Are On-Demand Hot Water Heaters any Good? Buying Tips and Things to Look For

Rinnai on-demand water heaterTankless water heater for on-demand water heating

Imagine having an endless supply of hot water whenever you need it, without having to worry about running out or waiting for a storage tank to heat up. That's the beauty of on-demand hot water heaters!

In this comprehensive guide, we'll take a deep dive into the world of on-demand hot water heaters, exploring their advantages and highlighting some of the best models available.

So, whether you're looking to save money on your energy bills, free up some space in your home, or simply enjoy the convenience of always having hot water available, we've got you covered.

Get ready to experience the benefits of on-demand hot water heaters and transform your daily routine for the better!

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On-demand hot water heaters: Considerations and benefits

Are you feeling overwhelmed by the various options, types, and models of water heaters available on the market? Do you feel confident in your knowledge of tank-type, tankless, gas, electric, or solar systems to make an informed purchasing decision?

It's understandable that getting familiar with water heating and its available options can be a time-consuming and daunting task. It took me weeks, if not months, of reading, training, and hands-on experience before I felt confident enough to repair and sell them.

As you search for the right answer online, consider connecting with HVAC experts and "gurus" who can help compare different types, such as on-demand vs. tank type or tankless vs. hybrid.

You may also notice that some groups prefer the traditional way with a tank-type heater, while others, especially those who have experienced on-demand water heating, would highly recommend the tankless technology.

So, take the time to research and explore all options to make an informed decision that best suits your needs.

How on-demand hot water heaters work

On-demand hot water heaters, also known as tankless heaters, do not have storage tanks and are powered by natural gas, propane, or electricity to generate hot water as required. They can provide a continuous supply of hot water to one or multiple applications simultaneously.

The incoming cold water passes through the heat exchanger, where it is instantly heated by a built-in gas burner or heating elements (in electric models). Most modern tankless heaters include modulation, so the unit doesn't always operate at maximum capacity, only when necessary.

These types of appliances provide endless hot water, making them perfect for homes with high hot water demands or occasional use (such as cottages or camping). For more information about tankless heaters, check out this article.

In contrast, water tank heaters heat the water inside a large tank, and the hot water is almost always ready but not fresh. If all the water in the tank is used, you will have to wait for the tank to refill and the water to reheat before using it again (depending on the recovery and tank capacity). Learn more about tank-type heaters - here.

Benefits of on-demand water heaters

  • Freshwater is heated and delivered on demand
  • Endless and continuous supply of hot water
  • Energy Star approved
  • The small size ensures more flexibility
  • High efficient water heating
  • Energy savings of over 30%
  • Hot water is available immediately with the use of a recirculation system
  • It can last for a long time
  • Long warranties
  • Adds value to your house

Disadvantages for on-demand water heaters

  • High purchase and installation price
  • Limited flow rate
  • Requires minimum water flow rate to start
  • Repairs might be complex and expensive
  • Professional installation and service are recommended
  • Prone to cold water sandwich effects (temperature fluctuations)

Are on demand water heaters more efficient?

On-demand hot water heaters are designed to operate with an efficiency of over 80%, with some models being highly efficient and others ultra-efficient. The latter is known as condensing heaters and are designed to use heat from flue gases for water preheating, resulting in an efficiency of over 90%.

Unlike tank-type heaters, tankless heaters do not store water, so water is only heated when needed, making it fresh. Tank-type heaters store hot water in a tank, constantly reheating it, even when not in use.

Considering how both systems operate and the fact that tank-type heaters lose energy through the tank walls (standby heat loss), we can see that small but powerful tankless heaters can save over 30% of energy, making most models Energy Star compliant.

On-demand water heater types

On-demand water heaters are designed for various use, from residential to commercial applications, and as follows:

  • Indoor models – models installed only inside the house.
  • Outdoor models – installed outdoors only.
  • Point of use (POU) – small on-demand water heaters that are installed mainly under the sink in the kitchen or bathroom, and close to the hot water fixtures.
  • Whole-house – powerful heaters that are installed mainly on the wall to save space and provide enough hot water from small to large homes.
  • Portable – this type is used mainly when camping or when hot water is needed outside and off-grid (washing pets on the farm, for example).
  • Mobile – this type is used in RVs or the marine industry, and the most common are those running on propane fuel.

Can I use an on-demand water heater to heat a pool?

According to the Rinnai manufacturer, tankless water heaters should not be used for heating pools and spas because the chemicals used in pools can damage inner components.

They are designed to heat domestic water only, heating water at higher temperatures and relatively low flow rates. This is not the case with the pool heating, where the required water temperature is lower and the flow rate is higher.

