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A new study shows more efficient water heaters can save homeowners money, reduce energy consumption, and help lower carbon emissions.

When you consider that domestic water heating accounts for up to 20% of the household energy usage, and that a conventional water heater loses 57% of the energy before hot water even gets to your shower, tub or kitchen faucet, you have to wonder if there is a better alternative.

So what is the best, most efficient water heating technology available today?

The Wilden Living Lab is a Kelowna-based research project initiated by the Green Construction Research & Training Centre, a partnership between UBC and Okanagan College. Additional partners are AuthenTech Homes, FortisBC and Wilden, Kelowna’s largest master-planned community. The partners recently conducted a study to assess the performance, strengths and weaknesses of energy-efficient water heaters.

The study compared three homes with three different water heating systems. Two of the homes have been built and their energy consumption monitored for three years. The third home, designed to bring energy waste to zero, is currently under construction.

The first home, the Home of Today, has a conventional electric water heater that stores water in an insulated tank. In the second home, called the Home of Tomorrow, the water heater uses a heat pump to extract heat from the surrounding air and stores the water in a tank. According to the U.S. Department of Energy, a heat pump water heater is two to three times more efficient than a standard electric water heater.

Results for the third home or Next Generation Home now being built were modeled on it having a tankless natural gas water heater that heats water instantly on demand. The U.S. Department of Energy reports that a tankless water heater uses up to 34% less energy than a conventional electric water heater.

The table below summarizes the results of the study conducted by UBC Okanagan’s School of Engineering. Under current utility rates, heat pump water heaters offer substantial cost savings and a relatively short payback time of just 2.6 years. The natural gas tankless heater planned for the Next Generation Home offers slightly higher savings but will take 4.1 years to pay back the capital investment. These payback times are very reasonable, making both options a better economic choice than conventional electric water heaters.

Whether you are building from scratch or thinking about upgrading your current water heating system, there are a few other considerations to factor into your decision.

While the cost savings are high for the tankless water heater, it could have a higher operational carbon footprint than an electric storage tank if it was operated with conventional gas. Of course, there is the possibility to operate the tankless water heater with carbon neutral renewable natural gas. FortisBC has a number of renewable natural gas projects underway to provide plenty of this climate-friendly energy.

Space may also be an issue. A heat pump water heater needs a minimum of 28.3 cubic meters of air space to operate and a controlled temperature environment between 4.4 and 32 degrees Celsius. A tankless model, on the other hand, naturally requires much less space.

Pros and cons of different water heating systems:

The Wilden Living Lab is an unprecedented and ongoing research initiative for sustainable homebuilding. Much more research, insight and results to come. Subscribe to the Wilden Living Lab newsletter to stay informed.


[1] “Water heating,” [Online]. Available: [Accessed 27 September 2021].

[2] “Replacing your Water Heater,” [Online]. Available: [Accessed 2021 September 2021].

[3] “Storage Water Heaters,” [Online]. Available:

[4] “Heat Pump Water Heaters,” [Online]. Available:

[5] “Tankless or Demand-Type Water Heaters,” [Online]. Available:

[6] “Why You Should Consider Switching to a Heat Pump Water Heater,” [Online]. Available:,between%2013%20and%2015%20years.. [Accessed 27 September 2021].

Join the discussion 14 Comments

  • Gary says:

    This analysis appears relatively superficial. For example no account has been taken for carbon prices and their rising real costs over time as per government plans and global commitments. Time value of money (and inflation) also ignored. Also heat losses are not always household losses as they may go to support heating of the home depending on time of year. These are a few examples only of deficiencies. A more thorough analysis before drawing conclusions would be appreciated. Thanks.

  • wildenlivinglab says:

    Thank you, Gary, for your feedback. We agree that considering the rising natural gas (including carbon taxes) and electricity prices would provide a more in-depth view of the performance of water heaters. However, the main objective of this article was to offer readers an insight into available water heater options in simplified terms that can help them to make informed decisions. Since simple payback time is an easy criterion to understand, it was adopted.

    Consideration of increasing carbon tax per year and inflation rates would provide similar results, i.e., heat pump water heater would have the lowest payback time among the three water heaters. Under an increasing carbon tax, water heaters operated on natural gas will face higher bills with time. One of our previous blog articles (Rising Carbon Tax is a Game Changer) specifically addressed how a change in a carbon tax will affect energy prices. Here the impacts of the rising carbon tax were explored for heat pumps but the results indicate that appliances/equipment operated on electricity may become more cost-effective.

    The heat losses will depend on the home characteristics, the amount of water used, and detailed monitoring of temperature changes. Here, heat losses generally observed in literature were depicted due to lack of detailed monitored data. A more detailed analysis with advanced monitoring techniques was beyond the scope of current work.

  • Carol Schultz says:

    I’d be interested in how a natural gas hwt compares to the other 3 that were studied

  • Andrea says:

    We just spent over $4K to install the suggested on demand tankless unit. We have had it for 10 months now and hate everything about it! It is so loud – hear the hum all through the house every time someone turns on hot water, sounds like a low hum of a vehicle running outside (apparently this is normal), it takes over 1 minute to get hot water to my kitchen sink (tankless unit is less than 10 feet from the sink) and 3 minutes to get hot water upstairs. So I am told to spend another $300-$400 and put in a circulating pump that will make more noise and run off and on throughout the day (using more electricity I assume?). And then the teenagers…they do enjoy the 30 minute showers now that hot water never runs out. So yeah, we are using a stupid amount of water. I would never recommend this system…we are thinking of cutting our losses and going back to a tank. Such a shame. Anyone want to buy a tankless system?!

