Question: The water heater in our Goleta home is at least 15 years old, and last weekend I noticed that it has sprung a small leak and water is collecting in the round pan that it stands on.

My wife and I have read about how much less energy a tankless water heater uses compared to the old tank style of water heater that we now have.

Our house is a typical California ranch-style home that was built in the 1960s with four bedrooms and two bathrooms.

Can you give us some information on the pros and cons of installing a tankless water heater?

Your Handyman: There has been much written in the past 10 years or so about the energy efficiency of tankless water heaters. However, things often are not as simple as advertised and you are wise to do your homework before making a purchase.

The two basic types of residential water heaters can be classified as storage and tankless.

The storage water heater is an insulated metal tank holding anywhere from 40 to 120 gallons of water, and is heated by either a gas burner or an electric heating element.

A storage water heater is constantly losing some heat through the walls of the tank. This loss of heat is referred to as “standby heat loss” and is one of the reasons that tankless water heaters were developed. Since tankless heaters heat water on demand, there is not any standby heat loss.

In new construction, smaller tankless water heaters are often installed at the “point of use” near a bathroom or kitchen, but in an older home they are usually a larger unit installed in a central location.

Another plus is that the size of the tankless heater is considerably smaller than the storage tank unit, freeing up room for other uses. It also can be mounted onto an exterior wall of your house.

Depending on which report you read, tankless water heaters are credited with energy savings of from 22% to 36% when compared to a properly sized storage unit in the same home.

Purchase and Installation Costs

The tankless unit is considerably more expensive to purchase and to install than the storage unit.

According to Consumer Reports, tankless model purchase costs range from $800 to $1,150, plus about $1,200 for installation, compared to $300-$480 for storage tank heaters and $300 for installation.

These upfront cost differences in many cases pencil out to a 20- to a 40-year payback period for the tankless heaters, which is much longer than the expected life of the unit.

These costs are national averages, and costs in Santa Barbara are considerably higher (probably twice the national average).

Politics

A prevailing political thought is that natural gas is both an indoor and outdoor polluter, and the sale of new natural gas appliances are currently slated to be banned in California after Jan. 1, 2030.

If this happens, both gas tankless and gas storage tank heaters will have to be replaced with electric versions when they wear out.

Replacing a gas storage tank heater with an electric storage tank equivalent will require providing a new 220-volt (usually 30 amp) circuit to your water heater closet with minimal changes to the plumbing.

The cost of this electrical work will vary and, if your home has an outdated electric panel, it may require that your panel be replaced by an electrician, which could cost several thousand dollars.

Replacing a gas tankless heater with an electric tankless unit will not be easy in most homes because of the large amount of amperage that an electric tankless unit requires.

Electric tankless units with adequate capacity for a typical four-bedroom house require as many as 160 amps, which would probably require total electrical service to your home of 400 amps.

Upgrading your electrical service and panel to this level would be very costly, and in some cases won’t be possible.

If you opt to switch to an electric storage tank unit, it may be a challenge finding the physical space to replace the gas tankless unit with the much larger electric storage tank unit, plus quite a lot of plumbing work will be required.

So, it may be that after taking a careful look at all the considerations, a tankless water heater is not the best option for your home. Avoid the temptation to save money by purchasing a tankless unit that is undersized for your home’s hot water needs.