Is a Tankless Water Heater a Worthwhile Investment?
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Though tankless water heaters may cost slightly more at the time of purchase, long-term savings will ultimately offset that cost

Updated: February 20, 2017

Is a tankless water heater a worthwhile investment?

For some consumers, a tankless water heater can pay itself off quickly. There is, however, more that goes into making the decision to replace your bulky water heater with a slim tankless model that a yes or no answer.

While not necessarily a problem in single-family households, households with four or more people taking showers continuously while using appliances such as dishwashers might not have enough hot water. Those consumers might seriously consider the on-demand performance of a tankless water heater and the promises of endless hot water.

What Are The Differences?

A traditional water heater works overtime when heating up the water, especially as it is being used. Two heating elements are usually working simultaneously to keep the water at a constant temperature inside the tank.

Unfortunately, while you have the water running, the cold water entering the tank is mixing with the hot water already inside the tank. As a result, the temperature of the water inside the tank drops as you use the hot water, which is why you might find yourself turning up the temperature in the shower until you run out of hot water.

An electric tankless water heater, or on-demand water heater, typically weighs about 25 pounds and can be mounted on a wall taking up about two square feet of wall space. Their versatility means that these units can fit practically anywhere, often freeing up valuable space in garages and closets.

Plus, since you only heat the water when you use it, you can reap some money savings because you will no longer need to continuously heat water sitting in an unused tank. You will also never run out of a continuous supply of hot water unless the power goes off or, in the case of a gas heater, you run out of gas.

Can Your Home Support a Tankless Water Heater?

Many newer homes have the electrical capacity to use a tankless electric water heater.

According to representatives of Duke Energy Progress in Raleigh, any household with at least 200 amps of electricity coming in at the main breaker box will be enough for a unit sized to heat water for a family of four. Homes in cooler climates or in the western parts of North Carolina may need stronger systems, with 300 amps or more at the main breaker needed to sustain the heater.

In any case, you will need to make contact with your power company to ensure that the transformers on your street can handle the peak load generated by the tankless heater. Power companies typically don't charge you to verify these power requirements. You will need the product specifications, which are available on the manufacturers' websites.

If you do not get approval from your power company, you may be responsible for any damages caused to transformers and power supply lines caused by your heater drawing too much power.

If you have an existing gas water heater, you should be able to upgrade to a tankless gas water heater relatively easily. Keep in mind, however, that many gas units require an external vent, so you may need to have a vent installed. As an alternative, you may be able to locate a ventless heater.

How Much Does A Tankless Water Heater Cost To Install And Operate?

A tankless water heater can be a bit pricey. Tankless water heaters can range from $300 to $1100 or more depending upon the model. Gas tankless water heaters are typically a little cheaper. Tankless water heaters are more complicated than traditional models and require more electronics. This results in a corresponding price increase, but the long term energy savings can make up for that difference.

Installation costs can range from $500 to $1600 or more, though these costs depend heavily upon who is doing the work, whether you are installing an electric or a gas unit, and whether any additional materials are needed.

Electric tankless water heaters typically can't use your existing water heater wiring due to their high energy needs, which means you will need 6 gauge or thicker wire installed to dedicated breakers. The more heating elements your tankless unit has, the more wiring you would need, which means more cost. The further that wire has to go, the more you can expect to pay.

If you plan to install a gas tankless water heater, you'll also have to factor in the cost for venting to the outside and any needed electrical requirements for fans. If you do not already have an outside vent, this installation can get a little pricey depending upon the length of the vent needed and any cutting that needs to be done.

Another option would be to install a smaller tankless water heater only where you might need the unlimited supply of hot water, such as in a bathroom that has a long run from the centralized water heater.

Are There Any Other Considerations That I Need To Make?

Is a Tankless Water Heater a Worthwhile Investment?
Image: NCCC

Most tankless water heater manufacturers recommend that a filtration system be installed to filter the water before it enters the unit. Debris, sediment and minerals can damage the heating elements.

Water in North Carolina traditionally has a lot of mineral content, so consumers might also consider installing a water softener system to prevent scale buildup inside the unit, which can lead to premature unit failure.

Many consumers report disappointment when their units fail because they overlooked these important steps.

You can even reap double rewards by installing a water filter at the cold water inlet coming into the home in conjunction with a carbon filter. Not only are you filtering the water going to the heater, you are filtering the water for your entire house!

