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Can You Save Energy with a Tankless Water Heater?

July 1, 2016

Here at Interstate AC Service, we have a passion for green products and saving energy and thought you too would enjoy keeping abreast of the latest “green” gadgets. Water heaters account for 17% of your home’s energy use, which is more than all other household appliances combined, so saving energy here can make a big impact on the environment and on your budget!

What is a Tankless Water Heater?

Tankless water heaters as the name implies, heat the water instantly as it’s needed, without the use of a large “storage tank.” By eliminating the need to keep a whole tank of water heated round-the-clock, just in case it’s needed, you eliminate energy waste. You also reduce the air conditioning energy that is required to remove the waste heat around the water tank. A tankless water heater can be powered by electricity, natural gas, or propane, and can be 8-34% more efficient than traditional water heaters. Plus, because of their small size (about the size of a small suitcase), they can be installed anywhere, even a crawl space or attic.

Never Run Out of Hot Water Again

In many homes, running the dishwasher, laundry, and trying to take a shower at the same time is almost impossible without exhausting the capacity of the typical hot water storage tank. Tankless water heaters provide an “endless supply” of hot water because it is being made on-demand. When a hot water tap is turned on, cold water travels through a pipe into the unit. Either a 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. A tankless water heater is best located near the place you want to use hot water, such as in the bathroom, kitchen, or laundry room. That way, little energy is lost getting the hot water to the point of use.


A tankless water heater’s output limits the flow rate to 2 5 gallons per minute, with gas-fired tankless water heaters having higher flow rates than electric ones. In a large household, even the largest, gas-fired model cannot supply enough hot water for simultaneous, multiple uses in different areas of the house (for example, taking a shower and running the dishwasher simultaneously). There are two ways to deal with this: install two or more tankless water heaters in parallel, or install a separate tankless water heater near each appliance that uses hot water. Installing a separate tankless system near each appliance achieves the greatest efficiency (up to 50%).

Installation & Payback

Proper installation and maintenance of a tankless water heater will optimize its efficiency. The initial cost of a tankless water heater is more than a storage-type water heater, and you’ll need the skills of a variety of tradespeople. Tankless water heaters require reconfiguring the existing water piping, installation of a new 120-volt electrical receptacle, and for gas-powered units, installation of a double-walled vent pipe through a side wall as well as a larger gas line. Thus, the installation costs are much greater: $2K-5K for a tankless (costs are dropping) vs $900-1300 for a traditional water heater. Plus, for tankless systems, yearly maintenance is required by a qualified technician, so that calcium build-up does not decrease the unit’s efficiency.

ENERGY STAR® estimates that a typical family can save $100 or more per year with an ENERGY STAR qualified tankless water heater, depending on water usage and energy costs (gas or electric) in your area. And tankless water heaters have a much longer life – more than 20 years – compared to conventional water heaters, which typically last only 10-15 years. But, because of the higher purchase and installation costs, payback periods are generally on the order of 20 years or more for a tankless system.

Is a Tankless Right for You?

Studies reported that the majority of homeowners who switched to a tankless water heater were very happy with it. As long as you realize the upfront cost, you’ll definitely save energy, and have unlimited hot water with a tankless unit. To help offset the upfront costs, there are some Federal Tax Credits (available until December 31, 2016 on gas-powered units only), and manufacturer’s rebates offered. Plus, if you’re going for LEED certification for your commercial or residential building, tankless water heaters may help you get there.