Water heating
What a water heater costs to run, by fuel and type
Water heating is often the second-largest energy bill in a house. Three numbers, gallons a day, the temperature rise and the UEF, give its cost.
The energy in a day’s hot water
Heating water takes one BTU per pound per degree Fahrenheit, and a gallon of water weighs 8.34 pounds. A household’s daily water heating energy is therefore:
UEF, the uniform energy factor on the EnergyGuide label, is the water heater’s efficiency over a standard day of use, including standby losses from the tank. It is the efficiency to use for running costs.
Typical UEFs
| Type | Typical UEF | What limits it |
|---|---|---|
| Gas tank, standard | 0.60 to 0.70 | Flue losses and standby heat loss |
| Gas tank, condensing | 0.80 to 0.90 | Standby loss |
| Gas tankless, condensing | 0.90 to 0.97 | Very little; no tank |
| Electric tank | 0.90 to 0.95 | Standby loss only |
| Electric tankless | about 0.98 | Almost none |
| Heat pump water heater | 3.0 to 4.0 | Moves heat rather than making it |
The water heater running cost calculator uses 0.65 for a gas tank, 0.93 for electric and tankless units, and 3.5 for a heat pump water heater as defaults, all replaceable with the figure on your label.
A family of four, three ways
64 gallons a day heated from 55 to 120 °F, gas at $1.50 per therm, electricity at 17 cents per kWh.
- Heat into the water: 64 × 8.34 × 65 = 34,694 BTU a day
- Gas tank at UEF 0.65: 34,694 ÷ 0.65 = 0.53 therms a day, $24.34 a month, $292 a year
- Electric tank at UEF 0.93: 10.93 kWh a day, $56.50 a month, $678 a year
- Heat pump at UEF 3.5: 2.91 kWh a day, $15.01 a month, $180 a year
The heat pump water heater saves about $498 a year over the electric tank and costs less to run than the gas tank at these prices. Over a 12-year tank life, the gas tank’s running cost is about $3,500. The ranking is the same one the guide to comparing fuels per million BTU sets out for space heating: resistance electric is the most expensive way to heat anything, and a heat pump is among the cheapest.
How much hot water you use
The daily gallons matter as much as the type. The daily hot water use calculator builds a figure from showers, appliances and sinks: about 70 gallons a day for a family of four with 8-minute showers at 2.0 GPM, about 49 for a couple with longer, faster showers. Showers are most of it, so a 1.5 GPM showerhead in place of a 2.5 GPM one cuts the shower’s hot water by 40% and the household’s water heating by over a quarter for the same minutes.
Ways to cut the cost
Lower the setting. Each 10 °F lower on the thermostat cuts the heat per gallon in proportion: from 130 to 120 °F, with 55 °F water, is a 13% cut. 120 °F is the usual recommendation; lower risks Legionella growth in the tank.
Insulate. Older tanks lose heat through their shell, and insulating the first few feet of hot pipe cuts losses on the way to the taps.
Fix leaks and drips. A dripping hot tap wastes heated water continuously.
Choose by fuel price. Where gas is cheap and electricity dear, a condensing gas tank or tankless unit costs least to run. Where electricity is cheap or gas is unavailable, a heat pump water heater wins easily. The fuel cost per million BTU calculator compares the fuels at your prices.
Standby losses and tank size
A tank keeps its water hot around the clock, and loses heat through its shell and, for gas, up its flue even when nobody runs a tap. That standby loss is part of why a gas tank’s UEF is so much lower than a tankless unit’s. It grows with the tank’s surface area, so an oversized tank costs more every day of its life. A household that uses 40 gallons a day pays to keep 75 gallons hot if it has a 75-gallon tank. Insulating jackets on older tanks, and heat traps on the pipes, reduce it; modern tanks are already well insulated.
What replacement costs
The water heater replacement cost calculator uses HomeAdvisor’s 2025 ranges and a 2026 contractor price list:
| Type | Installed range |
|---|---|
| Electric tank | $700 to $1,500 |
| Gas tank | $900 to $1,800 |
| Electric tankless | $1,500 to $3,000 |
| Heat pump water heater | $1,500 to $4,000 |
| Gas tankless | $2,500 to $4,500 |
A like-for-like 50-gallon gas tank with a permit comes to $1,000 to $2,200. A 65-gallon heat pump water heater replacing a gas tank, with a new 240 V circuit, a permit and $750 of rebates, comes to $1,650 to $5,950. A switch from a tank to a gas tankless unit usually needs a larger gas line and new venting, $1,000 to $2,500 more. Utility rebates for heat pump water heaters are common; the federal 25C credit ended for installations after 2025.
Payback
A heat pump water heater that costs $1,500 more than an electric tank and saves $498 a year pays back in about three years. Against a gas tank the saving is smaller, about $110 a year at the prices above, so payback depends on gas and electricity prices and on rebates. The guide to water heater sizing helps choose the right capacity first, since an oversized tank adds standby losses to every year of its life, and the guide to what installations cost covers the other equipment in the house.