Assess Efficiency

The next number to look at is the energy factor (EF), a number that represents the percentage of energy that is turned into hot water by that specific model. The higher the number, the more efficient the unit and the less it will cost to operate. (An EF of 1 would indicate that 100 percent of the energy a heater uses is converted into hot water — a physical impossibility, alas.) While a high EF is good, you have to factor in the cost of the energy the heater uses to get a true picture of how much it costs to operate. In most areas, for example, an electric heater with an EF of 0.8 will cost more to run than a similar-size gas model with an EF of 0.6, due to the higher price of electricity compared with gas.

In most cases, water heaters with high EFs cost more to buy, but don't overlook the potential long-term savings in fuel costs. Here's an easy formula to calculate the payback period when comparing heaters that have the same FHR rating but different prices: Divide the difference between the prices of the two models by the difference between their estimated annual operating costs (printed on the Energy Guide labels). The result is the number of years it will take the energy savings to offset the higher purchase price. Look for a payback within 10 years, the expected life span of an average heater. Of course, if energy prices go up during that time, the payback period will be shorter.

Keep in mind that the estimated annual operating cost is just an approximation. To more accurately predict performance and payback time, plug each model's EF and your actual energy cost into the online worksheets provided by GAMA (

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