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What is More Affordable: Electric or Gas Water Heaters?

on September 7th, 2018 in Water Heaters

Looking for the lowest price tag when upgrading your water heater? Then stick around and we’ll go through the in and outs of the different water heater that you can purchase without breaking the bank.

Water heater

Your water heater is literally a tank that heats and stores water. All tank water heater work on the same premise of storing heated water and delivering to taps and showers when they are opened. Although, they may all share this same characteristic, the way they are heated varies greatly.

There are tanks that heat using natural gas, propane, electric and even hybrid of electric and reverse refrigeration. It can get quite complicated! But for the purpose of this article we’ll be focusing on the cheapest! Natural gas and electric.
Gas water heaters have a hard piped gas line connected into it’s gas valve. An aquastat monitors the temperature of the tank and when the temperatures dip down to low, then “bang” it turns on your burners and heats the water.

The gas is supplied by your local utility company and you receive a bill every month with statement with how much gas you used. As of the date of this writing, our local utility company in Toronto, ON, Canada is Enbridge.

Electric water heaters work on the same principle of monitoring water temperature in the tank however turn on an “electric element” to heat the water. This electric element works similar to the burner on your electric stove.
So which one is cheaper? Well it depends.

The rates you pay for gas and electric vary from place to place and change overtime. Electric may have been cheaper to heat your tank 10 years ago but today can be twice the price of gas!

As of today in Toronto, gas is notable cheaper to operate than electric.

Electric Water Heater Costs

But it doesn’t end with operating cost. You also need to consider how much the tank is going to cost buy. On average electric water heaters are cheaper than gas water heaters. You don’t have to go far to check out the selection of electric tanks as they’re available in many hardware big box stores. Home depot is currently offering a Rheem 39G for $494.

Electric water heater

Now this price doesn’t require installation which can be anymore from additional $200-500 depending on the application when done with a big box store.

When installed with an HVAC company (such as ourselves) you can expect to pay an additional $400-600 more than you would with a big box store. The advantage is that HVAC companies with good reputation is you get higher caliber quality installation translating to better performance and much lower chance of leaving safety risks (there are horror stories out there). Reputable HVAC companies also provide a more aggressive warranty on their tanks that can easily pay for the extra cost in the event of costly premature breakdown.

In total you can expect to spend $700-1000 for an electric water heater from installed from a big box store and $1400-1600 for electric water heater from reputable HVAC company.

We mentioned earlier that electric cost more to operate than gas. But now let’s go ahead and punch those numbers in. As of Jan 1st, 2018, Toronto Hydro showed monthly average cost of electric water heater for family of four to be $44.43. Now let’s multiply that with the average lifespan of a water heater averaging between 10-15 years. So on average you’ll be looking to spend $5331.60 – $7997.40 for the full life of the tank.

So how cheap is electric tank really? To set a benchmark we can later compare with gas water heater, we’ll say that we had it purchased and installed by reputable HVAC company for $1400. Since we used a reputable HVAC company we’re more than likely reach the higher end of the tank’s lifespan of 15 years equally $7997.40. Add the costs together and we’re looking at spending $9397.40 to heat the water for a family of 4 in Toronto.

Gas Water Heater Costs

So how do gas water heaters measure up? Right off the bat you’ll find they cost more to buy upfront. Depending whether you purchase a Power-vent (PV) or conventional gas water heater. As many homes are transitioning to Power-vent we’ll focus on these types of tanks.

Gas Water Heater

Home Depot currently list a Rheem 40G PV tank for $798. Bix box store charge around $400-600 in labour and material to install the tank so you’ll be looking at a total of $1398. Working with an reputable HVAC company you can expect an extra $400-600 on top of that price with all the perks we discussed earlier. Note, the safety risks are a lot higher when installing an a gas tank then a electric tank. It may be worth spending a little extra to get a peace of mind that your having highly trained experts installing your system and greatly reducing the chances of carbon monoxide poisoning and gas leaks.

Now the tricky part, calculating the average hot water use for these tanks. Unlike electric, there is no study on the average cost on operating a water heater for 4 families. So to continue with our math, we’re going to take an article that states electricity is almost x5 more expensive to use as a form of energy then natural gas (in Ottawa). But let’s be very conservative and say it’s x3 more expensive.

Taking our number earlier of $7997.40 to operate an electric tank for 15 years and then dividing it by 3 (as operating gas is a third the cost then with electricity) leaves us with a $2665.8.

Add $2665.8. that with the cost of $1998 purchasing and installing the tank leaves us with a total of $4663.80.

Therefore at a minimum you’ll be saving a total of 3333.6 ($7997.40 -$4663.80 in the span of 15 years or $222.24 every year.

Conclusion

Although it may be tempting to purchase the cheaper water heater, if you don’t take into consideration energy cost, you can actually spend more in the long run. Every city has different rates for gas and electricity. It’s important to see how they compare to determine which one will be cheaper to operate.

It’s the operating cost that’s the hidden variable that can really swing which water heater is actually cheaper. As of today gas is notable cheaper to operate in most cities in Canada.