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Tanked vs Tankless - Which Hot Water Heater is Better?


Hot water heaters rarely need replacing but when they do it's a big expense! Replacing them is one of the biggest homeowner decisions you can make. Right now, during this difficult economy everyone wants an efficient option that will save them money too. Thankfully, there's an answer. Today, there's a variety of hot water heater options available.

When you think of a hot water heater, what do you imagine? Do you picture a large tank, strapped to the wall, indoors or out, tucked away inside a closet? Me too! Until now - that is.

I rely on my tanked hot water heater to provide me with hot water daily. I turn on the faucet and hot water comes out, a guarantee I've never questioned before. I've been enlightened and I want to share my knowledge with you. Today, most models are compact in design, taking up very little space.

This article provides an overview of hot water heater options. We hope to shed some light on what's available and help you make an informed decision. Consider these facts before you make a purchase.

Tanked Water Heater

These have been around for years. This invention dates back to the 1800's and needless to say, they've changed. Yet Americans continue to cling to the old design concept.

Tanked water heaters are more efficient today than they've been in the past. Many of us rely on them because they conveniently link to our city's gas or electric supply, making installation easy and hot water a regular resource.

How do they work?

  • Cold water enters the tank through a pipe at the top of the tank. The tank is filled and the pilot flame turns on to heat the water. This keeps hot water ready and waiting inside the tank.
  • A flue pipe runs vertically though the center of the hot water heater and transfers heat from the pipe to the water.
  • A draft hood on top of the flue tank allows air to enter the flue and feed oxygen to the burner. Once the cold water is heated it exits through the hot water pipe at the top of the tank.

Most tanks house about 40 gallons of water, typically a sufficient amount for individual showers, running the dishwasher or washing clothes. Sometimes you have to wait for water to be heated, especially if you've been using it and it runs out.

Of the tanked variety the electric hot water heater is considered the most energy efficient option. It works by way of a heating element like a coil instead of a pilot light. Cold water moves over a heat exchanger and traps heat before dispensing through a faucet.

tanked hot water heater

Tanked Water Heater Advantages:

  • Proven track record
  • Can be insulated for efficiency
  • Installation expense is lower
  • Keeps hot water ready and waiting


  • Consumes more energy
  • Standby loss increase energy costs
  • Possible leakage
  • Yearly maintenance
  • Implosion potential
  • Rust corrosion
  • Dirty water
  • Constantly produces greenhouse gases
  • Purchase costs are higher

Additional Options: A Tankless Future

Hot water heaters have changed. In fact, a tanked version isn't your only option. Tankless hot water heaters - also known as on-demand hot water heaters - don't store hot water the way tanked units do. This new design is compact in size, fitting in small spaces easily to heat water using electricity or gas.

How does a tankless hot water heater work?

  • In order to get you that piping-hot shower when you want it, a tankless water heater uses a powerful heat exchanger to raise water temperature.
  • A heat exchanger is a device that transfers heat from one source to another, transferring heat generated by electric coils or a gas-fired burner to the water that comes out of your faucet.
  • When you turn on the hot water, water circulates through a series of high grade copper pipes, over this heat exchanger, and through the faucet.
  • The heat exchanger is activated by an incoming flow of water that heats the water to a preset temperature selected upon installation.

There are two types of tankless models: point-of-use and whole house. Point-of-use models are small and fit under a cabinet or in a closet. This type is effective for one or two outlets. Whole house models are usually installed in a garage or closet. They're compact in size but are capable of providing hot water for an entire household.

40H-NG Image3

Tankless Hot Water Heater Advantages:

  • No standby losses
  • Save up to 20% on energy costs
  • Clean water source
  • No rust or corrosive development
  • Compact design fits in small spaces easily
  • Provides hot water when needed
  • Low power consumption
  • Produces very little or no greenhouse gases
  • No flooding or leaking
  • Initial cost is lower


  • Installation expense is higher
  • More detailed installation: larger gas line or electric circuit might be needed
  • Requires a flow rate of 5 GPM to activate heat exchanger
  • Small lag time for hot water production
  • Produces small amounts of greenhouse gas
  • Splits hot water output among household fixtures
  • Requires a modulating temperature control for even heating

Hot Water Heater Efficiency: Comparatively Speaking

Tanked Hot Water Heater:

  • Insulated to reduce energy costs
  • Draws less instantaneous power
  • Supplies enough hot water for a variety of jobs
  • Hooks up directly to a pre-installed city gas line

Tankless Hot Water Heater:

  • Receive a tax credit
  • Long lifespan
  • Lower overall energy costs
  • Low maintenance requirements
  • Eliminates water waste
  • Environmentally friendly: zero greenhouses gases

Tankless units are popular in Europe and Japan. Today, these water heaters are relatively new to Americans so the concept is foreign, but going tankless is the way of the future.

Environmentally friendly, using less energy than a tanked version, a tankless water heater is guaranteed to meet the hot water demands of any household.

So before you make a purchase examine the facts and make an informed decision with the increased knowledge you've earned here today.

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