Water heating is a big slice of your home’s energy bill—about 18% for the typical U.S. home.

Choosing the right type of water heater can improve comfort and lower operating costs.

Below, we compare propane and electric options (including modern heat pump and tankless models) so you can pick the best fit for your home.

A close comparison – propane water heaters are more efficient

Propane water heaters are more efficient, but electric water heaters closely compare in efficiency.

The cost to operate a propane water heater vs an electric water heater is a marginal difference. Propane water heaters can save you roughly $70-80 per year compared to electric water heaters. Efficiency, propane fuel cost, and your in-home energy usage all factor into your cost savings.

However, there are several more factors you need to consider…

Initial expense

Propane Water Heaters cost more up front than electric water heaters. A gas water heater unit is about $850 on average, but more efficient models can cost up to $1,400. Electric water heaters cost about $650. Likewise, higher quality units can rise up to $1,500.

Gas water heaters may cost a little more to install upfront. However, check with your propane gas supplier to see if they will install it for you at a lower price.

Propane water tanks deliver more consistent heat

We’ve all had the water go cold in the middle of a shower. It’s the worst! Gas water heaters help make sure this doesn’t happen. While electric water heaters can take hours to heat your entire tank and the hot water eventually runs out, propane heaters are constantly keeping the water hot. This uses less energy and results in lower fuel consumption and costs.

The switch is not worth the cost

Electric and propane water heaters are a close comparison with a small cost difference. Propane heaters take the lead by a small amount. Switching from electric to gas is really only worth it if you are looking to replace your tank anyway. But if your tank is still in good condition, the cost to switch would be more than you’d save.

Tankless water heaters are more efficient, but have high price tag

Tankless gas water heaters can be up to 22% more efficient than conventional models. However, the upfront cost is still high and maintenance costs may also be higher.

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FAQs

1. Which water heater is most energy-efficient today?

For most homes, an ENERGY STAR® heat pump water heater (electric) uses the least energy overall—often about 70% less than a standard electric tank—while a high-efficiency propane tankless unit (UEF up to ~0.95) minimizes standby losses and delivers continuous hot water. The best choice depends on your space, usage, and utility rates.

2. Do propane water heaters heat faster than electric?

Yes—compared to standard electric resistance tanks, propane (and natural gas) storage heaters typically have faster recovery because their burners provide higher input. If rapid back-to-back showers are common in your home, propane storage or propane tankless can help maintain steady hot water.

3. What size water heater do I need?

We size by your household’s peak demand and usage patterns. For storage tanks, we look at the first-hour rating; for tankless, we match flow rate (gpm) to simultaneous fixtures and winter inlet temperatures. Proper sizing prevents cold-water surprises and avoids overspending on capacity you won’t use.

4. Where should a heat pump water heater go?

HPWHs work best in spaces that stay roughly 40–90°F with enough air volume (or ducting) and a place to drain condensate. They cool and dehumidify the surrounding area slightly, which is great for many basements. If your home lacks a good location, propane tankless or storage may be a better fit.

5. What maintenance keeps costs down?

Annual service is smart for any model. For tankless, that means checking combustion, flushing scale, cleaning intake screens, and verifying venting. For storage tanks, test the T&P valve, inspect the anode, flush sediment, and verify thermostat settings. A clean, tuned system runs safer and more efficiently.