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.

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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.


George Trail is absolutely correct. No matter how you heat your water, the wait for hot water is entirely dependent on the distance the water must travel (and the flow rate) to the point the water is used. To make the wait shorter, turn the faucet or shower on full force to increase the flow rate. If a tankless system significantly reduces the flow rate, then the wait may be longer.

As some people mentioned,in Europe we use tankless water heaters for a long time, (. Durchlauferhitzer ) I'm a professional plumber, and was in business for 35 years, in 2010 i installed a Navian tankless water heater with a circulation capability,and a additional On. Off divide by my thermostat, When i need hot water,push two bottens, and in 3 minutes,I have all the hot water I need,after iam done,push one botten, Everything is turned off, excellent setup.

Do you mean your system has a water recirculation pump between the heater and the furthest fixture from the heater? Fine Homebuilding's March issue had an article about low wattage recirc pumps that was intriguing. A friend installed one and is ecstatic about the instant hot water and reduced water use. We have an aged gas tank hot water heater and expect to replace it. I haven't heard of anyone using a tankless heater with a recirc pump. If that's what you have, I'd like to know more about it.

Check out CHILIPEPPER. A small pump pulls water from the hot water line and sends it back in the cold water line, recirculating the unheated water back to the hot water tank. It keeps recirculating until it senses hot water at the pump and then automatically shuts off. It's best if you install it under the sink farthest from the hot water tank in order to get warmer water at all locations along the way. It requires 110 AC at the pump. I have one. I'm sure it's paid for itself many times over. :)

Florida resident here. I can agree with those who say more water is used with a tankless heater. My natural gas water heater is right outside my kitchen so it doesn't take quite as long to heat as my daughter's whose tank is in her garage a good distance from her kitchen. I have to run her water at least 3 or 4 minutes before it begins to warm. It's horrible. I usually just resolve that I have to use cold water or be in the kitchen forever doing dishes. My gas bill is higher than it used to be as well as my water bill. Have considered going back to a tank and selling this tankless heater.

I do no understand why tankless systems are said to waste more water. In neither system does the water in the line between the heater and the appliance empty, nor remain hot when the faucet closes. when the tanked system is turned on the cold in the line before the faucet was opened runs out. Exactly the same thing happens with the tankless system. The water in a tankless system heats immediately as it runs through the line, which happens when the faucet is opened. In both systems you have to "wait" for the hot water, not for the water to "get hot" because its is hot from the point the faucet is turned on. In both tanked and tankless systems your "wait" for hot water is determined only by the distance of the faucet from the heater.

How does very hard water effect tankless water heaters? Our water is very hard and is a problem our traditional gas hot water tank.

Hard water may shorten the life of a tankless water heater to 2 years or less.

We also have very hard water. We were told that a softener was mandatory to eliminate the scale buildup. I really like the unlimited hot water but if I had time to do a do-over I would have put a point-of-use heater in the kitchen. Some genius installed two 40 gallon units in the attic of a house that is backed into a hill so the water pipes run down three levels to the kitchen and it takes a while to get hot water. When the old tank blew, we had three floors of damage before we noticed the leak. This one won't do that since it doesn't store water and has a shutoff. That alone makes it free when compared to the flooring replacement costs we had three years ago.

There is little water harder than Houston's, and I have had two tankless heaters for over 20 years with no hard water problems.

In all the chatter about electric vs gas appliances I do hear mention of the carbon cost of generating electric power. I never hear mention that many power plants are located near large bodies of water and take in huge volumes of water for cooling. That same volume of water is returned to the sea or lake, at a higher temperature affecting sea life and further contributing to global warming.

It should be mentioned that the cost of running a tankless should consider water loss as well as gas use. Here in central Florida natural gas is cheap but water is expensive, because water use is used as a base for sewer charges too. Our heater has the following issues: It takes 2 to 3 gallons of water to heat depending on the user location in the house. It has never worked correctly, shutting off hot water at unexpected intervals. The "plumbing" company who installed it claims it's due to one thing, the manufacturer says another. We're sorry we ever had it installed. It's expensive to operate, and unreliable for a steady supply of hot water.

