ENERGY STAR water heater options

New technologies are adding up to big savings

An ENERGY STAR water heater can potentially cut your home energy bill by several hundred dollars a year, and can pay for itself in as little as five years, particularly with tax credits offered, for instance in the US, for the most efficient hot water systems. It's definitely worth your while to understand more about these water heater systems.

The average American household spends over $350 a year on hot water (over $500 a year for hot water heated with electricity). New technologies are available that can substantially cut your hot water energy use, yet most people wait until their existing hot water tank stops working (or worse yet, springs a leak) before even thinking about replacing it.

ENERGY STAR water heaters are now available that can cut your hot water heating costs by 30%, 50%, or even more. There are five different technologies available, and depending on your location and your existing hot water system, one or more of these ENERGY STAR water heater technologies may be worth your while to invest in.

Household energy use by type, USA, 2005

Let's start by looking at where a typical family spends its energy budget. The following chart shows total household energy use for the US, broken down by type of use. The figures are based on total energy consumption of 10.55 quadrillion therms (in 2005), with 2.11 quadrillion therms going towards hot water. That means on average, we're using about 20% of our energy budget on hot water

If your hot water is heated with electricity, the cost picture is somewhat worse than the energy use picture, because it takes up to 3 times as much source energy (at the power plant) to produce a therm of electric resistance heat as it does to produce a therm of heat from natural gas. I would guess that in an average household with an electric hot water heater, you are probably spending 30-40% of your household energy dollars on hot water.

Switching to a new ENERGY STAR water heater can cut that 20% down to 10% or less, depending on the type of hot water heater you choose. There are five basic types of ENERGY STAR water heaters available now, or due to come onto the market within the next year:

You'll notice there are no regular electric hot water heaters in the list. Why is this? In my opinion, there are two reasons:

  1. ENERGY STAR typically sets standards to encourage people to buy the most efficient items in a class. In the case of electric hot water heaters, there just isn't much differentiation, between the least and most efficient models. There's no way to make the process of heating the water more efficient, because electric resistance heating elements are already 100% efficient at converting electricity to heat. The only improvements would be in tank insulation and heat traps to reduce heat loss. Because of the high cost of running an electric hot water heater, most electric hot water heater manufacturers have already put a lot of effort into better insulation and heat traps.
  2. There is an alternative to electric hot water tanks - namely heat pump water heaters - that is at least 2-3 times more energy efficient. It doesn't make sense to give an ENERGY STAR rating to one type of water heater, when an alternative technology that can often just be swapped in offers that much of an improvement in performance.

You may have trouble finding a list of qualifying ENERGY STAR water heaters of any of the above types, because the new ENERGY STAR rules only came into effect very recently (as of November 2009) and for at least some of the above technologies, no commercially available units are expected until at least mid-2010. That doesn't mean you shouldn't inform yourself now - the more you know about ENERGY STAR water heaters now, and the longer the lead time you have before you actually have to replace your hot water tank, the more likely you'll make the right choice. This is a key point, worth its own paragraph:

Don't wait until your old hot water heater is broken to look into getting a new ENERGY STAR water heater. The time to plan is now.

Which type of hot water heater is right for you? That depends on a number of factors:

Your current setup. If you don't have a natural gas line, then heat pump or solar hot water with electric backup are your best options.

Your financial situation. Heat pump and solar hot water heaters are the most cost effective but also the most costly. Gas storage water heaters are the cheapest to buy and to install, but offer the least efficiency gain of all ENERGY STAR water heaters.

Space considerations. Tankless gas hot water heaters take the least space. But in my experience they come with some inconveniences.

Your energy saving ambitiousness. If you truly want to do the maximum to cut your energy use, then a heat pump water heater or solar water heater is going to give you the most energy savings.

We'll now look at each type of ENERGY STAR water heater in turn, explaining how each type works, where the savings come from, and whether they might be suitable for you.

Gas storage water heaters

If you already heat your hot water with gas, you almost certainly have a gas storage water heater. This is your typical hot water tank heated by natural gas or propane. What is the difference between the unit you now have, and a high efficiency ENERGY STAR water heater using the same basic design?

