Water Heaters and Power
The overlooked tankless water heater problem—plus heat pump, solar thermal, and point-of-use
When you take a shower and aren't freezing cold, you can thank a water heater. There is much debate over tank vs tankless style water heaters for homes. The general impression you'll get after some Googling or talking with a water heater salesperson is that a tankless water heater is the modern premium option—it works better but costs more. I call BS.
General Comparison
A conventional tank water heater heats and stores a set amount of water in an insulated tank, typically ranging from 30 to 80 gallons. Cold water enters the tank through a dip tube, where it is heated by either a gas burner or an electric heating element located at the bottom. A thermostat maintains the water at a set temperature, reheating it as needed to compensate for heat loss. When hot water is used, it exits through a separate pipe at the top of the tank, while cold water refills the bottom, ensuring a steady supply. Although tank water heaters seem simple on the surface, an incredible amount of thought has been put into engineering their design.
A tankless water heater heats water on demand rather than storing it. When a hot water tap is turned on, cold water flows through the unit, where either a gas burner or an electric element rapidly heats it. The system only operates when hot water is needed, eliminating standby heat loss and improving energy efficiency. Tankless heaters can provide a continuous supply of hot water, but their flow rate may limit simultaneous use for multiple fixtures. Compact and wall-mounted, tankless systems are ideal for saving space, but they require sufficient water pressure and occasional maintenance to prevent scale buildup, especially in areas with hard water. Tankless water heaters usually cost more, around $2,200 installed. Compare that to around $1,400 for a conventional tank water heater.
Tank water heaters can be fuelled by natural gas, propane, heating oil, or electricity. Natural gas, propane, or electricity generally fuels tankless water heaters. Electricity and natural gas are the most common for both types.
Efficiency
Tankless water heaters are touted for their higher efficiency since they don't have standby heat losses, where a hot water tank will slowly lose its heat to the environment.
The process of heating the water is basically the same for both types. Electric water heaters are technically 100% efficient since 100% of the electricity is converted into heat in the water. Natural gas is 80-95% efficient in the process of heating water because some heat inevitably goes out the exhaust pipe.
Standby losses are almost zero for tankless water heaters. For tank water heaters, standby losses depend on a few factors such as the surface area of the tank, the temperature of the environment and the water, and the insulation. We can calculate the standby heat loss for a standard 50 gallon hot water tank using Fourier's Law.
Let's assume standard tank specifications: 24" diameter, 48" high, R-24 insulation, 140°F water temperature, and 70°F ambient temperature.
That works out to a heat loss of 26.8 watts. But that's not including the significant effect of thermal stratification, where the hot water rises to the top of the tank and the cooler water sinks. Thermal stratification can reduce heat loss in a hot water tank by 20-55%, depending on the tank. If we assume a reduction in heat loss from thermal stratification of 30%, that leaves a heat loss of 18.8 watts. That works out to a heat loss for a conventional tank water heater of 0.45 kWh per day, or 165 kWh per year. At $0.15/kWh, that's less than $25 per year.
The average American home uses about 58 gallons of hot water per day, which equates to about 10 kWh of energy per day, or 3,650 kWh/yr. This means the standby losses of a hot water tank account for about 5% of the total energy used to heat the water. So tankless water heaters are about 5% more efficient.
From this point forward, we'll discuss electric water heaters and drop the discussion of combustion water heaters for two reasons. First, it will be confusing to talk about different energy sources in addition to tank vs tankless. Second, and most importantly, modern high-performance homes are all-electric and don't require fossil fuels. Electric appliances are the future and are already here.
The Power Problem
Energy is what's required to heat water. The specific heat or heat capacity of water is 4.181 J/gK, or if we convert the units to be more familiar for this example, 2.44 Wh/gal°F. That means for every degree Fahrenheit we raise the temperature of 1 gallon of water, 2.44 watt-hours are required.
Power is the amount of energy delivered per unit of time. Let's figure out how much power (in kilowatts) is required to heat water at a flow rate of 1 gallon per minute.
Let's assume an average desired hot water temperature of 100°F and a water inlet temperature of 50°F.
Every gallon per minute of flow rate of hot water requires 7.32 kW of power.
A typical shower uses 2 gallons per minute, so heating water for 2 showers requires 29.28 kW of power! That's 122 Amps of current: 29,280 W / 240 V = 122 A.
The problem is that many homes can't supply that much power. Around 1/3 of US homes have a 150 Amp main electrical service or less, and 1/4 have a 100 Amp service or less. The remainder mostly have 150-200 Amp services, with an insignificant amount with greater than 200 Amp services.
A 150 Amp service can provide 36 kW of power. Not all of that is available for heating water. Other significant power users with typical peak power consumption are:
Air conditioning / heat pump: 7 kW
Backup heat strips: 11 kW
Electric clothes dryer: 5 kW
Oven: 5 kW
Electric cooktop: 6 kW
EV charger: 12 kW
If it's Thanksgiving and you have the turkey in the oven, the rest of the meal on the stove, the heat pump is heating the house, plus any other lights, computers, and electronics, that's at least 18 kW of power being used. Now when your spouse or kid goes to take a shower before the guests arrive and you're in the kitchen washing dishes, the hot water demand is 2 gal/min for the shower, and 1 gal/min for the kitchen sink. With a tankless water heater the power requirement is about 22 kW. But your house with a 150 Amp service can only provide 36 kW of power and you're trying to use 40 kW, so your main circuit breaker trips. And that's without even using the dryer, backup heat strips in the HVAC system if it's really cold outside, or charging an EV.
