Whole House Tankless Water Heaters - How Much Will I Save?

Both electric and gas whole house tankless water heater models are examined. How much will I save? The article draws the conclusion that whole house tankless water heaters do not typically save any money over the life of the heater.

The installation costs of tankless water heaters negate the savings

Tankless water heaters (whole house) can be the right solution for some situations, but for most modern families it is probably not the way to go.

Tankless water heater manufactures often claim up to 30% savings over tank type water heaters, and provide you with endless hot water, and making your hot water system more green.

Well let's examine the savings and the payback period to see exactly how much you will save over the life of the heater.  The U.S. D.O.E. provides a way of comparing water heaters using the Energy Factor, which takes into consideration standby losses for tank type heaters.  All water heaters must have a certified Energy Factor.

For our comparison we will use a national average gas price of $1.13/therm, and electricity at 13 cents/kWh. Energy factors range from about .54 to .64 for tank type heaters, and .62 to .83 for tankless water heaters.

For gas water heaters the formula we will use is 41045 x cost of fuel x 365 / (1000,000 x Energy Factor) Cost of fuel in therms.  For electric water heaters the formula is:  Estimated Annual Cost of Operation = 12.03 x Cost of ‘electricity x 365/ (Energy Factor)

Picking two middle-of-the-road water heaters to compare, we will use an Energy Factor of .725 for the tankless heater and .59 for the storage water heater.  Doing the calculations returns an annual cost for the gas water heater of $286.93.  Repeating the calculations for the tankless heater yields $ 233.50.  So the tankless heater saves about $53 per year. 

For electric heaters, tankless cost of operation is $787.34 and for storage type it's $967.50.  A savings of $180.00 per year.

Installed cost of tankless water heaters

Now we need to examine the installed cost of the heaters. According to the Department of Energy, a tank type water heater with installation will cost about $300-$1000 depending on the model and type of installation.

Tankless water heaters capable of replacing a storage water heater in whole house applications are considerably more expensive and much more difficult to install. The venting for gas units will often require much larger diameter tubing and may have to be stainless steel and even powered.

If it's electric it will need a dedicated electrical run with very heavy gauge wire, and if it's gas you may need to replace your gas line with a larger one.

Typical installations including the heater will run from about $2500 to over $4,000. 

Again taking the middle of the road approach, we can use $750 installed cost for the natural gas storage water heater, $600 for an electric storage heater, and $3,000 for the tankless unit. Tankless units are often advertised as having a life expectancy of 20 years, but the warranties seldom last that long. For this article we will use 15 years.  For a natural gas storage heater compared to a natural gas tankless heater, the tankless unit will cost you about $2,250.00 more, for an electric water heater it will be about $2,400 more.

For the gas units you would save over a period of 15 years about $800, and for the electrics about $2,700. Subtract that from the additional cost:

Total savings after cost for a natural gas whole house tankless water heater: - $1,450.00 Yes, that's right, it will cost you almost $1,500 more than if you had installed a storage type heater.  How about 20 years?  Over twenty years you only pay about $1,200 more with tankless.

Some savings are possible

The electric units actually do save you some money. Over fifteen years, subtracting the difference in installed cost from the savings shows a savings of $300.

If you are considering purchasing a whole house tankless water heater you most likely will not save any money over the life of the heater. That's if it doesn't break down.  Tankless water heaters are more complicated and harder to service and repair than traditional storage tank type heaters.

Other problems exist with tankless water heaters. A tankless water heater requires an additional 10 to 20 seconds to deliver your hot water beyond what a tank type heater takes. This causes more wasted water run down the drain while waiting for the hot water to arrive.

This wastage of water and longer delivery time can be eliminated through the use of a on-demand hot water pumping system such as the Chilipepper CP6000, the Metlund d'mand ® system, or the Taco on-demand system. Some of these pumping systems are priced below $200 giving them a payback time from water and sewer charges much shorter than the water heater.  They typically only use less than $2.00 per year in electricity.

A on-demand hot water system will do a lot more to make your hot water system "green" than installing a tankless water heater.