Water heating is the third largest energy expense in a home, and typically accounts for about 13% of your utility bill. There are many choices in the market today, which can be confusing. When comparing the cost of various water heating options, keep in mind that there are two types of cost you need to look at: purchase cost and operating cost. Life-cycle costs, which take into account both the initial costs and operating costs of different water heaters, provide a much more accurate representation of the true costs of the water heater than the purchase price alone. The following chart compares life-cycle costs for the various types:

LIFE-CYCLE COSTS FOR DIFFERENT TYPES OF WATER HEATERS

Water heater type

Efficiency

Cost¹

Annual energy cost²

Life (years)

Cost over 13 years³

Conventional gas storage

57%

$380

$179

13

$2,707

High-efficiency gas storage

65%

$525

$157

13

$2,566

Conventional oil storage

55%

$950

$220

8

$4,760

High-efficiency oil storage

66%

$1,400

$180

8

$5,140

Conventional electric storage

90%

$350

$410

13

$5,680

High-efficiency electric storage

95%

$440

$380

13

$5,380

Demand gas

70%

$650

$160

20

$2,730

High-efficiency pilotless demand gas

84%

$1,200

$90

20

$2,370

Demand electric (2 units)

100%

$600

$414

20

$5,982

Electric heat pump

220%

$1,200

$140

13

$3,220

Indirect water heater with efficient gas or oil boiler

79%

$600

$100

30

$1,900

Solar with electric back-up

n/a

$2,500

$125

20

$4,125

¹ Approximate cost. Includes installation.

² Energy costs based on hot water needs for typical family of four and energy costs of 8.28¢/kWh for electricity, 68.8¢/therm for gas, $1.09/gallon for oil.

³ Future operation costs are neither discounted nor adjusted for inflation.

Source: American Council for an Energy-Efficient Economy.