Tankless (demand or instantaneous) water heaters provide hot water only as needed. There is no storage tank and no standby heat loss, which saves energy.
Hot water on demand. When a hot water tap is turned on, cold water enters the unit. A gas burner or an electric element heats the water as it flows through the system. There’s no waiting for a storage tank to refill.
Tankless water heaters usually provide hot water at a rate of 2–5 gallons (7.6–15.2 liters) per minute, and gas-fired versions produce higher flow rates than electric ones.
Tankless water heater limits. In a large household, the biggest, gas-fired model cannot supply enough hot water for simultaneous, multiple uses. For example, taking a shower while running the dishwasher may tax a tankless water heater. You can install two or more tankless water heaters, connected for simultaneous demands of hot water, installed or separately for appliances—such as a clothes washer or dishwater.
Cost versus energy savings. Tankless water heaters cost more than conventional storage tank water heaters. But they can be 24%–34% more energy efficient than tank water heaters if your home uses 41 gallons or less of hot water each day. And you can be 27%–50% more energy efficient if you install a demand water heater at each hot water outlet.
Save space. Another benefit of a tankless water heater is size. Since there is no storage tank, it can easily fit into a much smaller space than a conventional water heater.
Learn how you can qualify for federal tax credits if you purchase a tankless water heater.