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Reuben Saltzman

My Beef With Tankless Water Heaters

Reuben's BeefTankless water heaters are sexy.  They take up less floor space, they provide an endless flow of hot water, they’re environmentally conscious… and they’re really expensive.   If you enjoy showing off your home’s mechanical equipment to your friends or you’re in to being green at any cost, get a tankless water heater. On the other hand, if you’re in to saving dough, doughn’t buy a tankless water heater.

A tankless water heater will not save you money.

I stopped by my local big orange box the other day to check up on the latest sales pitch for tankless water heaters.  The brochure for tankless water heaters said they can save up to 25% in fuel costs.  That sounds great, but lets examine what that means. I spend about $12 per month for natural gas during the non-heating season, if I don’t include my fixed fuel costs, such as the ‘fuel delivery charge.’  This figure includes the gas for my water heater, clothes dryer, and oven.  Just for the sake of argument, lets also pretend that I don’t have a family of four who uses the clothes dryer all the time, and I don’t use the oven all the time.  We’ll pretend that I spend the full $12 / month just  to keep a 50 gallon tank of water hot all the time.

Fuel savings

If I save 25%, I’ll save $3/month, or $36/year, or $720 over a period of 20 years.  My standard 50 gallon water heater has a 12 year warranty, and so does the tankless water heater I looked at… but the life expectancy for a tankless water heater is apparently 20 years, so I’ll give it the benefit of the doubt and assume it will last that long.

Sizing a tankless water heater

The brochure on tankless water heaters said I should buy the largest tankless water heater they make, based on the number of bathrooms I have in my house – three.   The particular model is the ECOH200DVN.  This unit boasts a 9.5 gallon per minute flow rate at a 35 degree rise in temperature.  With an average ground water temperature of 45 degrees here in Minnesota, that would give me… 80 degree water.  Ha!  That’s useless.  To get 120 degree water, my flow rate would be reduced to 5.1 gallons per minute.  Maybe I’ll need two water heaters. For the sake of argument, lets just say I only need one.  This unit retails at my local Home Depot for $1,427.00.

Installation costs

Plumbers charge a lot more money to install tankless water heaters, because they’re a lot more work compared to traditional storage tank water heaters.  The water supply pipes will need to be re-routed, the venting will need to be completely redone, the unit will need to be mounted on a wall, an electrical outlet may need to be added, and the gas pipe may need to be re-done.  Just for fun, let’s say you were able to find a plumber to do all of this for $1,000.   A traditional water heater might cost up to $500 in labor for replacement, so we’ll assume you’re only spending an extra $500 in labor for a tankless water heater.

The bottom line

A traditional 50 gallon water heater with a 12 year warranty retails for $559 at my local Home Depot.   I would spend an extra $868 to buy a tankless water heater, and at least an extra $500 in installation costs, making this unit cost at least $1,368 more than a traditional water heater.  I would spend at least $1,368 for the potential of saving $720 over a period of 20 years.  If I ever buy a tankless water heater, I won’t be doing it because I’m hoping to save money.

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No responses to “My Beef With Tankless Water Heaters”

  1. Reuben
    October 18, 2011, 8:17 am

    What about failure costs? When a tankless unit fails, it just kind of stops working, right? When a 50 gallon tank fails, you might end up with 50 gallons of water on your basement floor (plus any running water that ends up there as well between the time of failure and the time when you notice it).

  2. Reuben Saltzman
    October 19, 2011, 5:45 am

    @Reuben – when most traditional water heaters fail, you’ll get a tiny little leak. The catastrophic failures are few and far between.
    @Mike – I’ve heard the same. I’ve also heard that they’re supposed to be serviced annually for their warranties to be in effect… but I haven’t researched that yet. I plan to though.
    @Larry – the water heater I listed in my blog will also heat 40 degree water to 120 degrees almost instantly – you just don’t get as much water flow. I suspect the water heater that you have has a similar flow rate as the one that I used as an example. What model of tankless water heater did you buy? I’m glad to hear that you’re happy with your tankless water heater. I’m that person who loves to show off their home’s mechanicals, I love the idea of having a tankless water heater, and I’ve been flirting with the idea of installing one for the last ten years… but it still hasn’t made financial sense for me yet.

  3. Mike
    October 18, 2011, 2:03 pm

    I hear they are prone to clogging up easily as well. Great write up!

  4. Larry Cruse
    October 18, 2011, 2:32 pm

    I don’t doubt your numbers, but I suspect you looked at a limited range of tankless heaters. Our experience is contrary to your findings in almost every way. It heats 40 degree water to 120 degrees almost instantly. We are easily saving the 25% in energy costs and the original investment difference between a top of the line replacement 50 gallon standard heater was about $200 and the installation costs were minimal.

