Home energy efficiency: the upgrades and habits that actually cut electricity use

Three loads consume most of a home's electricity. Air conditioning accounted for 19% of US home electricity use, space heating 12%, and water heating another 12%, according to U.S. Energy Information Administration survey data. Efficiency advice that ignores those numbers, unplugging phone chargers, obsessing over lights, tends to produce single-digit savings. Advice that targets them can cut hundreds of dollars a year: a heat pump water heater alone saves an ENERGY STAR-certified household close to $300 annually.

Two levers control what a home pays for electricity. Efficient equipment and habits reduce how many kWh the home uses, and the supply rate determines the price of every kWh that remains. Arbor, an automated energy service founded in 2022, handles the rate lever for households in deregulated states, while the upgrades and habits in this hub address the usage lever.

What actually cuts home electricity use

• Three loads dominate the meter. Air conditioning, space heating, and water heating together account for more than 40% of home electricity use, so efficiency effort pays off in proportion to how directly it targets them.
• Water heating is the upgrade most homes overlook. A heat pump water heater is 2 to 3 times more efficient than a standard electric tank, and even a free thermostat adjustment to 120°F saves $36 to $61 a year.
• Audits find waste, they do not remove it. A DIY or professional energy assessment tells you where the kWh go; the savings come from acting on the two or three biggest findings.
• The incentive landscape changed in 2026. Federal efficiency tax credits ended after 2025, but state-run IRA rebates still pay up to $14,000 per household toward heat pumps, water heaters, dryers, and wiring.
• The supply rate is the other lever. Deregulated states let a household move from a utility default rate to a competitive fixed rate, which cuts the cost of every kWh the home still uses after every upgrade.

Which appliances use the most electricity in your home?

Heating and cooling equipment comes first, water heating second, and everything else a distant third. EIA's Residential Energy Consumption Survey puts air conditioning at 19% of home electricity use, space heating at 12%, and water heating at 12%, with lighting and refrigeration the next largest end uses. The Department of Energy estimates the average household spends 14% to 18% of its utility bill on water heating, roughly $400 to $600 a year.

The pattern behind those numbers is runtime. The most expensive loads are the ones that either run constantly, like refrigerators and water heaters holding temperature, or draw heavily for hours at a time, like compressors, electric dryers, and EV chargers. The devices people worry about most, televisions, laptops, and LED lights, cost a few dollars a month. A per-appliance cost table appears in the why is my electric bill so high guide, and the home cooling hub covers the air conditioning load in full. The practical rule the numbers support is simple: rank your appliances by annual kWh, and spend your efficiency budget from the top of the list down.

Are energy efficient appliances worth the extra cost?

At replacement time, almost always. As early replacements for working appliances, only for the heaviest loads. An efficient model costs more upfront and pays that premium back through lower operating costs, so the math works when the appliance runs enough hours to matter. A water heater or dryer that runs daily can return its premium in a few years, while an efficient version of a rarely used appliance may never pay back at all.

Two rules keep the decision honest. First, wait for end of life unless the appliance is a top-three load: replacing a working refrigerator rarely pays, but replacing a 15-year-old electric water heater often does. Second, compare yellow EnergyGuide labels on annual kWh, not marketing claims, and run the arithmetic at your own per-kWh rate.

Key Fact: Efficiency upgrades cost money upfront. Getting a better supply rate doesn't — Arbor is paid by suppliers, not by customers.

Water heating: the biggest upgrade most homes overlook

Water heating is the second-largest energy expense in most homes, and it is unusual in offering both a free fix and a high-return upgrade.

Are heat pump water heaters worth the cost?

For most homes with an electric tank, yes. A heat pump water heater moves heat from the surrounding air into the tank instead of generating it with resistance elements, which makes it 2 to 3 times more efficient than a conventional electric unit, per the Department of Energy. ENERGY STAR-certified models save close to $300 a year on electric bills, so a unit that costs $1,500 to $3,000 installed typically pays back in 5 to 8 years and faster with a rebate. State IRA rebate programs cover up to $1,750 of that cost for income-qualified households.

The caveats are physical. A heat pump water heater needs about 1,000 cubic feet of air space and a location that stays between 40°F and 90°F year-round, which usually means a basement, garage, or utility room rather than a closet. It also cools the space around it slightly, an advantage in hot climates and a small penalty in cold ones.

Are tankless water heaters cheaper to run?

Somewhat, with conditions. A tankless unit heats water only on demand, eliminating standby losses from a stored tank, and Department of Energy figures put the efficiency gain at 8% to 34% over storage models, worth around $100 a year with an ENERGY STAR unit. The gain sits at the high end for households that use modest amounts of hot water and shrinks for heavy users, because standby loss is a smaller share of a big hot water budget.

For an all-electric home deciding between the two upgrades, the heat pump water heater usually wins on operating cost, since a 2 to 3 times efficiency multiple beats a 34% improvement. Electric tankless units also draw very high instantaneous power, which can require panel upgrades that erase the savings.

What temperature should you set your water heater to?

