Most homes heat water using either a gas burner or electric heating elements inside a storage tank, though heat pumps, tankless units, and solar systems are increasingly common alternatives. Water heating is the second largest energy expense in a typical home, accounting for about 18% of total household energy use.
Gas Water Heaters
Gas water heaters use a burner at the bottom of the tank that ignites natural gas or propane to produce a flame. That flame heats the bottom of the tank, and the heat rises naturally through the water. A flue pipe runs through the center of the tank and out through the roof, carrying exhaust gases out of the house while also transferring additional heat to the water as those gases pass through.
Gas models heat water faster than standard electric models, which is why they can often get away with a slightly smaller tank for the same household size. They do require a gas line and proper venting, which adds to installation complexity. If your home already has a gas line running to the water heater location, replacing one gas unit with another is straightforward. Adding gas where it doesn’t exist is a bigger project.
Electric Water Heaters
Electric water heaters use one or two high-voltage heating rods (called elements) that sit inside the tank, directly immersed in the water. The upper element heats the top portion of the tank first so you get hot water faster, while the lower element handles the bulk of the heating. These elements run on a 240-volt circuit, the same heavy-duty wiring your dryer or oven uses.
Electric tanks are simpler to install since they don’t need a gas line or exhaust venting. They tend to cost less upfront but historically cost more to operate in areas where electricity is expensive relative to natural gas. That equation is changing as heat pump water heaters become more common.
Heat Pump Water Heaters
A heat pump water heater doesn’t generate heat directly. Instead, it pulls warmth from the surrounding air, concentrates it using a compressor (the same principle behind a refrigerator, just in reverse), and transfers that concentrated heat into the water tank. Because it moves heat rather than creating it, a heat pump water heater uses roughly half the electricity of a standard electric tank.
These units look like a regular tank water heater with a larger top section that houses the compressor and fan. They work best in spaces that stay between about 40°F and 90°F year-round, like a garage, basement, or utility room. They also produce cool, dehumidified air as a byproduct, which can be a bonus in warm climates and a minor drawback in cold basements during winter.
New Department of Energy efficiency standards taking effect in 2029 will require over 50% of newly manufactured electric storage water heaters to use heat pump technology, up from just 3% today. The standards will more than double the efficiency of electric storage water heaters compared to current models, so heat pumps are quickly becoming the default for electric homes.
Tankless (On-Demand) Water Heaters
Tankless water heaters don’t store hot water at all. When you turn on a faucet, cold water flows through the unit and is heated instantly by either a gas burner or electric elements. The advantage is that you never run out of hot water, and you’re not paying to keep a tank warm around the clock.
Whole-house tankless units powered by gas need significant venting and a high-capacity gas line. Electric whole-house models require substantial electrical capacity, typically a 220-240 volt circuit with 30 to 60 amps depending on the unit. Smaller point-of-use electric models can be installed under a sink or near a bathroom to provide hot water at a single fixture, which is useful when a fixture is far from the main water heater and you’d otherwise wait a long time for hot water to arrive.
Boiler-Based and Indirect Systems
If your home uses a boiler for space heating (common in older homes in the Northeast and Midwest), your hot water may come from an indirect water heater. In this setup, the boiler heats a fluid that circulates through a heat exchanger coil inside a separate storage tank. The hot coil transfers its heat to the domestic water without the two fluids ever mixing.
Indirect water heaters are efficient because modern boilers are already high-efficiency units, and the well-insulated storage tank holds heat for long periods. During the heating season, the boiler handles both your radiators and your hot water. In summer, the boiler fires only when the water tank calls for heat.
Solar Water Heating
Solar thermal systems use rooftop collectors to absorb heat from sunlight and transfer it to your water supply. The two main collector types are flat-plate collectors, which look like dark, shallow boxes mounted flush with the roof, and evacuated-tube collectors, which use rows of glass tubes and are more efficient in colder or cloudier climates. Which type works best depends on your roof orientation, budget, and local climate.
Most solar water heating systems include a backup gas or electric element for cloudy stretches, so they reduce your energy bill rather than replacing your conventional system entirely. They’re most cost-effective in sunny regions with high energy prices.
How Long Water Heaters Last
A standard tank water heater, gas or electric, typically lasts 8 to 12 years. One of the biggest factors in that lifespan is a component called the anode rod, a metal rod inside the tank that corrodes on purpose. It attracts minerals and corrosive particles in the water through an electrochemical process, sacrificing itself so the tank walls don’t rust. Once the anode rod is consumed, the tank itself starts corroding.
Most manufacturers recommend inspecting the anode rod every one to three years and replacing it once it’s more than 50% corroded. If you have hard water or use a water softener, the rod degrades faster and needs more frequent checks. Replacing a $20-$50 anode rod every few years can add several years to your water heater’s life, making it one of the cheapest maintenance tasks in the house.
Tankless units generally last longer, often 20 years or more, because they don’t hold standing water that gradually corrodes a tank. They do need periodic descaling, especially in hard water areas, to keep their heat exchangers working efficiently.