Tankless Water Heaters: Better Energy Efficiency

In a typical home the energy used to heat water accounts for around 15-20 percent of utility costs. Conventional systems use a storage tank to supply hot water but these can waste energy through standby loss – water that is heated but not used. One way to save energy and cut down the cost of heating your home’s water is by installing a tankless water heater.

In a storage water heater the system continually draws energy to keep the water temperature in the tank hot. If the water sits without being used heat escapes through the tank walls via conduction and radiation. This loss can add up to 10-20 percent of water heating costs.

Tankless water heaters or demand water heaters eliminate the storage tank and thus the standby heat loss. They are more energy-efficient because they provide hot water only when it is needed.

How? The flow of water through the system activates a heating device fueled by either electric, gas or propane. As the water flows it is heated to a preset temperature. When the faucet or shower is turned off, the device stops.

In Europe, it’s common to find point-of-use units installed in bathrooms and kitchens to provide hot water at specific locations. Larger units can be a central hot water source for the entire demand of a home.

The best time to install a tankless water heater is during construction. Replacing a storage water tank can require some upgrades to the electrical wiring, main panel or ventilation of an existing home. These costs can overshadow the savings of the switch to on demand.

In new homes, tankless water heaters incur greater upfront costs but these are recaptured by annual utility costs savings. You can expect to pay more for a tankless water heater than a storage unit. However, implementing this energy saving strategy at a project’s onset will cut your water heating bill up to 20 percent.

In addition to providing utility bill savings, tankless water heaters will last longer. Many models have 20 year warranties, twice that of conventional tank systems. Tankless systems also require less maintenance and you’ll never have to worry about the tank bursting open.

Tankless water heaters are rated by the maximum flow rate they can produce at a desired temperature. The flow rate of a tankless water heater depends on the unit’s capacity. In general, gas fired units have a larger capacity than electric.

Tankless water heaters aren’t without drawbacks - they can have an appetite for energy. Electric models draw considerable electricity. Gas models can have a large fuel appetite as well but typically cost less to operate than electric systems. Plus, many gas models have an intermittent ignition device (IID) instead of a standing pilot light which cut down fuel usage.

Still, tankless water heaters cost less to operate than storage tank systems. Running an electric on-demand water heater can yield up to 20 percent annual savings and those savings can double with gas fired models.

Some critics of tankless water heaters point to the fact that they provide an endless supply of hot water and thus enable more water and energy use. The reality is that homes that use less water reap greater savings in hot water heating costs. Energy efficient appliances and water conserving fixtures can balance demand with comfort and optimize the benefits of tankless water heaters.

The oversight in the criticism of tankless water heaters is more a failure to implement a “whole house” energy philosophy. Systems that work together with a comprehensive energy saving strategy make a home energy efficient, not necessarily each element. In other words, it’s possible to waste hot water with or without a tank.

The criticism actually proves the point: tankless water heaters supply an endless source of hot water within their capacity. Point-of-use units are especially effective as they shorten the distance water travels in the pipes – the water heated is used. They can be especially useful in providing hot water at remote points of your system, like the guest bath in the attic or the work shed.

One “whole house” strategy that can be especially effective is combining a solar thermal system with tankless water heaters. Solar thermal is less expensive than solar photovoltaic and ideal for domestic hot water. The sun’s energy takes the edge off of cold water making the tankless water heater’s job easier. The higher the water temperature is when it enters the heating device the less energy needed to reach the desired hot water temperature.

Personally Speaking

I returned from vacation a few years ago about three seconds shy of my attic-located water tank bursting open and flooding my entire condominium. Unfortunately, the upgrade to a tankless water heater didn’t make economic sense but the experience left me willing to give tankless systems a try in my new home.

For the past 2 years I’ve been trying out tankless water heaters both while traveling through Europe and at home. The showers have been hot and the savings noticeable so my personal experience has been very good.

The Bottom Line

There is a combination of factors to consider before deciding if tankless water heaters will work for you. If you are remodeling you’ll need to consider any extra costs associated with an electrical upgrade which can be hefty. If you are building, tankless water heaters are worth a look.

In either situation, you’ll need to do some research including determining your home’s water demand and whether you’ll need a gas or electric unit. These factors make for some variations in price. General rule of thumb is the higher the unit’s capacity, the more it will cost. Another consideration is of course the energy efficiency.

Point-of-use units start under $100 and a model in this price range can provide a flow rate between 1.5 – 3 gallons per minute (gpm) for a shower. Larger units for central hot water can cost upwards of $1500 with a 5 gpm capacity.

It’s important to keep in mind that the higher upfront costs are offset by lower annual operating and energy costs as well as a longer expected lifespan. Tankless water heaters cost more only in the beginning and the higher price tag is recouped in perennial energy savings.

*Note: The information in this article is general advice and not meant as a substitute for personal guidance from a financial advisor, real estate professional, home improvement contractor or legal counsel. Although the author is a licensed realtor, the advice given in this article does not constitute any client contract or agreement between the author and the user. The author is not responsible for any losses, damages or claims that may result from your decisions.