Most of us want to become more water and energy efficient. It's better for the environment and more affordable in the long run.

Tankless water heaters are just one of the options you can try to boost the energy efficiency of your home while still enjoying on-demand hot water.

In this article, we'll look at the cost of the average tankless water heater, the alternatives to consider, and how a tankless system works in practice.

Why Switch to a Tankless Water Heater?

Conventional water heaters use large 40-50 gallon water storage tank systems that require energy twenty-four hours a day, seven days a week, all year, to ensure that the household has access to hot water at all times.

That's the theory, at least. In practice, it doesn't always work that way. If someone takes a long shower, the emptied tank can take a long time to heat water.

There are also maintenance issues to consider. Tanks can fill with sediment or leak, and most will fail within eight to twelve years.

A tankless water heater generates hot water on demand when you need it, as long as you need it.

Tankless hot water heaters can reduce your fuel costs by 27-50% over typical gas units, which can waste up to half of the fuel it burns.

There's no tank, which means there is no chance of leaking.

Many of these units are also extremely sophisticated, with wireless connectivity and controls that can reduce water heating costs even more and alert owners when maintenance is required.

Because tanks aren't required, a tankless water heater will take up much less space and have a longer lifespan.

How much does the average tankless water heater cost?

According to HomeAdvisor, tankless water heater prices range from $1,171 to $3,331, with a national average of $2,216.

Installation costs depend largely on the fuel type, brand, and flow rate required.

While these costs may seem a little steep, these tankless water heaters (sometimes called on-demand water heaters) will save money in the long run.

It's important to consider the installation cost when determining your budget for a new tankless water heater.

A professional plumber will likely charge around $45 to $150 (depending on the size and complexity of your hot water heater and your location). Expect to pay around $100-$450 for labor.

Considerations When Calculating Tankless Water Heater Cost

Bear in mind that the cost of tankless water heaters will vary depending on a number of factors, including the fuel type, system, the home itself, the flow rate, brand, and other elements. We'll cover some of these factors in the next section.

Type of Heater

You will likely have the option of choosing between a gas, propane, solar, or electric tankless water heater, each with its own price point and benefits.

A gas water heater will have a higher upfront cost but save money down the line. Electric tankless water heaters are cheaper to install, but the running costs will fluctuate with the cost of electricity.

A solar-powered tankless water heater will be the most expensive to buy and install but will be the cheapest to run.

Here's what you can expect from each type:

• Tankless natural gas water heaters or propane water heaters will cost between $1000 and $1500 to install, with running costs of around $200 per year.
  They are ideal for larger households and colder climates where hot water needs may be higher than average.
  The running cost of propane water heaters is generally higher at around $350 per year.
• Electric tankless water heater costs vary between $800 to $1500. There is no vent to the outside, which reduces the installation cost.
  A tankless unit is more energy efficient than a tank-style electric unit, but the outputs are lower.
  If you need to convert from a natural gas water heater, you will need an electrician to assist.
• Solar, tankless heaters cost between $1700 and $5000, with some premium units costing as much as $13,000.
  These costs may be offset by tax credits, and they can reduce your heating costs by 50-80%, especially in sunny areas.
  Having said that, maintenance and installation costs are much higher than other options.

Type of System

A single-point tankless water heater system is installed next to the faucet, appliance, or shower where it will be used.

They cost between $100 to $300 each, are highly energy efficient, and will save water.

They can be installed inside or outside the home as long as it's installed within 50 feet of an adjoining power source using an electric heater.

A separate heater needs to be installed for each water source.

A whole-house system costs between $450 and $1500 and is installed near an exterior wall to allow for venting (for gas units).

These systems provide hot water for multiple appliances and bathrooms, even when used simultaneously.

There are multiple sizes to choose from based on your hot water needs.

If you have a large home, you may want to use a whole-house tankless system with single-point units for specific rooms.

Labor and Materials

Plumbers will charge between $45 and $150 per hour for installation, depending on where you are based.

Expect installation to take around two to eight hours, based on the type of heater and fuel type.

You may need to open up walls, which will contribute to the cost. (Add roughly $200 for paint and repairs).

If an access door needs to be installed, you will need to hire a carpenter or handyman (around $70 to $100 per hour).

Ventilation and insulation costs can also add $400 to the bill.

If you are replacing your current water heater with a tankless hot water heater, and the old heater is hard to access and remove, your removal and installation costs will increase.

Removal will typically cost $500 or more, depending on the size of the unit and the hourly rate charged by your contractor.

Make sure to check that removal and disposal are included in the estimates.

Next, factor in the cost of the materials, including gas connector kits, termination vent kits, fittings, mounting hardware, valve sets, and piping and insulation costs which are charged per foot.

This can add several hundred dollars to the final bill.

Check your local building costs. You may need a permit to install a tankless water heater in your home.

Some areas consider a new water heater and a replacement tankless water heater as different, requiring permits in some instances but not others.

A propane tankless water heater will require installation by a licensed and insured professional.

Additional Costs and Considerations

These are just the basic considerations. Electrical work, gas line installation, and structural modifications can also influence the cost.

Brand

Some brands are more affordable than others.

Premium brands usually come with longer warranties and better maintenance plans, so it's worth making comparisons on these factors when researching tankless water heater costs.

Electrical Updates

Electric tankless water heaters may require updates to the electric design or system to accommodate the new voltage requirements.

Insulation

If you are switching to a tankless water heater, you may need your plumber or electrician to design a new setup with additional materials like piping and insulation at around $10 per foot.

Insulation for water pipes will cost around $45 per hour in labor fees.

Gas Line Installation

Tankless gas units require more time and effort to install as gas lines need to be fitted.

If there isn't an existing gas line in place, a new connection will need to be run at the cost of around $800.

There may be restrictions on where they can be installed, especially if venting is required.

Structural Modifications

Your home may require some structural modifications to install your new tankless water heater.

This may be included in your contractor's plumbing or electrical permit, so make sure to investigate before making a decision.

Venting

Your tankless water heater that uses gas will require venting, either with a power vent or a direct vent.

The power vent draws air from the surroundings and uses a fan or blower to vent the exhaust through a duct.

A direct vent brings the air supply from outside through one duct and exhausts through a different duct or chamber.

Direct ducts are often used in small homes and enclosed spaces.

Variety

Tankless heaters are available in condensing and non-condensing varieties.

A condensing tankless heater has a second heat exchanger that traps the extra heat before it exits the venting system to warm the water, which increases energy efficiency.

A non-condensing tankless hot water heater uses a single heat exchange and vents the exhaust heat to the outside.

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Conclusion

Tankless water heaters can help your home achieve energy savings and reduce your water and heating bills in the long term.

Always do your research to calculate the cost of your tankless heater, including the maintenance and installation costs.