Tankless or on demand hot water heaters are not quite the boon they have been promoted to be.  While they will reduce the amount of energy required to heat a given amount of water by 10 to 30 percent (depending to a certain extent on the age of your existing tank model and the efficiency of the tankless unit), there are several big drawbacks to the product.

As we said earlier, they are more expensive than traditional hot water heaters, but are still competitive.  The difference between tank and tankless models can be measured in hundreds of dollars rather than the many thousands required to convert household heating plants to geothermal or solar heat, however, the real expense can come with the installation of the tankless heater. 

First, most electric models are intended to raise the temperature of water by 55 to 60 degrees.  Thus, to instantly reach the 120° -130° usually recommended for hot water, the water will have to start out at 60 to 70°.  This is not easily done in most northern climates, especially if the hot water pipes flow to the heater through an unheated space.  Electric tankless heaters require a relatively high electric power draw to heat colder water quickly and for that reason they provide a lower flow of hot water and may require installation of additional electric power to the location of the heater and perhaps more service to the house itself.

Here, for example, are the specs for two Stiebel Eltron electric heaters.  The Model 20 requires an 80-amp, (220v) 19/14.4 kw power supply to provide about 2.37 gallons per minute (gpm) with a 55° flow.  The price is $625.  The Model 30 required 15-amps, (220v) .0/27.0 kw power to give 4.50 gpm with a 55° flow.  The uninstalled price is $849. 

Gas heaters are more capable of quickly bringing up cold water temperatures than are electric models.  One supplier states that residential gas models are available that can heat more than five gallons per minute by 60° which is typically sufficient for two showers to be taken simultaneously while electric units typically produce three gallons per minute.  The flow rates by required temperature rise provided by the manufacturer for one model of Bosch gas heater were:

  • 90° rise - 3.2 gpm
  • 77° rise - 3.8 gpm
  • 55° rise - 5.3 gpm
  • 45° rise - 6.4 gpm

Consumer Reports recently surveyed users of tankless units and conducted tests on several models and for the reason cited above, only tested gas models.  The two tankless models they tested were a Takagi ($800) and a Noritz ($1,150.)  They used a measure of hot water usage per day - 75 gallons - rather than flow per minute and heated water from 54° to 124° or higher. For comparison they used two tank type 50 gallon heaters, one regular hot water heater ($480) and one high efficiency tank type ($1,400.) They found that the installation cost for both tankless models was $1,200 (standard tank model - $300 and high efficiency $500.  The annual operating cost was around $325, almost identical to the high efficiency model and $80 less than the standard tank model.  CU calculated the payback period of the Takagi and the Noritz at 15 and 22 years and the high efficiency model at 16 years when compared to operating a standard 50 gallon gas heater.  Keep in mind that some energy saving tax credits or utility rebates may be available when you purchase these units.

Tankless heaters do not have a significant advantage over regular models when it comes to instant availability.  With either heater the cold water standing in the pipes must be expelled, and when the faucet is turned on the tankless units pull in some cold water to gauge the temperature increase needed.  Also, the flow-triggered heating mechanism might not kick on if only a trickle of hot water is required.  Unlike regular gas heaters, tankless models will not operate in a power outage because they require electricity for the electronics involved.

Consumer Reports also said that more routine service might be required because of calcium buildup which can reduce efficiency and water flow and damage the unit. 

To decide if a tankless hot water heater makes sense for you, try the calculator provided by Consumer Reports at ConsumerReports.org/hotwater.  You will need to know your water flow requirements, but the site will help you figure that out too.