The Department of Energy has established new regulations the will inevitably change the way we heat our water. While the yearly cost to operate your water heater should drop by roughly $25 per year, the initial cost for a water heater will jump from $300-$500 all the way up to $800-$1400. You may also be paying more for additional labor that is required on most energy efficient models.
A new way of venting
Most of the water heaters that meet the new energy requirements are of the Power Vent variety. These power vent water heaters vent similar to a high efficiency furnace. Instead of emitting the gas combustion through the flue or chimney, power vent models vent through the side of the house. If your water heater is located near an exterior wall it will be an easier transition. For those that have water heaters located in the center of a finished basement you may need more than a plumber to complete the installation. In some homes drywall will need to be removed to run the new vents.
Fortunately there are some water heaters that still use conventional venting methods that will meet the new efficiency requirements. One water heater that meets the new requirements using conventional venting is the AO Smith Effix water heater. This unit has an Energy Factor of .70 and an annual operating cost of $262 per year with a 40 gallon tank. There is a hefty price tag on the purchase of this new water heater, the cheapest we have found online is about $1300. However you should think twice about purchasing a water heater online.