The main improvements in ENERGY STAR gas storage water heaters are:

Not only that, but ENERGY STAR water heaters of this type will have to become even more energy efficient in late 2010. Right now, the ENERGY STAR water heater requirements for gas storage water heaters are an energy factor of 0.62. The energy factor is the share of total input energy that comes out the tap - in other words, at an energy factor of 0.62, 38% of the energy in the natural gas either goes out the tank exhaust pipe, or leaks through the tank walls or into the hot water pipes. At the end of August 2010, ENERGY STAR plans to raise the required energy factor for storage gas water heaters to 0.67. That means that if you can wait until then to buy an ENERGY STAR water heater, you could save an additional 8% on your energy bills.

Gas hot water heaters that use a power vent can be even more efficient than non-power-vented models. However, bear in mind that they can be somewhat noisy. My next door neighbors have one and while they don't complain about it themselves, I can certainly hear it humming away when I'm sitting on my front porch at night! The main reason for going with a power vented hot water tank, however, is not efficiency, as the difference they make there is nominal; the more important difference is that power vented models can often be vented right out a wall, instead of requiring venting up a chimney.

Should I replace my gas storage water heater now?

If you're thinking of switching to an ENERGY STAR water heater, the only case where it makes sense to switch to a new, ENERGY STAR qualified gas storage water heater is if your current water heater is old, or malfunctioning, or you are planning a renovation that will require you to remove the old heater. The total savings from a new ENERGY STAR water heater probably aren't enough to warrant pulling out your old gas storage water heater and replacing it. That's because the expected savings for an average US household of 2.6 people are only about $30 a year. And given an expected lifetime for the heater of about 13 years, you'll only save around $350-400 in total fuel costs, which is probably far less than the cost of purchasing a new ENERGY STAR water heater and having a technician install it.

On the other hand, if you know your hot water tank is nearing the end of its useful life, you should at least plan to replace it now. Find an ENERGY STAR water heater that meets your needs, line up a reputable contractor to install it, and set a date by which you plan to replace it. You may want to wait until your current unit actually fails, but there are two types of risks in doing this: the failure may cause damage. First, a ruptured pipe or leaking tank can wreak havoc, especially if you're not at home when it happens. Second, an older tank can become increasingly inefficient, as scale build-up reduces heat transfer into the tank container and therefore more of the heat just goes up the chimney. It's hard to tell at exactly what point a hot water storage tank should be replaced, but generally any tank older than 10 years is probably a candidate.

Gas tankless water heaters

Tankless hot water heaters are certainly gaining ground in North America, although this technology has been around for at least 35 years in other parts of the world. I should know - when I was a teenager in Paris, France in 1974, I had a tankless gas hot water heater in my washroom. It certainly worked well for the limited hot water my brother and I used - basically for showers and hand washing.

Tankless hot water heaters are among the most efficient of the ENERGY STAR water heaters because they don't lose any heat to storage losses. Because there is no tank, there's no heat to leak out of the tank, and because they don't apply heat to the water except when there's a demand for it, there's very little heat wasted. As a result, the typical energy cost of a tankless ENERGY STAR water heater running on gas is about $260 per year, compared to about $475 for a traditional gas storage water heater. That $115 a year in savings adds up over the years - especially when you consider that most gas tankless water heaters have an expected life span of 20 years or more, which is significantly higher than a gas storage water heater. A tankless gas ENERGY STAR water heater is required to have an energy factor of 0.82, the highest of all gas water heater types. That energy factor can translate into big savings.

Other than significant energy savings - nearly 50% compared to an older tank heater - the other major benefits of tankless gas water heaters are that they take less space, provide continuous hot water for as long as you need it, and don't use any energy when you're away for periods of a day or more. The energy savings and space savings are definite benefits. Of course, if continuous hot water sounds like a benefit to you, then you might want to question your commitment to saving energy - if you want to be able to stay in the shower for an hour straight, you can probably save a lot more energy by changing your showering habits than by buying a tankless water heater.

