Water Heating Alternatives

Instantaneous

• An instantaneous water heater delivers hot water on demand by using either a gas burner or electric element to heat cold water running through it. Such tankless heaters have no standby losses, and rate as more energy efficient than conventional water heaters, states "Consumer Reports." You can mount these tankless water heaters on a wall in a utility room, garage, basement or even on an exterior wall. Some models are installed at individual hot water outlets. Their limited output flow rate may not meet simultaneous demand such as supplying water for a shower and a load of laundry at the same time. Installing multiple instantaneous heaters can overcome this issue, but an individual unit costs $200 to $1,500, as of 2011.

Standard Heat Pump

• A heat pump does not generate heat but moves it from one place to another using a small amount of electricity. Typically used in homes for space heating, they can also heat water in conjunction with space heating or as standalone water heating systems. A heat pump water heater takes heat from the air and concentrates it inside a tank to heat water. Standard heat pumps are feasible in climates where the outdoor temperature stays between 40 and 90 degrees Fahrenheit year-round, and require of at least 1,000 cubic feet of "air space" to operate, according to the U.S. Department of Energy.

  About the size of a central air conditioning unit, heat pumps are usually located in a utility room or basement. Standalone water heating and hybrid models consist of an upright tank with the heat pump integrated into the form. Slightly larger than standard water heaters and costing approximately $1,400, heat pumps can save up to 50 percent or more on water heating costs.

Geothermal Heat Pump

• In colder climates, geothermal heat pumps, or ground source heat pumps, prove effective when others don't because they take heat from several feet below ground rather than the air in the room. Typically, these systems supply space heating and cooling in homes. For water heating, a small heat exchanger -- called a desuperheater -- takes heat from the system's compressor to heat domestic water. Installing the heat loop, heat pump and distribution system in a home costs between $15,000 and $30,000 as of August 2010, making using a geothermal heat pump for water heating practical only as an add-on to an existing geothermal HVAC system.

Solar

• Solar thermal collectors offer an efficient way to heat residential water. Collector types vary, but all rely on the same principle: Via collectors mounted on the roof, a south wall or on the ground, the sun heats the liquid in the panel before it circulates out of the collector for use. Direct systems feed the same water flowing through the collector to the hot water tap. In closed loop systems, liquid in the collector passes through a heat exchanger to heat water in a tank before it cycles back through the panels. The cost of solar water heaters depends on solar availability and hot water demand, but range from about $2,000 to $14,000 as of August 2010. After initial installation, such units save homeowners 50 to 80 percent on water heating bills, the Department of Energy states.