Quick answer
Choose a replacement water heater by matching the fuel type to your home (gas, electric, or heat pump), sizing it correctly for your household, and prioritizing units with a high Uniform Energy Factor (UEF). Then compare total cost of ownership: purchase price + installation + estimated yearly energy cost. Consider site constraints (space, venting, electrical circuit), available rebates/tax credits, and ongoing maintenance. For many homes today, a heat pump water heater (HPWH) offers the lowest operating cost; for limited space or endless hot water, a high-efficiency condensing tankless can fit—but costs more to install.
What to consider (and why)
1) Fuel and type
- Electric tank: Lower upfront cost, simple install, higher operating cost in high-electricity areas.
- Heat pump (hybrid) electric tank: Uses 60–70% less energy than standard electric. Needs space and a condensate drain. Often the best long-term cost if electricity rates are reasonable.
- Gas tank (atmospheric or power vent): Faster recovery, moderate operating cost. Venting must be correct and safe.
- Gas tankless (condensing preferred): Very efficient and endless hot water; higher install cost, needs larger gas line and venting.
2) Right size
- Tanks are sized by gallons and First Hour Rating (FHR); tankless by flow rate (GPM) at your required temperature rise.
- Examples:
- 1–2 people: 30–40 gal tank; tankless ~5 GPM at 70°F rise.
- 3–4 people: 50 gal tank; tankless 7–9 GPM at 70°F rise.
- 5+ people: 60–80 gal tank or recirculation; tankless 9–11+ GPM.
3) Efficiency and operating cost
- Look for UEF:
- Electric tank: ~0.90–0.95 UEF
- Heat pump: ~3.0–4.0 UEF
- Gas tank: ~0.60–0.70 UEF (standard) or ~0.80–0.90 (condensing)
- Estimate annual cost using your local rates. HPWHs often save $200–$400/year vs. standard electric.
4) Site constraints and install complexity
- Space/clearance, vent path (for gas), condensate drain (HPWH or condensing gas), electrical circuit capacity, and gas line sizing matter. These can make or break feasibility and cost.
5) Rebates and credits
- Many utilities offer $300–$1000+ rebates for HPWH or high-efficiency gas. In the U.S., a federal tax credit up to 30% (max $2,000) for HPWHs may apply. Check local programs.
6) Maintenance and lifespan
- Tank: Flush annually; replace anode rod every 3–5 years in hard water areas.
- HPWH: Clean air filter; manage condensate.
- Tankless: Descale 1–2x/year; flush with pump and vinegar solution.
Key specs and clearances
Setpoint: 120°F for safety and efficiency (use mixing valve if higher is needed).
TPR valve discharge: 3/4" full-size, gravity, to within 6" of floor or to an approved drain.
Drain pan: Required where leaks can damage; pipe to a safe drain.
Expansion tank: Needed on closed systems; size by heater gallons and house pressure.
HPWH room volume: Typically ≥700–1000 cu ft, or ducted.
Electrical:
- Std electric/HPWH: usually 240V, 30A dedicated circuit (some 120V HPWH models exist).
- Gas tankless: 120V for controls/condensate pump.
Gas line for tankless: Often 3/4"–1" for 150k–199k BTU.
Venting: Follow manufacturer category; condensing units use PVC/CPVC/PP with condensate neutralizer.
Step-by-step: choosing and planning
1) Check utilities and site
- Verify available fuel types and rates.
- Measure the space. Note ceiling height, doorways, and path for removal.
- Identify vent route (gas) or space/ducting (HPWH) and a drain location.
2) Size your unit
- Count simultaneous hot water uses (shower, laundry, dishwasher).
- For tank: choose FHR that covers your peak hour demand.
- For tankless: calculate required GPM at your temperature rise (groundwater temp to 120°F). Example: Two 2.5 GPM showers at 70°F rise need ~5 GPM at 70°F rise.
3) Compare lifecycle costs
- Price equipment + installation.
- Estimate energy use from the yellow EnergyGuide label and your utility rates.
- Factor maintenance (descaling kits for tankless, filter changes for HPWH).
4) Check rebates and codes
- Confirm permits, seismic strapping (in applicable regions), drain pans, expansion tank requirements.
- Apply for rebates before purchase if required.
5) Decide install path
- Like-for-like electric tank swaps are achievable DIY projects for experienced homeowners.
- Gas, venting, new circuits, or tankless conversions usually warrant a licensed pro.
Tools and materials (typical DIY like-for-like tank)
- Tools: pipe wrench, adjustable wrench, tubing cutter, PEX crimp or expansion tool (if using PEX), torch and solder or press tool for copper, screwdrivers, level, drill/driver, bucket, shop vac, hand truck, multimeter, non-contact voltage tester.
- Materials: dielectric unions, flexible stainless water connectors or copper/PEX and fittings, Teflon tape and pipe thread sealant, drain pan and pan drain, expansion tank with hanger strap, TPR discharge pipe (3/4"), shutoff valves, pipe insulation, leak detector alarm. For HPWH: condensate tubing and neutralizer (if required).
Safety considerations
- Turn off power at the breaker and verify with a meter before disconnecting.
- Shut off gas and test for leaks with gas leak detector solution after reconnecting. Install CO detectors with any gas appliance.
- Ensure correct venting slope, material, clearances to combustibles, and termination.
- Water at 140°F scalds quickly; set to 120°F unless code or health needs dictate otherwise.
- Use proper lifting techniques and a hand truck—water heaters are heavy.
Tips for best results
- Add a thermostatic mixing valve if you need a higher tank setpoint but want anti-scald protection.
- Insulate the first 6–10 feet of hot and cold pipes and any recirculation loop.
- In hard water areas, install a scale-reduction system, especially for tankless.
- Place a leak alarm in the pan; consider an automatic shutoff valve.
Common mistakes to avoid
- Undersizing tankless (won’t meet peak demand) or oversizing tanks (unnecessary standby losses).
- Ignoring gas line capacity or vent category for gas units.
- Skipping the expansion tank on a closed system.
- Installing HPWH in a tiny closet with no ducting—performance and noise issues.
- Not providing a condensate drain for HPWH/condensing units.
- No permit or inspection where required.
When to call a pro
- Any gas work, venting changes, or upsizing gas lines.
- Electrical upgrades (new circuits, panel work) or 120V-to-240V conversions.
- Converting to tankless or HPWH in tight spaces that need ducting/condensate routing.
- If local code requires a licensed installer or you’re unsure about compliance.
Cost ballparks (equipment only; installation varies)
- Electric tank: $500–$1,200
- Heat pump (hybrid) tank: $1,200–$3,000 (often offset by rebates)
- Gas tank (std/condensing): $700–$1,600 / $1,400–$2,500
- Gas tankless (condensing): $1,000–$2,000 Installation can range $800–$2,500+ depending on modifications.
Choosing with these factors in mind will help you land on the lowest true cost over the life of the heater, not just the lowest sticker price.