Replacing Your Water Heater
Before you buy a water heater, remind yourself that the price on the sales tag doesn't tell you how much you will pay to operate it. Often the cheapest to take home is the most expensive to keep there. It's probably more economical to pay more for a heater now that uses less power over its life. When you go shopping, bear the following in mind.
 Right now it may make sense to install a gas, oil, or propane-fired water heater since they currently cost less to operate than electric heaters. No promises for the future though. Who knows what fuels will cost next week, let alone 5 years from now.
As a general rule of thumb, the smaller the water heater tank, the more efficient it is. So get a tank that holds just enough hot water for the times of the day when you use the most hot water.
Heat pump water heaters use less than half as much electricity as conventional electric resistance water heaters.
If your new water heater doesn't have built in heat traps, make sure your installer puts in heat traps or one-way valves to cut down losses through the pipes.
Minimize the length of pipes to your kitchen and bathrooms. The best placement is central to all your hot water taps. Talk to your plumber.
Install your water heater tank in a relatively warm area. Unheated basements leach heat off water heaters.
Your electric company might have a deal that makes an electric water heater more attractive to you than the other alternatives. Some electric companies offer special off-peak rates. They install separate meters that allow electricity to be drawn through that meter to the water heater only during off-peak periods. If you get this option, you will probably need a larger water heater to have enough hot water to last through the periods when you can't use electricity for the heater.
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