What type of water heater is the most energy efficient? - Reachable home (2023)

As a homeowner, you want your water heater to help you reduce your energy bills while also reducing your carbon footprint - this is where energy efficiency comes in.

So what type of water heater is the most energy efficient?

Energy Star rated solar water heaters are the most energy efficient, followed by ground source heat pumps and heat pump water heaters. An energy efficient water heater should keep your electricity bills down and provide enough heat for your home's needs.

The rest of this post examines the different types of water heaters and the most energy efficient ones to help you make the best choice.

I will also look at the factors that affect a water heater's energy efficiency and provide general tips for choosing the best energy efficient water heater.

So read on to learn more about this important topic.

Table of contents

Types of water heaters and their energy efficiency

What type of water heater is the most energy efficient? - Reachable home (1)

The energy efficiency of water heaters depends primarily on their type.

It also depends on the mechanisms they use to heat water and what energy sources they get heat from (which I'll discuss in more detail later in this article).

Below I have ranked the most common types of water heaters from least to most energy efficient.

I also discuss their pros and cons to help you decide if they're worth buying given your home's needs, budget, and preferences.

Conventional electric water heaters

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Traditional electric water heaters are the most popular choice for residential homes.

These heaters have large tanks that heat the water, which they distribute to faucets throughout the home using heat from oil, gas, or electricity sources.

As the hot water leaves the tank, a cold water source refills the tank from the bottom.

Traditional water heaters are less energy efficient as they require a constant power supply. If the tank is oversized and too large for your home, which can sometimes be the case, this will further contribute to higher electricity consumption.

Electric water heater manufacturers try to reduce heat loss by insulating the system, but their energy efficiency is still low compared to other heaters.

Still, there are reasons why they are popular with homeowners.

B. conventional water heatersrelatively easy to care forfor the average homeowner, which is a big plus. So it's not obvious that the extra expense of buying a more energy efficient water heater makes sense for everyone.

water heater

What type of water heater is the most energy efficient? - Reachable home (3)

As the name suggests, instantaneous water heaters contain no water. Instead, they only provide hot water when you need it.

Since they do not store hot water in a tank and only heat the water that is actually used, they do not use as much energy as tank water heaters.

Also, no heat is lost from the tank as standby losses, making instantaneous water heaters more energy efficient than traditional water heaters.

Specifically, instantaneous water heaters use 24% to 35% less energy than traditional heaters for homes that use up to 40 gallons (151 L) of water per day. On the other hand, they use between 8% and 15% less energy in homes that use more than 151 L (40 gallons).

If your household usage is well over 40 gallons (151 L), you may find that non-instantaneous water heaters cannot provide the amount of hot water you need.

For example, with these heaters you want to avoid using the dishwasher and the hot shower at the same time.

Water heater with geothermal heat pump

geothermal heat pumpsare one of the most energy efficient types of water heaters. They use the sun's energy stored in the ground to generate heat, as opposed to electricity or other energy sources such as traditional water heaters.

Heat pumps require electricity to drive their compressors and manifolds to move the hot water from one point to another, much like any other water heating solution.

Heat pumps can also be combined with traditional water heaters in a hybrid system to reduce electricity costs and your carbon footprint.

Heat pumps use up to 60% less energy to provide households with hot water. While they require power to control critical parts, they use a much smaller fraction than traditional systems.

The only downside to geothermal heat pumps is that they are relatively expensive to install. However, once you get that part out of the way, you should see a return on your investment in about a couple of years.

Condensing water heaters

Condensing instantaneous water heaters work like traditional water heaters, but are far more energy efficient.

Because they use a tankless system, they don't have to waste energy by maintaining a constant high temperature in a tank. Instead, these heaters heat water as it flows through their heat exchanger before it is released to the faucets.

Condensing water heaters use up to 30% less energy to provide domestic hot water than traditional water heaters. However, they still rely on electricity, heating oil or gas to generate heat, although they have the benefit of storing excess heat for reuse.

Solar water heater

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As the name suggests, these heaters use solar energy via solar panels to heat water in a tank.

Solar energy is renewable and contributes fewer emissions to the atmosphere. Therefore, it is one of the most energy efficient water heating systems.

Solar heaters are up to 90% more energy efficient than other water heaters.

However, there are a few disadvantages of solar water heaters that you should be aware of.

  • They are expensive to install.
  • They are more practical in areas with more sunshine. If you live in places with meager UV index values, you may need to spend more money on solar panels, which can capture more UV rays in low-light conditions. Alternatively, you may need to consider a backup power supply.

Factors affecting the energy efficiency of water heaters

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Fuel type or energy source

Electricity, heating oil, solar, propane, natural gas, and geothermal systems are some energy sources that can power your water heaters.

Let's look at the different energy sources and how they affect energy efficiency:

  • Electricity:Electric heaters cost homeowners a lot of money every year, but they're more efficient than gas for hot water.
  • Natural gas:Natural gas is cheaper than electricity and other fuels. However, it may not be accessible in your location.
  • Solar:Solar energy is the most energy efficient source for heating water. It can serve as a power source for conventional and instantaneous water heaters, but may be unstable due to unpredictable weather conditions. In addition, these systems are more expensive to install.

The heating mechanism

A tankless water heater is always more efficient than a traditional system as it does not need to preheat water and only heats the water you use.

Traditional water heaters must maintain the water temperature in the tank and keep it from cooling down.

On the other hand, instantaneous water heaters only become active when there is an immediate need for hot water. The heating mechanism allows the heater to deliver exactly the amount of hot water you need every time.

The size of the house

The size of your water heater must match the hot water needs of your home.

A single-family home with only three to four residents can use an instantaneous water heater efficiently. In these houses, usually only one person uses hot water at a time.

On the other hand, instantaneous water heaters may not be suitable for larger households.

For example, several people can use the hot water shower in separate bathrooms at the same time.

In this scenario, a tankless water heater uses much more energy to keep up with demand. When hot water demand is very high, a tankless system may not be able to keep up.

As a result, traditional water heaters are often less expensive for larger households.

Choosing the most efficient water heater for your home

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The best way to choose the most efficient water heater for your home is to carefully consider the above factors and the recommendations that apply to you.

If you have a large family, consider installing a traditional water heater using natural gas as the energy source.

This is especially true for homes with radiant heaters.

However, if you do not need a constant supply of hot water, you can do with a tankless water heater.

For best results consult a qualified HVAC professional. The HVAC team will inspect your home and consider any challenges and needs before making a final recommendation.


The most efficient water heater varies from house to house. In general, it is the one who finds the right balance between using energy and meeting your home's hot water needs.

Solar heating and hybrid systems of heat pumps and conventional water heaters are the most energy efficient on paper. However, they may not be suitable for everyone.

Solar water heating systems are expensive to install and do not work well in regions without enough sunlight.

Geothermal heat pumps are also expensive. The installation requirements (such as the amount ofSpace required for a geothermal heat pump) also make them impractical for many homeowners.

For more information on water heaters, including those that qualify for an Energy Star rating from the EPA and the US Department of Energy (DOE), see our articleHere.

What type of water heater is the most energy efficient? - Reachable home (7)

Erin Shine

Founder & Netzero Home Experimenter

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