TL;DR: Your tankless heater is a 240V "only" circuit and the instructions assume cable.
There are 3 types of circuits and 2 kinds of wiring methods in typical US residential construction:
This generally includes lighting (though modern LED lighting can often handle 240V just fine), "regular" receptacles around the home and most hardwired devices - e.g., dishwasher, disposal, ceiling fans, exhaust fans, doorbell transformers, etc.
2 wires (hot + neutral) needed + ground.
This generally includes appliances (either hardwired or dedicated receptacles) that need a lot of power. This includes electric hot water heaters (whether tank or tankless), electric resistance heat, EV chargers and sometimes shop receptacles - e.g., for welders or other big tools.
2 wires (hot + hot) needed + ground.
This typically includes clothes dryers, HVAC and ovens.
3 wires (hot + hot + neutral) needed + ground.
The neutral is used in order to provide 120V power to lights, controls, etc. that don't require 240V. In reality, anything made for 120V can be redesigned for 240V. But it saves a little money, and manufacturers know that in a residential installation combination 120V/240V circuits are available, so they make use of it.
Individual Wires in Conduit
This is more common in commercial/industrial construction, but can be used in residential and is required in a few places (e.g., Chicago). Individual wires are used of various colors:
- Green or Green/Yellow or bare = Ground
- White or Gray = Neutral
- All other colors (black, red, blue, yellow, etc.) = Hot
Except for large wires (not used typically in residential construction past the main panel, except occasionally to connect to a subpanel), hot wires can't be white.
In some conduit installation, the conduit itself provides the ground. In others, a ground wire is required.
This is what most people are familiar with in US residential construction. Commonly called Romex after a very popular brand name, this includes individual wires inside an outer covering. The colors are standardized. The most common combinations are:
- 2-wire = Black + White + bare ground
- 3-wire = Black + Red + White + bare ground
In a perfect world, the colors used would be the same as with the conduit wiring method. However, there are two exceptions generally permitted:
- Switch Loop - In a switch loop, both wires are hot - one is always hot, one switched hot. In this situation, the convention is to use the white wire as always hot and the black wire as switched hot and mark the white wire with colored tape on each end. But the tape is rarely used, and sometimes falls off, resulting in "why is this white wire hot?"
Note that new switch loops in many locations require neutral, in which case black/red/white, white being neutral, black always hot, red switched hot (though technically it could be red always hot, black switched hot.)
- 240V circuit - In a 240V circuit (no 120V needed), you only need two wires carrying current (the ground wire is different). Since the standard 2-wire cable only comes in Black/White, code allows using it - with white as a hot wire - for 240V circuits.
Back to Your Circuit
Instructions should really not assume any colors. If your area allows cable and you feel like using standard cable then "black = hot, white = neutral" is, in fact, correct. However, if your area only allows conduit, or if you choose to use conduit for other reasons, then you may not use white for neutral. You can then use black + black or black + red or blue + yellow or any other 2 colors not designated for neutral or ground.