Q: I just read a money saving article that says I can save “up to $200 a year” by installing an insulation blanket around my electric water heater. I’ve seen these for sale at the local hardware store for about $20, and it looks like even a klutz like me can install the thing in 20 or 30 minutes. This seems too good to be true.
A: I saw the same article and almost fell out of my chair! In some cases, adding insulation to your electric water heater is a great idea that is easy to do and will save you a few bucks. But your instincts are right on—there’s no way this can save you $200 a year. This is one of those supposed “facts” that gets circulated by well-meaning people (and, occasionally, people just out to make a buck). The more websites that post this information, the more people believe it. We end up with a perfectly good idea that gets a bad rap because people created ridiculous expectations.
Here is a great website from the U.S. Department of Energy (DOE) that has been reviewed by experts in the field. Looking at the information they provide on water heater blankets, I can guess where the “up to $200” figure comes from.
Research has shown that “adding insulation to your water heater tank can reduce standby heat losses by 25% – 45%.” If someone sees those figures and doesn’t understand that “standby heat loss” is only a small part of the energy used by your water heater, that person might conclude that the blanket can save you up to 45% of your water heating cost. The DOE site explains that the overall energy savings are typically in the 5% – 9% range.
Someone in an area with relatively high energy rates might spend as much as $450 a year heating water. If you were to save 45% of that, you’d have around $200 in your pocket for beer, barbeque, heart medication or the church’s mission fund. But the actual savings amount is likely to be in the $20 to $40 range (5% – 9% of $450).
Now, investing $20 and half an hour to get back $20 a year for many years is, by any measure, a terrific investment. When you’re making less than 1% on your savings account, it’s hard to argue with 100% annual return. There’s no need for wild exaggeration.
How do you know if this is a good idea for you? Feel the outside of your tank. If it’s hot, extra insulation will save energy and money. Where is your water heater located? If it’s in a location that gets very cold in the winter, the blanket will probably save more.
How old is the water heater? Newer heaters usually come from the factory with more insulation around the tank than older heaters. But there’s a balance to be considered. Water heaters last an average of 15 years. If your heater is older than 15 years or so, it may make more sense to replace it now with a more efficient one.
While you’re at it, adding foam or rubber pipe insulation on the first few feet of pipe coming out of the tank—both hot and cold—has been shown to save a few bucks, too.