Do Tankless Water Heaters Save Money?

Do Tankless Water Heaters Save You Money

Do tankless water heaters save money or not? And if yes, then how much can they save you, and is it worth the high price of this kind of water heaters?

And what is more efficient and saves better on the long run, electric or gas tankless water heaters?

When, and when not to use any of these?

These questions and more, I will be answering in this short article in order to help you find the answer based on your situation, based on my experience as an electrical engineer and an energy manager.

So, without further ado, let’s jump in!

Do Tankless Water Heaters Save Money?

Yes, tankless water heaters can save you money compared to traditional water heaters that come with tanks, however, there might be some moments where they can cost you more, which I will be coming to later in this article.

But how do tankless waters save you money?

The answer to that question comes with the answer to the next question.

Do Tankless Water Heaters Save Energy?

Yes, tankless water heaters, regardless of their type based on the fuel they use, save energy as they work only on heating the amount of water you want to use, at the time you decide to use it.

While when using water heaters with tanks, they heat the complete quantity of water in them (let’s say 4 gallons or 15 liters), although you might only need to use half of that amount.

The result will be that you the rest of the heated water would go back to a lower temperature in the coming hour or two, and then you would lose the energy that was used to heat that amount of water.

And based on the type of your water heater, gas or electric, you would be paying for the fuel that was used to provide this amount of energy that was wasted.

But when you use a tankless water heater, whether gas or electric, you save that amount of energy and use only what is necessary to heat up the water you want to use, and then you save money as a result.

That’s how tankless water heaters can save you money by saving energy through saving on the electricity or gas used to fuel the water heater.

Do Gas Tankless Water Heaters Save Money?

Yes, gas tankless water heaters can save gas and money compared to gas water heaters that come with tanks, because the tankless ones only use gas enough to heat the amount of water that you need to use, instead of heating the complete amount of the tank that you sometimes don’t use in full, which would then drop in temperature and make you lose the gas you used to heat it.

Do Tankless Water Heaters Save Electricity?

Yes, electric tankless water heaters save electricity compared to electric water heaters that come with tanks, as the tankless ones use electricity for heating only the amount of water you need to use, instead of heating the amount of water in the whole tank.

Do Electric Tankless Water Heaters Save Money?

Generally speaking, electric tankless water heaters can save money compared to the electric water heaters with tanks as they use less electricity, since they will only heat the amount of water you need to use, instead of heating a complete tank where you only use half of it.

And saving on electricity, usually means saving on money.

However, there’s one case where you might save electricity, but you might not save money, which is the following:

1 Case Where You Pay More by Using an Electric Tankless Water Heater

This is a bit an extreme case, but I need to tell you about it.

Some electric utility companies use the peak-hour tariff, which means that they charge a high rate for electricity during the peak demand hours, and a lower rate during the remaining of hours.

For example, some companies consider the peak hour to be from 3 pm to 10 pm during the business days, and would charge a higher rate during these house, and all other hours cost the lower rate.

And some other companies charge the peak rate starting from 7 am until 10 pm.

In the case of the second example, let’s say that you were used to turning on the water heater with a tank at 6 am, and turn it off before 7 am.

And then you would use half of the water that was heated, leave home, and the rest would drop to the low temperature.

In this case, you would waste half of the electric energy that was used to heat it.

Now if you use a tankless water heater, and you use the hot water only before 7 am, then you end up saving both, electricity and money, since you use less energy based on the same low rate.

But if you use the hot water with a tankless heater after 7 am, then although you use less electricity, but you get charged a higher rate as you used it during the high rate hours.

Now whether you would save money or not depends on how much is the peak hour rate.

If it was double the normal rate, then based on this example, you might end up paying almost the same.

But if it was three times the normal rate, then you might end up paying more than what you would pay by using the heater with a tank.

And you would think in the same way regarding using the water heater in the evening hours.

If you would use hot water anytime during the evening hours that are considered peak hours, then the tankless water heater will save you money that would offset the cost of the morning usage in the above hypothetical situation.

