Should you go tankless?

Tankless water heaters are catching on in the United States
as an alternative to storage tank models. Instead of
constantly heating water in a stored tank, tankless units
only heat water as you need it. Turning on your hot water
triggers an electric or gas-powered heat exchanger that
quickly heats the water to your preset temperature. There are
point-of-use models that only operate one or two fixtures, or
whole-house units that take care of all your water heating
needs. Point-of-use models are small and can be mounted under
a cabinet or in a closet. Whole-house units are also wall
mounted, saving valuable floor space.

There are many benefits to going with a tankless heater. Most
units come with a federal tax rebate of $300 and are more
efficient than storage tank models -- you can shave as much
as 20 percent from your water heating bill [source: Energy
Star]. Since tankless heaters heat water as it flows, you'll
never run out of hot water. Tankless heaters also last five
to ten years longer than a storage tank model. Electric
models don't produce greenhouse gases, and there's no
possibility of flooding due to a ruptured tank.

There are also drawbacks to tankless heaters. Natural gas
whole-house units can cost up to three times as much as
conventional heaters. Although you'll have an unlimited
supply of hot water, there are limits on volume because the
output is split between all of your fixtures. Some houses
require a larger natural gas line to supply the unit with
enough fuel, adding to the price. Further expense comes from
venting the gas or propane with pricey stainless steel tubing.
If you go with an electric unit, it may require an additional
power circuit. Gas powered models produce greenhouse gases
and require annual servicing. The time that it takes to get
the hot water from the heater to your faucet can increase
water waste.

A large whole house electric model costs $500 to $700, about
the same as a similar storage tank unit. Gas models have
a much larger price difference. A whole house gas tankless
heater can cost as much as $2,000. The storage tank
counterpart runs about $450. Installation of tankless heaters
is almost always more expensive as well.

To decide which type of heater to go with, add up the total
price of purchase and installation for the heaters that fit
your needs. Then compare that to the efficiency rating you'll
find on the yellow Energy Star sticker on the heater. The
amount of time it takes to recoup the additional expense of
a tankless heater is called the payback period. You should
also consider that a storage tank heater will need to be
replaced again in about 10 years -- you'll get roughly 15-20
years of use from your tankless model.