Conventional vs On-Demand Water Heaters

Conventional VS On-Demand Water Heaters

We’ve talked before about smart home devices that can remotely lock and unlock doors, turn on lighting and appliances, raise and lower shades, and so much more. One of the less lauded technologies is on-demand hot water. Tankless water heaters may not seem as glamorous, but for those who want to have energy-efficient homes and save money, they are worth considering.

Types of Water Heaters

There are two types of water heaters; conventional tanked systems and tankless units. Storage tank systems have been around for quite a while, so it’s no surprise that they are by far the most common. Both types of water heating systems have gas and electric options and are connected to a home’s cold-water supply. They each have their pros and cons.

Conventional Tanked Systems

Pros include:

  • They are cheaper to purchase and install
  • They are less money to repair and maintain
  • Handy homeowners can install

Cons include:

  • They use more energy since they are continually heating the water in the tank
  • They take up considerable space
  • They have a shorter lifespan, approximately 8-12 years
  • Hot water can run out if demand is too high

Tankless Systems

Pros include:

  • On-demand supply of hot water
  • Use less energy since water is heated only when it’s needed
  • Small wall-mounted units take up considerably less space
  • Longer lifespans, lasting 20 to 30 years

Cons include:

  • Considerably higher unit and installation costs
  • Maintenance costs are higher than tankless
  • Not a DIY installation; licensed electrician, plumber, or factory-authorized installer required

Purchase and Installation

The large majority (90%) of water heater installations are done “in an emergency,” when an old unit has failed, and homeowners are desperate for a replacement. Urgent installation always has a higher price tag, so it is best to avoid such a situation.

Under normal circumstances, a conventional water heater will cost approximately $600 for a standard 50-gallon unit. Installation runs an additional $600 to $800 for both gas and electric systems.

Tankless units range from $500 to $1200 (depending upon the size/capacity) and, according to HomeAdvisor, installation costs an additional $800 to $1500.


Both systems require regular maintenance to keep them functioning properly, especially in areas where there is hard water. Lack of proper care reduces the unit’s lifespan and ultimately can result in higher energy costs since the system has to work harder to heat the water.

Tank storage systems need to be flushed to remove sediment build-up, reducing the tank’s capacity over time. Tankless units also need to be periodically flushed for the same reason. Handy homeowners can perform maintenance on conventional units, while tankless systems require professional servicing, sometimes at a cost of $300 or more. Installing a whole house water softening system can help reduce mineral build-up in both types of heating systems.

Should You Make the Switch?

Behind heating and cooling their home’s interior, heating water is the second-highest home utility cost. Saving money on utilities (plus their small space-saving footprint) has resulted in tankless systems gaining traction with homeowners.

Since they only use energy when a faucet, shower, or other hot-water appliance is in use, tankless water heaters are extremely energy efficient, which equates to saving money. They make a lot of sense to install in new construction and homes undergoing a major renovation.

But switching from a standard tank storage to an on-demand unit, though possible, is not an easy feat. It often entails a plumbing retrofit and may require an electrical or gas line upgrade. The payback period for such a switch can be 12 to 20 years, with this timeframe often outlasting the unit’s warranty.

Rebates Can Help

Local utility companies often provide rebates that offset a portion of the cost of a new or replacement water heating system. To determine whether a rebate is available, check the PG&E rebate webpage, the Energy Star rebate finder site, and/or search the Database of State Incentives for Renewables and Efficiency for rebates by zip code and type of appliance.

The Dawn Thomas Team guides nice people through Silicon Valley and Santa Cruz County real estate matters. Our mission is to help everyone find their place in this world. Contact us today, and we can assist you in selling or buying your home.