Most homes have a storage tank for hot water — 50 gallons or more that’s regularly reheated and ready to use 24 hours a day. The compact alternative, often billed as the more efficient European system, is a tankless, or on-demand water heater. This suitcase-size unit heats water as it flows through a coil of pipes and makes hot water only as you use it.
On-demand heaters are wall-mounted and smaller than tank-storage heaters, but space is rarely an issue. Either type can be fueled by gas or electricity, but the fuel source isn’t key. Both types use conventional burners and heating elements, so there is no new technology that makes one system better than another.
The contest boils down to efficiency, which seems to favor the tankless type because it’s not chugging away at 4 a.m. when everyone’s asleep. It produces hot water only when people need it. That matches the way most households use water — not 24 hours a day, but in peak periods for showers in the morning, and for cooking and doing dishes in the evening. Logic suggests that if you pay to heat water only at those peak times, it must cost less than heating water all the time.
The American Council for an Energy-Efficient Economy says that by eliminating standby losses in a storage tank, a tankless system can reduce energy consumption by 10 to 15 percent. Recent figures from the U.S. Department of Energy (DOE) also show that tankless heaters, overall, use less fuel. But don’t dump your conventional storage-tank heater just yet.
First, check these cost figures from the DOE’s Office of Energy Efficiency and Renewable Energy. It calculated average one-time costs (purchase plus installation) and annual operating costs based on average utility rates for both types. The installation estimates: $865 for a 50-gallon storage-tank heater and $1,470 to $2,500 for a gas-fueled, tankless water heater.
To see how a tankless investment might pay off, take the median, or $2,000, as the average installed cost, plus a few hundred more to disconnect and remove the existing conventional tank. How long will it take to recoup your investment with the more efficient tankless system?
The DOE computes average annual operating costs of $388 for a storage-tank heater, and $272 for a tankless heater. That’s $116 less. If the tankless system costs $2,200 installed, and saves $116 a year, it would take about 19 years to break even on the investment. If the new tankless system replaced an Energy-Star storage-tank heater (its operating costs are $360 a year), it would take about 25 years to break even. Anytime, but particularly when money is tight, saving $116 starting about 20 years from now is not high on most homeowners’ lists.
With 50 gallons waiting in a tank, two people can take morning showers (about 20 gallons each on average) while another does some dishes and makes breakfast (about 5 to 10 gallons). In older homes with corroded or small-diameter supply pipes this math may not add up. But if old plumbing doesn’t get in the way, a storage-tank heater can supply hot water to several fixtures within a peak-use period.
A tankless heater can supply no more than its flow rate, typically 2 to 5 gallons per minute. With a typical shower flow-rate of 2.5 to 3 gallons per minute (or slightly less with modern fixtures and flow restrictors), most tankless heaters will not be able to keep up with a secondary demand, for instance, from a dishwasher, clothes washer, or second shower location.
Gas-fired tankless heaters typically produce more hot water than electric units. But if you don’t have a gas line into the house and have to use an electric unit, existing wiring may have to be upgraded. Even then, the American Council for an Energy-Efficient Economy says that if you rely on electricity to heat your water, a tankless system is unlikely to meet your needs.
On the positive side, and despite the sticker-shock price tag, a tankless heater may be the best solution in a remote or infrequently used location.
For instance, if you have plumbing in a home shop, guest room or studio that’s far from the main water heater, cold water standing in the pipes might delay the delivery of hot water for minutes, and waste a lot of water in the process. The council says that, at most, an electric tankless unit may be appropriate for small applications, such as a remote bathroom without a bath tub.