Water Heater Options in Ontario: Gas, Electric, Tankless and Heat Pump

Most Ontario homeowners do not think about their water heater until it leaks. That is a pity, because it often accounts for somewhere around 15–20% of household energy use (an estimate that varies with household size and habits), and replacement is a chance to pick something cheaper to run.

This guide compares the main types available in Ontario, with estimated operating costs, installation considerations and the trade-offs that matter.

The main types

Type	How it works	Typical lifespan	Notes
Gas tank, conventional (natural draft)	Burner heats a stored tank; exhaust rises up a chimney	10–13 years	Lowest upfront cost for gas homes; standby heat loss
Gas tank, power vented	Fan pushes exhaust out a side wall through plastic pipe	10–13 years	Common when the chimney is no longer shared with a furnace; needs electricity
Gas tankless (on-demand), condensing	Heats water as it flows; no storage	15–20 years	Endless hot water; higher upfront cost; needs annual descaling in hard-water areas
Electric tank	Resistance elements heat a stored tank	10–15 years	Simple, no venting; most expensive to run
Heat pump water heater (HPWH)	Moves heat from surrounding air into the tank; has backup elements	10–15 years	Very efficient; needs space and airflow; cools the room
Combination (combi) systems	One gas appliance provides both space heating and hot water	Varies	Can save space in smaller homes; design-sensitive

Estimated annual running costs

The table below uses illustrative assumptions for a three- to four-person Ontario household: natural gas at an example 45¢/m³ all-in, and electricity at an example 16¢/kWh all-in on Time-of-Use before the Ontario Electricity Rebate. Real costs depend on hot water use, incoming water temperature, location of the heater and your rate plan.

Type	Estimated annual energy	Estimated annual cost
Gas tank, conventional or power vented	~450–600 m³	~$200–$270
Gas tankless, condensing	~330–420 m³	~$150–$190
Electric tank	~3,800–4,600 kWh	~$610–$740
Heat pump water heater	~1,200–1,600 kWh	~$190–$260

These are estimates, not guarantees. The Ontario Electricity Rebate (15.7% as of 1 November 2026) reduces electricity costs somewhat. If you are on the Ultra-Low Overnight plan and have a tank that can heat mostly overnight using a timer or smart controls, electric water heating costs can drop further. See our electricity price plan calculator.

Note: The federal consumer carbon charge on natural gas was removed effective 1 April 2025. That reduced gas water heating costs and narrowed the operating-cost gap between gas and heat pump water heaters.

Typical installed costs

Rough 2026 ranges for a straightforward replacement. Venting changes, electrical upgrades or relocations add cost.

Type	Typical installed cost (estimate)
Electric tank (40–60 US gal / 150–230 L)	$1,200–$2,200
Gas tank, conventional	$1,800–$2,800
Gas tank, power vented	$2,500–$3,800
Gas tankless, condensing	$3,500–$6,000
Heat pump water heater	$3,500–$6,000

Heat pump water heaters: the trade-offs

HPWHs are among the most efficient options, but they are not right for every house.

Pros

Roughly 60–70% less electricity than a standard electric tank.
No combustion, no venting, no carbon monoxide risk from the appliance.
Dehumidifies the basement in summer, which can be a bonus.

Cons

Higher upfront cost.
Needs a reasonably large space with good airflow, and a condensate drain.
Cools the space around it. In winter, if the heater is in a basement heated by your furnace or heat pump, some of the heat it uses comes indirectly from your space heating system.
Recovery in heat-pump-only mode is slower than a gas tank; hybrid mode uses backup elements when needed.
Fan noise similar to a dehumidifier.
May need a dedicated 240 V circuit (some newer models run on 120 V). Electrical work requires an ESA permit.

HPWHs make the most sense in electrically heated homes, homes moving away from gas, homes with large unfinished basements, and households that use plenty of hot water.

Gas options and safety

Gas water heaters must be installed by a contractor registered with the TSSA, using a licensed gas technician (G2 or G1). If you replace a gas furnace with a high-efficiency model or a heat pump, an old natural-draft water heater may be left alone on an oversized chimney, which can cause venting problems. A contractor may recommend a chimney liner or a power-vented unit.

Make sure you have working carbon monoxide alarms near sleeping areas if you have any fuel-burning appliance.

How to choose

If you...	Consider
Have gas service and want the lowest upfront cost	Gas tank (conventional or power vented)
Have gas and want endless hot water or a compact install	Condensing tankless
Are all-electric or planning to drop gas	Heat pump water heater
Have limited space and low hot water use	Electric tank, possibly with off-peak timing
Are renting your current unit	Read our water heater rental guide before deciding to buy or keep renting

Sizing matters. A tank that is too small runs out; one that is too large wastes standby heat. Tankless units are sized by flow rate (litres per minute) and temperature rise; Ontario's cold winter water supply, often around 5–10 °C, means you need more capacity than in warmer regions.

Simple ways to cut hot water costs now

Set the tank to about 49–55 °C (120–130 °F). Lower settings save energy, but do not go so low that you risk bacteria growth; follow manufacturer guidance.
Install low-flow showerheads (about 5.7 L/min / 1.5 gpm or less).
Insulate the first metre or two of hot water pipe.
Fix dripping hot water taps.
Wash clothes in cold water.

Rebates

According to Save on Energy, a heat pump water heater has qualified for $500 in the Home Renovation Savings Program assessment stream, which requires pre- and post-retrofit energy assessments and at least two upgrades. There has not been a standalone water heater rebate route. Confirm details on saveonenergy.ca and see our Home Renovation Savings Program guide.

Frequently asked questions

Is tankless always cheaper to run than a tank?

A condensing tankless heater avoids standby losses and usually costs less to run than a conventional gas tank, but the savings may only be roughly $50–$100 a year at current gas prices. The higher purchase price and maintenance can take many years to recover.

Will a heat pump water heater work in a cold basement?

Most models operate down to about 5–7 °C ambient air, switching to backup elements below that. Unheated spaces that drop near freezing are not suitable.

Can I install a water heater myself?

Gas installations must be done by TSSA-registered contractors and licensed gas technicians. Electrical work requires an ESA permit. Plumbing work may need a municipal permit. In practice, most homeowners hire a professional.

Should I replace my water heater before it fails?

If it is past about 12 years old, planning ahead lets you compare options and avoid an emergency purchase or a rushed rental contract.