In the past, I've had comments about how a tankless water heater could save money, but I hadn't really looked at the numbers to see if this was true or not. Then I saw an article in this month's The Family Handyman magazine that addressed this specific issue. They started by listing the savings you can expect from a tankless water heater:
Tankless water heaters use 30 to 50 percent less energy than units with tanks, saving a typical family about $100 or more per year, depending on water usage.
$100 a year, huh? Not bad. But I needed more details. Luckily, the magazine provided them:
The primary disadvantage is the upfront cost. The smaller units ($500) that you often see won't produce enough hot water to serve most households.
Larger units that can handle the demand of a whole family run $1,000 and up. (Regular tank water heaters cost $300 to $500, and they last 10 to 12 years, compared with 20 years for a tankless unit.)
By this time, I was already doing the math in my head (which you may be doing as well). But there's more to factor in:
But because tankless units have high-powered burners, they also have special venting requirements (a dedicated, sealed vent system, which requires professional installation). Natural gas burners often need a larger diameter gas pipe, which could easily add $500 to $1,000 to the installation cost.
Hmmmmm. This is obviously an issue that needs to be factored in. But before I run the numbers, let's review a couple of parting thoughts from the piece:
The bottom line: When you're pricing a unit, be sure to get an estimate or firm bid on installation costs.
Me? I always prefer a firm bid. "Estimates" have a way of being 10-20% lower than the final, actual cost.
Finally, they throw in this comment at the end:
Ask if the unit qualifies for a $300 federal tax credit.
They make no further mention of this tax credit, but I'm assuming that they're referring to the energy tax credit available the next couple of years for installation of energy-saving products.
Ok, with all the information now in, here's how I looked at the issue:
Right from the start, the tankless water heater looks like a great deal. It could cost up to $2,000 at most ($1,000 for the unit and $1,000 for installation), but it saves you $2,000 as well ($100 a year for 20 years). It pays for itself! It seems like a no-brainer at this point.
But it gets better. The above numbers reflect the worst-case scenario. Let's assume a best-case scenario. Let's say the tankless water heater costs $1,000 and it's only $500 to install. And let's say it saves you $125 per year (the piece does say it saves about $100 or MORE). Finally, let's assume you get the $300 tax credit on the unit (that's $300 savings because it's a credit, not a deduction). In this case, the unit costs $1,200 ($1,000 + $500 - $300) and saves you $2,500 ($125 x 20 years) for a financial GAIN of $1,300. Not bad. Not bad at all!!!!
So it appears to me that a tankless water heater is a great deal if you're in the market for a new water heater -- unless there are some hidden issues that I'm not aware of. Anyone out there have experience with a tankless water heater? What are the pros and cons? I'd love to hear your thoughts in the comments below.
I'm not sure that I agree 100% with what is written here, but it does make sense:
http://www.askthebuilder.com/451_Tankless_Water_Heaters_-_Some_Surprising_Facts.shtml
I can see a tankless water heater useful for a vacation home where the need for hot water is not daily, but for a homeowner, I'm just not sold yet.
Posted by: Tom | August 08, 2006 at 01:32 PM
I was really excited by tankless water heaters when I first heard of them - conceptually, it seems like a better way to make hot water. However, the cost efficiencies are not as significant as I would hope.
A more economical approach might be a solar water heater with a conventional backup. It is estimated that a solar water heater can produce 65-70% of a household's hot water needs without any fuel cost. The other 30-35% can be supplied by a conventional system.
Also, with conventional fuel costs inflating, the difference in the cost of operating a conventional (either tank or tankless) hot water heater and a solar hot water heater will continue to improve as solar fuel costs have remained constant for at least several thousand years.
(I haven't tried tankless or solar, but I'd certainly be considering them if I were purchasing a hot water heater)
Posted by: JB | August 08, 2006 at 02:01 PM
What water heater should I buy?,What's the right water heater?,Who makes the best water heater?
i find it from here :
http://www.waterheaterrescue.com/pages/WHRpages/English/Longevity/the-best-water-heater.html
Cheers,
Little Guy Can Succeed Online
http://www.Monitorinvest.com
Posted by: monitorinvest.com | August 08, 2006 at 02:11 PM
I know someone who has one. It only instantely heated water on one side of the house until they installed a "bridge" or "adapter" to get hot water on the other side of the house. You push a button on the device, wait one minute before running the water. Before the adapter, it took 3-5 minutes of running water before it got hot.
I would definitely get referrals from the company installing it. I like the idea, especially when you want to run a bath. I hate running out of hot water before the tub is full :)
Posted by: kiwi | August 08, 2006 at 02:57 PM
I like the Total Cost of Ownership metrics. What I think is odd is that we give tax credits for doing the right thing instead of charging buyers squandering fees wasting energy. Inertia is a powerful force, but if everyone had to pay $300 extra for buying inefficient product...it would focus both buyers and manufactures on the need to conserve.
