Energy-Efficient Water Heaters: Will A Tankless Water Heater Save Me Money?

If you want the low down on reducing your electricity bill, you’ve come to the right place. And today’s recommendation is all about hot water usage and how a tankless water heater (both gas- powered and electric) can save you money.

In fact, the average savings with a tankless water heater can be anywhere from $44-$108 per year according to the U.S. Department of Energy. Sounds good, right? Read more about which type of demand-type water heater is best, the pros and cons of tankless vs traditional, and a roundup of tankless water heater FAQs. But first, a little crash course:

What is a tankless water heater?

Tankless water heaters, also known as demand-type water heaters, only provide hot water as needed. They are small, wall units often installed where the hot water is being used. For example, you may have one close to a bathroom, laundry room or dishwasher. How does a tankless water heater work? When you turn on a hot water faucet, cold water goes through the unit’s heat exchanger and either an electric element or a gas burner will heat the water. This system means you won’t ever “run out” of hot water—and instead of heating and reheating the water on standby in a traditional water heater, a tankless one only provides what is needed when it’s needed.

What’s the Difference Between a Tankless Demand-Type Water Heater and a Traditional Water Heater?

A traditional water heater is that huge metal tank, probably in a utility closet, near your major appliances. It stores anywhere from 30-50 gallons of water and always keeps it heated. And while this may sound nice in theory, where it fails (a limited supply of water, a huge footprint, energy-inefficiency) a tankless water heater takes the lead.

Tankless Water Heaters vs Traditional Water Heaters

From a bird’s eye view, we’ve compared some of the most important factors when deciding between a tankless vs traditional water heater:




Life Expectancy 

20+ years 

10-15 years 





- more efficient 

- never ‘runs out’ of hot water 

- can save upwards of $100 annually 

- cheaper to buy and easier to install 


- if in high-demand use, water flow rate can decrease 

- energy savings may not offset the higher cost 

- energy wasted on maintaining water temperature even when not in use 

- can run out of water 

Pros & Cons of Tankless or Demand-Type Water Heaters

Now that you have this handy chart, let’s break down each of the pros and cons in a little more detail.

Cost of Tankless Demand-Type Water Heaters

Unfortunately, the cost of tankless water heaters is what keeps most people from making the switch. If you’ve never wondered how much does a tankless water heater cost, we’re here to tell you the average is around $3,500. Why is it so expensive? The bulk of the cost is the installation fee—and before you think “I’ll save that money and install it myself,” consider that you may be dealing with permits, gas lines and electrical units. We really recommend hiring a licensed plumber to ensure everything is up to code and safe for you and your family to use.

How a Electric Tankless Water Heater Works

Life Expectancy of Tankless Demand-Type Water Heaters

If you can get behind paying the initial cost of a tankless water heater, you’ll be glad to hear how long your investment pays you back. How long does a tankless water heater last, you ask? With the right maintenance, your tankless water heater can last up to 20 years (if not longer!).

How Much Energy Does a Tankless Demand-Type Water Heater Use?

For reference, most American households use more than 60 gallons of hot water every day. Water heating is a major factor when it comes to your utility bills, accounting for 14-18% of those bills according to And as far as efficiency goes, the Department of Energy says that demand-type water heaters can be 24% to 34% more energy efficient than conventional tank water heaters.

Size of Demand-Type Tankless Water Heaters

Tankless water heaters are so small they can be wall-mounted—very different from their tank counterparts. Electric-powered tankless units can measure 10” high by 7” wide, while gas-fired units are slightly larger at 30” high by 20” wide.

Maintaining an On-Demand Tankless Water Heater

The best (and easiest) way to maintain your tankless water heater is the initial step: proper installation. If you’ve tried to DIY the installation process, you may be susceptible to serious issues. On-going maintenance tasks may include descaling (removing any calcium buildup) and checking for any possible corrosion.

Tankless Water Heaters Provide Instant Hot Water

Is there anything worse than being the last in line for a hot shower? A tankless water heater ensures you’ll never run out of hot water again. Instead of housing a finite number of gallons, tankless water heaters provide on-demand hot water, so the flow rate is continuous.

Is Switching to a Tankless Water Heater Worth It?

You’ve seen the average savings with a tankless water heater, it’s more energy-efficient, and they’re much smaller than traditional tank water heaters—so now it’s time to decide: is a tankless water heater worth it?

Can a Tankless Demand-Type Water Heater Save Money on My Power Bill?

We understand that for most people, the biggest drawback of a tankless water heater is the initial cost. But when you consider the amount of energy savings over time, you’ll realize that your investment upfront will pay you back overtime. Whether you choose gas-powered tankless water heaters or electric tankless water heaters, their efficiency will help you save money on your power bill. Not to mention, it’s our job at Energy Ogre to ensure you’re getting a great rate when it comes to your energy bills. Because of that, you can see why tankless water heaters could make sense for you.

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Top 5 Most Energy-Efficient Tankless Water Heaters

We hope you’re convinced that tankless water heaters are worth the cost—so we’re breaking down what is the best water heater by providing you with the top five in the category.

EcoSmart ECO 27

Rheem 18kw Tankless Electric Water Heater

Stiebal Eltron DHC Trend Point-of-Use Electric Tankless Water Heater

Rheem 13kw Tankless Electric Water Heater RTEX-13

Eemax 27kW Electric Tankless Water Heater

For more ways to save on your energy consumption, switch to Energy Ogre and we’ll make sure you’re paying the lowest possible rate each month. Time for a hot shower!

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