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Selecting the right type of water heater for your home is essential. To benefit from your investment, it must provide enough hot water, and also be energy efficient to help conserve resources and your finances. Hot water heaters are not one-size fits all. They are available in different sizes and capacities, use different energy sources/fuel types, and in models that provide on-demand or an in-tank supply of stored water.
To understand the needs of your home, it’s important to know exactly what a water heater is, the different types that are on the market, and what to look for when buying one. We’ll provide insights into these aspects of the purchasing process. In addition, this all-inclusive guide to water heaters offers an in-depth look into today’s advanced features, safety tips, and advice on maintenance to help your system last.

Introduction To Water Heaters

Water heaters are among the most expensive and energy-consuming appliances in your home. Consuming close to 20% of household budgets (second only to HVAC systems), they’re also often ignored.1 These appliances heat all the water you use for cooking, cleaning, and bathing and can supply water for space heating and other functions that require heating water.

A water heater enables a heat transfer process that uses an energy source (fuel or electricity) to raise the temperature of water. Unlike pots, kettles, and cauldrons that heat water on the spot, water heaters produce a continual supply of hot water at a preset temperature to accommodate the level of consumption in a household.

History of the Hot Water Heater

Until the mid-19th century, homes would be left with cold water unless there was a nearby hot spring or occupants lit a fire to heat water. The first instantaneous domestic water heater that operated without the use of solid fuel, such as wood or charcoal, was invented by Benjamin Waddy Maughan in 1868, called the geyser. The London-based painter built it to heat cold water that flowed through the top via pipes, using a burner at the base.

Hot water flowed directly from the geyser to a sink or tub. One downside was the system didn’t remove heated gases via a flue or any other device. Therefore, it was considered somewhat dangerous.

In 1889, Norwegian mechanical engineer Edwin Ruud developed a storage tank-type gas water heater after immigrating to Pittsburg, PA. The first automatic device of its kind, it gave rise to the Ruud Manufacturing Company, which still develops state of the art equipment including tank-type and tankless water heaters. Ruud’s invention was inspired by Maughan’s work.

Energy Use

Hot water heaters have been used in the U.S. for quite some time. The National Appliance Energy Conservation Act was enacted in 2015 to set minimum efficiency standards. At the time, the United States Department of Energy (DOE) was seeking to address the efficiency of increasingly energy hungry appliances.

The new standards increased the minimum energy factor of gas storage tank water heaters (of under 55 US gallons) to at least 60%. Prior to then, the minimum standard was 58% for 50-US-gallon units. These new standards also increased the minimum required energy factor of electric storage tank water heaters under 55 US gallons to 95%, which was previously 90% for 50-gallon units.

At the time, the DOE projected this increased efficiency could, by 2020, reduce national energy use by up to 20%.3 Energy efficiency requirements continue to get stricter, which is one consideration when buying a new water heater.

Why You Need a Hot Water Heater

Despite their demands and associated energy costs, a household hot water heater is a necessity. In general, water enters a home at about 50°F. This is much too cold for taking a shower or doing the dishes or laundry. When mixed with cold water, heated water is about 72°F, although the optimal hot water temperature for cleaning is around 122°F.

It takes a lot of energy to raise the temperature of water. Boiling just one gallon on a stove requires quite a bit. If you were to use a standard 120V wall outlet, you’d only get enough power to warm 0.17 gallons of water per minute at 72°F.4 Considering 80 to 120 gallons of hot water per day are used by the average U.S. home, this is quite significant.

Types Of Water Heaters

Depending on the type of water heater you choose, you can save on energy and annual operating costs, but pay more up-front for installation, or vice versa. Or you may save on energy costs but require more time to pay off the unit. There are several other factors in play, including your local utilities, availability of specific fuel types, and the size of your household.

The most common types of hot water heaters on the market include:

History of the Hot Water Heater

Storage or Tank-Type Water Heaters

Most often used in homes, storage tank water heaters come with 20- to 80-gallon insulated tanks that store water until the tap is turned on. Pipes draw hot water from the top of the tank. At the same time, the tank is replenished by cold water that enters the bottom. Water temperature is maintained by an adjustable thermostat, while pressure is managed by a temperature-pressure-relief (TPR) valve.

