How Tankless Water Heaters Work


When thinking about making the decision to switch from a traditional hot water tank to a tankless water heater, there are many of factors to consider: capacity, type, installation, budget, and more. To help facilitate making this decision a little bit easier, we’re going to spend some time discussing how tankless water heaters work, and touch base on a few of the different types on the market. On a very basic level, tankless water heaters have the capability to heat your water at a rate that’s fast enough to keep up with the flow, which essentially provides an unlimited amount of hot water, versus a traditional tank, which is limited to the capacity of the tank itself. We’re going to spend a little time diving into the different types of heaters available today, beginning with electric tankless heaters, and then moving through gas-powered options.

How Do Electric Tankless Heaters Work

An electric tankless water heater is similar to an electric tank heater in the sense that the water is being heated by electric heating elements. There is a cold-water inlet and hot water outlet, once a faucet is open, a flow sensor is typically used to sense the demand for hot water.  Once this demand is sensed the heater will activate and a series of heating elements will begin to heat the water. Similarly, to a traditional tank, thermostatic controls are used to regulate the temperature of the outgoing hot water, which is often set via a dial inside of the unit or even with an external, adjustable digital display. In many of today’s complex electric tankless heaters, onboard processing units monitor both the incoming water temperature as well as the outgoing water temperature. The computer then processes this information and regulates the output to the heating elements to maintain the desired temperature of the hot water. One thing to consider when considering an electric tankless heater is available power services. For example, a whole house tankless water heater will typically have four 7,000-watt heating elements, verses a traditional tank, which usually will have two 4,500-watt elements. The heavier electrical load will require wire and a breaker than can support it, usually around 120 amps. The demand for a greater electrical service may come with a pricey upgrade to your home service. However, reports suggest that despite the additional electrical load, cost savings outweigh the initial installation cost, since the heating elements are operating only on demand, as opposed to cycling on and off constantly, even when hot water isn’t being consumed.

How Do Gas-fueled Tankless Heaters Work

Fueled tankless water heaters can burn either natural gas, or propane, depending on what’s available in your area. Just like the electric tankless heater, the concept is to deliver hot water on demand, without having the need to have it stored in a tank. Instead of relying on electric heating elements to heat the water, gas powered tankless heaters use burners and heat exchangers to support this. In a similar manner, the burners only kick on when there is a demand for hot water, unlike traditional gas-powered tank heaters, which have to burn constantly to maintain the temperature. Thermostatic controls are still utilized in gas powered tankless heaters to regulate water temperature, which monitor water temperature and automatically adjust the burner to maintain water output temperature. Much like a gas furnace, there is typically a constant pilot flame to support ignition of the burner when required. With the use of flow sensors, demand will drive the system to ignite, and a blower will begin moving air across the burner and carry the exhaust and excess heat through an exhaust pipe. The burner heats the heat exchanger(s), which are typically aluminum, and much like a shell-and-tube heat exchanger, the water picks up the heat as it moves through a tube that makes passes back and forth across the heat exchanger.

When talking about gas powered tankless heaters, they are generally broken into two main categories, either non-condensing, or condensing. We’ll begin with discussing non-condensing, which accounts for the majority of gas-powered tankless water heaters out there. Non-condensing styles utilize only one heat exchanger, which transfers the heat to the water as it passes through. Excess heat not picked up by the water is moved through exhaust venting. Due to the high heat level of the exhaust, this does require the exhaust piping to be made of heat resistant metal (usually stainless steel), which can be costly. Despite the need for the high heat exhaust, installation costs are typically less than their counterpart, condensing tankless water heaters. Condensing tankless water heaters are a more recent development in tankless technology. In condensing tankless water heaters, the heat from exhaust gases are recycled, and utilized to help heat the water. This is accomplished through the use of multiple heat exchangers. The initial heat exchanger is where these hot gases are housed and serves as a pre-heater for the incoming water. This allows the primary heat exchanger to use much less fuel to achieve the desired water temperature and eliminates the need for high temperature ratings on exhaust venting, since incoming water removes much of the heat from the exhaust in the primary heat exchanger, PVC can typically be used for venting. While these units are typically more expensive initially, they usually bolster about a ten percent increase in efficiency over non-condensing models, which has been making them more attractive to potential buyers in recent years.

