Gas vs Electric Water Heater: The Complete Buyer’s Guide (2022)

According to a study by the Department of Energy, the average American household spends 18% of its annual energy costs on water heating. You can definitely reduce your energy consumption by cutting down on hot water. But spending a cold winter without hot water or taking daily cold showers is not what most people consider a good time. So homeowners must purchase the most energy-efficient water heater available.

The two most common types of water heaters are gas and electric, and they vary significantly in terms of cost, efficiency, and operation. Understanding their benefits and drawbacks can help you determine which type of water heater is best for your house.

This article will examine the differences between gas and electric water heaters to help you choose the best type.

Gas vs. Electric Water Heater: Things to Consider

Before I compare them, let’s look at the advantages and disadvantages of each type of water heater.

Gas water heaters

There are various types of gas water heaters, including standard storage tanks, high-efficiency storage tanks, and tankless water heaters. 

A gas tank water heater works by convection. A steady supply of cold water is forced into the tank by a cold water delivery line. The cold water at the tank’s bottom is then heated by a gas burner situated under the tank’s seal. As the water heats up, it rises to the top of the tank, where the hot water discharge line draws it off to supply hot water to every fixture in the house. The hot water discharge pipe is much shorter than the dip tube, as its purpose is to convey the hot water at the top of the tank.

High-efficiency storage tanks use the same technology as conventional water tanks. Instead of a discharge pipe, high-efficiency condensing gas tank water heaters are constructed with a helical internal heat exchanger. This design enables more heat transfer into the water, which saves energy consumption by at least 30% compared to a conventional gas tank water heater.

Whole-house gas tankless water heaters use the same heating mechanism as conventional gas water heaters but without a storage tank. They save energy by only heating water when it is needed, hence avoiding energy loss during standby operation. When a hot water faucet is turned on, cold water is sucked into the water heater. The incoming cold water activates a flow sensor that ignites the gas burner. The water then circulates through the heat exchanger before exiting the heater at the desired temperature. Combustion gases escape through a separate, hermetically sealed exhaust system. 

By delivering hot water on demand rather than maintaining a tank of hot water at all times, tankless water heaters can be more efficient than gas tank water heaters.

Some water heaters come with the Energy Star label that use “condensing technology” to improve their energy efficiency. These condensing water heaters are often constructed with a secondary heat exchanger in addition to the main heat exchanger found in all continuous flow water heaters.

The secondary heat exchanger extracts more heat from the combustion gas, bringing it to the point of condensation. Due to the fact that condensed liquid corrodes copper, secondary heat exchangers are made of stainless steel rather than copper.

Condensing water heaters are designed to improve energy efficiency and longevity. In addition, they include more efficient burners, heat exchangers, and better insulation compared with standard gas water heaters.

Regardless of which type you pick, gas water heaters have the following advantages and disadvantages.

The advantages of gas water heaters

When compared to electric water heaters, gas water heaters heat water nearly twice as fast. While an electric heater may take an hour to heat 100 liters of water, a gas heater can heat a 200-liter tank in 30 minutes. This reduces the likelihood that you will run out of hot water. A gas heater is typically the best choice for larger households, as they are less likely to struggle to keep up with the heavy demand for hot water.

Natural gas is also more readily available than electricity. Almost every home in the United States has a gas line connection, and for those that do not, propane tanks can be easily installed. One of the most significant benefits of gas water heaters is their ability to operate during a power outage. They are particularly useful in areas where adverse weather conditions frequently disrupt electricity supply.

Because natural gas and propane are substantially cheaper than electricity, using them as a power source for water heaters allows you to save a significant amount of money. In the long term, gas water heaters have lower operating and energy costs than other types of water heaters.

Propane gas is one of the cleanest burning fossil fuels on the planet. Authorities have even certified this gas as an alternate fuel for several pieces of equipment and appliances. Given these facts, using this gas for powering water heaters significantly reduces greenhouse gas emissions, and since propane is a nontoxic gas, your gas water heater will not harm the environment in any way. Propane’s nontoxic nature also eliminates the risks of accidental homestead fires and related mishaps.

High-efficiency gas tank water heaters (and some tankless gas heaters) have another significant advantage. Homeowners who’ve upgraded their water heating systems to these high-efficiency units are eligible for a $300–$500 annual federal tax credit. However, this only applies if your water heater has a Uniform Energy Factor (UEF) of 0.82 (or higher) or a thermal efficiency rating of at least 90%.

A tankless gas water heater can also be used to augment the water supply from a tank water heater, especially in larger households where it is difficult for hot water to reach fixtures placed in the farthest corners. However, their best application is in urban townhouses and apartments that have limited space to install a 50–100 gallon tank water heater and have far less demand for hot water. A tankless water heater is hung on a wall and out of the way, freeing up space for other uses.

The disadvantages of gas water heaters

Gas hot water heaters have their fair share of shortcomings. 

For starters, purchasing a gas hot water heater will leave a massive dent in your finances compared with an electric water heater. Units such as the AO Smith Vertex 100 Power Direct Vent 50 gallon gas water heater and the American ProLine XE 50 gallon tall high efficiency natural gas water heater can cost upwards of $6,000, and that’s without considering the delivery and installation costs. There are other, more reasonably priced, gas heaters within the $1,000–$2,000 range, but generally, you’re likely to find an affordable electric water heater at a much lower price.

