Choosing the Best Water Heater System

Mar 21, 2023

Choosing the Best Water Heater System

We explain what to look for in a new water heater to help you save in the future.


Water heaters are worth your attention because in a typical Minnesotan home about 15 percent of total energy used in our homes is used to heat hot water.

To maximize your cost savings when replacing a water heater, it is best to wait until your old one needs to be replaced. Most water heaters last between 10 and 12 years, so such upgrade opportunities don’t come around all that often. That being said, don’t wait until your water heater stops working to think about what you would like to install next. Having an efficient water heater will help lower your energy bills. 

How does a water heater work?

Most homes have a storage hot water system that is powered by natural gas, propane or electricity.  A typical home water heater tank holds 40–50 gallons of hot water. It either burns natural gas or propane, or uses electric resistance to heat cold water. As the hot water sits in the tank and begins to slowly cool off, the water heater will use more fuel to keep it hot and ready for you to use. After you use the stored hot water for things like bathing, the system adds cold water to the bottom of the tank near the burner, and the cycle starts over again. In a typical home, a water heater will go through this cycle several times a day.

CEE recommends replacing your water heater with one that (1) is efficient, and (2) has sealed combustion venting.

When you need a new water heater, ask your contractor to install a power-vented (sealed combustion) water heater with a UEF rating of at least 0.64. See below for an explanation of this metric. This will ensure that you install a safe and highly efficient water heater. You can also consider installing other water heater systems that are even more efficient than standard tank models.

Water heater energy efficiency 

A water heater’s efficiency is measured by the Uniform Energy Factor, or UEF. This is a new rating from the Department of Energy, so you may see some water heater descriptions still using the old efficiency metric: Energy Factor or EF.

The way the metric works is that closer you get to 1.0, the more efficient your water heater will be. High-efficiency gas water heaters have a UEF between 0.64 and 0.80. Check with your utility provider to see how you can earn a rebate when you install a new high-efficiency water heater.

Powered combustion venting: A solution to a common water heater risk

The other important aspect to consider is how the water heater vents the gases after it burns natural gas or propane. Since there is no combustion process in electric water heaters, no venting is needed, so this only applies to natural gas or propane water heaters.

When your water heater burns natural gas or propane, it leaves behind combustion byproducts like water vapor and carbon monoxide. In a perfect setup, these gases leave your home through a vent that sits just above your water heater and escape to the outside. However, when the gases can’t escape, they fall back down the vent and spill into your home — such spillage can be caused by a variety of factors.

This is problematic because over time the gases can build up, causing indoor air-quality issues and even health problems. The best way to address this potential health risk is to make sure your water heater is a sealed or power- vented model.

Electric resistance vs. natural gas water heaters

Power-vented natural gas water heaters are more expensive to install than electric water heaters. However, electric resistance water heaters cost more to operate every month. Therefore, if you have to choose between the two, it is more cost effective to select a natural gas water heater.

What about heat pump water heaters?

In some circumstances, electric heat pump water heaters are a good alternative to natural gas or propane water heaters. To learn more about this technology see the Department of Energy's page about them.

How much does it cost to install a water heater?

Installing a power-vented water heater typically costs between $3,200 and $4,000. Installing an electric water heater will cost less. Remember to check with your utility for potential rebates before you start your project.



 Outside Resources


MN Department Of Commerce Home Energy Guide

Learn more about water heater efficiency on page 46 of the guide.


Storage Water Heaters

Learn more about the efficiency of conventional storage water heaters.


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