Water Heater Energy Cost by Fuel
Which fuel is cheapest is a local question, not a universal one. This tool heats the same delivered BTU three ways — electric, natural gas and propane — at your rates and UEFs, and names the winner for your market.
1 Enter your numbers
The cheapest fuel depends on YOUR local rates and the unit’s efficiency — this compares them on the same delivered heat. At these rates and UEFs, natural gas is cheapest. Enter your real $/kWh, $/therm and $/gallon.
“Gas is cheaper” is a rule of thumb that fails often enough to be worth checking. What actually decides the cheapest fuel is the price per delivered BTU — and that folds together the raw fuel price, the energy content of the fuel, and the unit’s UEF. A cheap therm through a 0.62 tank can lose to expensive electricity through a heat pump, and propane’s per-gallon price hides a lower energy content per gallon.
This tool removes the guesswork by holding the delivered heat identical and letting only the fuel economics vary. It prices electric ($/kWh ÷ UEF), natural gas ($/therm ÷ UEF) and propane ($/gallon ÷ UEF, at 91,500 BTU/gal) on the same water, then flags the winner. Enter your real rates and it answers for your address, not a national average.
Formula
Identical delivered heat, three fuel economics:
- ΔT = output_temp − inlet_temp; annual_BTU = daily_gal × 365 × 8.33 × ΔT
- electric = (annual_BTU ÷ 3,412 ÷ electric_UEF) × $/kWh
- gas = (annual_BTU ÷ 100,000 ÷ gas_UEF) × $/therm
- propane = (annual_BTU ÷ 91,500 ÷ propane_UEF) × $/gallon
- cheapest = min(electric, gas, propane)
Worked example
Same household, three fuels. 64 gal/day, ΔT 70 °F:
- electric (UEF 0.92, $0.16/kWh): 4,339 kWh → $694/yr
- natural gas (UEF 0.62, $1.20/therm): 219.7 therms → $264/yr
- propane (UEF 0.62, $3.20/gal): 240 gal → ~$768/yr
At these rates natural gas is cheapest — about 62% under resistance electric — and propane trails because its per-gallon price buys fewer BTU. Swap in a heat-pump electric UEF (~3.5) and electric would leapfrog them all: the fuel ranking is only ever as good as the rates and efficiencies you feed it.
Rank by delivered BTU, not by sticker rate
Measure this first: the real $/unit on each bill (electric $/kWh, gas $/therm, propane $/gallon) and the UEF of the specific unit you’d install on each fuel — a condensing gas unit (0.90) and a heat-pump electric unit (3.5) change the ranking dramatically versus their standard-tank cousins.
Common mistakes: comparing raw fuel prices without dividing by energy content and UEF; entering a resistance UEF while shopping a heat pump; and ignoring that propane is billed per gallon of a lower-BTU fuel, so a seemingly modest $/gallon can still lose. This is running cost only — upfront and install differ by fuel too (see the cost-by-type tool).
Reference table
Every fuel is priced on the same delivered BTU. These conversion constants are physical identities, not prices — only the $/unit you enter changes the answer.
| Fuel | Energy content | Priced as |
|---|---|---|
| Electricity | 3,412 BTU/kWh | $/kWh |
| Natural gas | 100,000 BTU/therm | $/therm |
| Propane | 91,500 BTU/gallon | $/gallon |
Frequently asked questions
What is the cheapest fuel for a water heater?
It depends on your local rates and the unit’s efficiency. On the defaults, natural gas is cheapest (~$264/yr) versus resistance electric (~$694/yr) and propane (~$768/yr) — but a heat-pump electric unit (UEF ~3.5) can undercut gas. Enter your own $/kWh, $/therm and $/gallon to see the real answer.
Why compare on delivered BTU instead of price?
Because a kWh, a therm and a gallon of propane carry different amounts of energy (3,412; 100,000; and 91,500 BTU) and each unit wastes a different share to inefficiency (UEF). Only by pricing the same delivered heat do the fuels become comparable — sticker rates alone mislead.
Is propane more expensive than natural gas?
Usually, per delivered BTU — propane is billed per gallon of a lower-BTU fuel and often at a higher effective rate, so even a similar UEF leaves it behind piped natural gas. Where natural gas isn’t available, propane competes mainly with electric.
Where do I get my energy prices?
Straight off your bills: the electric bill shows $/kWh, the gas bill $/therm (or per CCF — convert to therms), and your propane delivery ticket shows $/gallon. Using your own numbers is what keeps this comparison correct as prices move.