My calculations tell me that propane water heater should be an economical alternative to an electric water heater.

But, looking at Energuide labels of comparable water heater, I seem to be wrong.

Hypothesis :

  • The propane retail price per gallon is $2.60


  • The electricy price is $0.16 per kw/h


  • Both are tankless water heater.

  • Thermal efficiency is 95% for electricity

  • Thermal efficiency is 90% for propane


BTUs required to raise 50 gallons of water by 70 deg F

1 gallon of water = 8.33 pounds To raise the temperature of 1 pound of water by 1 deg F = 1 BTU To raise 50 gallons of water by 1 deg F = 50 * 8.33 = 416.5 BTU To raise 50 gallons of water by 70 deg F = 416.5 * 70 = 29,155 BTU

29,155 BTUs per day

Propane gas consumption, per day (50 gal, 70 deg F raise)

1 gallon of propane = 91,000 BTU

91,000 BTU @ 90% thermal efficiency = 91,000 * 0.9 = 81,900 actual BTU per gallon

Daily BTUs to propane gallons = 29,155 BTUs per day / 81,900 BTU per gallon = 0.35 gallon

0.35 gallons per day

Electricity consumption, per day

1 kw/h = 3412 BTUs @ 95% thermal efficiency = 3241 actual BTUs per kw/h Daily BTUs per day in KW = 29,155 BTU / 3241 btu per kw/h @ 95% = 8.99 kw/h

8.99 kw/h per day

Daily Propane cost : 0.35 gallon @ $2.60 per gallon = $0.91

Electricity cost = 8,99 kw/h @ $0.16 = $1.43

It seems to me that propane is clear winner.

Let's change the hypothesis, and say I live in a area where propane is more expensive $3.30 per gallon), and electricity is cheap, ($0.11 kw/h)

Daily propane cost : 0.35 gallon @ $3.00 per gallon = $1.05

Daily electricity cost = 8,99 kw/h @ $0.11 = $0.99

This is an unlikely scenario, and propane is only 5% more expensive

How can energuide rate electricity cheaper than propane?

  • 2
    Thermal efficiency of electric is 100% by definition. If it were only 95% then where does the 5% go? The unit would have to be glowing cherry red. Commented Jan 18, 2023 at 0:56
  • 1
    @Filip A real gallon is 4.546L ~10lbs You are using the smaller US gallon. ~
    – crip659
    Commented Jan 18, 2023 at 11:35
  • 1
    If the OP is actually trying to decide whether to install an electric or a propane tankless water heater, then he must consider the flow rate of water needed in this application. The power required to raise the temperature of a decent stream of water by 70 deg F is so large that it will draw 125 A at 240 V. Hardly anyone has electric service that can devote 30 kW to heating water. Electric tankless water heaters are only for point of use, not central. Commented Jan 18, 2023 at 11:38
  • 1
    In affluent North America the minimum burner size for a whole house gas fired tankless water heater is 160 kBTU / h. I think the conversion factor is 1 kBTU / h = 293 W (?? someone please check this). Only gas fired burners can supply the heating rate for whole house tankless water heating in the colder areas of North America. A storage tank must be used for whole house hot water supply using electrical power. If the OP is interested in efficiency he should get an electric heat pump water heater. Commented Jan 18, 2023 at 12:11
  • 1
    Are you sure that you want a tankless heater? You should be looking at heat pump water heaters, including the split-system units (Sanden/ECO2 and friends), if you want an efficient water heater Commented Jan 18, 2023 at 12:40

4 Answers 4


Government regulations are funny.

Because Energuide labels follow regulations written prior to February 24, 2022 when the Ukraine war blew up, weirdly re-shaping the energy market. In particular, the government used a metric to determine the price of electricity and gas which is not the same metric you used. You can't just "freestyle it" or you'll get different results. Your next step is to look up the relevant regulations to see how the NRC requires the Energuide data be generated.

But markets are capricious.

The simple fact is that gas and electric prices are spot markets subject to dramatic change based on world events. EV adoption may drive up electric costs, or it may drive down electric costs due to V2G and home batteries removing the need for very costly peaking units. A whole town may be killed by a poison gas cloud in a Lac-Mégantic style catastrophe resulting in the banning of fracking and gas prices increase by 10x.

What we know for sure is that converting from propane to electricity is easy to do at scale, so electricity prices will always be moderated by the fact that it will always use the cheapest of many sources.

Also, with the uncertainties of wind, solar and EVs, the electric market is pushing pretty hard to move consumers to demand pricing. As such, with an electric, you could find yourself paying the price de l'heure every time you open a tap.

Don't forget other costs and limitations.

Gas tankless are more expensive, but electric tankless requires a positively enormous electric service. We regularly see tankless installations fail entirely (as in, the spouse is dissatisfied and forces it to be removed) because people under-size the heater for the flow, electric elements, because they're not willing to commit to the large electric service a tankless requires. Realistically to run a tankless you will need 400A class electric service.

Note also that propane has limits too, in northern climes. It's stored in the tank as liquid, but must be boiled to vapor to be used. To evaporate, a pound of propane requires 180 BTU, which it takes from the liquid propane in the tank. That makes the liquid colder. As the liquid gets closer to its boiling point of -42°, its vapor pressure falls, as does its ability to flow. In summer, the liquid quickly re-absorbs energy from the environment through the tank walls, but this slows down the colder it gets. This forms a limit to how much gas the propane tank can deliver. A tankless heater is VERY demanding - our simple unit delivers 200,000 BTU/hr - so this could be an issue.

