Tankless suits homes that need long, continuous draws or have little floor space. A tank suits homes with short, overlapping peaks, such as two showers and a dishwasher at once, and straightforward like-for-like replacements. The sizing math is different for each. A tank is rated by how many gallons it delivers in its first hour of use. A tankless unit is rated by how many gallons per minute it can heat at a given temperature rise. Mixing those two numbers up is the most common way to buy the wrong heater.

How each is rated

Storage tank Tankless (on demand)
Sizing number First-hour rating (FHR): gallons of hot water in the first hour Gallons per minute (gpm) at a stated temperature rise
ENERGY STAR minimum (gas) FHR of at least 51 gallons per hour; UEF of at least 0.81 (medium draw) or 0.86 (high draw) for tanks of 20 to 55 gallons At least 2.8 gpm over a 67°F rise; UEF of at least 0.95
ENERGY STAR minimum warranty (gas) 6 years on the system, including parts 6 years on the heat exchanger, 5 years on parts
Running out Can run short when a peak outlasts the stored volume Will not run out during long draws, but flow is capped
Standby loss Keeps a full tank hot around the clock Heats only when a tap opens

UEF (uniform energy factor) is the federal efficiency metric. Compare UEF only between heaters of the same type and draw pattern.

Work out your temperature rise

Temperature rise is the target hot-water temperature minus the temperature of the water coming in. A 67°F rise, the ENERGY STAR test point, takes 53°F water to 120°F. In colder regions, incoming winter water can be well below 53°F, so the rise is bigger and the same unit delivers fewer gallons per minute. Ask for the model’s flow chart at your winter inlet temperature, not its maximum headline flow.

Then add up what runs at the same time at your peak: showers, a tub fill, the dishwasher, the washer. If that total is more than the tankless unit’s gpm at your rise, you need a larger unit or a second one, or the household has to stagger use.

What changes the installed cost

  • Gas tankless: ENERGY STAR-certified condensing units vent through vertical PVC pipe and need a condensate drain, which is different from a typical tank’s metal flue. Ask the installer to confirm the gas line and meter can carry the unit’s rated input. A certified unit’s secondary heat exchanger uses 9 percent less energy than a conventional, non-condensing tankless unit. Gas units also need electric power. Noritz says its tankless heaters won’t work during a power outage, and Rinnai lists 120 volts AC at under 3 amps for its units, so plan an outlet and, where outages are common, backup power.
  • Electric tankless: check the model’s required circuits and breaker sizes against your panel, and have an electrician confirm the service can carry them before you buy. Whole-house units draw a lot. Stiebel Eltron’s Tempra specifications call for three 50 A breakers and recommend 300 A main service for the 36 kW Tempra 36, which at 3 gpm raises water up to 82°F on 240 V but only 61°F on 208 V. The Tempra Plus cuts flow slightly when demand exceeds capacity so the outlet temperature holds. That trades flow for temperature; it doesn’t add capacity.
  • Storage tank: usually reuses the existing vent, gas or electric supply, and space. Add a drain pan, an expansion tank where required, and seismic straps where your code requires them.

Every quote should list permits, venting, gas or electrical upgrades, condensate disposal, removal of the old unit and labor warranty. Get those line items before comparing totals.

Maintenance

Follow the manual for each. Tanks need relief-valve checks and anode inspection where fitted. For tankless units, follow the manual’s flushing or descaling schedule. For a third option, compare tankless vs heat-pump water heaters .

Sources