If you’re looking to replace your hot water heater soon, you may have run across models that are “tankless” or “instantaneous/on-demand” alongside the conventional “storage” or ”tank” water heaters. Here’s what you need to know about these two water heater options before you make any decisions.

How they work

Storage/tank water heaters work by pulling cold water through a pipe then heating it up before storing that hot water in a big tank. When a faucet or appliance in the house calls for hot water, the tank opens up an outgoing pipe and lets the already-heated water flow out. The storage water heater will always replenish the supply of hot water in the tank, but you have to wait for more water to become available if you use it all at once.

A tankless/on-demand water heater, on the other hand, does not have hot water ready and available when needed but instead heats the water at the moment it’s being used. When a hot water faucet is turned on in the home, the tankless water heater pulls cold water into the unit, heats it, then immediately dispenses it out through an exit pipe. When the hot water faucet is turned off in the home, the tankless water heater stops its work.

Energy efficiency

The big drawback to traditional storage water heaters is the passive loss of energy. Since a large quantity of water is being heated and then stored for an indefinite period, the unused water will need to be reheated as time goes on. The U.S. Department of Energy estimates that “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.” 

Efficiency Maine offers instant and mail-in rebates for heat pump water heaters, bringing the cost of a new water heater as low as $349 with some retailers. These units use a storage tank design, but make-up for lost energy with an efficient heat pump system. Efficiency Maine estimates that they cost $600 less per year in electricity bills than a traditional heater. 

Household usage

So how do you figure out how much water your household uses? If you’re used to running the washing machine while someone hops in the shower, then a single tankless water heater probably won’t keep up with your needs. 

The U.S. Department of Energy estimates that tankless water heaters generally heat two to five gallons per minute, depending on energy source and temperature of incoming cold water. That’s about twice what a shower can output at the same time. Visit energy.gov/energysaver to find more information on calculating the best size water heater for your household. 

Upfront vs. long-term costs

A tankless water heater costs more upfront than a storage unit and if you determine that you’d need multiple tankless units to meet your household demand, the difference in cost will grow. However, the energy savings from a tankless version may be noticeable depending on your family’s usage and energy costs in the area. Both tank and tankless options can use natural gas or electricity as their energy source, so depending on the price and availability of each in your area, one may be more efficient than the other for your needs.

Even though the upfront cost of a tankless water heater is more, the long-term costs may not be. Typically, a standard storage unit needs to be replaced every 10-15 years, but tankless units often make it to 20 years without any issues. Replacing parts on a tankless unit is also easier than on storage models, so regular maintenance is simpler with a tankless version.

SIDEBAR:

Before you replace your water heater…

Gather quotes from at least three professionals

Assess your household water usage 

Evaluate local energy sources and cost

Look at current versus long-term budgetary needs