Most residential water heaters differ in two important ways: the technology they use to heat water and the fuel they use to power that technology. These two factors largely determine a water heater's purchase price, operating costs, energy efficiency, and suitability for different homes.
Conventional storage water heaters are the most common type of water heater in the United States. They store a tank of hot water, typically between 30 and 80 gallons, and continuously keep that water at a set temperature until it is needed.
Because the tank stores hot water at all times, some heat continuously escapes through the tank walls into the surrounding air. This heat loss, known as standby loss, occurs even when no hot water is being used. Therefore, a well-insulated tank requires less energy to keep water hot since it loses less heat to the surrounding air.
Conventional storage water heaters can be powered by several fuel types, including electricity, natural gas, propane, and fuel oil.
Heat pump water heaters, sometimes called hybrid water heaters, are a type of storage water heater. Like conventional storage water heaters, they store hot water in an insulated tank. However, instead of generating heat directly, they use a heat pump to transfer heat from the surrounding air into the water.
Because moving heat requires much less energy than creating heat, heat pump water heaters can use over 50% less electricity than conventional electric resistance water heaters. As a result, they often have the lowest operating costs of any electric water heater.
Most heat pump water heaters also include electric resistance heating elements that automatically provide additional heating when hot water demand is unusually high. This is why heat pump water heaters are sometimes referred to as hybrid water heaters.
Because they store hot water in a tank, heat pump water heaters also experience standby losses.
Heat pump water heaters are powered exclusively by electricity.
Tankless water heaters, also called on-demand water heaters, do not store hot water. Instead, they heat water only when a hot water fixture or appliance is being used.
Because they do not continuously store hot water, tankless water heaters largely eliminate standby losses. This can improve efficiency, particularly in homes with lower hot water demand.
However, tankless water heaters have a maximum heating capacity. If several showers, faucets, or appliances require hot water at the same time, the unit may not be able to supply enough hot water unless it is properly sized for the household.
Tankless water heaters are commonly powered by electricity, natural gas, or propane.