Simulation models for a variety of new water heater systems were developed and the models were integrated into a city-level residential energy end-use model for Osaka City. Using the model, the potential of energy conservation and CO2 emission-reduction by introducing new residential water heaters was evaluated at the city-level. Optimal water-heating systems for each household category for primary energy reduction, CO2 emission-reduction, or cost reduction were identified by applying the end-use demand model. The effect of subsidies for installing more efficient systems and the influence of diffusion of these systems on electricity load curves were also discussed. (C) 2010 Elsevier Ltd. All rights reserved.