Ask the Expert: What is the most efficient type of water heater?

| by Teena Hammond
Ask the Expert: What is the most efficient type of water heater?

Knowing which type of water heater to buy makes it easier to be energy efficient. Find out from some of our Approved Contributing Experts, also known as ACE's, which water heater is best for residential use. Options include tankless on-demand hot water heaters, solar and geothermal.



Ted Clifton, founder of Zero-Energy Plans LLC and CVH Inc.

The best type of water heater to use? It depends! How about we start with what not to use!

 Do not, under any circumstances, even consider using a naturally aspirated gas water heater. They do not belong in a house, an office, a warehouse, or even in the garbage dump! (recycle them, please!) At around 55 percent to 60 percent efficient, they are extremely wasteful of energy, and they are likely to cause severe indoor air quality problems, especially if they are installed within the conditioned envelope of the house. The draft created when they are running is not enough to overcome the negative pressure exerted by a bath fan, and they can cause asphyxiation.

If you live in a very cold climate, you could consider a high-efficiency sealed-combusion or power-vent gas water heater. The tank will lose some energy during stand-by periods, but that energy will help heat your home, as long as the unit is located inside the conditioned envelope. If it is not possible to locate the water heater inside the conditioned envelope, consider an on-demand unit. The main drawback to on-demand units is that they seem to require a fairly large flow of water to trigger the burner ignition, which means some ultra-low-flow faucets may not be able to get hot water, unless you turn on the shower first. The distance between the water heater and the point-of-use is also an issue. This should be kept as short as possible for all types of water heater, but is even more critical if you are trying to get real efficiency out of an on-demand unit.

In a moderate or warm climate, the new heat pump water heaters should be considered. In a moderate climate, it could be placed in a garage, in a warm climate it should be placed in the conditioned envelope of the house. The same energy that is being used to heat the water is also helping to cool the house!

If the water heater needs to be placed inside the conditioned area in a cooler moderate climate, with few or no cooling degree days, consider an electric resistance tank-style water heater. They are 100 percent efficient, when you consider that the stand-by losses are helping to heat the house, and that you would rarely need to be cooling the house.

Finally, consider using a solar hot water heater, either as a stand-alone unit, or in conjunction with any tank-type option above. In very cold climates, it may be difficult to get enough hot water from the solar water heater to justify the cost, but in moderate or warm climates they will pay for themselves very quickly.

Heather Ferrier, marketing manager for Ferrier Custom Homes

As a result of their performance & affordability/shorter payback periods, our clients generally opt for either a tankless water heater or a solar hot water system. The decision between the two typically comes down to two factors: budget constraints and desired payback periods. 

Following is an overview of the pros and cons of each of the units. See which one you would pick if you were installing a new hot water system:

Tankless Water Heaters


  • Continuous supply of hot water on demand
  • Does not unnecessarily heat a full tank of water at all times as regular tank-type heaters
  • Compact design
  • More affordable than solar
  • Comes in gas or electric units
  • High efficiency factor
  • Plumbing is no different than a conventional tank type
  • Normally saves +/- 40 percent of energy used by traditional tank type water heater


  • If an electric unit is used, it will most likely require an upgrade to electrical panel to compensate for additional amps needed. In new homes or major remodels this is typically not a problem as you can account for the increase in amps when designing the electrical load/upgrading the service.
  • Requires more of an upfront investment than regular tank-type heaters
  • Electric is a great choice where gas is not available, although you are drawing from a non-renewable source (unless your electricity is produced with renewable energy)

Solar Water Heaters


  • Draws energy for renewable resource
  • Federal tax credit helps offset upfront costs by 30 percent
  • High efficiency factor
  • Least costly way to heat water
  • Simple system to install & maintain


  • More of an upfront investment = longer payback period
  • Drain-back and storage tanks require more storage space than tankless
  • More parts involved = more opportunity for repair

Rheem has a solar water heating calculator available online to show how much you would save by going with solar.

 photoScott Flynn, principal at Flynner Building Co.

On our new net-zero house we are using an evacuated-tube solar thermal hot water system. They are very efficient and well priced. Hot water from the roof feeds into an Energy Star 50-gallon tank located in the home. The tank has a heating element contained within it for back up.

We were able to reduce the amount of photo voltaics, relative to the electric tankless water heaters that were first discussed, saving the client thousands of dollars in equipment costs.

photoMelissa Rappaport Schifman, principal at Resonance Companies

As with most questions that deal with tradeoffs, the answer to this question will always begin: it depends. On what? Budget, type of home and hot water usage, and fuel sources available. Having said that, as a homeowner who looked into each of the following as potential options, here is my opinion.

On-Demand: A lot of people really like the instant on-demand tankless hot water heaters. The efficiency there is gained by only using energy when you need hot water. But these systems might not work that well when there are several people in a household that may want to shower at the same time. They also require venting, which may not be practical for some homes. For vacation homes or homes that are frequently vacant, I would highly recommend the on-demand water heaters. For homes with a lot of hot water usage, I think the results are mixed.

Solar:Another extremely efficient water heater uses solar thermal collectors — so the water is heated by free energy from the sun. The drawbacks are the upfront investment (household systems can cost in the range of $7,000-$10,000) and the need for space for an additional hot water tank — usually a 50-70 gallon tank. The initial cost, however, will be paid back — typically within 5 to 7 years — by lower operating costs.

Geothermal: In our case, we have a geothermal heat pump to heat and cool our home, and we have what's called a "desuper heater" — an auxiliary tank where the excess heat is dumped whenever the pump is running. It is basically a pre-heat tank, so in the summer and winter months, our water is already heated for us. The only time the back-up gas boiler kicks in is during the spring and fall months when we are not heating or cooling our house. If it is within your budget to get a whole-house geothermal system, then I think this is the most efficient option.

In any case, there are many easy things to do to make a hot water heater more efficient without a lot of investment. If you have a tank, one of the most important things to do is to properly insulate the tank (and pipes) so that minimal heat is lost during storage. Also, if you are leaving town, you can turn it off entirely so that energy is not wasted keeping the water hot while you are gone. Finally, turning the temperature down a few degrees will also save energy, because you usually mix it with some cool water anyway to get it to the right temperature. How often is scalding hot water required for the shower or washing machine?

For more information, see our Water Heaters research center.

Topics: Bathroom, Water Heaters

Teena Hammond
Teena Hammond has published more than 2,000 articles in People and W magazines, Women's Wear Daily, and in dozens of newspapers and books. She also wrote a home improvement, remodeling and decor column that ran in Gannett newspapers nationwide. She's interested in all things green and would love to hear from you with your story ideas.

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