Conventional water heaters are powered by gas or electricity. Gas units use fuel oil, propane, or natural gas; although they’re more expensive to buy than electric units, they cost less to operate. Electric water heaters are less costly to install but the savings may be realized through higher efficiency and energy-factor ratings.
The downside: Despite using gas or electricity, or more efficient tank insulation, stored water loses heat over time, requiring more energy to reheat it to the set temperature.

Hybrid Water Heaters

A tank-type heater that features a heat pump mounted above the hot water storage tank. The pump captures ambient heat from the room using a small compressor and evaporator coil. This reduces the amount of energy used. However, compared to a standard water heater, this system costs about twice as much; it can take three to four years of lower electric bills to recoup the extra cost. But state and local energy rebates can reduce this time.

A hybrid heat pump works in a similar way. It extracts heat from the ambient air and heats water in a tank, while supplemental electric heating provides additional support when there’s high demand. The pump is efficient because it uses air that’s already warm (saving up to $300 per year on your energy bill). On the other hand, hybrid systems require a lot of space to work efficiently and are sensitive to annual temperature extremes.

Tankless or On-Demand Water Heaters

The lack of a tank dramatically cuts down on the space needed for the water heater. Compact, wall-hung units provide hot water for an entire home. Only when the hot-water tap is opened does the unit start running. A flow sensor triggers the electric heating element (or a gas-fired burner) that warms a heat exchanger. Water passing through coils in this component heats up as a result, before reaching the faucet or appliance that requires it.

Most models can heat about 3.5 gallons-per-minute (GPM) of water. They are reliable but can be overloaded if more than two sources of hot water are running at once. Gas-fired units produce combustion gases, which are released via a sealed vent pipe. The perks include an unlimited supply of hot water, not to mention a lifespan of up to 20 years.

The lack of a tank dramatically cuts down on the space needed for the water heater. Compact, wall-hung units provide hot water for an entire home. Only when the hot-water tap is opened does the unit start running. A flow sensor triggers the electric heating element (or a gas-fired burner) that warms a heat exchanger. Water passing through coils in this component heats up as a result, before reaching the faucet or appliance that requires it.

Most models can heat about 3.5 gallons-per-minute (GPM) of water. They are reliable but can be overloaded if more than two sources of hot water are running at once. Gas-fired units produce combustion gases, which are released via a sealed vent pipe. The perks include an unlimited supply of hot water, not to mention a lifespan of up to 20 years.

Plus, if you use 40 gallons of hot water per day, it draws about 34% less energy on average than a standard system.Plus, if you use 40 gallons of hot water per day, it draws about 34% less energy on average than a standard system.

Point-of-Use or Utility Water Heaters

Most people think of water heaters as those that serve the whole house. A type of tank-less model, a point-of-use water heater delivers nearly instantaneous hot water to a sink, shower, or other specific location. It’s best used for fixtures far from the main water heater.

You can fit a point-of-use water heater inside a vanity cabinet or small closet. It is simply plugged into a GFCI electrical outlet. Just about all the energy consumed goes into providing hot water. Ranging in size from 2.5 to 19 gallons, these compact units can be installed in small secondary bathrooms and even to supply hot water to a detached garage or outbuilding.

Solar Water Heaters

Are more often used in the Southwest region of the United States. A solar water heater is powered by solar collectors outside the structure, which may be installed on the walls, roof, or a nearby location. The water heater itself can be a pre-existing model or one designed for solar-thermal applications.

A direct-gain solar thermal heater sends potable water to the collector, heating it directly. However, there’s often little or no freeze protection and heat loss is an issue on a cold night or cloudy day. In an indirect or closed-loop system, a heat transfer fluid is pumped through the panels and heats water via a heat exchanger.

A drainback system protects against freezing temperatures, as water drains into a storage tank located in a conditioned space. But if an anti-freeze solution is used, the circulation pump must keep running if outside temperatures are too hot or too cold (rather than turn off if the panels are cooler than the tank or the tank reaches its maximum temperature). Flat panel and evacuation tube collectors are more suited for cooler climates.