Ten-inch carbon and sediment filters can cost about $1 each and should be changed every one to three months. Compare that to the cost of a water filter in your refrigerator or your sink! A home filtration system can run anywhere from $100 to $300 or more.

Water softeners vary greatly, but you can avoid the cost if you clean the inside of the tankless unit every year with a mineral cleaning solution, such as CLR or vinegar. These products will dissolve any mineral buildup on the heating elements, thereby extending their life and restoring lost efficiency. You should be regularly cleaning traditional water heater models in the same way at least yearly to prevent premature failure.

Another consideration many consumers fail to take into account is water pressure and the flow requirements of the units they buy.

In the colder areas of North Carolina, you may need the largest capacity heater, which may have three of more heating elements. Each heating element requires a minimum flow in order to activate, so a three-stage unit may require triple the water flow to activate over a single stage unit.

If you have poor water pressure, your unit may not turn on. If you have the minimum flow requirement to activate the unit, the unit may turn off momentarily due to a sudden pressure drop if you are showering and someone opens a cold water faucet or flushes a toilet. You may even find that you have excellent water pressure but still get no hot water in the shower due to low flow shower heads. Again, depending upon the minimum flow requirements of the heater, you may find yourself with no hot water with an ultra low flow shower head.

The best option is to get the heater sized for the needs of your home. An even better alternative, though perhaps more costly, is to install smaller tankless heaters in each of the rooms needing hot water. You have the triple advantage of being able to set the temperature individually in each room, having significantly lower flow requirements for your low flow fixtures, and having hot water nearly instantly at the tap as opposed to having to wait for it to snake its way through your entire home.

Federal Tax Credits For Energy Efficiency

At the time this article was published, gas tankless water heaters were eligible for a federal tax credits for energy efficiency. Electrical tankless water heaters had no federal tax credits for energy efficiency. Check with your local municipalities and utility companies to see if there are any credits or rebates currently being offered.

Can I Really Save Money With A Tankless Water Heater?

Depending upon your geographical location, usage, the cost of the system, the installation costs, and the differences between your old water heater and your new one, the amount of time to recoup your investment can vary greatly. Over time, however, tankless water heaters do save money. Because of these factors, there's no simple answer as to how much money you can save.

A tankless system can save 25% to 60% on your water heating bill, which can account for 30% or more of your overall utility bills. You may not pay off the system right away, but you will in the long run. Of course, if your existing system is very old and inefficient, you can expect a quicker payoff. If upfront costs are important, you may consider replacing your unit with a more efficient traditional system.

What If I Don't Want To Switch Now?

While it may not be economical for you to replace your functioning unit now, consider replacing it the when you need to replace your water heater. In the meantime, consider installing a fiberglass insulation blanket around your existing traditional water heater in order to conserve energy, especially if your water heater is in a garage or uninsulated crawlspace. They cost anywhere from $10-$20 and can pay for themselves rather quickly. As it is insulation material, it may also be eligible for a federal tax credit.

You can save even more money with a tankless water heater by lowering the water temperature below 120 degrees. Water inside traditional water heaters must be maintained at 120 degrees or higher to prevent the growth of bacteria that can cause illness and death. Since they have no standing warm water, the bacteria can't breed in a tankless hot water system, meaning you can set the temperature as low as you desire.

Do Tankless Water Heaters Truly Offer Unlimited Hot Water?

A potential drawback to a tankless water heater is a sudden drop of water pressure, such as from a toilet flushing, that can leave you with momentary moments of cool or cold water. Clogged water filters can exasperate this problem.

Ripples in Water / Are Tankless Water Heaters a Worthwhile Investment, or Just a Lot of Hot Water?
Image: Pixabay

With most manufacturers, the minimum flow requirement to trigger the heating elements increases with each heating element. So if you have three heating elements in your tankless water heater, you would require three times the flow as a unit with a single element, which appears to average about .25 gallons per minute. If someone flushes a toilet while you are in the shower, the flow to the tankless water heater could drop below the minimum requirement, causing the heater to turn off until the water pressure returns to a more normal level.

Many models now have flow regulators that can restrict the flow leaving the heater if the heater can't keep up with demand, such as if you are running multiple faucets. You will notice a drop in pressure to each tap, but the temperature will be more consistent. These flow regulators don't solve the problem of low water pressure, though.

Final Thoughts

You must weigh the pros and the cons to determine if a tankless water heater is the right option for you and your family. Does saving money, having an endless supply of hot water and freeing space outweigh the upfront installation costs and the need for water filters? Only you can decide.

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