Is It Time to Upgrade to an Energy-Efficient Water Heater?

Water heating accounts for approximately 18-20% of the average home's energy bill — second only to heating and cooling. If your water heater is more than 10 years old, it is likely operating at significantly lower efficiency than modern units. Upgrading to an energy-efficient water heater can reduce your monthly energy costs while improving hot water performance.

Here is what you need to know about modern water heater efficiency options available to Duluth homeowners.

Water heater efficiency is measured by the Uniform Energy Factor (UEF). The higher the UEF, the more efficient the unit. Standard tank water heaters have a UEF of 0.58-0.65. High-efficiency tank models reach 0.67-0.95. Tankless units achieve 0.87-0.99. Heat pump (hybrid) water heaters lead the category with UEF ratings of 2.0-4.0.

That last number is not a typo — heat pump water heaters are two to four times more efficient than standard units because they move heat from the surrounding air into the water rather than generating heat directly.

If you prefer the simplicity and lower upfront cost of a tank water heater, high-efficiency models offer meaningful energy savings over standard units. These units feature improved insulation, more efficient burners (gas) or elements (electric), and better heat retention to reduce standby energy losses.

For Duluth homeowners replacing an existing tank unit, a high-efficiency tank model is the most straightforward upgrade — it uses the same connections, the same footprint, and installs in 2-3 hours as a direct swap.

Tankless water heaters eliminate standby heat loss entirely because they do not store hot water. They heat water only when a faucet is opened, then shut down when flow stops. This on-demand approach saves 24-34% on water heating costs for most households.

Gas tankless units are the most popular choice in Duluth due to their higher flow rates — critical for Minnesota winters when incoming water temperatures are very cold and the unit must work harder to reach the desired output temperature.

Heat pump water heaters are the most efficient option available. They use electricity to move heat from the surrounding air into the water — similar to how a refrigerator works, but in reverse. Their UEF ratings of 2.0-4.0 mean they use 2-4 times less energy than standard electric tank heaters.

The trade-off is that they need adequate warm air around them to operate efficiently. In a Duluth basement that stays relatively cool, performance may vary seasonally. They also have a higher upfront cost. However, utility rebates and the long-term energy savings often make them an excellent investment.

Federal tax credits and local utility rebates can offset the higher upfront cost of energy-efficient water heaters. The Inflation Reduction Act provides tax credits for qualifying heat pump water heaters. Check with your local utility — Minnesota Power and other providers periodically offer rebates for high-efficiency water heating equipment.

At Duluth Plumbing, we can help you identify which units qualify for available rebates and credits, ensuring you maximize your savings on both the purchase and ongoing operation.

If your water heater is over 10 years old or your energy bills seem high, an efficiency upgrade is worth exploring. Duluth Plumbing installs all types of water heaters — standard, high-efficiency, tankless, and heat pump — and can help you choose the best option for your home and budget.

Call us at (218) 227-4082 for a water heater consultation.