The thermal efficiency in a water heater is measured using an energy factor (EF), which equals the amount of energy used to heat the water compared to the amount of heat energy in the water. Energy factors for water heaters are between 0.50 and 2.20, depending on the method of heating. Generally, the higher the energy factor, the more efficient the heater.
Electrical water heaters have an EF of 0.90 to 0.98. However, electricity will not heat water as quickly as other sources such as natural gas.
Conventional Natural Gas
Conventional natural gas water heaters have EFs from 0.60 to 0.70. Some heat loss occurs when heating the water with gas, but gas heats the water much faster than electricity. New technologies, such as demand heating, allow natural gas to be much more efficient.
Condensing Gas and Demand Gas Heating
Newer gas heating technologies, such as a condensing gas water heater and a tankless (demand) water heater, have EFs from 0.80 to 0.90. The technology allows water to be heated almost instantly and then it is either stored or supplied to water fixtures.
Heat Pump Water Heater
Heat-pump water heaters have energy factors around 2.20 because they pull heat from other sources and apply it to the water–the water heater does not provide any direct heat to the water. This is very efficient and uses less energy than the heat pump can collect to heat the water. The heat-pump water heater heats water slower than natural gas, but it is clear the heat-pump version is much more efficient and cheaper to run over time.
Solar Water Heater
Solar water heaters have energy factors around 1.20. That is, the solar water heater creates more heat energy than the energy it uses to heat the water. This is because the sun warms the water, not the water heater. This is one of the most efficient methods of heating water, but it is also the most expensive to set up.