Installation can be a bothersome issue for homeowners with limited space to place their tank water heaters. Most local authorities have regulations on how to properly install gas-fired water heaters. A general rule of thumb is to place it against an external wall of the house. This is the reason the majority of hot water heaters are installed in garages or basements—to make space for the flue to convey exhaust gases away from the house.

Do not place the heater in an area where water may quickly seep into foundations and subfloors or areas where gas can easily enter the home. If you own a gas heater, you must put it in a well-ventilated area or provide appropriate ventilation. Keep any combustible things away from the heater, and attempt to position it such that regular maintenance and inspections are simple and all panels are easily accessible. 

Due to the size of the tank and the required installation of a ventilation system, gas water heaters tend to have limited placement options.

There is also a serious risk of accidental fires caused by gas leaks. According to the National Fire Protection Association, there are an average of 4,200 household fire incidents caused by the ignition of natural gas that take the lives of 40 Americans every year. To avoid such risks, it’s highly advisable to find a licensed professional to install, repair, and service your gas water heater. 

Electric water heaters

Just like gas units, electric water heaters are available in different types and sizes, including standard tanks, heat pumps (also called hybrid water heaters), and tankless electric water heaters.

A standard electric water heater works pretty much the same way as a gas water heater. It brings in cold water through the dip tube and heats it with the electric heating element(s) inside the tank. The hot water rises in the tank, and the heat-out pipe moves it to various fixtures situated all over the house.

An electric hot water heater has the same parts as a gas water heater. It has a thermostat, a temperature and pressure-relief valve, a drain valve, insulation, and an anode rod. The only major difference is that the electric elements that heat the water are plugged into a power source, usually a 240V wall outlet.

Heat pump water heaters don’t generate heat directly. Instead, they use electricity to move heat from one place to another. Therefore, they can save two to three times as much energy as traditional electric water heaters. 

Heat pump water heaters, better known as hybrid water heaters, work like a refrigerator in reverse to move heat. A refrigerator pulls heat from inside a box and sends it into the room around it. A stand-alone, air-source heat-pump water heater pulls heat from the air around it and sends it to a water storage tank at a higher temperature. You can buy a stand-alone heat-pump water heating system as a single unit with a water storage tank that has heating elements as a backup. You can also install a heat pump on a standard electric water heater that you already have.

A tankless electric water heater operates similarly to a tankless gas model. It instantly warms water without the need for a storage tank. When a hot water faucet is turned on, cold water travels through a heat exchanger and is heated by an electric element. Consequently, tankless electric water heaters provide an endless supply of hot water on demand.

The advantages of electric water heaters

Electric water heaters do not need additional pipes or ventilation systems, which minimizes installation costs. Electric water heaters also need less maintenance than gas water heaters because they have fewer moving components, lowering the overall cost of ownership. Electric water heaters, in addition to being less costly, often last an average of four years longer than gas models, making them an excellent investment for any homeowner.

Rating a water heater relies on how much fuel or electricity it requires to heat water, also known as its energy factor (EF). The greater the energy factor, the more efficient a water heater is, and the higher its rating compared to other models. Thus, electric water heaters have higher energy factors and are more efficient than typical gas water heaters, as the majority of energy loss in a gas water heater happens during the venting process, which does not occur in an electric water heater.

Additionally, electric water heaters are becoming an integral component of the future electric grid. These previously inconspicuous appliances are transforming into “smart” appliances and energy storage devices that are enhancing the grid’s stability and efficiency. Electric water heaters may save money by heating water when demand for electricity is low and storing the thermal energy for later use.

In hybrid water heaters, the heat pump draws hot air from the surrounding air and expels colder air. The heat that the water heater absorbs minimizes the amount of power required to heat the tank. This results in reduced power costs. In addition to lowering energy costs, hybrid water heaters also aid in reducing a household’s carbon footprint. In fact, this sort of water heater may reduce your carbon footprint by two metric tons per year!

Another advantage of heat pump water heaters is that due to their high energy efficiency, owners are eligible for an annual federal tax credit, as well as state rebates. These financial incentives will ensure that your hybrid water heater pays for itself within a short time.

Lastly, electric water heaters are very easy to install. As there are no gas lines to tap into, all you need is a little plumbing knowledge to install the unit. Also, due to the lack of moving parts, electric heaters don’t require frequent maintenance.

The disadvantages of electric water heaters

Electric water heaters are more costly to run than gas-powered models, which is a significant disadvantage. Typically, gas is less expensive than electricity. This implies that installing a gas-powered water heater will result in lower utility costs (over time) than purchasing an electric water heater.

Electric tankless units are more expensive to acquire and install than tankless gas models. This disadvantage is offset by the high efficiency of tankless electric water heaters, which results in lower long-term costs. 

Another downside of electric heaters is their inability to supply hot water during a power outage. 

Additionally, because electricity heats water more slowly than gas, electric water heaters need a long recovery period.

Gas vs. Electric Water Heater: Which Is Best?

When choosing between a gas or electric hot water system for a home that will be occupied for many years, gas makes the most sense. You save money on your energy bills and recover the additional expenses of installation and equipment. 

Because of the high ticket price of gas heaters, an electric heater makes more sense if you do not intend to stay for a long time, particularly if you are replacing an electric hot water system. 

Tankless models (both gas and electric) are more energy efficient and thus help you save more money compared to storage tanks, but they are not the best option for large households.

Read my review of the 7 best water heaters for your home to find out which brand and model is best suited for your home.