  5. Jim Lanning
    October 19, 2011, 10:40 am

    I’m sure your math is correct and that buying tankless isn’t going to save $$ over the life of the water heater …

    What really frustrates me is the one-sides argument about money and no mention on the resource impact or the environment – what if EVERYbody had a tankless water heater and used less gas … That would be a GOOD thing because gas is a non-renewable resource and I think that tankless waterheaters can also be electric. I’m sick & tired about hearing the $$ calculations without any consideration on the environment or resources. We will never go ‘green’ as long as people only think about $$ …

  6. Reuben Saltzman
    October 23, 2011, 6:03 am

    Hi Jim,

    You’re right, this blog post really only discussed whether or not a tankless water heater is a worthwhile financial investment. I may write a follow-up post discussing a few other pros and cons.

    – Reuben

  7. Daniel Rogers
    October 24, 2011, 2:16 pm

    energy efficient systems aren’t designed to conserve money, they conserve energy usage. It’s like hybrid cars. You’ll save on gas mileage but that savings is far swallowed up buy the higher sticker price. But don’t feel too badly because mother earth appreciates it.

  8. Reuben Saltzman
    October 24, 2011, 7:20 pm

    Good point, Daniel. I’m writing a follow up post to cover a few other points that were brought up – I’ll post it tomorrow.

  9. Tankless Water Heaters - A Few More Things to Consider | Structure Tech Home Inspections
    October 25, 2011, 3:46 am

    […] last week’s blog post, I discussed the amount of money I might save by having a tankless water heater installed, and I concluded that I would never see a return on my investment.  I received a lot of […]

  10. Jim
    November 4, 2011, 2:53 pm

    What about the newer direct vent (‘condensing’) water heaters which appear to use similar technology but in a more conventional package? At first glance they seem to address some of these concerns. Just beginning to learn about these as a possible solution to once again using a conventional water heater – My house has inadequate ‘replacement air’ options, so I like the idea of the fully enclosed (direct vent) system. Thoughts?

  11. iHeater
    November 5, 2011, 12:04 am

    Thanks for writing so much on water heater, I am sure I got what I was searching.

  12. Carlos
    July 13, 2012, 7:46 am

    You are correct on your write up , if you are comparing going tankless from a 50-60 gallon tank heater. The main reasonms for going tankless are basically 3 of them, the frst one being Energy savings and a top gas tankless can save you up to 50% not 25%, but 50% off your water heating bills. the second reason for going tankless is not running out of hot water, so if you have a tank heater now, the only option is to increase your tank heater from a 50-60 gallon to an 80mgallon tank heater and these average in price from $900-1200.00 So cost is now equal. Installation of an 80 gallon tank will require in most cases upgrades to your gas supply line to 3/4″ and venting to 4″, so cost is now almost equal. and then the final one Space saving. Keep in mind that a tank heaters average life expectancy is that of 6-7 years , a gas tankless is 20 years, that is 2 to 3x that of a tank heater. So at the end of the day, Going tankless cost will average that of an 80 gallon. So if you do the math Going Tankless will save you money, offer you unlimited hot water and space savings. You need to consider all the facts before making assumptions or off the wall calculations. The facts.

  13. Reuben Saltzman
    August 9, 2012, 3:49 am

    Carlos – I see you represent “Ecosmart” – http://www.ecosmartus.com/ .

    1. Yours is the first web site I’ve seen that advertises savings of 50%; how can your company offer 50% savings when all of the other large, well known manufacturers only claim up to 25% savings?

    2. You claim that increasing the water heater size is the only way to get more hot water out of your water heater, but that’s simply not true. You could also install a tempering valve on your existing water heater. I wrote about this here http://www.structuretech1.com/category/water-heater-size/ and here http://www.structuretech1.com/category/water-heater-temperature/.

    You’re also skewing the numbers for water heater life; I don’t know where you’re writing from, but here in Minnesota water heaters typically last 10-15 years. Standard tank warranties are for 6, 9, or 12 years.

    3. Yes, you’ll save space with a tankless water heater.

  14. David
    September 17, 2012, 9:11 pm

    You should also consider the $400 rebate from Xcel for tankless water heaters in your cost calculation.

  15. Reuben Saltzman
    September 18, 2012, 3:55 am

    David – I wrote this post in 2011. Xcel’s rebate program began January 1st, 2012. http://www.xcelenergy.com/Save_Money_&_Energy/Find_a_Rebate/Water_Heater_Rebates_-_MN

    Good point though. That rebate could certainly be enough to change someone’s mind.

