Pros and Cons of Electric Water Heaters

hand adjusting temperature on electric water heater in shower

Americans spend approximately $500 a year on heating water in their homes, which accounts for around 18 percent of their total energy usage. While natural gas is the cheapest, most powerful way to heat water, homes powered exclusively by electricity are rising across America for a multitude of reasons.

One of the major factors is the improved technology and availability of modernized electric heating equipment like hybrid heat pump systems. There has also been an increase in population among warmer regions in the south, which has given rise to all-electric homes.

Natural gas water heaters are more commonly used in colder regions where more energy is needed to heat water. These systems are still used in just over half of all American homes, however, energy-efficient electric options for colder regions are changing these statistics.

The choice to use an electric water heating system is something to consider for any new or existing homeowner, especially if it's time to replace an old one. Here are the pros and cons of electric water heaters compared to other types.

What Do Water Heaters Do?

Water that's supplied to your house is unheated, so you need a way to warm it up for bathing, laundry, cooking, and cleaning. A water heater's only job is to provide constant availability of hot water to the various lines that run to your shower, sink, and appliances like dishwashers and washing machines.

The three most popular and accessible ways to heat water are natural gas, electric, and propane. The majority of residential homes will choose either gas or electric, as propane is generally used for camping sites, mobile homes, cabins, and other off-grid structures that don't have access to municipal "grid" services like gas and electric.

Among the three ways to heat water, there are five main types of water heaters to choose from, depending on the amount of hot water your household needs, and your budget. Each one has its specific advantages and disadvantages, which is why the decision ultimately comes down to practicality and cost.

man near water heater with tablet

Storage Tank Water Heaters

This is the most common water heater used in American homes. They are large, cylindrical structures, usually tucked into a corner somewhere in the basement. They take up a lot of space and have various lines running into them, making them somewhat of an eye-sore.

They can hold between 30-50 gallons of heated water inside of them so that when you want it, it's there. This makes for a convenient on demand hot water system, however, once the water in the storage tank runs out, you have to wait for it to heat up another reservoir.

Most homes with 2-4 people do not exceed their hot water needs on a regular basis, and generally use less than 40 gallons within the time it takes for the tank to heat more water. If you have a large family, or multi-family residence, the limited hot water supply may be an issue at times.

Storage tanks can be powered by natural gas or electric fuel systems. Gas will heat water up faster, but electric ones are cheaper upfront. Both need regular maintenance like cleaning and flushing from a professional, but gas storage tanks generally use half as much energy as electric-powered ones.

In their 10-15 year lifespan, they generally don't require any major maintenance and are fairly reliable. Once they reach their limit, though, they can breakdown easily and have been known to cause expensive leaks.

Tankless Water Heaters

Tankless water heaters can also be serviced by natural gas or electricity, and have become a popular option among homeowners who want unlimited hot water with reduced operating costs. They are installed on a wall, and take up as much space as an upper kitchen cabinet, making them a lot sleeker than storage tanks.

Tankless heaters also provide unlimited hot water, though it will take up to a minute to provide it to different taps. The closer they are to a fixture, the faster the hot water arrives. Some people choose to place multiple units next to different hot water supplies for more efficiency, especially in larger buildings.

These units cost more upfront, but they can make your money back in a few ways. First, they last 20-30 years which is twice the amount of time as storage tanks, and aren't known to breakdown all of a sudden, meaning your investment lasts longer, more safely.

If you are renovating your basement, space is a premium, and opening up some square footage can be the difference between a full kitchen or a kitchenette, or even an extra bedroom, which accounts for big savings if you are renovating for passive rental income.

The main way they save you money is by using overall less energy than a storage tank on a yearly basis. When used in a household with normal hot water use, tankless water heaters are 24-34 percent more efficient than storage tanks, according to the US Department of Energy.

Note that gas-powered units will save about $100 a year, compared to electric-powered ones that save around $45 annually. Electric units will be cheaper up front, costing between $500-800 compared to gas ones that range from $1000-2000. Electric heaters (both tank and tankless) will be cheaper and simpler to install since there are no gas lines to hook-up.

tankless water heater in shower

Heat Pump Water Heater (or Hybrid)

Heat pump technology is a popular way to heat your home's water, especially for anyone who lives in a warm or moderate climate. Heat pump water heaters are able to transfer warm air from inside the house to heat the water in the tank.

This process uses the same idea as a refrigerator, but in reverse, and in the end uses a lot less energy than the other two types of water heaters. Less energy use translates to lower utility bills.

All heat pumps are electric, and should be installed in a warm room, or one with excess heat since they draw warm air in and cool the space around them. Heat pump water heaters are recommended for climates that don't drop below 40 degrees F, though hybrid models are able to handle colder temperatures.

For those wanting to heat their home with electricity, these water heaters can save homeowners a lot on energy costs compared to tank or tankless electric water heaters (not gas). A family of four can save approximately $400 annually when using a heat pump water heater in comparison.

For households in colder regions, the split heat pump water heater is able to work efficiently when temps drop. Some models are rated to handle outside temperatures as low as -25 degrees F. Heat pump technology can also be combined to handle all of the home's heating and cooling needs as well as hot water consumption, saving a lot of energy in one convenient system.

Heat pump water heaters will cost more upfront compared to a storage tank, but are similar in price to tankless models, ranging anywhere from $1000-3000. Since they save around $400 a year, they end up paying for themselves eventually by lowering monthly energy bills.

    They look and take up the same amount of space as a storage tank water heater, and have a lifespan of 10-15 years. They will also need regular yearly maintenance from a professional, but are otherwise fairly reliable.

