Macroware Technology
Hot Water Heaters
posted Monday, 24 April 2006
Our hot water heater is 19 years old and it has shown many signs of impending failure over the last year. I've been thinking about replacing it recently. There are several different options including traditional storage tank heaters, tankless heaters, solar water heaters, geothermal water heating, and electric heat pump water heating.
Efficiency of Tankless vs. Storage Tank
Tankless water heaters qualify for an energy tax credit this year of $300, so I was considering going this route. The tankless heaters cost more up front but promise energy savings. I did a present cost analysis and rate of return analysis of tankless vs. storage tank using the published energy factor numbers for each type (0.82 for tankless vs. 0.61 for storage). It wasn't even close to being worthwhile economically to go with the tankless based on the up front cost difference. See the attached Mathcad sheet.
Then I came across this article. The published energy factor numbers are overly optimistic for tankless heaters and overly pessimistic for storage heaters based on testing by Bradford White using operating conditions based on the typical hot water usage of a family of 4.
I found a good quality tankless heater to be about $2500 installed vs. about $640 installed for a storage tank. There may be a return on investment for a do it yourself installation as the cost of a tankless is about $1000 vs. about $400 for a storage tank heater. The optimistic monthly savings for the tankless heater over the storage heater is about $5. A tankless heater with a $300 tax credit would cost $2200 or $1560. Assuming a $1560 investment, approximately $5 monthly benefit, and a 20 year life for the tankless heater vs. a 19 year life for the storage tank heater, the rate of return would only be about 1.7%. Similarly, assuming a 10% rate of return for econominc decision making, the present cost of the tankless heater is about $725 higher than a storage tank. The numbers are even worse if you assume more pessimistic efficiency results for the tankless heater as presented in the Bradford White testing.
Now on the other hand if you do the installation yourself with a $1000 cost for the tankless vs. a $400 cost for the storage tank, with the same assumptions, the rate of return for the tankless would be about 22% and the present cost would be about $489 less. However even this may be based on overly optimistic energy factor numbers for the tankless heater.
The bottom line is that if you can't do the installation yourself, or installers don't start charging a lot less to install tankless heaters, they do not make economic sense, even with the $300 tax credit. Even if you can do the installation yourself, you need to carefully take into account your use model for hot water to determine if there are any cost savings to going with the tankless heater. For the typical family of 4 morning/evening use model, there are not.
Storage Heater vs. Solar
I wasn't able to find much information about installation costs in my area for solar hot water heaters. I have serious doubts that we get enough sun in WI for these to make much sense. I would be very interested to hear of others' rate of return calculations for going this route. I did find one interesting article describing the various types of hot water heaters and the advantages of each.
General Conclusions
Good old storage tank water heaters still made the most sense in my situation. I definately would go with natural gas over electric powered heaters at the present time, but I'm not sure what the added installation cost would be to switch. There are some very interesting alternatives available such as solar hot water heating and combination heaters that provide both hot water and space heating. I guess as long as you have a big tank of hot water sitting there you may as well use the heat to heat the house. I did not thoroughly investigate these because I didn't want to get a new furnace yet. Tankless heaters probably only make sense in certain applications. There are some useful tips to reducing hot water heating costs in this faq as numbers 32 through 41.
Efficiency of Tankless vs. Storage Tank
Tankless water heaters qualify for an energy tax credit this year of $300, so I was considering going this route. The tankless heaters cost more up front but promise energy savings. I did a present cost analysis and rate of return analysis of tankless vs. storage tank using the published energy factor numbers for each type (0.82 for tankless vs. 0.61 for storage). It wasn't even close to being worthwhile economically to go with the tankless based on the up front cost difference. See the attached Mathcad sheet.
Then I came across this article. The published energy factor numbers are overly optimistic for tankless heaters and overly pessimistic for storage heaters based on testing by Bradford White using operating conditions based on the typical hot water usage of a family of 4.
I found a good quality tankless heater to be about $2500 installed vs. about $640 installed for a storage tank. There may be a return on investment for a do it yourself installation as the cost of a tankless is about $1000 vs. about $400 for a storage tank heater. The optimistic monthly savings for the tankless heater over the storage heater is about $5. A tankless heater with a $300 tax credit would cost $2200 or $1560. Assuming a $1560 investment, approximately $5 monthly benefit, and a 20 year life for the tankless heater vs. a 19 year life for the storage tank heater, the rate of return would only be about 1.7%. Similarly, assuming a 10% rate of return for econominc decision making, the present cost of the tankless heater is about $725 higher than a storage tank. The numbers are even worse if you assume more pessimistic efficiency results for the tankless heater as presented in the Bradford White testing.
Now on the other hand if you do the installation yourself with a $1000 cost for the tankless vs. a $400 cost for the storage tank, with the same assumptions, the rate of return for the tankless would be about 22% and the present cost would be about $489 less. However even this may be based on overly optimistic energy factor numbers for the tankless heater.
The bottom line is that if you can't do the installation yourself, or installers don't start charging a lot less to install tankless heaters, they do not make economic sense, even with the $300 tax credit. Even if you can do the installation yourself, you need to carefully take into account your use model for hot water to determine if there are any cost savings to going with the tankless heater. For the typical family of 4 morning/evening use model, there are not.
Storage Heater vs. Solar
I wasn't able to find much information about installation costs in my area for solar hot water heaters. I have serious doubts that we get enough sun in WI for these to make much sense. I would be very interested to hear of others' rate of return calculations for going this route. I did find one interesting article describing the various types of hot water heaters and the advantages of each.
General Conclusions
Good old storage tank water heaters still made the most sense in my situation. I definately would go with natural gas over electric powered heaters at the present time, but I'm not sure what the added installation cost would be to switch. There are some very interesting alternatives available such as solar hot water heating and combination heaters that provide both hot water and space heating. I guess as long as you have a big tank of hot water sitting there you may as well use the heat to heat the house. I did not thoroughly investigate these because I didn't want to get a new furnace yet. Tankless heaters probably only make sense in certain applications. There are some useful tips to reducing hot water heating costs in this faq as numbers 32 through 41.
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