Storage tanks are the most common type of water heater. As the name suggests, these consist of an insulated tank in which water is heated and stored until needed, then emerges from a pipe on top of the water heater.
There is also a temperature- and pressure-relief valve, which opens if either exceeds a preset level.
Natural-gas water heaters typically use less energy and cost less to run (by about half) than electric water heaters, although you should note that gas models cost more.
Electric water heaters use electricity to heat water. They usually comprise a water tank and one or several electric resistance coils that sit directly in the tank. Once electricity passes through the coils, they heat up the water before it’s distributed throughout the house.
Rather than storing water, tankless water heaters use heating coils to heat the water as you need it. They’re more energy-efficient than a storage tank but provide only a limited flow of hot water per minute—about 3.5 gallons, depending on inlet water temperatures.
They’re best for people who typically aren’t drawing water for more than one use at a time—such as running a shower and dishwasher simultaneously.
Tankless models are best for homes that use natural gas to heat the water; electric models might require an expensive upgrade of the home’s electrical capacity.
Check for rebates. Whether your water heater installation is new or a replacement, you may be eligible for a rebate from your local utility company, which can offset some of the cost. To see whether your utility offers rebates, check its website or the federal Energy Star rebate finder