How it works
Heating water takes a fixed amount of energy: 8.34 BTU to warm one gallon by 1°F. The calculator multiplies your daily hot water by the temperature rise to get the heat you need each year, then divides by each heater's Uniform Energy Factor (UEF), the efficiency figure on the EnergyGuide label. UEF already includes standby losses from a tank.
Gas use is priced in therms (100,000 BTU) and electricity in kWh (3,412 BTU). A heat pump water heater has a UEF above 3 because it moves heat from the surrounding air rather than making it, so it uses about a quarter of the electricity of a standard electric tank.
Finally it compares the extra installed price with the yearly saving, and the total cost over 20 years including replacing units that wear out sooner.
The formula
heat needed (BTU a year) = gallons a day × 8.34 × temperature rise × 365 gas (therms) = heat ÷ UEF ÷ 100,000 electric (kWh) = heat ÷ UEF ÷ 3,412 payback = extra installed price ÷ yearly saving 20-year cost = installed price × units needed in 20 years + yearly cost × 20
Worked example
55 gallons a day, heated by 67°F, at $1.43 a therm and 18.2¢ per kWh: 11.22 million BTU of hot water a year.
| Water heater (UEF) | Energy a year | Cost a year | 20-year cost |
|---|---|---|---|
| Gas tank (0.62) | 181 therms | $259 | $8,775 |
| Gas tankless (condensing) (0.95) | 118 therms | $169 | $7,377 |
| Electric tank (0.92) | 3,574 kWh | $650 | $16,008 |
| Electric tankless (0.98) | 3,355 kWh | $611 | $14,711 |
| Heat pump water heater (3.5) | 939 kWh | $171 | $10,419 |
Gas tankless saves about $90 a year over a gas tank, so its extra $2,200 takes about 24 years to pay back, although it comes out ahead over 20 years because a tank usually needs replacing once. A heat pump water heater saves about $479 a year over an electric tank and pays back in about 4.2 years.
Frequently asked questions
Is a tankless water heater worth it?
For energy savings alone, usually not when replacing a gas tank: it saves about $90 a year but costs thousands more to install. It makes more sense if you value endless hot water, need the space, or plan to stay 20 years. See is a tankless water heater worth it.
What is the cheapest water heater to run?
A heat pump water heater, at about $171 a year in our example, followed by gas tankless and gas tank. Standard electric tank and electric tankless heaters cost the most to run where electricity is expensive.
What does UEF mean?
Uniform Energy Factor: the share of the energy a water heater uses that ends up as hot water, in a standard DOE test that includes standby losses. A higher UEF means lower running costs.
How much hot water does a household use?
The DOE's medium-use test day is 55 gallons, about right for two or three people. Larger families often use 65 to 85 gallons.
Is there still a tax credit for water heaters?
The federal 25C credit for heat pump water heaters ended for equipment installed after December 31, 2025. Check your utility and state for rebates.
Sources
- ENERGY STAR, what Uniform Energy Factor means (heat pump models UEF 3.3 to 4.1).
- US Department of Energy, selecting a new water heater.
- Gas price: US residential natural gas about $14.86 per thousand cubic feet (EIA 2026 forecast), about $1.43 per therm. Electricity: US average residential price, EIA 2026 forecast (checked Oct 2026).
- Installed prices: 2026 cost guides (tank about $600 to $2,500; gas tankless about $2,100 to $5,600; electric tankless $1,400 to $3,000; heat pump $2,000 to $4,600).
Related guides
Estimates are for planning only and are not financial advice. Get written quotes before you buy.