• Rinnai controllers allow home owners to adjust their tankless water heaters from inside any room in the house. 
    Rinnai controllers allow home owners to adjust their tankless water heaters from inside any room in the house. 

Hot water is a hot issue for builders, architects, and remodelers these days.

Why? Many current buyers are interested in homes that are energy efficient and economical to operate, which are factors that can be dramatically affected by a home's hot water usage. According to the DOE's Office of Energy Efficiency and Renewable Energy, water heating is the third-largest expense in most homes, accounting for 14% to 25% of a home’s expenses. In some cases, that percentage may even be higher, which means energy-conserving hot water solutions also could result in big cost savings for homeowners in this difficult economy.

Currently, the most popular energy-efficient option for water heating is a tankless water heater, also known as an on-demand system. Unlike a traditional tank that heats a reservoir of water 24 hours a day, a tankless unit activates only as needed. When there is a demand for heated water, cold water travels through the tankless unit, where a gas burner quickly heats it to the preset temperature.

According to www.smarterhotwater.com, a Web site launched by Alabama-based Rheem Manufacturing, the average annual operating cost for a conventional storage is between $230 and $285, nearly twice the cost for a tankless system. (Rheem estimates a tankless hot water heater would cost $165 to $170 annually to operate.)

Given those numbers, the decision to go tankless seems a simple equation; tankless water heaters have proved popular in Europe and Asia, according to W.B. "Butch" Aikens, tankless resource manager for Rheem, which manufactures both tankless and conventional tank water heaters. But like many other construction technologies, tankless water heater usage in the United States lags behind the rest of the world, Aikens says.

Cost could be a factor for the low penetration in the U.S. market--tankless heaters cost significantly more than a conventional system. But it also could be a matter of educating the American market about the product. In recent years, manufacturers say awareness has grown significantly, and so has usage, which has seen double-digit increases. The driving force? Consumers. They are “mainly the ones driving this demand for tankless water heaters more than builders,” Aikens says.

Does that mean that every builder and remodeler should install tankless in their projects? Maybe, maybe not. While tankless technology can reduce a home's energy costs by as much as 25% annually compared to a standard 40-gallon tank heater, there are other considerations. Standard storage tanks now qualify for Energy Star certification. And tankless systems may have other issues that negate its energy performance and lower operating costs.

What's a smart builder to do? Make the best decision possible, given the parameters of your homes, buyers, business, and locality. Here's a handy guide outlining the pros and cons of tankless water heaters versus conventional storage tanks that you can use to evaluate the options for your customers.