Tankless water heaters: Everything you wanted to know

Tankless heaters are good for only a few situations

Tankless heaters are rife with problems, as I'll detail below.  However, there are a few situations in which accepting the downsides might make sense for you.

1. Your tank heater is outside, with no space for it inside.  When the heater is outside, the pipes are susceptible to freezing and breaking, even if they're wrapped with insulation.  That's true of both tank and tankless heaters, but if you're gonna move your heater inside, then a tankless will take a whole lot less room.
2. Your tank heater is inside, and you want to reclaim that space.  Tanks take up a lot of space.  We were able to make a path from one bedroom to the garage (where the washer is) by ripping the tank out of the closet and turning te closet into a passageway.  That made the house a lot more functional.
3. The biggest tank doesn't supply enough hot water.  Maybe you have a large family or lots of guests.  In that case, a tankless provides an endless supply of hot water.

Another advantage of tankless is that they're less likely to leak.  By contrast, all tanks leak eventually.  The problem with leaks is that they could damage your home which could be expensive to fix.  If your water heater has to be located in an attic, then tankless is safer.  The attic is the last place you want a water leak.

Gene Hayes has a good Tankless Pro & Con comparison.

Seventeen reasons you might not want a tankless water heater

1. They rarely pay for themselves.  The (piddling) energy savings are more than offset by the fact that they're more expensive to buy, more expensive to install, more expensive to maintain, and more expensive to repair.  One report found that the energy savings "was not enough to offset the high incremental cost, resulting in paybacks from 20 to 40 years." (source)  That is, the payback time is often longer than the expected life of the unit.  Consumer Reports put the payback time at 15-22 years.
   
   If your goal is to save energy (as opposed to saving money), you'd be better off by going with hybrid (heat pump) water heater.
   
   
2. They promote water waste. That means you could wind up using more water, and thus more energy to heat it, wiping out any potential energy savings.  More on this in a minute.
   
   
3. They're more likely to break down.  Normal tank heaters are simple, but tankless heaters have lots of proprietary, rare parts that are less reliable and subject to failure.  Hard water also makes breakdowns more likely—standard tank heaters are a lot more tolerant of hard water.  (You could get a water softener, but if you do, that increases the already high cost of the tankless even more.)  Lots of tanks have near-perfect reviews, that's not true of tankless.
   
   
4. When they break down, they're harder to get serviced.  Fewer plumbers know how to work on them, and the ones who do will have to order the parts because they won't have them on-hand.  Have fun being without hot water while you wait on parts to arrive.  Our tankless died on Christmas Eve when we were hosting four guests, and we found out that there is exactly one authorized service provider for our name-brand heater brand in all of Austin, Texas.  They came out and determined they had to order parts from the manufacturer, which would take days to arrive.  If we had a standard tank he could have fixed it on the spot with parts in his truck.  Actually, let me take that back:  If we'd had a standard tank then our heater wouldn't have died in the first place, because tank heaters are super-simple and typically don't have printed circuit boards to control them!  That's the part that died in our tankless, the logic board.  You almost wonder if soon they're going to start putting memory and hard drives into tankless heaters, too.
   
   
5. The warranties are shorter.  Tankless models supposedly last twice as long as tanks, but if so, then why are the warranties for tankless models shorter?  At Home Depot, entry-level tankless heaters have 1+5 year labor/parts warranties, while the (cheaper) tanks carry 2+6 year warranties.  Hmm.
   
   
6. It takes longer for hot water to reach the tap with a tankless unit, because the heater has to sense that water is being drawn and then fire up the heating apparatus.  It took around a whopping two minutes for us.  You can get around this by installing a recirculating pump, but that means spending even more money for the install, plus you'll be wasting energy as the pipes continually get filled with hot water and then lose their heat and then get refilled.
   
   
7. Cold water sandwich.  When you turn the faucet on, it takes several seconds for the tankless heater to actually get the water hot.  If you're the second person to take a shower, that means you'll get hot water initially from the hot water still in the pipes, then maybe 15 seconds of cold water right in the middle of your shower (yow!), then hot water again once the tankless finally kicks in.  As per above, you could fix this with a recirculating pump, if you want to spend more money and waste energy.
   
