Water heaters vary significantly in terms of efficiency, although newer models tend to offer better efficiency that older models. Homeowners often have to choose between optimal efficiency and convenient design.
In areas of the country where people rely on electrical resistance heating instead of more efficient systems, electric water heaters are common. While these systems efficiently convert electricity into heat, power plants operate far less efficiently, making these models inefficient in environmental terms if the energy is drawn from a coal or natural gas plant. These systems are more expensive to run than their combustion-powered counterparts.
Homeowners who use boilers or furnaces powered by gas or oil can generally use these systems to heat their water as well. While heating water for residential use still takes energy, integrated systems can often used the heat generated in a more efficient manner, making gas-powered hot water the most popular source as of 2015.
Tankless water heaters warm water on demand, which eliminates the need to keep a tank of water constantly warmed and allows more efficient operation. Tests show that these systems provide better efficiency than traditional tank systems, and they are designed to provide an uninterrupted supply of hot water. The high cost of these systems, however, makes them less popular than traditional systems as the break-even point is typically measured in decades.