Customers like to have choices, but for decades, an inefficient water heater was the only choice. New federal criteria for five kinds of efficient water heaters now give plumbers and contractors a suite of options that carry the cachet of the Energy Star label. That federal stamp of approval also comes with several tax incentives to sweeten the deal.

The five technologies — high-efficiency gas storage, whole-home gas tankless, gas condensing, solar and heat pump water heaters — offer energy savings ranging from 7 percent to 55 percent. Some have greater installation challenges than others, but if you learn how to install even a few of them, that expertise can set your business apart. Each technology can have a positive impact on the environment, your customer’s energy bills and your company’s bottom line.

High-Efficiency Gas Storage Water Heaters

For the customer that wants a one-for-one replacement, isn’t too keen on new technologies or can’t pay more up front for long-term savings, a high-efficiency gas storage water heater is the way to go. Installation is just about the same as for a standard tank model. Cost is also only marginally higher than for a standard storage tank, simple upgrades on the insulation and burner save about 7 percent a year on water heating gas bills, and there’s a 2- to 3-year payback.

Homeowners depend on your expertise when a water heater fails, and high-efficiency gas storage is the quick and easy choice in an emergency replacement. But you can help your customers achieve far greater savings — and sell a higher-end model — through some thoughtful planning. Energy Star recommends replacing water heaters 10 years old and older because of the energy-savings potential. If you’re in the home for any reason other than an emergency water heater replacement, bring up the idea. This will give your customers time to think about more efficient technologies.

Whole-Home Gas Tankless Water Heaters

Because there is no tank of water to keep hot, tankless water heaters eliminate standby losses, making them about 30 percent more efficient than standard gas tank models. Despite a somewhat higher outlay (tankless units cost between $1,000 and $2,000), the payback is 4 to 5 years when you account for federal tax credits (30 percent of the cost up to $1,500) and the energy savings.

Tankless models don’t provide hot water “instantaneously,” as some advertisements claim, but it is continuous. Since there’s no tank, the hot water won’t run out. Customers with high hot water use will especially appreciate this. Because of their small size, tankless units also take up much less space than a standard tank, a handy feature for smaller homes. Some units can even be installed outdoors in cold climates with freeze-resistant technology.

Note that installation can be a bit more complex than for a storage model.

“A tankless water heater installation depends on whether it’s in new construction or in a remodel,” says James York, director of engineering at Rinnai. “In a new home, it can be installed practically anywhere. As for a remodel, a plumber will have to review the incoming gas line for adequate sizing and replace the venting. Proper installation is the key to every tankless water heater application.”

Tankless models that have earned Energy Star status have higher-powered burners than gas storage models. When installing such units, it’s important to do so with plenty of ventilation. Placing them in closets or other small enclosures without adequate airflow is not a good practice. Follow the manufacturer’s installation guidelines exactly.

One of the best benefits of tankless water heaters is their long lifetime: life expectancy is about 20 years, compared to 12 to 13 years for a conventional storage model. The extended life does mean a bit more maintenance. A homeowner or plumber will need to periodically flush the heater to remove build-up of minerals that are in the water. The harder the water, the more often this will need to be done.

Gas-Condensing Water Heaters

If you do commercial work, you may already have installed a gas-condensing unit. While Energy Star-qualified models are not yet available, they are expected to come to market in 2010. The internal design of the flue allows the unit to re-use energy that is normally exhausted out the stack, which will save the average household about 30 percent on their water heating bills. Cost is about on par with tankless models, and payback is 6 to 7 years.

Customers with high hot water needs will like the gas-condensing option. Like tankless, gas-condensing models provide a nearly continuous supply of hot water because the tank heats up almost as quickly as it’s filled. However, gas condensing water heaters aren’t a simple replacement for a standard gas storage model. They require a condensate drain, powered stainless-steel venting and potentially a larger gas line.

Solar Water Heaters

Customers who like the latest technology, are concerned about the environment and can afford the immediate outlay are good candidates for solar water heaters. 

The technology is simple: The sun’s energy heats up a collector and that energy is transferred to a gas or electric back-up storage tank, ensuring hot water even on cloudy days. Using this free energy, solar can cut a homeowners’ water heating bill in half.

Solar is more expensive than any of the other water heaters, and those using electricity for back-up cost more than gas. Federal incentives — 30 percent of the cost with no cap — take out much of the sting, but the payback is still 9 to 11 years. Be sure to investigate state and county rebates, more of which are likely to appear in the next year. 

Solar water heaters are most practical in homes with a south-facing roof or ground space with unobstructed sunshine for six hours a day. But the house doesn’t have to be located in Arizona or Hawaii: Germany is known as the world leader in solar energy use and it receives about as much sunlight as Alaska. In colder regions, a nonfreezing liquid transfers solar energy to a back-up storage tank, which allows for energy storage even on the chilliest days. Alternatively, an all-water system can be designed to dump all its water into a storage tank inside the home’s conditioned space to prevent the water from freezing in cold weather.

Bob Zrallack of Solar Energy Systems in Florida has 30 years of experience in the solar water heating industry. “A solar water heater is not much different from a standard water heater. The tank is usually larger in size and copper connections have to be installed between the collector and tank,” he explains.

However, installation is more complicated than for the other water-heater types as it can be site-specific. Zrallack emphasizes that it’s important to get the right training.

“Until recently, there wasn’t much training available for plumbers on how to install these systems,” he says. “Now with the green movement going on, community colleges and the manufacturers themselves provide training on how to install them.”

The North American Board of Certified Energy Practitioners also offers a reputable certification program and a link to certified installers nationwide on its Web site.

Zrallack says maintenance is fairly easy.

“These units are pretty reliable,” he says. “An owner might have to clear off sediment blocking the panel, but the collector is typically aligned on a slope so rain washes it off. Every few years, a solar contractor should come to check the sensors and electronic controls and make sure trees haven’t grown to block the sunlight.”

Note that Energy Star requires all solar units to be certified by the Solar Rating and Certification Corporation. They must also be complete systems, meaning that they must include the collector, the tank, back-up capacity and all connecting parts. In other words, you can’t hook up a new collector to an old tank and qualify for the Energy Star.

Heat Pump Water Heaters

Heat pump water heaters were used in limited numbers during the 1980s with mixed results. In many instances, a heat pump was simply added to an existing tank. Because of incompatible parts or connections, these fell out of favor with installation professionals. About 20 years later, an emphasis on quality has emerged with the help of the Energy Star program. Available now (with other models on the market in 2010), qualified models will come with a minimum six-year warranty on a sealed system, which includes the heat pump, parts and tank.

Heat pump water heaters are best for customers that are open to technologies on the cutting edge. They will be more expensive than gas storage, but will also be eligible for a 30 percent federal tax incentive up to $1,500. Add in 55 percent savings on energy costs and the payback is just 2 to 3 years.

Rather than heating the water directly, heat pump water heaters will move heat from surrounding air and transfer it to the stored water, yielding the biggest energy savings of all the new technologies. During periods of extremely high use, most models will include a feature allowing the unit to recover rapidly by switching temporarily to electric resistance mode. This ensures a house always has sufficient hot water.

Homes with humid basements are ideal for this type of technology. An Energy Star-qualified heat pump water heater will dehumidify the surrounding area, often eliminating the need for a separate dehumidifier. Once these water heaters are on the market, they may also be suitable for emergency replacement. To remove the condensed water, units may need to be fitted with a hose or pipe that leads to a drain. Other than that, installation is virtually the same as for an electric tank model.

To compare Energy Star water heater cost estimates for the five types of qualified water heaters, click on the pdf below.