‘Tankless’ Vs ‘Storage’ Water Heater? Do the Math!


For the last few years, I’ve gotten plenty of customer calls that go something like this;
“I’m thinking about changing my water heater. Can you tell me which is better, the ‘storage tank’ style that I’ve always had or one of those new, ‘Tankless’ water heaters everyone is talking about?”

I will always try to answer “Well, I think they are both good choices really, but the real question we need to consider is not ‘Which is better’, but ‘Which is better for you.”

Both conventional ‘Storage’ type and ‘Tankless’ type water heaters have advantages and dis-advantages. Due to marketing hype, there are misconceptions about both that should be cleared up before a choice is made.

When I help customers decide which choice is best for them, I recommend three things be carefully considered:

1. Economics – all the economics of water heating…from day to day use to installations.
2. Needs and performance – the needs of the family will best fit what unit and how it performs?
3. Family/community impact – how concerned is my Customer about how their choices are affecting our planet?

There is so much that needs to be considered about each of the three that in an article like this, we can only cover one at a time effectively. This article will address the ‘economic’ considerations of heating water, and the other two issues will be addressed in later articles.

Economics – “do the math”…
Lots of marketing has been done about ‘how much more efficient Tankless heaters are than Storage water heaters”, with the implication that a lot of money can be and will be saved by ‘going tankless’. But what is almost never mentioned, is how much an average family actually spends heating their water. According to many studies, the average family will spend roughly $250 to $450 per year on hot water. (14% to 25% of their energy bill). A couple or a single person spends even less.

On the high end an average family spends about $400 a year and the average couple spends $250 a year. That breaks down to $33.33 a month for a family and $20.83 a month for a couple. (These basic estimates apply to both electric and gas water heaters here in the Pacific NW, though electric water heaters can cost $50 to $100 a year more than gas.)

The Tankless water heaters we are considering are gas, and are very efficient, some as much as 98%. That means when our average family switches from a conventional gas storage tank (existing tanks are 60% to 80% efficient; let’s use 70%), they will save 28% of what they are currently spending on heating water. In real dollars, that’s a whopping savings of $112 a year, or $9.33 a month. A couple would save $70 a year, or $5.83 a month. And again, if our average family has an electric water heater, they may save about the same amount or a little more. Not quite the giant money-saver that the hype teases us with, is it?

I am then often asked “Won’t the fact that it’s ‘tankless’ automatically save a lot?”. The reality is, if the current storage tank is inside the home and well insulated with foam, the heat and energy loss’ is minimal. Studies indicate that these foam insulated tanks indoors only lose about 3 degrees F. per 24 hours; that’s very little heat and energy lost and very little re-heating. Even if it were as much as an additional 10% or 15%, do the math; how many real dollars are saved by tankless or spent on re-heating?

Of course, the only economics we have considered are the day to day dollars spent on hot water; we haven’t even considered the cost of installations. In the Seattle Metropolitan area, the average 52- gallon Hot Water Tank can be replaced with an efficient, well insulated gas water heater for an average of $ 1,100.00, and a good 52-gallon electric water heater for about $800.00 for tank, parts and labor plus Tax and Permit. These tanks would have 6-year warranties and assumes they are replacing units that meet Code. (Please note; in April of 2015, the new Energy Code requirements come into effect, and these tank prices may increase by 20% to 30%). If Code ‘upgrades’ are needed like an expansion tank and/or seismic strapping, it can add another $200.00 to $400.00. The average storage style water heater lasts 10 to 12 years before it fails and needs replacing.

The average tankless installation in the same market is going to cost $2,500 to $4,500 for the unit, parts and labor, plus Tax and Permits, installed by a Licensed Contractor, using Licensed Technicians, with the difference in pricing based on the unit choice and installation difficulty. Most tankless units have a 15 – 20 year warranty on their copper or stainless steel heat-exchanger, with a 1- year warranty on the rest of the unit, parts and labor. How long will tankless water heaters last? In my opinion, it’s looking like at least 20-years, and possibly up to 30-years for many of the units if they are maintained properly with annual service

Speaking of Maintenance and Service Repairs, how do the tankless heaters compare to storage water heaters when it comes to those things? Both should be serviced and cleaned annually, and that Annual Maintenance will cost about the same for both of them. But –and it’s a big-but- there are 2 differences that can cost more with a tankless water heater.

The first big difference is that some tankless units have heat-exchangers that are very sensitive to hard water, and need to be de-limed every other year or so. That’s not just ‘flushing’ it like with a storage tank; it’s a 2-hour service call by a plumber. The other big difference is that if you neglect to service a tankless unit annually it will break down sooner, and could need repair as often as twice a year. Compared to storage tank waters heaters that’s quite a lot. I’ve seen storage tank water heaters go 10+ years needing only a new pilot or heating element; that’s just one repair its whole life! I do not recommend neglecting annual maintenance like that; it is not safe and the unit will not run as economically as it could otherwise. However, the fact remains that tankless water heaters can ‘get by’ with far less attention, and I have seen them have fewer repairs and less trouble.

Contrary to some of the marketing hype, I don’t recommend ‘going tankless’ just to save money. It often doesn’t save much, and the ‘Payback’ time is often 15-20 years if everything goes well and nothing unusual fails. Please remember, the above numbers are estimates. It’s very, very hard to predict what might change and/or be saved because there are so many variables, not the least of which is how the hot water is used. Sometimes, when a family gets a tankless water heater, their savings are huge due largely to the fact that they all became hyper sensitive and aware of every-single-gallon they were using, so they change their habits and use far less hot water. At the same time, their next door neighbor might have ‘gone tankless’ and their bill for heating water went way up because they started using their double-wide, jetted whirl bath tub 4 times a week now (instead of once or twice a year), because they could fill it and not run out of hot water.

All that said… economics are not really why so many people, including me, value and own tankless water heaters. Longevity, durability, the comparatively small size, and a potentially endless supply of hot water; those are the reasons folks “Go-Tankless”. We’ll began to look at some of those things next time around.
Bruce Davis Sr.
Licensed Journeyman Plumber
Licensed Electrician, HVAC/R
Electrical Administrator, HVAC/R
Certified WA State C.E.U. Instructor

Bruce Sr is President of Day and Nite Plumbing and Heating, a 60-year old family owned and operated plumbing and heating
business in Lynnwood, Washington.
Day and Nite Plumbing and Heating Inc.
16614 13th Ave. W.
Lynnwood, WA 98037


2 Responses to “‘Tankless’ Vs ‘Storage’ Water Heater? Do the Math!”

  1. You’ve made some great points. Tankless water heaters do cost a lot more themselves than their counterparts with tanks. The money saved on cost of use is pretty negligible compared to that cost. That said, they do have other advantages. I’m sure you’ll have more to say of the advantages of tankless heaters discussed in your other two articles. Thanks for the info!

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