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What Is a Tankless Water Heater and How does it Work?

Nobody likes a cold shower.

But traditional tank water heaters are designed with a fundamental flaw: standby energy loss.

Fortunately, tankless water heaters are compact and lightweight energy-savers that heat water on-demand.

This means water gets heated only when needed such as when you’re taking a shower, running the dishwasher or cycling on the washing machine.

How does it work?

Water is heated rapidly every time it passes through the tankless water heater which runs through a heat exchanger of high-powered coils.

In going tankless, nothing could be more obvious than to save space, energy and money.


Here’s everything you need to know.

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How the Traditional Tank Water Heater Wastes Energy

The fact is the third largest energy users at home are water heaters and they cost the average household $280 on energy bills annually.

That can add up.

For instance, many people are guilty of wasting water before taking a shower. They turn on the shower, find it freezing at first and keep it running until the water is warmer. In between moments of waiting are wasting.

When water takes time to warm up it’s often due to a combination of factors:

  • The tank water heater is too far from the water outlet
  • Faucet or showerhead flow rate is slow
  • Energy gets lost as water travels in big pipes

Did you know that such “behavioral waste” costs $59 worth more of energy? And that’s just for the shower

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How the Tankless Water Heater Saves Energy

There are two types of tankless water heaters:

  1. Point-of-use and
  2. Whole-house tankless water heater

Both designs can either be powered by electricity or gas.

The point-of-use tankless water heater, being compact and lightweight model can be mounted on the wall, installed under the sink or inside a cabinet. One unit is for one water outlet: sink, faucet or shower for example.

Whole house tankless water heaters, on the other hand, can withstand multiple applications or “heavy use” such as running a shower and a washing machine simultaneously.

Either type of tankless water heaters work the same basic way to save energy: they remain inactive when not in use. Want to control the temperature and save more energy? Simply, adjust the thermostat.

In contrast, heating a tank draws energy all throughout the day when it takes just an hour for the average household to consume heated water. Meaning, whether or not you need hot water, you’re paying the bill of running storage tanks 24/7.

That is why tankless water heaters are up to 34% more energy-efficient than their tank counterparts.

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The Price War: Tankless Water Heaters vs. Tank Water Heaters

HomeAdvisor reports that tank water heaters range from $1000 to $1,500 for the unit price and installation.

Whereas, the average cost of buying tankless water heaters racks up to $3000, including the installation cost.

However, the big BUT according to John Banta, a consumer reports engineer, is that while tankless water heaters are more energy-efficient, payback time takes time, when switching from tank to tankless.

“If you have a warranty of 12 to 15 years, which is typical, it doesn’t make financial sense to replace a tank water heater with a tankless,” says Banta.

In part that’s because installing tankless units require removing a large tank which requires more time, money and effort.

But that doesn’t mean homeowners should dismiss tankless types. In fact, it’s the best option for first-time water heater installers since there would be no major retrofitting or plumbing costs involved.

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The Best Water Heater

So which is better: tank or tankless water heater?

Consumer reports recommends neither. They advocate a third option to heat water and save better: electric heat pumps which don’t generate heat but only captures warm air and transmits it to the water.

But they probably have not heard of the patented Ohmic Array technology now being used in water heaters, in which Time magazine dubbed as one of the best inventions in 2018.

The Ohmic array technology leverages on the natural conductivity of water and electricity—not on any heating metals—which results in a tankless water heater. One particular device even has its own mobile app to track on water and energy usage.

That doesn’t end there. Technology is reinventing the way the world uses energy.

Soon, the smartest water heater will be like hot water—no longer a luxury but a necessity.

Your water heater can only get better.

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