Large standard water heaters use a lot of energy keeping large amounts of water at a constant hot temperature 24 hours a day. They lose energy again transmitting hot water to far away rooms in cold pipes, and we waste water as we wait for our hot water to arrive.

The solutions:

-Solar hot water systems come in a variety of configurations. Each differs in design, cost, performance, and level of complexity.
-Whole house tankless water heaters use gas to heat water as needed in an endless supply, (you may need two for large families with simultaneous uses)
-Smaller electric under-sink units (around 5 gallons) that are also good back up for solar water systems
-Heat pump water heaters that pull heat from the surrounding air and dump it—at a higher temperature—into a tank to heat water.
-Geothermal heat pumps draw heat from the ground during the winter and from the indoor air during the summer, with a desuperheater auxiliary heat exchanger that uses superheated gases from the heat pump's compressor to heat water
-Tankless coil and indirect water heaters use a home's space heating system to heat water. They're part of what's called integrated or combination water and space heating systems.
-On demand hot water circulation pumps drain cooled water back through closed system while pushing hot water to your faucet, eliminating the need to have water running until it gets hot
-One-way valve heat trap devices stop hot water from heading up pipes (as heat rises) only to cool and run back down into unit to be re-warmed again
-Insulation on all your hot water pipes
-Energy Star rated products

Tax credits are available for energy efficient water heaters of all kinds.