  16. mike
    November 6, 2012, 9:34 am

    I appreciate this discussion. I own a tank type heater now and have considered going tank-less, but after reading all this I think I’m going to stay with my old system, its about 7 years old now and works just fine. I’m in Virginia so long periods of cold weather are not something we deal with, nor are power outages a very regular occurrence, and since I’m on municipal water system, I still have pressure when the power is out, thus still have hot water to use, although we might have to shower by candlelight!
    The anode rod was changed in my heater about 2 years ago, and I think that’s something I’ll be doing about every three years from now on. As to the environmental aspects, to each his own, but I will vote my wallet EVERY time on these issues, and quite frankly we have more natural gas available than even coal, and its clean and very efficient, so I don’t see the need or imperative to even let that enter into the discussion, it seems to me that buying one of these units is a personal decision based on not only pocketbooks, but some vision of morality, which is pretty silly in my mind. Planet’s been here for 4.5 billion years, the planet will be just fine no matter how we heat our water 🙂

  17. Ed
    February 27, 2013, 4:29 pm

    You are not comparing apples to apples. a 50 gal. tank is not adequate for a household of four with three bathrooms and laundry. You would need a 90 gal + tank and you would still have a limit on the amount of hot water. If you calculate the added cost of the larger size tank (tanks take a big cost jump after 65 gal.) and the added cost in maintaining a desired temp (a temp.that will prohibit the growth of bacteria, lets say minimum 130 degrees) you would realize that the costs are not that far off.

    There is also another factor you have forgotten, the rebates and federal tax credits. If you purchased a 9.5 GPM and it is a new model with a high efficiency you will get an $800 rebate from the gas Co. and a $300 fed tax credit! If you factor everything in the numbers defiantly favor a tankless system.

  18. Reuben Saltzman
    February 27, 2013, 8:31 pm

    Ed – a 50 gallon gas water heater is fine for a family of four.

    As for the rebates, there is no such thing as an $800 rebate here in Minnesota. I mentioned the rebates in this follow-up post – http://www.structuretech1.com/2011/10/tankless-water-heaters-revisited/

  19. Nelson Hammond
    March 7, 2013, 12:46 pm

    I have had a tank-less water heater in my house for a year now. I love it works great. Again someone talks crap about something they have never used/installed in there house.
    How can you do this without doing it? then talk about it! No wonder why people are confused

  20. Reuben Saltzman
    March 7, 2013, 1:47 pm

    Nelson – do you disagree with anything I wrote? Did I give any information that wasn’t accurate?

  21. John Hill
    March 13, 2013, 11:01 pm

    I happened upon this site trying to learn if others have had my experience, this is a cautionary tale (well I wish it were a tale as that implies its made up, sadly this is true) We live in Washington DC, small row house no basement. We moved our HVAC to the roof to cut out a utility closet to renovate the kitchen, at the time we went tankless to save space and this is located in a second floor laundry room. This was 6 years ago and we loved our Rinnai R53 tankless, saved space and money and we felt all good and green. Now all of a sudden it starts making this loud noise when you turn on the hot water. I call Rinnai they give some local service people (plumbers) to call they come out $75 (reasonable) tell us it’s the heat exchanger and now unit is even dripping some water, heat exchanger under warranty for 10 years so I’m thinking, oh good! No it’s bad, the parts under warranty not labor. He tells me it’s going to be $1300 to put in! I say no and start calling other plumbers, all come in around $1300 to $1500. The R53 at the time cost us $1200 plus install labor. So I’m still battling Rinnai to help cover some cost or give me a deal on a new unit, or work something out. I know it’s an imperfect world and things go wrong but this is crazy money for something that was promoted as lasting 20 years and saving us money. Not designing the unit to have the heat exchanger easily serviceable renders the part warranty useless. I Hope Rinnai steps up and takes care of this – I want them to be a better company and this technology is good for the planet so I hope hav the sense to not turn off customers who have been all for it. You can probably tell I can go on and on and on. So frustrating, I’m still hoping for an affordable outcome.

  22. Ron Reitz
    June 19, 2013, 7:44 am

    I had a tankless heater installed for 6 months and have had constant problems with sediment clogging all shower heads and airators. Do you know what that might be about?

  23. Karl Albrecht
    July 17, 2013, 11:42 am

    Ron,
    I live in a very hard water area and I too have a fairly new electric tankless unit. My old water heaters would only last a few years and the warranty does not cover lime or scale build up. I chose this product because their claim of no lime or scale build up and after almost 2 years I have had no clogs in any part of my system. My system uses infrared to heat water and it’s almost silent. The water flow is a little less then what I prefer but I can fill my Jacuzzi tub with hot water (which I could never do before) for my wife and then take a hot shower and never run out of hot water. Probably the best new thing I bought for this old house and it’s supposed to be maintenance free. I haven’t had to touch it yet. I think your getting a scale build up in your system and if it’s white it’s probably calcium. I had the same problems with my old system.
    Just my thoughts.