  • A proper propane tank install in cold areas is underground, where the temperature is nice and stable. Plenty of folks cheap out, of course, but a buried tank is not subject to freezing up.
    – Ecnerwal
    Commented Jan 19, 2023 at 15:03

TL;DR You're doing better than EnergyGuide

While you might think it is all BTUs (or all kWh, which is used in some places), but that is not what the EnergyGuide ratings are about. Actually, I think that is what they should be about - provide a number per unit of usage and let the user calculate the rest. For water heaters, that would be "gallons per day". For heating or cooling it would be "per degree day". But your typical consumer is presumed to not understand such lofty concepts, and instead things are based on "similar appliances". To some degree that makes sense. For example, the typical consumer will be shopping for a replacement similar item - another regular air conditioner + furnace (and not switch to a heat pump), another gas water heater (and not switch to electric), another electric dryer (and not switch to gas). Plus not dramatically change size/capacity. Not dramatically changing size/capacity usually makes sense for HVAC (unless you are building an addition to your house) but actually is quite common for water heaters (the water heater that works sufficiently for a couple may be way undersized for a family of 5).

The end result is that EnergyGuide labels are based on same type, similar size. I picked a couple of tankless water heaters available at Home Depot (I did that because I know Home Depot sells a decent variety and includes links to EnergyGuide labels). And it just so happens that with electric tankless hot water heaters, there is pretty much no difference between models. They are all 100% efficient! So a 2.5 GPM ECO 27 (27kW) and a 1.7 GPM ECO 18 (18kW) are the same - $288 for one, $289 for the other, based on comparisons with other 1.7 - 2.7 GPM electric tankless water heaters, $0.12/kWh, 2408 kWh per year. And on those two, the scale doesn't even show a range of $. On the other hand, the 0.7 GPM ECO 8 (8kW) is at the high end of the range, at $74! But that means nothing - the range is $72 - $74 (< 3% difference) and the cost is low compared to the larger models because for 0 - 1.7 GPM the usage is 615 kWh, just about 1/4 of the larger models, because it is calculated for heating ~ 1/4 as much water as the larger models.

Similar things happen with natural gas/propane. But since we never see "how many gallons, how much temperature rise", it is impossible to directly compare gas and electric from EnergyGuide ratings, only by doing the BTU calculations as you already did. I picked a natural gas heater rated at 3.7 GPM and it is lumped into a 2.8 - 4 GPM natural gas group with a total of $149 and a range from $130 to $151. The range is a bit larger than with electric because no gas appliances are 100% efficient, and the actual efficiency (90%, 95%, etc.) varies by make/model.

Back to the original question. I tried finding electric comparable to the sample gas. Not so easy. The EnergyGuide GPM ratings on electric tend to be way below the manufacturer's advertised GPM, presumably due to different measurements (temperature rise). And the large ones I checked (e.g., 36 kW - needs a lot of power) don't have EnergyGuide ratings, at least not in the Home Depot web site. I suspect (but have not researched this) that EnergyGuide ratings may max. out at a certain level deliberately on the basis that a certain size is not energy efficient simply based on the peak demand required. (Peak demand is a big issue in the electricity business.) On the gas side? Even harder to figure out. A $206/year "propane 2.6 GPM" group. A $237/year "natural gas 0.8 - 6.0". Plus those last two had nearly identical energy (182 Therms vs. 184 Therms) but different per-Therm costs.

It isn't this simple to calculate for HVAC, washing machines, refrigerators, etc. But for straight resistance heating (tankless electric, by its nature, can't make good use of heat pump technology) and straight combustion heating (propane or natural gas), figure out BTUs out (amount of water x temperature rise) and combustion efficiency (or 100% for electric) to get BTUs in, then calculate how much fuel or electricity and you have your cost.

And if it is all equal (or close), consider the critical issue of electric demand. Many commercial and industrial customers pay demand charges, most residential do not. But that could change.

  • 1
    I note that the GPM ratings of the electric TWHs are much lower than those for the gas ones. Probably, as you mentioned, because heating that much water with electricity will produce local brownouts, so it's, erm... not recommended. ;)
    – FreeMan
    Commented Jan 18, 2023 at 13:19

At the time this was written the $2.60/gal is from the Data Series tab but when you select the Area tab it gives a very different number. Current cost is approximately $3.98/gal. 15 months ago when written it was $3.60/gal for rates in Virginia. Other states appear to be similar.

I come from home with a tankless natural gas WH for domestic hot water and Hydronic heating. Recently purchased a home with two electric water heaters servicing two areas of the home. I was considering the installation of tankless in the new home. Under current rates for my use of a family of 7 it appears to be about a savings of $100-150 per year. That's not significant for installation cost of 5-7k.

I noticed when reviewing the cost of propane over the past 30 years is that the cost of Propane fluctuates with the political winds. In the last 4 years its gone from $2.20/gal to a brief spike of $5.47 then settled back down to $3.98/gal all while natural gas and electricity has remained relatively stable.

I appreciate this article because it allowed me to plug in my specific costs to make an informed decision. Looks like I will table the change over until I need a new water heater.

I would like to see something similar for comparing natural gas to propane for water heating. Thanks.


Man, are you guys overthinking this or what? it all depends upon whats more expensive, electric or nat gas or propane. BUT and here is the big BUT if you have regular power outages there's no way you can power a electric, on-demand WH with a generator, whereas a gas fired on-demand WH needs very little power, leaving other generator capacity for the rest of the house. I've said this many times before but I think electric, ondemand WHs make no sense, we can hardly keep the lights on now and when more and more things go all electric it will get even harder. IMHO just go with a tank type WH.

  • Agreed! The electric grid can't keep up with current demand, everybody wants more production, but NIMBY! Unfortunately, this is a comment, not an answer. ;)
    – FreeMan
    Commented Jan 18, 2023 at 13:21

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