The best water heater for your circumstances depends on many factors. We’ll get you started by introducing the four general categories of water heater that are suitable for renovation projects, and describing their advantages and disadvantages.

Once you know what type of system you want, it’s usually wise to get the most efficient unit you can afford. You can compare the estimated yearly operating cost (found on the EnergyGuide label) for two different water heaters to get an estimate of how much money one will save you each year over the other. Then look at the difference in purchase price between the two units and divide that difference by the yearly energy savings to compute how many years it would take to recoup the cost of the more-efficient unit.

And pay attention to these other efficiency features:

  • How many inches of insulation does it have? Look for R-16 for a gas unit, R-22 for an electric-resistance unit.
  • How long is the warranty on the heater? If it’s a short warranty and you have to replace the heater, it wasn’t very energy efficient.
  • Is there an accessible anode rod? Better yet, are there two?

Tank-Type Water Heaters

Most tank-type water heaters have steel tanks, lined on the inside with a glass-like coating and insulated on the outside with fiberglass or rigid foam. The insulation is covered with a sheet-metal jacket. Heat is usually supplied by a gas flame or an electric heating element; both types are thermostatically controlled.

An especially energy-efficient option is the gas condensing water heater. Rather than sending hot combustion gases up the flue, it captures heat from those gases and uses it to further heat the water. An ENERGY STAR-rated condensing water heater can save over $100 a year compared with a standard model.

Tank-type water heaters are very common, and most plumbers are familiar with them. But they may not be the best choice for a vacation cottage that gets intermittent use. Because this type of water heater has a finite capacity, they’re also not great for meeting big demands, as for a spa, or for filling bathtubs.

The best tank-type water heater for your home will depend on what fuel you use, how much water you use, and whether you plan to include a solar water-heating system.

Tankless Water Heaters

The biggest advantage of a tankless water heater is that it doesn’t waste energy by storing hot water until it’s needed, or by losing heat from a storage tank. When a faucet draws hot water, the gas burner or electric heating element turns on, heating water as needed.

However, tankless water heaters are not appropriate for every situation. Electric units are limited in their flow rates, which average 1 gpm. (Units with higher flows exist, but their application is limited by their high electrical demand.) Gas units have flow rates of 1.3–3 gpm, but they require venting for combustion gases, which limits placement.

A tankless water heater may be your best choice if

  • you don’t have many people in the house, and you need a steady flow of hot water during “rush hour”;
  • you’re remodeling a guest cottage or summer home; or
  • you’re adding new faucets far from the current water heater and want to avoid long pipe runs by adding a tankless heater near the distant end use. 

Heat Pump Water Heaters

Heat pump water heaters work like a refrigerator in reverse: They pull heat from the surrounding air to put into the water. They are roughly twice as efficient as conventional electric water heaters, with a comparable first-hour rating. A backup electric-resistance heating element responds to high-demand situations that exceed the capacity of the heat pump.

By taking heat out of the air, a heat pump water heater also dehumidifies the space and cools the air. So locating this type of water heater inside a home’s conditioned space is advantageous in hot-humid climates. The positive summertime effect outweighs the negative wintertime effect.

A heat pump water heater is somewhat noisier than a conventional water heater, but the noise is unlikely to be noticed if the water heater is located in a garage or an unoccupied basement. The filter on these units should be cleaned periodically.

Solar Thermal

You may be able to use the sun to heat much of your water, whether for the house, pool, or spa. The simplest and most cost-effective use of solar is to heat a pool. Solar collectors with no glazing are normally used for this purpose, and they are relatively inexpensive. They may be metal (usually copper) or plastic; plastic holds up better to treated water, and copper holds up better to the sun’s exposure. It’s usually not hard to find a contractor qualified to install pool solar.

Spa heating is similar, but it requires higher water temperatures. Glazed plastic collectors can deliver these temperatures; however, they are more expensive than unglazed collectors. For either pool or spa heating, it’s best to place the collectors higher than the water, so they can drain down when the circulating pump shuts off. This gives good freeze protection in winter and prevents overheating in summer.

For pool or spa, have a pro size your collector. Be sure to get a well-insulated spa—and use an insulating cover to keep the heat in the water.

There are two basic types of solar water-heating system: active and passive. Active-solar systems use a pump and controls to circulate a fluid that collects solar heat. Passive-solar systems use natural convection and may have no mechanical parts. Passive systems aren’t as thermally efficient as active systems, but they’re generally more durable, since there are fewer parts that can fail.

Of the active systems, the drainback and the closed-loop are the two most durable. Drainback systems let water drain back into a tank when the pump to the collectors shuts off, while closed-loop systems remain full of an antifreeze fluid, such as glycol, oil, or alcohol.

Of the passive systems, the two main types are thermosyphon and batch heaters. A thermosyphon system is more efficient, as the heated water is stored in an insulated tank, usually on the roof. A batch heater collects heat when the sun shines on it, but loses much of that heat overnight, unless it has an insulated lid. The thermosyphon system can suffer from freeze damage, so it comes with antifreeze fluid in the collector; for milder climates, a freeze valve lets cold water out and warm water in to prevent damage.

A solar water-heating system will probably not meet all your hot-water needs, so you will need a backup water heater. The solar system usually needs its own storage tank, from which preheated water flows to the fuel-fired water heater. Building codes, and the amount of solar hot water generated daily, may require a storage tank of up to 120 gallons, so you’ll need to find room for a large tank.

Another possible use of the sun is called simple solar—for example, an uninsulated water storage tank placed in a warm attic. Cold water run into this tank could be heated by the warmth of the attic to 120° or more in summer, leaving little for the backup heater to do. A tank in a greenhouse space, or a coil of large-diameter tubing in the attic, could do the same job. Just be sure to drain simple systems in winter, if there’s a chance that they might freeze.

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