When the time comes to replace your electric water heater, a new high-efficiency model can be a worthwhile investment in energy savings. Next to heating or cooling, water heating is usually the largest energy expense in the home.

High-efficiency electric water heaters have higher levels of foam insulation, some as high as R-19. This reduces the "standby loss" or the heat that is lost from the tank 24 hours a day. This extra insulation is especially helpful if your water heater is located in an unconditioned area.

There has been no significant improvement in the electric elements that heat the water. Electric resistance heating elements in the tank transfer virtually 100% of their energy to the surrounding water as heat, and it is difficult to improve on 100%.

There are higher-efficiency heat pump water heaters which operate at an efficiency of over 100%, and sometimes as high as 200%. They transfer heat from the surrounding air to the water in the tank. Although not widely used as primary residential water heaters, heat pump water heaters are an excellent means of heating a swimming pool or spa.

If you use central air conditioning, consider a waste heat recovery unit, which reclaims the heat given off by the outdoor unit of your air conditioner and uses it to heat water. When the air conditioner is not running, the water heater’s heating elements serve as a back-up. In general, the more you use your air conditioner, the greater the potential savings from a heat recovery unit. Ask your heating and cooling contractor to evaluate whether a waste heat recovery unit is right for you.

Water Heater Efficiency

The energy efficiency of a storage-type water heater is indicated by a number called an Energy Factor (EF), which is a decimal equivalent of a percent efficiency (.89 EF = 89% efficient). It compares the heat energy delivered to the water to the total energy consumption of the water heater. The most efficient electric storage water heaters have Energy Factors between 0.94 and 0.96.

First Hour Rating

This is the amount of hot water that the water heater can supply in the first hour of operation. It is a combined measurement of how much water is stored in the water heater and how quickly the water heater can heat cold water to the desired temperature. Use this rating to compare hot water delivery capabilities of similar models.

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 that particular water heater compares with all other comparable models. When purchasing a new electric water heater, look for the "EnergyGuide" label and purchase one with lower estimated operating costs.