A “tankless” or demand-type water heater provides hot water only when it is needed, instead of continuously heating a large tank of water. This could potentially save you money on energy costs depending on your situation.
The diagram below from the Department of Energy shows the basic elements of a tankless water heater.
With tankless water heaters, when the hot water tap is turned on, cold water flows into the unit and is heated by a gas burner or electric heating element.
Because the hot water has to be heated as it flows through the unit, the flow rate is limited to 2-5 gallons per minute. Sometimes, this may not be enough for large households--for example, if multiple people are showering at the same time, there might not be enough hot water for everyone.
To get around this problem, you could install multiple tankless water heaters that run in parallel or install separate tankless water heaters for certain appliances like dishwashers that use large amounts of hot water.
The advantages of a tankless water heater include:
- They can be 8%--14% more energy efficient for homes that use 80-90 gallons of hot water a day
- They have easily replaceable parts that can extend their life beyond 20 years, compared to 10-15 years for storage water heaters
- Energy Star qualified tankless water heaters can save the average family $100 or more a year
