Consumers looking to buy new heaters have a few choices

By Ian Harvey, Toronto Star

Unless it breaks down, you probably don’t spend a lot of time thinking about your hot-water heater. But if you’re going to buy your own water heater, should you purchase a tankless system or a tank?

Tank heaters heat up water and wait to serve it up the next time you have a shower or run the dishwasher. Tankless water heaters, also called an on-demand systems, only heat up the water when we need it. They’re considered the more eco-friendly option because there’s no wasted energy going up the flue, as is the case with tank-style heaters which keep 40 to 60 gallons of water hot and ready to go.

The market is overwhelmingly saturated with tank heaters and, while about half of Canadians are aware of tankless systems, the market penetration is low with only about 5 per cent of homes installing them, says Bob Hiscott, spokesman for tankless maker Rannai Canada.

Part of the reason is the cost. Tankless systems are more than double the price of standard units and, in some cases, the logistics around installation adds even more to the cost, he says.

And some people argue that while tankless systems are more energy efficient, the payback may not justify all the costs in some cases.

Spotting the energy-efficiency trend a few years ago, suppliers like Direct Energy and Reliance Home Comfort started offering a rental option, softening that upfront cost.

Typically it’s also expensive, at around $35 a month for a seven-year term after which the homeowner can buy it out at a price to be determined at that time, which is a bit of a risk. Or they can sign up again for another term, also at a price to be set then.

Over 10 to 15 years, renting a tank comes out to favour the supplier with the cost of installation recovered many times over.

Still, there are advantages to tankless beyond energy for the homeowner, says Dave Hammond, general manager at A.O. Smith Canada, one of the largest manufacturers of tankless systems under its own brand and others like Takagi.

A basic tankless system can cut from 15 to 25 per cent of gas costs and the state-of-the-art condenser systems can cut between 25 and 40 per cent, he says.

Condenser systems are equipped with a second stage heat exchanger and on-board digital sensors that monitor every process and adjust for optimum performance.

Standard tankless systems have an Energy Efficiency Rating of .82, while condensers are rated at .90. The difference is immediately clear in the exhaust heat: standards are about 177C (350F) while condensers are just 32C (90F).

It sounds good and the energy savings are tempting, not to mention the 12 to 16 feet of floor space you get back because tankless heaters are wall mounted, but there are challenges.

For one, forget about it if you don’t already have gas. Running a gas line just for a water heater is prohibitively expensive and while they do come in electric versions, you’ll also need 200 amp service, which most homes don’t have.

First published in the Toronto Star on May 3, 2011.

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