Optimizing Your Water Heater Efficiency to Save Money In 2024

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Water heaters play an overlooked but critical role in providing us with one of the necessities of modern living: hot water. It’s one of those things you only really appreciate when it’s not working. Water heaters provide not just a comfortable bath, but are essential in dishwashing and laundry. 

Given how much we rely on our water heaters, how can we get the most hot water for our buck? 

Well, water heater efficiency and proper maintenance can help extend its service life, improve its performance, and reduce energy usage and the resulting monthly costs. Apart from lowering your bills, efficient use of water heaters also contribute to a more sustainable living environment. 

In this comprehensive guide, we explore all facets of water heater efficiency so you can make full and effective use of your water heater without the monthly billing headache.

The Different Types of Water Heaters

There are several types of water heaters, each serving a unique function and catering to different needs.

Point of Use Water Heaters

These heaters are compact and designed to supply hot water to a specific appliance or location rather than an entire home.

Due to their size, they can be installed in tight spaces.

They can provide hot water quickly, reducing the wait time and water waste associated with larger systems.

Water heater efficiency is improved by the heater being located very closse to where the water is used. Which prevents wasting water before the hot water arrives.

Bosch Electric Mini-Tank Water Heater Tronic 3000 T 2.5-Gallon (ES2.5) – Eliminate Time for Hot Water – Shelf, Wall or Floor Mounted
  • CONVENIENT HOT WATER HEATER: 2.5 gallon point-of-use mini-tank fits under your sink to provide hot water right where you need it. Thermal efficiency is 98%. Dimensions : 13.75 W x 13.75 H x 10.75 D Inches
  • LONG LASTING QUALITY: This electric water heater is easy to maintain and has premium glass-lined material for a long service life. (Amps 12A, Volts (VAC) 120)
  • INDEPENDENT INSTALLATION: 36-37″ cord plugs into a 120 volt outlet for independent installation or in-line with a large hot water source
  • FAST RECOVERY RATE: Eliminates long waits for hot water at your sink, get on demand hot water at your every need (supplies up to 2 sinks at a time)
  • EASILY MOUNTED: Can be shelf, wall or floor mounted (bracket included); simply tap into the cold water line and install the water heater directly at the sink to provide hot water. Mini-tank water heaters are the perfect solution for a variety of applications such as small homes, garages, offices, in-law suites and anywhere you need hot water produced at the point-of-use.

Related article: Bosch Electric Mini Tank Water Heater Review: 3 Hot Choices

Tank Water Heaters

The most traditional type of water heater, tank heaters, are typically used in most homes. They store a certain amount of water (usually between 20 and 80 gallons) and maintain it at a set temperature.

When hot water is needed, it’s drawn from the top of the tank, and cold water enters the bottom to be heated.

A popular choice among these heaters is the 50-gallon gas water heater and the 50-gallon electric water heater .

AO Smith 50 Gallon – 37,000 Residential Gas Water Heater – Tall Model, Propane (10 Yr Warranty)
  • Intended Household: 3-4 Person, Application: Plumbing, Fuel Type: Propane, Capacity (Gallons): 50, BTU Input: 37000
  • Energy Factor: 0.62, Energy Star Rated: No, Gas Connection: 1/2″, Water Connection: 3/4″, Height (Inches): 60.75″
  • Vent Size: 4″, Venting: Atmospheric, Vent Size: 3″, Diameter (Inches): 22″, Depth (Inches): 22″
  • Weight (lbs): 165 lbs, 1st Hour Delivery (Gallons): 88, Recovery 90°F Rise: 41 GPH, Warranty: 10 Year Limited Tank & Parts Warranty
  • Max Altitude (Feet): 10100

Related article: Rheem 40 Gallon Gas Water Heater Reviews: Top Five Models

Tank style water heaters are the worst at water heater efficiency because they store a large amount of water prior to being used. Water heater efficiency can be greatly improved with water heater blankets and pipe insulation.

Tankless Water Heaters

Unlike traditional heaters, tankless water heaters don’t store hot water. They heat water directly whenever needed using heating elements that heat water through the unit.

This eliminates the need for a storage tank and significantly reduces energy costs because it doesn’t need to maintain a tank of hot water at all times.

Water heater efficiency is excellent in tankless water heaters. Although hybrid heat pump water heaters are even better.

Related article: 8 Rheem Electric Tankless Water Heater Reviews: 220-240 Volt

Rheem RTEX-24 24kW 240V Electric Tankless Water Heater, Gray
692 Reviews
Rheem RTEX-24 24kW 240V Electric Tankless Water Heater, Gray
  • ON/OFF Dial Control with adjustable digital temperature display
  • Self-modulating power control
  • 24kW Model Flow Rate: up to 5.9 GPM for RTEX-24
  • Bottom 3/4″ NPT water connections
  • On demand, consistent and continuous hot water

Hybrid Water Heaters

Hybrid, or heat pump water heaters, are the most energy-efficient options on the market. You cannot buy better a water heater with better water heater efficiency.

