A variety of fuel options are available for conventional storage water heaters—electricity, natural gas, oil, and propane. Ranging in size from 20 to 80 gallons (75.7 to 302.8 liters), storage water heaters remain the most popular type for residential heating needs in the United States. A storage heater operates by releasing hot water from the top of the tank when the hot water tap is turned on. To replace that hot water, cold water enters the bottom of the tank, ensuring that the tank is always full.

Because the water is constantly heated in the tank, energy can be wasted even when no faucet is on. This is called standby heat loss. Newer, more energy efficient storage models can significantly reduce the amount of standby heat loss, making them much less expensive to operate.

To determine the most energy-efficient model, consult the EnergyGuide label required on storage water heaters. EnergyGuide labels indicate either the annual estimated cost of operating the system or energy efficiency ratings.