Following up on "Which water heater types do you recommend?" and "Are tankless water heaters worth it in cold climates", is there a way to calculate the point at which installing a tankless water heater makes economic sense? Given the cost of purchase and installation, it should be possible to determine the break-even point, factoring in the amount of hot water used and the temperature change required.

Is there a way to estimate hot water usage separately from cold water? If I have a gas furnace and gas hot water heater currently, can the gas usage by each be separated?

3 Answers 3


You get the bast cost saving when you have to replace your tank or boiler anyway for another reason. Remember that for some of the year, the lost heat from the tank may be of value to you depending on how the tank is sited and how cold and long your winters are.

Also are you having to use more air con due to the tank, if so the air con savings may be well worth while.


With electric, standby losses on tanks should be minimal or otherwise not important, especially if your water heater is indoors in cold climates. (Any tiny amount of heat loss is going to be heating your home, and if you're in a cold climate, that's not a bad thing.) Of course, moving from an electric tank to a gas tankless would save money, but moving from an electric tank to electric tankless is a waste of money.

With NG, however, standby losses are much more significant... and most of your losses are through the flue. Since you have NG, yes, the tankless can save you money. It has nothing to do with the amount of hot water used nor the temperature change from the incoming cold water to the outgoing hot water, however. The savings are the removal of standby losses, which are based upon flue losses, tank surface area & insulation, and the temperature difference between the heated water and the ambient air temperature.

A word of caution, however: they will scale up quicker. If you live in an area with hard water, get a water softener or flush it with vinegar/CLR/LimeAway/etc. every year.

  • Do you have any justification for the assertion that moving from electric tank to electric tankless is a "waste of money"? (I'm not saying it's necessarily wrong, but I am not convinced it is always true).
    – gregmac
    Jun 18, 2012 at 17:22
  • @gregmac Electric tanks lose very little heat, and the only thing that tankless eliminates is standby losses. This comes out to about $2.20/month. They are less efficient in their generation of hot water, however, since tanked water heater elements are surrounded by several inches of water and insulation, and since, upon shutdown, the vast majority of heat built up within the tankless' heat exchanger will be lost to the surrounding air. They also scale up much quicker, so their efficiency will take a further blow unless you have salt-based water softening.
    – Michael
    Jun 18, 2012 at 18:10
  • Of course, salt-based water softening has its costs, and if you don't have it, you'll have to spend several hundred dollars acquiring it. That $2.20/mo. savings is quickly eroded and, over time, even reversed. On top of that, they are massive amp draws, often requiring upgrades to the circuit and/or service. Massive amp draws also wreak havoc on the electrical grid (sharp changes in electrical demand cost electric companies money; TXU is right now offering 100% free electricity at night to mitigate their daytime "peaks"), and the electrical companies pass the costs on to their customers.
    – Michael
    Jun 18, 2012 at 18:10
  • If you assume $1/month in savings, how long is it going to take to pay off the extra $200 (best-case scenario)? 16 years. If you have to buy a water softener, upgrade the circuit/breaker, and/or upgrade your entire service, it's going to get ugly very fast. Of course, if you live in an NYC apartment/condo, it may be worth it to spend an extra $200-2k just to free up some space, but that's a special case and those who live in a tiny apartment/condo are very space-conscious and aware that they have to conduct a very different cost/benefit analysis. (Some will also value the novelty.)
    – Michael
    Jun 18, 2012 at 18:18

Assuming you live in California, your gas usage in the hottest months of the summer wil be almost all for water heating (aside from any gas cooking you do).

Also assuming your hot water use will not increase because you never run out of hot water, you could lookup the Energy Factor for your old and proposed new tankless water heaters here:


and compute the gas savings and thus the dollar savings. If we assume your old water heater EF is 0.6 and the tankless is 0.85 and your old monthly gas bill is $10, the new bill would be computed as follows.

Your old water heater delivered $6 of hot water and wasted $4. To generate $6 of hot water with the tankless, you need $6/0.85 = $7.06 of gas instead of $10. Thus your month savings would be $2.94

The new tankless will cost around $1500 to $2000 if you pay for installation.

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