When buying a tankless water heater you need to consider a number of factors including the temperature of incoming water (which can vary by season), the diameter of your gas supply pipe (since pipe with a diameter under 3/4" may not be able to provide a high enough flow of gas to heat water at full capacity) and the total gallons per minute flow you're going to use. Tankless water heaters are typically rated in gallons per minute flow for a given degree rise. The greater the difference between the input water temperature and the output temperature, the lower the maximum flow. Most tankless water heaters limit flow, rather than limiting temperature gain. This means that appliances such as clothes washers, which have among the highest requirements, in gallons per minute, may not fill up as quickly when you use a tankless water heater as when you use a storage tank heater. But having to wait an extra 30-60 seconds for your washer tank to fill shouldn't be an issue to most people.

In colder climates such as my home town of Toronto, where the water is sourced from Lake Ontario, the input temperature can drop to 40F. That means the heater has to add 80F of heat to the water, so either it requires a very high powered heating element, or flow will be limited. It's important to assess both the maximum temperature gain you'll require, and the maximum flow you require. If you want to be able to have a shower, run the clothes washer, kitchen sink, dishwasher, and bathroom sink, all with hot water running at the same time, you'll need a much higher GPM flow than if you're willing to wait a bit. Typical requirements are:

Gas tankless ENERGY STAR water heaters may also be eligible for a $300 Federal tax credit in the US.

Are they really as great as they sound?

All the above makes tankless gas water heaters sound like a major improvement over the storage tank water heater. But I have some experience with tankless water heaters, in houses I've lived in and from the experience of friends, and I can say that in all cases the energy savings were at least partially offset by inconvenience, equipment failure, or even serious damage caused by pipe bursts.

On the inconvenience front, the first thing you should know is that when you turn on the hot water tap, there is no hot water anywhere in the system. The tankless hot water heater detects a demand for hot water, and so starts applying heat to the water after it has already started flowing. If all you wanted is enough hot water to give your hands a quick wash, you may have to run the water for ten seconds just to get the hot water from the heater to your hands. If you then turn the tap off, and back on ten seconds later, there's another gap of cold water between what's left of the first burst of hot water (from ten seconds earlier) and the new burst. As a result, activities such as washing dishes with occasional bursts of warm or hot water become impossible with a tankless water heater. In fact, my sister even had to spend several hundred dollars replacing the heat exchanger in her tankless water heater, after someone turned the water on and off too many times over the course of a ten minute period (while doing dishes) and caused the heat exchanger to crack. I hate washing dishes by hand at her house because I use hardly any hot water to start, and then use hot water to rinse each dish as I go. You can't do that with a tankless water heater.

Then there's the problem of minimum flow. Some tankless water heaters only heat the water if there's at least a certain level of flow. If you need a slow trickle of hot water for an extended period, you won't get it with a tankless water heater. So you could wind up running more hot water than you would if you had a storage hot water heater, where there's always hot water for any demand. Again in my sister's house, they can only get hot water for a shower by first running it at maximum flow, to get the hot water heater to kick in, even if they want touse a low-flow showerhead to conserve water.

Finally, there are the mechanical failures. I have direct knowledge experience using tankless hot water heaters in four environments: my house in France in 1974 (where things worked fine, except for the time I burnt off my eyebrows while trying to light the pilot light); my sister's tankless water heater, whose cracked heat exchanger was just one of several repairs they have had to make; an electric tankless water heater in a house my family rented in 2008-2009 in Costa Rica, which exploded not once but three times (granted, it was a cheap $150 heater and was not serviced by an experienced technician); and a friend's gas tankless water heater, which had serious problems because it was not designed for the extreme cold we sometimes get in Toronto in the winter. In my friend's case, cold air coming down the exhaust pipe caused the water inside the heat exchanger to freeze, which cracked the heat exchanger, resulting in a major spill of water in their basement. The company that sold and installed the tankless heater was unwilling to take any responsibility for the problem or the damage, in spite of having provided a written guarantee that they would address any problems, so my friend has since gone back toa storage tank heater.

If you are determined to buy a tankless ENERGY STAR water heater, by all means do, but make sure you buy a reputable brand from a reputable dealer and have it installed by a competent technician. And if possible get a written guarantee and pay for a service contract, so that if you encounter any problems such as those I've described above, you're covered.

