Tankless or Demand-Type Water Heaters - Department of Energy

Tankless water heaters, also known as demand-type or instantaneous water heaters, provide hot water only as it is needed. They don't produce the standby energy losses associated with storage water heaters, which can save money.

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Here you'll find basic information about how they work, whether a tankless water heater might be right for your home, and what criteria to use when selecting the right model.

How Tankless Water Heaters Work

Tankless water heaters heat water instantaneously without the use of a storage tank. When a hot water faucet is turned on, cold water flows through a heat exchanger in the unit, and either a natural gas burner or an electric element heats the water.

As a result, tankless water heaters deliver a constant supply of hot water. You don't need to wait for a storage tank to fill up with enough hot water. However, a tankless water heater's output limits the flow rate.

Typically, tankless water heaters provide hot water at a rate of 2–5 gallons (7.6–15.2 liters) per minute. Gas-fired tankless water heaters produce higher flow rates than electric ones.

Sometimes, however, even the largest, gas-fired model cannot supply enough hot water for simultaneous, multiple uses in large households. For example, taking a shower and running the dishwasher at the same time can stretch a tankless water heater to its limit.

Advantages and Disadvantages of Tankless Water Heaters

For homes that use 41 gallons or less of hot water daily, demand water heaters can be 24%–34% more energy efficient than conventional storage tank water heaters. They can be 8%–14% more energy efficient for homes that use a lot of hot water -- around 86 gallons per day. In some cases you may be able to achieve even greater energy savings if you install a demand water heater at each hot water outlet. 

The initial cost of a tankless water heater is greater than that of a conventional storage water heater, but tankless water heaters will typically last longer and have lower operating and energy costs, which could offset their higher purchase price. Most tankless water heaters have a life expectancy of more than 20 years. They also have easily replaceable parts that may extend their life by many more years. In contrast, storage water heaters last 10–15 years.

Tankless water heaters avoid the standby heat losses associated with storage water heaters. However, although gas-fired tankless water heaters tend to have higher flow rates than electric ones, they can waste energy if they have a pilot light. This can sometimes offset the elimination of standby energy losses when compared to a storage water heater. In a gas-fired storage water heater, the pilot light heats the water in the tank so the energy isn't wasted.

The cost of operating a pilot light in a tankless water heater varies from model to model. Review the manufacturer's literature to determine how much gas the pilot light uses for the model you're considering. Look for models that have an intermittent ignition device (IID) instead of a standing pilot light. This device resembles the spark ignition device on some natural gas furnaces and kitchen ranges and ovens.

Installing and Maintaining a Tankless Water Heater

Proper installation and maintenance of your demand water heater can optimize its energy efficiency.

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Proper installation depends on many factors. These factors include 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. Do the following when selecting a contractor:

• 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.

If you're determined to install your water heater yourself, first consult the manufacturer. Manufacturers usually have the necessary installation and instruction manuals. Also, contact your city or town for information about obtaining a permit, if necessary, and about local water heater installation codes.

Periodic water heater maintenance can significantly extend your water heater's life and minimize loss of efficiency. Read your owner's manual for specific maintenance recommendations.

Improving Energy Efficiency

After your demand water heater is properly installed and maintained, try some additional energy-saving options to help lower your water heating bills. Some energy-saving devices and systems are more cost-effective to install with the water heater.

Visit Ask the Experts for more information on when you should replace your water heater.

Backed by ENERGY STAR

Not only are today’s super-efficient models quieter and more efficient than before – they are backed by decades of research and innovation. Models that have earned the ENERGY STAR are independently certified and come with a minimum 6-year manufacturer warranty for added peace of mind.

Super-Efficient in All Climates

Heat pump water heaters use a hybrid system that reliably and efficiently produces hot water in both warm and cold climates.

Visit Ask the Experts to learn how heat pump water heaters work in cold climates.

Cleaner and Safer for Your Home

ENERGY STAR electric water heaters generate hot water without burning fuel inside the home. They are easy to install and safer to operate with dramatically lower total carbon emissions. If your current water heater runs on gas, oil, or propane, switching to an electric heat pump removes a potential source of carbon monoxide (CO) and nitrogen dioxide (NO2) from your home. It can even help reduce ground-level ozone, a common environmental problem in many metropolitan areas.

Convenient User Controls

Unlike standard electric water heaters, heat pump water heaters include a convenient control panel which allows you to adjust temperature settings and select between various operating modes. Heat pump water heaters are intelligent and easy to use.