  24. Kellie
    September 2, 2013, 7:40 am

    DO NOT BUY A TANKLESS HOT WATER HEATER!! THEY ARE A POS AND COST MORE MONEY.
    We bought one about 5 years ago and after the first year the water would turn FREEZING COLD while in the shower or washing clothes etc. so then you have to reset it or have someone do while you are in the shower and if no one else is home, well, sucks to be you then. going on 5 years now with it the hot water issue has gotten worse. You go down and reset it come back up to only find that it didn’t reset or it gets hot and then minutes later back to the same issue of running down stairs to reset it again. We have a bosch that cost us about $1200, hubby installed so we saved money there, but have lost lots of pennies due to the hw issue. and not to mention i have to let the water run that seems like for SEVERAL minutes to get it hot and on top of that going through the hw issue all the time. no money saved there. We are going back to a regular hot water heater. should have known, like everything else, the old stuff is always the better stuff. all this technology gets you know where, but broke, just like they want us.

  25. Karl Albrecht
    September 2, 2013, 11:28 am

    Kellie,
    I researched my unit before I bought and Eemax and Bosch have the worst records. Every electric unit operates exactly the same except the one I chose. I chose it because it does not use a metal rod to heat water and it claims to never rot out or need maintenance. So far, so good. Look them up if you want to replace yours. Don’t give up, just get better technology. Notec global is the one I bought, and it’s way cheaper than the Bosch you bought.
    Just an FYI

  26. Dane Alberty
    September 21, 2013, 12:31 pm

    I bought a Rinnai R53 tankless about 7 years ago to replace the tank heater that burst and ruined our kitchen floor in our manufactured home. What I noticed about this Rinnai is that it does not regulate the hot water that is fed into it during the summer. If you live where the water is warm-hot in the summer don’t buy this unit. We paid about $2400 installed and it works great in the winter but as I have found, many other people are experiencing the same issue. I should have looked into a solar heater for the summer months, I guess.

  27. Harold
    December 6, 2013, 1:07 pm

    We have owned several tankless water heaters in Wisconsin and Arizona. We’ve had problems with them but, have been satisfied with them overall. We may replace our tank heaters in our current house with tankless when they need replacement.

    In Wisconsin, we had some problems with keeping the tankless going in one house. We had to figure out the problem with the assistance of the manufacturer but we did and the tankless worked well for years. One tankless froze and a couple of pipes cracked. We had to replace a couple of parts which was easy to do and repair the plumbing. Again an easy fix.

    In Arizona, we installed a tankless system to replace a solar system that failed. Both systems had scale issues. We had a problem with the tankless cutting out on us like Kellie did but solved the problem, again with the help of the manufacturer.

    We mostly installed the systems ourselves. Most were natural gas which does work better than electric.

    The problems, while frustrating, were sporatic and we’ve had similar problems with tank systems. Most of our tankless were purchased for less than full retail and, by installing ourselves, probably saved us money. But the convenience of having hot water always available no matter how many people had to take showers makes tankless a far better deal. We also installed pumps to draw hot water to the faucet so that we wouldn’t have to turn the faucet on and let it run until the hot water reached the faucet.

  28. Karl Albrecht
    December 6, 2013, 2:17 pm

    I must of set this up because I just got an email on this.
    My manufacturer emailed me a few months ago on their new products and they now have electric point of use units. You can’t get thos in gas. I bought 2 for under 500 bucks a small one for my bathroom sinks and a larger one for our kitchen sink. The small one plugged into a standard 120v 20a plug I tapped off of my gfi on the sink. Easy install and I don’t have to wait for hot water or use a recirc pump which turned on my big 60amp unit to rinse my hands.
    The other a 7kw is mounted under our kitchen sink and feeds the sink and dishwasher. I have a raised floor so my power run was easy.
    I now use the least amount of power, wasting no water, and getting what I want when I want it. These are all electric and since I have power panels on the roof, I literally get free hot water and love it.

  29. adam
    December 31, 2013, 2:01 am

    NO wonder people say Americans are math-challenged. If a tankless heater does last 20 years long, while a tank one lasts 12 years, then you have 8 additional years’ service from the former! This means that you save additional money, besides the $720 from fuel saving, by not having to install another heater in the 13th year!

  30. Reuben Saltzman
    December 31, 2013, 4:15 am

    @adam – so add 40% of the standard water heater replacement cost into the equation to match the added life. $400. Still no savings.

  31. adam
    December 31, 2013, 8:42 am

    @Reuben
    Thanks for your reply, but sorry the math is still wrong.
    First, since a 12-year standard water heater lasts roughly 12 years, so the additional 8 years is 8/12=66.7%, not 8/20=40%, of the heater life.
    Second, you need to factor in the purchase price of a new tank as well as another installation.

    Once you take these into account, I am sure you will see some savings from tankless, assuming if a tankless can indeed last 20 years (I admit this is a big if). By the way, today is the last the day to make a purchase to qualify the tax rebate. Happy New Year!

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