While on-demand models are designed particularly for pool heating, such as EcoSmart Smart Pool 27, we always recommend consulting a professional first.

Choosing an on demand water heater - Selecting and sizing tips

Before buying a water heater, you need to consider the following:

  • Size
  • Fuel type and availability
  • Efficiency
  • Costs


Sizing an on-demand hot water heater is not hard to figure out. It would be best if you determine the flow rate and temperature rise for the applications in your home.

List the number of applications you expect to use at the same time and add up their flow rates, calculated in gallons per minute (GPM).

The temperature rise is also easy to calculate; subtract the temperatures of the incoming water temperature and desired output temperature. Different values for temperature rise are usually given in the manufacturer's manuals.


On-demand water heaters are more efficient than traditional tank-type types – most have an energy factor of 0.82, Energy Star – 0.87 or higher, and the most advanced, such as condensing, have an energy efficiency of over 90%.

How much does an on demand water heater cost?

On-demand water heaters are more expensive than the traditional tank type. The price is often two times higher.

Prices range from $40 for the electric shower head water heater to over $800 for the 36 kW tankless unit, and from $100 for the portable gas unit to over $2000 for the ultra-high efficient condensing models.

Venting in gas indoor models is very expensive, because non-condensing models use stainless steel vents due to the high exhaust gas temperature and acidic nature of condensation. Condensing units use cheaper plastic vents.

Tankless heaters have more sophisticated elements; they need more care, making the service and maintenance cost you more.

On average, one on-demand water heater can save up to 40% of heating costs when properly installed.

Popular gas tankless manufacturers for residential use

Popular on-demand manufacturers for RVs and camping

  • Eemax
  • Suburban
  • Zodi
  • Coleman
  • EccoTemp

Popular on-demand electric heaters

Components of on-demand water heaters

The main advantage of the on-demand hot water heaters over the storage tank-type is the use of sophisticated components, which are replaceable and serviceable. For example, if leaking happens on the water tank heater, you have to replace the whole unit, while if the heat exchanger leaks, no problem, you just have to replace this particular element.

Tank-type heaters operate at the constant gas input rate, while tankless have a modulating burner (actually, the gas valve provides more or less gas), which adjusts its power based on the water flow. Since the tankless heaters do not have a tank but a heat exchanger, they can provide hot water up to its maximum rated output. If the system is not sized correctly, the unit cannot meet the demand if the demand exceeds the maximum result. On the other hand, tank-type can handle peak demands.

Most tankless units utilize the self-diagnostic system and remote controller to monitor the water heating and change the settings, making them convenient to operate. Advanced electronics allow easy troubleshooting, so in some cases, homeowners can fix the problem.

An on-demand hot water heater does not require the anode rod since there is no water storage and the inner components are made of copper and stainless steel, so there is no corrosion as it happens on metal tanks.

Other requirements

All tankless heaters need a minimum water flow to trigger the ignition, so properly sized plumbing pipes are a must. Tank-type can work with any flow or pressure. Also, the correct size of the gas pipe should provide sufficient gas for gas combustion, so when switching from tank to tankless, a proper size should be provided and the new vent pipe. Every on-demand water heater consumes a large amount of gas at the beginning.

According to consumerreports.org, on-demand water heaters are more efficient but not economical.

Installation and maintenance tips

Installing an on-demand water heater is much more expensive than conventional tank-type, especially in the case of the venting system where stainless steel pipes should be used.

Direct vent tankless models are designed for the installation in any part of the house as they come with the sealed combustion chamber and vent system that gets the air from outside and transfers the flue gases out safely.

In retrofit situations, when replacing the tank heater with the tankless, installation costs are higher. Due to its higher gas inputs, tankless units require larger venting and gas lines.

Periodic water heater maintenance can greatly extend the unit's life and reduce service costs.


Almost every on-demand hot water heater has a 12-year warranty, some 15 years, on the heat exchanger and five on other elements, while most tank-type heaters are 6-9 years, rarely 12.

How long does an on demand water heater last?

On-demand water heaters have an average service life of up to 20 years while tank-type of 10-15 years. While almost all the elements of tankless units can be replaced, this is not the case with conventional models.

So, are on demand water heaters worth it?

Based on the facts from above, on-demand hot water heaters are more energy and water efficient with long draws, and that's why they are recommended in situations with high hot water demand. Since tankless models heat water only when needed, they are also recommended in places where not used frequently.

One of the frequent complaints about tankless operation is the "cold water sandwich," which is minor when taking into account the great number of positive reviews. With the new advanced technology implemented in some models, on-demand water heaters today are capable of reducing the number of temperature fluctuations significantly, saving you energy and money.

As they offer many benefits, on-demand water heaters are well worth the money, making them a good investment for many homeowners.

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