Gas vs Electric Water Heaters: What’s Best for Your Home?
When it’s time to replace your water heater (which is necessary every 8 to 12 years), one of the first questions homeowners ask is: gas or electric water heater? Since electric water heaters come in two forms — electric resistance and heat pump — and gas water heaters come in two main designs (tank and tankless), there’s a lot to unpack.
In this guide, we’ll walk through the key differences between gas, electric, and heat pump water heaters, compare tank vs tankless systems, and help you decide which option makes the most sense for your home and budget.
Gas vs Electric Water Heaters: The Basics
Gas-powered water heaters work by burning methane to heat water in a tank (or on demand in the case of a tankless system). They’re known for quick recovery times and decently low operating costs — but only if gas prices are low in your area. They also produce carbon monoxide, require proper venting, and carry a higher carbon footprint.
There are two different types of water heaters powered by electricity. Standard electric water heaters rely on resistance elements to heat water. They’re generally cheaper to install but can have higher monthly energy costs.
Then there are heat pump water heaters, which are extremely energy efficient (up to 2-4X more so than a gas system). They are also considered safer with no methane combustion.
So which is better — gas, heat pump electric or standard electric? It depends on your home setup, how much hot water you need at any given time, upfront cash availability and your energy prices.
Read on to get the information you need to make an informed decision.
How to Evaluate Gas vs Heat Pump Electric vs Standard Electric Water Heaters
To make an informed decision when deciding which type of hot water system is best for you, you’ll need to know the jargon that installers and equipment manufacturers rely on to explain their systems, such as tank vs. tankless, first hour rating, and energy efficiency ratings.
Energy Source: Most run on electricity or gas. Sticking with your current energy source is simplest, but switching could pay off long term.
Tank vs Tankless: Traditional water heaters store hot water in a tank, while tankless models heat water on demand.
Usage Needs: Consider how much hot water your household uses at peak times and whether you’ll need one central unit or multiple smaller ones.
Size & Fit: Measure your space carefully. Different water heater systems have different spacing requirements.
First Hour Rating (FHR): This shows how much hot water the unit can deliver in the first hour. Match the FHR to your family’s busiest times (like mornings with showers, laundry, and dishes running).
Energy Efficiency: Water heating makes up ~18% of home energy use. Upgrading an older unit to a high-efficiency model can cut both energy use and utility bills (see more on efficiency ratings in the next section!)
Understanding Water Heater Efficiency Ratings: ENERGY STAR and UEF
When comparing gas, electric, and heat pump water heaters, it’s important to look beyond upfront cost and consider efficiency ratings. These ratings help you understand how much energy your water heater uses and how much it will cost to operate over time.
ENERGY STAR Certification
What it means: Products with the Energy Star label meet strict energy efficiency guidelines set by the U.S. Environmental Protection Agency (EPA).
Why it matters: Energy Star-certified water heaters use 10–50% less energy than standard models, saving you money and reducing greenhouse gas emissions.
Who qualifies:
Most heat pump water heaters are Energy Star-certified.
Some high-efficiency gas and electric tankless units also qualify.
Standard electric resistance and gas tank models rarely meet Energy Star standards.
Uniform Energy Factor (UEF)
What it measures: UEF is a measure of water heater efficiency. It reflects how much hot water the unit produces per unit of energy consumed. It can help you understand a system’s expected operating costs.
How to read it:
Higher UEF = greater efficiency.
Example UEFs:
Heat Pump Water Heater: 2.0–4.0 (very high)
Standard Electric Tank: ~0.90 (moderate)
Gas Tank Water Heater: 0.60–0.70 (lower)
Tankless Gas/Electric: 0.80–0.98 (high)
Why Ratings Matter for Your Choice
Heat pump water heaters consistently outperform others in efficiency ratings (Energy Star, UEF).
Gas water heaters typically have lower UEFs because energy is lost during combustion and venting.
Tankless systems (especially gas) often have higher UEFs than tank models but can vary widely by brand.
👉 Tip: Look for a water heater with Energy Star certification and a high UEF to ensure long-term savings on your energy bills.
Pros and Cons of Heat Pump Water Heaters and Standard Electric Water Heaters
Which Electric Water Heater is Better?
A heat pump water heater is technically a type of electric water heater — but it works differently.
Instead of generating heat directly, it pulls warmth from the air (like a reverse refrigerator) and transfers it to the water in the tank. This makes it 2–4x more efficient than standard electric models. (A confusing concept, we know, but trust the thermodynamics of it all.)
If you're comparing a heat pump water heater vs electric, here’s what to know:
Heat Pump Water Heater
Pros
Highly efficient (2–4x more efficient than electric resistance)
Lower operating costs (saves ~$200–$400 per year according to the EPA)
Eligible for utility rebates ($2,250 in Colorado’s Xcel Energy territory)
Longer lifespan (up to 15 years)
Eco-friendly with a low carbon footprint
Cons
Higher upfront cost compared to standard electric water heater
Space for airflow needs to be considered when selecting installation space
Electric Resistance Water Heater
Pros
Easier to install due to its generally compact size
Works in small or enclosed spaces
Cons
Higher operating cost
Less energy efficient compared to heat pump water heaters
Not eligible for many rebates
Tankless vs. Tank Water Heaters
Another important decision is whether you want a tank or tankless water heater. Here’s the breakdown →
Tank water heaters store hot water in a reservoir, are generally less expensive to install compared to tankless systems, but can run out of hot water during high use.
Tankless water heaters heat water on demand (no storage tank), which saves space and energy but requires a higher upfront investment. They can be good for households with consistent but moderate hot water use.
Tank vs Tankless Water Heater Pros and Cons
Tank water heaters are typically less expensive to install but tankless systems take up much less space and offer an endless supply of hot water. More pros and cons for each system type →
Tank Water Heaters (Gas or Heat Pump Electric)
Pros
Lower upfront cost
Simple to install and maintain
Can supply hot water to multiple fixtures at once
Heat pump electric tanks are extremely energy-efficient and eligible for rebates
Cons
- Limited hot water supply (based on tank size)
Takes up more floor space
Gas tanks are less energy efficient (UEF ~0.6)
Heat pump electric tanks require more space and airflow
Tankless Water Heaters
Pros
Endless hot water (no storage tank)
Compact, wall-mounted design saves space
Higher energy efficiency than gas tank models
Longer lifespan (15–20 years)
Cons
Higher upfront cost
May require electrical upgrades or larger gas lines
Limited flow rate if multiple fixtures run simultaneously
Maintenance can be more complex
Another way to look at these options is that for homes with moderate budgets, steady hot water needs or are focused on energy usage — tank water heaters are likely best for you. If you have a smaller home and are seeking a most space-conscious installation — tankless is probably the way to go.
Don’t Forget About Heat Pump Water Heater Rebates
If you’re considering a heat pump water heater, many utility companies (like Xcel Energy) offer rebates and incentives to help reduce the upfront cost. In Colorado and Minnesota, these rebates can cover up to 75% of the total cost — but funds are limited and expected to be reduced soon.
Learn more about rebate-eligible options here or speak with a heat pump water heater expert here.
Final Thoughts
Choosing between a gas vs standard electric vs heat pump electric water heater isn’t just about upfront costs — it’s about energy use, climate impact, long-term savings, and household needs. With newer tech like heat pump water heaters, homeowners have more control than ever.
In many cases, heat pump water heaters offer the right combination of reliability, energy efficiency, low operating costs and acceptable installation costs (when paired with rebates). Still not sure what’s right for your home? Zero Homes can help you evaluate your options and find the most cost-effective, energy-efficient solution.
