Tankless hot water heaters are also called "on demand" or "instantaneous" water heaters. Standard hot water heaters store water in a tank and warm it periodically so that hot water is ready when needed. Tankless hot water heaters warm water only when it is needed somewhere in the home, and no storage tank is needed. This gives tankless heaters some distinct advantages, but these systems also have some drawbacks.
Because tankless water heaters do not heat and store large volumes of water, they present opportunities for significant energy savings. Tankless hot water heaters use between 30 percent and 50 percent less energy than traditional hot water heaters, reports the Family Handyman website. For a typical home, this can add up to around $100 per year in energy savings. The annual savings varies depending on the cost of the natural gas, propane or electricity required to heat the water.
Tankless hot water heater systems do cost more than traditional systems, and installation is not for do-it-yourselfers. Tankless systems cost around two to three times more than traditional water heaters, with the cost of tankless varying between $1,000 and $1,200. Because installation can require rerouting gas lines as well as adding flues and ventilation systems, installation costs can double the initial price of adding a tankless system. Electric models can also incur extra installation costs. A family-sized unit requires thicker wires than conventional ones, as well as a dedicated circuit to serve it's short surge of usage, so will likely require rewiring.
Hot Water Output
While tankless systems are referred to as instantaneous, that doesn't mean that hot water begins flowing from the tap the moment you turn it on. Rather, the system fires up the instant you demand hot water, with another caveat. Tankless systems typically do not fire when only a trickle of hot water is required. Just as with traditional hot water heaters, cold water already in the pipes must purge before hot water flows. On the other hand, you could potentially take a shower for as long as you'd like without running out of hot water because tankless systems heat the water as you use it instead of relying on a limited tank. Added demands from other activities, such as a dishwasher, laundry or another shower, all running at the same time, could tax a tankless unit.
Initial Energy Requirements
When a tankless unit first fires up, it requires a large amount of energy. While the energy demands of the system settle back down as the system continually heats water, that initial burst can strain a home's energy draw. For example, while traditional systems need about 30,000 to 50,000 British thermal units of natural gas or propane to heat water in the tank, a tankless system can consume three to four times as much energy in its initial firing. If other appliances are also requesting energy, there may not be enough fuel flowing into the house to satisfy all systems at once.