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Saving On Hot Water Tanks

Blog Issue #: 



Significant savings for hot water production may come from efficient home designs promoting short pipes, reducing wastage; re-circulation or heat boosters may be used where designs do not allow short pipes. Energy cost differences for electricity, propane (LPN), and oil, can be substantial and regional pricing must be evaluated. Hot water tanks may loose up to 2% of heat during standby periods, during summer or in hot climates, however this may be substantially less than the installation costs for instantaneous hot water heaters. High efficiency designs are recommended for propane and oil heaters due to pilot lights, heat transfer and latent heat loss out flue pipes. Condensing type oil furnaces and water heater warranties should be cautiously evaluated because latent heat loss is less (6% vs 11%) while corrosive by-products challenge furnace designs.

Good design reduces hot water wastage.


Plumbing systems were first used by ancient civilizations to provide public baths, potable water, and waste drainage. These systems changed little until the 19th century with the introduction of high-pressure supply pipes, modern materials, public electric and gas utilities, and alternative energy sources. These enhancements made a variety of methods to create and deliver hot water possible.

In North America, we place an emphasis on tank versus tankless water heaters, and on the type of power source involved: electricity, natural gas, and oil. However there are other methods of producing hot water, including: district heating, also known as co-generation, and waste heat recycling. Similarly, other sources of fuel are available, including: solar; wood fuel; combined systems, such as electrically operated heat pumps; and waste heat recycling. For the purpose of this article, we will look at the commonly available tank and tankless systems, energy sources, and then how to select the best system for performance, efficiency, and cost of ownership.

The key difference between tank and tankless is the lack of a tank, and also the increased capacity to generate heat. The reason for bypassing hot water storage is to benefit from not maintaining hot water during standby periods, which is a small source of inefficiency. However, since tankless heaters must create hot water at the same rate as peak demand, they require substantially larger heat output. The increased equipment and installation costs may be substantially greater than the efficiency gained by eliminating standby heat loss.

(Scroll down to Hot Water Heaters Compared for a quick summary table.)

Each heating method has strengths and weakness which has also led to the creation of hybrid solutions that attempt to take advantage of each systems positive attributes. The most important consideration when choosing between tank, tankless, or some hybrid variety, of water heater, is your location conditions. For example, standby heat loss is offset by reduced space heating, therefore the net change in energy consumption is zero—for houses in cold climates (e.g. Canada). Other factors include local utility rates (including peak demand pricing), local fuel costs, number of users, when peak usage occurs, the type of building, where a heater is located, location of water fixtures within the building, and personal preferences.

Equipment costs can exceed standby heat savings, making standard hot water tanks the most cost effective solution.

Energy, Heat, and Units of Measurement

(You can skip this section if the method of calculating is not relevant to you.)


In order to compare water heating systems, it is important to quickly review the Laws of Thermodynamics and Conservation of Energy (itself a part of the first law of thermodynamics) and recognize that extensive scientific experimentation has found these laws to be a correct representation of nature. The first law of thermodynamics adopts the law of energy conservation, to specifically include heat as a form of energy, and states that the amount of heat energy in an isolated system will remain unchanged unless work is performed on or by the system. While this is especially important to the operation of heat pumps and standby heat loss for hot water tanks. It is sufficient to note that, simply put, energy can neither be created or destroyed, it can only change from one state to another.

The second law of thermodynamics says that the entropy of any isolated system always increases. In other words, systems evolve towards thermal equilibrium which means the spontaneous flow of heat between objects in thermal contact is from the high temperature object to the low. Consider a block of ice. It contains a substantial amount of heat energy. At just -1 °C, it may appear frozen, but the block is a little more than 272 K above absolute zero (0 °C = 273.15 Kelvins). That block of ice however, cannot be used to warm a person's hands.

Standby heat loss can be misleading. While it is true that heat may transfer from a 140°C tank to a 21°C room (increased entropy), it is not lost, because energy is not destroyed (conservation of energy). Furthermore, since most rooms are moderated by heating and cooling systems, the transfer of heat may offset the demand placed on heating systems, while equally placing an increased load on air conditioned spaces. Therefore, standby heat loss is effectively zero when space heating is in use (e.g. winter months in cold climates) and, conversely, doubles the inefficiency when air conditioning is in use (e.g. summer in warm climates).

Heat is not lost, only transferred; standby heat loss is not a factor in winter months.

