What a water heater really costs to run per year
Updated · Reviewed against the current HotWaterAtlas dataset
Short answer: at national average rates, certified heat pump models run about $116–$296/year (median $196), gas tankless $3–$525 (median $258), and gas storage $264–$567 (median $278). Over a 10–13-year service life, the running-cost spread between categories is usually larger than the purchase-price spread.
Where the numbers come from
Every certified water heater reports its annual energy use under the standardized DOE test — kWh/year for electric and heat pump units, therms/year for natural gas, gallons/year for propane. We convert with national average residential rates ($0.17/kWh, $1.45/therm, $2.7/gal — see the methodology). The dollar figure on each model page is that conversion, nothing more.
The market, in dollars per year
| Category | Models | Cheapest | Median | Most expensive |
|---|---|---|---|---|
| Heat pump | 578 | $116/yr | $196/yr | $296/yr |
| Gas tankless | 387 | $3/yr | $258/yr | $525/yr |
| Gas storage | 134 | $264/yr | $278/yr | $567/yr |
Within-category ranges mostly reflect size: an 80-gallon unit serves more hot water — and uses more energy — than a 40-gallon one under its (larger) test draw pattern. Compare models of similar capacity, not just categories. The cheapest-to-run certified model overall is currently the Vesta VX 9 at about $3/year.
Adjusting to your utility rates
The conversion is linear, so scaling is trivial:
- Electricity at $0.30/kWh (California, New England): multiply our heat pump figures by 1.76×.
- Gas at $1.00/therm (gas-rich states): multiply gas figures by 0.69×.
- Time-of-use plans: a connected water heater can shift most heating into the off-peak window — effectively applying your cheapest rate to the heat pump math.
What the test number can't tell you
- Your household ≠ the test pattern. A five-person home uses more than the test's draw; a single occupant far less. The ranking between models holds; the absolute dollars scale with your usage.
- Setpoint and climate matter. Hotter setpoints and colder groundwater raise real use — the same physics as in the tankless sizing guide.
- Purchase and installation cost are separate. For the full economics, see heat pump vs gas.