Gas condensing water heaters

Gas condensing water heaters are the most promising gas-powered ENERGY STAR water heaters. Although not quite as efficient as gas tankless water heaters, because there is still some heat loss from the tank, these new heaters come pretty close to tankless water heaters because they extract much more of the heat from the combustion gases than a traditional gas storage water heater. Given the problems I've mentioned above with tankless hot water heaters, I would definitely consider a gas condensing water heater for my next purchase. We mentioned the energy factor of ENERGY STAR water heaters in the storage tank (EF: 0.62) and tankless (EF: 0.82) categories. Gas condensing ENERGY STAR water heaters are required to have an energy factor of 0.8, as of 2010. So they compare pretty favorably to tankless gas water heaters, without the challenges and problems I mentioned above.

A gas condensing water heater has a tank, just as a standard storage gas water heater does. However, the combustion gases flowing through the tank have much more opportunity to impart their heat to the water tank on their way up to the flue, because of the way gas condensing water heaters are designed.

In a standard storage gas water heater (even an ENERGY STAR water heater), a burner heats the bottom of the tank, and the exhaust gases flow up through an opening that runs straight up the center of the tank. The tank, in essence, is like a donut that has been stretched upwards. The burner cooks the bottom of the donut and slightly warms the inside of the hole.

A condensing gas water works on the same principle, but instead of the exhaust air flowing up through a single cylinder in the center of the tank, it flows through a set of smaller pipes and typically flows upwards in a spiral or scatter pattern, with the result that there is much more surface contact between the water inside the tank and the hot flue gases. The result is that the exhaust coming out the tank isn't nearly as hot, because more of the heat has been imparted to the water itself.

A gas condensing water heater will typically cost about $275 a year to operate for the average American household size of 2.6, compared to about $375 for a standard gas storage water heater. Over a typical 10-year lifetime that adds up to $1,000 in savings, assuming natural gas prices hold steady (my bet is that they will rise steeply in the next few years). They are more expensive than your typical cheap gas storage water heater, but it remains to be seen how they will be priced against storage tank ENERGY STAR water heaters, because there are still not enough of either on the market yet to determine which is cheaper. However, because they are more efficient, they qualify for a $300 Federal tax credit in the US (at least for 2009). The $1,000 in savings over 10 years, along with the $300 tax credit, may be more than enough to offset any increased cost.

Another benefit of gas condensing water heaters is that they provide a nearly constant supply of hot water, because the tank heats very quickly. In fact, if your current tank water heater is meeting your hot water needs, you may be able to install a gas condensing water heater of a smaller size, and if your current water heater is not doing quite as good a job as you want, a gas condensing water heater of the same gallon capacity will probably work quite well for you.

To my mind, a condensing gas heater sounds like the best of the gas-powered ENERGY STAR water heaters. Much more efficient than a storage tank water heater, less failure prone than a tankless water heater, and doesn't require the changes in water use habits that a tankless water heater does.

But believe it or not, there's an electric water heater solution that may be even more cost effective and environmentally friendly than a gas condensing water heater - coming up next!

Heat pump water heaters

I mentioned above that electric resistance water heaters are 100% efficient at converting electricity into heat. That sounds about as good as it gets, doesn't it? And yet there are no electric ENERGY STAR water heaters - at least not ones that use electric resistance heating (the same kind of heating that heats a stovetop burner or a blow dryer).

When it comes to electric water heaters, it turns out that you can do better than 100% efficient - far better. Well, sort of. It's actually impossible to be more than 100% efficient at producing heat. And in fact, most gas water heaters are far less than 100% efficient, as we saw with the energy factor of0.62 for gas storage water heaters (rising to 0.67 for ENERGY STAR water heaters in September 2010), an EF of 0.80 for gas condensing ENERGY STAR water heaters, and 0.82 for tankless ENERGY STAR water heaters.

