It depends on what works best for you and your home.
Here are the various methods to heat the water in your home for showers, bath tubs, laundry, sinks, dishwashers, etc. listed by my personal five star ratings:
Heat pump water heater *****
This water heater has been my favorite in many applications.
A heat pump water heater take the heat out of the air in your basement and uses it to heat the water in a tank with a 50 or 80 gallon capacity. An average shower is 12-15 gallons so a 50 gallon water heater is suffice for most homes. We have installed many of these water heaters and have been very impressed because they heat the water and remove much of the high humidity in a basement as a byproduct of heating the water. Therefore, it decreases the operation of humidifiers that people have been using to control the high humidity in many homes in this geographical area. A huge bonus is that a heat pump water heater can provide hot water to the average home with a family of four for less than $1 per day.
The disadvantage of a heat pump water heater is slower recovery. However, this is not a problem in most homes.
Gas fired tankless water heater *****:
This water heater instantaneously heats the water (using natural gas or propane) whenever someone in the home opens a faucet or otherwise activates a call for hot water. Therefore, if you are not using the hot water, you will not spend any money on gas. For example, when you are away on vacation, sleeping, or at work, you will not consume any gas.
These units take up very little space and are hung on a perimeter wall and direct vented out through your wall. They also last as long as 20 years and can be a great long term investment. They can handle a limited flow rate so they will struggle in large homes with many bathrooms and high demands (more than two appliances operating at the same time). However, they can be integrated with a heat pump water heater and will boost the temperature of the water heater on high demand periods.
Gas water heater **
This tank of 40 gallons or more uses natural gas or propane to heat water.
There is a flue that runs up the center of the tank and is usually vented into a chimney. The tank loses 12-15 degrees per hours and will turn on 12-13 times a day even if no one is home. These are less expensive to install than the more efficient alternative but usually only last 6-12 years so they need to be replaced often.
Electric Water Heater. *
I cringe every time I see one. These tanks of 40 to 80 gallons are heater by electric coils. They are cheap to install but are extremely expensive to operate. They usually last 10 to 15 years.
Oil fired boilers with tankless coils *:
These copper water coils are inserted into a forced hot water boiler. They require the boiler to be kept at 180 degrees all day and all night in preparation of hot water demand. Extremely inefficient. New England is one of the few place in the world where you will see one. They usually last 20 years or more will make you broke in the meantime.
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