Water Heater Options: Complete Guide to Choosing the Right System

Water Heating 11 min read

Table of Contents

Choosing the Right Water Heater for Your Household

Water heating accounts for 14-18% of your home's total energy use, making it the second-largest energy expense after heating and cooling. Choosing the right water heater involves balancing upfront costs, operating efficiency, household needs, and available space. The wrong choice costs you hundreds of dollars annually in wasted energy, while the right system delivers decades of reliable, efficient hot water.

Modern water heaters span three main categories: traditional storage tank systems, tankless on-demand heaters, and efficient heat pump units. Each technology offers distinct advantages, and the best choice depends on your household size, usage patterns, available utilities, space constraints, and budget. This guide breaks down each option to help you make an informed decision that matches your specific needs.

Storage Tank Water Heaters: The Traditional Standard

Air leaks are the single biggest source of wasted energy in most homes. You can't save energy efficiently if conditioned air constantly escapes and outdoor air infiltrates. The good news: air sealing delivers the highest return on investment of any efficiency improvement.

Where Air Leaks Hide

Focus your efforts on these high-impact areas:

  • Attic access points: Pull-down stairs and whole-house fan openings
  • Recessed lights: Gaps around fixtures penetrating into attic
  • Plumbing penetrations: Where pipes enter walls, especially under sinks
  • Electrical outlets: Exterior walls and unheated spaces
  • Baseboards: Gap between floor and wall on exterior walls
  • Window and door frames: Interior trim gaps
  • Dryer vents: Check damper closes fully
  • Fireplace dampers: Should seal tightly when not in use

Simple Sealing Solutions

Materials needed (about $50 total):

  • Caulk (interior and exterior grade)
  • Expanding foam (minimal expansion for small gaps)
  • Weatherstripping (adhesive-backed foam or V-strip)
  • Outlet gaskets
  • Caulk gun
💡 The Biggest Bang for Your Buck

Sealing attic air leaks often reduces heating and cooling costs by 15-20% for an investment of under $100. This single afternoon project typically saves $200-400 annually. That's a payback period of 2-3 months.

Quick Sealing Projects (2-4 Hours)

  1. Attic penetrations: Use expanding foam around pipes, vents, and wires entering attic. Focus on areas above bathrooms and kitchens.
  2. Outlet gaskets: Install foam gaskets behind outlet covers on exterior walls. Takes 2-3 minutes per outlet.
  3. Baseboards: Apply thin bead of caulk where baseboard meets floor on exterior walls.
  4. Window trim: Caulk any gaps between window frames and interior trim.
  5. Door weatherstripping: Replace worn door sweeps and perimeter weatherstripping.

Smart Thermostat Settings and Strategies

How you use your thermostat matters more than the thermostat itself. These strategies work with any thermostat, though programmable or smart thermostats make them easier.

Optimal Temperature Settings

Heating season:

  • 68°F when home and awake
  • 62-65°F when sleeping or away (8+ hours)
  • Each degree lower saves 1-3% on heating costs

Cooling season:

  • 78°F when home
  • 82-85°F when away (4+ hours)
  • Each degree higher saves 3-5% on cooling costs

Common Thermostat Mistakes

Avoid these efficiency killers:

  • Constant temperature: Setting one temperature 24/7 wastes 10-30% compared to setbacks
  • Extreme setbacks: More than 10° difference triggers inefficient recovery
  • Frequent adjustments: Let system run at set temperature rather than constant tweaking
  • Cranking temperature for faster heating/cooling: System heats/cools at same rate regardless—you just overshoot target
ℹ Smart Thermostat Worth It?

Smart thermostats ($120-250) typically save $100-150 annually through automated setbacks and learning patterns. They usually pay for themselves in 1-2 years. However, you can achieve 80% of those savings with disciplined manual adjustments or a basic programmable thermostat ($30-50).

LED Lighting Upgrades

LED bulbs use 75-80% less energy than incandescent bulbs and last 15-25 times longer. At current prices, LEDs are a no-brainer for any socket you use more than 1 hour per day.

