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Types of water heaters: key differences, advantages and disadvantages



Water heaters are essential in any modern household, especially during colder months. We use warm water to shower, wash dishes, do laundry, cook and more.

Today, different types of water heaters exist, including tankless, solar-powered, and others that use condensing technology and heat pumps. Generally, water heaters serve the same purpose but differ in how they heat and store water.

Since there are many brands on the market, we know you may need help choosing a water heating system that fits your home perfectly. That’s why we’re providing answers and detailed explanations to help you make an informed decision.

This article will look at the major water heater options and their pros and cons. We will also provide top tips to help you choose the best water heater for your home.


Conventional storage water heaters

A conventional storage water heater is one of the most popular heating appliances among homeowners. It features a storage reservoir that holds between 40 and 120 gallons of hot water.

Conventional storage-tank water heaters operate under the principle that cold water is heavier than warm water. Therefore, cold water enters the system via a pipe at the bottom of the tank. The cold water is heated, causing it to rise toward the top of the storage tanks. 

People can access hot water through a tap at the top of the tank. Whenever hot water exits the storage tank, the inlet valve at the bottom opens to allow cold water to enter. This means that the storage tank will always be full.

Conventional storage water heaters can use different types of fuel, including electricity, propane, natural gas and oil.

Like other machines, conventional storage tank water heaters need proper installation and maintenance. It's advisable to hire professionals rather than trying DIY installation. The labor cost for installing a conventional storage water heater can be between $150 and $450; however, the overall cost depends on the unit size, fuel type, building safety requirements, property location and dealer.

Pros of storage water heaters

  • High flow rate. Conventional storage-tank water heaters work continuously and are full most of the time. Whenever the user opens a tap and accesses warm water, the system automatically lets cold water in from the bottom of the tank. This continuous cycle makes conventional storage water heaters suitable for small- and medium-size households. Conventional storage water heaters also support multiple simultaneous usages. For example, one person can shower while another can use warm water to clean dishes.
  • Versatility. Conventional storage water heaters can operate in different types of climates. This is because they use fuel sources like natural gas and propane. In case of a power outage, your household will still have access to warm water.
  • Low initial costs. Conventional storage water heaters are more affordable and easier to install than other water heaters. The repair and maintenance costs are also usually low because conventional storage water heaters are common.
  • Long-lasting. Storage water heaters also last longer because they lack components like pumps and motors that are subject to frequent breakdowns.

Cons of storage water heaters

  • Energy loss. Most conventional storage water heaters lack insulated tanks. As a result, they lose a certain percentage of heat to the environment. This means the water heater will consume more energy to heat water to a specific temperature, likely causing higher fuel charges.
  • Leaks. Conventional water heaters can be subject to frequent leaks as they age. Apart from being a huge inconvenience, the leaks may cause other electric appliances to fail and create damp environments where mold and other property-damaging algae can grow.
  • Bulky. Most conventional storage water heaters come with heavy tanks. You may need extra hands or special equipment to install or move them.
  • High utility costs. Conventional storage water heaters continuously heat water to keep it at a specific temperature even when you’re not using it. Apart from the water bill, you will likely have high electric or fuel charges. 
  • Sediment buildup. Sediment can build up in the storage tank and affect the water quality. You might need to hire professionals to remove the sediment.


Tankless water heaters

Unlike conventional storage water heaters, tankless water heaters lack storage units. Instead, they use a heat exchanger to warm water for the user. The heat exchanger heats using different fuel sources, including electricity and natural gas.

Depending on the model, a tankless heater can release between 1 and 6 gallons of water per minute, which is enough for most homes. These systems also save significant energy because they only provide hot water when required.

However, the amount of hot water from tankless water heaters may reduce when it comes to multiple or simultaneous usages. In some cases, the water will only be slightly warm because the heat exchanger has a harder time keeping up with your water needs. Therefore, tankless water heaters are more suitable for smaller homes.

A tankless water heater can cost between $500 and $2,000, and installation costs roughly $2,800.

Pros of tankless water heaters

  • High energy efficiency. Unlike conventional storage water tanks that heat water regularly to keep it at a specific temperature, tankless water heaters provide warm water only when needed. As a result, you will spend less on fuel or electricity.
  • Convenience. You can access hot water from tankless water heaters almost instantaneously. This is a huge advantage over storage water heaters, where you sometimes have to wait for the tanks to fill up.
  • Space-saving. Most tankless water heaters are small in size, allowing you to install them in tight spaces.
  • Better safety. Conventional storage water heaters heat water continuously and can overheat in rare instances, leading to disastrous consequences. Tankless water heaters cannot overheat easily because they only operate when warm water is required.
  • Durable. Tankless water heaters last long without requiring heavy repairs. A well-maintained tankless water heater can last between 15 and 20 years.
  • No contamination. Tankless water heaters lack storage units, meaning water cannot be contaminated easily. Your water comes directly from the supplier and passes through a heat exchanger for heating.

