Tankless hot water: What you need to know

Tankless water heaters are an energy-efficient alternative to traditional hot water storage tanks that provide many benefits. Also known as on-demand water heaters, tankless hot water systems produce hot water only as needed, as opposed to traditional water heating systems that heat water and store it for use in a large tank. Tankless water heaters are a safe, energy-efficient water heating option that can help you save space and money compared to traditional options.

The basic principle of tankless water heaters is that you can supply your home with heated water without a storage tank, often a source of significant energy loss. Tankless water heater systems provide heated water through a series of four steps:

1. Water enters the tankless unit

When you turn on a hot water tap in your home (such as a shower or washing machine), water flows into the tankless heater system. A flow sensor detects the incoming water and signals the heating element of your unit to begin producing heated water. For most gas-powered tankless water heaters, a central control panel opens a gas valve to fuel a burner. In electric units, the control panel turns on the electric heating element.

2. A heat exchanger transfers heat to your water

Next, water that enters the heater flows through a heat exchanger, which captures heat from the heating unit and transfers it to the cool water flowing through the system. The heat exchanger is often a coil of copper tubing that absorbs heat from a gas burner or electric current and transfers it to water moving through the heater. 

3. Controls adjust water to the correct temperature

After the heat exchanger transfers heat into water running through your tankless heater, a temperature sensor detects how hot the water is; if the temperature needs to be brought down, your panel will adjust any number of controls. These controls include a mixing valve, a water valve, and–for gas units–a gas valve. These precise controls allow your on-demand water heater to adjust the water it produces to the exact temperature and pressure you need. 

4. Usable hot water exits the water heater

Finally, hot water at your desired temperature exits the heating system and flows into your faucet, showerhead, or other device using heated water. In gas units, exhaust gases are filtered out and disposed of through a ventilation system.

There are two main ways to segment tankless water heaters: their fuel source and their use case:

Gas vs. electric tankless water heaters

On-demand water heaters typically run on gas or electricity. Electric units are typically quieter, less expensive, and more versatile than gas units; however, in some colder climates, they may not be able to supply enough hot water to large properties. Electric heaters are also more efficient than gas units (98%+ vs. 80-85%, respectively) but have a lifetime of around half that of gas-powered on-demand water units.

Another advantage of electric water heaters is that you can power them with a solar panel system on your own property. For this reason, electric tankless water heaters are generally considered more environmentally friendly than gas-powered units. Additionally, the exhaust from gas units contributes greenhouse gases to the atmosphere, while electric tankless heaters don’t produce any emissions on-site.

Point-of-use vs. whole-house tankless water heaters

The second major way to differentiate tankless hot water heaters is by their use case. A point-of-use on-demand water heater works much like a mini-split air source heat pump – instead of a single heater supplying hot water for your whole property, a point-of-use system is installed at a specific spot that needs hot water, such as a faucet or laundry machine, and only supplies hot water to that single water-using appliance.

A whole-house on-demand water heater does as its name implies - it supplies hot water to an entire property. Whole-house setups are often more practical in warmer climates or as retrofits, but a more important factor is your household hot water usage patterns. If you use a lot of hot water simultaneously, whole-house systems may be more practical. For example, a family that all showers at a similar time in the morning will likely benefit more from a whole-house heater, as long as you don’t use too much water. That said, if you use hot water sporadically or infrequently in certain parts of your home, like with a washing machine or a guest bathroom shower, having a few point-of-use heaters may be more cost-effective.