Prioritize High-Use Areas

Replace bulbs in this order for maximum savings:

  1. Kitchen and bathroom: Used multiple hours daily
  2. Living areas: Family rooms, offices
  3. Outdoor fixtures: Especially dusk-to-dawn or motion-activated
  4. Accent lighting: Often forgotten but left on for hours
  5. Bedrooms and closets: Lower priority due to less use

LED Selection Guide

Replaces LED Watts Annual Savings (3hrs/day)
60W Incandescent 8-10W $7-10 per bulb
75W Incandescent 11-13W $9-13 per bulb
100W Incandescent 14-17W $12-16 per bulb

Cost: Quality LEDs run $2-6 per bulb. A whole-house upgrade (25-30 bulbs) costs $75-150 and saves $200-350 annually.

Water Heating Efficiency Improvements

Water heating typically accounts for 14-18% of home energy use. These simple adjustments cut that significantly.

Temperature Adjustment (Free)

Most water heaters ship set to 140°F, but 120°F provides adequate hot water while:

  • Reducing standby heat loss
  • Slowing mineral buildup
  • Preventing scalding
  • Saving 6-10% on water heating costs

Adjust the thermostat on your water heater (usually requires screwdriver to access). Wait 24 hours, then test hot water temperature. Adjust again if needed.

Insulation Blanket ($20-35, 30 minutes)

For water heaters installed in unheated spaces (garage, basement), an insulation blanket provides two benefits:

  • Reduces standby heat loss by 25-40%
  • Saves $20-45 annually per water heater
  • Pays for itself in under one year

Important: Don't cover the top or bottom of gas water heaters. Leave access to draft hood and burner. Electric water heaters can be wrapped more completely.

Pipe Insulation ($15-25, 1 hour)

Insulate the first 6 feet of hot water pipes leaving your water heater. This simple project:

  • Delivers hot water faster (less waste down drain)
  • Reduces heat loss during distribution
  • Saves $8-12 annually
  • Makes hot water feel hotter at faucets

Low-Flow Fixtures ($30-80, 15 minutes each)

Modern low-flow showerheads (1.5-2.0 GPM) and faucet aerators (1.0-1.5 GPM) maintain pressure while reducing water use by 30-50%. For a family of four:

  • Annual water savings: 7,000-10,000 gallons
  • Energy savings: $70-120 (less hot water = less heating)
  • Payback period: 3-6 months

HVAC Maintenance: DIY Essentials

Regular maintenance keeps your HVAC system running efficiently. These simple tasks prevent 5-15% efficiency loss and costly repairs.

Filter Changes (Every 1-3 Months)

Dirty filters force your system to work harder, reducing efficiency by 5-15% while shortening equipment life.

Filter selection guide:

  • Standard fiberglass (MERV 1-4): $1-3, minimal filtration, change monthly
  • Pleated (MERV 7-8): $8-15, good balance, change every 2-3 months
  • High-efficiency (MERV 11-13): $15-30, best filtration, can restrict airflow if not changed promptly

Tip: Buy filters in bulk (6-12 at a time) and set phone reminders for changes.

Outdoor Unit Maintenance (Twice Yearly)

Spring and fall, spend 30 minutes on outdoor unit care:

  1. Clear debris, leaves, and vegetation within 2 feet of unit
  2. Gently spray fins with garden hose (outside to inside) to remove dirt
  3. Straighten bent fins with fin comb if significantly damaged
  4. Ensure unit sits level (check with torpedo level)
  5. Verify proper clearance above unit (minimum 2 feet)

Register and Return Vent Cleaning (Quarterly)

Vacuum registers and return vents to prevent dust buildup that restricts airflow. This simple 15-minute task maintains efficiency and improves air quality.

âš  When to Call a Professional

DIY maintenance covers basics, but schedule professional service annually for: refrigerant checks, electrical connections, blower motor lubrication, condensate drain cleaning, and combustion safety tests (gas furnaces). Professional maintenance prevents major failures and maintains peak efficiency.