    Solar Water Heaters

    solar water heater on roof

    Solar water heaters gather energy through a solar collector or panel and heat up water in a storage tank. They are less common than the others, but as more people look for ways to utilize clean energy off the grid, this technology is gaining in popularity.

    The major pro of a solar water heater is that they don't use fossil fuels and can save you up to 80 percent on hot water energy costs when done properly. The major con is their price.

    You don't have to live off-grid to use solar energy to heat your water, but the cost of setting up this system is steep - usually around $5000 for the unit and $2000 for installation. Solar energy produces electricity, and you need to generate enough to heat your water.

    With active and passive solar heating options, there are different models to use in any climate. Since this technology relies on the sun, they will not work as well in persistently cloudy regions or homes in the shade.

    Some are better at storing heat even on cloudy days, however, and panels can be set somewhere on the property or on the roof to utilize the best angle for getting the sun's rays. Or, you can set up a back-up electric or gas system if you're on grid, or propane if off-grid.

    As an electric water heating source, solar energy can be a great investment to use either in conjunction with existing residential systems, or for use in off-grid situations.

    Condensing Water Heater

    Condensing water heaters are very similar to gas-powered storage tank heaters, but are even more efficient. They are able to capture more heat throughout their process and have very efficient burners and heat exchangers. They are also insulated better.

    These only work with natural gas fueling systems, so while they are worth noting as a popular and efficient type of water heater, they are not able to run on electricity.

    Electric vs Gas

    The biggest competitor to electric heating systems is natural gas. Each has their benefits, but also their disadvantages, and these will affect households differently depending on region, budget, and service.

    Electric water heaters are considered safer since you won't have to worry about a potential gas leak. This isn't a common issue with natural gas-powered water heaters, and even if there was a leak, it's often small and can be dealt with by the provider easily, but it's still something to consider.

    One of the biggest advantages of electric over gas is that these heaters won't require a licensed gas technician to install and hook up a gas line. If you don't have natural gas running to your home, this can be a significant factor. A licensed electrician and plumber will still be necessary to set up most electric-powered hot water systems.

    Heat pump water heaters may be something the DIY-minded homeowner could install, however, it's not recommended, and there may be local permits for changing or installing a new system of any kind.

    Electric-powered tank or tankless water heaters will be cheaper and easier to install than a gas-powered unit, and won't require any venting to the outside, but electricity is currently more expensive and less powerful than gas when used with these systems.

    Solar power water heaters and heat pump water heaters are changing these terms, however, since they provide the most energy-efficient way to heat water out of all of the options, and do so with electricity.

      Best Electric Water Heaters on the Market

      Rheem tankless water heater

      One of the best basic storage tank water heater on the market is the Rheem Performance 50-gallon Electric Tank Water Heater. This brand carries different sizes, but 50 gallons is more than enough for an average household without worrying about running out of hot water.

      At $550, it's a cost-effective and simple to install heater that's known for being well-built and easy to repair. It's not ENERGY STAR rated, but still has an efficiency rating of .93 which is still fairly good.

      For optimum efficiency, Rheem makes a 50-gallon ENERGY STAR rated hybrid heat pump water heater that costs just under $2000 and can save around $300 annually to offset the cost. There are also different local and federal rebates for switching to a hybrid heat pump water heater to help with the price tag.

      The Stiebel Eltron Tempra is an amazingly efficient tankless electric water heater, with a rating of 99 percent. For around $700, it's powerful enough to provide enough hot water for four showers at one time at 140 degrees F. It requires a 240 V supply and 150 amps.

      Alternate Energy Technologies offers different solar water heating solutions, including direct and indirect for various climates. They are all ENERGY STAR rated and even come with electric back-up systems. You need to be quoted to get a price.

      The Sunbank Solar Water Heater is a 40-gallon passive system that doesn't require pumps or a connection to a power source. The insulated tank can handle temps that drop to -40 degrees F and can be DIY-installed. For $2800, this system meets the majority of household needs and may qualify for government tax credits and rebates.

      ENERGY STAR Rating

      When looking at any kind of electric water heating system, ENERGY STAR rated models will be the most efficient ones compared to older, outdated models, often using up to 70 percent less energy than standard models. There are a number of tax credits available for upgrading to ENERGY STAR models, as well.

      ENERGY STAR rated models are available for solar water heaters and hybrid heat pump water heaters, however, there are no ENERGY STAR rated storage tank or tankless electric water heaters because of the amount of electricity that they use. Electricity depends on fossil fuels, so they don't make the cut according to EPA regulations.

      This doesn't mean that the tankless unit isn't a good option for efficiency, it just means their particular kind of efficiency doesn't meet the criteria. Electric storage tanks are considered to be less efficient, outdated technology, but tankless electric models are widely considered energy-efficient by other standards like LEED certification, for instance.

      Overall, hybrid heat pump water heaters and solar water heaters will be the most energy-efficient options, but there are still many factors involved as to what's the best choice for your home and energy needs, including your climate, your home's existing system, and of course, your budget.

      Look for rebates when considering a change to more energy-efficient technology like hybrid heat pump water heaters. While their cost is higher than electric storage tank or tankless models, they end up saving you money in the long run, especially with rebate programs.

      While there are many pros and cons of electric water heaters, newer, energy-efficient technology is making them a contender when it comes to upgrading your home's water heating system - even if you've always gone with natural gas. Since heating your home's water is the second biggest utility bill, it's worth considering all of your options.

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