How to Cut Your Hot-Water Costs

Is a conventional electric heater or a hybrid model the best bet for your property? An expert offers tips on selecting, installing and getting maximum energy savings from your equipment.
Newer hybrid water heaters have easy-to-control functions, like room air conditioners and furnace thermostats. Energy saving features can be adjusted by residents or homeowners, without requiring a service call.

Newer hybrid water heaters have easy-to-control functions, like room air conditioners and furnace thermostats. Energy saving features can be adjusted by residents or homeowners, without requiring a service call.

Water heaters are an integral part of everyday living, whether at home or at work. As with any heavy-use appliance, high efficiency ratings are important. Increasing these ratings has been the primary goal of new water heater designs over the years.

Certainly, one of the best ways to improve efficiency is by improving the insulation qualities (or water storage costs) of the units—and this has been going on for a long time. But over the last decade, newer models have improved their ratings based on how the unit actually heats the water, not just how it stores it.

How hybrid water heaters work

Hybrid water heaters are one of the best new designs that feature both lower storage costs and more efficient heating methods. The name comes from a dual-source approach, much like heat pump furnaces. When the temperature ranges between 40 and 90 degrees Fahrenheit outside the building, there is enough economically available heat in the air to be captured and used to heat water for residential hot water use. This is perfect for temperate climates.

In colder climates, inside air is used for the heat pump cycle. Whenever the air in either location gets too cold, the water is heated by electric resistance elements like those used in traditional electric water heaters.

A heat pump water heater looks like a standard electric unit with a vertical storage cylinder, electric resistance heating elements, a bottom drain and a temperature-and- pressure relief valve near the top. But the unit also includes heat pump features like a condenser, an evaporator and a compressor. Illustration Credit: www.energy.gov

A heat pump water heater looks like a standard electric unit with a vertical storage cylinder, electric resistance heating elements, a bottom drain and a temperature-and- pressure relief valve near the top. But the unit also includes heat pump features like a condenser, an evaporator and a compressor. Illustration Credit: www.energy.gov

The basic theory is that it’s easier and cheaper to move heat than it is to produce it. This sounds good, and when it’s combined with some manufacturer’s efficiency claims (often above 60 percent), it makes people want to sign on the line. Unfortunately, some math is required before you decide on a new model.

Calculating payback

The best way to get your bearings before visiting a water heater salesperson is to pick a hybrid model from a well-known manufacturer’s website. Choose a model that fits your hot water needs, then plug in your local electric rate per kilowatt hour, and calculate your potential hot water costs if you buy a new hybrid tank. Do the same analysis for a traditional electric water heater, from the same manufacturer, as long as you are already on the site.

The difference in costs between these two tanks should approximate the yearly cost savings available by using the new technology. Then, compare the projected life of both tanks (warranty length is a better indicator of this than a simple marketing claim) to calculate how long the savings with the hybrid tank will last. Compare this to how many traditional tanks will need to be purchased and installed to deliver hot water for the same amount of time. The point at which the energy savings payback the extra purchase cost of the hybrid tank will tell you if the purchase make sense.

For example, a new Rheem heat pump model with a tank capacity of 50 gallons and a 10-year warranty has a purchase price of about $1,200. Another Rheem product, a 50-gallon traditional electric water heater, sells for just under $600. Both units have competitive, but not identical, user-friendly features.

The maker claims that the hybrid unit is four times more efficient than most traditional units, and, as a result, will pay back its higher purchase price in about two years. For developers and architects who are specifying water heaters for multiple residential units, these energy savings are significant.

Installation Considerations

Hybrid models do require more room than standard ones. They are taller by about two feet and need to be surrounded by about 1,000 cubic feet of empty air space. Squeezing the unit into tight quarters is out of the question. Some regular maintenance is also required, because the air filter for the heat pump unit must be cleaned or replaced regularly.

Heat pump water heating technology can also be added to existing heat pump furnace systems, though the costs are harder to estimate because retrofitting jobs are often more difficult than installing stand-alone units. However you choose to implement one, hybrid water heaters are an efficient way to save on your utility bill.

Steve Willson, a carpenter and business owner turned author, writes for The Home Depot and other publications on home improvement topics. He provides advice on topics ranging from installing a hybrid water heater to choosing the right replacement lighting fixture.