Condensing Water Heaters

If you require a system with more than 55 gallons of capacity, and use gas for heating, you can use a condensing water heater. This kind of system can be tank or tankless. Its main difference from a conventional water heater is that exhaust gases are captured and sent to a coil. From here, heat from these gases is absorbed by cold water.

This process avoids wasting heat energy due to combustion, as flue gases are vented out of the system.

Mobile Homes

Mobile homes have specific requirements for water heaters, which can be gas or electric. All units must be Housing and Urban Development (HUD)-approved. Important factors in selecting a water heater include the type of connection, which must be compatible with the type of gas used in a mobile home. The heater must have outside access. If none is available, you’ll need a sealed combustion gas water heater rather than a standard model.

It’s also important to take measurements. Mobile home doors and other dimensions are often smaller than a typical home. By measuring properly, you can avoid problems when installing the water heater.

Buying Guide For Water Heaters

Here is an overview of the considerations you should take into account when buying a water heater, starting with a few basic steps to follow:

5 Easy Steps

  • Identify the fuel source: By identifying the type of fuel source available in your home, you can narrow down your choices of water heaters. Fuel options include electricity, gas or propane, or heat pumps and hybrid devices that heat water using energy from the air, which is a renewable resource. If you’re not limited by the fuel source available in your area, you can focus on annual operating costs and efficiency.
  • Choose a type of heater: Storage tank water heaters are still the most common; newer models are labeled according to their energy efficiency and yearly operating costs. If space is limited, consider a tank-less water heater. If a heat pump or condensing water heater will meet your needs, now is when you can narrow down your options even further by picking a water heater type.
  • Determine the capacity: The capacity of the system will affect how much hot water is available in your household. Storage tank units are classified by capacity in gallons, which directly impacts the size of the appliance. Recovery rate, or how many gallons of water can be heated in an hour, is another consideration.
  • Measure the space: Not all homes have room for a standard-size water heater. You can select a tank-less unit or a lowboy or short water heater that’s designed for areas with limited headroom. For example, a lowboy ranges from 30 to 49 inches high and has a 50-gallon tank but can be installed under a cabinet or in a crawlspace. If space is tight but height isn’t limited, tall water heaters can stand up to 76 inches high and hold as many as 100 gallons of water.
  • Consider Efficiency & Costs: If high efficiency is your priority, look for ENERGY STAR appliances. Increased operating efficiency sometimes comes with higher up-front costs but long-term savings. Narrowing your choices lets you compare EnergyGuide labels. You can see how each model can be expected to perform and view estimated annual operating costs.

Fuel Source Types

  • Electricity: A widely available source to power conventional, tank-less, and heat pump water heaters as well as combination water and space heating systems. If you have the electrical capacity to support a water heater, no other fuel source may be needed.
  • Fuel Oil: Is used to fuel conventional storage water heaters and indirect combination water/space heating appliances. In the U.S., use of fuel oil systems is limited by resource availability.
  • Geothermal Energy: Widely available throughout the United States. You must have a geothermal heat pump already installed and connected to your heating and cooling system.
  • Natural Gas: Available depending on location and can power many different types of hot water heaters, if high up-front purchasing costs aren’t a primary concern.
  • Propane: Propane water heaters are used in many areas of the U.S., although heavy use, cold weather, and level of maintenance can impact system longevity.
  • Solar Energy: Solar water heaters are ideal where there’s abundant sunshine. Many new homes in the Southwest harness solar power in areas where it’s usually dry and sunny.

Sizing & Capacity

To estimate optimal water heater size and capacity for your home, first, determine peak water usage. A full estimate of daily usage will help you break down the right models no matter what type of water heater you are looking for. In general:
A water heater with up to 55 gallons can deliver 47 gallons per hour (40 gallons for two showers, two gallons for a shave, and five for food prep).
A water heater with over 55 gallons can provide up to 99 gallons per hour (60 gallons for three showers, two for a shave, five for food prep, and 32 for one laundry load).

