After heating and cooling, water heating is the largest consumer of energy in U.S. residences, accounting for approximately 15% of electricity usage and 25% of gas usage. In general, factors impacting water heater energy consumption can be separated into two categories; factors affecting the amount of hot water used and those affecting the efficiency of the water heating system. Factors impacting water usage are the use of water for bathing, showering, shaving, and other purposes as well as the use of clothes washers and dishwashers. The largest impact on water heating energy consumption is typically showering habits.

Here we emphasize the factors that impact the efficiency of the water heating system. These include style, fuel, age, and energy saving options.

Styles of Water Heaters
The most common type of system by far is a Conventional Tank system that heats hot water and stores it in a tank until it is needed. Tanks typically range in size from 20 to 100 gallons. The size of tank you need is a function of water use; the more hot water you use, the larger the tank that you will need to supply sufficient hot water.

Hot water storage systems use energy to heat the hot water, and then to maintain the temperature while heat is lost through the walls of the tank. Accordingly, the larger the tank, the more energy lost, so you want to make sure you do not install an oversized unit.

While most water heater systems are stand-alone systems, they can also be integrated with the boiler used to heat the home. (It is also possible to integrate water heating with a hot air furnace, but such installations are very rare). There are two styles of integrated systems; Tankless Coil and Indirect. Tankless Coil systems heat water as it is needed just as a demand system, the only difference being that the boiler is used to heat the water. Indirect systems also heat water in the boiler, but the water is then stored in a tank. The advantage of a tankless coil system is the avoided cost of purchasing a separate water heating system. The disadvantage is that during the non-heating season water heating is inefficient since the heating system must operate solely for heating water. Indirect systems have the added cost of a tank, but the improved efficiency generally offsets this cost; in fact, these may be the most efficient systems available today. Tankless coil and indirect systems are more common with older oil boilers, but they are also installed with gas boilers.

Fuels for Water Heaters
By far the most popular fuel for water heaters is gas, which accounts for about 53% of all water heaters in the United States. Gas water heaters are typically more costly to install but less expensive to operate than electric water heaters. The average efficiency of gas water heaters has improved approximately 8% over the past 25 years.

Electric water heaters are the next most common type, accounting for about 38% of all installations, including heat pump water heaters, which have a very small market share. Electric water heaters (except heat pumps) are generally the most costly to operate. Although the non heat pump electric water heaters are the least efficient systems available, they have improved in efficiency by almost 10% in the last 25 years.

Oil water heaters comprise only 4% of the market, the remaining systems being either propane or solar. Oil systems have become less popular over the past several years with the increased availability of gas and the introduction of heat pump systems. Oil systems are considerably more expensive than gas to install. In addition, they tend to last 8 years on average, versus 13 years for a gas or electric system.

Solar heating was popular during the years that subsidies were widely available, but its popularity decreased when those subsidies dried up. In recent years, solar heating for hot water has made a comeback. It is expensive to install and will typically require a small back up system. However, a solar system is so economical to operate that it becomes cost-effective over its lifetime.

The following exhibit indicates the average purchase and energy cost of different types of water heaters using average prices of 10 cents per kilowatt-hour of electricity, 60 cents per therm of gas, and 90 cents per gallon of oil.

Purchase and Operating Cost of Selected Types of Water Heaters

(Source: American Council for an Energy Efficient Economy)

Other Factors That Effect Energy Use
In addition to style and fuel, there are a number of other factors that impact the energy use of water heaters; some are features of new water heaters while others can be implemented with existing units.

• Inlet Water Temperature – Variations in the temperature of water entering the water heater can have a substantial impact on energy consumption. The supply water temperature will typically vary by 10°F from one region to another. Though this cannot be controlled, it should be noted that a 10°F change commonly results in 15% swings in energy consumption.

• Usage Patterns – Most consumers use more hot water in the evenings and mornings than at other times of the day. For those who have an electric water heater, this usage contributes to the electric utility's "peak load," or the largest amount of power demand that they have to meet on a daily basis.