A water heater is one of those home appliances that you don't think about until it stops working. However, a water heater can be a major energy eater, whether you're buying one for a new home or replacing your decades-old water heater. According to the US Department of Energy, water heating is the second-largest energy expense for most homes, accounting for nearly a fifth of all of your home's energy usage in a month -- which is why we put together this water heater buying guide.

Finding the water heater model you want in your home is not a decision you should take lightly. Water heaters will last anywhere from 10 to 20 years typically, depending on the type, which means you'll live with your choice -- and its expenses -- for up to two decades. You want that price tag to be as small as possible while getting the hot water you expect. 

You'll have to wade into the deep end and sort through the different types of water heaters, fuel sources, capacities, costs over time and additional features. While it may seem overwhelming at first, we're here to help you decide which water heater is right for you and your home. 

Types of water heaters

If you're new to the water heater market, you might not even realize there are different types to choose from. While storage water heaters remain the most common, there are a variety of water heater types, each with their own unique set of features and functions. 

Storage water heater

"Storage water heaters, also called tank water heaters or traditional water heaters, use electricity or gas for heating water," said Kelly Russum, owner of KC's 23 ½ Hour Plumbing and Air Conditioning in Palm Springs, California. The storage water heater is the most common type of water heater for both residential and commercial buildings. It consists of a tank that holds a certain amount of water, typically ranging from 20 to 80 gallons. The tank is insulated to help retain heat and keep the water warm until it is needed.

A storage water heater heats water using an electric heating element or a gas burner located at the bottom of the tank. As cold water enters the tank through a supply pipe, hot water rises to the top of the tank where it's distributed to the rest of the house when a faucet or appliance calls for hot water.

Storage water heaters are relatively affordable, are simple to install and can supply hot water to multiple fixtures simultaneously. 

"Storage water heaters can offer between 20 to 80 gallons of water right away, which makes them an excellent solution for big families of four or six," Russum said.

However, they are energy inefficient and prone to lose heat from the tank even when hot water is not being used. Regular maintenance, such as flushing the tank to remove sediment buildup, keeps them as efficient as possible and prolongs their lifespan. 

Tankless water heater

A tankless water heater, sometimes called an on-demand or instantaneous water heater, doesn't use a storage tank and heats water only when it is needed, providing a continuous supply of hot water on demand. When a hot water tap is turned on, cold water travels through a pipe into the unit, where it is heated, typically by a gas burner or an electric element. The heated water then flows out of the unit and to the desired fixture or appliance.

One major advantage of tankless water heaters is their energy efficiency. Since they only heat water as needed, there is no standby heat loss, resulting in potential energy savings over storage water heaters. Additionally, tankless heaters have a longer lifespan than storage heaters, often lasting 20 years or more with proper maintenance. 

"While they don't have a tank for storing water, they still need to be flushed from time to time to remove scaling and prevent breakdowns," Russum said.

Tankless water heaters have higher upfront costs than storage heaters and may require upgrades to gas lines or electrical systems during installation. They also have limited flow rates, which means the temperature of the water may fluctuate if multiple hot water sources are used simultaneously in a larger household.

Heat pump water heater

A heat pump water heater is an increasingly popular alternative to traditional water heaters that moves heat from the surrounding air to the water being heated. It uses a compressor and refrigerant system to transfer heat from the air to the water in the tank where the heated water is stored for later use. It's the same principle that heat pumps use to heat or cool the air in your home.

One of the main advantages of heat pump water heaters is their high energy efficiency. By extracting heat from the air or ground rather than generating heat directly, these water heaters can produce hot water using significantly less energy than conventional options, resulting in lower utility bills.

Heat pump water heater adoption will likely rise over the next several years, as this type of water heater is the best fit to match new energy efficiency regulations enacted by the US Department of Energy.

"Heat pump water heaters are more costly to buy and install than other models," Russum said. "Their higher upfront cost pays off through lower electricity bills, though." Heat pump water heaters can also act as a dehumidifier and provide air conditioning in warmer climates. 

Heat pump water heaters may not be suitable for all climates or installation locations. Because they require adequate space and ventilation to operate efficiently, they may struggle in colder climates or poorly ventilated areas. The compressor and fan can also be noisy during operation. 

"Homeowners with a heat pump water need to remember about such maintenance tasks as cleaning the air filter regularly, checking the area around the unit to ensure adequate airflow and periodically checking the condensate drain to ensure it is not blocked," Russum said.