But in the case of a heat pump water heater, the electricity isn't actually producing heat. It's moving it from one place to another. It turns out it takes far less energy to move heat than to produce it. This is the basis upon which air conditioners and refrigerators work: they extract heat out of your house, or your refrigerator, and expel it outside (to the outdoors in the case of air conditioning, or into the kitchen airspace for your fridge). In the case of a heat pump water heater, the process works the same way except we switch "inside" and "outside": we extract heat from the outside, and move it to the inside (the hot water tank). As a result, heat pump water heaters can achieve an efficiency ratio (heat energy output, over electrical energy input) of up to 300%. Getting back to that energy factor, an ENERGY STAR water heater that operates on a heat pump is required to have an EF of 2.0.

You can buy ENERGY STAR water heaters that are drop-in heat pump replacements for electric storage hot water tanks. Manufacturers in the US include Applied Energy Recovery Systems, Aqua Products, Beyond Pollution, Nyle International, Parker Davis, and Trevor-Martin. There are also a number of Japanese manufacturers. The main challenge with heat pump water heaters is that they typically extract heat from the airspace in which they are installed. They then vent much colder air out, either to the out of doors or back into the room where they are installed. While this can be desirable in a climate where you tend to run the air conditioning much of the year, it is less ideal for a cold climate where the heat is on more often than the AC, because you are often extracting heat from air that you've paid to heat, in order to put it into your hot water.

Typically you'll need a 1,000 cubic foot space (equivalent to a 10x14 foot room with a 7 foot ceiling) to have enough airflow around the heat pump water heater to avoid freezing the air in the room. While it is possible to install a heat pump water heater in a crawlspace or other outdoor space, this should only be done in warmer climates where the outdoor temperature rarely falls below about 44F, because theefficiency of any heat pump decreases as the outdoor temperature falls towards the freezing point.

There are also heat pump water heaters that can be installed indoors and that draw cold air in from outside, extract the heat (making that air colder), and then pump the colder air back outside. Again, this is suitable for mild climates but not for cold ones, or at least is not suited for use on days when it is below about 44F. The colder it gets, the less efficient the heat pump is at extracting heat from the outside air (because there's less heat in it), and at a certain point a heat pump becomes less efficient than an electric resistance heater. Many heat pump water heaters come with an electric element as well, to allow hot water to be produced quickly at times when the air supply is too cold for efficient heat pump operation.

A heat pump ENERGY STAR water heater can pay for itself in under 5 years, depending on the cost of electricity in your area and whether you have to replace an existing electric water heater that is no longer working, or are thinking of removing one that still works (since you can subtract the price of a new standard electric storange tank heater from your payback calculations, if you needed to replace a broken or worn out tank anyway). For a household using 40 gallons of water a day, an electric resistance heater would require about 7 kwh per day, to raise the water temperature from 55F to 120F. A heat pump water heater with an energy factor of 2.5 could produce the same volume of hot water, for only 3.2 kwh per day, for a savings of 3.8 kwh per day. If your electricity cost is $0.10 per kwh, a fairly typical number, you would save about $0.38 per day, or $140 per year.

As someone living in a cold northern climate, I can't really see myself buying a heat pump water heater, because I know that for much of the year it will either be sucking heat out of my house while I'm heating the house, or will be operating very inefficiently using outdoor air. But in a warm or hot climate, where a little extra 'free' air conditioning might be desirable, a heat pump ENERGY STAR water heater may be a great investment. Just remember that heat pump water heaters also require annual maintenance by a qualified technician, which can add to their overall operating cost. This maintenance cost is not included in the calculations above for savings resulting from the energy efficiency of these water heaters.

Solar hot water heaters

A solar ENERGY STAR water heater typically consists of a combination of water heated by solar energy, and a backup source such as a gas storage tank or an electric storage tank. The sun doesn't shine every day, and doesn't shine all day long, so for anyone wanting access to hot water any time they need it, there's not much sense in going 100% solar. Of course, if you can afford to wait until the son does shine before you have a shower or do the dishes (or you don't mind showering or washing dishes with cold water, as I did for much of 2008-09 when my family lived in Costa Rica), then by all means, go 100% solar for your hot water.

Solar ENERGY STAR water heater ratings only came out very recently. The basic rules for ENERGY STAR qualification are:

There is an extensive set of requirements for the storage tank portion of the solar water heater: the storage tank must conform to the Solar Rating and Certification Corporation (SRCC) OG-300 guidelines for solar water heater design and insulation. While these criteria do not explicitly state any efficiency factor for the backup hot water source in the storage tank, they do include a number of strict guidelines for safety, insulation types, tank materials, and so on.

