Tankless Hot Water Heaters: Get into Hot Water

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Tankless water heaters—like this one from Takagi—generate hot water on demand, saving time, money and space over a water-storing model.
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Rheem tankless models are designed to supply enough hot water to operate up to three appliances simultaneously for an extended period of time.

Tired of high home energy bills? Water heater on the fritz? Building a new home and hoping to put a lid on fuel bills? Consider installing a tankless water heater; they’re fuel efficient and can provide years of trouble-free service.

To understand how tankless water heaters operate–and why they’re more efficient than standard water heaters–let’s look first at storage water heaters, common in most American homes. A storage water heater consists of a 40- to 80-gallon glass tank wrapped in insulation and encased in steel. Cold water enters the tank and is heated by a gas burner or electric heating elements that start every time the water temperature inside the tank drops below a predetermined setting, ideally around 120°F.

Storage water heaters work well, although they may not provide enough hot water when demand is high. They also lose a lot of energy maintaining a constant temperature between active periods–what’s referred to as “standby” losses, which typically account for about 20 percent of the energy they consume.

Hot water when you want it

One key advantage of a tankless model over a storage water heater is that by using a device known as a heat exchanger, it heats on demand rather than maintaining a 24-hour-per-day hot-water reservoir. In natural-gas or propane tankless water heaters, the heat exchanger consists of a combustion chamber surrounded by pipes through which water circulates. In electric models, high temperatures are created by an electric heating element. When a hot-water faucet is turned on, cold water flows through pipes in the wall of the heat chamber. The burner or electric heating element turns on, and the flowing water raises from 50°F to 120°F in the blink of an eye.

In gas or propane-powered models, a flue pipe exhausts unburned gases and pollutants, such as carbon monoxide, out of the house. No venting is required for electric models. When the hot-water faucet is turned off, the flow through the water heater ceases and the flame goes out (or the electric heating element shuts off).

As a rule, gas-fired tankless water heaters produce higher flow rates (more hot water per minute) than electric ones. Most tankless water heaters provide 2 to 5 gallons of hot water per minute, although Takagi manufactures a model that delivers 9.6 gallons per minute–enough for showers, washing machines or efficient dishwashers.

Installing a tankless water heater

Tankless water heaters are fairly compact units that come in two varieties: household-size units or much smaller point-of-use models, called “under-the-sink” models (usually only available as electric). Household units typically are mounted on the wall in a central location (a utility room or basement), where they service all hot-water demands. In some homes, two units are installed near the main “demand centers”–usually the bathroom, kitchen or utility room.

Like storage water heaters, household-size units are connected to a natural-gas or propane line and a cold-water line. Some models can even be fed solar-heated water, which dramatically reduces their workload and saves even more money.

In Europe, where energy efficiency is a way of life, tankless water heaters are installed under the sinks of homes, apartments and hotel rooms. They heat water for one sink only and are typically powered by electricity.

Converting to a tankless system at your house is fairly simple. An experienced plumber removes the existing water heater, disconnecting the water heater’s natural-gas or electric hookup, the cold-water feed, and the hot-water line to the house. He or she then mounts the tankless water heater on the wall nearby and reconnects the gas and water lines. The cost for conversion is around $200.

Dollars and sense

Contrary to popular belief, tankless water heaters don’t reduce overall home water demand–unless installed at the point of use. They do cut energy use by reducing standby losses by about 20 percent.

How much you’ll save by installing a tankless water heater depends on the unit’s efficiency and the amount of hot water used daily. For homes that use 41 gallons or less of hot water daily, on-demand water heaters can be 24 to 34 percent more energy efficient than conventional storage-tank water heaters, according to the U.S. Department of Energy. To check your family’s daily water use, divide your last water bill’s total gallons used by 30.

In homes that use lots of hot water–around 86 gallons per day–a tankless water heater is only 8 to 14 percent more energy efficient than a storage water heater because there’s less idle time and thus less standby loss. Even greater energy savings–27 to 50 percent–can be achieved by installing tankless water heaters at each hot-water outlet, although the cost of the multiple units could negate fuel savings.

How does all this translate into dollars and cents? Water heating makes up about 15 percent of a family’s monthly fuel bill, so on-demand water heaters could save a water-wise family of four that pays $2,000 a year in fuel bills (or $280 per year for hot water) about $60 to $140 per year.

Economic savings don’t end there, however. Most tankless water heaters last more than 20 years, and the easily replaceable parts extend their lives even more, reports the Office of Energy Efficiency and Renewable Energy. (In contrast, storage water heaters last 10 to 15 years.)

Tankless water heaters offer many benefits, but like storage water heaters, they may not supply enough hot water for simultaneous, multiple uses such as taking a shower and running the dishwasher at the same time. The solution: Invest in water-saving showerheads, dishwashers and washing machines. (See “How Low Can You Flow?” on page 57.) Alternatively, install two or more tankless water heaters connected in parallel for simultaneous hot-water demands, or install a separate tankless water heater for water-hungry appliances, such as clothes washers and dishwashers.

Tankless water heaters aren’t cheap: Prices range from $600 to $1,500. A gas-fired storage water heater costs less than $200; electric storage water heaters cost a bit more. Fortunately, energy savings over the first couple of years easily can make up the difference. Additional economic incentives–available through local utilities and state and federal government–can substantially reduce the cost of a tankless water heater and help reduce your impact on the environment and the cost of heating water for your family. For more information, check Energy.gov/taxbreaks.htm.  

A Tankless Decision

Some points to weigh about a tankless water heater.


• Efficient (no standby losses in energy)
• Provides endless hot-water supply with no waiting for the tank to heat up
• Uses less fuel; produces fewer air pollutants
• Durable, long lasting and easy to repair
• Compact; some models can be used with solar hot-water heaters


• Cost substantially more than storage water heaters
• Not as widely available as storage water heaters
• May not meet all hot-water needs if demand exceeds instantaneous output (typically 2 to 5 gallons per minute)
• May not work well with hard water
• Should be installed by professionals
• Models with pilot lights waste some energy.

Shopping Tips

When selecting a tankless water heater, consider the following:

• Physical size. Will the model fit in the location you have in mind?
• Output. How many gallons of hot water will it produce and how much do you need at any one time?
• Fuel type. Natural gas and propane generally produce fewer pollutants than electric models powered by nuclear or coal.
• Energy efficiency. Obviously, the higher the efficiency the better.
• Cost of purchase and installation.
• Pilot light. Does the water heater have a pilot light, and how much gas does the pilot light consume? Models with electronic ignition are best.

Adapted from the Office of Energy Efficiency and Renewable Energy’s website: “Selecting a New Water Heater,” EERE.energy.gov/consumer


The Homeowner’s Guide to Renewable Energy by Dan Chiras (New Society, 2006)

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