Solar water heater

A solar water heater is similar to a storage water heater, except it uses solar energy to heat water instead of gas or electricity. A typical solar water heater will have solar collectors that absorb sunlight and convert it into heat and a storage tank to hold the heated water. There are two main types of solar water heaters: active systems, which use pumps to circulate water through the collectors and into the storage tank; and passive systems, which rely on natural convection to circulate water.

Solar water heaters are environmentally friendly and don't require burning fossil fuels to generate heat, though they can have a backup heating system that relies on electricity or gas. While solar water heaters are typically considerably more expensive up front, "operational costs of solar water heaters are lower compared to storage and tankless water heaters," Russum said. Expect lower energy bills and a smaller carbon footprint from a solar water heater. The cost model mirrors that of residential solar panel systems -- these are a true investment that will save you more money, but it's going to take some time.

While solar water heaters tend to operate efficiently, performance may vary depending on location, climate and available sunlight. Maintenance and repair costs may also be a consideration. "If you have a solar water heater, remember to clean collector panels and remove sediment buildup in a tank," Russum said. 

Water heating fuel types

There are two primary fuel types for water heating: electricity and natural gas, which is made primarily from the fossil fuel methane. Electric water heaters are generally easier to install, have lower upfront costs and don't require venting, which makes them versatile and functional for most homes. Depending on how the electricity they run on is made, they can be cleaner options than gas heaters. However, they tend to cost more to operate and have slower recovery rates than gas heaters. Gas water heaters, while more expensive and in need of ventilation, are often faster at heating water and can be more cost-effective in areas with affordable natural gas. 

Solar water heating uses solar energy to heat water, reducing energy costs and carbon emissions. Though upfront costs are higher, solar heaters have minimal operating expenses. You may find other fuels for water heating like propane, oil and biomass, but these are typically less available than gas or electricity.

Water heater capacity

Perhaps the most important factor when it comes to picking a water heater is water capacity. "The first thing to take into account when choosing a water heater for your home is your needs," Russum said. "Regardless of the type, by choosing a water heater of the right size, you ensure smooth, energy-efficient operation." 

If the tank capacity is too small for your hot water demands, you may find yourself running out of hot water. Conversely, too large of a tank will have you heating more water than you need, leading to higher operating costs. As a general rule, you should consider 10 to 15 gallons per person in your home.

"Small households will benefit from tankless water heaters, larger families will benefit from storage, solar, or heat pump water heaters," Russum said. For tank-based heaters, he recommends paying attention to the first hour rating, which is an estimate of how many gallons of hot water the heater can supply within an hour. For tankless heaters, look at gallons-per-minute ratings, a measure of "how many gallons of hot water the heater can deliver in a minute," he said.

Water heater maintenance

Regular maintenance -- like flushing the tank and checking for corrosion and leaks -- is key both to energy efficiency and to extending the life of your appliance. "Both traditional storage water heaters and solar water heaters require regular descaling," Russum said. "The harder the water in your region, the more often you need to drain and flush a tank to prevent damage from scaling. A general recommendation is once every year."

These are tasks that you can typically do on your own. But if there are more serious issues that need to be addressed, you may want to tap a professional. If you need to replace anode rods or relief valves, for example, you're best to call in a technician to ensure it is done right. If you see signs of leaks or corrosion, you may also want a second opinion from an expert before taking action.

Water heater cost

Costs vary with water heaters depending on the type you choose, but the upfront cost is almost always going to be the largest one that you incur. Storage water heaters are typically cheapest, costing as little as $350, according to HomeAdvisor. Solar, by contrast, can cost up to $5,500 for a standard size home.

Over time, storage heaters tend to be more expensive because the reservoir can experience more maintenance cost, from sediment buildup and corrosion to tank leaks. Tankless heaters will typically have lower maintenance costs. "Homeowners choosing a storage or a tankless water heater should also keep in mind that electric water heaters tend to have higher operational costs than water heaters that use gas," Russum said. Solar heaters have the lowest operating costs over time, but can require more upkeep.

Additional important water heaters features

When choosing a water heater, there are a few more features to consider beyond the basic functionality of heating water. Smart features, such as Wi-Fi connectivity and mobile app integration, allows you to monitor and adjust settings remotely, track energy usage and receive alerts for maintenance issues or potential leaks. 

If energy efficiency is a top concern for you, look for things like Energy Star certification, which identifies models that meet or exceed industry standards for efficiency and performance. Ultimately, selecting a water heater will come down to the needs of your household, as well as your preferences and budget.