Choosing an On-Demand Water Heater

Why pay to keep water hot 24/7? Here's how to decide if an on-demand water heater can save you money.

| March 17, 2008

Hot Water Tap

Tankless hot water heaters reduce energy use while making hot water available whenever you turn on the tap.


Most water heaters heat 30 to 70 gallons of water and keep it hot until it’s needed. When you open the tap, hot water flows through the pipes and cold water enters the tank to be heated. But when you’re not using hot water, it’s being maintained at 120 degrees Fahrenheit (or more) — all day and all night, increasing your energy bills but not contributing to your comfort. Wouldn’t it be great if you didn’t have to keep a tank of hot water available to use the next time you open the hot water tap? A tankless or on-demand water heater makes it possible.

On-demand water heaters warm water as it’s needed, and they’re different from a standard tank water heater. A water heater with a tank heats water to a set temperature, but as cold water enters the tank, the water temperature gradually drops, and eventually you run out of warm water. Tankless heaters raise the temperature of water based on flow rate, so if you’re using more water (shower and dishwasher at the same time), it won’t be as hot, but the heater keeps producing hot water as long as you need it.

To choose a model that will work for your home, you’ll need to know three things: the temperature of cold water entering your house, the flow rate of hot water you’ll most commonly need, and the temperature of the hot water you want to use.

Suppose the temperature of water entering your house is 50 degrees. If you want to have hot water to take a shower and run the dishwasher at the same time, you’ll want about 5 gallons of hot water per minute. (To estimate hot water use, click here and scroll down to “Typical Flow Rates in Gallons per Minute.”) To get 95 degree water, you’ll need an on-demand heater that can raise the water temperature 45 degrees (95 – 50 = 45) at a flow rate of 5 gallons per minute.

Producing that volume of hot water would take a fairly large on-demand unit. You may need to re-evaluate how and when you use hot water. Or you might consider installing two units, depending on your floor plan. You’ll waste less water waiting for hot water to get to the tap if the heaters are close to where you use the water. Some models are small enough to fit in the cabinet under a bathroom sink.

When determining the temperature of hot water you’ll want, remember that if your current water heater is set to 120 degrees, you probably rarely run straight hot water in a shower or when washing your hands. The tank water has to be hotter than you need because as you use hot water, cold water is added to the tank to be heated. (That’s why a hot shower usually doesn’t turn instantly cold when you run out of hot water, but the water gradually gets cooler.)

11/6/2015 9:40:20 PM

It would be nice to have an article that contained enough information to make an informed decision. The link you included to determine how much capacity you need does not work. The key information that you do not include is that a tankless heater burns gas at a rate of 3 to 4 times what traditional gas water heater does. The example you gave quoted a raise of 45 degrees which is 25 degrees short of what most people need to take a shower or wash dishes. Where those degrees come from is a lower flow rate than you need or a much larger heater. This is the inherent flaw with the design and why many people are dissatisfied with their installations. We need more real world facts not just the feel-good greenspeak that is in this article jb

11/6/2015 3:58:52 PM

CO2, really? I stopped reading as soon as I saw that. If you believe that crap about CO2 crap, I can't trust the rest of the article. Moving on...

11/6/2015 9:26:05 AM

I installed a Paloma on demand water heater in a house I was working on in the late '70's. To get the water hot enough to take a shower, the pressure was quite low. I imagine that the systems have eliminated that problem since then?

11/6/2015 7:54:01 AM

One reason I DIDn't put in a tankless ( And I WANTED one) was because the BTU for the tankless is 3x as much as a conventional. Trying to instantly heat water quickly is not energy efficient. Secondly, My daughter and her husband have one and the flow sensor left me in cold water during a shower. I had to turn off the hot and then turn it back on to restart the Hot. Thirdly, if you have extremely cold water coming in the "heating capacity is "rise of temperature over gallons/minute." Cold water is harder to make hot that say 70 degree water. So you might be able to heat you water at a gallon per minute if your water is 70 to say 105 but if the water is 50 or 60 then you might only be able to get that water to 90.