Cons of tankless water heaters

  • Multiple and instantaneous demands. Tankless water heaters may be unable to serve multiple users simultaneously. In such cases, the water temperature can reduce due to increased usage. It’s recommended for large households to install an extra tankless water heater to supplement the existing system.
  • High initial costs. Tankless water heaters can be more expensive to buy and install, but their longevity and benefits are often worth the cost.


Heat pump water heaters

Rather than burning propane and natural gas to produce heat, heat pump water heaters pull the heat directly from the surrounding spaces and use it to heat water.

These water heater systems use fans to pull heat from the environment and force it to a compressor that increases the air temperature and pressure. The warm air passes through evaporator coils containing a refrigerant (a fluid used for air conditioning). As a result, the refrigerant becomes hot and passes the heat to the water inside a tank.

Consider hiring professional plumbers to help you correctly connect the heat pump water heater. The average cost of purchasing and installing a heat pump water heater is between $1,500 and $3,000.

Pros of heat pump water heaters

  • Energy efficiency. This hot water system uses less energy than other water heaters. Instead of generating their own heat, heat pump water heaters pull it from the indoor space. 
  • Environmentally friendly. Since they consume less energy, heat pump water heaters have low greenhouse gas emissions, which is good for the environment.
  • Durable. Well-maintained heat pump water heaters can last between 10 and 15 years. You get great value for your money by purchasing heat pump water heaters.

Cons of heat pump water heaters

  • High upfront cost. Purchasing and installing heat pump water heaters is somewhat expensive. You’ll need to work with an expert to set up the water heating system, which is costly. However, you will make significant cost savings over time due to the low energy consumption.
  • Not suitable in cold weather. Since heat pump water heaters absorb warm air from the environment and use it to heat water, they are not suitable in locations that experience extremely cold weather.


Solar water heaters

Instead of generating energy by burning natural gas, propane or electricity, solar water heaters use the sun as their energy source.

Depending on the solar water heater’s model, the sun’s rays can heat water directly in pipes or heat a fluid that transfers the heat to a water tank.

In terms of installation, solar water heaters are usually placed on high surfaces (like rooftops) with sunlight access. You can install one on a flat surface, as long as nearby trees and other objects don’t obstruct the sunlight.

Solar water heaters are more suitable in warm or sunny areas. Such climates allow solar water heaters to consistently provide hot water to the household. 

The cost of installing solar water heaters varies from $8,000 to $10,000. Installation costs can vary depending on your location, dealer, and solar water heater brand and size.

Pros of solar water heaters

  • Cost-effective. Solar water heaters use sunlight, which is free and readily available. Investing in a solar water heater can make significant savings in the long run.
  • Environmentally friendly. Solar water heaters have low carbon footprints because they use 100% green energy.
  • Low maintenance. Once installed, solar water heaters require little maintenance. All you need is to keep the solar water heater clean and dust-free. You should also ensure not to block the system from sunlight.
  • Long-lasting. Solar water heaters can last more than 20 years, providing great value for the cost.
  • Space-saving. Since owners commonly place solar water heaters on rooftops, they save significant indoor space to use for other purposes.
  • Rebates and tax credits. Installing solar water heaters can make you eligible for federal tax credits. According to Energy Star, solar systems installed before December 2019 qualify for a 30% tax credit, while those installed between December 2019 and January 2023 get a 26% tax credit. The tax credits help make solar water heaters more affordable.

Cons of solar water heaters

  • High initial costs. Despite government incentives, purchasing and installing solar water heaters is still quite expensive. The average cost for a solar water heater, including labor, is about $9,000.


Condensing water heater

Similar to a conventional storage water heater, a condensing water heater provides a steady supply of hot water but much more efficiently.

Condensing water heaters feature a bigger surface area that allows the heat exchanger to capture more heat and transfer it to the water, resulting in less energy loss. Condensing water heaters also have good insulation and efficient burners. 

Condensing water heater systems use natural gas or propane to generate heat, making them suitable for homes in different climates.

The cost of purchasing and installing storage tank water heaters with condensing technology can range between $2,900 and $3,600. However, this cost might change depending on the size of your home, preferred brand, location and other factors.

