As their name suggests, tankless hot-water heaters, also known as on-demand water heaters, don't store hot water in a tank. Instead, these units are typically mounted on a wall (even outdoors in mild climates) and start heating water only when a faucet is turned on. Since households use hot water only intermittently, this saves fuel. Consumers can also turn down the thermostat safely since there's no tank of water that may breed bacteria. The major advantage of tankless units is that when sized correctly, a household will never run out of hot water. Tankless water heaters also save space and last longer -- 20 years or more on average -- and can be repaired to last even longer. They can also provide useful backup to solar water heaters and can boost tank-style water heaters during peak periods of use.
For whole-house tankless water heaters, most experts say gas is the preferred fuel since it heats water faster and more efficiently. Small electric tankless models are useful as point-of-use water heaters installed right by a particular faucet. The best gas tankless water heaters are eligible for the 30 percent federal tax credit on the installed price -- important since switching from a tank-style heater to an on-demand model usually requires quite a bit of installation labor. (No electric tankless water heaters are energy-efficient enough to qualify for Energy Star certification.) Consumers may need to install bigger intake water pipes and/or a different venting system prior to operation.
Fine Homebuilding magazine editors estimate installation costs at $1,500 to $2,900 when you're replacing a tank-style water heater; Builder Online says costs can go to $3,000. In addition to the federal tax credit, though, state "cash for appliances" rebates and other state and local incentives can bring the total installed price way down. Note that these credits and rebates only apply to the buyer's existing primary residence -- not to a second home or new home construction.
Still, even without these incentives, experts say whole-house tankless water heaters are well worth considering for new homes, where the installed cost can be covered by the mortgage. Builder Online notes that installing a tankless water heater in a new home doesn't cost any more than installing a regular tank-style water heater, and it saves space. Also, when tankless water heaters are built into a new house, the whole plumbing system can be designed around them from the start. Experts recommend combining tankless water heaters with a recirculating system and designing the plumbing with especially short runs from the water heater to each point of use.
The sizing of a tankless unit depends a lot on the temperature of its incoming water. In colder climates, experts say the flow rate is apt to be about half that of the rate achieved in a warm climate, so it's important to consult local contractors. A contractor can also judge whether or not the plumbing system is designed so that the pipe runs from one tankless water heater to all the points of use will be short enough to provide a good flow of hot water everywhere it's needed. This is crucial because if the water has to travel too far from the tankless water heater to a faucet, too much heat escapes. This is true even when pipes are well insulated.
Without tax credits, rebates and other incentives, ConsumerReports.org editors calculate that the payback for going tankless is about 20 years. Fine Homebuilding magazine editors estimate the savings in gas at a minimum of 19 percent -- as long as consumers don't go overboard and use more hot water than before. (The more efficient models that use condensing technology will save more.) Unless installation costs are very high, users can still save money when replacing a tank-style water heater in their primary home with a tankless model, because the incentives will bring the cost down.
Overall, we found tankless water heaters get mixed reviews from owners, partly because of unrealistic expectations (and advertising) and partly because they're not a good solution for all homes. For instance, if the groundwater is colder than the U.S. average of about 50 degrees Fahrenheit, the tankless water heater may have trouble heating it fast enough, decreasing output below an acceptable flow rate. Additionally, in homes where the pipes run long, an on-demand water-heating system may not be practical. Owners also complain about bursts of cold water between bursts of hot -- an unpleasant event during showers. Tankless water heaters require frequent maintenance, especially when heating hard water. Fine Homebuilding magazine editors recommend avoiding this problem by adding a circulating pump to keep hot water continuously in the lines.
A recirculating system also prevents another problem common to tankless water heaters -- wasting a lot of cold water while waiting for hot water to reach the faucet. (Circulating pumps can also be a valuable addition to a tank-style water heater.) However, some experts say the upfront cost (*Est. $600 to $1,400) of a recirculating system can pay for itself in lower water, sewer and water-heating costs.
The bottom line: Many reviews say it's important to consult with a professional contractor who's experienced with tankless water heaters prior to any purchase. (We read quite a few comments from over-eager shoppers who were ultimately stranded without any technical support.) Each tankless water heater must have exactly the right lines, water pressure and gas pressure to work safely and well. A local contractor can also make sure that repair parts and service will be available in your area.
Experts recommend consulting local contractors with a good track record for installing tankless water heaters before choosing a model. Overall, though, we found gas tankless water heaters by Rinnai lead the pack in reviews. Rinnai earns top rating in the survey of builders done in 2007 for Builder Online and also fares well in the earlier survey done by J.D. Power and Associates.
One well-reviewed model, the Rinnai R75LSiN (*Est. $900) provides a flow rate of 7.5 gallons per minute (GPM) of hot water -- plenty for two showers at the same time. It's Energy Star-certified, so it's eligible for the federal tax credit, state "cash for appliances" rebate and possibly local incentives as well. The precursor to this model was tested by the Okaloosa (Fla.) Gas District, based on the average hot-water use by a four-person household. Tests there comparing it with a tank-style water heater found that the Rinnai not only saves money but delivers more hot water.
The Rinnai R75LSiN earns high praise from owners reviewing it at Amazon.com, though they note that like most tankless water heaters, it wastes water because of the delay between turning on the faucet and getting hot water. This model is also the top pick at Bestcovery.com, where reviewer Mariette Mifflin (who's also the About.com expert on household appliances) scrutinizes reviews and specifications to find the best buys. She praises this water heater's build quality, ease of installation and excellent warranty. Homeowner Ryan Tucker also praises this model's precursor in his blog, saying it has saved him significant money.
