Heating your water accounts for up to 30% of your home's energy consumption. Therefore, it stands to reason that reducing the amount of energy needed to heat your water could significantly lower your energy use and energy bills. Tankless water heaters, otherwise known as instant or demand water heaters, are gaining popularity due to their small, compact design and energy efficiency.

What is a Tankless Water Heater?

A tankless water heater is an appliance that heats your water on demand rather than continually heating and storing a large amount of water in a tank like a traditional hot water heater. They come in point-of-use and whole-house versions, and there are electric tankless water heaters and natural gas or propane models. Some tankless units are sized to heat a cup of tea, others to provide enough hot water for 2 or more bathrooms.

How Tankless Water Heaters Work

The tankless water heater works by directly heating water on demand, as it is required. Unlike traditional hot water heaters using a storage tank, the tankless units have no storage tank and thereby have no standby heat loss. Whether a tankless water heater is point-of-use or a whole-house unit, they work the same basic way. When a hot water tap is opened, the cold water enters the tankless water heater, and a flow activated switch triggers the heating elements to turn on. The water is then heated as it flows through the tankless heater. The hot water supply line in your home carries hot water from the water heater to the various sinks and baths throughout the house.

Benefits of Tankless/Demand Water Heaters

In a home with a regular tank water heater, when you turn on a hot water faucet, all the water sitting in the supply lines has to pass through the pipes before hot water from the tank reaches the faucet. As a result, water may be wasted while waiting for hot water to arrive, which can be especially problematic when it comes to showers. Also, storage tanks have standby heat loss, which is the heat lost and energy wasted by heating and reheating water to keep it ready to use. A tankless water heater turns itself off when the faucet is closed, thus saving energy costs over the entire lifetime of the unit. Avoiding standby heat loss is primarily why tankless water heaters are considered energy efficient.

Lastly, tankless water heaters take up very little space compared with storage tank water heaters, so they're a good solution for small homes such as condos and apartments, and it's a major reason why they have been popular in homes in European cities for a long time.

Types of Tankless Water Heaters

There are different sizes and types of tankless water heaters, and the one you would choose depends on a few different factors. First, there is the volume of water the unit is required to heat, measured as flow rate in gallons per minute (GPM). This depends on whether you need it to heat water for your whole house or for only one or two points of usage, like a single shower or bathroom. Second, there is the temperature of the cold water entering the unit, which mainly depends on whether you live in the North where it is cold or the South where groundwater is warm. Last, there is the desired temperature of the hot water exiting the unit. Those three factors are what determine the type, size and possibly even the quantity of tankless water heaters you need, or whether you choose to install any, depending on the costs compared with traditional water heaters.

As mentioned, there are two basic types of tankless water heaters, point of use and whole house, either of which is available in electric or gas fired models. The type you select is based upon your intended use, your budget, and the amount of space you have to install your water heater(s). A point of use tankless water heater is relatively small and will usually fit inside a sink cabinet or in a closet. They are typically dedicated use heaters, meaning the unit serves one sink or faucet or one shower. Point of use tankless water heaters are less expensive than whole house units and cost around a few hundred dollars for a unit, not including installation. Whole house tankless water heaters have a higher gallon per minute (GPM) flow rate capacity and can handle demand for more than one fixture at a time. Whole house units are much more expensive than point of use units and cost from several hundred to several thousand dollars (without installation).

Installation and Maintenance

Proper installation and maintenance of your demand water heater can optimize its energy efficiency. Proper installation depends on many factors including fuel type, climate, local building code requirements, and safety issues, especially concerning the combustion of gas-fired water heaters. Therefore, it's best to have a qualified plumbing and heating contractor install your demand water heater. When selecting a contractor, do the following: Request cost estimates in writing. Ask for references. Check the company with your local Better Business Bureau. See if the company will obtain a local permit if necessary and understands local building codes, etc.

Most tankless water heaters have a life expectancy of more than 20 years. They also have easily replaceable parts that extend their life by many more years. In contrast, storage water heaters last 10-15 years. Periodic water heater maintenance can significantly extend your water heater's life and minimize loss of efficiency.