UPDATED: Wednesday, October 10, 2012 - 12:56pm
When choosing a water heater for your home, you may want to consider the number of appliances you have, size of the household, environmental concerns, and economic factors before making a decision. The best choice can depend on a number of different factors, and with a range of products on the market, you should be able to find the perfect water heater for your needs.
Water heaters can be broadly broken down into flash or on demand heaters and tank heaters which use a variety of techniques to actually heat the water. Flash heaters only warm water when you need it, working rapidly to bring it up to temperature. Tank heaters heat water in a storage tank and periodically turn on to reheat it, ensuring there is a reserve of hot water available. As it is depleted and new water pours in, the heating element turns back on to bring cool water up to temperature.
Some are gas-fired, using a gas heating element. Depending on prevailing gas prices and how efficiently designed they are, this can be more cost-effective than those which use electric heating elements. Electric  water heaters can also be prone to breaking down more quickly, especially in homes with hard water which chews into the lining of the heater over time. In both cases, you can increase efficiency with tricks like turning down the heat if you find you never use the water at the hottest setting and insulating the heater so it doesn’t have to work as hard to bring water up to temperature.
Because on demand water heaters only heat water when needed, they don’t waste energy keeping a tank warm when no one’s using it, and they work very quickly and efficiently, so you shouldn’t notice an interruption in hot water supply as long as your heater is appropriately sized. For example, someone could take a shower while another member of the household runs a dishwasher or does a load of laundry.
They also have a lower profile, which can be useful in a structure with limited space for appliances. It’s important to make sure the heater has enough room for safety clearances to reduce the risk of fire or water damage, but it should fit under a sink or counter if necessary, unlike a large tank, which requires far more surface area and vertical space.
The disadvantage to flash heaters is that they tend to have a higher up-front cost. Sometimes it’s possible to get a rebate or qualify for cash assistance if you can demonstrate that you are making your home more efficient with a flash heater, but otherwise, you may need to budget ahead for the higher price.
Electric and gas tank water heaters are available, and as an alternative to the traditional electric design, heat pump water heaters are available to save money by using less energy. All designs keep the water heated in a large storage tank, but have the obvious drawback of allowing a home to run out of water during periods of heavy use. It’s important to select a tank of the right size to supply a household, which means thinking about how much people might use at peak periods; and remember, it can take a while for a heater to “recover” after a tank has been depleted for tasks like showering, dishes, and laundry. Many newer tank heaters are energy efficient. Some green building experts prefer them  to on-demand water heaters, such as the Atlanta contractor  who critiqued on demand water heaters on Networx.
The one distinct advantage to having a tank heater is that the water can stay warm during a power outage. Flash heaters may not be able to function when the electricity is off because the thermostat is often electric, rendering even gas elements useless. On the other hand, a well-insulated tank may stay warm for a few hours or a full day, so in a household on pressurized water lines that flow when the power is out, people will have some warm water for dishes and other tasks.
Another option to consider is a solar water heater , a great choice for areas with lots of sun if you have a home with a big roof that faces south for a solar installation. This will require more start up costs and maintenance, but allows you to heat water for free using the power of the sun. View original post .