Time to consider tankless heater?

Stimulus subsidies make tankless water heaters more affordable

By Steve Law

Pamplin Media Group, Jun 11, 2009, Updated Oct 30, 2009

When the hot water kept petering out at Alan Martin’s house in Milwaukie, he ditched his old hot-water tank and switched to a tankless system. Now he’s saving $20 a month on utility payments, and his six-member household never worries about running out of hot water.

Sustainability advocates preach the virtues of tankless water heaters fueled by natural gas, because they use 30 percent less energy, according to the federal Energy Star program. However, homeowners haven’t flocked to tankless systems, balking at the price tag.

But tankless water heaters suddenly became much more affordable in mid-February, when the federal stimulus package was signed into law. The federal government now reimburses 30 percent of the cost for tankless systems installed by the end of 2010.

A conventional hot-water tank heats day and night to maintain a constant water temperature. It can run out of hot water if there’s a surge of demand, and requires some patience while it heats replacement water. A tankless system heats the water as needed, when a tap is turned on. If properly sized for a home, it never runs out of hot water.

“If you’re gone for the weekend, there’s no cost,” Martin says. “The less you use, the better it is for the environment . . . and your pocketbook, too.”

Saving money

Some critics, including Consumer Reports magazine, question the benefits of tankless water heaters. But cost has been a bigger concern among would-be buyers.

Installing a conventional gas water heater costs $500 to $800, compared to $2,500 to $3,500 for a tankless system. But the new federal subsidies, combined with state and local incentives, can cut the net cost of a tankless system in half.

That means a Portland-area homeowner can recoup the extra costs of a tankless system in seven years or less, through lower utility bills.

One Northwest Portland customer just secured a $2,700 bid to install a tankless water heater in his home, says Brian McVey, general manager of Neil Kelly Home Performance. The ultimate cost to that customer will be $1,350, McVey says, thanks to $810 in federal tax credits, a $340 state tax credit and a $200 cash incentive from the Energy Trust of Oregon. The energy trust is a local nonprofit that uses money from a utility bill surcharge to fund energy conservation projects.

Nationally, the Energy Star program estimates a family of four can save $175 a year with a tankless gas water heater, or $260 for a family of six.

Closer to home, an Energy Trust of Oregon study found that natural gas customers switching to tankless water heaters in 2007 saved an average of 59 to 73 therms. That’s $82 to $101 in annual savings under current Northwest Natural rates. Shifting from an electric water heater would bring greater savings.

Most tankless systems are gas-powered, because electric systems aren’t as efficient and don’t qualify for ample subsidies.

Environmental benefits

There are other environmental benefits of tankless water heaters besides trimming energy consumption. A typical tankless system lasts 20 years, compared to 13 years for a tank-based system, according to a 2005 study commissioned by the Energy Trust of Oregon. That narrows the cost advantage of tank systems.

Portland General Electric and Pacific Power customers who switch from an electric water heater to a gas-powered tankless system will reduce carbon emissions that contribute to global warming. That’s because a good chunk of those utilities’ electricity comes from burning coal, which emits more carbon than natural gas.

If Portland-area power customers can shift from coal to gas energy usage, “we would be miles and miles down the road toward meeting our carbon goals,” says Angus Duncan, chairman of the Oregon Global Warming Commission.

It’s also more efficient to pipe natural gas directly to a residential water heater, instead of burning gas at an electric plant and then sending juice to the same home.

Decision not simple

Despite the acknowledged benefits of tankless heaters, homeowners pondering a new system face a thicket of competing claims, alternative technologies and outright skepticism.

Many sustainability advocates prefer solar thermal water-heating systems, which tap the sun’s rays to preheat water before it’s piped into the home. Those are costlier than tankless water heaters but provide more energy savings and lower carbon emissions.

Electric utilities, which have seen a steady defection of residential customers switching from conventional electric water heaters to lower-cost gas models, see prospects to reverse that trend with an emerging technology. General Electric and Rheem plan to mass-produce electric heat pumps for water heating by year’s end, says John Karasaki, PGE program manager. Those will be super-efficient and cost $1,000 to $1,200, plus about $200 for installation, he says. Customers should be able to recoup the extra costs in about seven years, via lower utility bills, Karasaki says.

Some experts urge caution about claims made for tankless systems.

“The tankless people like to say they’ll never run out of hot water, but you can only use it so fast or the water doesn’t get completely hot,” says Dave Brook, energy analyst with the Oregon Department of Energy.

Homeowners should install large-capacity units if they want to enable someone showering while someone else is washing dishes and a clothes washer is running, he says. The systems may require adjustments in how water is used, such as filling up a bathtub more slowly, Brook says.

Consumer Reports magazine published a scathing review of tankless water heaters last September, concluding they don’t perform as well as advertised. The magazine received many comlaints about tankless systems from its on-line poll of 1,200 readers.

Consumer Reports suggests the tankless systems save an average of $75 a year, but at that rate it could take up to 22 years to pay off the systems. The magazine concludes it’s “probably not” a good time to switch to tankless water heaters, and instead urges readers to buy traditional tank heaters.

That review, however, doesn’t account for environmental benefits or the new federal subsidies. Nor does it reflect local subsidies offered by the state of Oregon and Energy Trust of Oregon.

stevelaw@portlandtribune.com

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