Tankless Water Heaters & Saving Money on Your Water Heater Bills

Tankless water heaters have become an increasingly popular equipment option for homeowners. Compared to the traditional storage tank style of water heaters, tankless water heaters offer many benefits. While there are many advantages to installing a tankless system, it may not be the best for your home or situation. Before purchasing a new water heater, consider the points below.

Hot water demand

Tankless water heaters heat water on demand, rather than storing preheated water for use. You’ll wait a little longer for water to heat and travel to the tap, but a tankless model can provide you with an endless supply of hot water, unlike a tank water heater. The downside is, you can’t utilize too many hot water-consuming taps or appliances at once — depending on the capacity of your tankless water heater, it may not be able to keep up with your home’s demands.

Equipment costs

Cost is a major factor for most homeowners when making purchase decisions. Tankless water heaters are generally more expensive than storage water heaters. However, don’t let the sticker price get you down. Although tank models have a lower purchase price, tankless water heaters are more efficient and have a longer lifespan offering low, long-term operating costs. Consider the payback period of purchasing either type of hot water heater before making your decision, as you may see that a unit that is more expensive upfront will be cheaper in the long run.

Installation incentives

Many state and local utility programs offer incentives to homeowners for installing energy-efficient equipment, such as tankless hot water heaters. These incentives can help offset your installation costs. Contact your utility company or state agency to ask about incentives that you may qualify for when installing a tankless water heater.


A tank water heater requires a certain area for installation, consuming valuable space within the home. Tankless water heaters are much smaller, and typically mounted to the wall. Tankless water heaters are ideal for applications where installation space is limited. If you live in a smaller home or condo, investing in a tankless water heater can make quite a difference in your available space.

How to Save Money on Your Next Water Heater Bill

The average household spends between $400 to $600 each year on heating water; it’s the second largest energy expense in your home, accounting for up to 18 percent of your total energy use. With such a significant portion of your energy budget dedicated to water heating, homeowners look for ways to save money with their water heaters. Below are some energy-saving tips that will help you conserve hot water, and money.

Lower your water heater’s thermostat settings

Your water heater’s thermostat is likely set higher than really needed. Many manufacturers set their thermostats at 140°F, but most households are comfortable with a water temperature around 120°F. If your water heater’s thermostat is set at 140°F, you could be wasting up to $61 each year through standby heat losses while your water heater stores water at a hotter temperature, and as much as $400 in demand losses as you use water that is hotter than needed! For instructions adjusting your water heater’s thermostat, see our Water Heater Maintenance Guide.

Insulate your hot water system

Insulating your hot water storage tanks and hot water lines will help you retain more heat and limit energy loss. While insulating the hot water pipes within walls can be cost-prohibitive, you can easily install insulated pipe sleeves on the water lines that extend from your water heater or that are installed in an accessible crawl space or basement. This improvement can save you around $12 each year and help you conserve water, as you won’t have to wait as long for hot water to reach your showerhead or sink faucets.

Fix hot water leaks

Hot water leaks from your sink faucets, shower heads, and tub faucets account for both energy and water waste. A hot water leak at a rate of one drop each second amounts to 1,661 gallons of water each year, at a cost of $35 in energy! If you notice leaks, fix them right away rather than ignoring them.

Change your hot water habits

  • Wash laundry using cold water cycles when possible. Also, utilize the cold water rinse setting on your machine, if applicable.
  • Take short showers instead of baths. Save even more water when showering by installing a low-flow showerhead, which can help you reduce your hot water use in the shower by as much as 60 percent!
  • Only run your dishwasher when it is full rather than running multiple smaller loads.

Having issues or have more questions about your water heater? Contact a local trusted HVAC contractor!