On demand water heaters heat water directly without the use of a storage tank. Therefore, they avoid the standby heat losses associated with storage tank heaters. Traditional tank-style water heaters are the most common in use today. When the hot water tap is turned on, cold water travels through a pipe into the unit and either a gas burner or an electric element heats the water. As a result, demand water heaters deliver a constant supply of hot water. You don't need to wait for a storage tank to fill up with enough hot water. However, a demand water heater's output limits the flow rate. So, it is important to size the unit appropriately to suit your needs.
Gas-fired demand water heaters produce higher flow rates than electric ones. Unfortunately, many of the gas-fired model cannot supply enough hot water for simultaneous, multiple uses in large households. For example, taking a shower and running the dishwasher at the same time can stretch a demand water heater to its limit.
To overcome this problem, you can install two or more demand water heaters, connected in parallel for simultaneous demands of hot water. You can also install separate demand water heaters for appliances—such as clothes washing machines or dishwashers—that use a lot of hot water in your home. These systems also serve an excellent backup for a solar water heating system.
Unlike storage tank water heaters, many of the tankless units can qualify for the Federal tax credit. The unit must have an energy factor of at least .82 OR a thermal efficiency of at least 90%.
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