The U.S. Environmental Protection Agency’s (EPA’s) plan to regulate carbon emissions is just the latest challenge facing the U.S. electric power system. Technological innovation is disrupting old ways of doing business and accelerating grid modernization. Earlier this year, AEE released Advanced Energy Technologies for Greenhouse Gas Reduction, a report detailing the use, application, and benefits of 40 specific advanced energy technologies and services. This post is one in a series drawn from the technology profiles within that report.

Water heating technology spans a range of options, from conventional technologies to renewable systems. Conventional storage water heaters typically run on natural gas or electricity and keep water hot in an insulated tank and ready for use at all times. They have a simple design and are relatively low cost, but they also have standby losses associated with storing hot water for long periods of time. High-efficiency models are available that increase the heat transfer efficiency and reduce the standby losses with more insulation. Tankless (instantaneous) water heaters eliminate standby losses by heating water on demand, creating a continuous supply, though there may be a limit on simultaneous use of hot water devices. Heat pump water heaters are electric water heaters that use heat pump technology to increase efficiency over conventional electric resistance units. Solar hot water systems harness the sun’s energy using solar thermal collectors. They typically require a larger storage tank and a backup fuel (such as electricity or natural gas) for times when the sun cannot produce enough hot water.

Efficient water heaters are being adopted at the commercial and campus levels, but they are most likely to be adopted in homes, where water heating makes up about 15% of an average home’s total energy use. Energy Star-rated heaters made up 11% of the gas water heating market and 1% of the electric water heating market in 2011, leaving room for further market penetration. The U.S. market for high efficiency water heaters was an estimated $1.3 billion in 2013, an increase of 6% over 2012.[1]

Energy-efficient water heaters can use 10% to 50% less energy than standard models; however, actual savings depend on size and location of the heater and water pipes. Residential customers can also take advantage of utility or state programs (covering 37 states) that support the purchase of efficient water heaters, which may include financial incentives. The Department of Energy estimates that 37 million residential water heaters will be replaced between 2010 and 2015. Should those be replaced with high-efficiency solar and heat pump water heaters, it could reduce U.S. total energy consumption by 2%

[1] Navigant Research, Advanced Energy Now 2014 Market Report, http://info.aee.net/advanced-energy-now-2014-market-report