An Introduction to Tankless Water Heaters

Tankless hot water system in the basement of a Green Technology Home
Mark Hunt / Getty Images

In a modern home with expansive showers, large-capacity washing machines, and maybe even more than one dishwasher, the traditional water heater with a storage tank may not be large enough to keep up with demands. When deciding on an upgrade, give strong consideration to a tankless water heater. Tankless water heaters, also known as on-demand water heaters because they don't usually store hot water, create hot water on demand, remaining inactive when there is no need. The type you select is based upon your intended use—and your intended use will have even more to do with the cost of these units.

But for all the hype surrounding these appliances, there are some limitations and trade-offs to consider before you can really decide if a tankless hot water heater is for you. But consider your choice carefully; improperly used, they are disappointing and expensive.

Tankless water heaters come in two principle designs: point-of-use and whole-house versions. In each category, there are both electric models and natural gas or propane models. Some tankless units are sized to heat a cup of tea, while others provide enough hot water for two or more bathrooms. Also, the region of the country you live in has a lot to do with how much hot water a tankless water heater can produce.

There are a lot of factors to consider with these units, so the following examples will lay out what you need to know.

How a Tankless Water Heater Works

The tankless water heater works by directly heating water on demand, as it is required. Unlike traditional hot water heaters using a storage tank, the tankless units have no storage tanks and thereby have no standby heat lossthe heat lost and energy wasted by heating water only to store it in a tank, a character flaw of traditional hot water heaters. Avoiding standby heat loss is primarily how tankless water heaters make their claim of being energy efficient.

Whether a tankless water heater is point-of-use, as in the illustration above, or a whole-house unit, they work the same basic way. Cold water enters the unit and is heated by a heating element (heat exchanger), which is turned on by a flow-activated switch. The heat exchanger can be electric-resistance heating coils or a gas-fired burner using natural gas or propane. (Gas units generally have more heating capacity, and larger whole-house units are typically gas-fired.)

There are three variables that have to be considered in sizing the unit.

  • The volume of water the unit is required to heat, measured as the flow rate in gallons per minute (GPM).
  • The temperature of the cold water entering the unit.
  • The desired temperature of the hot water exiting the unit.

Those three factors are what determine the type, size, and possibly even the number of tankless water heaters you need.

Diagram of the Chronomite instant-flow tankless water heater.
Chronomite Laboratories, Inc.

Point-of-Use Tankless Water Heater

The point-of-use tankless water heater is relatively small and will usually fit inside a sink cabinet or in a closet. They are typically dedicated-use heaters, meaning the unit serves one sink/faucet or one shower, etc.

Point-of-use tankless water heaters are less expensive than whole-house units and cost around a few hundred dollars for the unit (without installation). They are good choices for some applications, such as when your standard water heater (with tank) is in good shape but does not have sufficient capacity to serve extra fixtures.

Examples of a whole-house and point-of-use tankless hot water heater.

Whole-House Tankless Water Heater

Whole-house units have higher GPM flow rate capacity and can handle the demand for more than one fixture at a time. For example, a unit may sufficient capacity to handle two shower fixtures at one time, or a dishwasher, kitchen sink, and lavatory hot water faucet at one time. Why the different number of fixtures? Because different fixtures use different amounts of water. Some showerheads can use six times more water than a bathroom lavatory faucet.

The size and number of whole-house tankless water heaters you need will be largely driven by flow rate, which is determined by the number and types of fixtures you may have running at one time. And the worst culprits are showerheads. That's why you may need more than one whole house tankless water heater hooked up in parallel to meet your hot water demands, especially for simultaneous shower usage.

Whole-house units are much more expensive than point-of-use units and cost from several hundred to several thousand dollars (without installation).

Example of an electric whole-house tankless hot water heater and its interior.
Stiebel Eltron

Considering Groundwater Temperature

In addition to the number and type of fixtures you want simultaneously served by the tankless water heater, you will also have to consider the temperature of your groundwater. And that is determined by where in the country you live in.

This chart delineates what is generally accepted as the cool/ warm dividing line of about 55 F groundwater. The colder the groundwater gets, the less hot water can be produced by a unit for a given GPM flow rate. This means a tankless water heater in Michigan needs to be 33 to 50 percent larger than in Florida to serve the same number and types of fixtures.

This is because the tankless unit heater has to work harder to warm the incoming cold water since the groundwater coming into the unit can be 30 F colder in Michigan (42 F) than Florida (72 F).

