Improve the Efficiency of Your Existing Hot Water Heater Tankless and solar hot water heaters are great, but simple changes to your existing setup can cut your energy bills and carbon emissions by 25 percent or more. Reduce the temperature of your hot water heater to 120 degrees, wrap it in a water heater insulating blanket and insulate the first 3 to 6 feet of hot and cold water pipes. These changes should take you less than an hour and cost less than $50 to complete.