120°F. Many water heaters ship at 140°F, and the Department of Energy estimates turning the dial down to 120°F saves $36 to $61 a year while slowing mineral buildup in the tank. The adjustment takes five minutes, costs nothing, and is one of the few water heating measures available to renters with access to the unit. Households with a dishwasher that lacks a booster heater may need the higher setting, so check the dishwasher manual before adjusting.

Laundry and kitchen: heat pump dryers, air drying, and induction

Is a heat pump dryer worth it?

If you are buying a dryer anyway, yes. A heat pump dryer recirculates hot air instead of venting it, using around 70% less energy than a conventional dryer, according to ENERGY STAR. A conventional electric dryer uses 600 to 1,000 kWh a year in typical use, so a 70% reduction saves roughly $60 to $105 a year at $0.15/kWh. Heat pump models cost more upfront, run longer per load, and need no vent, which makes them a strong fit for apartments and condos where venting is impossible. State IRA rebates cover up to $840 for income-qualified households, which closes most of the price gap.

How much can you save by air drying clothes?

The full dryer budget, if you commit. Air drying every load eliminates 600 to 1,000 kWh a year, worth $90 to $150 at $0.15/kWh, and a rack or line costs under $30. Air drying half your loads captures half of that. It is the rare efficiency measure with no upfront cost worth mentioning, no installation, and full availability to renters. Washing in cold water compounds it, since most of a washer's energy goes to heating water.

Is an induction stove worth it?

As a stove, often. As a savings play, no. Induction transfers energy directly into the pan and is upwards of three times more efficient than gas but only 5% to 10% more efficient than a conventional electric stove, per ENERGY STAR. Cooking is a small load, typically 500 to 800 kWh a year for an electric range, so that 5% to 10% is worth under $15 a year. Buy induction for speed, control, and indoor air quality when a stove needs replacing, and let the state rebate of up to $840 for electric and induction ranges lower the price. Do not buy it expecting the electric bill to notice.

Do unplugged devices still use electricity?

No. An unplugged device draws nothing, and no residual charge in the cord costs you money. The myth points at a real cost, though, one plug to the left: devices that stay plugged in while idle. This standby draw, phantom load or vampire power, accounts for 5% to 10% of residential electricity use, up to $100 a year in an average home, according to the Department of Energy.

So vampire power is costing you money, just not through the empty charger most people unplug first. The heavy standby loads are cable boxes, game consoles, and always-on entertainment and office clusters. A full breakdown of common phantom loads appears in the why is my electric bill so high guide, and the smart home energy hub covers the smart power strips that cut them automatically.

Home energy audits: is one worth it, and can you do it yourself?

An audit is worth it the same way a diagnosis is worth it: it saves nothing by itself and directs everything that follows. Skipping the audit usually means spending on visible fixes while the real losses, duct leaks, missing attic insulation, a failing water heater, go untouched.

A DIY assessment covers most of what a homeowner needs and costs nothing:

1. Walk the home on a cold or windy day and feel for drafts around doors, windows, outlets, and where pipes and wires pass through walls.
2. Check the attic: insulation should be even, uncompressed, and deep enough to hide the joists.
3. Note the age and condition of the HVAC system, water heater, and refrigerator, the three most expensive machines in the house.
4. Read the yellow EnergyGuide labels, or the nameplate wattage, on major appliances and estimate annual kWh for each.
5. Rank the findings by estimated annual cost and fix from the top.

A professional assessment goes further, using a room-by-room examination with blower door tests and infrared cameras to measure air leakage and locate insulation gaps that a walkthrough misses, per the Department of Energy. Many utilities offer free or discounted assessments, so check your utility's efficiency programs before paying out of pocket. The federal tax credit that covered $150 of a professional audit ended after 2025, which makes the utility-sponsored route the best current path.

Energy tax credits and rebates in 2026: what is still available

The federal tax credits expired, and the state rebates survived. That one sentence resolves most of the confusion in this area.

The Energy Efficient Home Improvement Credit (25C), which covered 30% of efficiency upgrades up to $3,200 a year, applies only to equipment placed in service before December 31, 2025, per the IRS. The residential solar credit (25D) ended on the same date, and the EV charger credit (30C) expired for chargers installed after June 30, 2026. A charger installed before that date can still be claimed when filing 2026 taxes.

What remains is larger for many households: the Home Electrification and Appliance Rebates (HEAR), funded by the Inflation Reduction Act and run state by state. Unlike a tax credit, a rebate arrives as an upfront discount and does not depend on tax liability.

Rebates are capped at $14,000 per household. Households below 80% of area median income can have up to 100% of project costs covered, and households between 80% and 150% up to 50%. Availability, amounts, and open enrollment vary by state, since each state launches and administers its own program, so check your state energy office before pricing a project. A companion program, the Home Efficiency Rebates, pays for whole-home retrofits that hit modeled savings targets, and utility rebates on ENERGY STAR equipment continue in most markets regardless of federal policy.

Home EV charging without the bill shock

An EV is the one purchase on this page that raises electricity use instead of lowering it, and it raises it a lot. A Level 2 charger in daily use adds 2,500 to 4,500 kWh a year, an increase of roughly 25% to 40% for a household near the national average of 900 kWh a month. That makes an EV home the household with the most to gain from every measure in this hub, because each avoided kWh and each cent off the rate is multiplied across a bigger total.

