Saving energy with hot water heaters

Ask Mr. Electricity has a concise page that compares installation and operating costs for different types of hot water heaters. It covers gas vs. electric and tank vs. tankless.

Installing timers can save energy in some cases, but not always:

A $40 timer can automatically turn off an electric heater . . . after you go to bed, and on again right before you get up. These don't save as much money as you'd expect, though. That's because a typical electric water heater only runs about three hours a day anyway, and modern energy-efficient water heaters run only 1.3 hours or so. . . . (In fact, if your heater was made after 1998, it's possibly not worth using a timer at all.) . . . A timer for an old (pre-1998) heater will save about 25kWh/mo. for a family of two using 40 gallons a day with the heater off four to six hours a day, but only 14kWh/mo. for a family of four using 80 gallons a day.

There's also a nice tidbit about health considerations when setting the temperature on your heater:

Bacteria fram Legionnaires Disease can grow in water up to 122°F, so many people set their heater tanks to at least 123°F.