Water Heater Blanket
Published Saturday January 19, 2013: Updated 10/29/2021
Another improvement that is very easy and inexpensive to do is add an insulating blanket around your water heater. Just make sure you don't block off the intake and exhaust air paths on gas water heaters.
My gas water-heater is 6-years old. Back in April 2012, I bought a $20 water heater insulation blanket kit from Home Depot.
Depending on the season of the year, it has saved between 8 and 28 therms of natural gas each month. Even with Utah having some of the cheapest natural gas in the nation, this wrap still paid for itself in under 3 months.
This is one of the advantages of on-demand water heaters, it reduces these stand-by losses.
Electric water heaters can benefit even more by adding insulation. Because you don't have to worry about blocking off the combustion air flow, more insulation can be wrapped around them.
A friend of mine who like me, obsesses over such things, wrapped his electric water heater with 3-layers of 1/2" foam insulation followed by a layer of Reflectix. His water-heater standby losses went from 1.4 kWh per day to 0.6 kWh per day. That's only the equivalent energy of a 25 watt light bulb running continuously, or 11 times less stand-by losses than a gas pilot light.