Tankless or on-demand Water Heaters vs. Conventional Storage Tank Water heaters

Green technology is very much in our consciousness as energy prices continue to rise.  As home inspectors in Connecticut, we have observed two major reasons home owners consider energy saving systems for their home:

1.       Conserving the limited resources our planet can produce.
2.       Saving money by using less energy.

While there is a greater awareness for conservation, cost savings is by far the biggest concern we hear from our home inspection clients.  If you fall into that category, you should ask if an on-demand unit will save energy, and whether you will recover the cost of the unit, installation and maintenance.

During an annual educational convention of the American Society of Home inspectors (ASHI) an instructor discussed water heaters. One type discussed was the gas-fired, on-demand water heater. We would like to offer the following information, and the websites for the US Department of Energy and Consumer Reports which confirms this information.

(http://energy.gov/energysaver/energy-saver)

(http://www.consumerreports.org/cro/appliances/heating-cooling-and-air/water-heaters/tankless-water-heaters/overview/tankless-water-heaters-ov.htm),

An article on the Department of Energy’s website noted that tankless water heaters use less energy and last longer, therefore they “could offset the higher purchase price.” The article was designed to help the public determine whether an on-demand water heater was right for them.  It did not endorse them as the best choice for everyone.  Much of the article reported similar drawbacks to both the ASHI conference and Consumer Reports.

The ASHI course indicated that the cost, including installation for an on-demand unit ranged from $2500 to $5000. Our research found prices somewhat lower, but still significantly more expensive than conventional storage tank units.  If you are considering an on-demand unit it is wise to check costs in your area.

Do the energy savings and benefits outweigh the greater expense?

Consider the following potential drawbacks of on-demand units that were noted at the ASHI convention, Department of Energy website, and the Consumer Reports website:

  • Installation is more costly in an existing home, due to a need for replacing gas pipes.
  • On-demand water heaters may last 20 or more years but it will often take that long to recover the cost of the unit, sometimes breaking even at best.  The ASHI course noted that the higher-end, expensive units could take up to 71 years to recoup costs, an obvious financial loss.
  • For an on-demand water heater to actually save money you must live in the home many years to make back those savings.
  • On-demand units may have trouble keeping up with several fixtures running hot water at the same time.  The solution recommended on the Department of Energy’s website is to install more than one unit.  This means more costs that the energy savings would not likely make up.
  • On-demand does not mean you get immediate hot water.  You still have to empty the cold water in the pipes by running the water.
  • On-demand units require annual maintenance due to potential scale build-up.

The ending comment on the Consumer Report’s website article noted that even high-end efficient storage tank units are pricey, and recommended “buying a conventional storage water heater with a 9 – 12 year warranty”.