More realistically, a tankless water heater would never be installed in the first place without an electric service upgrade—which is incredibly expensive and not always possible—because they simply draw too much darn power. That is, they require too much energy too fast.
The solution to this problem is a good old-fashioned tank-style water heater. The brilliance of a hot water tank is that it stores thermal energy in the form of hot water. If a 50 gallon water heater is fully heated to a typical 140°F, it can store 11 kWh of thermal energy as hot water. But even at maximum power consumption a tank water heater doesn't draw more than 4.5 kW.
Tank water heaters draw much less power than tankless water heaters because they store energy thermally as hot water, decoupling electricity supply and demand in the home.
In the previous example the home power demand with a tank water heater would be 22.5 kW—well within the 36 kW budget for the home.
So the 5% overall reduction in energy use from a tankless hot water heater comes at the cost of either being unable to supply enough hot water or unreasonably high power demand. As homes modernize and electrify, tankless water heaters become unfeasible due to insane power demand.
Heat Pump Water Heaters
The most advanced water heater technology is the heat pump water heater. These pull heat from their surroundings and put it into the water. While this may sound like a good idea, these water heaters are bigger, more expensive, louder, and require good airflow around them. They typically have a COP (coefficient of performance) of around 2.0, meaning they add 2 kWh of thermal energy to the water for every kWh of electricity they use. But the problem is where that heat comes from. If the water heater is located inside the conditioned space of a house (closet, basement, etc.), which it almost always is, it's just pulling the heat from the air. This might be a good thing in the summer, but in the winter, it's cooling the house off and requiring more energy to be used by the home's heating system.
Solar Thermal Water Heaters
The basic concept behind solar thermal water heaters is to pump a heat exchange fluid up to either flat plate collectors or evacuated tube collectors on the roof, where it picks up heat from the sun and transfers it into hot water in a tank. Free heat with no hydrocarbons and little electricity needed! Efficiencies for converting radiant energy from the sun into thermal energy in water vary between 50 and 70%.
The issue with solar thermal is the more useful alternative: solar photovoltaic panels and conventional electric hot water tanks. While the efficiency of the PV panels at turning sunlight into electricity is lower at about 22%, electricity is a more useful form of energy and it has a higher exergy content.
Solar thermal panels can only heat water, so when they heat all the water in the tank, they are no longer doing anything useful. Electricity from PV panels on the other hand, can be used to heat water plus run the air conditioning, freezer, computer, vacuum cleaner, lights, air purifier, EV charger, etc.
Solar thermal hot water systems are more complicated to install and cost about the same as enough PV panels to match output. They also require more maintenance, risk leaks, don't last as long, and lose efficiency when it's cold out. One of the few cases where solar thermal makes sense is if a building needs a lot of hot water and relatively little electricity, such as a car wash, laundromat, or restaurant.
Point-of-Use Water Heaters
One problem with water heaters, tank or tankless, is that their centralized location wastes water. When you turn the hot water on for a shower, it takes a few minutes to get hot. If it takes 2 minutes for the hot water from the water heater to flow through the pipes and to your shower, 4 gallons of water are wasted.
One solution is to put the water heater where hot water is needed. Multiple point-of-use water heaters with small tanks located where hot water is most used could not only save energy but also save water. I installed a small 3-gallon water heater under my kitchen sink, and it's fantastic. Hot water comes out of the tap within 5 seconds. Any increase in heat loss from greater surface area from multiple smaller water heaters is more than offset by the energy saved by not pumping hot water from the central water tank to the faucet, where that hot water in the pipes loses it's heat.
But doesn't a circulator pump do the same thing? Circulator pumps on water heaters constantly circulate hot water throughout the house on a hot water loop to allow hot water to be available for showers and sinks within seconds. The problem with circulating hot water is that it cools off as it's circulated, requiring the water to be constantly heated. This leads to 2 to 3 times the electricity consumption for the water heater.
To summarize the great water heater debate:
Tankless water heaters suck. They are more expensive and require insane amounts of power.
While an older design, tank-style water heaters are better suited for high-performance modern houses—and are cheaper.
Heat pump water heaters are probably not worth it. Neither is solar thermal water heating in most cases.
Small point-of-use tank-style water heaters can save water, time, and money.
Questions for you:
Has your view of water heater types changed? How so?
Do you have a case for a specific type of water heater? Please explain logic.
I love your practical breakdown, backed by the numbers. I have a heat pump HWHeater tank and added a small on-demand (about 3 gallons. The sink supply lines runs about 22’ under a concrete slab) heater under the kitchen sink. As a designer of homes, I think there could be recapture of heat from appliances to help ‘feed’ heat to a HP HWHT from refrigerators and cooktops/ovens. Yes, this would require a redesign of standard kitchen layouts by moving the refrigerator and HPHWT to an adjacent space, but what a great way to add overall efficiency to heating water and cooling, as well as housing noisy appliances away from open spaces in the home. I toy with this idea often, as I sit in my living room with the refrigerator humming loudly on one side and the HPHWT doing its thing off the other side, tucked into a closet.
Appreciate the thoughts, and the hand drawn electric power use chart. A question: The analysis on heat pump water heaters seems…incomplete for the conclusion that is made. At high electric rates per kWh (eg $0.20-30/kWh), do heat pump water heaters get more cost competitive? If memory serves the COPs for heat pump water heaters operating in a conditioned space are ~3 or higher.