   
8. No water when the power goes out.  Even tankless heaters fueled by gas still require electricity to operate.  If the power goes out, so does your tankless.  But if you have a regular tank heater, you've got 30-80 gallons of hot water waiting on standby.
   
   
9. Requires more maintenance.  You'll need to periodically either flush the unit with an acid solution, or hire a plumber to do it.  Depending on which route you go, it's either an added annoyance or an extra expense.  A water softener will let you go longer between flushes, but then you have to buy a water softener for $300+, install it, and buy and replace the cartridges periodically.  Which brings us to:
    
10. Water softener recommended for areas with hard water.  In areas with hard water, be prepared to spend $300+ on a water softener, and then periodically buy and replace the cartridges.
    
    
11. Tankless heaters use extra electricity.  Besides the 5 watts of standby power, the 100-200 watts of anti-freeze protection in cold areas is even more significant.  Total use in one study was 31-170 kWh/year, which could be $2.50/mo.  That's not a lot, but when the installed plus operating costs of tankless are already more expensive than standard tanks, this makes the disparity even greater. (MNCEE PDF)
    
    
12. If you don't have antifreeze protection and your tankless is outside or in a freezing garage, expect your heater to get damaged or ruined.  Tankless heaters are susceptible to freezing temperatures in a way that traditional tank heaters are not.  Your heater needs to have (or you'll need to install) an antifreeze heater, which kills any possible eco-advantage of the tankless.  In fact, even if you have freeze protection, then if the power goes out—which is common with winter storms—then your freeze protection goes out right along with it.  Many of my neighbors in Austin found this out the hard way in early 2021 when we had a cold snap and their heaters went kaput, with many of them forced to spend thousands to replace their heaters.  One neighbor said that after the recent freeze, 27 of the 30 service calls by his plumber were for frozen tankless heaters.  By contrast, all the traditional tank heaters at all my rental properties were just fine, even the ones located outside.
    
    
13. The fuel source is a problem.  Tankless come in both electric and gas flavors, just like tanks.  Electric are more expensive to operate than gas, and if you're thinking of an electric tankless you'd be better served by an electric hybrid tank which are ultra-efficient.  If you go with gas, then you have all the problems associated with gas, which is why homes are increasingly going electric-only:  Gas homes are more likely to explode, the byproducts of combustion are unhealthy to breathe, there's a separate monthly charge from the gas company, and gas can't be produced with solar or wind like electricity can.
    
    
14. Electric tankless heaters require running one or two new electrical lines.  Electricians aren't cheap.  You'll also need a permit from the city.  You'll also need to have enough space and capacity in your electric panel to support the tankless, otherwise you're looking at many thousands of dollars to upgrade the service panel.


15. Tankless heaters are incompatible with solar PV.  The modern way to go green with water heating is to install solar PV panels to generate electricity, and then use a hybrid electric tank heater, which uses half the energy of a standard electric tank.  You can't do that with tankless, because tankless typically run on gas.  Some of them run on electricity, but those use twice as much electricity as hybrid tanks.
    
    
16. Tankless heaters are incompatible with geothermal.  One green way to heat and cool homes and provide hot water is to install pipes in the ground to suck the heat out of the earth.  For water heating, that heat has to be stored in a tank.  With tankless, there's no way to store the heat.  Geothermal systems are admittedly not very common, but if you wanted one, it won't heat your water.
    
    
17. Tankless heaters are incompatable with solar water heating.   Like geothermal, a solar water heating system heats the water in a tank, which is impossible for tankless.  Solar water heaters aren't very popular these days because it's cheaper and easier to install solar PV to generate electricity and then marry than to a hybrid tank, but some people prefer solar water heaters because they require fewer collectors, which could be important if there's not enough sunny area for lots of collectors, or if, like me, you have a rooftop deck and want just one collector on it rather than a whole bunch of them.  Anyway, if you want a solar water heater system, you can't use it with a tankless.
    

Consumer Reports doesn't think much of tankless heaters.  In their report they wrote, "So is it time to switch [to a tankless]? Probably not." (source)

How tankless water heaters promote water and energy waste

Tankless heaters waste water in three ways, which drives up their already high cost even more:

1. It takes longer for the hot water to reach the tap, because the heater has to sense that water is being drawn and then bring the heat exchanger up to temperature.  While the penalty is supposed to be only around 15 seconds (which is sizable enough), it took around two minutes in our home, even with insulated pipes.
   
