Are Tankless Water Heaters Worth It? 10 Pros and Cons

hot water from tankless heater

February 13, 2017

Tankless water heaters are one of the newer tools for creating a more energy efficient home. Unlike standard units, which continuously heat and reheat water so that it is always hot, tankless heaters generate water warm instantly with high-powered gas burners or electric coils. Yes, this instant heating requires more power, but because the water does not have to be reheated again and again, like in a standard “tank” model, tankless systems use less energy overall. According to Consumer Reports, which studied these appliances extensively, gas-powered tankless water heaters are approximately 22% more efficient when compared to traditional water heaters. Is there a catch? Yes and no. In the right situation, a tankless water heater is the best option. However, it is a good idea to weigh the pros and cons of these relatively new systems before committing.

Pro #1: Instant Hot Water

After flushing the cold water from the pipes out of the faucet, tankless water heaters can provide an unending stream of hot water almost instantly. Therefore, on a very basic level, these units can indeed deliver on their promise to supply heating without the inconvenience of bulky storage tanks.

Con #1: Inconsistent Temperatures

The Consumer Reports survey mentioned above names inconsistent water temperatures as one of the biggest buyer complaints. This issue typically results from the heater’s inability to send enough hot water to multiple outlets simultaneously. Also, tankless heaters do not always turn on if the faucet is slightly open (when shaving or rinsing a toothbrush, for example).

Pro #2: Longer Lifespan

A considerable advantage of tankless units is their longer lifespan. A standard, high-quality water heater will last roughly a decade, whereas tankless models function for twice as long. Opting for the longer-lasting tankless model can save a homeowner from needing a replacement every 10 years.

Con #2: Higher Initial Cost

Their longer lifespan makes tankless units inherently more expensive. The average traditional model costs around $500, while the cheapest tankless options start at $1,000. These specialized models are also more expensive cost more to install, so labor fees must be factored into the overall price tag.

Pro #3: Lower Month-to-Month Costs

While these systems are more expensive, they are also more efficient. In fact, Consumer Reports indicates that tankless water heaters are 22% more efficient than standard models. The monthly savings might be nominal, but homeowners can expect to save hundreds of dollars annually.

Con #3: Limited Hot Water Supply

Tankless water heaters supply a steady stream of hot water, but the supply is not unlimited. Standard models heat several gallons of water at once – perfect for a single person taking a shower or washing the dishes. But if an individual is running the dishwasher or washing machine while someone else is taking a shower (or two people are taking showers in two different bathrooms at the same time), a tankless heater is not equipped to keep up. A traditional water heater, which can store between 30 and 80 gallons depending on the model, will not have a problem providing hot water to multiple outlets at the same time.

Pro #4: Space Savings

Tankless water heaters are much smaller than bulky storage models. Installers usually mount them on a wall in an inconspicuous place in the basement. In smaller homes, the space savings is a welcome benefit.

Con #4: Additional Equipment is Often Necessary

A water softener is usually necessary to ensure a tankless heater operates properly. Obviously, this extra equipment adds to the unit’s initial price tag. A softener will also negate the space-saving benefit, as the bulky softener (in addition to the necessary bags of salt) will take up space beside the wall-mounted heater. In fact, this appliance may actually take up more space than a traditional water heater.

Pro #5: Special Financing and Tax Breaks

Because they are more efficient, tankless heaters qualify for federal tax credits, which help offset the steep installation cost. As of December 2016, the federal government offered a 10% tax credit on the overall cost of buying and installing a tankless hot water heater. Energy Star-certified traditional storage heaters also qualify for the same 10% tax break.

Con #5: Rerouting Gas Lines

As mentioned above, tankless water heaters require a non-traditional setup, making installation more expensive. A contractor might even be forced to reroute a gas line or add new venting, adding to the overall cost of the project.

Pro #6: Tankless Water Heaters Eliminate “Standby Loss”

The biggest selling point for tankless heaters is that they eliminate “standby loss.” Traditional units reheat water repeatedly, raising energy costs each time that they do so. Even if no one is home, the water heater is using energy because it is still firing up to reheat the water in its tank.

Con #6: Could Take Years to Make Up for the Higher Price Tag

While month-to-month water heating costs are cheaper with a tankless unit, it could take years to make up for the high initial cost. Over time, a homeowner will likely come out ahead, but according to Consumer Reports, the energy savings for going tankless add up to $75 per year, on average. Therefore, it could take 6 to 12 years (or more) before the month-over-month savings cover the installation costs.

Pro #7: Never Run Out of Hot Water

In houses with heavy hot water usage, storage tanks will eventually run out of hot water (for example, if three or four people take showers in a row while the dishwasher is running). A tankless heater ensures that everyone has an equally warm shower – as long as they are taken consecutively, not at the same time – because it does not rely on reserved water to meet demand.

Con #7: Changing Water Usage Habits Could Save as Much Money as Going Tankless

A tankless water heater is not the only way to make a home’s water system more efficient. By merely changing showering habits, a family could lower its water bill significantly. In addition, low-flow plumbing fixtures or a more efficient dishwasher could save as much money as a new water heater when the cost of water plus heating are added together each month.

Pro #8: Both Electric and Gas Models are Available

Tankless water heaters are often powered by natural gas, but electric models are also on the market. Depending on a home’s electrical infrastructure, a non-gas unit may solve the issue of rerouting gas lines or investing in other pricey, labor-intensive alterations.

Con #8: Other Options Like Solar Heating are Available

Tankless water heaters are not the only efficient option; solar water heating is gaining popularity across the nation. Featuring solar collectors and storage tanks, solar water heaters eliminate the need to reroute gas lines or install new electrical fixtures. Solar water heaters can be used in any climate and can even recoup their installation costs more quickly because they do not rely on gas or electricity – only sunshine.

Pro #9: Tankless Heaters Offer Longer Warranties

Because of their lengthy lifespan, tankless heaters have longer warranties. Therefore, if anything goes wrong, the homeowner will not have to pay for repairs or foot the bill for a replacement. Warranties can run up to 20 years, which is the average lifespan of a tankless heater.

Con #9: Additional Maintenance is Possible

To keep the warranty valid, owners must perform annual maintenance and, perhaps, run a water softener. Homeowners should also flush out their system annually to prevent mineral build-up in the heater or water line. The cost of performing these tasks could counteract some of the savings produced by the lower energy requirements of a tankless heater.

Pro #10: Ideal for Smaller Homes With Minimal Hot Water Requirements

If you have a smaller home and a modest demand for hot water, a tankless water heater is optimal. These efficient units will eliminate standby loss and will provide enough instant hot water for one, two, or three people to shower, wash clothes, and do dishes.

Con #10: Standard Energy Star Water Heaters are Also Efficient

New Energy Star certified traditional storage water heaters are also on the market. Not only do these units offer monthly savings for a lower initial cost – they also qualify for tax credits. Additionally, homeowners do not have to make significant changes to their gas lines or electrical wiring, as nearly all homes are equipped to accommodate these traditional water heaters.

A Final Consideration

Tankless water heaters often qualify for PACE financing. Homeowners can finance the purchase and installation of a tankless water heater through their local PACE program and then pay for the upgrade over time (as a line item on their annual property tax bill). Traditional water heaters may also qualify for PACE financing in many cases, so it is best to consider the pros and cons of each option before selecting the type of water heater for your home.

PACE can help you finance an array of energy efficiency, storm preparedness, renewable energy and water conservation upgrades. Contact YgreneWorks at (855) 901 3999; to learn more.