Water heaters: tank, tankless and heat pump options

How it works: where the energy goes

NRCan puts water heating at 17.2% of the energy used in the average Canadian home, second only to space heating (ENERGY STAR Canada ↗). Its Keeping the Heat In guide says about 20%, and notes that in a new or deeply renovated home, water heating can use more energy than space heating (NRCan ↗). In all-electric Quebec homes, Hydro-Québec puts hot water at 16% of electricity use in a detached house and 21–22% in a plex or multi-unit building (Hydro-Québec ↗).

Canadians use an average of 75 litres of hot water each per day (ENERGY STAR Canada). NRCan's Water Heater Guide puts the average household at 225 L a day, with three people using anywhere from 110 to 450 L depending on habits and fixtures; showers and baths account for almost half (NRCan ↗).

Gas and oil water heaters are rated by energy factor (EF): the share of energy that ends up as hot water over a standard 24-hour test, including heat lost from the tank while it sits (standby loss). Electric tanks are rated by standby loss in watts. A higher EF and a lower standby loss are better.

Tank or tankless (on-demand)?

A tank keeps water hot around the clock; a tankless (on-demand) heater heats water only as it flows. The US Department of Energy (US DOE ↗) states: “For homes that use 41 gallons or less of hot water daily, demand water heaters can be 24%–34% more energy efficient than conventional storage tank water heaters. They can be 8%–14% more energy efficient for homes that use a lot of hot water — around 86 gallons per day.” By our conversion, those thresholds are about 155 and 326 litres a day; NRCan's average household (225 L) falls between them.

ENERGY STAR Canada says a certified tankless model uses 30% less energy, on average, than a storage tank (ENERGY STAR Canada ↗). In NRCan's 2011 listings, gas tankless models had EFs of 0.64–0.98 (average 0.85), against 0.53–0.70 (average 0.62) for gas tanks.

The limits: tankless units typically deliver 7.6–15.2 litres a minute, so a shower and the dishwasher together can stretch one; a gas model with a standing pilot light gives back some of the savings, so look for intermittent ignition (US DOE). Most electric tankless units can't supply a whole house and are rarely installed that way in Canada, and NRCan notes hot water will likely take longer to reach the tap.

Heat pump, condensing, combi and heat recovery options

• Heat pump water heaters move heat from the surrounding air into the tank. ENERGY STAR Canada says certified models use up to 70% less energy than a standard electric water heater (ENERGY STAR Canada ↗); the US DOE says two to three times as efficient as conventional electric water heaters. They need a space that stays between 4.4°C and 32.2°C all year with at least 28.3 m³ of air around them, and they cool the room they're in, so a warm furnace room improves their efficiency (US DOE ↗).
• Condensing gas water heaters, tank or tankless, use a condensing heat exchanger, similar to a high-efficiency furnace; NRCan suggests them where large amounts of hot water are needed.
• Combination (combi) systems use one water heater or boiler for space and water heating, and suit homes that need less heat. They aren't regulated; look for a rating to CSA P.9 and a designer certified for combination systems by the Heating, Refrigeration and Air Conditioning Institute of Canada (HRAI) (NRCan ↗).
• Drain-water heat recovery coils the cold supply pipe around the drain stack so warm shower water preheats incoming water. It has no moving parts and works best when hot water drains while fresh water is drawn, as in a shower (NRCan ↗).
• Solar water heaters can use up to 60% less energy than other water heaters and need a backup heater (NRCan ↗).

Water heaters compared

Settings, safety and when to replace

Set the tank to 60°C to prevent the growth of bacteria such as Legionella, and use mixing (anti-scald) valves to deliver 49°C at taps, showers and tubs (Public Health Agency of Canada ↗). At 60°C, water can scald in under five seconds; at 52°C it takes 1.5 to 2 minutes (NRCan). NRCan warns that lowering the tank temperature too far may promote bacterial growth, especially in electric tanks.

Storage water heaters last 10–15 years and most tankless units more than 20 (US DOE). ENERGY STAR Canada suggests upgrading a water heater more than 10 years old, and NRCan advises choosing a replacement before the old one fails, so you are not forced into a rushed decision.

On a gas or oil tank, soot or staining around the vent connection, or melted plastic fittings on top of the tank, can mean exhaust is spilling into the house (NRCan). Have it checked; see combustion safety testing.

What an energy advisor checks

An EnerGuide evaluation records the size and efficiency rating of your water heating equipment, and fuel-fired water heaters are turned down during the blower door test (NRCan ↗). The rating assumes standard hot water use, so your household's use may differ. Your report breaks down energy use, including water heating.

In Ontario, the Home Renovation Savings program pays $500 for replacing a gas, oil, propane or electric water heater with an ENERGY STAR heat pump water heater (as of October 2026). It counts only as one of at least two qualifying upgrades, and the initial home energy assessment must happen before any work (Home Renovation Savings ↗). See program details.

Mistakes to avoid and next steps

• Buying a bigger tank than you need: larger tanks are typically less efficient, especially when demand is low (NRCan).
• Undersizing a tankless unit for showers and appliances running at the same time.
• Putting a heat pump water heater in a cold or cramped space.
• Skipping pipe insulation: insulating hot and cold pipes within 2–3 m of the heater is the most cost-effective improvement (ENERGY STAR Canada ↗); NRCan suggests at least RSI 0.7 (R-4).
• Expecting an ENERGY STAR electric or oil tank: those types aren't eligible.

Next steps: look for water heater rebates on our programs page, compare running costs with the energy cost calculator, and fit the upgrade into your plan.