Here is another good post from my friend Tazmine Loomans, who is an architect and green renovator of older homes explaining how you can save big bucks by just upgrading our water heater.

First of all, get rid of the electric water heater if you can. If you have natural gas running to the home, get a gas heater. It is worth the up-front money.

I was told once when I was the Energy Office Director by folks from Southwest Gas that it takes 1,200 gallons of water to heat a 60 gallon electric hot water heater. This is because it takes two units of electricity to move one unit of electricity from the big power plant to your home. Further, that big power plant is cooled by ground water at the rate of 100’s of thousands of gallons per day.

I installed a tankless hot water heater in my historic home in the Garfield Neighborhood. While it saved money, even over the tank natural gas water heater that was there before, I found that it used more water. Basically, it was because the tankless water heater needs to run water through itself at a certain rate, otherwise it will shut off. That’s fine if you have a number of people in the house all using water at the same time. Not so good if you are just little ol’ me.

I always liked the way the Europeans and Asians do this. They put small hot water tanks or tankless heaters at the point they use them. So, they only use that which they need and they are not heating up water just to flow 40 feet from the tank to your shower or kitchen. Much of that water and heat energy goes to waste.

So, what is the solution? First, go gas or get a heat pump. Second, go tankless if you have the demand for it.