Do you need to replace your old hot water heater? Or maybe you’re looking to upgrade to a water heater that’s more efficient? Either way, you might be wondering whether you should get a tankless water heater.

Although they aren’t as common as storage tank water heaters, both tankless gas water heaters and electric tankless water heaters have been around for a long time. The earliest models weren’t as efficient or reliable as the storage water heater system, but technology has changed that.

In the last few decades, more homeowners in the Phoenix area have been choosing to have a tankless water heater installed in their home for a variety of reasons. But for some, the traditional storage tank water heating system still makes more sense.

To decide which type of hot water heater is best for your home, it helps to compare their features and benefits.

How Tankless Hot Water Heaters Work

As the name implies, tankless hot water heaters don’t store a supply of hot water in a tank the way conventional water heaters do. Instead, they heat only the amount of water you need, as you need it. This is why they are also called “on demand” water heaters.

With a “whole home” tankless water heater, when you turn on the hot water faucet in your sink, shower or bathtub, cold water is drawn through a pipe into the water heater. A sensor activates an electric element or a gas burner (depending on the type of tankless unit), which warms the unit’s heat exchanger. The water circles through the heat exchanger until it reaches the set-point temperature. It then flows out of the heater and through the pipes to the faucet.

You can expect a tankless water heater to produce 2 to 5 gallons of hot water per minute. Gas units (which most often operate on natural gas or propane) generally have a higher flow rate than electric units do.

Furthermore, a tankless water heater does not typically run out of hot water, because the water is heated as it flows through the unit. As long as the unit is large enough, it will give you limitless hot water. With a storage tank system, when you’ve used all of the hot water reserve, you have to wait for another tankful to be heated. That’s no fun if you’re in the middle of a shower.

However, if there are frequently several people or appliances using hot water at the same time, a tankless hot water heater that’s too small won’t be able to keep up with the demand. That’s why it’s important to consider your household water usage when choosing a new water heater, no matter which type you buy.

To ensure that you always have enough hot water, you could have multiple tankless units installed in your home. For instance, you could have one installed near the kitchen, another in your laundry area and one or more to provide hot water for the bathrooms.

Efficiency Comparison

Since a tankless water heater doesn’t have to keep a whole tank of water heated and ready for you to use all hours of the day and night, you might assume that a tankless water heater is more energy efficient. In general, this is true.

For homes with moderate daily hot water usage (41 gallons or less), a tankless hot water heater can be 24% to 34% more efficient than a conventional water heater, according to the Department of Energy. For homes that use 86 gallons of hot water or more on a daily basis, a tankless unit may only be about 8% to 14% more efficient than a storage tank system.

Gas vs. Electric Tankless Water Heaters

Overall, electric tankless water heaters are more efficient than tankless systems that operate on gas. One reason is that some gas-powered tankless units have a pilot light that stays on all the time. As an alternative, if you’re shopping for a tankless gas water heater, look for one that has an intermittent ignition device instead of a pilot light.

Be aware that even though electric tankless units may be more efficient than storage tank systems, they do require a substantial amount of electricity when they are running.

Cost Comparison

The upfront costs are higher for a tankless water heater, in part because of the installation costs. Tankless units require a dedicated venting system, and those that operate on natural gas may require the installation of a larger gas line than the one your storage tank water heater is using.

Bear in mind, though, that tankless water heaters usually last longer than storage tank water heaters. In most cases, a properly maintained tankless unit will last 20 years or longer. And tankless units have parts that are relatively easy to repair, which can extend the life of the water heater well beyond 20 years.

By comparison, the lifespan of a storage tank water heater is typically 6 to 10 years, depending on how well the system is maintained and how hard your water is. Phoenix-area water tends to be hard because it’s high in calcium and magnesium. Hard water will cause more sediment to build up inside the tank (which reduces capacity) and around the heating elements (which increases the length of the heating cycle).

As noted earlier, if you decide to go with a tankless system, you may want to install multiple units. You’ll need to factor that into any cost comparisons you make.

Space Requirements

The difference here is obvious. A tankless hot water heater mounts on the wall and takes up only a fraction of the space a traditional hot water heater requires.

If you want the numbers, storage tanks that hold 40 to 60 gallons of water stand about 60 inches tall and are 18 to 24 inches in diameter. Compare that with a standard electric tankless unit, which measures about 10 x 7 inches, or a standard gas-fired tankless water heater, which measures about 30 x 20 inches.

No matter whether your storage tank water heater is located in the garage, the laundry area or a closet (or in the basement, if you have one) — replacing it with a tankless unit will free up a considerable amount of space, which you can use for other purposes.

Questions to Consider Before Choosing a New Hot Water Heater

How much hot water does your household typically use?

If you have several people needing hot water at the same time, or if you want to run the dishwasher and the clothes washer while you’re showering and still have plenty of hot water, then you might be better off with a large-capacity storage tank water heater. Another option would be to have multiple tankless units installed.

Do you plan on moving in the next few years?

Unless you plan on living in your current home long enough to recoup the installation costs associated with a tankless water heater, you may want to replace your existing storage tank system with the same type of water heater. If you do intend to remain in your current home for several years, know that a tankless water heater may increase your home’s value when you are ready to put it on the market.

Do you have the option of choosing between fuel types for your water heater?

Remember, there are other types of water heaters besides storage tank and tankless units (e.g., solar water heating systems). Depending on where you live, your options may be limited. This could make your choice of which type of water heater to buy much easier.

Recapping the Pros and Cons of Both Types of Water Heaters

Storage Tank Water Heaters


  • Lower installation costs
  • No waiting for water to heat (unless you use the full supply of heated water in the tank)
  • May be a better option for large households that use a lot of hot water


  • Can leave you without hot water for up to 30 minutes if you use the stored supply of heated water
  • Not as energy efficient as tankless systems — generally more expensive to operate
  • Heavy and bulky
  • Shorter lifespan than tankless systems
  • Require more maintenance for best performance


Tankless Water Heaters


  • Continuous supply of hot water, as long as you choose the right unit size
  • More energy efficient than storage tank systems: lower operating costs, smaller carbon footprint
  • Require substantially less space than storage tank systems
  • Typically last longer than storage tank systems
  • Lower maintenance


  • Higher upfront costs, both for the unit itself and for installation
  • May not keep up with household demand if the unit is too small
  • Electric tankless systems won’t work during a power outage

    (a battery back-up generator can be added to resolve this issue)


Here’s the bottom line: The experts at Donley can help you figure out which type of hot water heater will best serve your needs. Then, once you’ve made your choice, we can install your new system and your hot water worries will be over!