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I noticed the same thing as the OP about the cost of the hot water heaters has gone to the moon. I am already waiting on the demise of my current water heater so that I can replace it with something far more efficient. In the mean time I had some of that reflective bubble wrap insulation around the house with some of the reflective tape for it and I made a wrap for my water heater and it does seem to help a little, but not enough to write home to mom about! LOL
When I go to replace this heater I will take a look a the latest data comparing the on-demand units with the latest gas tank units that are using timers and electronic ignition systems to only heat water when it is needed. If I were staying in this house longer term I would look for a unit that has the solar hot water feed and look at going that route, but since I don't plan on staying here that will go in my next home. I think the last data I had seen showed that the intelligent tank systems are even more efficient than the on demand systems, but I haven't shopped in a few years so I am not sure if that is still the case or not... Either way it is CRAZY expensive...
Do the tank insulators work? Yes, they do help and it really is a no brainer thing to do. I would just make a blanket yourself. It wasn't hard. Just make sure to stay away from the exhaust, pilot lights and make sure you have plenty of air flow... :-D
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