According to the US Department of Energy (DOE), on average, a home's hot water heater uses 13% of household energy. After heating/cooling and appliances/lighting, providing hot water for your home uses the most energy.

There are typically four ways to cut energy use in this area:

1. use less hot water
2. lower the temperature setting on the hot water heater
3. insulate the hot water tank
4. buy a new energy efficient water heater

Use less hot water
- Installing low flow aerators on faucets and low-flow shower heads can reduce water use dramatically. we have had these for years just to reduce our monthly water bill, and have never noticed a performance problem. In fact, a few years ago, we lived in a house with very poor water pressure because it was at the end of the water line. After installing a 3 gallon-per-minute showerhead, we actually felt like we were getting a good shower - it concentrated the water enough that we didn't even notice the low pressure problem.

- Fixing leaky faucets promptly will save many gallons of wasted water.

Lower the temperature setting on the hot water heater
- The hot water doesn't need to be more than 120 degrees for household use. Check the current setting on your water heater, and you will probably find that it is set closer to 140 degrees.

Insulate the water heater tank

Insulate your electric hot-water storage tank, but be careful not to cover the thermostat. Follow the manufacturer's recommendations.

Insulate your natural gas or oil hot-water storage tank, but be careful not to cover the water heater's top, bottom, thermostat, or burner compartment. Follow the manufacturer's recommendations; when in doubt, get professional help.

Replace an old water heater with a new energy efficient one
- The design and construction of water heaters has improved greatly in recent years. If you water heater is more than 10 years old, consider replacing it -- most have a useful life of 10-15 years. The energy savings will be a huge improvement.

- Consider installing a tank-less (on-demand) water heater. Energy savings can be 30% above an energy-efficient tank water heater! These units will cost quite a bit more, but they have a couple of advantages: 

   1. they free up a lot of floor space. Tankless units are typically wall-mounted, and have a fairly narrow profile - several inches, as opposed to the large area of floor and room space that most standard water heaters use. 

   2. you don't have to worry about having enough hot water - rather than having a fixed amount of ready hot water sitting waiting in a tank, these systems actually heat the water intantly when you need it. So if you have a household of teenagers who use up all the hot water before you can take your shower, an on-demand system would solve your problem - and save energy (just don't tell the kids that the hot water can never run out, or you'll lose the energy savings benefits!)

There are more tips for saving energy related to water heaters at the DOE website:

http://www1.eere.energy.gov/consumer/tips/water_heating.html