Properly sizing a storage or heat pump water heater requires identifying the unit’s first hour rating. This is the number of gallons of hot water it can supply per hour, starting with a full tank. Found on the EnergyGuide label, the first hour rating varies depending on tank capacity, heat source, and burner or heating element size.
To calculate peak hour demand, determine whether you use the most hot water in the morning, mid-day, or evening, and estimate how much water you use during that time.

Electric Water Heater Capacity

• Up to 2 people: 30 gallons
• Up to 3 people: 40 gallons
• Up to 4 people: 50 gallons
• 5 or more people: 80 gallons

Gas Water Heater Capacity

If you own a gas water heater, you’ll need:

• Up to 2 people: 30 gallons
• Up to 3 people: 40 gallons
• Up to 4 people: 40 gallons
• 5 or more people: 50 gallons

Tankless Water Heaters

To size a tank-less water heater, determine the required flow rate and temperature rise. You can do this by listing the number of devices you might use at once and add up their flow rates. The total you get is the desired flow rate for the water heater.

Temperature rise is calculated by subtracting the incoming water temperature from the desired temperature of the output water. This is important because demand water heaters are rated according to inlet temperature (most are rated for specific temperature ranges). Some models have thermostatic controls that allow output temperature to vary with inlet temperature and water flow rate.

Solar Water Heaters

With solar hot water heaters, you’ll need to consider storage volume and collector area. A 50- or 60-gallon tank is enough to support up to three people, while a household with three or four individuals requires an 80-gallon tank; with four to six people, an even larger tank is needed.

The collector area should be around 20 square feet for each of the first two members of your household. Add eight square feet per each additional person in the Sun Belt. If you live in the northern U.S., increase this amount to 12 to 14 square feet for each extra person.

In an active solar hot water heating system, tank size generally increases 1.5 gallons per square foot of collector to avoid overheating at times of low demand. Other factors include the solar collector’s orientation and tilt. It’s a good idea to consult a professional if you’re not familiar with how solar water heaters work.

Energy Efficiency & Costs

According to, the average cost of running a standard-efficiency electric storage model is over $500. An ENERGY STAR qualified solar system can reduce this to under $300. Standard-efficiency gas storage types can cost around $400 a year to run, while a solar installation can reduce your annual operating costs to under $200.
On average, households spend $400 to $600 per year on heating water. This equates to about 20% of a typical home’s energy bill.

The cost of owning a hot water heater include:

• Installation
• Labor
• Location
• Type
• System size
• Electricity/fuel rates
• Operating time

Replacing a water heater may come with additional costs, especially if you have damaged or incompatible piping. If your municipality requires a permit to install a new unit, you may incur additional fees.

Tax Credits

Although it has expired, if you installed a solar water heater in 2016, you may be eligible for a federal tax credit of up to 30% of the installation cost. Only systems that generate half their heat from sunlight qualify. Tax credits for non-solar water heaters and other residential energy efficiency upgrades are available through December 31, 2021.6 You can also get a $300 tax credit for qualifying gas, oil, and propane units with an energy factor of 0.82 or higher or thermal efficiency of at least 90%, and electric heat pump units with an energy factor of at least 2.0.

Additional Features to Consider

  • Warranty: Warranty coverage can protect your investment should there be any defects in parts, labor, or workmanship. At Nexgen, an extended parts and labor warranty is available to customers who join our X Protection Plan.
  • Anti-Scale Devices: A filtration system, such as those from HALO Water Systems we offer, can prevent mineral scale from filling the tank or blocking your water pipes and tubes, improving function and efficiency, extending water heater life, and avoiding flushing sediment.
  • Brass vs. Plastic Drain Valves: Brass drain valves are stronger and more durable. Plastic valves are more prone to damage and developing leaks. Drain valves are readily available and easy to replace if you prefer something stronger.
  • Glass-Lined Tanks: A glass lining can prevent steel inside the tank from rusting. Glass coatings are often applied to the metal in powder form and heated in a furnace to create a solid surface lining.
  • Digital Displays: Reading a digital display makes it easy to precisely set water temperature, program the unit, and check on its status. Plus, digital readouts make your hot water heater look more high-tech.

