Will a Tankless Water Heater Save Me Money?

Tankless Water Heaters May Lower Your Energy Bills, But That Doesn't Always Mean They'll Save You Money

According to the Department of Energy, the average American household spends $2,060 annually on energy bills. And 13% of that cost is for heating water. That's about $268 dollars each year to heat the water for those hot showers, dishwashers, washing machines, mop buckets, and good hand scrubbings.

That doesn't include the additional $70.39 average monthly ($845 annually) bill for the water itself, with the average Atlanta water bill at $91.92 per month ($1,104 per year).

It all adds up for most families, and it's no wonder that homeowners look for ways to save money on their water heating costs.

Is a Tankless Water Heater the Secret to Savings?

Over the last decade or so, tankless water heaters have become a popular alternative to traditional storage water heaters. Also known as demand, on-demand, or instantaneous water heaters, tankless water heaters have several advantages over storage water heaters. They heat water almost instantly, when you need it. And there's no more keeping a 30- to 80-gallon tank of water heated when no one is using it.

This has led many homeowners to believe that switching to a tankless water heater will save them money. Over the long term, some families may indeed save a little money, but for most, the calculation is not so clear.

Tankless Water Heaters Heat Water More Efficiently

One thing is clear: all else being equal, tankless water heaters are usually more efficient than storage water heaters. (This assumes we're comparing gas to gas, electric to electric, and the same amount of daily use.)

"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," concludes the Department of Energy. "They can be 8%-14% more energy efficient for homes that use a lot of hot water -- around 86 gallons per day."

That greater efficiency can lead to an average of $108 in annual savings for gas-fired water heaters, and $44 in annual savings for electric water heaters.

That energy bill savings may sound appealing, but it doesn't always mean that tankless water heaters will save you money overall. To understand why, let's look a little closer at the differences between tankless water heaters and traditional storage water heaters, a topic we've previously written about in more detail.

The Costs of Energy Efficiency

The energy savings of tankless water heaters come with higher front-end costs, both for purchase and installation. The more complex engineering of tankless water heaters leads to a higher purchase price. A study by Consumer Reports found some low-end tankless water heaters priced comparably to storage water heaters, but others cost as much as $550 more.

And tankless water heaters are more complicated to install. Gas tankless water heaters may require additional venting and larger diameter gas supply lines. And whole-house electric tankless water heaters draw so much power when they're running that homeowners may need to upgrade their electrical systems to 200 amps or more.

In the Consumer Reports study, these complexities led to installation costs that were from $200 to $700 higher. (An electrical system upgrade, if needed, could add a lot to these costs.)

Tankless water heaters can eventually pay for themselves with energy bill savings, but the payback period may be long: 22-27 years for a gas tankless heater, 12-20 years for an electric.

Tankless water heaters tend to last longer than storage heaters: 20 to 25 years in many cases. So they can eventually deliver on that savings. But that's a long wait for little net savings.

Other Tankless Water Heater Benefits

That's not to say that tankless water heaters are a bad idea. Their greater efficiency may be good for the environment. And they offer several potential performance benefits for your home.

Longer Life

First, as we mentioned above, tankless water heaters generally last longer, often twice as long. A typical storage water heater may be under warranty for 6 years and last for 8 to 12 years. Tankless water heaters may be warrantied for 10 years and last for 20 to 25 years.

Also, most parts in a tankless water heater are replaceable. Problems that might end the life of a storage water heater may need only a repair job on a tankless heater.

Endless Supply

With an important exception, tankless water heaters put an end to running out of hot water. Your family can take hot showers all day long and never once run out or have to wait while the water heater heats another batch. For large or busy families, this can be a game changer in your morning and evening routines.

The exception has to do with flow rate. Tankless water heat water almost instantly, but only up to a certain volume of water per minute. Depending on the size and model, typical flow rates vary from 2 to 5 gallons per minute. With some whole-house tankless water heaters, running your dishwasher, washing machine, and a hot shower all at the same time may exceed that flow rate, leaving you temporarily without enough hot water. (As soon as the demand goes back below the maximum flow rate -- say when the washing machine has finished filling its tub -- you'll immediately have enough hot water again.)

Most families find it easy to adapt to the flow rate limitations, and they enjoy the endless supply. But homeowners who use a lot of hot water simultaneously should choose tankless water heaters with higher flow rates. (We've written previously about how to choose the right size tankless water heater for your needs.)

In some homes, it may make sense to install multiple tankless water heaters, including smaller-capacity "point of use" tankless water heaters right next to high-use or remote appliances. This can eliminate the flow rate limitation. And it may deliver even better overall efficiency -- 27% to 50% -- because less heat is lost through supply line pipes as hot water travels to where it's needed.

Space Savings

A typical storage water heater is about five feet tall and about two feet in diameter. It takes up a lot of space. It may fill up a closet, crowd your laundry room, or, in older homes, be a bit of an eyesore in your kitchen.

Tankless water heaters are much smaller. They take up less space and are generally wall-mounted. They're easy to hide away, and, even if they're out in plain sight, many are very attractively designed.

Is a Tankless Water Heater Right for You?

There's a lot to consider when choosing whether to switch to a tankless water heater. But you don't have to decide on your own. We're here and ready to help. Contact Ragsdale today to learn more about tankless water heaters and explore whether they're a good choice for your home.

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