Be careful if you live in an area where water is in short supply and expensive. My tankless heaters (I have two) waste a huge amount of water before the hot begins to flow. Anybody who tells you it's just the cold water in the pipes that's coming before the hot is not being straightforward. I have had two qualified plumbers out to try and change this situation but to no avail. They just waste a lot of water. If I could, I would change them out for a pair of Tank heaters in a New York minute but the house was plumbed for them and that plumbing won't work with Tank heaters without major remodel.....

At 73 I'll be DEAD before I get back the difference in cost.

The energy savings of tankless heaters is a plus, but here in earthquake country we rely on our hot water heaters to provide a back up supply of drinking water as water is typically cut off for a couple of days after a big one (and can be contaminated when it does come back: ten days after the Northridge Quake, for example).

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 think I would look at venting issues, a fan in the exit vent outside would push fumes away from house. Also look at venting through the roof or even underground.

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.

Walter, I'm sorry, but you completely misinterpreted the meaning of the efficiency quotes that were made. The comparison IS valid and power plant or distribution efficiencies have nothing to do with those numbers. Saying "an electric water is 93 percent efficient" means that 93% of the energy being used by the water heater is converted into heat within the water. So, for the sake of numeric simplicity, if your home used 100 KWH of electricity to heat your water, 93 KWH would ACTUALLY be heating the water. The other 7 KWH would be lost to the electronic controls, efficiency of the heating element(s), thermal losses through the insulation, and perhaps a couple others. If you change to an electric water heater that is 99% efficient, all that means is that under the same conditions as above, your loss would only be 1 KWH, resulting in power consumption of 94 KWH to provide the same hot water as otherwise used 100 KWH. The efficiencies that have been used throughout the article and comments, except for yours, refer STRICTLY to how much of the energy that comes in to the heater goes out as hot water. Yes, most, perhaps all gas water heaters are less efficient in their energy conversion. That absolutely does NOT mean that electricity is a more efficient way to heat water. In fact, in an apples to apples comparison, gas will ALWAYS be more efficient than electricity if you begin at the producer. How does much of this country get its electricity? From generators that burn natural gas! Think about the losses in this system. Use natural gas to power an engine, that spins a generator, that produces electricity that goes into a transformer, that is sent down transmission lines, that goes through more transformers and sets of power distribution lines, that finally goes through the last transformer in your neighborhood to bring the voltage down to 3 phase 240v in your neighborhood, that runs through local power lines, and finally, into your home to heat water. Each item I listed has an inherent efficiency that is less than 100%. Now, what about the losses in this system? Use that same natural gas to heat your water. There no losses here other than the efficiency of the water heater! You can see the differences in losses every month by the differences in power bills between gas and electric customers. It would only be fair to add the gas and electric bills for the gas customer to allow for the electricity both use for lights, TVs, etc. The combined bills of the gas customer, under matching circumstances, will always be lower than the bill for the electric customer. A real-life example: One of our homes was all electric when we purchased it. We were friends of the sellers, so they had no qualms about showing us their electric bills. They were on a level-pay plan to avoid the dramatic increase in their bill in the winter. Within a few months of us moving in, the gas company ran a main through our neighborhood and offered discounts on the purchase and installation of a gas furnace and storage tank water heater, which we used. The previous owner's monthly, level-pay bill was over $300. Our combined gas and electric bill NEVER exceeded $300, even in the coldest part of the winter, and we kept the house warmer than they did! So, if you want to look at efficiencies beginning with generation/acquisition through final use in your home, gas will ALWAYS beat electricity. Even a nuke suffers from all the power/efficiency losses of the gas powered plant beginning with the generators. From there on, every electric power source has the same losses. The statement about efficiencies was neither misleading nor incorrect. The error was in your understanding of the meaning of those terms in the described scenarios. I hope that I have helped you to better understand this, and that knowledge help you purchase devices that are truly more efficient. Ignore the efficiency numbers on the devices unless you're comparing identical products to truly get the most efficient. However, in almost all cases, the more efficient device will be evident in the Government mandated power cost labels on most major appliances. Just find the one that meets your needs and has the lowest energy usage. I TRULY hope this helped, and apologize for the length!

I think you may be missing the point. The efficiency is not about everything that happens in the generation and delivery of the energy to the unit - It is comparing *what the unit actually is using* without regards to how the energy was transported to the water heater. Unless they know your specific location and source of fuel, how would you expect the article to speak to your circumstances? Who would want to read such a narrowly focused article??? (other than you).

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