The US Department of Energy has determined that water heating accounts for 14 to 18 percent of energy consumption in the average American home, which represents $400-$600 per year and makes it the second largest energy expense. Water heating expenses are strongly determined by three main factors: the type of heater, the energy source and consumption habits.

Since hot water is a basic need in buildings, especially in northern states such as New York, building owners must make sure they select the heater type that better suits their needs. In most cases, the two main options are:

  • A conventional water heater with a storage tank.
  • An instantaneous or tankless water heater, in which water is fully heated as it flows through.

Regardless of the heater type chosen, both electric and gas-fired models are available. On average, a home with a tankless heater spends $100 less on hot water each year, but this does not mean storage heaters must be overlooked. Each alternative has advantages and disadvantages.


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Classification of Instantaneous Heaters by Fuel Source

There are both electric and gas-fired tankless heaters, and although their main operating principle is the same, there are some key differences between both types:

Gas-Fired Tankless Heaters

These heaters normally offer a lower operating cost because they run on gas, and they can handle higher flowrates than electric heaters, generally up to 5 GPM on larger models. However, gas-fired instantaneous heaters often require an upgrade to the gas service entrance, increasing their upfront cost; and they also require a chimney to get rid of flue gases.

In general, gas-fired tankless heaters are cost-effective if the existing gas installation is suitable for the unit and there is already a chimney in place. Otherwise, upfront cost of the associated gas installation and chimney can negate the benefits of the project.

Electric Tankless Heaters

Running on electricity, these heaters tend to have a higher operating cost than their gas-fired counterparts, but their upfront cost is reduced – electrical installations are easier to upgrade than gas lines, and these heaters don’t require a chimney.

Electric tankless heaters have a flowrate disadvantage with respect to gas-fired heaters: even the largest models are normally limited to values below 2 GPM. However, this can be compensated by simply installing more units in parallel. When upgrading existing hot water systems, electric tankless heaters tend to be the winning option due to the upfront cost advantage.

Which is the Best Option?

None of the heater types can be considered better than the other – some projects will favor gas and others will favor electricity.

  • Gas heaters are better suited for new installations, or in existing projects with a high demand for hot water and where the gas installation and chimney are adequate.
  • Electric heaters are normally the top choice when upgrading existing installations without the provision for a gas heater, when heating demand is relatively low, or if the client prefers point-of-use heaters at several locations.

When site conditions are suitable for both options, the decision can be taken based on financial performance: which heater type provides the highest net savings with respect to the existing installation?

Advantages of Instantaneous Hot Water

Regardless of the energy source, tankless water heaters offer several performance features that make them the preferred option in many US households.

Instantaneous Heaters are Compact

The hot water tank is the largest piece of equipment in conventional heating installations, and this can be an issue when space is a limitation. Thus, tankless water heaters are common in single-person apartments, tiny houses, and other dwellings of similar size.

The size advantage is especially true for point-of-use heaters, which can be easily installed on a wall next to a sink, shower or faucet.

Instantaneous Heaters Save Energy in Most Applications

Storage water heaters constantly consume energy just to keep the water in the tank at a desired temperature. This waste of energy is prevented with tankless heaters, and although their savings vary by project, they can exceed 30 percent in extreme cases.

Although it is not common, there are cases where electric tankless heaters can be more expensive to operate than their storage-based counterparts; it happens if hourly electricity rates are applied and if the heater is used extensively precisely when peak rates are being charged.

Design Flexibility in New Installations

Another significant advantage of instantaneous heaters is that, since no storage tank is used, there is flexibility with regards to how the installation is configured:

  • A single heater can be deployed for an entire household.
  • Multiple point-of-use heaters can be used at strategic locations.
  • A combination of both approaches.

Using a single heater is the recommended choice when there is a consistent and predictable water heating load that will demand the unit’s full capacity. On the other hand, point-of-use heaters are the top choice when there are just a few spots with variable consumption, for example two bathrooms and a kitchen faucet in a small apartment.

