Demand or tankless water heaters do not have a storage tank to supply a direct flow of hot water. When you turn on a hot-water tap, cold water flows through a pipe. Either an electrical heating element or a gas burner heats the water. As a result, demand water heaters deliver a constant supply of hot water, albeit at a limited flow rate. This innovative system doesn’t produce the standby energy losses associated with storage water heaters, which can save you money.
Typically, demand water heaters provide hot water at a rate of 2 to 5 gallons per minute. Gas-fired demand water heaters produce higher flow rates than electric ones. Sometimes, even the largest gas-fired models cannot supply enough hot water for simultaneous multiple usesage in large households.
For homes that use 41 gallons or less of hot water daily, demand water heaters can be 24% to 34% more energy efficient than conventional storage tank water heaters. They can be 8% to 14% more energy efficient for homes that use a lot of hot water – around 86 gallons per day. Though demand water heaters consume less energy, they are limited in their capabilities to produce large quantities of hot water.