Relationship Between Heat and Energy

The joule (J), is a derived unit of energy that defines work. In terms of electricity, a joule is the amount of work required to create 1 watt (w) of power for 1 second (s). Since heating a substance is doing work, joules may also be used to measure the amount of work performed. In the case of water, it takes 4186 J to raise the temperature of 1 kg of water by 1 °C. These two measurements allow for a convenient and direct conversion between heating and electrical demand. For example, raising the temperature of 1 kg of water by 1 °C in 1 second requires 4186 watts of power per second. The same task performed in 1 minute only requires 70 watts of power per second. Since a British Thermal Unit (BTU) is the amount of energy required to heat 1 pound of water from 54 °F to 63 °F, it is also possible to convert between British Thermal Unit units and Joules: 1 BTU = 1055 J. From this equation we can determine that 3.87 BTU are required to raise the temperature of 1 kg of water by 1 C°.

Energy Sources: Electricity versus Fuel

The most popular energy sources for water heating are fossil fuels and electricity. The fossil fuels are usually in the form of natural gas, oil and propane. Electricity is usually provided by utilities that are powered by hydro, nuclear, coal, or diesel generators. Each energy source has a different efficiency, operating cost and heat output. The fossil fuel powered heaters are capable of producing significantly more BTU than electricity, however they operate at less than complete efficiency due to pilot lights, escaping hot flue gases, and drafts. Electrical resistance heating, essentially completely efficient, may cost more because electrical production is often more expensive than fossil fuels. When comparing energy sources, it is important to consider regional price variations, output, and efficiency.

For example, in the following chart, it would appear that both petroleum based energy sources (e.g. oil and propane) are significantly more expensive than electricity.

However, a comparison of energy costs must be adjusted for energy output. In the case of electricity, this is straightforward as a kilowatt-hour is a unit of energy, whereas petroleum sources require some calculating because a litre is a unit of volume. We do this by first determining the BTU of each fuel type (24 127 for propane/LPN, and 36 638 for furnace oil), and then converting BTU units to joules (1 BTU = 1055 J), and finally to kilowatt-hours (100 000 J = 0.027778 kWh.)

Using these adjusted numbers, it is now easy to make a rough comparison of home heating energy costs using a typical house during a winter month. (Hot water heating for the same household and time period is about 15% of the following numbers, or about 10% of overall energy use.)


  1. BTU/L of propane (24 127 BTU) from , Irving Energy
  2. BTU/L of furnace oil (36 638 BTU) from , Irving Energy
  3. Cost per kWh for electricity (10.604 cents/kWh) from , NL Power
  4. Future cost per kWh for electricity (23.3 cents kwh) from , CBC
  5. Energy rates do not include delivery or basic customer charges (e.g. $16.04/month (up to 200A electrical service) and $21.04 (exceeding 200A electrical service).
  6. Cost per L for propane ($0.756/L) from , NL Public Utilities Board
  7. Cost per L for furnace oil ($0.9113/L) from , NL Public Utilities Board
  8. Estimated furnace efficiency ratings from , National Resources Canada
    1. Radiant Electric @ 100%
    2. Radiant Electric @ 100%, future projected electrical rate of 20.266 cents kWh
    3. Mid-efficiency Forced Air Oil Furnace @ 85% AFUE
    4. Condensing Forced Air Oil Furnace @ 95% AFUE
    5. Generic Propane Appliance @ 95%
    6. Generic Propane Appliance @ 95%, including fuel delivery charges
  9. Delivery cost for propane and furnace oil from primary research of consumer billing conducted April 20, 2018, for St. John's and surrounding area by Robert Miller.
  10. Efficiency ratings do not account for poor system design and installation (e.g. routing heating ducts through unconditioned attics and garages).
  11. For furnaces that are not equipped with a standing pilot light, the Canadian Seasonal Energy Utilization Efficiency (SEUE) is equivalent to the American Annual Fuel Utilization Efficiency (AFUE).
  12. 2529 kWh total energy consumption for an average home in group of 338 houses with electric heat, built between 1948-2002, in St. John's, NL, from Feb 07, 2018 - Mar 08, 2018 from NL Power MyHome Energy Report
Local utility rates are a big factor on determining which energy source is most economical for each region; and is subject to change.

Hot Water Storage: Tank versus Tankless


Tank style water heaters store hot water ready for use in 114 to 450 L (30 to 120 gallon) storage tanks. These tanks are compatible with a wide range of fuel sources including fossil fuels, electricity, and even solar power, heat pumps, waste heat recycling, and other methods. The size of the tanks are selected based on the heat capacity of the fuel source. For example, solar power has a small heat capacity meaning it cannot heat water rapidly, however, solar power is an ideal source to heat water continuously (daytime). Therefore, a large tank is well suited to solar energy because it may collect heat energy over a long period and contain sufficient storage to meet short periods of peak demand. Unlike solar energy, petroleum energy sources have very high heat capacity (approximately 100 000 BTU). This allows water heaters fuelled by natural gas, oil, and propane, for example, to recover very quickly and therefore require much smaller tanks. Electric water heaters (approximately 15 000 BTU) fall between these extremes.

The relationship between heat capacity, known as recovery time, and tank size is very important. It is storage capacity that allows the heating elements to be much smaller than required to heat water at the same rate as peak consumption. 70% of the storage capacity is usable while the remainder is cooled to an unacceptable temperature by incoming water (80% for high efficiency models). However, plenty of water is available, providing the tank is properly sized, for the demand requirements and recovery capacity of the heaters. Since some energy is lost maintaining hot water while not in use, over sized tanks maintain an excess of hot water resulting in higher standby energy losses.


According to the U.S. Department of Energy, domestic hot water heating is 14 – 25% of the total energy used by the average household. Also, using a high efficiency hot water heating system, such as a tankless water heater, may reduce energy consumption by 30% (this statistic will not, even remotely, apply to most applications). Popular in European and Asian housing for many years, these systems are now entering the market in North America. Although they do save some energy, it has be calculated that the savings may not offset the purchase and installation costs, and in addition, they may be incompatible with some household needs. For example, simultaneous hot water demand may exceed supply and energy savings may be mitigated by habitual long shower users. Short term savings may be diminished as tankless popularity requires power grids to increase capacity for spikes in usage and transfer those costs to consumers. However, some problems may be circumvented by staggering hot water use, replacing inefficient appliances or selecting high volume heaters at additional expense.


On-demand water heaters, best known as tankless units, are triggered by water flow and create hot water as needed. For example, a natural gas unit may use electronic ignition to start a burner once flow is detected. That burner will heat water passing through coils of copper tubing and continue to operate as long as demand is detected. In contrast, a traditional hot water heater must maintain hot water in a storage tank ranging in size from 100 to 300 L. Additional energy must be expended to maintain a constant temperature as heat escapes from the large storage tanks. This energy consumption, known as standby loss, does not exist in instantaneous water heaters. Since these units create water on demand, their capacity is rated in litres per minute of hot water production. Typical units range in size from 7.6 to 15.2 L of hot water per minute.

Hot Water Heaters Compared
  Tank Tankless
Cost Inexpensive: Tanks start at $300, with high performance and lifetime warranty designs closer to $1000, and are installed in less than a day. Expensive: Heaters may cost $2000-$3000. Installation may include upgrades to the electrical distribution panel, or even the electrical service, and have more components to install.
Availability Readily Available: All hardware stores carry a selection of hot water tanks. Limited: Specialized training may be required. Usually tankless systems are provided by suitably trained contractors which specialize in a particular brand. Service and replacement parts may be difficult to obtain if contractors close or change brands.
Installation Simple: Electrical systems require a 20 or 30 amp circuit, similar to electrical baseboard radiators. Complex: Electrical systems may require 120 amp circuits, but the average household's total capacity is 200 amps. Installation by a certified HVAC technician is recommended.
Size Moderate: Most tanks are 180L and occupy a space 600 mm ø and stand 1.5 m in height. Small: Usually wall mounted.
Efficiency 2% Standby Heat Loss Negligible: Increasing electrical service from 200 amps to 400 amps may incur additional utility costs. For example, in Newfoundland and Labrador, NL Power charges $16.04/month for up to 200 amp electrical service and $21.04 for services exceeding 200 amp.
Energy Electricity or Fuel: Recovery times are . Electricity or Fuel
Durability Basic models have five to seven year use life periods. Lifetime warranty models may be three to four times more expensive. Warranties often cover parts of five years and heat exchangers for fifteen.
Supply Limited to tank size and heating capacity. A typical first usable hour for a 3000W, 180L, tank is 174L, while a high efficiency 4500W, 180L tank, is 195L. Tank sizes range from 120 L, 10 180L (most common), to very large tanks at 300 L. There are also much smaller tanks available for point-of-use locations (this will become important later in this article).

Note: The average 8 minute shower uses 65L.

Limitless. Minimum flow rates of approximately 2 L/m are required for the unit to turn on; producing tepid water may be difficult.

Note: Families often report extended shower usage leading to higher energy costs.

Capacity Limitless, while supply available. Limited to heater size. It may be possible to exceed output if using hot water at multiple locations (e.g. showering while washing clothes in hot water).

Optimizing Hot Water Heating Systems

(Smart home design—optimizing hot water pipe layouts—will produce greater savings than choosing between tank and tankless systems.)


