How to Calculate Energy and Water Savings for Tankless Water Heaters

Have you ever wondered through your local big box store and looked at all the numbers on the side of waters heaters. What the heck do all those annual savings and EF numbers really mean?  I can’t be the only one who gets lost in the maze of percentages and ratings. What we at Tankless Guide really want to know is how much can we save by putting in a tankless water heater. In this Tankless water heater guide, we walk you through the energy savings you can realize with large tankless heaters that serve an entire home.

Gas or Electric Tankless Heaters

Gas-fired tankless heaters use 35%-50% less fuel than tanked gas models, depending on the size of the house and how much hot water is used daily; the typical electric tankless heater consumes an average of 40% less electricity than standard electric water heaters.  The water savings for a whole-house tankless water heater are not high – perhaps 5-10% — but that adds up.  You don’t have to wait as long for a tankless heater to deliver hot water.  However, in terms of water, it is tankless heaters installed at the point of application that makes the difference.  In addition, no matter what type of water heater you have, using low-flow fixtures will reduce water use and costs.


Calculating Energy Savings with Gas Water Heaters

The typical tanked hot water heater has an energy efficiency of 55% to 70%, depending on its age. Most gas tankless heaters are 87% to 95% efficient.  You can simply do the math, and see how much more efficient tankless models are.  That’s a rough way of looking at it but it certainly gives you an approximate idea of your savings. The actual savings are significantly greater when you take into consideration standby heat loss in tanked water heaters.  They heat up water and if it isn’t used, it cools off.  When it reaches a certain point, the heater comes on again and reheats it.  The water may be reheated multiple times before it is used, wasting plenty of energy.

Using an equation is a more accurate way of finding out the cost savings of using a tankless heater.  You’ll want to determine how much energy you use with a tanked water heater, how much you use with a tankless heater, multiply cost, and subtract. Something known as Energy Factor, or EF, is important here.  A 70% efficient tank-style water heater will have an Energy Factor of about 55 which takes into account standby heat loss.  Since there is only a tiny amount of standby heat loss with a tankless model, mainly from hot water sitting in the pipe between the tankless heater and the application, the EF of a 90%+ water heater is about 87.

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So What Do You Save?

Now, divide the amount of gas used by the water heater in a given month by the EF and multiple that number by the cost of gas.  If you don’t know how much you’re paying per therm, use $1.25 which is the national average. One therm equals 100,000 Btu of gas.  The equation looks like this:

Gas Quantity /EF x $1.25 = Cost for the tanked water heater:


Gas Quantity /EF x $1.25 = Cost for the tankless water heater:

Equals the cost savings realized when using a tankless heater.

Water heaters account for 20% to 100% of the gas used in a home.  If you use a heat pump for heat and an electric dryer, your gas water heater might be the only thing that uses gas.  If you have a gas dryer, gas stove and gas furnace, the figure will be closer to 25%.  Use the quantity of gas listed on your bill to fill in the number in the equation.

Electric Tankless Water Heaters

Most experts agree that heat water accounts for 15% to 35% of a home’s energy use. If you also have an electric dryer and light your home brightly, the electric water heater will account for closer to 15%.  If you have a gas dryer and use lights conservatively, then the water heater will account for closer to 30% of the electricity use.   If you have an electric bill, multiple it by the percentage you would estimate is close to your specific usage. For example, if you estimate your water heater accounts for 25% of your electric bill of $160, multiply those numbers and you get $40.  Now, if you install an electric water heater that uses 50% less electricity, it is easy to see that your savings will amount to $20 per month or $240 per year.  This clearly demonstrates how a tankless water heater pays for itself in just a few years.


No matter what energy source you decide to use you’ll pay more for a tankless water heater or heaters in most cases, especially when installation is factored in.  You’ll begin to pay yourself back immediately however, as well as having the satisfaction that you are having less of a negative impact on the environment.


Outside Reading

Dept. OF Energy

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