4/16/2014 4:06:32 PM

It is obvious you might save money and energy with selecting proper tankless water heater,i found another great article which talks about cons and pros and costs. Here is the link:

6/17/2011 1:54:03 PM

Hello, Our home is as green as we can be for now. Our water comes from to cisterns collecting rain water. Question is how do you suggest we make our rain water drinkable. Right now we are having a hot water heater problem so our water, both hot and cold STINKS, literally. The anode rod was ruined after 3 years of use, and they took it out, but the stink remains. We also don't know what is in the water, it is hooked up to our gutters. We have a 1000 gal concrete tank which is better than the 500 plastic tank. Would you please take the time to tell me how best to get drinking quality water out of our system? Please, Beccie

4/20/2011 9:01:00 PM

Kandi Newell_2. I know this is a long way after you posted in November 2010 but I had the same experience with a Rinnai heater (gas), which was (is) now 20 years old. After similar experiences in winter and several expensive new parts - I gave up on the "professionals" and did two DIY things. The unit was mounted quite high on an exterior wall (yes, but remember this was 20 years ago - indoor vented outdoor units weren't available), so there was not protection from winter-freeze (in spite of the manufacturer's assurances) and I live too far out to conveniently run back and froward to town. Firstly, I added a valve (tap) to the input water-line so that I could turn off ingoing water. This was sited where the pipe exited through the wall, adapted so that it came into the bathroom first - through the valve - then out to the heater unit. On going to bed I brushed my teeth or showered/whatever - then turned the in-water tap to off. I then opened the hot water faucet in the hand basin and completely drained the unit (about a gallon). Obviously I used this water if possible. The tank and the piping was now completely empty and could not freeze. I have not had a frozen heater now for 17 years. I repeat the exercise when we go away for any length of time (rare on small farms with livestock), as there is then no danger from 'quakes or other such bursting pipes etc. Hope this helps.

1/14/2011 7:45:02 PM

mr. mike b, you have heard correct, if you buy a tank-less thats to small and you set your t-stat to 120 degrees the unit will adj. flow so you get the desired temp, to avoid this you should by a proper sized unit to meet your needs, i-e look at your family's hot water demands and buy the right unit, talk to a certified installer, and most plumbers are not! i have a bosch pro 800 and we can take 3 shower's at a time plus any other demands,[ washer- dishwasher ] most home's water supply can only feed so much any-way, our gas bill went down 55% year over year { hot water only demand } want even more trouble! try a home ctr. no one is trained, and you will not get proper size, venting requirement's and they will always say contact the mfgr. with any problems, we only sell the unit's, work with somebody thats in the game to stay and you'll be happy in the long run, any question's give me a shout, thx. tim.

Mike B
1/14/2011 7:53:13 AM

I have heard that with the tankless system you don't get much water pressure. Is this true?

1/11/2011 3:22:54 PM

Power bill dropped quite a bit when the Stiebel eltron water heater replaced the electric water heater. If you want to save money and NEVER run out of hot water get a Stiebel Eltron Tankless Water Heater. - Stiebel Eltron

1/11/2011 3:13:21 PM

I am think about replacing our 60 gal tank with three small units, one for each of two sink and one for the laundry.

Kandi Newell_2
12/30/2010 6:30:21 AM

It’s 5:30 am and I’m reading about hot H2O heaters because my Aquastar propane on demand, is yet again frozen solid and we are thawing it out w/the hopes that it did not burst, yet again. The only answer, the portable heater sitting within inches of the H2O heater for some reason did not kick on during the night. The expensive heater clips on it (made for the H2O heater) do not work. Well, it is official.....our hope that we caught it time is’s spewing out water now. It burst yet again. I have to get it braises, yet again, No matter what we have tried, a winter does not go by that there isn’t some type of problem. I have talked to Bosch countless times and their only answer was to purchase the ceramic heater clips that were supposed to heat the coils when it turned to freezing temperatures. The problem is that the cold air comes down the vent pipe and freezes from the inside. A damper cannot work, the vent pipe installed at a sideways angle was not recommended and so forth. The ceramic heater clips were to solve the problem. Morale of this story,propane on demand water heaters are not made to be used in regions that have freezing temperatures. Stay far away. I would love to find something “green” that would work. Any ideas short of blowing up the cottage?

Karl K.
11/28/2010 8:24:15 PM

Tankless is definitely greener and cheaper to run. We bought a "smallish" electric unit (Powerstar) that was not advertised as whole house, yet, while talking to the Co's. tech, I found out that many of their customers use it as such in smaller sq ft homes. Our unit cost approx. $300 in early 2010. It serves two baths and the kitchen sink only, as laundry is always done w/cold water. There is, however, another issue that homeowners should be aware of. In areas like ours (rural, with an electric cooperative) the smaller scale electricity providers may have to replace the transformer that feeds your house with a larger unit. One that is big enough to handle the tankless unit's power requirements (while operating/heating). If your transformer is too small your (and possibly your neighbor's) lights etc. could dim in a unnerving, pulsing kind of rhythm. No one told us about this issue when we installed our unit and we spent some time worrying if we made the right choice in buying this (over a conventional unit). I think the water heater industry and electricity providers owe it to the public to be up front on details like this. As it stands now, the Elec. Co. gripes that they have to install more expensive equipment, the water heater mfg. just wants to sell units, and unwitting, "eco" and cost consious consumers get stuck in the middle.

