Value on Demand: Top-Rated Tankless Water Heaters

Tankless water heaters are becoming more efficient than ever before. The newest condensing models emit cooler exhaust fumes, which means that vent pipes can be installed more cheaply. New installation standards also mean that you can avoid the expense of upgrading to larger gas lines, too.

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We’ve all been there: You’re the last one in line to take a shower, which is a prospect that literally can send chills down your spine.

Enter tankless water heaters, which also are known as on-demand or instantaneous water heaters. A tankless water heater, as the alternative labels suggest, provides hot water when you need it. A conventional water heater has a tank, which restricts how much hot water that it can dispense before it has to heat more water.

Tankless water heaters range in price from $170 for electric models to $2,400 for natural-gas- or propane-fueled models. Unfortunately, federal tax credits of up to $300 for tankless water heaters expired at the end of 2011, but local utility rebates still are available—some  of up to $450. (Check manufacturers’ websites for information in your area.)

Using a tankless water heater means that you’ll have enough hot water to get you through your shower regardless of how many people showered before you did, and it will use less energy to accomplish that task than will a conventional water heater. However, tankless water heaters have flow-rate limits—a drawback that conventional models don’t have. In other words, if too many people shower around the same time, they could end up with water that’s cooler than the typical temperature setting of 120 degrees Fahrenheit.

Tankless water heaters have been used widely overseas, where smaller houses can’t hold a conventional model’s bulky storage tank, but tankless water heaters are gaining attention in the United States. Manufacturers tell us that that largely is because models that are fueled by natural gas or propane now are more efficient than ever before at providing larger volumes of hot water. (Electric tankless water heaters, which typically are “point of use” for one use, such as a kitchen faucet or a showerhead, already are highly efficient—up to 99.8 percent, according to manufacturers.)

However, a tankless water heater might not make financial sense for you, depending on the size of your home and where you live.

CONDENSED VERSIONS. One of the boasting points of tankless water heaters is that they’re more efficient than are conventional models. Now, thanks to the emergence in the past 3 years of models that are condensing units, tankless water heaters are more efficient than ever before. Nine manufacturers now make condensing tankless water heaters, which are so named because the heating process produces condensation, which is discharged into a drain. The price of a condensing tankless water heater starts at about $1,070.

Manufacturers tout the efficiency of these models, which is based on their overall efficiency rating or energy factor. Energy factor is based on the amount of water that’s heated per unit of fuel that’s consumed on an average day. The statistic factors in how efficiently that the heat from the unit is transferred to the water and the loss of heat as the water circulates through the unit—the higher the energy factor, the more efficient the water heater will be. Condensing models have an energy factor of as high as 0.97, compared with the typical 0.82 for noncondensing models. That difference translates into typical savings of about $43 per year, according to Department of Energy calculations. (Conventional water heaters typically have an energy factor of about 0.60 for gas models.)

Deciding on a Tankless Water Heater

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What makes condensing tankless water heaters different from regular tankless models is that they have two heat exchangers instead of one. On any tankless unit, a heat exchanger, which is activated when you turn on hot water, quickly heats water as it is passed through. Condensing units add another heat exchanger that captures heat from the combustion gases as they exit the flue. This heat exchanger heats incoming water before it flows into the primary heat exchanger.

“You’re getting more performance using fewer Btus,” says Jason Fleming of Noritz, which makes tankless water heaters.

Any savings that you’ll see depends on the type of fuel that you use—natural gas or propane—its price and, of course, how frequently that you use the water heater. (Natural gas typically is less expensive than propane is, in part because the latter is created mostly from crude oil, so it’s subject to price increases that affect oil prices. However, propane might be your only choice if you live in an area that has no natural-gas lines.)

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