Propane Systems Incentives Program
Home/ Research & Training/ Compare Water Heating Systems

Compare Water Heating Systems

Water Heating Systems

Comparing propane water heating with electric or heating oil systems? Get the facts with our research on efficiency, cost, energy use, and carbon emissions.

According to the U.S. Energy Department, residential water heating often accounts for up to 25 percent of home energy use. As more homeowners become aware of this fact, the marketplace is responding to their desire to cut energy costs by offering an array of innovative water heating technologies, such as condensing and noncondensing tankless units, condensing storage tank systems, and cogeneration units that combine space heating and water heating — and those are just the ones that run on propane or natural gas. Factor in systems that run on other energy types and the range of choices can become overwhelming.

A critical new factor in the residential water heater market is the change brought about by amended federal efficiency standards which went into effect in April 2015. The amended standards affect electric, gas/propane, and heating oil water heaters, and fundamentally change the product offerings in the U.S. market. So, which is the right system for your project?

A study conducted in 2015 by Newport Partners, LLC helps you discuss today’s water heating options with customers in a knowledgeable, research-based way.

Download the Research Findings



1. Energy Factor: What It Does and Doesn't Tell You

Energy Factor

Let’s start with Energy Factor (EF), the industry’s benchmark for measuring a water heater’s energy efficiency. Based on the amount of hot water produced per unit of fuel consumed over a typical day, the EF also takes into account a unit’s:

  1. Standby losses, or thermal losses from storage (tank) water heaters to the surrounding environment. Tankless units do not have standby losses, one of their advantages.
  2. Recovery efficiency, or how efficiently a unit can heat cold water.
  3. Cycling losses, or thermal losses that occur as water circulates through a water-heater tank.

Energy Factor is very useful for comparing the efficiency of water heaters with the same energy source and predicting which one will have lower annual energy costs. For example, a high-efficiency storage (condensing) propane water heater (EF = 0.80) will cost more to run than a propane tankless condensing water heater (EF = 0.94).

But using Energy Factor comparisons to predict annual energy costs across water heaters of different fuel types is not reliable. For example, based on EF alone, an electric storage water heater (EF = 0.90) seems a better option than a propane storage water heater (EF = 0.67). But if one also considers the price of the energy source, the propane water heater in the example below would cost roughly $72 a year less to operate than the electric water heater.

Because cost of energy is such an important part of true operating cost, the study used energy modeling analysis to calculate the costs of 10 water-heating systems across 10 U.S. locations. Newport Partners based each estimate on a daily hot-water demand of 60 gallons. They determined annual energy costs by measuring the efficiency of producing and storing hot water (for tank-type systems) and estimating the average cost of energy in each test location. The study found that, among conventional options, the propane condensing and noncondensing tankless systems ranked among the top performers. An alternative-energy combination of solar hot water with propane tankless back-up showed the lowest overall energy costs.

Of course, energy cost is not the only factor to consider when choosing a system. One must also account for up-front costs and service life, which we will discuss next.

chart -1

2. Factoring In Equipment Cost and Service Life

Annual Cost of Ownership

Clearly, we should weigh annual energy costs when evaluating water-heating options, but what about system cost? Initial purchase costs and service life are also critical factors to consider when choosing the system with the best value. To address this issue, the study calculated the Annual Cost of Ownership (ACO) of each system. The ACO measures the average purchase cost of a water heater spread over the unit’s rated service life — which can vary by a decade or more — in addition to estimated annual energy costs. Because it combines all the cost factors discussed by the study thus far, ACO is a highly useful, comprehensive way of comparing water-heating systems. By the ACO yardstick, propane water heaters were favorable in all but one climate zone for both new and replacement applications.


3. More Hot Water, Fewer Emissions

Performance and Emissions

The study examines two additional factors that construction professionals should consider when choosing a water-heating system: flow rate and greenhouse gas (GHG) emissions. Although these factors do not have a direct impact on the true cost of the heating system, both can affect the home’s sustainability profile — not to mention homeowner satisfaction.

When it comes to hot-water delivery capacity, the study found that propane tankless units have more than triple the capacity of standard electric models and heat pump water heaters, based on the first full hour of operation. Propane tankless systems delivered their rated gallons per minute continually over the course of an entire hour, which resulted in a significant increase in hot-water flow rates.


And when it comes to GHG emissions, propane water heaters are responsible for lower CO2 emissions than their electric counterparts. That’s because most electricity in the U.S. comes from coal-fired power plants. In fact, the study showed that a standard-efficiency electric tank water heater generated CO2 by at least double the rate of a propane tankless condensing unit. And while heat pump water heaters are cleaner than standard electric models, they still produce one-third more carbon emissions than the propane condensing tank system. Meanwhile the solar hot-water system with propane tankless backup was the cleanest choice among tested water-heating systems.


4. High-Performance Water Heating Lowers HERS

Water heating and the HERS Index

Fast gaining favor among building professionals as a data-driven way to score a home’s energy efficiency, the Home Energy Rating System (HERS) Index is one way to measure the combined performance of a home’s construction, appliance and energy selections.

High-performance water-heating systems can significantly lower a home’s HERS Index, leading to lower energy use and increased marketability of the home. For example, the study modeled a new home in the Northeast U.S. with a standard-efficiency electric storage unit could score a HERS Index of 75. The same home built with a propane condensing water heater would score a HERS Index of 69, meaning that the home is approximately 6 percent more efficient.

Propane Energy Pod homes demonstrate even better numbers: HERS Index of 67 for the Propane Energy Pod home, versus 83 for a standard (oil and electric) home — a 16 percent difference.

Weighing the Value of Tankless and Heat Pump Water Heaters

The special case of HPWHs

To lower water heating costs, construction professionals have begun to favor two water-heating technologies: tankless systems and heat pump water heaters (HPWHs). Our research shows that in many cases, tankless systems outperform heat pump units when it comes to upfront investment, long-term energy cost, service life, homeowner satisfaction, and environmental benefit.

Versatile Propane Builder
Home/ Research & Training/ Compare Water Heating Systems