Window and Door Quick Improvements

Even if replacement isn't in your budget, these fixes dramatically reduce energy loss.

Weatherstripping Replacement ($30-60, 2-4 hours)

Check all exterior doors for worn, compressed, or missing weatherstripping. Replace with:

  • Door sweeps: Seal gap under door (choose adjustable for best fit)
  • V-strip or foam tape: Seal door perimeter (foam easier but less durable)
  • Threshold gasket: Creates seal between door bottom and threshold

Quality weatherstripping lasts 3-5 years and typically saves $30-60 annually per exterior door.

Window Film for Solar Control ($50-150, 4-6 hours)

For windows with excessive solar heat gain (west and south-facing), heat-control window film:

  • Blocks 50-80% of solar heat
  • Reduces glare without significantly darkening rooms
  • Protects furnishings from UV fading
  • Costs $5-15 per window
  • Saves $50-100 annually on cooling in hot climates

Cellular Shades ($30-80 per window)

Cellular (honeycomb) shades trap air in pockets, providing significant insulation:

  • R-value of 2-4 (compare to window's R-2 to R-5)
  • Most effective overnight and on west-facing windows
  • Top-down/bottom-up style allows light while maintaining privacy
  • Install on most-used and largest windows first

30-Day Energy Efficiency Action Plan

Implement these improvements systematically over one month for maximum impact with minimum stress.

Week 1: Assessment and Quick Wins

Time required: 3-4 hours

  1. Walk house noting air leaks (use incense on windy day to see air movement)
  2. List all incandescent bulbs in high-use areas
  3. Check HVAC filter condition
  4. Measure water heater temperature
  5. Purchase: LED bulbs, caulk, foam, outlet gaskets, thermostat batteries
  6. Install LED bulbs in top 5 most-used fixtures
  7. Replace HVAC filter if needed
  8. Adjust water heater to 120°F

Week 2: Air Sealing

Time required: 4-6 hours

  1. Seal attic penetrations with expanding foam
  2. Install outlet gaskets on exterior walls
  3. Caulk window trim gaps
  4. Caulk baseboard gaps on exterior walls
  5. Check and replace door weatherstripping if worn

Week 3: Water Heating and HVAC

Time required: 2-3 hours

  1. Install water heater insulation blanket
  2. Insulate hot water pipes
  3. Install low-flow showerheads
  4. Install faucet aerators
  5. Clean outdoor HVAC unit
  6. Vacuum all registers and returns

Week 4: Optimization and Monitoring

Time required: 2-3 hours

  1. Replace remaining high-use incandescent bulbs with LEDs
  2. Set/program thermostat for optimal schedules
  3. Install window film on problem windows if needed
  4. Consider cellular shades for key windows
  5. Document baseline energy bills for comparison
  6. Schedule professional HVAC maintenance

Expected Total Investment and Savings

Total cost for complete 30-day plan: $250-450

Annual savings: $400-700

Payback period: 6-14 months

After the first year, these improvements continue saving money year after year with minimal additional investment—just filter replacements, occasional weatherstripping updates, and basic maintenance.

💡 Maximize Your Impact

Track your energy bills monthly to see improvements. Most utility companies provide online tools to compare usage year-over-year. Seeing the savings reinforces good habits and may inspire additional upgrades. Consider using savings toward larger improvements like additional insulation or a programmable thermostat.

Beyond Quick Wins

Once you've completed these foundational improvements, consider these next-level projects:

  • Attic insulation upgrade (see our Insulation Basics Guide)
  • Duct sealing and insulation
  • Smart power strips for phantom load reduction
  • Programmable or smart thermostat upgrade
  • Energy Star appliance replacement as existing units fail

The beauty of these quick wins is that they deliver results immediately while forming habits and understanding that make larger projects more effective. You'll know your home better, recognize efficiency opportunities, and make smarter decisions about future upgrades.

Related Articles