Mike D
9/15/2010 11:38:48 PM

Todd Shaw Do your research. I don't have a dog in this hunt other than I wish for people to get proper information. I got to this site by mistake and I like to read. So here goes. Your plumber does not know what the is talking about. A tank water heater is rated at about 60% efficitency rating meaning if you put 100,000 btu's of energy (gas) in, you get 60,000 btu's of hot water out. The other 40,000 btu's are exhausted up the flue pipe as waste heat. Hence the double walled insulated flue pipe that has to be a min. of 2" from combustibles. Now for the On Demand heaters. The are up to 98% efficient meaning if you put 100,000 btu's in you get 98,000 btu's of hot water and only 2% latent heat or waste. That is why they use PVC pipe as exhaust pipe. So for the same amout of gas (energy) used, you get 38% more hot water. He is just flat wrong. And that does not even take into affect the hot water you are heating all day while you are at work or what about vacation. Now, he would be correct in that they really don't pay for themselves because they cost so much compared to the money that they save. But if you figure in tax credits, it makes up for that (unless you kick into the Alt. Min. Tax then it is disallowed). Did that help to clarify the situation?

3/16/2009 8:29:55 AM

I'm thinking of replacing our 40 gal tank with three small units, one for each of two baths (sink/shower) and one for the kitchen/laundry. My water source is about 45 degrees F. Is this doable? Greg

Reuben Rajala_2
3/7/2009 6:48:25 PM

We had an Aquastar for years, mounted on our bathroom wall and vented with double walled pipe for propane. Worked like a charm. Never ran out of hot with two young kids. But on super cold days the vent pipe would backdraft. I was not liking the cold bathroom and worried about the heater freezing here in N. NH. There appeared to be no themostatically conrolled vent damper or anything available. If it was hooked up to a large chimney, we may not have any any problem. Went to a System 2000 furnace that essentially has the same thing, an on demand water heater hooked up to a standard water heater. Works very quite efficient.

3/6/2009 10:47:47 PM

We made a compromise on the water heating 9 years ago. We weren't sure about the whole house on-demand water heater so we went with a conventional water heater for the baths and laundry and installed an 0n-demand unit under the kitchen sink for the sink and dishwasher. The on-demand unit has been great. After 9 years of service we haven't had even a small problem with the unit. It gives us lots of water at the sink and dishwasher. The conventional unit for the baths has already been replaced once. We wish we had gone with the whole house unit but it would be very expensive to change over now. So we will stay with what we have. We are an all electric house so the savings of the second unit it great. Also since the kitchen and baths are a LONG way apart (at the other end of the house) we saved on initial installation not having to run pipes across the house. The only complaint I would have with the on-demand unit is that the temperature of the water is determined by how fast it passes through the unit, sometimes it takes a bit to get the right flow amount and temperature set. That may not be an issue with all units, ours was a "low end" unit with no extra bells or whistles.

3/6/2009 11:42:21 AM

I have been using a Rinnai Tankless water heater for 8 years. Produces all the hot water we need for a family of 9 which includes babies to teenagers. The Rinnai is 180,000 to 200,000 btu depending on the unit. You can choose temperatures of 98 to 140 degrees and it can be changed as often as you like. We average about 3/4 of gallon of propane per day. At times it is as low as a 1/2 gal per day. Power bill dropped quite a bit when the Rinnai replaced the electric water heater. If you want to save money and NEVER run out of hot water get a Rinnai.

Todd Shaw_1
2/11/2009 1:43:51 PM

DO YOUR RESEARCH!!!! If you have a large family as I do you will spend more money making hot water with a tankless then you will with a standard 30 to 70 gal. Hot water heater. The tankless BTUs/Hr is 180,000 on Bocsh 6 gallons per minute unit. That is 2 gallons of Propane per hour while the burner is on. After adding up the amount of time my family takes a shower, dishes, laundry, I calculated that it would cost about twice as much as my 50 gallon hot water tank. If you live by yourself then a tankless might be the way to go, but for the rest of us that are raising families the tankless hot water heater is a scam. As a do it your self person, I thank the plumber that informed me of this VERY important piece of information that is left out by the manufacturers.

Nicole A.
12/18/2008 6:58:38 AM

I don't know if it's saved us money, but we installed a tankless water heater 2 or 3 years ago and we absolutely LOVE it. It doesn't take any longer for hot water to come out of the tap than w/ an old style tank heater, and I never have to wait for a tank to heat up if (for example) I want to take a bath after washing laundry.

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