Years ago I was visiting a friend in Tokyo and was astonished that she took water from the tap for tea, and it was too hot to drink. This was way back in 1979. I was amazed that all the hot water for the home's kitchen and bath came from a heat-on-demand water tank powered by natural gas. Later that year, I saw passive solar water heating systems on the roofs of homes just outside of Tel Aviv. Thirty years later I've yet to see these systesm in widespread adoption around the states.
Then you consider that tank-less, heat-on-demand systems are available-with models that just heat your teapot, while others power the shower-they're still a ways off from popular use around the states. You'll probably remember (or still have) one of those tea elements for plugging in and using electrical power to heat coffee. That's as far as most of us go.
You might save a hundred dollars a year in energy bills from an on-demand system. But if you're considering buying an on-demand heater to cover all your hot water needs, be sure to consider the size of your family, the cost of installing a system, the tank capacity, and the amount of hot water you need every day. The Department of Energy says a majority of systems can generate 2-5 gallons a minute, depending on the fuel source. From your own experience you know that gas-fired heaters are quicker to raise your water to the right temperature than electric ones.
Tax Credits for Tank-less Water Heaters
You can read up on the 2009-2010 tax credit at the Alliance to Save Energy website. In essence, your potential credit for installing a tank-less unit for the credit depends on your finding a system that can heat the water to efficiency standards based on source (electric, gas, oil, propane). An acceptable energy factor may be hard to find. The credit may only be $300, but pennies saved by energy efficiency can add up.
According to the Department of Energy, the energy factor is determined by fuel consumption and the speed of recovery, and how much heat is lost in the cycle of briefly storing and pumping out the water. When shopping around, examine units for a high-number energy factor, meaning the most-efficient for home use.
Dedicating a tank-less heater to appliances, spas, or as a secondary power source can prove a wise choice if there's no constant or huge demand.