They use electricity to move heat from the air or ground to heat water instead of generating heat directly.

This makes them up to three times more energy-efficient than traditional tank heaters.

State Proline XE Series 66 Gallon Capacity 4.5 kW Heating Input Hybrid Electric Heat Pump Water Heater
  • 79 Gallons per Hour First Hour Rating
  • 3.45 Uniform Energy Factor Rating
  • 21 Gallons per Hour Recovery at 90°F Rise
  • Dimensions: 61″ H x 27″ D
Water heater types and water heater efficiency infographic. Source: US DOE Energy Saver 101: Water Heaters

Heat Pump Water Heater vs. Tankless Water Heaters: What’s the Difference? 

While heat pump water heaters and tankless water heaters are considered energy-efficient alternatives to traditional heater systems, there are important pros and cons you may want to consider before investing in either unit. 


The initial cost of a heat pump water heater is generally higher than that of a conventional tank water heater. However, the silver lining here is that heat pump units are far more efficient in the long run, resulting in a lower operating cost over time that offsets the initial purchase cost. 

On the flip side, while tankless water heaters are still considered expensive upfront compared to traditional tank water heaters, they do cost fractionally less than their heat pump counterparts. 

Water Heater Efficiency: 

When comparing heat pump water heaters to tankless water heaters, it’s important to consider the process responsible for heating the water in your home. Heat pumps utilize natural resources (heat from the surrounding environment) to heat up the water. Heat pump water heaters also have a higher COP than traditional tankless water heaters. 

As such, those living in a cold temperature environment may find a tankless water heater to be more efficient. 

Over Time Investment: 

Both of these units share the same over-time cost principle; thanks to the energy-saving ratings of these units, compared to traditional water heaters, the cost can be offset due to lower demand in maintenance and unit repairs. However, this depends on factors such as usage, climate, and energy costs in your area. 

What to Look for in a Water Heater for Maximum Water Heater Efficiency

Choosing a water heater depends on various factors, including the size of your home, your hot water needs, and the energy sources available. When considering size, you’ll want to determine what capacity you’ll need. A 50 gallon gas water heater or a 50 gallon electric water heater is usually the perfect size for most homes.

Also consider the uniform energy factor (UEF) rating, which measures the water heater’s energy efficiency. The UEF takes into account both how much energy the water heater uses, and how much energy is used to power the water heater itself. The higher the UEF rating, the more efficient the unit is.

UEF ratings are determined by slotting water heaters into one of four different categories of hot water usage called bins. The water heater’s UEF rating in its bin is based upon its first hour rating. A water heater’s UEF should only be compared with water heaters within the same bin.

The table below from the US Department of Energy shows the bin classifications of water heaters based on size.

Bin classifications of water heaters based on size.

Upgrading to more energy-efficient models, like a hybrid water heater, can reduce your energy costs over time (and benefit the environment).

How to Clean and Maintain Your Water Heater For Better Water Heater Efficiency

Regular maintenance can significantly enhance your water heater’s longevity and performance. Most maintenance procedures are straightforward and can be done without professional help.

Routine maintenance tasks include:

Flushing the Tank

Flushing the tank at least once a year is integral to water heater maintenance. Over time, sediment and minerals from the water build up at the bottom of the tank. Below we list out how this maintenance check can help with both heat pump water heaters & tankless water heaters. 

Heat Pump Water Heaters: 

Heat pump water heaters use coils to facilitate the conversion of heat between the surrounding air and the water. Over time, these coils can accumulate dust and debris, reducing the overall efficiency of the unit. 

Tankless Water Heaters: 

One common maintenance issue homeowners face with tankless water heaters is debris build-up, causing units to overheat. This is due to minerals such as calcium and magnesium accumulating on the heat exchanger surfaces. Flushing helps remove these deposits and allows the water heater to work efficiently. 

Add Insulation

One of the biggest sources of heat loss in hot water heaters are the pipes.

Generally speaking, the farther the tap or faucet is from the tank, the greater the heat loss as it travels the length of the plumbing to get to the end.

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Adding a water heater blanket and pipe insulation can cut down on energy losses, improve efficiency, and save money in the long run.

Checking Pressure Relief Valves & Temperature Settings

The temperature and pressure relief valve is a critical safety feature of your water heater. It’s designed to release water when the temperature or pressure exceeds safe levels. This valve should be checked at least once a year to ensure it’s functioning correctly.

Heat Pump Water Heaters: 

When the pressure sensing unit (PSU) inside of a unit is above-average, components tend to bear the force of the excess pressure, which lead to more frequent maintenance calls, and in the worst-case scenario, a complete breakdown of the unit. Ensuring the pressure is properly regulated helps avoid this calamity. 

