2 years ago I bought a conventional gas water heater. Now I know better. So should I replace it?

Only about a year before I knew any better, I replaced our 20 year old conventional gas water heater with a brand new conventional water heater that – if well cared for - will last another 15-20 years. Why I bought that heater is not an uncommon story: my electrical panel at the time couldn't handle more electrical load (said my installer), there was no place to exit a horizontal flue required for a tankless gas water heater, and I had never even heard of a heat pump water heater nor was I offered one.

Fast forward to today, I need no additional convincing that heat pump water heaters are here and ready for prime time and I deeply regret buying the wrong water heater at the time.

But what should I do with that regret? A lifetime of financial and environmental wisdom from my parents that tell me "the most energy efficient X is the X that you already have;" but I feel like it's worth answering this question with more science and less aphorism. To do this, let's explore the two legs of this question: 1) what's the right answer for my wallet; and 2) what's the right answer for the planet?

Financial Considerations

Baseline

In April 2022, I paid $2,390.00 for the installation of a 50 gallon Bradford & White gas water heater with an added expansion tank. The tank (model RG250T6N) has a Uniform Energy Factor (UEF) rating of of 0.63 .

To operate it, I guesstimate (from reviewing meter data during seasons I'm not using my gas furnace) that I use about 20 therms of natural gas per month, which is close enough to the yellow EnergyGuide label's estimate of 269 therms/year that I'll use for the remainder of this post, in order to make apples-to-apples comparisons easier. Using the 269 therm number, and our blended (supply, delivery, and taxes/fees) rate of ~$1.91/therm in Maryland, that puts me at around $42/m in energy costs, or $514.00 annually.

New Water Heater

If I were to replace my water heater with a heat pump one (say a high end Rheem or AO Smith ), that would set me back a similar amount as before, if not a smidge higher with installation. The Rheem XE65T10HS45U0 offers 59 gallons (vs 50 I have now) and retails for ~$2,200. With a UEF of 4.05 and estimated 1,184 kWh of annual energy consumption, that puts me at around $187/year to operate it (using a blended electricity rate in Maryland of ~$0.158/kWh).

Resale & Rebates

Before I tally everything up there are two ways I can make the installation of a heat pump water heater less expensive: the first is reselling my like-new conventional heater. In the environmental section below, I explore the ethics of reselling a gas water heater – as it might not matter if I reduce my carbon emissions only to help someone else sustain theirs. But, for the sake of the financial exercise I trawled Craigslist and found people willing to part with their 50 gallon gas water heaters that were also only a few years old for $300.

Meanwhile, there are some serious rebates available for the upgrade:

1. BGE - my local utility - will give me $800 for qualified heat pump water heaters via the state mandated (and energy bill surcharge funded) Empower Maryland program.
2. The Inflation Reduction Act (IRA) will give me 30% back, conditioned that I haven't passed the $2,000 total rebate threshold for the calendar year from other purchases (e.g., the heat pump HVAC system I need to buy as well).

Evaluation

Given these factors, the question boils down to how quickly I can pay myself back for the purchase of a new heat pump using the energy savings it will give me.

I should note that presently I'm running at a ~300 kWh of over-production from my solar installation, so there's a time where the savings will be even greater than the therm-minus-kWh savings of $327/year from the above calculations. However, just like the IRA rebate will compete for the HVAC upgrade I plan to make this year, that solar overage will as well, and for the sake of this analysis I won't use either.

I will, however, take the $800 Empower Maryland rebate, and (unless someone can convince me it's bad to resell my old one) assume a $200 resale value of my present tank, bringing my guesstimated out-of-pocket for the upgrade down to ~$1,200. So, at $327 energy savings a year, I can pay myself back in ~3.6 years at best and 4.3 years at worst. Not bad!

