All About Tankless Water Heaters

Gas tankless water heater with cardboard box, delivery concept. 3D rendering
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Tankless water heaters provide instant hot water when you need it.

Tankless, or on-demand, water heaters are used throughout Europe and Asia. And although they are not as popular here in the U.S., they do offer advantages that make them a viable alternative to traditional storage tank water heaters.

How They Work

Unlike traditional water heaters that keep water at a set temperature 24/7, tankless units heat only the water you use. Open a tap and the unit clicks on. When you finish, the unit shuts down. So there is no wasted energy heating water while you sleep or are away from home. And there is no tank to run out of hot water. The heater's burners will keep heating water for as long as you need it. Some units can supply hot water to an entire house, while others are designed to heat the water at a specific location, such as a kitchen sink.

Tankless heaters have a life expectancy of about 20 years, which is longer than a standard water heater. They are compact, and even whole-house units are small enough that they can be attached to a wall, which opens up the floor space a standard heater takes up. The heaters can be powered by electricity, natural gas or propane. And both indoor and outdoor units are available.

Of course, there is a downside. Tankless water heaters cost more than standard units. Highly efficient gas models can cost as much as $1,500 to $2,000 before installation, although some models are less expensive. The amount of hot water produced and the fuel source determines the price. And installation can be more complicated than it is for standard units, which usually translates into higher cost. Some need larger gas and water lines, and there are special venting requirements for some models.

Tankless water heater.
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Tankless water heaters are available in gas (shown) as well as electric models.

Buying Tips

Here are a few things you will need to know if considering a tankless water heater.

How Much Hot Water Do You Need?

While tank heaters are rated by the number of gallons the tank holds, tankless water heaters are rated on their flow rates, or the number of gallons they can heat per minute (GPM). For whole-house units, the amount of hot water the household uses determines the GPM you will need from the heater. It is best to discuss this with an experienced installer, but you can find estimates of the amount of hot water typical fixtures use, such as a shower or dishwasher. Whole-house units are usually in the 8 to 11 GPM range.

Energy-Efficiency Rating

Tankless water heaters provide an opportunity to save on energy use. The Department of Energy estimates an 8 to 34 percent savings over standard water heaters, depending on the amount of water used. Using less water can lead to bigger savings. Products are rated by their Uniform Energy Factor (UEF), a number from 0 to 1 that indicates how efficient the unit is at turning fuel into hot water. The higher the number, the more efficient the unit. Some tankless models can rate .90-plus, much higher than most standard water heaters. You may see products with an Energy Factor rating. The rating works the same way, but it is being phased out in favor of the UEF.

The UEF is used to prepare the Energy Guide Label that must be posted on most appliances. The label tells at a glance how the unit you are considering compares with similar units in terms of cost to run.

The most efficient tankless water heaters are gas condensing units (you can also find gas condensing storage tank heaters). These types have a burner that heats the incoming water and a second heat exchanger to capture the heat in the flue gases, which would usually be vented to the outside. The flue gases cool considerably when they go through the second heat exchanger, and the moisture in the gases condense—hence the name condensing water heaters. The flue gases are now cool enough to be vented through standard PVC pipe, which is less expensive than other types of venting. In some cases, the vent needs a blower to expel the gas. High-efficiency water heaters use a single pipe for both venting and bringing in combustion air to the unit.

Groundwater Temperature

Groundwater temperatures entering the home's plumbing system vary from the 40s in the far North to the 60s and 70s in the South. A heater has to work harder to get the temperature up to 120 or 125 degrees in regions where water temperatures are colder, and this temperature rise affects the flow of the water heater. A product may be listed as having 9 GPM maximum flow, but if it has to raise the temperature by 60 or 70 degrees, the flow rate will be reduced. You can find this information in the data sheets for the products.

One reason that tankless water heaters are less common in the U.S. is that they are relatively unfamiliar to most people here, including many builders and plumbers. As they become more commonplace in new homes and retrofits, acceptance will grow. That's why it is important to find a pro who is knowledgeable about the systems should you decide to switch from a storage tank water heater.

Fran J. Donegan

Fran Donegan is a writer and editor who specializes in covering remodeling, construction and other home-related topics. In addition to his articles and blogs appearing in numerous print and digital media outlets, he is the former executive editor of the consumer magazine Today's Homeowner and the managing editor of Creative Homeowner Press, a book publisher. Fran is the author of two books: Paint Your Home (Reader's Digest) and Pools and Spas (Creative Homeowner Press).