How Do Point-Of-Use Water Heaters Work

A final type of tankless water heaters are available for use, and these are point of use heaters. These are small electric or gas-powered units that are typically housed at or near the point of use, under a sink for example. These compact units can handle the low flow requirements of single systems, like a shower or a sink, and are ideal for relatively low cost and ease of installation. They work just like the whole home electric heaters, just on a much smaller scale. These are ideal for homes that have high water usage and want the ability to draw hot water at multiple points at once, without having to worry about overstretching the limits of their current water heating system. They’re also ideal for remote appliances, such as an outdoor shower or hot tub, where the close proximity can compensate for the distance, the water may need to travel, and provide immediate heat.

Pros and Cons of Tankless Water Heaters

Now that we have a basic idea of how the different styles of tankless water heaters operate, we can dive into some pros and cons of converting from a traditional tank system to a tankless system. We’ll begin with one of the most obvious advantages to a tankless system; the elimination of “running out” of hot water, since it is available essentially endlessly, and immediately. For some, the convenience of having hot water readily available, without the worry of emptying the tank and having to wait for water to re-heat, is in and of itself worth the investment. Of course, another big advantage to tankless systems is efficiency. As we discussed earlier, you’re eliminating the need to constantly expend energy to maintain water temperature. Despite being insulated, traditional tanks do lose thermal energy, even when not in use. To maintain readiness, the energy source (fuel or electric) will be called on periodically to re-heat the water. With tankless systems, the unit will remain on standby, and only heat the water as it’s needed. This results in much more efficiency, even up to a 50 percent increase in efficiency with optimal systems. The “heat-as-needed” functionality of these units also makes them more environmentally friendly, which is often a huge factor when considering switching. Lastly, tankless water heaters sport much longer life expectancies than traditional tank heaters. A traditional water heater is typically expected to last about 10 years, while some tankless systems on the market today have a lifespan of nearly 20 years, which is almost double. While there are a lot of benefits to installing one of these systems, that decision can’t be made without first knowing the down sides.

When it comes to tankless heaters, one of the biggest drawbacks is the large initial investments. They can range up to nearly double what a traditional tank installation cost. If you’re switching from a traditional tank to a tankless, there is also retrofitting that needs to be considered, as well as the potential for electrical service upgrades. Depending on the size of the system that you get, while hot water is available immediately, the available flow rates are typically lower. Meaning, a traditional water heater can support a greater demand at any point in time over tankless water heaters, which may limit the number of applications available for use at the same point in time without supplemental heating (such as with the use of point-of-use tankless heaters.) Lastly, while they do have a longer life expectancy than traditional tank heaters, they are also much more complex systems, meaning there are more parts, and repairs tend to be more complex and costly than those associated with the traditional tank heaters. Next, we’ll take a brief look at some of the common problems and maintenance required for tankless heaters.


One of the number one issues is mineral build up. The design of traditional tank systems allowed for sediments to build up at the bottom of thank (such as with hard water), without an immediately noticeable impact to the water supply itself. In order to contend with this, a yearly flush of the system will be required to help maintain efficiency. Given the nature of tankless heaters, as sediment and minerals fall out of the water, they may have a tendency to restrict flow through the piping and will have a noticeable impact on the water flow. The flow of the exhaust, especially in condensing tankless water heaters, can also have a sever impact on components and piping. The corrosive nature of the exhaust is known to cause degradation of components and piping, while most of these components are manufactured of corrosion resistant steels, it is still known to be an occurrence. Routine inspections for rust and corrosion should be performed, often in tandem with routine air and water filter cleanings. All of that being said, more and more people are making the investment, and moving away from traditional tank heaters. There is a lot to be said about the convenience of tankless heaters, and the high cost of complex maintenance is often outweighed by the infrequent need for it.

There are a lot of tankless water heaters on the market today. I’ve provided a few models available on Amazon with the highest reviews.

Electric Tankless Water Heaters:

Gas Powered Tankless Water Heaters (condensing):

Gas Powered Tankless Water Heaters (non-condensing):