High-efficiency gas water heaters have several features that reduce the cost of heating water. First, the tank walls have higher levels of foam insulation, as high as R-13. Secondly, instead of having a standing pilot light, a high-efficiency model utilizes an intermittent-ignition to reduce the time that the pilot light burns. The intermittent-ignition device provides a spark to ignite the pilot flame only when needed. Finally, heat exchanger efficiencies are improved, allowing heat from the gas burner to more efficiently and completely heat the water in the tank.

The Gas Appliance Manufacturers Association (GAMA) sponsors an efficiency certification program. This program verifies manufacturer's equipment efficiency ratings according to a standard test method. A Consumer's Directory is published biannually which lists the manufacturer's model numbers and Energy Factors. Gas water heaters with an Energy Factor of .62 or higher are considered energy efficient. The Federal Trade Commission (FTC) requires that all storage type water heaters be labeled with an "EnergyGuide" label, which is based on the GAMA certification. This label shows, based on the national average cost of fuel, the annual operating costs of that particular water heater. The label also shows how that particular water heater compares with all other comparable models.

The life of a gas water heater will vary depending on care and maintenance of the unit and factors like mineral content of the water. On average, most water heaters will need to be replaced after approximately 13 years.

The two main factors that should be considered when replacing a water heater are initial cost and operating costs (which are a function of the water heater’s efficiency). High-efficiency gas water heaters have several features that reduce the cost of heating water.

• The tank walls have higher levels of foam insulation, as high as R-13.
• Instead of using a standing pilot light, some high-efficiency models use an intermittent ignition to light the burner.
• The heat exchanger efficiencies are improved, allowing heat from the gas burner to more efficiently and completely heat the water in the tank.
• Some models feature "sealed combustion" burners and power venting for even greater efficiency.

All water heaters should be installed according to the manufacturer's specifications.