Tankless water heaters: they're efficient but not necessarily economical.(Cover story)

HEATING WATER accounts for up to 30 percent of the average home's energy budget. Some makers of gas-fired tankless water heaters claim their products can cut your energy costs up to half over regular storage heaters. So is it time to switch?

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Probably not. Gas tankless water heaters, which use high-powered burners to quickly heat water as it runs through a heat exchanger, were 22 percent more energy efficient on average than the gas-fired storage-tank models in our tests. That translates into a savings of around $70 to $80 per year, based on 2008 national energy costs. But because they cost much more than storage water heaters, it can take up to 22 years to break even--longer than the 20-year life of many models. Moreover, our online poll of 1,200 readers revealed wide variations in installation costs, energy savings, and satisfaction.

With the help of an outside lab, we pitted Takagi and Noritz gas-fired tankless water heaters against three storage water heaters. We didn't test electric tankless heaters because many can't deliver hot water fast enough to replace a conventional water heater if ground water is cold. Even in areas with warm groundwater, most homeowners would need to upgrade their electrical service to power a whole-house tankless model.

 
               TANKLESS WATER  HIGH-EFFICIENCY   STANDARD 
                   HEATER            TANK          TANK 
 
                                  50-gallon     50-gallon 
 
Model         Takagi  Noritz     A.O. Smith         GE 
               T-K3   N-0751M  Vertex GPHE-50   SG50T12AVH 
 
Retail price    $800   $1,150           $1,400        $480 
 
Estimated 
 
installation  $1,200   $1,200             $500        $300 
cost 
 
Annual          $320     $330             $331        $400 
operating 
cost * 
 
Energy 
savings 
(annual over 
 
standard         $80      $70              $69          NA 
tanked unit) 
 
Payback           15       22               16          NA 
period 
(years) 
 
* We used the 2008 national average energy costs of $13.65 per 1,000 
cubic feet (MCF) of natural gas and $0.108 per kilowatt hour of 
electricity. 

Our tests simulated daily use of 76 to 78 gallons of hot water. That's the equivalent of taking three showers, washing one laundry load, running the dishwasher once (six cycles), and turning on the faucet nine times, for a total of 19 draws. While that's considered heavy use compared with the standard Department of Energy test, we think it more accurately represents an average family's habits. We also ran more than 45,000 gallons of very hard water through a tanked model and a Rinnai tankless model to sim ulate about 11 years of regular use.

Here's what else we found: