Water heating is often the third largest energy expense in your home, after heating and cooling—it can account for 13–17% of your utility bill. Here are a few tips for more lowering your water heating costs.
If you have an electric water heater, install a timer that allows you to turn the unit off at night when not in use—you'll save an additional 5–12% on energy needed to heat the water.
Install heat traps, one-way valves or loops of pipe, which prevent heated water in a storage tank from mixing with cooled water in pipes. Most new water heater models have factory-installed heat traps. Heat traps can save you $15–30 per year by preventing convective heat losses through the inlet and outlet pipes.
If you have a tank-style water heater, drain about a quart of water from the water tank every 3–6 months. This helps to remove sediment that slows down heat transfer and lowers the efficiency of your water heater. Follow the manufacturer's recommendations for your specific unit.
If your water heater is more than 10 years old, it's a good idea to start shopping for a new one now. This will give you a chance to do some research and select the type and model that most appropriately meets your needs. Although most water heaters last 10–15 years, it might be economically smarter to replace your water heater early; the lower utility bills could be worth it. Compare costs: purchase price and lifetime maintenance and operation costs.
To learn more about water heaters, download this pdf fact sheet from the University of Florida.