Tankless Heaters have a Superior Service Life

Another significant advantage of tankless heaters is their long service life: they typically last for 20 years or more, while heat pumps and conventional storage heaters normally last for 10 to 15 years. Only solar heaters offer a service life comparable to that of tankless heaters.

A tankless heater may seem expensive in terms of upfront cost, but consider it replaces two conventional heaters over its service life. You will be avoiding the cost of the replacement storage heater, as well as the associated labor cost.

Synergy with Solar Water Heaters

A tankless heater can provide excellent results when combined with a solar water heater:

  • The solar collector has a storage tank, compensating one of the main limitations of instantaneous heaters.
  • The tankless heater allows the solar collector to provide a consistent output: in days where sunlight can’t provide consistent heating due to weather conditions, the tankless heater can cover any gaps.

Basically, the tankless heater provides hot water on demand, while the solar collector provides free heating and storage. When both heater types are combined, the result is a reliable supply of hot water.

Disadvantages of Instantaneous Hot Water

Instantaneous hot water systems offer solid performance, but they are not free from limitations. As with any engineering decision, there are pros and cons to consider before installation.

Tankless Heaters are Unable to Store Hot Water

Lacking a tank, instantaneous heaters are unable to store hot water for later use, and there are several scenarios where this can be an issue.

If the gas or electric utility must interrupt its service due to routine maintenance or an emergency, the affected customers will lack access to hot water until the heat source is restored. With storage heaters, it is possible to keep a tank full of hot water as backup.

Electric storage heaters can take advantage of hourly electricity rates, maximizing consumption when energy is cheap and only using stored hot water when rates are high. This is not possible with a tankless heater; if hot water is needed during peak demand, there is no option other than consuming expensive electricity.

Tankless Heater Offer a Lower Efficiency than Heat Pumps

As stated by the Department of Energy, the average US household saves $100 per year with a tankless heater, but this rises to $300 on average with a heat pump. In addition, heat pumps can use hot water tanks – they offer top efficiency without giving up on the convenience of energy storage.

The only limitation of heat pumps is that they are basically refrigerators operating in inverse, so their response is slower than that of tankless heaters. They also have a higher upfront cost, but are generally the most energy efficient option available. There are now heat pump models that can use geothermal energy to boost their efficiency, providing even greater savings for their owner.

Tankless Heaters May Provide Inconsistent Temperatures

Conventional heaters have a hot water reservoir, making it easier for the system to supply water at a consistent temperature. On the other hand, tankless heaters must raise water temperature to a specific value as it passes through, and they may have trouble responding to sudden changes in demand:

  • In homes with a central tankless heater, sudden drops in hot water consumption may cause a drastic surge in temperature. The heater will then adjust operation to meet the new demand, but the overheated water present during the transition period can cause discomfort or even minor burns.
  • The opposite also applies: a sudden rise in hot water consumption may cause temperatures to drop, while the heater ramps up its output to meet the higher flowrate.

Fluctuating temperatures are normally an issue when a central instantaneous heater is subject to a variable load. When various tankless heaters are used independently, hot water temperature tends to be more consistent because plumbing fixtures don’t affect each other.

How to Compare Tankless Heaters?

Assuming a project offers suitable conditions for both electric and gas-fired tankless heaters, the key factor that determines the best choice is operating cost. All heaters have an Energy Factor (EF), which is a measure of how effectively the unit uses the energy input. However, the heater with the highest EF will not necessarily be the cheapest to operate – it is also necessary to consider fuel cost.

  • If both heaters use the same energy source, the one with the highest EF will have the lowest operating cost.
  • When the energy source is different, operating cost must be estimated based on both the EF and the unit price of energy.

Concluding Remarks

Instantaneous hot water systems offer the advantages of a compact size and higher energy efficiency than conventional storage heaters, while having a longer service life. However, they give up on the ability to store hot water for later use, and temperatures can fluctuate when hot water demand changes drastically.

To determine the best water heater for your application, we recommend you get in touch with a qualified engineering firm. They can help you select the option that better matches your project conditions and needs, while optimizing the total cost of ownership.

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