Tankless Water Heaters - A Few More Things to Consider

In last week’s blog post, I discussed the amount of money I might save by having a tankless water heater installed, and I concluded that I would never see a return on my investment.  I received a lot of good feedback from that post, both for and against tankless water heaters.  I thought it would be worth bringing up a few few of these points in another post.

Pros

• You can’t put a price tag on going green.  There’s no dispute about this – tankless water heaters use less energy.  Doing the environmentally responsible thing doesn’t always have a measurable return on investment.  I mentioned this last week, but only briefly.   Not everything we spend money on will give us a return on our investment – we all know that.   After all, what’s the payback period on a sofa?
• Tankless water heaters make sense for a cabin / vacation home.  Traditional water heaters have a ‘vacation’ setting, but I’ve heard it’s a bad idea to use this setting, because it greatly increases the potential for legionella pneumophila growth.   Having a tankless water heater installed in one of these settings would result in much more than a 25% fuel savings.
• Energy Star Tax Credit.  This $300 tax credit which includes tankless water heaters, expires December 31, 2011.   You can read about it here - tax credit.  I’m guessing we’ll see another one show up when this one ends.
• Fuel costs will continue to rise.  As we all know, fuel costs continually increase.  If fuel costs tripled in the next 20 years at a linear rate, a tankless water heater would actually give me a return on my investment, using the numbers from the example last week.

Cons

• Low water flow = no hot water.  If there isn’t enough hot water flow, a tankless water heater just won’t turn on.  One person even commented that they had to turn on the hot water faucet at their bathroom sink and leave it on the entire time they took a shower, or they couldn’t get hot water.  For instance, Rinnai tankless water heaters need at least .6 gallons per minute, Bosch units need .65 gallons per minute, and Rheem at least .4 gallons per minute of hot water flow to kick on.
• The cold water sandwich.  If you think gefilte fish sandwiches sound bad, just try one of these.  The cold water sandwich effect is something that happens with every tankless water heater.  When the faucet is turned on, off, and on again, you’ll end up with a slug of cold water interrupting your hot water flow.  Some tankless water heaters require the call for hot water to last for at least three seconds before the burners turn on, so there can be several layers of hot and cold water in the pipes.  This doesn’t exist with traditional water heaters.  You can read more about this at Rinnai’s web site– they claim to have nearly eliminated the cold water sandwich, but not completely.
• The long wait for hot water.  I already have to wait for approximately forever to get hot water at my kitchen sink, but the wait would be even longer with a tankless water heater.  One interesting solution that I heard a plumber mention was to install a dedicated 3/8″ supply line to his kitchen sink from the water heater.   He claimed that this still provided just as much water flow, and made the wait much shorter.  I’ve considered doing this at my own house, although this is technically a code violation.

For me, a tankless water heater doesn’t make sense just yet.  I’m waiting for the price gap between tankless water heaters and standard water heaters to get a little smaller.  I have the temperature cranked up on my water heater with a tempering valve installed, so I never run out of hot water.  Maybe by the time my kids are teenagers I’ll have a different opinion of tankless water heaters.

Reuben Saltzman, Structure Tech Home Inspections - Email - Home Inspector Minneapolis

    

My Beef With Tankless Water Heaters

Tankless water heaters are sexy.  They take up less floor space, they provide an endless flow of hot water, they’re environmentally conscious… and they’re really expensive.   If you enjoy showing off your home’s mechanical equipment to your friends or you’re in to being green at any cost, get a tankless water heater. On the other hand, if you’re in to saving dough, doughn’t buy a tankless water heater.

A tankless water heater will not save you money.

I stopped by my local big orange box the other day to check up on the latest sales pitch for tankless water heaters.  The brochure for tankless water heaters said they can save up to 25% in fuel costs.  That sounds great, but lets examine what that means. I spend about $12 per month for natural gas during the non-heating season, if I don’t include my fixed fuel costs, such as the ‘fuel delivery charge.’  This figure includes the gas for my water heater, clothes dryer, and oven.  Just for the sake of argument, lets also pretend that I don’t have a family of four who uses the clothes dryer all the time, and I don’t use the oven all the time.  We’ll pretend that I spend the full $12 / month just  to keep a 50 gallon tank of water hot all the time.

Fuel savings

If I save 25%, I’ll save $3/month, or $36/year, or $720 over a period of 20 years.  My standard 50 gallon water heater has a 12 year warranty, and so does the tankless water heater I looked at… but the life expectancy for a tankless water heater is apparently 20 years, so I’ll give it the benefit of the doubt and assume it will last that long.

