Tankless Water Heaters Have Pros and Cons

Tankless water heaters cost more up front, but the energy savings may make up for it in the long run. (Photo courtesy of Angie's List member Scott D., Westhampton, Mass.)

Tankless water heaters cost more up front, but the energy savings may make up for it in the long run. (Photo courtesy of Angie's List member Scott D., Westhampton, Mass.)

When he built an addition to his Portland, Oregon, home, Peter Ravagni decided to replace his old electric storage water heater with a tankless gas one after some cost-comparison research. "It's been a huge savings," Ravagni says. "Several hundred dollars a year, easy."

Hot water accounts for up to 30 percent of an average home's energy budget. Tankless water heaters provide an endless supply of hot water as needed by running through a heat exchange coil, eliminating the standby energy losses of a conventional tank, which uses fuel to maintain water temperature even when not needed.

The U.S. Department of Energy estimates gas-fired tankless heaters save an average of $108 in energy costs per year over their traditional counterparts, while electric tankless heaters save $44 per year.

Electric tankless heaters are 99 percent efficient. However, they don't qualify for rebates or an Energy Star rating, which requires a product improve energy output 14 percent over older models. The worst traditional electric heaters are 93 percent efficient. Conventional tank gas heaters are only about 60 percent efficient, according to the Department of Energy.

"And we all know that energy prices aren't going to stay stable," says Joe Kruger, vice president of sales and marketing for highly rated Isaac Heating & Air Conditioning in Rochester, New York.

Tankless heaters also save space with a compact design, last longer and are better for the environment because a rusty tank doesn't end up in the landfill. "A lot of people buy them because of the green movement," says Connie Steele, co-owner of highly rated Gulf Coast Tankless Hot Water in Clearwater, Florida.

However, tankless water heaters cost up to three times more than storage heaters — from less than $1,000 for an electric, whole-house model to $3,000 for a gas-powered one, including installation by a qualified plumberSwitching to a tankless heater can pay off, particularly if you buy a gas model, which is about 23 percent more efficient than a traditional storage version, according to the DOE. Most gas-powered tankless water heaters also qualify for a $300 federal tax rebate. Many states offer similar incentives.

Whole-house models do waste a minimal amount of water. When a faucet's first turned on, cold water flows out before the hot water can replace what's already sitting in the pipes. Environmentally conscious users often use this excess water to cook or water plants.

Point-of-use tankless heaters are installed next to an appliance or sink, eliminating wasted water. They cost between $150 and $350, but like the larger models, a professional plumber should install point-of-use tankless water heaters.

RELATED: Tankless Water Heaters Provide Hot Water on Demand

Steele started her business after watching her own electricity bills decline thanks to a tankless water heater. "I've been in business almost five years," she says. "No one has said, 'I'm not saving any money.'"

Editor's note: This is an updated version of an article originally published on May 28, 2009.

More Like This

Tankless water heaters provide hot water on demand


Natural gas tankless systems work best under cool conditions. (Photo courtesy of Lilly Funcion)
Natural gas tankless systems work best under cool conditions. (Photo courtesy of Lilly Funcion)

A storage tank water heater must maintain hot water even when not in use, but a tankless water heater provides endless hot water in minimal space.


We have been installing and SERVICING BOSCH Tankless for the past 7 years; we have made a commitment to this brand and to the education of the technology. Get an installation from a highly qualified company and you will have no problems. We are a local BOSCH sevice provider for Tankless if we cannot fix your tankless nobody can.

Great entry. Helpful!

Tnakless water heaters have been in use in Europe and Asian countries for many more years than here in the United States. These units have very sophisicated burners that require calibration. We have been installing and servicing Tankless units for 7 years and the number one problem we found is poor installation. Once installed correctly and calibrated the unit will run correctly and last three times longer than a traditional hot water tank.

A few years ago I researched tankless water heaters. The first thing I discovered was the gas versions were more efficient than electric ones. I was looking for an electric whole house version for my condo so I could increase my storage space. Unfortunately, the wiring to a electric tankless whole house heater is not standard for most houses. In my case I would have to have an electrician run the proper wiring from my electric box to the heater. Also in my part of the country the incoming water temp can be very cold in the Winter. The reason for the big difference in gas and electric tankless systems is that gas can heat the water at a single point with less cost than electricity. Gas uses a controlled high temp flame whereas electric has to use elements that have a high draw. Electric units work best as "point of service" heaters for individual sinks or separate showers and in warmer climates. Don't depend on a contractor to know this stuff. Refer to the manufacturers specifications as to the performance you can expect for your usage in your climate.

While it's probably true that the overall efficiency of electric appliances is diminished by the efficiency of the powerplant supplying the energy and the loss in transmission, I'm guessing that the efficiency described in the blurb is in regards to the end-user's supply. Perhaps the amount of heat generated by the amount of gas the user must purchase is less per dollar than the amount of heat generated by the amount of electricity a user must purchase. I suppose clarifying that point would be helpful, however. Still, if it's about "greenitude," then yeah, check the efficiency of the powerplant. Mine's a nuke plant, so bah to emissions (and hello NIMBY controversy).

Walter Merrill is correct - electric appliances in general, and a water heater in particular, are substantially LESS efficient than gas powered, because power plants are not that efficient and the transmission losses can be enormous.

`I have a Noritz 841MC whole house tankless water heater. It was professionally installed 11/20/2008. There is a venting problem. I have had 2 reps, a Noritz technician, and my local licensed plumber out 3 different times to survey the problem. It still has not been fixed. One smells gas when in rooms next to the outside venting. The way our house is built may not have a good solution. Make certain the installer knows how to prevent this problem.

I am a medium skilled DIYer. I self-installed a gas tankless water heater two years ago. It was rated for a family of 4, we are 3. We never run out of hot water here in Nebraska. Installation instructions said to use 3/4" gas line but this old house only has 1/2". I'm glad I did it.

Stating that an electric water heater is 93 percent efficient compared to 60 percent for a gas heater is comparing apples and oranges. The efficiency of a power plant is only about 60 percent and then there are transmission losses in getting the electricity to your home. You should not be misleading consumers like this.

Add comment

Anonymous reviews are Internet graffiti.  Angie's List has real reviews from real people.

What is Angie's List?

Angie’s List is the trusted site where more than 3 million households go to get ratings and reviews on everything from home repair to health care. Stop guessing when it comes to hiring! Check Angie’s List to find out who does the best work in town.

Local Discounts

Daily deals up to 70% off popular home improvement projects from top-rated contractors on Angie’s List!