It takes energy to get into hot water. Heating water is typically the third largest use of energy in your home, after heating and cooling.

The most common type of water heater in the United States heats and stores hot water in an insulated tank. To maintain the proper temperature, these water heaters use power whether or not you're using hot water.

In other parts of the world, tankless or demand water heaters are more common. These water heaters can use less energy, because they only heat water when you turn on the hot water tap. They are, however, significantly more expensive.

Look at the total life-cycle cost when comparing water heaters. According to the American Council for an Energy-Efficient Economy, the projected average cost over 13 years for storage and tankless water heaters using the same fuel is about the same.* Tankless water heaters generally last longer, but the high initial cost means you'll have to use the tankless water heater longer to realize the savings.

There are two simple ways to save on water heating costs now:

Conserve hot water

• Use lower flow showerheads and faucet aerators.
• Wash your clothes in cold water with detergents designed for cold water.
• Wait until your dishwasher is full to run it.

Lower the temperature
Set the water heater thermostat at the lowest temperature that gives you enough hot water. Lower water temperatures will also protect children from accidental scalds. The recommended temperature is 120 degrees F, or about halfway between the low and medium settings.

Comparison

Tank Water Heaters

• Capacity based on size of tank
• Less expensive to buy and install
• Simple upkeep and repair
• More tolerant of hard water
• Mass produced and well supported
• Waste energy with standby losses
• Can develop leaks
• Can run out of hot water

Tankless Water Heaters

• Capacity based on amount of water flow
• Larger initial cost
• Fewer dealers and trained service technicians
• Continuous hot water as long as operating within its capacity
• Take up less space
• Has trouble meeting large simultaneous demands for hot water