Sizing a tankless water heater

The brochure on tankless water heaters said I should buy the largest tankless water heater they make, based on the number of bathrooms I have in my house – three.   The particular model is the ECOH200DVN.  This unit boasts a 9.5 gallon per minute flow rate at a 35 degree rise in temperature.  With an average ground water temperature of 45 degrees here in Minnesota, that would give me… 80 degree water.  Ha!  That’s useless.  To get 120 degree water, my flow rate would be reduced to 5.1 gallons per minute.  Maybe I’ll need two water heaters. For the sake of argument, lets just say I only need one.  This unit retails at my local Home Depot for $1,427.00.

Installation costs

Plumbers charge a lot more money to install tankless water heaters, because they’re a lot more work compared to traditional storage tank water heaters.  The water supply pipes will need to be re-routed, the venting will need to be completely redone, the unit will need to be mounted on a wall, an electrical outlet may need to be added, and the gas pipe may need to be re-done.  Just for fun, let’s say you were able to find a plumber to do all of this for $1,000.   A traditional water heater might cost up to $500 in labor for replacement, so we’ll assume you’re only spending an extra $500 in labor for a tankless water heater.

The bottom line

A traditional 50 gallon water heater with a 12 year warranty retails for $559 at my local Home Depot.   I would spend an extra $868 to buy a tankless water heater, and at least an extra $500 in installation costs, making this unit cost at least $1,368 more than a traditional water heater.  I would spend at least $1,368 for the potential of saving $720 over a period of 20 years.  If I ever buy a tankless water heater, I won’t be doing it because I’m hoping to save money.

Related links:

• A White Paper from A.O. Smith – What’s the Big Deal About Tankless Water Heaters?
• Consumer Reports – They’re efficient but not necessarily economical
• Jay’s Blog - The Fabled Tankless Water Heater

Reuben Saltzman, Structure Tech Home Inspections- Email - Minneapolis Home Inspector

    

Water Heater Replacement Options

When I replaced my first water heater, I was excited to get something larger, more efficient, and maybe even a little sexier.  As it turned out, getting a different type of water heater wasn’t my best option, and now I end up telling my customers the same thing.  If you’re in need of a new water heater, chances are pretty good that you have a 40 – 50 gallon gas water heater, and your best option for replacement will be with the exact same type.

A standard gas water heater is a pretty simple device – there’s a tank that holds water, a burner at the bottom of the tank, and a vent that takes the exhaust gas out of the house through gravity (the warm air rises).  There are several other types of water heaters, and I’m going to list some pros and cons of each type.

Standard Gas - This is what makes up the bulk of water heaters in Minneapolis and Saint Paul – I would estimate 95%.  They have a low cost, they're easy to replace, and they recover hot water relatively quickly.  On the downside, energy is lost by keeping water heated all day.  If you're replacing a standard water heater and there is a problem with the chimney or flue (which usually means it’s not up to code), it can be very expensive to repair the chimney or bring it up to code.

Powervent - These are similar to standard gas water heaters, but instead of the exhaust gases rising up and out of the house, a fan forces the exhaust gases through a plastic pipe out the side of the house.   The biggest advantage is that the exhaust gases don't need to rise up the house through the roof - these water heaters can be vented right through the side of the house.  These are a great option if there are problems with an existing standard water heater flue.  Unfortunately, they cost about twice as much as a standard water heater.  I’ve also noticed that they are frequently installed wrong; I would guess that about 50 – 75 percent of the powervent water heaters that I inspect are incorrectly installed.

Tankless – This type of water heater definitely generates the most interest.  These water heaters only heat the water that you use, so you’re not wasting money by keeping 40 gallons of water hot all day.  They use less energy, take up less space, and provide an endless supply of hot water.  Unfortunately, they cost about three times as much as a standard water heater, and it's very expensive to convert from a standard water heater to a tankless - so much so that getting a payback in energy savings is out of the question.  They also provide a limited volume of hot water; a standard tank will give you all the hot water you want until it's gone, but a tankless water heater produces a limited amount at once.  Click the following link for an in-depth research paper on tankless water heaters.

Electric – Electric water heaters are probably the easiest to install and easiest to replace.  There is no venting required, so they can be installed in small places or in places where it would be difficult or impossible to run a vent.  The biggest downside to electric water heaters is that they take a long time to recover hot water.  Once you’re out of hot water, you’re out for a long time.  I don’t recommend electric water heaters if you have the choice of using gas instead.

Reuben Saltzman, Structure Tech Home Inspections - Email - Minneapolis Home Inspections