An insulation blanket can make some water heaters more energy efficient. If your water heater is located in unconditioned space (a garage, basement, or attic) or you don’t want added heat, install a heavy blanket — R-11 or better. The higher the R value, the thicker the blanket and the more insulating horsepower.
An insulation blanket is not recommended for a water heater located where its lost heat could be utilized. Nor is a blanket necessary if you have a new water heater that is factory insulated with R-16 or better. (The factory-installed insulation is located between the metal shell and the tank, so don’t worry if you can’t see it.) The manufacturer’s label will tell you how much insulation your water heater contains.
You purchase a water-heater insulation blanket as a kit based on the size of the heater — 30 gallons, 40 gallons, 50 gallons, and so on. The kit contains a blanket that’s finished with white vinyl on the outside and raw insulation on the inside and enough adhesive tape to finish the seams.
Here’s how to wrap your water heater with an insulation blanket:
If you have a gas water heater: Wrap your gas water heater all the way around and from the top to just below the controller. Don’t worry if the blanket seems a bit short. The bottom of the tank is several inches above the very bottom of the water heater — a couple of inches below the drain valve.
Don’t wrap the top of a gas water heater because the insulation could catch fire from the heat being exhausted. Also, the blanket should not cover the controller, the anode, or the pressure and temperature relief valve.
If you have an electric water heater: Because electric water heaters have no exhaust, you can insulate the sides and the top. But to prevent electrical components from overheating, don’t cover the heating-element access panels.
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Source:http://www.dummies.com/how-to/content/insulating-your-water-heater-for-improved-efficien.html
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