Purchasing a high-efficiency electric water heater can be a wise energy investment, particularly in homes with high hot water use. Most domestic hot water systems are "stand-by systems" - that is, water is kept hot and stored for use whenever it is needed. Because the water in the tank is kept hot, some of the heat is lost to the air around the tank. These "standby losses" can be reduced by insulating the tank. In the past, external water heater insulation blankets were widely recommended to help reduce standby losses and overall operating costs. Newer water heaters have higher levels of insulation, making additional insulation unnecessary.

High-efficiency electric water heaters usually incorporate a layer of foam insulation, often as high as R-19, between the tank itself and the exterior of the water heater.

High-efficiency electric water heaters usually incorporate a layer of foam insulation, often as high as R-19, between the tank itself and the exterior of the water heater.

What to Look For

The Federal Trade Commission (FTC) requires that all storage type water heaters be labeled with an "EnergyGuide" label. This label shows, based on the national average cost of electricity, the estimated annual operating costs for that particular water heater. The label also shows how the operating costs for that particular water heater compare with all other comparable models.

Insulating the Tank

In the past, the use of external insulation blankets on water heater tanks was widely recommended. Older water heaters had much less internal insulation than current models, and the added insulation helped to reduce "standby losses" and overall water heating costs.

High-efficiency water heaters are built with much higher levels of internal insulation, so an external insulation blanket is much less important. If your water heater is less than ten years old, it probably has enough insulation already built into the tank. If it is older than ten years, it will probably need to be replaced before long.

Water Heater Timer

A "stand-by system" keeps water in the tank hot 24 hours a day. However, many consumers only use hot water during relatively short periods of time each day. A water heater timer can be used to turn the water heater on for high-use periods and off during low-use periods. Most timers will allow multiple on/off periods per day and have a manual override switch to allow water heating at any time.

Water heater timers are most cost-effective when combined with "time of use" rates, an option offered by a number of electric utilities. During "peak" hours, the rate is higher, and drops during "off peak" hours (usually at night). If the water heater timer can be set so that the heating elements only operate during off peak hours, significant savings can be realized (actual savings will depend on the difference between standard and off peak rates).

Operation and Maintenance

• Set the temperature at the lowest setting that will provide enough hot water (usually around 120° F.) In the past, settings of 140° F. were recommended for homes with a dishwasher but newer liquid detergents for automatic dishwashers work well at lower temperatures.
• Follow the manufacturer's recommendations for flushing the tank.