Advanced Technology

We’ve already covered ENERGY STAR and high-efficiency units. These help you save money and protect the environment. The higher the energy factor rating of the model, the more efficient it is. But high efficiency isn’t the only technological aspect of today’s hot water heaters. You’ll also find models with:
  • Dry-Fire Protection: Prevents the upper element of an electric water heater from burning out if the system doesn’t sense any water around it. Electric current can’t flow unless the tank is filled to a predetermined level.
  • Intuitive Technology: Some newer water heaters can track use patterns to adjust the temperature based on your schedule and hot water demands, making them smarter, more durable, and efficient.
  • Premium Electronic Gas Valve: Has fewer moving parts than a mechanical gas valve, improving reliability; to check if the pilot light is on, an LED indicator will show it. It’s also self-powered, so no external power source is needed.
  • Wi-Fi Capabilities: If your water heater has a Wi-Fi module, you can control it remotely, set it to a schedule, and receive alerts if hot water is low or there are any other operating issues.


The safety and efficiency of water heaters are not limited by the manufacturer’s design. There are ways you can make your system even more safe and efficient if your budget allows. You can order your water heater or modify it with accessories such as:
  • Expansion Tanks: Connect to the water heater via pipes, so there is extra room for when cold water expands in the primary tank due to heating. By handling thermal expansion, the second tank prevents excessive water pressure from building up.
  • Timers: Wired to the electrical supply, a timer can be adjusted to allow the heater to use electrical power at times the system is needed. Your water heater won’t run all the time, which saves energy and utility costs.
  • Water Alarms: Are triggered if there is an overflow or the water heater develops a leak. An audible alert will let you know immediately if there is a problem. Alarms can be wired to the water heater on an attached pan or the floor next to the unit.
  • Water Heater Blankets: Designed to fit over the outside of the system, these provide additional insulation to help the water heater run more efficiently. A specially designed blanket prevents heat loss in cool areas such as garages.
  • Water Heater Pans: Collect water from underneath the heater if there’s a leak or overflow. A water heater pan is generally designed to collect water released due to excess pressure and discard it via an opening attached to a drain hose.
  • Water Heater Stands: Built for gas units, stands reduce the risk of a fire should flammable liquid spill from the system. Water heater stands usually require professional installation and alter the plumbing and venting requirements of the unit as well as its overall measurements.

Water Heater Safety

Water heaters are very safe when they’re working properly. But if your unit has an unaddressed problem and requires repairs, or is an older system, it can be dangerous to operate. Many hot water heaters operate on gas or electricity, creating potentially serious hazards in your home. This is one reason to call a professional for maintenance or repairs.

If not cared for, a water heater can become the most dangerous appliance in your home. The most common dangers it can pose include:
  • Explosion Hazards: Flammable vapors from a gas water heater can build-up and ignite. If there’s a gas leak, it can trigger a fire or explosion when the unit is turned on. An explosion can occur due to a faulty pressure relief valve. In older gas water heaters, the lack of a bottom seal increases the explosion risk. Newer systems have bottom sealing that prevents vapors from mixing with the pilot light. In electric water heaters not used for two weeks or more, hydrogen gas can build up and must be removed from hot water pipes.
  • Electrocution: Improper handling of electrical connections can result in shock and serious injuries. In hot water heaters, electrical heating elements are immersed in water. When they wear out, an electrical short can occur, causing current to run through the metal casing. You could then be severely shocked by touching the housing or connecting pipes.
  • Thermal Burns: If you’re draining the tank to, for example, remove sediment, make sure the unit is turned off to let the water cool down. Severe burns can result if you don’t flush the tank carefully. Hot water output from fixtures is also a threat if the temperature is too high. Children and the elderly not able to react fast enough are at the greatest risk.
  • Water Heater Blankets: Designed to fit over the outside of the system, these provide additional insulation to help the water heater run more efficiently. A specially designed blanket prevents heat loss in cool areas such as garages.
  • Bacterial Contamination: If the temperature of the water heater tank is below 120°, it can create an environment conducive to bacteria, such as Legionella. These bacteria stop multiplying in higher water temperatures, especially over 135°F, according to the American Society of Sanitary Engineering. Even then, they may survive in pipes and reach a faucet or shower head.
  • Carbon Monoxide Poisoning: Carbon monoxide exposure is another risk associated with gas water heaters. This gas has no smell or color and can quickly lead to symptoms such as headache, weakness, dizziness, nausea, vomiting, chest pain, and confusion. There’s no warning if you are sleeping; prolonged exposure to carbon monoxide can lead to death. To prevent exposure, gas appliances should be properly vented.
Water heater related injuries can be prevented through proper venting, as mentioned earlier, and by installing carbon monoxide detectors in your home. Clean the area around your water heater with plain water. Common cleaning chemicals can be a dangerous mix if they come in contact with gas fumes. Don’t store chemicals or combustible or flammable materials near your water heater, or consider replacing your system with safer alternatives.

