Will A Tankless Water Heater Fit In Your Boston Home? (Part 2)

Last week, I started a discussion about tankless water heaters. Boston homeowners are beginning to consider tankless water heaters as a green replacement for their conventional hot water systems. In last week’s post, I covered the issue of cost, since this is one of the biggest considerations for homeowners. This week, I’ll tackle energy efficiency.

The second question most homeowners have about tankless water heaters relates to the system’s efficiency. Tankless water heaters take the prize in this category; the most efficient conventional hot water heaters operate at about 60% efficiency. Tankless systems have an efficiency rating of about 80%. The story goes deeper than ratings, though. A hot water tank will lose efficiency over time because sediment, minerals, and deterioration by-products from the sacrificial anode all work to reduce the efficiency of a hot water tank. Tankless systems maintain their efficiency over time because they’re not subject to these problems.

You can save money on operational costs with a tankless water heater because you only pay for hot water when you need it, as opposed to keeping water on “hot standby.” Generally, a tankless hot water system will save between 30% and 60% over conventional hot water system operating costs. That savings may not be enough to justify the added expense of the system.

Exactly how much savings are we talking about? Your costs to operate a conventional hot water heating system will depend, of course, on how big your tank is and where you live. A good estimate for natural gas-powered 40-gallon tanks is about $350 per year. If you use propane, your 40-gallon hot water tank may take $500 out of your pocketbook annually. In comparison, a tankless hot water system that uses natural gas may cost $250-$300 to operate, meaning that you could save $50-$100 per year as long as your hot water usage doesn’t change much.

If a conventional 40- or 50-gallon tank system costs $1,000 to install and $350 per year to operate for 15 years (and you had to replace the tank once during that time), your total out of pocket expense would be $7,250. In comparison, if you spent $3,500 on a tankless hot water system with an annual operational cost of $250, your total out of pocket expense for the tankless hot water system would be (ta da!) $7,250… exactly the same.

If you’re looking to replace a larger tank – a 75-gallon model – the installed cost may be more like $1,500. If you need to replace the tank once during our theoretical 15-year period, you’ll spend $3,000 on the hardware and another $6,000 on operational costs. Your total out of pocket expense would be $9,000. If you installed a high-volume tankless system for $5,000, you’ll spend an added $3,750 on operational costs. Your total out-of-pocket expense would be $8,750 – a savings of $250 over the conventional option.

At this rate, you can see why your savings may not justify the added initial cost of the system if you don’t need a heavy-duty hot water system.

Next week, I’ll close out this series on tankless water heaters. Boston homeowners may find reasons other than cost to go tankless after all! In the mean time, if you have questions about water heating, or a problem with your water heater, contact us at Boston Standard Plumbing & Heating at (617) 288-2911. We offer 24-hour emergency service for all plumbing, heating and cooling needs.