Surveys of builders and contractors rank the Rheem brand just under Rinnai, and two Rheem gas tankless water heaters earn above-average ratings from owners reviewing them at HomeDepot.com. However, both are priced there higher than the price we found on the Rinnai R75LSiN. The Rheem ECO-200PVN 7.4GPM (*Est. $1,200) has the same 0.82 EF rating as the Rinnai R75LSiN, carries the same 12-year warranty and doesn't seem to offer any other advantages.
Newer and even more efficient gas tankless water heaters use condensing technology to boost thermal efficiency even higher -- even up to 0.98. A condenser preheats the incoming water using flue gases that would otherwise be wasted. Installation is also easier (and thus less expensive) because you can use PVC for venting instead of stainless steel. This technology looks promising, but we didn't find enough reviews of specific models to recommend one. Furthermore, a 2009 article on condensing water heaters in the Journal of Light Construction, a publication aimed at builders and contractors, recommends holding off on installing a condensing tankless water heater until they have a longer track record.
It's worth keeping an eye on the Navien NR Condensing 98 tankless water heaters, which boast 0.98 thermal efficiency. The Navien NR A models even build in a buffer tank and recirculating pump. These are designed to eliminate surprise bursts of cold water that are a rude shock to anyone showering. The Navien NR A water heaters get an enthusiastic review at 411plumb.com, with praise for the stainless-steel heat exchanger (which should last much longer than the copper used on most). The 15-year warranty is longer than the usual 12-year warranty on a gas tankless water heater. The middle-sized model in the series, the Navien NR-210A (*Est. $1,780), also earns praise at the Alpine Heat blog. In the coldest parts of the United States, the flow rate is 5.4 GPM; in the South it rises to 10 GPM.
Navien isn't covered in the brand surveys mentioned above, but top-ranked Rinnai also makes models that use condensing technology. Thermal efficiency is rated at 0.97, with an EF rating of 0.96 (so these water heaters qualify for the federal tax credit and other incentives). The Rinnai RC80HPe (*Est. $1,325) doesn't build in a buffer tank or recirculating pump, but a contractor should be able to add these. The maximum flow rate for this model is 8 GPM, but this will vary depending on the temperature of the incoming water.
It's possible to buy a whole-house electric tankless water heater, but they need a lot of electricity and don't provide the cost savings and efficiency of gas models. Nor are electric tankless water heaters eligible for tax credits or rebates. Most electric models are small point-of-use water heaters designed to supply hot water to just one or two faucets at a time. Reviews say these are useful to boost the main water heater for peak periods, but point-of-use water heaters can also be used alone. Since they use electricity only when hot water is actually needed, they're especially good for workshops or seldom-used rooms.
Overall, we found Bosch electric tankless water heaters receive the most recommendations in reviews. Both the Bosch PowerStar and Bosch Ariston water heaters are sized to fit under a sink. The Bosch PowerStar models have to be wired into the circuit box, while the Ariston water heaters plug into an outlet. Other differences: The PowerStar models are true tankless water heaters, while the Ariston water heaters add a tiny tank to ensure instant hot water. Owners like the way it's easy to adjust the temperature setting on the PowerStar water heaters. You can add a similar knob to the Ariston models, but it requires some do-it-yourself confidence.
Overall, though, the smaller 1,500-watt Bosch Ariston water heaters receive the best reviews. Though sold by Bosch, the Ariston water heaters are actually designed and manufactured by an Italian company, Merloni Termosanitari (MTS), one of the largest manufacturers of electric water heaters in the world. The Ariston water heaters are easy to install since they just plug into an ordinary outlet. They have storage tanks ranging from 2.5 to 7 gallons but are still small enough to fit under a sink.
The smallest model, the 2.5-gallon Bosch Ariston GL2.5 (*Est. $160) is the most popular, but owners also like the 4-gallon Bosch Ariston GL4 (*Est. $170) and the 7-gallon Bosch Ariston GL6 Plus (*Est. $200). We didn't find any objective comparison tests of the Bosch Ariston water heaters, but all three models are among the top-rated water heaters at Amazon.com, and the Ariston GL6 Plus and Ariston GL2.5 earn high praise at HomeDepot.com. At Bestcovery.com, household appliance expert Mariette Mifflin recommends the GL2.5 and GL4 as the best point-of-use water heaters, praising their ease of installation and the way they provide instant hot water. The warranty is for six years.
The 120-amp Bosch PowerStar AE125 (*Est. $650) can serve two sinks at a time, or one shower, with a flow rate of 3 to 3.7 gallons per minute (GPM). This model earns high praise from owners reviewing it at HomeDepot.com, where some owners have even replaced their tank-style electric water heaters with it. The flow rate is low for a whole household, but some owners say that with low-flow shower heads they manage two showers at the same time.
The main drawback is the extra wiring needed: three separate 40-amp double-breakers and No. 8 wire. That's not a problem for new houses, but it makes installation difficult in a lot of existing homes. At Amazon.com, fewer than half the more than 30 owners that post reviews are satisfied with this model, reporting many complaints about poor performance and technical support -- and giving it a below-average rating of 2.5 on a five-point scale. The Bosch PowerStar AE125 carries a 10-year warranty on the heat exchanger but only one year on other parts, which owners say cost a lot to fix.