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A tankless water heater heats water flowing through it directly, immediately converting the cold water into hot water. Because the water is heated directly in the pipes, the need for a storage tank is eliminated.

Unlike a typical storage type water heater that collects and heats water regardless of it being necessary or not, a tankless water heater starts heating only when a hot water faucet is turned on.

For the above-stated reasons, tankless water heaters are also known as instantaneous, flash type, continuous flow, instant-on, and on-demand water heaters.

Tankless water heaters are extensively used in Europe and Japan. The US has seen a growth in demand for tankless water heaters in recent years.

There are various factors that have attributed to the popularity of tankless water heaters. But at the same time, tankless water heaters also have their limitations.

Let us take a look at the pros and cons of having tankless water heaters in our homes.

Pros of Tankless Water Heaters – Why Buy Them

Here are the key reasons why you should consider buying a tankless water heater – 

1. Energy Efficient than Tank Types

Tankless water heaters are significantly more energy-efficient than storage tank-type water heaters. This is mostly due to the fact that tankless water heaters work on an on-demand basis.

On average, for a house spending 41 gallons or less water per day, tankless water heaters are 24% – 34% more energy efficient.

A household that uses much more water, around 86 gallons per day, tankless water heaters can help save about 27% – 50% energy, compared to typical reservoir type water heaters.

2. Eliminates standby heat loss

Standby heat loss is the term used to describe the energy that goes to waste when the water in a storage tank heater is continuously heated, even when hot water is not being used.

This heat loss is eliminated in a tankless water heater.

The standby heat loss in a storage type water heater operating on gas is 350 – 500 BTU per hour, and one operating on electricity is 150 – 200 BTU per hour.

The standby heat loss associated with a tankless water heater is almost 0 BTU.

3. Compactness and Ease of Mounting

Due to the absence of a storage tank, tankless water heaters are economic of space. The reservoir type water heaters are typically 2 feet in diameter and almost as tall as an adult.

The large size of tank-style water heaters makes their placement in a household limited to the basement or any other infrequently accessed room spaces.

One need not worry about finding a place to install tankless water heaters as they can be easily mounted on any wall.

This eliminates wastage of floor space and their small size allows them to be fixed in garages, basements, storage rooms, etc.

4. Time Saver and Conserves Water

Due to the compact nature of tankless water heaters, they can be installed closer to the points of water usage.

Tankless water heaters dedicated to only a single application can also be installed.

When installed near the hot water faucets, once in use, the time taken for hot water to come out of the taps is reduced. At the same time, the amount of water wasted is also reduced.

5. Unlimited Capacity

Storage tank water heaters can hold only a certain amount of water at a time. Typically their capacity does not exceed 40 gallons (gas type) or 53 gallons (electric).

This limitation can be avoided by the use of a tankless water heater which virtually has unlimited capacity due to its ability to heat water instantly as required.

6. Lasts longer

The average life expectancy of a tankless type water heater, when maintained properly is 20 years.

Where a storage type water heater can be in operation for about 12 years, a tankless water heater can last up to 9 years longer.

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Cons of Tankless Water Heaters

Here are a few limitations of the tankless water heaters – 

1. High initial cost

The cost of purchase and installation of a tankless water heater is quite high in comparison to that of a tank-style unit.

A typical tankless water heater costs about $750 – $1800. This is pretty expensive when compared to a storage tank-type water heater which costs about $312 (electric type) or $337 (gas type).

The high cost of purchase is one of the most prominent reasons hindering the expansion of the tankless water heater market.

2. Installation changes

While the tankless heater itself is compact and easy to install, the supplementary changes required are quite inconvenient.

The first one to look at is plumbing. Installation of a tankless water heater demands some major plumbing changes. This becomes more difficult if tankless water heaters dedicated to certain applications are being installed.

In case of a gas tankless water heater being installed indoors, proper vents have to be built. If venting fails, combusted air containing toxic Carbon Monoxide might end up being trapped in the house.

An electric tankless water heater also requires a major upgrade of the electrical capacity of the house, which can be quite expensive.

3. Limited flow rate

The typical output hot water flow rate of a tankless water heater is 2 – 5 gallons per minute. A gas tankless water heater has a higher flow rate than its electric counterpart.