Three decisions control the cost. First, charge on the cheapest schedule available: if your utility offers time-of-use pricing, overnight charging can cost a fraction of peak-hour charging, and most cars and chargers can enforce the schedule automatically. Second, size the installation to your driving rather than the biggest charger on the market, since a standard outlet already covers short commutes. Third, and largest, check what you pay per kWh, because at EV volumes the gap between a default rate and a competitive fixed rate compounds fast: a $0.04/kWh difference on 3,500 charging kWh is $140 a year on the car alone, before the rest of the house.

The other half of a lower bill: what you pay per kWh

Everything above works on one lever, reducing how many kWh the home uses. A heat pump water heater cuts water heating, a heat pump dryer cuts laundry, an audit points to the leaks, and a rebate lowers the cost of fixing them. None of it changes the price of the kWh the home still buys, and even the most efficient house still buys thousands of them a year.

That price is the supply rate on the bill, and in deregulated states it is shoppable. Moving off a utility default rate or an expired fixed-rate contract onto a competitive fixed rate cuts the cost of every remaining kWh, including refrigeration, well pumps, and EV charging that no upgrade can eliminate. A quick self-audit using the understanding your electric bill and compare electricity rates guides shows whether the current rate is competitive.

Arbor handles that lever the way this hub handles the usage side. It checks your supply rate, compares competitive fixed-rate plans in your utility territory, handles the change of supplier when a better rate exists, and monitors the contract so no household rolls onto a higher variable rate without knowing. Arbor's service is no cost to you and works for both renters and homeowners in deregulated markets, which matters here, because renters shut out of most equipment upgrades still have full access to the rate lever.

The cheapest home is the one where both levers are handled: use fewer kWh through the upgrades and habits above, and pay a competitive rate for the kWh an efficient home still needs. Your next step: pick the single biggest load you can change this year, and let Arbor check whether your rate should be lower while you work on it.

Home energy efficiency FAQs

Which appliances use the most electricity in my home? Air conditioning is the largest single end use at 19% of home electricity, followed by space heating and water heating at about 12% each, according to EIA survey data. After those, refrigeration, lighting, dryers, and pool or well pumps lead the list. The devices people suspect first, TVs, computers, and phone chargers, are among the cheapest to run.

Are energy efficient appliances worth the extra cost? At normal replacement time, yes, because the efficiency premium is paid back through lower operating costs over the appliance's life. Early replacement of a working appliance pays off mainly for the heaviest loads, such as an old electric water heater, and rarely for light-duty appliances. Compare EnergyGuide labels on annual kWh and calculate at your own rate.

Are heat pump water heaters worth the cost, and what temperature should I set my water heater to? For most homes with an electric tank, yes: a heat pump water heater is 2 to 3 times more efficient, saves close to $300 a year, and qualifies for state rebates of up to $1,750, though it needs about 1,000 cubic feet of space that stays between 40°F and 90°F. Whatever the unit, set it to 120°F, which saves $36 to $61 a year compared with the common 140°F factory setting.

Is a heat pump dryer worth it, and how much can I save by air drying clothes? When you are replacing a dryer anyway, yes: heat pump models use around 70% less energy than conventional dryers, worth roughly $60 to $105 a year, and need no vent. Air drying beats both, eliminating up to the full 600 to 1,000 kWh a conventional dryer uses each year, about $90 to $150, with no equipment beyond a rack or line.

Is a home energy audit worth it, and how do I do one myself? An audit is worth it as a diagnosis: it does not save money by itself, but it stops you from spending on the wrong fixes. A DIY version means checking for drafts, inspecting attic insulation depth, noting the age of the HVAC system and water heater, and ranking appliances by annual kWh. A professional assessment adds blower door and infrared testing, and many utilities offer one free.

What energy tax credits can I claim for my home, and what does the IRA still cover in 2026? The federal 25C and 25D tax credits ended for equipment placed in service after December 31, 2025, and the 30C EV charger credit expired June 30, 2026, though a charger installed before that date can still be claimed on a 2026 return. The IRA's state-run HEAR rebates continue, covering up to $14,000 per income-qualified household, including $8,000 for a heat pump, $1,750 for a heat pump water heater, and $840 each for an induction stove or heat pump dryer.

What is the fastest way to reduce my electricity usage? In order of speed: set the water heater to 120°F and put standby-heavy electronics on switched or smart strips, both effective the same day; shift laundry toward cold washes and air drying; then upgrade the largest old appliance, usually the water heater or dryer, with state rebates lowering the price. Alongside all of it, check the supply rate on your bill, since paying less per kWh is the one change that requires no reduction at all.

Learn more about saving on electricity

Related resources:

• Understanding your electric bill and how to lower it
• Why is my electric bill so high? The causes most people miss
• Smart home energy and connected devices
• Compare electricity rates
• Where does Arbor work? Service areas and supported utilities
• Is Arbor legit? Safety, savings, reviews, and how Arbor works
• Arbor reviews