An immersion heater is a large electric element that heats the water in a cylinder directly, like a giant kettle. It is reliable and useful as a backup, but because it heats with electricity rather than gas it is one of the dearer ways to make hot water, and it is easy to leave it costing you money without noticing.
Why it costs what it does
A typical immersion draws around three kilowatts and runs for an hour or more to heat a full tank. Put those figures through the running cost calculator at the electricity price and the cost of a tankful is sobering, especially compared with heating the same water on a gas boiler, where each unit of energy is far cheaper. The element is not inefficient; electricity is simply expensive per unit.
The quiet money-waster
The classic mistake is a household with a gas boiler that also has an immersion as backup, left switched on permanently. It silently tops the tank up with costly electricity whenever the temperature drops, doing a job the boiler would do for a fraction of the price. If that describes your setup, make sure the immersion is off unless the boiler is out of action, and you may shave a surprising amount off the electricity bill.
Use a timer
Where the immersion is your main water heater, fit or use a timer so it heats a tankful when you need it rather than maintaining a hot tank around the clock. Heating once in the morning and perhaps once in the evening, sized to your use, beats reheating continuously. Pair the timer with a good cylinder jacket so the heated water stays hot between draw-offs instead of cooling and triggering another costly reheat.
The off-peak trick
If you are on an Economy 7 or similar tariff with cheap night-time electricity, an immersion comes into its own. Heat a well-insulated tankful overnight at the low rate and the stored hot water lasts much of the day, sidestepping the expensive daytime price. This is the one situation where an immersion can be a sensible main source, provided the cylinder is well lagged so the cheap night heat is not lost before you use it.