Water heater cost calculator: what does hot water cost per year?
Water heating is the second-largest energy use in most homes. When your water heater fails, the cheapest one to buy is rarely the cheapest one to own. Compare yearly running costs with your utility's electricity price, your state's gas price and the water temperature in your area.
Running cost at U.S. average prices
Household of three (48 gallons a day), water heated from 58 °F to 125 °F, U.S. average prices (electricity 17.2¢/kWh in 2025, natural gas $1.48/therm in 2025).
| Type | Efficiency (UEF) | Energy per year | Cost per year |
|---|---|---|---|
| Heat pump water heater | 3.3 | 869 kWh | $150 |
| Gas tankless (condensing) | 0.93 | 105 therm | $156 |
| Gas tank (standard) | 0.64 | 153 therm | $226 |
| Propane tank | 0.62 | 173 gal | $441 |
| Electric tank (resistance) | 0.92 | 3,119 kWh | $537 |
How it is calculated
Heat needed per year = gallons per day × 8.34 lb per gallon × (setpoint − incoming water temperature) × 365. Incoming water temperature is estimated as your location's average annual air temperature plus 6 °F, a rule of thumb from NREL research on water main temperatures. Energy used = heat needed ÷ the water heater's Uniform Energy Factor (UEF), the efficiency rating on the yellow EnergyGuide label. UEF already includes standby losses of the tank.
Heat pump water heaters pull heat from the surrounding air. In a cold basement or garage they work less efficiently and cool the room a little, so the real-world savings can be smaller than the label suggests. The UEF of 3.3 used here is a typical value for current ENERGY STAR models; you can compare models by their own label.
Frequently asked questions
Is a heat pump water heater worth it?
Compared with a standard electric tank it uses roughly a third to a quarter of the electricity, which is usually several hundred dollars a year for a family. Compared with gas, the answer depends on your electricity-to-gas price ratio; use the calculator above with your ZIP code.
Tank or tankless?
A condensing gas tankless heater has a higher UEF (around 0.93) than a standard gas tank (around 0.64) because it has no standby losses. Installation is often more expensive, especially if the gas line or venting has to be upgraded.