Full Disclosure Finance

By Justin

I’m always interested in new equipment that is cost-effective (provide a decent payback period) and better for the environment. Let’s face it, most of us will talk the green stuff until we’re blue in the face but won’t adopt until it actually impacts our pocketbook. There has been plenty of research to back up this claim but we are finally starting to see some great products that you can feel good about buying.

Not exactly the most glorious piece of equipment, but we all have a water heater. Until recently, I didn’t think much of a water heater because they haven’t changed a bit. Until now!

I’ve discovered the tankless water heater and pretty soon we’ll all have them in our homes and cottages. These save money and space and last twice as long as tank models. In North America, these things haven’t been overly important until now. However, it appears tankless water heaters have been used in Europe and Asia since the Second World War.

Here’s the old water heater (left) beside a tankless model:

Many companies with solid reputations such as Bosch are producing these water heaters. They are also being sold by the likes of Home Depot. The residential market is great for these products because you can literally walk into the store and order them like a cup of coffee. If you are a commercial customer requiring larger units, often they are not stocked by most retailers. In that case, you’ll be searching the net to look for someone to serve you or you can ask your local HVAC outfit. I don’t have any good references, so I would just be giving you the results of a Google search if I linked anything.

So, these new gadgets save some space right? I can hear you saying “I’m not sold yet”. How do lower energy (gas / hydro) bills sound? How about a longer operating life?

Here’s some details to back it up.

Heating water consumes an average of 30% of our total energy bills.

Moving to gas will incur higher capital costs, but operating costs will be reduced by 50% compared to electric models. This principle applies for tank and tankless models.

Tankless water heaters use a minimum of 20% (up to 40% depending on usage, high usage will save more) less energy for gas-gas / electric-electric comparisons. When you start to look at changing from an electric tank to a gas tankless the operating cost savings can be as high as 60%! Keep in mind that it is difficult to obtain accurate numbers because most of the people providing them sell tankless water heaters. Consumer Reports is a good source for reviews on most products, but they only have two related articles with limited detail.

I have summarized some of the best info I could find in the table below:

As you can see, capital costs are higher but operating costs are lower for tankless models. After you factor in the extended life of the tankless versions (and calculate the actual capital cost / year of operating life) payback periods shrink to less than 1 year for gas and electric. If you won’t be owning the model for its entire operating life, the payback scenario changes. For a gas tankless vs. tank comparison you would get your money back after 11 years. Electric tankless vs. tank will get your money back in less than 3 years.

The length of time you plan to use the water heater will obviously influence your decision in the above cases.

Bottom Line: If you plan to stay in your house for a while go gas tankless. Even though the payback versus gas tank would take 11 years, compared to either electric model you’re still way ahead.

If you have installed a tankless system I would appreciate some feedback on the ease of installation and whether the promised savings have materialized for you.