Posted by: jason | August 08, 2006 at 03:04 PM
Don't you need to include the time value of the money in this case? In the worst case scenario ($2000 up front with $100 per year for 20 years) is seems like it's actually a losing proposition because that $2000 right now is worth alot more than $2000 in 20 years.
Posted by: Nick | August 08, 2006 at 04:39 PM
In response to Jason's comment, it may be break even over 20 years right now (or as water costs go up possibly only slightly better) but think of it this way...in 20 years when its time to replace, you won't have the extra $1000, as you will already have the proper connections. They will have become more popular and will likely to be cheaper and so your savings will increase even more as you streach it out over a longer period of time.
Posted by: the Prince of Thrift | August 08, 2006 at 06:48 PM
To Kiwi:
It hurts the economy, thats why you don't penalize for energy wasting appliances.
Posted by: Johnny | September 21, 2006 at 12:29 PM
Just do NOT buy an Omega2000 tankless water heater, especially the OME 514-PV. It doesn't work, and the company's customer service is unhelpful, unresponsive, and incompetent. Plus they don't accept returns for refunds.
Posted by: gary rett | October 24, 2006 at 03:53 PM
We bought a Tagaki tankless for our home in illinois.
We replaced two 40 gal gas water tanks with one unit capable of heating our big 6 ft tub.
It worked wonderfully.
One draw back was that if you wanted lukewarm the "on-demand would shut off and the water got ice cold.
I would buy it again for our new old house.
After reviewing our NICOR gas bill I was again convinced that this was a very wise decision
Our bill was cut by 1/3.
Posted by: patricia carter | November 19, 2006 at 01:26 PM
Check this article out: http://www.askthebuilder.com/451_Tankless_Water_Heaters.shtml
It goes into how tankless water heaters aren't the deal they claim to be. Very interesting!
Posted by: Jason | July 11, 2007 at 10:43 PM
Has anyone actually saved any money switching from tank to tankless water heaters?
Posted by: Travis England | August 06, 2007 at 03:45 AM
I'm in the process of building a new home here in the Philippines. The Meralco or electricity is about double the cost of what we paid in Canada and I was shocked to find out that all the water heaters here are electric. Even the on demand electric heaters you can have installed next to each shower are not as economical as using gas.
I am installing two tankless heaters, one on each floor. They are propane models, the same gas we use for our appliances and is cheap. We expect to have these paid off in about a year using the far cheaper propane and the fact that here in the tropics we get a much better GPM flow due to the warm weather all year 'round giving us far less of a required temperature rise.
Would it be worth it in Canada with the far colder water coming in from the supply lines? Maybe not but here in the Philippines it makes a lot of sense.
Posted by: Dennis | September 04, 2007 at 03:08 AM
A solar powered hot water heater is a much more cost saving way to run your home.
Posted by: Wands | November 15, 2007 at 08:45 AM
If you are looking for a tankless water heater I would recommend the Titan electronic tankless water heater. I purchased one years ago and I enjoyed it so much I actually started a company selling them. The titan don't have the temperature variation problems that other units have and they are protected from dry-starts. They are very compact, very powerful and made in the USA by Niagara Industries who have over 23 years of experience.
Posted by: Ana | January 03, 2008 at 10:34 AM
I'm interested in getting a tankless hot water heater because I'm sick and tired of cold showers (and so are my kids). We have a lot of kids (7) and they need to shower one after the other. the poor kids who have to go after the first 3 are subjected to cold water, and so am I. So, tankless will help keep the water hot when we do need it, and stop heating it when we don't need it. that's better than saving x amount of dollars for me!
Posted by: Kevin | March 06, 2009 at 12:15 PM
So it appears to me that a tankless water heater is a great deal if you're in the market for a new water heater,very informative,keep up the good work you have a nice blog.
by: jb
Posted by: plumber glendora | March 12, 2009 at 03:25 AM
I purchased a gas tankless water heater to replace my electric tank heater about 14 months ago. It is my only gas appliance at this time and it costs about $20.00 a month for gas. My electric bill dropped an average of 32% compared to the same months last year. This computes to about $75.00 per month so I am saving over $50.00 a month.
Posted by: Jeff Hill | April 10, 2009 at 03:35 PM
Tankless is not the way to go yet . . . I am an Engineer. Let me break it down for you. If you are buying a tankless water heater to save money. If you have less than a 50 gal tank heater you won't save any money. If you have more than that and you find yourself having cold showers all the time, then you won't save money, because you will actually consume more hot water vs. taking cold showers. This is purely a monthly cost analysis. If you have a 75+ gal water heater and you never run out of hot water then you probably will see a cost savings. My point is, if you are using all the hot water out of your tank, then you actually are operating at peak efficiency, (not peak comfortability). So Tankless heaters are great to provide virtually limitless (if sized right) supply of hot water. One other note is you have to check your water supply hard water will cause them to trip and have to be cleaned. Realistically this will happen every 3 years on hard water. Don't buy a Tankless water heater to save money, It only saves money for people who don't use that much hot water (and have a big tank) or use a lot at infrequent intervals. Bottom line is they are less efficient at heat used to raise water temp on a 1deg per gallon ratio. Why? because they operate at a higher temp, more heat goes out the exhaust pipe, hence why you need special exhausting. Do the research, you will be surprised. For the person above who said they saved a lot of money going from an electric to a gas tankless heater, you would have saved even more if you would have went to a gas tank heater. Electricity is the most cost inefficient way to heat anything. So in review, if you want more hot water and virtually limitless supply. Go Tankless, if you want economic cost efficiency, take shorter showers at lower temperature, and have a 40 gal tank heater turned up at a medium temperature.
