You need a water heater capable of providing adequate amounts of hot water during your household's busiest times of the day. For help in determining your family's peak hour demand for hot water, see the Consumer's Guide to Energy Efficiency and Renewable Energy at http://www.eere.energy.gov/consumer/your_home/water_heating/index.cfm/mytopic=12990.

In selecting a tank-style water heater, look for one with a first hour rating (FHR) that matches within 1 – 2 gallons of your peak hour demand. The FHR is a measure of how much hot water the heater will deliver during a busy hour. Federal law requires this information to be on the unit's EnergyGuide label.

For new construction, minimize piping runs to hot water requiring areas of the home by design or by centrally locating the water heater. Insulate buried hot water piping for new construction to minimize heat loss while hot water is flowing through or remaining stagnant in the pipes. Leave the pipe 6" below and 6" above the slab free of insulation, as having insulation through the slab may increase the potential for insect problems. Insulate all hot water lines in interior walls. Also, insulate all water lines in attic or floor joists.

Choose an Energy Star labeled water heater. The first phase of the new criteria goes into effect on January 1, 2009.

Source: UF/IFAS Energy Efficient Homes: Water Heaters; Wendell A. Porter, Hyun-Jeong Lee, and Kathleen C. Ruppert, 2008.