Need to replace your water heater? Consider electric

Discover the what type of electric water heater is right for your home.

Clean energy

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Electric water heaters are more energy efficient than gas and oil burning water heaters.

In most households, water heating is the second-biggest use of energy. Like other fossil fuel powered appliances, gas or oil burning water heaters release harmful pollutants into the air like carbon monoxide, nitrogen oxides, formaldehyde, and fine particulate matter.

Electric water heaters are not only cleaner and healthier, they are also more efficient than gas or oil water heaters. Switching to an electric water heater could help you save on your energy bills and remove a source of air pollution.

Types of electric water heaters

Conventional storage water heaters

Electric storage tank water heaters operate similarly to gas powered water heaters. However, instead of a gas burner at the bottom of your storage tank, there are electric heating elements that heat the water. The water is heated until it reaches the thermostat setpoint temperature and then stored until you want to use it.

Storage tank water heaters are less efficient than other types of electric water heaters because the tank will lose heat to the surrounding environment and thus require continual energy use to maintain the water temperature. A heavily insulated tank will lose less heat than a model with less insulation. Additionally, storage water heaters can take a long time to reheat the tank once all of the hot water has been used.

Tankless or on-demand water heaters

A tankless or on-demand water heater creates hot water as you need it instead of storing ready to use hot water. This means that tankless water heaters do not lose as much energy as storage water heaters and are therefore 24 to 34 percent more energy efficient and can save you money on your electric bill, but it will take a little longer to get hot water from your tap.

Tankless water heaters tend to cost more than storage water heaters up front, but tankless heaters last longer and have lower energy costs which can offset the higher initial price tag. No tank also means that you do not have the same risk of leaks or bacteria growth as you would with a storage tank water heater.

Heat pump water heaters

Like heat pumps to warm the air in your home, heat pump water heaters work by moving existing heat from the air or ground into the water. Heat pump water heaters transfer heat from the surrounding air to the storage tank rather than using an electric heating element like conventional storage water heaters. This method heats the stored water faster than conventional electric storage heaters and is much more energy efficient. 

The initial cost of heat pump water heaters can be high but with federal and state tax incentives and rebates and reduced energy use, most people can pay back their heat pump water heater within the first year. Households could save $550 a year on their electric bill with a heat pump water heater compared to a conventional electric water heater.

Solar water heaters

There are two types of solar water heaters; active systems and passive systems. An active water heating system will use either direct circulation which pumps water through the solar collector to heat it and then into the home, or indirect circulation which pumps non-freezing, heat-transfer fluid through the collectors then the heat exchanger to transfer the heat to the water. Indirect circulation systems are better suited for climates that experience freezing temperatures.

Passive solar water heating systems are generally less expensive and last longer than active systems but are not as efficient. The two most common types of passive systems are thermosyphon and integral collector-storage systems. Thermosyphon systems heat water in a collector on your roof and then circulates it through your home when you turn on a hot water faucet. In integral collector-storage systems, water is stored in a tank covered with a transparent material to be heated by the sun directly. Integral collector-storage systems are more common in areas that do not reach freezing because water is stored outside.

There are several factors that will affect what type of solar water heater you purchase and how it gets installed based on the climate you live in, the solar resource, building code requirements, etc. When selecting the correct solar water heater system, you will want to work with a qualified solar thermal systems contractor so the cost, size, and efficiency of your system is considered properly. 

Installing an electric water heater

The variety of options for electric water heaters means that the installation process will vary as well. Some of the criteria you should consider when selecting a system are the cost of installation, energy efficiency, and the size of the system, including the size of your home, the size of the system, and your rate of hot water use.

Heat pump water heater

Ways to save

Heat pump water heaters with the ENERGY STAR label qualify for a tax rebate under the Inflation Reduction Act. Eligible consumers can get a 30 percent tax credit on the cost of the equipment and installation, with a maximum tax credit of up to $2,000 per year. 

Simple ways to improve the efficiency of your water heater and save on energy bills are to lower its thermostat to 120ºF and insulate your water storage tank and hot water pipes. These tricks will also decrease the amount of time you have to wait for the water to get hot.


Jordan Hamrick

Utility Watchdog Campaigner, Illinois PIRG

Jordan works as a campaigner and organizer for Illinois utility campaigns, focusing on consumer protections and transitioning Chicago towards clean, renewable energy. Jordan lives in Chicago, where she enjoys reading and spending time outdoors.

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