In general, you most likely would save money by using an electric tankless water heater compared to using a water heater with a tank.

Are Tankless Water Heaters More Efficient?

Yes, tankless water heaters are generally more energy efficient than water heaters with tanks.

How Efficient Are Tankless Water Heaters?

The efficiency of an electric tankless water heater might reach up to 99%, and for a gas tankless water heater might reach up to 85%, depending on the manufacturer and the size of the heater.

How Much Energy Does a Tankless Water Heater Save?

According to energy.gov, tankless water heaters can anywhere from 8%-34% more efficient than water heaters with tanks, depending on the amount of hot water used per day, and depending on the type and efficiency of each heater.

And you might even gain higher savings on energy, up to 50%, if you use one small tankless heater at each hot water outlet, but that comes with a higher initial cost for buying and installing these units.

How Much Money Does a Tankless Water Heater Save?

The money savings of a tankless water heater depend on different factors, such as:

  • The type of the tankless water heater, gas or electric.
  • The price of the energy source.
  • The type and efficiency of the water heater with tank that you are already using.
  • The behavior of using hot water before and after installing the tankless water heater.

Are Electric Tankless Water Heaters Efficient?

Electric tankless water heaters are highly efficient and waste very little energy compared to electric water heaters that have tanks and require good insulation in order to keep the high temperature for longer times.

Are Gas or Electric Tankless Water Heaters More Efficient?

Electric tankless water heaters are more efficient than gas tankless water heaters.

Now the gas prices per unit of energy might be lower than electricity prices for the same unit of energy, but the higher efficiency of electric tankless water heaters will usually offset the price difference and make it cheaper to use an electric tankless water heater.

Gas vs Electric Tankless Water Heater Savings

Also, the electric tankless water heaters requires much less maintenance, therefore, lower running cost, and it is a bit safer to have.

Also, electric tankless water heaters are generally lower in price compared to the gas tankless water heaters.

In addition, electricity prices seem to be more stable than gas prices.

Remember to consider the peak hour usage when deciding which one to use.

1 Limitation on Using Electric Tankless Water Heaters

Because tankless water heaters are required to heat water on demand, this means that they need to use a big amount of energy during the minutes of operation.

And for electric tankless water heaters, this means a high current running through the panel and the wires.

This means that, depending, on the size of the tankless water heater you need to use, which depends on the number of people to be served, you might need to install bigger wires and circuit breakers to replace the existing ones that are powering the electric water heater with a tank.

And in some cases, the electric panel might not have the capacity to handle the bigger current required by this electric tankless water heater.

Electric Tankless Water Heater Limitations

In this case, your electrical system might not be able to handle the big tankless water heater.

What is the solution to this?

There are three solutions in this case:

  1. To install a gas tankless water heater, but this is the least desirable solution as electric water heaters are generally higher in efficiency, and gas tankless heaters require more maintenance efforts and costs on the long run.
  2. Use an electric water heater with a tank, but be conscious on how you use it, and don’t leave it on all the time, either by manually turning it on and off based on your needs, or by using water heater timers as they do save you money.
  3. The best solution, by installing separate electric tankless water heaters of smaller capacities at different points of hot water outlets, which might be higher in cost initially, but the long-term savings are worth it.

Conclusion – Are Tankless Water Heaters Worth it?

Yes, tankless water heaters are worth the investment and can save you energy and money compared to using water heaters with tanks.

In rare cases, like the example about using an electric tankless heater during the peak-tariff hours, the tankless water heaters might not be saving you money, but generally speaking, tankless water heaters do save you money whether they are gas or electric ones.

If you are not sure about the right type and size of the tankless water heater you need to use, you might consider contacting a professional in order to discuss the available option and the right choice based on your needs and on the energy prices.

I hope that I have help you in finding out if are going to save money by using the tankless water heaters.

If you still have a question, or if you need help, please, let me know in the comments’ section below, and I will do my best to help you out 🙂

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