According to A residential end-use energy consumption model for Canada (H. Farahbakhsh, V. I. Ugursal, A. S. Fung), the average Canadian household energy consumption for hot water heating is 22% of total energy demand (note: this number seems high, but may be due to population distribution in regions with very cold winters). Using our previous statistic of 10% water heating costs (see pie chart, % of Energy Use Based on 338 Houses Built Between 1948-2002, in St. John's, NL), with the domestic service energy charge of $0.010604 per kWh, published by Newfoundland Power (2018), and a typical residence in winter (2529 kWh total energy consumption for an average home in group of 338 houses with electric heat, built between 1948-2002, in St. John's, NL, from Feb 07, 2018 - Mar 08, 2018 from NL Power MyHome Energy Report), consumes $27 in water heating per month. Keep in mind that the temperature of water supply varies somewhat by season and region, while energy costs are determined by local utilities, and that the residential end-use energy consumption model established usage more than double our model home.

$322/year estimated water heating costs (tax not included) for a typical residence.


Conventional plumbing systems deliver hot water though a series of main and branch lines. When there is no demand, the hot water rests in the pipes. Eventually the hot water cools to a temperature level that is not acceptable and must be drained by running the fixture. If a water heater is set to 49 °C and the incoming water is 10 °C, the 17.4 L of wasted water in a 15 m pipe is also wasting 2380 kJ, or about $0.07 per use, assuming no additional run time. Assuming four persons in a household wait for hot water and waste about five cents each (showers, sinks, etc.), daily, the estimated yearly wastage is equivalent to $73. Hot water re-circulation eliminates the necessity to drain cooled water by circulating replacement hot water and returning the cooled water to be reheated.

Families can save $73 per year by avoiding running the hot water until it's hot.

Hot Water Re-circulation

Re-circulation is usually accomplished by using a dedicated return line and a low power re-circulation pump. The pumps may be continuously operated or triggered by time, temperature, motion, or user activated switches. However it is possible to eliminate the pump completely. Natural convection may recirculate the water provided the most distant fixture is higher in elevation than the water heater. This is possible because cool water has a higher density than warm and will settle in the return line. The dedicated line may be substituted with a bypass valve in retrofit applications by temporarily using the cold water supply when not in use.

In either configuration, re-circulation has one disadvantage in common: increased heat loss due to longer runs of pipe and higher temperatures, increased cost of installation, maintenance and operating costs for the pump, and wasting hot water in the cold water loop of bypass valve systems. The primary disadvantage, heat lost, may be mitigated by user controlled, or occupancy-sensing, pump switches. This replaces draining cooled water with returning it to the pump, however it does not offer users the convenience of immediate hot water availability. It's certainly better than sending warm water to the drain, right?


Clearly, the previously hot water, replaced in the pipes before each use, results in a significant system inefficiency. It is possible for a small instantaneous heater to be used for low volume—but frequently used—fixtures such as sinks and lavatories. Alternatively, they may be used as booster heaters to supplement any hot water supply located at a distance from the fixture and resulting in less demand on the inefficient-by-distance source. Likewise, small hot water heaters may be connected to hot water supply lines. These smaller heaters are sized to supply sufficient hot water for low volume tasks or be of sufficient size to absorb insufficiently heated hot water until the supply pipes are flushed.

Point-of-use tanks are low cost, and familiar equipment for servicing, making them a viable option to reduce running hot water.


Based on the conclusions of this The Home Building Remedy article, the following recommendations are made:

  1. Standby heat losses are insignificant in cold climates, and can be ignored.
  2. Utility rates matter, but installation and current equipment is a factor.
  3. Instantaneous hot water heaters are more economical in warm climates, or for direction connection to fixtures.
  4. Hot water tanks should be placed as close as possible to the most frequently used fixtures.
  5. Where short hot water supply lines are not possible, small capacity tanks located at high use fixtures can minimize wastage.
  6. Hot water re-circulation, if carefully designed, may be a suitable alternative to small capacity tanks.
  7. Note: environmental impact and carbon footprint will be addressed in a future The Home Building Remedy Blog.

Add Your Comments

What do you think of each hot water heating system? Are you considering an upgrade or tank replacement and wondering what is right for you? Have you changed from one energy source to another?

RJ Miller Building Professionals is dedicated to good building practices, safe and affordable housing, and environmentally responsible design. Are you wondering about carbon footprints and environmental impact of hot water heating? Lets us know in the comments below, or subscribe to The Home Building Remedy for future articles with a green perspective.



waiting for hot water

$73 on average waiting for hot water....I always knew there was a loss there but now knowing approximately what it is costing me bothers me even more.


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