Figure 1 - Gas fired on-demand tankless hot water heater

While on-demand tankless water heaters are becoming more and more common in new construction, whether they are truly cost effective as replacements for tank style water heaters, that are currently installed in homes, is one of the great debates in North America.

It is important to note that there is a great misconception when it comes to on-demand tankless water heaters. On-demand tankless water heaters DO NOT provide instant hot water as soon as you turn on a hot water faucet. Hot water must still flow from the on-demand tankless water heater to the faucet. What they do provide is an inexhaustible supply of hot water. With an on-demand tankless water heater you will never run out of hot water.

There are numerous things that you should consider before making the change from a hot water tank to an on-demand tankless water heater.

1. There are two types of on-demand tankless water heaters; those that are powered by electricity and those powered by gas.

• The electric units require large amounts of electrical current to heat the water and most homes do not have a large enough incoming service to power an electric on-demand water heater. In order to install an electric on-demand water heater you can count on having to increase your electrical service. This represents an additional cost of $1,500 to $4,000 and you haven’t even purchased and installed the on-demand water heater.
• Gas fired water heater tanks usually require a ½” gas line running to the unit. Whereas on-demand tankless water heaters usually require a ¾” gas line. If the incoming gas line into the home is close to the location of the on-demand tankless water heater it may only require that the gas line size be changed over a few feet. However, if the incoming gas line is a long distance away from the location of the on-demand tankless water heater replacing the gas line could be a high cost.

2. Water heater tanks are free standing appliances whereas as on-demand tankless water heaters are generally mounted on the inside of an exterior wall. This will definitely require modifications to the hot and cold water lines. It also means that you require free space on an inside of the exterior wall.
3. Gas fired on-demand tankless water heaters require electrical power for the operation of the control electronics. This means that even if you have a gas hot water tank, there will be a requirement to bring electrical power to the new on-demand tankless hot water heater. It should also be noted that you will not have hot water should the electrical power in your area go out.
4. Gas fired on-demand tankless water heaters require a different style of venting and materials used for the vent pipes than conventional hot water tanks.

How much will you save by installing an on-demand tankless hot water heater?

Gas fired on-demand tankless water heaters do not use as much gas as conventional gas fired hot water tanks. In laboratory tests the energy consumption of on-demand tankless water heaters versus hot water tanks have averaged a 22% decrease. In dollars and cents, for the average family the savings would be $70 to $80 per year.

The cost or a high quality on-demand tankless water heater is between $800 and $1,000. Then you must add the installation, gas piping changes, addition of an electrical circuit, the changes to the plumbing and the changes to the exhaust vent flue. The additional items will cost between $800 and $1,200 depending on how complex some of the changes and additions are.

Taking the cost of an on-demand tankless water heater plus the installation your cost will be between $1,600 and 2,200. If we take the middle of the road and say $1,900 with a savings of $75 per year on gas consumption it would take you more than 25 years to break even on the installation of the on-demand tankless hot water heater.

Indications are that the life of a high quality tankless hot water heater averages 20 years. Based on the numbers you would not recover the cost of installing the unit over its life, making the installation of an on-demand tankless water heater difficult to justify economically.

Summary

An on-demand tankless water heater is probably a good investment if you are building a new home or performing major renovations in your current home. If however, you are just looking at replacing a conventional hot water tank, the economics do not justify replacing it with an on-demand tankless hot water heater.

Selection of tankless water heaters.

Selection of hot water tanks.