heat loss.
  • Lower your hot water heater temperature. For most homes, 120° is plenty high. On some models, that is about halfway between low and medium.
  • When you go away for an extended time, either turn your hot water temperature way down or turn off your heater altogether. Make sure that you know how to re-light the pilot if you have a gas water heater.

Obviously, local factors specific to your area will influence the cost of keeping your hot water heater humming — the cost of gas and electricity in your region, the rebates offered at your local store or online, etc.