Selecting the best water heater for your needs

When you're in the market to purchase or upgrade a water heater, there are several things to consider, including how you need it to perform, and whether you want to pay more upfront for an especially energy-efficient model to save significantly over the lifetime of the equipment.

Here's a quick rundown of the different types of water heaters:

Storage tank water heater

This is the most commonly used type of water heater. Water is heated using electric or gas energy and stored inside an insulated tank. When called for, heated water comes out through a pipe at the top of the water heater. Natural gas heat is generally less expensive than electric heat, however the equipment itself is usually more expensive upfront. The storage tank water heater has a general life expectancy of 10 years – and you should follow the manufacturer's recommendations.

On-Demand water heater

For households that don't need large amounts of hot water, an “on-demand” water heater might be a better option. Rather than storing water for future use, an “on-demand” model heats water as you need it using heating coils. It's much more energy-efficient that a storage tank – but provides a smaller flow of hot water per minute. Installing this type of water heater is easier in a home set up with natural gas, otherwise you'll need to make expensive upgrades to your home's electrical system. These generally have a life expectancy of 20 years.

Hybrid water heater

Hybrid water heaters operate much like heat pumps, transferring heat from the air into the water. In fact, this type of water heater requires more physical space due to the heat pump on top of it. It costs more to install initially, but uses much less energy than traditional water heaters over its lifetime. It typically pays for itself after 3 years, and has an average of 15 years' life expectancy.

There are many other things to consider when buying a new water heater, such as warranty, materials, digital displays, etc. It's also important to consider the energy savings you gain over the lifetime of the water heater you select.

As you consider whether to go with a storage tank, on-demand model, or a hybrid, you can calculate what your energy costs will be. The U.S. Department of Energy offers a guide to help determine the energy costs related to each.