Should you go tankless? A fact sheet on tankless water heaters for your home.

Have you ever looked at the water heater in your garage with its perpetual-burning heat source, rusty, battleship-like drum, and think that there must be a better way to get hot water? If not, then you’ve certainly given it some thought when you open your bills and start writing checks.

In fact, there is a better way to supply hot water to your home, saving significant money and energy. Today, we’ll cover everything you need to know about tankless water heaters, also called instantaneous water heating systems. They’re most prevalent in new homes and high-end homes these days, but with 27 million households in the U.S. using a water heater that’s at least 10 years old, tankless systems are expected to soon become the new norm.

The average household used about 64 gallons of water each day, adding up to a $400-$600 annual expense for hot water alone. In fact, heating water usually represents the second-highest utility expense in the home, accounting for 14-18% of all utility bills!

Tankless water heaters are powered by either an electric, gas, or propane heating device inside the unit. Electric heaters using 110 or 220 Volts are most common for single-unit tankless heaters that supply hot water to only one bathroom or kitchen, while larger whole-house tankless systems are usually fueled by gas or propane because they heat the water more quickly.

While that those may be the same fuel sources for heating water in conventional water heaters, tankless water heaters operate not by storing large quantities of water in a tank but heating the water as it's needed, in only the quantity that’s needed.

The standard size for conventional water heaters is typically 40 gallons, but they do range up to 120 gallons. Conventional water heaters work by channeling some of the cold water from your water source into the tank, where it continuously heats it. If the water temperature falls below a certain set temp, the burner kicks in and the entire volume of water is heated up again.

In tankless systems, however, water is heated up quickly via an exchanger, which turns on anytime you tune on your hot water faucet, so water is only heated when there’s a demand, saving a whole lot of energy (and cost.)

In fact, the Department of Energy estimates that tankless systems reduce home energy costs by about 34% annually!

The most energy efficient tankless water heaters are single-point application heaters, which means they are present in each room where hot water is necessary (kitchen, bathrooms, and laundry room.) These single-point application heaters run between 2 to 5 gallons per minute.

While a standard water heater costs about $400 at your home supply store, tankless units do cost more – typically $700 to $1,500 each. But  homeowners can recoup that cost within a few years with the energy savings from going tankless.

Even better, tankless systems last longer, with an average life expectancy of 20 years, compared to 11-15 years life span for conventional tank water heaters.

Tankless water heaters are only about the size of a suitcase, taking up far less space than their round-drum counterparts (saving you garage space!) and are safer. You’d be surprised how often water heaters malfunction and explode, hence the need for a pressure release valve and drain. Likewise, when conventional tank water heaters do finally fail and die, it could potentially cause some serious water damage in the home.

Tankless systems can be difficult to costly to retrofit into your home, however, so they’re usually best installed with new construction or when your home is being renovated.

The hot water also may take a little longer to reach your faucet when it comes from a tankless system and is heated on-demand, although homeowners quickly become accustomed to this.

But while conventional heaters can run out of water when someone takes a long, hot shower (leaving the next person with a cold shower), tankless systems never run out of hot water since they heat on demand.

Water tanks can also corrode inside over time, compromising the cleanliness and even the safety of the water being supplied to your home.

Other options for hot water at home include hybrid electric systems, solar water heaters, and heat pump systems.

When shopping for a tankless water heater, check the unit’s flow rate, which is measured in gallons per minute. The higher the BTU rating (British Thermal Units), the higher the unit’s flow rate. It usually takes about 31,000 BTU to heat 4 Gallons Per Minute (GPM) of hot water. For reference, 4 GPM is about enough to supply hot water to one sink and one shower simultaneously, while a 6 GPM system can deliver enough hot water for two showers at the same time.

Dishwashers and washing machines can take a lot of hot water, but newer models also self-heat their own water, reducing the demand on your tankless system.

Look for a tankless water heater with a good efficiency rating, which usually takes between 78% and 87%, as well as the ENEGRYSTAR designation.