Conventional storage tank water heaters are the most popular type of water heating systems today, as they have been for a long time. They use gas or electricity to heat water inside a large holding tank and maintain the heat until the water is needed somewhere in the home. The main advantage of this type of water heater is the cost. These units are the least expensive to purchase of all the types and are also easily installed. On the negative side, they are not as efficient as some other types of water heaters because they lose heat through the walls of the tank, causing the energy source to constantly turn back on to keep the water hot.
Tankless water heaters, also known as demand water heaters, have become quite popular because they eliminate the wasted energy produced by conventional heating systems. Cold water passes through a series of tubes where heating elements bring the water to the desired temperature instantly before sending it out through the pipes in the house. The disadvantages of the tankless systems are primarily related to cost and availability of water. The instant heating system can only keep up with a certain amount of water demand, but typical use will not present a problem most likely. The cost of installation is a minor disadvantage because the long-term savings will probably outweigh the initial purchase and installation costs.
Solar hot water heaters use photovoltaic cells to gather energy from sunlight and use it to heat water for the home. The major advantage of solar systems is the complete lack of need for electricity or gas. The energy needed to heat the water is completely free. These systems also require very little maintenance and the amount saved on energy bills will quickly cover the cost of purchase and installation. The cost is the primary disadvantage of a solar heating system. They can be quite expensive to purchase and install. Although the energy bills will come down instantly, having the money up front can still be a problem for many. The other disadvantage of solar is the need for sunshine. If you live in a cold climate where it is often cloudy, you may not get as much efficiency out of a solar heater.
Heat pumps, like the ones used in your central home heating system, can also include a hot water heater. These systems pull heat from the surrounding air and pump it into a container holding the water---almost like a reverse refrigerator. The advantage of this type of water heater is it is up to three times more efficient than conventional tank heaters. But this type is more expensive to install and it must operate in an area that remains between 40 and 90 degrees Fahrenheit and with 100 cubic feet of space around it, which may not be possible for all homeowners.