However, even with the increased flow rate, the tankless water heater might struggle to meet the hot water demand if multiple appliances use hot water simultaneously.

This problem becomes more noticeable when large applications such as dishwashers and hot water tubs use hot water.

The problem of the limited output of a tankless water heater can be overcome by installing two tankless water heaters consecutively or by dedicating a tankless water heater to certain points of usage.

This is, however, a very expensive process.

4. Gas tankless water heaters are relatively inefficient

While it is true that tankless water heaters are extremely energy efficient, this claim might not hold true for all gas tankless water heaters.

Some gas tankless water heaters have a pilot flame that uses up fuel even when the heater is not in use. This continuous usage of fuel offsets the standby energy losses caused in storage type water heaters.

This energy wastage can be avoided by opting gas tankless water heaters that do not have a pilot flame. Instead, these heaters have an Intermittent Ignition Device (IID).

The IID ignites the fuel only when water flows through the heater pipes, which is when the flow sensor is activated.

5. Calcium deposits from hard water considerations 

In areas where only hard water is available, the continuous heating of water can result in the formation of sediments, mainly calcium salts.

These mineral salts deposit in the bends and valves of the pipes.

When such deposits are left unnoticed for very long, the tankless water heater unit might develop some issues.

Blockage of water flow and corrosion of metal parts in the plumbing are the two most common problems related to calcium salt deposition.

One has to make sure that the tankless water heater is free of such deposits by proper maintenance. These problems can also be avoided by installing a hard water softener preceding the water heater.

6. Instant heating requires a high energy rate

It is evident that tankless water heater heats water immediately as it passes through the unit. This instantaneous transfer of heat requires a high energy rate.

As seen already, an electric tankless water heater has a lower output flow rate than a gas tankless water heater. This makes an electric tankless water heater inadvisable to be used in extremely cold regions.

7. Freeze protection

The compact size of the tankless water heaters makes their installation possible at any point in the house.

In the southern states of the US, tankless water heaters are even mounted on the external walls of houses.

When installing them on the outside, it is important that the heater and its pipes are well insulated and protected from the extreme cold during the winters.

Without insulation, water in the external pipes might freeze, resulting in a block.


We have seen how a tankless water heater can be extremely efficient over a long period of time.

Apart from saving money on operation and maintenance, these heaters also help in conserving water and energy in the long run.

Tankless water heaters have numerous advantages, however, their limitations can definitely not be overlooked.

Unless installed, operated and maintained properly, the limitations of tankless water heaters might overrule its advantages by a significant margin.

One must consider various factors such as locality, annual weather, type of source (gas or electric) and water usage before installing a tankless water heater.


What is the biggest advantage of a tankless water heater over a tank type heater for a user?

The most important advantage is the endless supply of hot water for as long as the hot water faucet remains on. In a tank-type water heater, once the reservoir is depleted of water, one must wait until it fills up for hot water to be available again.

Will a tankless water heater help save money on the utility bills?

Significant savings on utility bills can be achieved using tankless water heaters. This, however, depends on several variables. Due to an unlimited supply of hot water, a person might end up taking longer showers and eventually, this will cut into savings.

The costs of natural gas, propane, and electricity vary across the US, and this factor also needs to be considered before purchasing a tankless water heater.

Apart from these, most of the manufacturers claim that 25% – 50% of energy can be saved with the use of tankless water heaters.

What happens to a tankless water heater in the event of a power outage?

A generator is the only way to keep a tankless water heater running during a power outage.

A gas-type tankless water heater also requires some amount of electricity to keep the control circuit in operation. So, a generator is necessary for a tankless gas water heater as well, in the event of a power outage.

Which type of tankless water heater should I choose for my house?

A propane or natural gas type electric water heater can provide hot water for an entire home. Electric tankless water heaters can be used in small houses, vacation homes, etc. They are also suitable for providing dedicated hot water to a single application.

ReviewsWorthy Team

Our team consists of enthusiastic and passionate people from different fields and experience. Some are geeks and spend most of their time among gadgets while others love nature and are always on the move! We spend 10s of hours researching and writing on each topic. The articles are then quality checked by our editors. View our "About us" section for more details about process and team.

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