Another way to reduce the cost of heating water in your home is to install a solar pre-heater. An experienced do-it-yourselfer can choose to build a system or to buy and install a complete system. Essentially, these pre-heating systems use solar power to warm water in a holding tank until it is needed. This pre-heated water is drawn from the holding tank into the tank of the hot water heater as it fills. The work of the hot water heater is significantly reduced when much of the water is already warm. While this option may not completely eliminate water heating costs, it will significantly reduce the cost of providing hot water for your home. Solar pre-heated water can be used in conjunction with either a traditional water heater or a tankless water heating system.

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Buy energy-efficient appliances that will get you a rebate or a tax credit
Take all allowable tax credits for energy efficiency
Locate your water heater effectively
Insulate pipes to reduce cooling of water as it moves from the water heater through the pipes to the faucet