Water Heater Replacement – Exploring Your Options

Date Published: May 31, 2024

It has happened to the best of us. The fateful day where you finally have to change out that old dinosaur of a water heater living in your basement. This is hopefully because you knew it was nearing its end, rather than waking up to a basement full of water!

Whatever the cause, water heater replacement isn’t ever a fun thing to do. However, there are a few different options that must be considered before you make an investment in your home. Here are a few things to consider.

To Tank Or Not To Tank (Do I Need a Tankless Water Heater?)

Often times, people go with the cheapest option for a water heater replacement, which is a standard tank water heater. But there are a ton of advantages to purchasing a new tankless water heater system instead. Tankless units come in both gas and electric models, and can be a direct replacement for a standard tank unit.

Most tankless units mount on a wall and are roughly the size of a medium suitcase. When a faucet or fixture is turned on and hot water is needed, the tankless unit immediately activates, running cold water over a heat exchanger to increase its temperature.

Tankless Water Heater. Image sourced from: https://www.bhg.com

The system will consume only the amount of energy relative to the amount of hot water demanded at a faucet or fixture. That is why these units are often referred to as “instant” or “on-demand” water heaters. When using an older tank style water heater, you end up heating water in your unit all day long regardless of if you are using it or not. On the contrary, tankless water heaters only heat water when needed or called for.

Conventional water heater replacement vs tankless system

Water Heater Replacement with a Solar Hot Water System

Advances in solar technology and storage systems make it a great time to consider installing a solar hot water system.

The systems from the ’70s have come a long way in many respects. However, the concept remains the same – pull some energy from that big orange thing in the sky and convert it into heat for your hot water system.

Most solar hot water systems consist of a number of solar panels mounted outside; piping and a pump system to circulate a water or glycol mixture through the panel; and a special storage tank inside the home that collects the circulated liquid, which then heats water in that tank.

Image sourced from: https://www.socalgas.com

Typically, another conventional water heater is present for cloudy days, but the majority of the heating is done by the sun. We have even seen tankless units acting as the backup source. But the incoming water is pre-heated by the solar system, and the tankless unit only does the small amount of work to raise the temps up to your desired level, if needed.

Comparing Water Heaters: Pros and Cons

Standard Efficiency

If you are looking for the cheapest up-front price and installation cost, the best option is a standard efficiency tank water heater. These types of systems have relatively straightforward venting configurations and plumbing attachments. Therefore, it’s a feasible installation job for the savvy DIYer. Additionally, it has minimal electrical components. So finding parts and service providers will usually come at a reasonable price.

On the other hand, as its name suggests, this type of water heater is going to be the least efficient option. These heaters can lose up to 20% percent of the heat they produce through exhaust. They also require access to outdoor combustion air, in order to operate safely and properly.

High Efficiency

As you may have guessed, the high efficiency (HE) water heater is going to be more energy-efficient than the standard option. It is configured to optimize its combustion process and extract as much energy as possible during the process, using 90% or more of its generated energy. A more efficient system also means that it will heat water faster than its standard counterpart. HE water heaters help you to minimize wasted energy over time, and thus save money in the long run!

Image sourced from: https://www.pinterest.com

However, they are more complex devices than standard efficiency heaters. So they are going to be more expensive to purchase and install. It is crucial to have these systems installed and operating correctly. This makes it more necessary to hire a licensed pro to install and maintain your HE heater.


The tankless water heater option is going to be even more energy efficient, as it only initiates the heating process when hot water is needed (as discussed above). So you’ll be looking at long-term energy and money savings. It also takes up much less space than a tank water heater, which could be an ideal option if you have limited utility room space. Another tankless pro is that they generally have longer life spans than tank systems. With the proper maintenance and care, you can expect your tankless water heater to last you 15-20 years.

On the downside, tankless heaters usually cost more to purchase and install than tank heaters. Also, its “on demand” quality means you won’t have your heated water as quickly as with an HE water heater. If you are converting from a tanked water heater, you generally have to change your venting type and might even need a larger gas line which can quickly increase costs.

Additionally, due to its size, a tankless system might not be able to provide sufficient heated water for multiple, simultaneous usages in large homes. For instance, if you are taking a shower, running the dishwasher and doing a load of laundry all at the same time, a tankless may not be able to provide sufficient heat to all 3 areas at once. You have to make sure to size your unit property to your home size.


The best part about solar water heating is that all you need is the sun. So if you live in an area that receives substantial sunlight, you could be getting your hot water for free! In addition, solar could be used to power other components of your home. This could effectively help you cut lots of energy costs over time.

However, the very feature that sets it apart from the other systems also acts as its primary flaw. Simply put- no sun equals no solar energy. So if it’s particularly cloudy or overcast, you might not receive enough solar energy to heat water to your desired temp. This is why a supplementary water heating device is recommended along with the solar. You might have also guessed that installation costs for solar panels can be quite costly.

Solar Hot Water Heater Panels=

It’s true that a standard efficiency tank unit may cost you the least to install. But by taking the time to research your options and weigh the overall cost of ownership, you may find that upgrading to a high efficiency tank unit, a tankless unit, or even a solar hot water system might be right for you. We recommend that you take the time to explore these options with your local plumbing expert.

What is Involved with Water Heater Installation?

In reality, a water heater is one of the simplest appliances in your home. You have cold water in, hot water out, and a power source.  If you have an electric unit, there is usually a 220V connection to your unit.  If it’s a gas unit you have a natural gas or propane pipe connecting to the gas valve built into the unit.

Water heater replacement involves shutting off the water supply, disconnecting the power connection, draining excess water, and swapping in the new unit. Overflow drain pans are recommended on all tank units with new and replacement installations.

If you are upgrading to a tankless or high-efficiency unit, there may be additional considerations related to venting, proper gas line sizing, etc. It’s not as straightforward as a standard tank water heater, so it’s best to hire a professional. The same, of course, goes for the solar water heater configuration.

What is the Best Water Heater System for You?

Unfortunately, there is no one-size-fits-all answer. Each home and each homeowner has unique needs. When considering water heater replacement, it’s all about weighing the pros and cons to make an informed, educated decision.

Explore all options and consider the long-term costs of ownership in your decision. There are many great options and your choice will have long-term impacts on your monthly operating costs and performance of the system.

For more articles and feedback on home maintenance items, visit our Ask Your Inspector section of our website.

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About the Author: Chris Scott

Chris Scott is an ASHI certified home inspector with multiple years of experience in home inspections, blower door testing, duct leakage testing, and Boulder Rental License Inspections. Chris is also the Website Coordinator for Scott Home Inspection.

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  1. RealEstateBrokers@juno.com'
    V May 4, 2016 at 11:08 pm - Reply

    We would have liked if your article had some price/cost ranges for each possibility. Maybe assume a typical 2000sf 3br/2ba home of 3.
    StdHWH $500-800; install $300-400
    HiEffHWH $850-1000; install ??
    Tankless ??; install ??
    Solar ?? Install??

    • George Scott May 12, 2016 at 4:58 pm - Reply

      We are reluctant to quote costs since this blog post can be read across the country, and pricing and installation costs vary greatly. Our goal was to highlight options to consider when replacing a water heater, versus just installing a standard tank unit and missing your opportunity to consider other options. We recommend consulting with local plumbers to get quotes for the options proposed.

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