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Decarbonizing Your Home Can Be Complex: Water Heater Edition

Photo courtesy of Reto Gerber, Pixabay

The natural gas water heater tucked away in my murky basement needs replacing. For the past eighteen years I’ve barely given it thought as it consistently provided the downstairs of my house hot water, even when the electricity went out for whatever reason.

But a few months ago, the overflow tank sprung a slow leak and has picked up in rhythm. It’s only a matter of time before the system fails completely and my basement turns into a kiddie pool. I’m hoping to find a new one that’s more energy efficient, reduces carbon dioxide (CO2) emissions, and saves me money in the long run.

According to the Department of Energy the average household spends between $400 to $600 every year heating their water. That cost accounts for approximately 14% to 18% of utility bills. Finding more efficient options can mean big savings. But this depends on lots of details and there are pros and cons to consider with each. Let’s break down the broad options.

Water heaters divide into two large categories based on their power source– natural gas or electricity. They further subdivide into tank and tankless options. This means that when it comes to replacing my own water heater – there were four main choices:

  • Heat Pump Water Heater

  • Electric Tankless

  • Conventional Gas Water Heater

  • Gas Tankless

Greenlink Analytics did a quick number crunching exercise to look at the cost of different options over a lifespan in terms of financial, CO2 emissions, and health costs (see bottom of article). Hint: a heat pump wins the day on numerous fronts. In addition, you’ll need to know the size of the water heater that best matches the size of your home and family, you may need larger or smaller systems.

Image by Sabine Kroschel from Pixabay


1. Heat Pump Water Heater:

A heat pump water heater is also called a hybrid water heater. It operates by moving heat from one place to another instead of generating heat directly for providing hot water. They’re the most efficient way to heat water for residential use and can be two to three times more efficient than traditional water heaters, provides cost savings.

Pros: About three times more efficient than a conventional tank water heater and does not emit any direct CO2 into the home.

Cons: Needs space to function and the efficiency decreases in colder climates.

Estimated Costs: Up to $3,000 (for a 50-gallon tank)

Estimated Installation Costs: It can be difficult to track down a professional installer and installation costs can be over $8,000, including the appliance costs and inspection fees

Rebates: The Inflation Reduction Act provides a $1,750 rebate for heat pump water heaters, or a tax credit up to $2,000.

Life expectancy: 10-15 years

Other requirements: They work best when installed in areas of the home that remain in the 40–90 degrees Fahrenheit and have at least 1,000 cubic feet of space around the water heater for good airflow. The home may require updates to the electric panel.

2. Electric Tankless: An electric tankless heater warms the water directly without using a storage tank. They take up less space, are more efficient than conventional tank water heaters, do not need to be vented, and provide continuous hot water. Tankless water heaters gain efficiency because they heat water on demand, instead of needing to continuously heat water in a tank. A whole 3 to 4 bedroom house electric tankless may draw more than 25,000 watts of electricity and needs a 150-amp, 240-volt breaker. The total electrical service for many houses uses less than a whole house electric tankless system may require.

Pros: Take up less space than a tank water heater and does not emit CO2.

Cons: May require upgrades to the electric panel and can increase electricity costs.

Estimated Costs: $500 - $1500.

Estimated Installation Costs: Between $800-$1500

Rebates: 10% federal tax credit

Life Expectancy: Can last 20 years or longer

Other Requirements: Requires annual maintenance to achieve the appliances longest lifespan.


3. Gas Tankless: A gas tankless heats water directly without using a storage tank. So they take up less space, are more efficient than conventional tank systems, and provide continuous hot water. These water heaters are up to 34% more efficient, which can save you money. It does need to be vented when installed indoors, but can be installed outside.

Pros: They take up less space and are more efficient than water heaters with a tank.

Cons: Depending on size of home and amount of water use, you may need more than unit one to supply hot water to multiple systems simultaneously.

Estimated Costs: Between $1,000 - $1,500

Estimated Installation Costs: $1,000 to $1,500

Rebates: 10% federal tax credit

Life Expectancy: Can last 20 years or longer

Other Requirements: Requires annual maintenance for longevity and best performance.

4. Conventional Gas Water Heater: These tank systems store large amounts of cold water that’s heated by a natural gas flame. These are the least efficient of the systems yet most commonly installed and well known. They also can run out of hot water at times.

Pro: Lower price point

Cons: Less efficient than all the other options, emits CO2, and can cause flooding in the home if bursts.

Estimated Costs: $550-$2000

Rebates: none

Life Expectancy: Approx. 15 years

Other Requirements: Takes up a significant amount of space and requires venting.

Greenlink Water Heater Analysis


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