Let's see how this really affects determining unit size and temperature rise.

Map of groundwater temperatures across the country.

Calculating Temperature Rise

The three variables that have to be considered in sizing and selecting the unit include:

  • The volume of water the unit is required to heat, measured as GPM.
  • The temperature of the cold water entering the unit.
  • The desired temperature of the hot water exiting the unit.

Determine Desired Temperature Rise

The difference between the temperature of the hot water exiting the heater and the cold water entering the unit is called the temperature rise. If you want a shower up to 110 F and you live in south Florida with groundwater at 72 F, then you need a 38 F temperature rise (110-72=38).

A tankless water heater is sized by rating its temperature rise at a given GPM. So a unit could be rated at a 33 F temperature rise at 2.0 GPM. Based on manufacturer's data, this same unit could also provide a 65 F temperature rise at 1.0 GPM.

You see, the slower the flow of water through the unit, the more the water can be heated.

Calculating Flow Rate

The Federal Energy Policy Act of 1992 required all faucet/shower fixtures made in the United States to have a flow rate of no more than 2.2 GPM at 60 PSI. Often you can get below 2.2 GPM with low-flow aerators, but before 1992, older fixtures used much more water than 2.2 GPM. To determine your required GPM, add up how many fixtures of what type you will have served by the tankless water heater:

Lavatory Faucet:

  • Low Flow: 0.5–1.5 GPM
  • Meets Code/1992 Standard: 2.2 GPM
  • Pre-1992 Faucet: 3.0–5.0 GPM

Kitchen Faucet:

  • Low Flow: Not appropriate for dish cleaning
  • Meets Code /1992 Standard: 2.2 GPM
  • Pre-1992 Faucet: 3.0–7.0 GPM


  • Low Flow: 1.0–2.0 GPM
  • Meets Code/1992 Standard: 2.2 GPM
  • Pre-1992 Faucet: 4.0–8.0 GPM​

As you can see, older pre-1992 faucets and showerheads can require very large water flow. So, to accurately size your water heater, you need to measure the actual water flow from your faucets and showerheads.

It is helpful to go through that simple exercise for a bathroom faucet, showerhead, and kitchen sink faucets—even relatively new ones. Since the Federal Energy Policy Act of 1992 is not heavily monitored, there have been problems with faucets exceeding their stated 2.2 GPM ratings. If that's the case, you need to know before you size and install your tankless water heater.

Close-Up Of Water Dripping From Faucet In Bathroom Sink
Chu-Wen Wang / EyeEm / Getty Images

Sizing the Tankless Water Heater (or Heaters)

By now, you know the required temperature rise (desired hot water temperature minus incoming groundwater temperature equals temperature rise); and you have added up the required flow rates for all the faucets and showerheads to be heated by the unit that may be on at one time.

As an example, let's say you require 11 GPM to accommodate two showerheads (one ​pre-1992 at 4 GPM, one at 2.2 GPM), one lavatory faucet at 2.2 GPM, and the kitchen faucet at 2.2 GPM. Based on the previous section, you need a 38 F temperature rise if you live in southern Florida. So, you need a whole-house unit capable of handling 11 GPM (4+2.2+2.2+2.2=11) at a 38 F rise, and you'd like an electric model.

Such a capacity is fairly large for an electric tankless water heater, but a 240-volt Tempra 29 model by Stiebel Eltron (for example) can produce about 5.5 GPM at a 38 F rise. This indicates you would need two units this size to meet the 11 GPM requirement.

On the other hand, if you live in the northern half of the country—in Michigan, Maine, or Washington, for example—then your incoming groundwater will be much colder than our Florida example. Probably at least 30 F colder, which means you'll be looking for a unit that can handle a 68 F temperature rise. Once you require a bigger unit like that, you'll have to move up to a gas-or propane-fueled tankless water heater or heaters.

Multiple tankless gas hot water heaters mounted on a wall.

Tankless Water Heater Manufacturers

There are plenty of manufacturers from which to consider your new tankless hot water heater. The following are some of the manufacturers to check out:

Other Energy Saving Ideas

Tankless hot water heaters, properly sized and installed, will save quite a bit of energy. But what if you want to go even further? The Department of Energy has these suggestions for additional energy-saving strategies:

  • Reduce hot water usage
  • Lower water heating temperature
  • Insulate hot water pipes
  • Drain water heat recovery system

Some good ideas to consider—but don't forget the obvious one: changing old pre-1992 faucets and showerheads to current 2.2 GPM models.