Insulate water heaters and piping

Older electric storage-type water heaters can lose a lot of heat through their walls. Wrapping it in an insulating jacket can save energy wasted through excess heat loss, and make your water heater more efficient (insulating natural gas or oil-burner water heaters should be left to professional installers.) Insulating the hot water pipes in your home can save energy wasted through heat loss, and keep your hot water from cooling off before it reaches the tap.

Skill level: Basic to advanced
Insulating blankets or jackets are available at home improvement stores. Follow the manufacturer's instructions or enlist the help of a professional. Insulate the storage tank, but take care not to cover a gas water heater's top, bottom, thermostat or burner compartment.

You can find easy-to-install, insulating pre-slit pipe covers at most home improvement stores.
Cost range: $20-$40
An insulating jacket is a low-cost way to improve the efficiency of your water heater. It can pay for itself in lower energy bills in the first year. Lengths of insulating pipe covers are very inexpensive. Use them to wrap the first 6 feet of pipes coming from your water heater, or extend the insulation throughout your home's piping system for even more energy savings.
Savings: Reduce standby heat losses by 25%-45%
Insulating your pipes will further reduce heat loss, and may make the temperature reduction on your water heater's thermostat even less noticeable.