  • Bill Keegan says:

    Why would you not have compared a gas fired hot water heater with these?

  • Luke Smith says:

    It was very informative to know that the payback time for gas hot water systems is almost seven years. My sister just moved in her new house, and she needs help with the water system. I have no knowledge about that stuff, so I’ll definitely hire an experienced plumber who can help her with gas hot water installation.

  • Dustin says:

    Would like to see your calculation of average annual opperating costs. Your estimate of $3,087 for the electric heater is more than most families will spend on their entire electric bill in a given year and the water heater is a small percentage of a homes power usage. The annual power budget for our house is 1450 including electric and gas. Budget for the water heater is 380$/year.

  • wildenlivinglab says:

    Thanks for sharing your experiences, Andrea. We asked the builder AuthenTech Homes and supplier Quality Air Care for their input. So far there have been no complaints from their customers (50+ instalments per year) on the waiting time for hot water. When it comes to the sound, both agree that you can hear it while someone turns on the hot water and that it is important to consider the location of the Navien while planning a new home. When it comes to cost efficiency: the added cost to go to a tankless unit will pay for itself (plus the $1,000 rebate currently offered by FortisBC on some models) by not having to keep a tank full of water warming constantly.

  • wildenlivinglab says:

    Hi Carol, we appreciate your interest. We only studied three water heaters specific to the Wilden Living Lab homes. The investment cost of natural gas water heater is similar to electric tank water heaters. If a natural gas hot water heater tank with 50USG capacity was used, the annual energy bills for this home would be about $2,700. The operating bills will be lower than the electric tank heater. However, savings will still be higher for a tankless water heater or an integrated water heat pump.

  • wildenlivinglab says:

    Hi Bill, thank you for being so interested. We only considered water heaters present in Wilden Living Lab homes for this research. The gas-fired water heaters are typical in Canadian homes, and their cost, capacity, and efficiency vary depending on location and supplier. If a 50USG water heater with 55% efficiency (typical for this water heater type) was used in the test home we would expect annual energy bills of about $2,700. This bill is lower than the electric tank heater. Still, the overall savings of a tankless water heater or a water heater pump will be more. In addition, this water heater will have an overall higher operational carbon footprint.

  • wildenlivinglab says:

    Hi Dustin, we appreciate your interest. These annual operating costs are for the whole house rather than the hot water systems alone. The energy costs are per FortisBC rates of 2021. The only change performed in the house was for the hot water system. Therefore, the difference in annual cost would indicate the energy savings associated with the water heater.

    The difference between your house’s annual power budget and Wilden home can be due to one or more differences between the two houses. Possible sources of variation are: size of the houses, specifications of building envelope and systems, efficiency of various energy system, sources of energy utilized in heating and cooling, number of occupants, time spent at home, temperature setpoints, age of your home, type of house (attached/detached) etc.

    For example, the Wilden House was built to BC Building Code 2012, before more stringent targets of the BC Energy Step Code (implemented in 2017) came into effect. If your house is new, it may have better envelope systems compared to this standard home. Another example is the size of the home. Wilden house falls into category of large size detached homes in BC. Large single detached homes have larger surfaces in contact with the environment and hence have higher heat losses. Therefore, their energy costs are significantly higher than medium or small homes. Likewise, the energy source introduces a difference. The house with an electric storage water tank has the highest bills because the cost of electricity in BC is still much higher than natural gas.

    We hope this helps to clarify why the discrepancy is present in your and this house’s energy bills.

  • Lou Cinalla says:

    Nice article, I learn plenty of information that might help me choose the best pool heater. Thankfully all the techniques you mention above match these pool heater; I will share your article with my friends as well.heat pump

  • Abby Cinalla says:

    Having a pool heater is a great way to save money and time. Its also an excellent choice for those who are looking to save money on their bills. Thank you for this informative article about the benefits of installing a pool heater in your home. Its important to note that there are many different types of pool heaters available, the same with this swimming pool heater.

  • Jason Wilson says:

    I find there is not enough detail or actual results in this study and the same can be said about the other studies on your “wildenlivinglab” website. Is the data and actual results available to review? I’d love to look at the costs of installation vs the heating and cooling bills as well as the total kwhrs produced month by month from the solar panel.

    Also, I’d like to know your assumptions. I’m not sure I trust your assumptions when you state: “If a 50USG water heater with 55% efficiency (typical for this water heater type) was used in the test home we would expect annual energy bills of about $2,700 “. This is simply wrong on a few levels the efficiency rating is only indicative of older direct vented natural gas water heaters and your cost to operate is way too high. Power vented water heaters are typically 73% efficient (UEF), some are as high as 88%. With a 73% efficient hot water tank that $2700 energy bill would be $2,000. But even that price is bazar when I compare my own natural gas bill (power vent 60 gallon tank), in the summer my hot water and gas cook top cost me an average of $46 a month ($53, $44, $43, and $44 June, July, August, and Sept respectively) for a family of 5 and we do a lot of laundry and run the dishwasher daily. If you extrapolate my summer gas bills for the full year hot water and cooking should run an annual bill of $555.

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