How Much Money Do Tankless Water Heaters Save?

Concerning increasing world population the natural resources are decreasing day by day. Among natural resources, water is the most precious one. Where there is no water, there is no life. In the available water resource, only 0.3% are usable for humanity, among which 70% is used directly for food production, i.e., for agricultural purpose. Compare to the world consumption; the United States use highest 23% of world electricity, 22% natural gas and 24% oil. Among total electricity production in U. S., 49% comes from coal energy. According to International Energy Agency the proven reserves of coal is around 909 billion tonnes, with 5% production growth this will support us until 2051. The natural gas will help us up to another 100 years with the current rate of consumption. So saving energy is a crying need today.


It’s time to concentrate on your home energy consumption for the sake of saving the environment as well as cut down your utility bills. To do this, you have to use the star rated appliance and optimize your use of water, electricity, and gas. According to ENERGY.GOV Info-graphic by Sarah Gerrity water heating is the 2nd most significant expense, accounting 14-18% of your utility bills. To cut your expenditure and lessen the energy usages Tankless water heater will be the best option for you.

To understand the saving we have to know about the fundamental difference between old tank or storage water heater and modern Tankless or on-demand water heater.

Storage/ Tank Water Heater

Tankless Water Heater


The heater usually holds 20-80 gallons of water and heat up the whole water and keep it warm until it needs for use.

The Tankless heater heat water during flow through a device by using gas or electricity on-demand basis, no need to store water for a long time.


It will occupy large space inside your home

Tankless water heater needs minimal space to install, and even you can set it under your kitchen cabinet.

Life Span

10-15 years

15-20 years


- Low upfront cost

- easy installation

- Get enough flow for multiple uses like shower, dish-washing, cloth washing

- Supply hot water constantly

- 8-34% energy efficient than storage water heater

- You may save about $100 per year based on your consumption


- Wastage of power due to keeping the water warm in the storage tank

- Need to wait for a more extended period after start the switch and get the hot water ready for a shower

- High upfront cost of the Tankless water heater installation by a skilled plumber

- the limited flow rate of hot water hindered the simultaneous use of multiple appliances like dish-washing, cloth washing, kitchen use


Av. Price of the storage water heater is $750

Av. Price of the tankless water heater installation is $1063

"Home is where our heart is." It is a great idea to make this lovely home energy efficient. Not only for ‘Green Movement,' but also it will help you to save electricity and gas bill.

Infographic by Sarah Gerrity

Infographic and Projects to Keep Your Energy Bills Out of Hot Water

water Heaters 101

How much money can you save by buying Tankless Water Heater?

First of all the significant advantage of Tankless water heater is that there is no need to store water, which is the main reason behind the saving of energy. In the tank water heater, you have to hold about 20-80 gallons of water (based on your heater capacity) and heat it up to reach the desired temperature (120 - 140° F). Once started the process of heating it will continue until the end of the use. On the other hand, in Tankless Water Heater cold water flows through a device and supply hot water continuously whenever required. This process helps to save energy and according to U. S. Department of Energy estimation gas Tankless Water Heater can save an average $108, and electric Tankless can save $44 annually.

As per estimation by Energy.Gov average water use per day per household is about 64 gallons. To heat this water, they spend around $400 - $600 per year. The efficiency of Tankless Water Heater over storage type heaters is 24 – 34%. By using Tankless Water Heater, you can save $96 - $200 per year (based on usage, types, and capacity of the heater).

Related15 Ways to Save on Your Water Heating Bill

Potentiality against Higher Upfront Cost and Extra Lifespan

There is a myth that the upfront cost of Tankless Water Heater is almost double than traditional water heater due using luxury high-end technology. According to 'Angie's List' the average price of a premium Tankless Water Heater is about $1063 with installation a full 8-10 hours by a professional plumber. You also get a portable Tankless Water Heater by spending as low as $100 which is easy to install. Whereas, the average cost of traditional storage water heaters is about $750. However, according to Larry Murdock (a water heater specialist), the warranty for a Tankless Water Heater is 15 years and six years for tank one. Also, there is no breakdown issue for Tankless. So you will get extra nine years life for Tankless which will return you minimal $100 x 9 = $900 approximately.

Energy Efficiency of a Tankless Water Heater

To maximize the energy usage, we have to think about energy efficient appliances. The energy efficiency determined by the Energy Factor (EF) which is the amount of hot water produced per unit of fuel consumed. This factor depends on –

  • Recovery Efficiency – efficiency of transferring heat from fuel to the water to heat it.
  • Standby losses – percentages of heat loss per hour from stored water.
  • Cycling losses – the loss of heat while circulating the water between tank and pipe.

The higher Energy Factor leads more efficient water heater. Usually, the Energy Factor for tank water heater is 0.60 and 0.82 found in Tankless one. The higher Energy factor means, the lower operating cost of fuel. 

Tax Saving

According to Federal Tax Credit if the Energy Factor (EF) remain minimum 0.82 than that device (gas, oil, and propane operated Storage and Tankless Water Heater) can save $300. However, it may vary from state to states.

Water Saving

To get hot water at the point of the faucet from tank water heater you have to wait for few moments as it needs to travel a long pipe. Before coming hot water it has to drain out cold water inside the tube, which wastes totally. On the other hand, you can get instant hot water from Tankless one as it set just before your faucet, which helps you to save water and time also.

Final Verdict

You will get hassle free hot water flow as per requirement from Tankless Water Heater. Because of easy maintenance and less costly spares. Also, almost all parts of Tankless are replaceable and available in the market. Based on above discussion it is clear that in spite of higher upfront cost if you think for long run, Tankless Water Heater is the best option.

  • Updated 10 months ago
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