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Step 1
Determine the size of the hot water heater that you would need to buy. Energy efficient hot water heaters come in a variety of sizes, each being able to handle a progressively larger home. In addition, larger heaters would be necessary for larger families in order to ensure that there is enough hot water for everyone (a family of five can easily use a staggering 100 gallons of hot water per day).
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Step 2
Buy an energy efficient hot water heater that has a very low radiant heat loss rating. Radiant heat is the heat that passes from the hot water heater out into the surrounding environment as opposed to back into the water itself. A hot water heater with less than a 15 percent radiant heat loss rating is a good choice (although 10 percent is better).
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Step 3
Buy an energy efficient hot water heater that has a low heat loss rating through what is known as cycling loss. Heat is lost from the water as it circulates through your home. More efficient hot water heaters are able to reduce the amount of heat lost in this manner (although upgrading your pipes will have a more profound impact).
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Step 4
Invest in a tankless heater. Tankless hot water heaters are more expensive to install (sometimes $1,000 more than a traditional hot water heater), but the estimated cost of running a tankless heater is between 20 and 30 percent less, adding up to a huge savings over the life of the heater.
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Step 5
Conduct a cost comparison on any hot water heaters you are thinking about buying. A cost comparison will tell you how long it would take for the energy efficient savings of a particular heater to compensate for the added expense of completing the upgrade. As a rule, the equation for the amount of time a heater pays for itself is "cost divided by yearly savings," which would return a result of the number of years before it has paid for itself.
