• Tankless water heaters reduce energy use up to 25%, but they cost twice as much as standard storage units.
    Tankless water heaters reduce energy use up to 25%, but they cost twice as much as standard storage units.

Tankless Hot Water Heater


Saves energy. The unit only operates when there is a demand for hot water, which can reduce its energy cost by about 25% annually.

Highly efficient. The most efficient storage tank has an energy factor of about .67, but, according to Energy Star, some tankless units have energy factors as high as .95.

Reliable. If a unit is sized properly, a gas tankless heater can deliver a continuous supply of water at a preset temperature (plus or minus one degree) at a rate of typically 2 gallons to 5 gallons per minute. The units never run out of hot water, though the flow rate may be inadequate during times of peak demand, according to www.smarterhotwater.com.

Compact size. The typical tankless heater is about the size of a small suitcase, which takes up significantly less space than a conventional tank.

Durable. It has a life expectancy of 20 years or more.

Versatile. The unit is easy to zone and it can go almost anywhere in the house. It also can be installed outside on a wall.


Tankless units cost about twice as much as traditional storage tanks. A typical tankless unit may cost about $700 and can easily top $1,500.

Installation is expensive. In addition to the high product cost, installation for the unit and the necessary piping can be pricey. They also need very good venting, which is also expensive.

Retrofit is pricey and complicated. Unlike a traditional tank, retrofitting a home with a tankless unit is difficult and expensive. “In new construction, the labor time required to install a tankless water [heater] is about the same as a tank water heater,” according to www.smarterhotwater.com. But the equation changes in a remodeling situation. The process is complicated, and the installed costs to replace a tank water heater with a tankless unit can be as high as $3,000.

Best performance comes from gas units. Though gas-fired tankless units are great performers for whole-house use, electric units are woefully inadequate. Electric units are not Energy Star-rated, Aikens says, and “require significant amounts of energy to use.”

Nigel F. Maynard is senior editor, products, at BUILDER magazine.