Water heater economics

The average US home spends about 20% of its overall energy use on hot water heating (source). Much of it via natural gas. Further traditional wisdom suggests that electric water heaters are more expensive to operate than gas (source). Lets check that one, we find that much depends on your energy price assumptions, at the new Ultra-Low Overnight rate, electric water heaters can be cheaper than gas electric water heaters.

Assumptions: The average Canadian uses 75 L of hot water a day (source), for the average Canadian household of 2.5, that’s 188 L of hot water per day. Suppose we need to heat this to 40 C, from 4 C, and let us assume efficiencies of 60 %, 90 % and 200 % for gas, electric and heat pump water heaters (source). Albertans apparently pay only 1.6 c/kWh for Natural gas, so lets go with that, as it is cheaper than what us Ontarians get. As for electricity, on the Ultra-Low Overnight Ontario rate, that’s 2.6c/kWh to 25 c/kWh depending on the time of day.

Some physics, it takes 4280 Joules to heat 1L of water by 1 degree (source). That is about 1.19 Wh (source). For our average Canadian home, that’s a daily hot-water energy consumption of 188 L x 1.19 Wh/L C x (40 C – 4 C) = 8 kWh/day. Factoring in the various efficiencies, as discussed above, we arrive at the following table.

Water heater type	Energy price [c/kWh]	Efficiency	Daily energy consumption [kWh]	Daily energy cost [$]
Gas	1.6	60 %	13	0.21
Electric	2.6-25	90 %	8.9	0.23-2.22
Heat-pump	2.6-25	200 %	4	0.1-1

As you can see, while the Gas water heater undeniably consumes the most kWh’s, the cost per kWh is the lowest. How all this shakes out depends in large part on the energy price you pay. While gas rates do not vary over the course of the day, they do vary quite significantly from time to time, currently, world oil prices are cheaper than they were last year (source), often Natural gas prices are tied into those of Oil. World events often send the gas rates to high heaven, making even the traditional electric water heater a steal in comparison.

The Ultra-Low Overnight rate, when in effect, allows even the standard electric water heater to come within a couple of pennies of the gas heater. The cheapest is in fact the heat-pump water heater offering the lowest operating cost, albeit in the dead of night. Some lifestyle adjustments, say showering in the evening and programming the heat-pump water heater to warm up nicely during those ultralow overnight rates (source), would allow you to come close to achieving that 10 c/day cost.