If you currently have a gas or electric storage tank water heater, you may be able to replace it with a solar ENERGY STAR water heater and save a substantial amount on your energy costs. Using a household of 2.6 people (the average US household size), we find that a solar ENERGY STAR water heater with gas storage tank saves about $190 per year on natural gas costs (compared to just using the gas tank heater) while in the case of electricity the savings exceed $250 per year. And given the long warranties for these water heaters, with life expectancies even longer - up to 20 years - these systems will keep on saving you money long after you have paid for the system in energy savings.

Of course, not every location is perfect for a solar water heater, and even in a warm, sunny climate your own situation may not be ideal. Here are some specific requirements:

Remember, it's much cheaper to reshingle a roof, and then put a solar hot water collector on it, than to put the collector up first and then reshingle.

In the US, if you install a solar ENERGY STAR water heater you can receive a tax credit of up to 30% of the installation cost, up to a maximum of $2,000. Tax credits are also available in Canada, although a friend who has decided to install one in his Toronto home recently told me he didn't think the system would ever pay for itself from a financial perspective, because his household uses very little hot water, the city planned to charge a huge permit fee for the installation, and because the tax credits in Canada were not as generous as those in the US.

A solar ENERGY STAR water heater will also require regular maintenance by a qualified contractor. Maintenance includes a visual inspection and any adjustments or repairs to worn fasteners, piping and sealing, including the sealing of any roof penetration by the plumbing or collector framing.

The most common solar water heater collectors available now are flat-plate collectors, which consist of copper tubes fitted to flat absorber plates and encased in an insulated box with a glass cover, and evacuated tube collectors, consisting of a raised tank and a series of thermos-like glass tubes which provide solar heat absorption and minimal heat loss, as the tubes consist of an inner layer for the fluid, and an outer, vacuum layer which acts as a very good insulator.

For cold climates, the liquid in the solar collector is typically an antifreeze solution, in order to prevent freezing of the liquid at night or in particularly cold conditions. These systems are called closed loop systems, because you have a closed loop of non-freezing liquid circulating between the collector and a heat exchanger in the storage tank. In a direct system water flows from the municipal water supply to the solar collector, and from there directly into the gas or electric storage heater.

Given the high price of a solar ENERGY STAR water heater, you might be tempted to make your own. In fact, I know of one book that tells you how to do just that. For as little as $100 in spare parts and materials - less if you're a good scrounger - you can build a solar water pre-heater for your hot water tank.

Whatever system you buy, conservation is always the cheapest energy source

Because hot water is such a big part of people's household energy budget, it's important to remind ourselves that buying an ENERGY STAR water heater doesn't mean we should suddenly stop paying attention to how we use hot water. There's something called the Jevons paradox, which describes what happens when a more efficient process or product is adopted. The jist of the Jevons paradox is that any increase in efficiency is typically offset, within a short period of time, by increased consumption of whatever the new process or product made more efficient.

In the case of an ENERGY STAR water heater, what the Jevons paradox would mean is that, when you buy a new water heater, you'll know you're using less energy to heat your hot water, and so the motivation to conserve hot water will be proportionally reduced. If you can cut your energy costs for hot water from $580 per year (for a household of 4) to $400 by switching to a gas condensing ENERGY STAR water heater, that's great. But if you use the new heater to feel less guilty about how much hot water you use, you may start to use more - and there go the savings.

So remember some basic tips: use cold water where possible (especially in laundry - you should almost never need hot water to do laundry); lower the temperature setting on your hot water tank from the factory default of 140F to 120F; use an ENERGY STAR dishwasher rather than wash dishes by hand; use low-flow showerheads and take showers rather than baths; leave the hot water in the tub after a bath if the heat is on, so the heat can escape into your house instead of going down the drain.

If you buy a new ENERGY STAR water heater and you don't keep these conservation tips in mind, you may find more than hot water going down the drain. And you surely don't want that!

ENERGY STAR water heaters > Water heaters > Home