Posted by: Ryan | July 24, 2009 at 11:26 AM
I used to live and work (as technical support engineer on gas heaters) in one of the East-European countries where natural gas was the secondary energy source.
Great majority of users, above 90% that I had to deal with were using gas combi-boilers, for both residential and water heating. It was very seldom to see someone buying free-standing units. The same in other countries that I visited.
I am not sure why North America cannot still accept the idea of using tankless units vs. storage tanks (really bad for environment).
Posted by: Zeljko | September 27, 2009 at 10:44 PM
We have a family of 6 and have now used our tankless system for 2.5 years. For us, it has been great. We are saving about 30% on our gas bill and we no longer have to worry about running out of hot water.
Posted by: JimL | September 28, 2009 at 08:53 AM
I lived in Italy about 13 years ago and we had a tankless water heater for both heating the home and heating water. I really liked the system since our family had two adults and 6 children and we always had hot water. The tankless unit was on the outside of the house (which was great when space is an issue) and made it easier to vent.
I also have wondered why the U.S. is not gravitating towards something that is obviously better. Only two people in my household at the present with the traditional tank water heater can take showers then we have to wait about 30 minutes for more hot water. Also the idea that my present water heater is constantly heating water even when it isn't being used seems a waste of electricity.
I wonder how the statistics are comparing an electric water heater to an electric tankless and then to a gas tankless.
Posted by: T. Johnson | October 07, 2009 at 09:03 AM
under the 20 year plan that the the writer speaks about -saving $100.00 (that's good?) over 20 years-I'll be dead by then! i'm getting a better and more honest read of these contraptions through reading the engineers comments. too much of this blog is spin.
Posted by: G. Reich | October 25, 2009 at 09:49 AM
There is more than saving money on energy. Have you ever seen (try online) piles of broken tanks sitting on the landfield... vs. tankless where almost every component can be replaced and can be recycled.
And how about convenience, space saving, fresh water...
Posted by: BP | January 18, 2011 at 09:10 AM
A separate storage tank is required with an indirect water heater. Like the tankless coil, the indirect water heater circulates water through a heat exchanger in the boiler. But this heated water then flows to an insulated storage tank. Because the boiler does not need to operate frequently, this system is more efficient than the tankless coil. In fact, when an indirect water heater is used with a highly efficient boiler, the combination may provide one of the least expensive methods of water heating.
Posted by: plumbing | April 11, 2011 at 02:01 AM
With all due respect, your analysis is way overly simplistic and misleading. For instance, you left out any mention on maintenance costs...Ryan's comment above seems to imply that there might be more maintenance for the tankless unit...also, on a regular basis are the maint costs the same? An even bigger miss is the time value of money. One cannot buy the same "basket of goods" with that $100 20 years from now as you can with $100 today. In financial terms, one would have to discount all future $100 savings to cover inflation, at the least, if not account for the implicit alternative anyone has...the interest rate that they can save their initial $2000 investment at. I think one would find that the worst case is far from a break even proposition.
Posted by: NoobToFMF | August 26, 2011 at 02:45 PM
Yes, but first a question: How are you managing without hot water? That can't be easy. But, assuming you can hold out for a while longer, you're smart to do your homework. A water heater can account for up to 25% of your total energy bill. And with energy costs rising as rapidly as they are you may be better off considering something called the "life-cycle" cost of each option. That includes the price of the heater as well as how much it costs to run it over its lifetime. Using this yardstick, a high-efficiency, on-demand water heater fueled by gas is one of the best choices you have. These water heaters have a lower life-cycle cost than either conventional gas or electric water heaters. And they last longer.
Posted by: ibc | September 09, 2011 at 11:49 AM
I think everyone knows someone who has had a water tank burst and leak in their basement ruining everything. To be on the safe side you should replace your water heater every 10 years, anyway that's what I have been told by plumbing guys. That being said, you need to consider that over twenty years, you will most likely replace your water heater tank twice that needs to be considered in your costs. Also, you increase your odds of having one leak on you two fold and becoming one of those people we all know who have had one leak and destroy everything in their basement. It's more about avoiding a disaster for me and making sure all my supply lines get hot water on demand. So I'm going tankless and the contractor needs to provide three references with the same size home and bathrooms, One 3 months, 6 months and one over a year with a tankless unit.
Posted by: Frank | January 19, 2013 at 12:35 PM