Pros of condensing water heaters

  • Consistent hot water supply. Condensing water heaters can detect when the water level in the tank drops and open up the inlet valve automatically to allow more water to enter the heating chamber.
  • High efficiency. Condensing water heaters have an energy efficiency rating of more than 90%
  • Tank insulation. Condensing water heaters are insulated to prevent heat loss, meaning they can hold hot water for long periods.
  • Durable. Condensing water heaters have a life span of 10 to 15 years without requiring major repairs. 

Cons of condensing water heaters

  • High initial costs. Compared to conventional storage water heaters, condensing heaters are more expensive and may be difficult to repair when they break down. The installation cost of a broken unit can be between $700 and $4,600.
  • Corrosion. During operation, condensing water heaters release fluids with a slightly high acidity rate. If not checked, this acidity can corrode parts of the venting system, eventually leading to a system failure that can be expensive to repair.


Point-of-use water heater

The term “point of use” applies to these types of water heaters because they heat water near where it’s supposed to be used. For example, they can heat water in the bathroom or at the kitchen faucet. In other words, point-of-use water heaters lack a central storage or heating unit.

The cost of purchasing and installing a point-of-use water heater ranges between $200 and $500.

Pros of point-of-use water heaters

  • Efficient. Point-of-use water heaters are efficient because hot water does not travel far from the central storage unit to the tap. This prevents heat loss, allowing users to access water at the required temperature.
  • Low initial costs. Point-of-use water heaters are cheaper to buy and install than conventional storage water heaters.
  • Flexible placement. Since point-of-use water heaters are small and take up less space, they are easy to install in different rooms.

Cons of point-of-use water heaters

  • Lack a central storage unit. A point-of-use water heater only provides hot water at a specific location or room. You’ll need to purchase more point-of-use water heaters if you wish to access hot water in multiple locations, which can be ineffective over time.
  • High utility bills. Point-of-use water heaters can increase energy bills if used continuously for a long time.


How to choose the best water heater for your home

Choosing a new water heater for your home can be an overwhelming decision. There are simply too many on-demand water heater brands in the market that boast top features. 

To help you make an informed decision, here are the top things to consider when shopping for a water heater.

  • Fuel type. Look at the type of fuel the water heater uses to generate heat. Most water heaters use natural gas, propane or electricity. However, some also use solar panels to convert sunlight into energy or heat.
  • Tank quality. Typically, there’s hard water and soft water. Hard water contains certain minerals that can stick to the inside of tanks or on the heating equipment. If you live in an area with huge reserves of hard water, consider water heaters with special or treated tanks that can accommodate hard water.
  • Energy efficiency. Determine the energy efficiency rating of the water heater before purchasing it. Avoiding water heaters with a low energy efficiency rating is recommended because they consume more fuel and can lead to high utility bills. Condensing water heaters have a more than 90% energy efficiency rating and are a good alternative.
  • Size. Choose a water heater that fits your home well. People with smaller homes can consider tankless systems, which are usually smaller than other water heaters.
  • Tank availability. Water heaters may have or lack a storage tank for hot water. Determine whether you wish to have a water heater capable of storing hot water or one that provides hot water only when required.
  • Safety. You should also consider the built-in safety features of a water heater. As a rule of thumb, avoid water heaters that seem risky or difficult to maintain.

What is the most common type of water heater?

Conventional storage water heaters are the most common in America and account for 74.91% of the water heater market in the United States.

Depending on the tank size, conventional water heaters can hold between 30 and 80 gallons of water and provide hot water consistently.

How much does water heater installation cost?

The installation cost for a water heater varies depending on your location, water heater brand, fuel type, dealer and energy efficiency. Nevertheless, the average cost usually ranges between $600 and $1,800.


Protect your water heater from costly repairs with Cinch

Water heaters are important and convenient household appliances. Without them, you’ll have to manually heat water to bathe, wash dishes and do laundry.

When shopping for a water heater, consider factors like energy efficiency, fuel type, safety, size and space. Take time to ensure that the water heating system can meet all your household needs.

Although water heaters last incredibly long, they are still subject to normal wear and tear. Depending on the type and brand, replacing damaged water heaters can cost between $1,300 and $5,500. Avoid breakdowns with regular maintenance and a warranty from Cinch Home Services.

Cinch’s home protection plans include a Built-in Systems plan that covers the cost of repairing or replacing major home systems like water heaters due to normal wear and tear. 

Sign up for our budget-friendly Built-in Systems plan today to avoid the burden of hefty repair and replacement bills. Get an instant quote today!


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