When it comes to heating water for your home, you have two main options: tankless water heaters and traditional storage tank water heaters. Both have their advantages and disadvantages, and the choice between them often comes down to factors like energy efficiency, installation cost, and personal preference.
Now, this might seem counterintuitive when dealing with water heaters…
In this in-depth article, we’ll take a close look at the energy efficiency of tankless vs. storage tank water heaters, exploring the key differences, performance metrics, and long-term cost considerations to help you make an informed decision for your home.
Tankless Water Heaters: On-Demand Efficiency
Tankless water heaters, also known as “on-demand” or “instantaneous” water heaters, are designed to heat water only when it’s needed, rather than continuously maintaining a full tank of hot water. This on-demand approach allows tankless heaters to avoid the standby heat losses associated with traditional storage tank models.
According to the U.S. Department of Energy, tankless water heaters can be 24-34% more energy-efficient than conventional storage tank water heaters for homes that use 41 gallons or less of hot water daily. For households with higher hot water demands (around 86 gallons per day), tankless heaters can still provide an 8-14% energy savings.
The reasoning behind this efficiency advantage is straightforward. With a storage tank model, the water is constantly being heated, even when no hot water is being used. Tankless heaters, on the other hand, only activate when a hot water tap is turned on, avoiding the standby energy losses of a storage tank.
“Gas-fired tankless water heaters tend to have higher flow rates than electric ones,” notes the Department of Energy. “However, they can waste energy if they have a pilot light.” To maximize efficiency, look for tankless models with an intermittent ignition device (IID) rather than a continuously burning pilot light.
Storage Tank Water Heaters: Tried and True
While tankless water heaters offer clear efficiency advantages, traditional storage tank water heaters still have their merits. These tried-and-true models maintain a reservoir of hot water, ready to be drawn upon as needed.
In our testing at WaterHeaterPick.com, we found that conventional storage tank water heaters easily met our target output temperature of 120°F and provided a steady supply of hot water. The gas-powered storage tank model we evaluated earned a “Very Good” rating for energy efficiency, with an estimated annual operating cost of $245.
The electric storage tank heater, on the other hand, received a “Fair” rating for energy efficiency, with an estimated yearly cost of $580 to operate. “Electric models actually run more efficiently than gas,” explains our in-house engineer, “but the higher cost of electricity makes them more costly to operate.”
One key consideration with storage tank heaters is the standby heat loss that occurs when the water in the tank cools over time. Proper insulation and maintaining the tank at the lowest effective temperature can help minimize these energy losses. Additionally, regularly flushing the tank to remove sediment buildup can improve efficiency and extend the heater’s lifespan.
Installation and Maintenance Factors
When it comes to installation, tankless water heaters generally require more extensive work than a straightforward storage tank replacement. Gas-fired tankless models may need upgrades to the gas line and venting, while electric units often necessitate electrical service upgrades to accommodate their higher power demands.
“Manufacturers recommend that certified electricians or plumbers install tankless water heaters,” cautions our expert. “In fact, many require installation by factory-trained professionals to maintain the warranty.”
Ongoing maintenance is also an important consideration. Storage tank heaters typically only need periodic flushing to remove sediment buildup. Tankless models, on the other hand, may require more frequent maintenance, such as cleaning the heat exchanger to address hard water deposits.
“If you live in an area with poor water quality, we suggest maintenance on a tankless water heater once a year,” advises Geno Caccia, a third-generation plumber. “The cost for a professional to do this can be $300 or more.”
Lifecycle Costs and Payback Periods
While tankless water heaters offer superior energy efficiency, the upfront cost is often significantly higher than a traditional storage tank model. Our research found gas tankless heaters cost $1,250 to install, on average, compared to just $600 for a gas storage tank.
The higher initial investment can take years to recoup through energy savings. Based on our analysis, the payback period for switching from a gas storage tank to a gas tankless heater ranges from 22.5 to 27.5 years. For electric models, the payback time is a bit faster, between 12 and 20 years.
“If you have a warranty of 12 to 15 years, which is typical, it doesn’t make financial sense to replace a tank water heater with a tankless,” cautions our engineer. “The payback time is longer than the heater’s expected lifespan.”
However, the math changes if you’re building a new home or undergoing a major renovation. In these cases, the space-saving and efficiency benefits of a tankless heater may justify the higher upfront costs, especially if you can take advantage of utility rebates or other incentives.
Environmental Considerations
Beyond the financial implications, the environmental impact of water heaters is an important factor to consider. Tankless water heaters generally have a smaller carbon footprint than storage tank models due to their improved energy efficiency.
According to the Environmental Protection Agency, tankless water heaters can reduce greenhouse gas emissions by 8-14% for homes with high hot water usage, and up to 34% for homes with more modest demands.
Additionally, tankless heaters often have longer lifespans than storage tanks, reducing waste and the need for more frequent replacements. Most tankless models are designed to last 20 years or more, compared to 10-15 years for a typical storage tank heater.
When it’s time to replace an aging water heater, responsible disposal and recycling of the old unit should also be a priority. Many municipalities and plumbing supply stores offer programs to double-check that proper handling of these bulky appliances.
Choosing the Right Water Heater for Your Home
Ultimately, the decision between a tankless or storage tank water heater comes down to balancing your priorities. Tankless models offer superior energy efficiency and endless hot water, but they require a more complex and costly installation. Storage tank heaters, while less efficient, provide a proven and often more budget-friendly solution.
Factors like your home’s hot water demand, local utility rates, water quality, and available space should all inform your choice. Consulting with a qualified plumber can also help you determine the best water heater option for your specific needs and budget.
Regardless of which type you choose, proper maintenance and following manufacturer guidelines are essential to ensuring your water heater operates safely and efficiently for years to come. With the right approach, you can enjoy a reliable supply of hot water while minimizing your environmental impact and long-term energy costs.
Tip: Use insulation blankets to improve energy efficiency
