The average home uses 25 percent of its energy consumption running the water heater. New water heaters are more energy efficient than most models which are only a few years old. A water heater lasts an average of 13 years. According to the California Energy Commission, a new water heater can save an average of $1 a month and up to $156 over the life of the water heater.
Energy Factor Label
When purchasing a new water heater, it is important to read the energy factor label posted on it. The number is represented as a decimal point followed by two digits. The higher the energy factor number, the more energy efficient the water heater. Electric water heaters have an energy factor of .75 to .95, while gas water heaters are between .50 and .70. Electric models are more energy efficient; however, the cost will depend on whether electricity or gas is more expensive to use in your home.
The yellow label EnergyGuide is another tool designed to help consumers, and it provides the approximate cost of operating a particular unit. The large number in the middle of the EnergyGuide is the estimated annual cost to operate the water heater. The guide also shows the range of the annual cost of comparable water heaters so you can easily compare models.
The most common types of water heaters are gas and electric models. A more energy-efficient option are solar hot water systems, which are most often used in homes to heat swimming pools. Also available are tankless water heaters, which only heat water as it is needed, instead of continually heating stored water. Not all systems are good in every home, so compare all options before buying a new unit.
Water heaters with a higher energy factor cost more initially, but will save more money later. For example, if you purchase a water heater with a higher energy factor of .04, and it costs $16 more over another water heater, you can save $141 more over the life of the water heater. This means it will only take 18 months to recover the cost of purchasing a more- expensive model.