One advantage is that since the tankless unit does not have a tank, there is no continuous heat (energy) loss from the large volume of stored hot water, as there is with a traditional storage type heater. Typically tankless heaters do not have standing pilot lights like tank type units, saving even more energy. There is no question tankless water heaters are more energy efficient.

Another advantage is that you have virtually unlimited hot water, you will never run out. This could be a double edged sword though, as there is a tendency for humans to use what is available. Some users might end up taking much longer showers for instance, leading to an increase in water and energy usage.

This effect was common back when the government provided large tax credits for installing solar water heaters. Homeowners believing they now had cheap hot water tended to use a lot more hot water than before the solar heaters were installed.

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A minor advantage that tankless units have over storage units is the size of the footprint. The tankless units take up less space, although I don’t think that is very important to most people.

Obviously there are some disadvantages to tankless water heaters. For one thing, they are much more expensive, and far more complex than a standard water heater. If they require repair it’s likely to be more expensive, and the parts are harder to obtain in some cases. Gas units require a large and more expensive flue, and electric units require very heavy wires because they use so much electricity.

Tankless heaters are typically turned on by a flow switch which turns the heater on when a minimum flow is reached, typically ½ to ¾ gallons per minute. This can be problematic if you need a very small flow of hot water, and can lead to wasting water. Most hot water circulating pumps don’t pump enough water to reliably activate tankless water heaters.

Using a traditional circulating pump will void the warranty on most tankless heaters, since they will cause the heater to turn on and off very frequently and far more than in typical household usage.

One of the biggest problems with the tankless heaters is the fact that they take much longer to get hot water to the fixture than traditional tank type units. You can picture a tankless water heater as a long pipe coiled up over a flame. For the water to get fully hot, it must travel all the way through the pipe. If the water starts out in the middle of the heater for instance, it will leave the heater after only being in the pipe for half the time it would need to reach full temperature. This means that it will take much longer for your water to get hot while you run the faucet waiting for it. It’s pretty clear that this will cause an increase in water being run down the drain, costing the home owner money, wasting one of our most precious resources.

There is however a way to eliminate any of the water from being wastefully run down the drain while waiting for hot water. Use a hot water demand system. A hot water demand system only turns on when hot water is “demanded”. When you are ready for your shower you push a button and the pump sends the hot water from your water heater to your fixture more quickly than if you run the shower at full blast, and the pump shuts off when the hot water reaches it. Thus you save time, water, energy, and money.

Many local water districts offer rebates for demand hot water systems, so check with your local water company, some of the rebates cover the entire cost of a demand system, so in effect, you get a free system!