Environmental Considerations

Operational CO ₂ e

Given the estimates above of 269 therms vs 1,184 kWh, we see a pretty clear picture: Using the EPA's CO2 Equivalencies Calculator , my present natural gas heater results in 3,138 lbs of CO ₂ e annually, while the new heat pump model would create 36% of that at 1,129 lbs CO ₂ e (two side notes here: 1. I find this to be a more instructive comparison than the UEF comparison, which would suggest an efficiency gain of twice that, at 16%; 2. The 1,129 is probably high, as EPA's Power Profiler tool suggests the CO ₂ alone is just 835 lbs in my location on the grid). Given some heat pump models have built-in Demand Response (DR) and time of day programming capabilities, the CO ₂ e savings could be even greater, making sure I am creating and storing hot water at times when I'm over-producing solar or the grid itself is the cleanest.

Embodied Emissions of the New Heater

Nailing down the embodied emissions from buying a new heat pump water heater proved to be the greatest challenge in writing this post (as are all LCA analyses). In Rheem's 2022 Sustainability Report , they mention that the LCA for the insulated tank alone is 1,027 of CO ₂ e but they do not bother to report on the full unit. Digging through AO Smith's latest ESG report they report an all-in 44.8 metric tons of CO ₂ e per $MM in revenue (assuming they wholesale at avg of ~$1,000, this would be only be ~100 lbs CO ₂ e), but this doesn't seem as helpful, as AO Smith has several lines of business likely watering this down (they are water treatment businesses, so pun intended). Meanwhile, digging around Google Scholar leads to this research report that offers two LCA figures for much larger heat pump systems (e.g., HVACs) at 3,446 lbs to 12,346 lbs CO ₂ e (yes, the wide gap is typical for such LCAs).

Given Rheem's 1,027 lbs for the tanks alone, I'd be comfortable assuming a ~5,000 lb figure for this analysis would be appropriately conservative, but if anyone has a better figure please share it.

Home Health

As we've learned in the gas stove debate, burning fossil fuels inside your home isn't great for the life within it. Of course, gas stoves are the worst home gas combustion has to offer – you stand over them and they don't have a flue to exhaust fumes – but that doesn't mean a well ventilated gas water heater (or furnace, for that matter) is totally benign. First there's always risk for ventilation error, leading to carbon monoxide poisoning, or a gas line leak, leading to, well, gas leaking through your home, exposing you and your family to those toxic fumes and or even a possible explosion.

Meanwhile, heat pump water heaters have some unexpected benefits, serving as natural dehumidifiers in parts of your home prone to mustiness and mold (likely your basement). The only downside I've heard of from heat pump water heaters is a low hum generated by the heat pump, similar to a refrigerator. Given these machines are frequently in basements and utility closets, this seems like a very minor issue.

Reselling the Gas Heater

When we resell our inefficient cars or appliances to get a fancy new EV, induction stove, or heat pump, are we really realizing the efficiency gains outlined above? Of all of the analyses, this has the least clear answer, but in an efficient market one simply has to consider whether the buyer of your used item would be buying something more or less efficient if your option didn't exist (even if the buyer ends up using your old machine more than you would have). My relatively new gas water heater is likely marginally more efficient than other used ones on the market, so I think I'm going to " wishcycle " that there is a net benefit despite prolonging its polluting lifespan. I have, however, asked people in the MCJ community to weigh in on this and will adjust my thinking based on the debate.

Evaluation

With an operational savings of 2,009 to 2,303 lbs CO ₂ e / year, no matter which LCA swag you take the answer is clear: a new heat pump water heater will pay for itself within 3 years of operations, and likely sooner.

Conclusion

I wrote this post because the answer was genuinely not clear to me before doing this exploration. As I said, I was raised with the notion that it is always better to keep what you have; and while that may be a good rule of thumb, it's not science, and we have increasingly helpful and trustworthy tools to hone our decision-making frameworks.

That said, with a financial payback of <4.5 years, and a CO ₂ e payback even sooner, upgrading my water heater to a heat pump water heater is an unambiguous choice. I'm officially in the market for a heat pump water heater.

Besides make/model (and installer), the only outstanding question now is one of timing. My present thinking is that I will likely wait to do it at the same time as I update my HVAC, so I can decommission the shared flue and gas lines all at one time. Watch this space.