Tankless Water Heater – Gas or Electric? [Pros, Cons, and Prices]

A tankless water heater is Good and Bad at the same time. Here, I discuss Pros & Cons from a practical approach of a homeowner faced with a decision: Tank or Tankless?

There are many positive aspects to using an on-demand water heater. The main one is much lower energy cost compared to regular storage tank units – you only make hot water when you need it – not 24/7. Another one is a much longer typical life span of these units – 15 years on average, vs 6 years for a basic tank.

However, you will quickly learn that the biggest negative aspect of tankless water heaters is the cost. These units will run you 40-200% more than a even high grade storage tank! Here we will discuss issues that you WILL face if you decide to go tankless, as well as how much it all will cost you, with detailed price breakdown for each type – Gas & Electric.

At the end of this guide I will tell you what I decided to do, when my old 40 gallon tank leaked in the summer of 2016.

If you want to know how much new tankless water heater costs, use our price calculator.

Pros and Cons of an Electric Tankless Water Heater

* When considering an electric tankless water heater you will often run into HAVING to also upgrade your electric service to 200 AMP. Here is why:

What you need to know about an Electric Tankless Water Heater, when making a buying decision: An Electric On Demand heater uses a lot of electricity (from 9KW to as much as 27KW). 99% of residential units are running on 240V circuit and need to meet an average of 37-115 AMPS maximum power draw! (37KW can support 1-2 people living in the house, and 115KW is upto to 6 people).

So you understand this better – most homes in US have 100 AMP service (your circuit breaker panel), which can supply up to 24KW at 240 volts. This is simply not enough to run the most demanding electric on-demand water heater!

Water Flow Rate and Power Consumption: As a basic rule we can use this formula. Electric on demand water heater can provide 2 Gallons per minute for every 8KW of electric power usage. Most modern showers are rated at 1.3 to 1.7 GPM. So if you run a shower and a faucet at the same time, you won’t have enough hot water for both!

The 9KW unit, cannot produce a lot of hot water for more than 1-2 people living in the household!

Therefore, if you need a lot of hot water, you are best off using a more powerful 18 or better yet 27KW unit. And that is when you run into the problem of not having enough juice IF you only have a 100AMP panel. So you will often have to shell out an extra $850-1250 for the circuit panel upgrade, which our calculator accounts for!

Pros and Cons of Gas Tankless Water Heater

Unlike electric heaters, Gas units can produce CONSIDERABLY more gallons per minute (9+ on average!) and you don’t need to upgrade your electric service! However, not every home has gas (although there are units that can work on Propane). If you do have gas in your home, it is recommended to actually go with it, instead of electric for 3 reasons.

1) Gas Water Heaters will have much lower energy costs Think of it this way. Much of electricity in US is produced by burning gas, to heat the water, to spin the turbine, to produce electricity. An now you use this electricity to once again heat water. Kind of redundant 🙁

2)Much higher hot water production: Most gas water heaters can heat up 5-10 gallons per minute!

3) No need to upgrade your electrical service: As discussed above, you don’t need to upgrade to 200 AMPs service (which is often required for most electric units), saving you $1000 on average.

With that said, gas on-demand water heaters are more expensive to buy. Also, they often require a power venting system to go outside the house. Power venting, also often implies relocating your water heater closer to the outside walls of the basement, so you can vent it directly out.

Very often, gas units cannot be vented into the chimney, for one reason or another. Consult with local plumbers to see if you need a direct vent or power vent option).

Relocating also means re-routing gas and water lines. This, combined with the more expensive material costs, often make the cost of a new gas tankless water heater exceed $3000 (compared to $950 for a basic 50 gallon tank).

Should you go Tankless, or stay with traditional tank water heaters?

This is a question for you to answer, and it depends on your set-up. If you need to relocate the gas unit toward exterior wall (and reroute Gas and Water Pipes), just for venting, or need to install new 200 AMP electric panel, it’s probably more cost efficient to go with a tank.

If your current GAS tank is by the wall, where it can be vented outside, or you already have 200 AMP electric service – your installation cost will be $1000 – $1500 lower, and then it kinda makes sense to go tankless, from financial point of view.

What I did, when my old 40 gallon tank leaked?

I installed an new 50 gallon tank! It was simply a matter of cost! Here is how I chose my tank:

I didn’t want to and really couldn’t vent tankless gas heater outside (my foundation is 20 inches thick) and the only spot to place it was kind of crowded with other things. And it would cost me $2000 more for a tankless unit!

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