Photo Credit: Univ of Alberta Creative ServicesNext to bulding heating and cooling, water heaters are the largest energy consumers in most homes. But, with a conventional water heater, much of the energy is spent on keeping the heated water from cooling off while it sits, waiting to be used. Tankless water heaters don't have these standby losses, and can be a much more efficient choice in some circumstances.
Tankless water heaters have no hot water storage (hence tankless), but can quickly raise water temperature by as much as 50 degrees F (~30 degrees C). They can do this with a flow rate ranging from 4 gallons per minute (GPM) to as much as 9 GPM. Tankless heaters are also much smaller than conventional water tank heaters, which can be a consideration for smaller homes where space is at a premium.
Depending on usage patterns, a tankless water heater can provide hot water much more efficiently than a regular tank heater. One manufacturer's information lists an annual operating cost (based on 2004 prices) of $166 for their tankless heater versus $210 for a conventional natural gas water heater, and propane and electric conventional heaters are even more expensive to operate.