Heat pump water heaters have a “heat pump” mode as well as a “backup electrical heating element”. Unfortunately, this backup element tends to draw out more power. The backup heater element has a water heater efficiency that is three times less than the heat pump mode.

It’s a good practice to ensure that your unit is running at a lower temperature when not needed to reduce the burden on the components and save energy overall. 

Tankless Water Heaters: 

In terms of checking the pressure relief valves, tankless water heaters share the same characteristics as heat pump water heaters – excess pressure can lead to a severe strain on the components within your unit, which could lead to more severe consequences over time. 

However, when it comes to the temperature settings, adjusting settings on a tankless water heater can aid with preventing overheating the water in your home, which not only impacts the overall efficiency of the unit, but is also considered a safety concern as high-temperatures can lead to scolding. 

Inspecting Anode Rods

Anode rods are metal rods usually made of magnesium or aluminum with a steel core. They are designed to attract corrosive elements, which protects the steel water tank from rusting. Inspect the anode rod once a year. If more than six inches of the core steel wire is exposed or the rod is less than 1/2 inch thick, it should be replaced.

Performing routine maintenance can prevent costly repairs and extend the life of your water heater. If you’re uncomfortable performing these tasks or encounter issues, contact a plumber to assist you.

It’s important to note that tankless water heaters do not have a traditional “storage” tank for water, so you will not be required to do this maintenance step for this type of unit.

However, on the flip side, tank type and heat pump water heaters rely on the anode rod to prevent corrosion within the tank.

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Troubleshooting Common Water Heater Issues

Despite regular maintenance, water heaters can still encounter issues. The good news is that many of these issues can be diagnosed and often fixed without professional help. Here are a few common problems and possible solutions:

Lack of Hot Water

If your water heater isn’t providing hot water, it could be due to a tripped circuit breaker, a faulty thermostat, or a malfunctioning heating element (in an electric water heater).

Start by checking the circuit breaker and resetting it if needed. If the problem persists, it may be time to investigate the thermostat or heating elements.

Strange Noises

Hearing strange noises from your water heater often signals sediment build-up in the tank. This can be remedied by flushing the tank to remove the residue. If noises continue, it may indicate a more severe problem, like a failing heating element.


Noticing water pooling around your water heater is a clear sign of a problem. A leaking hot water heater may be caused by a faulty valve, excessive pressure in the tank, or even a leak in the tank itself.

Check the pressure relief and drain valves for leaks and tighten or replace them as necessary. If you spot water seeping from the tank it’s often a sign of corrosion. This requires professional attention and likely replacement of the unit.

Water Heater Safety

Safety is paramount when dealing with water heaters. Here are a few key safety tips:

Prevent Scalding

Hot water can cause severe burns, especially in children and the elderly. To prevent scalding, ensure your water heater’s temperature setting is not excessively high. The Consumer Product Safety Commission recommends setting water heater thermostats to 120°F.

Ensure Proper Ventilation

If you have a gas water heater, proper ventilation is crucial. A poorly ventilated water heater can lead to a dangerous and potentially lethal carbon monoxide build-up. Ensure the ventilation system is free of blockages and adequately sized.

Regular Maintenance and Inspection

Regular maintenance ensures the efficient operation of your water heater and plays a crucial role in safety. Routine checks can help identify issues early on before they become serious safety hazards.

Make your Water Heater Last

Water heaters generally last between 8-12 years, depending on the type, energy source, water quality, and maintenance schedule.

Specific average lifespans:

  • 8-12 years for conventional gas heaters
  • 10-15 years for electric heaters
  • 15-20 years for tankless ones.

Hard water can negatively impact a water heater’s longevity because it causes sediment build-up and corrosion. Annual flushing and draining, inspections every 3-5 years by a local plumber, and water softener installation can extend the heater’s life.

Whether using a 50-gallon gas water heater, a 50-gallon electric water heater, or exploring the benefits of a hybrid water heater, knowing how to optimize and maintain your system is critical to enjoying endless hot water without a hefty energy bill.

Conclusions on Water Heater Efficiency

Water heater efficiency is primarily based upon the type of water heater purchased. However, each type of water heater is better suited for different uses within the house and geographic weather locations.

Air sourced hybrid heat pump water heaters provide the very best water heater efficiency but are best used in warm climates.

Electric tankless water heaters are second best at water heater efficiency but may require very expensive rewiring to install. Gas tankless water heaters need to be vented outdoors but are very good at increasing water heater efficiency.

Point of use water heaters may not require new wiring but have the shortest lifetimes.

Always properly maintain your water heater to preserve its water heater efficiency.

Last update on 2024-07-13 / Affiliate links / Images from Amazon Product Advertising API

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