Water Heater Maintenance

Regular maintenance can improve water heater safety, performance, and efficiency as well as longevity. Routine tasks include flushing the tank of sediment and debris, but always ensure there’s two feet of clearance around the appliance to ensure it runs as safely as possible. Professional maintenance is a must, and should address the following:

  • Drain the Water Heater Tank: Sediment that builds up doesn’t just reduce energy efficiency. It can clog water lines and damage the water heater. Accumulated sediment can also reduce its operating life. When draining the tank, open the drain valve slowly and let the water flow until it is clear. Opening the cold-water supply valve briefly helps stir up sediment so it’s not left at the bottom. Draining two or three gallons of water is usually enough.
  • Test the Pressure-Relief Valve: This valve prevents the tank of a gas or electric water heater from over-pressurizing. It opens if the pressure gets too high, but it can malfunction. Since an over-pressurized tank can explode, it’s important to periodically check the pressure-relief valve. After turning off the electricity or gas, pull the trip lever and allow water to fill a bucket. You should hear a rush of air or see water and some vapor. If not, drain the tank and have the valve replaced by a professional.
  • Check the Anode Rod: The anode rod should be examined every three years. Replace it if the rod is less than ½ inch thick, it is coated with calcium, or over 6 inches of core steel is exposed. A new 13-inch zinc-aluminum anode rod can be purchase for just a few dollars, so replacing it is an affordable repair.
  • Adjust the Temperature: Optimal water temperature is about 120°F when you consider safety and the survivability of bacteria. The temperature dial on the side of the tank can be adjusted by removing the cover and changing the dial position with a flathead screwdriver, unless your appliance has digital controls. Up to 5% in energy costs can be saved for every 10°F you lower the temperature.
  • Insulate Pipes: If your water pipes aren’t insulated, you can add self-sticking 3/8-inch-thick foam pipe insulation. To be effective, it must match the diameter of the pipe. Well-insulated cold-water pipe is protected against condensation in summer, while insulated hot water pipe can allow the system to run more efficiently in winter. Installing insulation involves just sliding it over the pipes as far as possible. To secure the insulation, peel the tape and squeeze it closed. Cover pipe sections less than six inches from the flue with unfaced fiberglass pipe wrap that’s about one-inch-thick.
  • Insulate Heater: An older unit can be insulated with a fiberglass jacket or R-4.5 foil-covered bubble wrap. Just fit the insulation over the tank, but avoid touching the flue. Cut the insulating material to fit around pipes, the pressure-relief valve, and temperature control. Seal the insulation shut with foil tape. When insulating oil or gas water heaters, don’t cover the top. An electric heater can be topped with a large circle of insulation with the edge taped to the side of the tank.

Buy Your Next Water Heater from NexGen

NexGen is fully licensed and insured to install, repair, and replace water heaters. We specialize in installing newer, more efficient hot water heaters and compact electric and tank-less models. Our technicians can ensure you have a reliable source of hot water. You can also trust us to fix a leak whether it’s coming from a crack in the tank, the pressure relief valve, drain valve, or a pipe inlet/outlet. Stay on top of maintenance with your X Protection Plan and get one water heater flush per year, priority service, and discounts on repairs. For help selecting a water heater or to request service, call NexGen today at 888-497-4882.