   
2. Some people leave the shower running so the next person taking a shower doesn't get a "cold water sandwich" (see above).


3. An endless supply of hot water could encourage you to take longer showers.  If that happens, then that's more energy used.
   
   
4. Tankless units require a minimum flow rate before they kick in, meaning you might have to turn the water on stronger in order for it to come out hot.  In fact, we had to replace our low-flow shower head with a higher-flow model in order to get the hot water to work.  More hot water used = higher energy bill.  Tankless units are supposed to work with flowrates of only 0.5 to 0.65 gpm, but that wasn't our experience.
   
   

How much do tankless water heaters save?

As we saw, the payback period for tankless models is so long that they're generally not worth it.  But if we look only at energy savings (that is, we ignore purchase and installation costs), how much do they save?

There have been a few different studies to address that question.  Here's what I found:

Payback time does not include the cost of the additional preventative maintenance (e.g., annual flushing/deliming) or occasional expensive repairs that tankless heaters require.  Once you factor in that, the payback time is even longer.

How much you'll save depends on:

1. Your local costs for fuel.  (Higher fuel costs = more savings.)
2. The size of the tank you're using or replacing. (The bigger the tank, the greater the savings.)
3. How much hot water you use.  (More water use = more savings.)
4. The temperature where you keep your tank.  (Warm temperature = less savings.)
5. Whether your tankless would be subject to freezing temperatures.  (Freezing = extra electricity for the anti-freeze feature.)
6. Whether having unlimited hot water seduces you into taking longer showers.  (Longer showers = less savings.)
7. Whether your tankless breaks down out of warranty. (Tankless repairs = expensive.)
8. Which model you choose.

Experts against tankless water heaters

Don't take my word for it.  Here's what others have to say about tankless heaters.

1. Water Heater Rescue:  "Tankless heaters are oversold.  Consumers are seduced by claims of greater efficiency, greater savings, and perhaps a chance to be 'really green'.  This warms many hearts until the owners realize that they paid a lot more money up front, their utility bills are significantly higher than before, and that they face expensive service bills."
   
2. Gene Hayes, WaterHeaterTimer.org:  "The genius of tankless is not that they save money or energy, because they don't. The genius is marketing that targets folks who believe that tankless save money and energy."
   
3. Consumer Reports: "They're efficient but not necessarily economical.  Is it time to switch?  Probably not."

How to buy a tankless water heater

If you're determined to get a tankless model, then you'll choose it based on the flow rate (how much how water it can deliver per minute) and the temperature rise (how much it heats the water).  You don't look at those separately, because they're related.  For example, one unit might heat the water 54° at 1.5 gallons per minute (gpm), but only 27° at 3.0 gallons per minute.

So let's first look at typical gpm requirements.  Here's the typical flow rate for water use in your house:

• 2.0 - 4.0 gpm - Bathtub
• 1.5 - 3.0 gpm - Shower
• 1.0 - 3.0 gpm - Dishwasher
• 1.0 - 2.0 gpm - Sink
• 0.5 - 1.0 gpm - Toilet (doesn't use hot water, though)

So for most uses, a 2.5 gpm unit would be fine, as long as you don't want to run various things at the same time, and as long the temperature rise is also good.  If you want to use more than one thing at a time, you need more gpm, so you'll need a bigger model.  Conversely, if you have an efficient showerhead and run the water slowly when you shower, you might do fine with a 1.5 gpm model, which will cost less than a bigger model.

The temperature rise you need depends on the climate where you live.  If you live in the north where the incoming water is colder, you'll need a bigger rise to get your water up to shower temperature than you would in the south, where the incoming water is warmer.  You can get a thermometer from the grocery store to measure your cold water temperature. You'll need to get it up to about 104°F (40°C) for showers or dishwashing. And keep in mind that the temperature will drop a few degrees as the water travels from the heater to the faucet.

Here are some links to check out electric models and gas models at Amazon.

Here's a Tankless Water Heater Guide that tells you pretty much everything you'd want to know about selecting and installing a tankless water heater.

On a separate page I have questions I've received and answered about how saving on water heating costs.