Electric vs Gas Tankless Water Heater(2024)

Updated on:
January 6, 2024

You’ve finally decided that a tankless water heater will be much more efficient, less expensive to operate, and more durable than a tank-type water heater. Nevertheless, the decision-making process is far from complete. Now you must choose between a gas or electric tankless water heater.

In contrast to choosing between a tank and tankless water heater, there is no definitive right or wrong answer. Both gas (propane or natural gas) and electric tankless water heaters have their advantages and disadvantages. 

Electric vs Gas Tankless Water Heater: Factors to Consider Before Purchase

When deciding between a gas or electric tankless water heater, you should consider the following factors:

  • Your water usage habits or patterns
  • Energy prices and projections for the future cost of electricity and gas
  • Maintenance
  • Environmental impact
  • Price and installation cost
  • Life-span of the tankless water heater 
  • Homeowner preferences

Let’s have a closer look at each factor and how it should affect your final decision.

1. Your water usage habits or patterns

In colder climates, a reasonably sized electric tankless water heater may deliver up to 3–3.5 gallons of hot water per minute, and up to 8 gallons per minute in warmer climates. This is sufficient for the majority of residential uses. Certain gas tankless water heaters are able to provide larger flow rates, but are often more costly to install owing to their complicated venting, gas line, and combustion air requirements.

2. Future gas and electricity prices

Obviously, the running cost of your new tankless water heater is an essential factor to consider. Nevertheless, it’s not as straightforward as simply comparing the operational costs of electric and gas tankless water heaters based on current energy rates. Currently, natural gas tankless water heaters are 10%–15% less expensive to run than electric tankless water heaters. However, a tankless electric heater is often less expensive than a tankless propane heater.

It is essential to remember that electric tankless water heaters are often over 99% thermally efficient, but the efficiency rating of the majority of gas tankless heaters, even the higher-grade models, ranges between 80% and 85%.

Even though natural gas is generally a cheaper fuel per BTU (British thermal unit) of heating power than electricity, the higher efficiency, longer service life, and cheaper installation of an electric tankless water heater can easily outweigh the small current operating cost difference, which amounts to only a few dollars per month for most households.

Considering that tankless water heaters may easily last over 20 years, you must also factor in the long-term cost of electricity and natural gas. Future prices will have a considerably greater influence on the total cost of heating hot water during the lifetime of your tankless water heater.

The US Energy Information Administration estimates that between 1994 and 2005, consumer electricity costs increased by just 12.8%, yet natural gas prices increased by an astounding 114.5%. The majority of energy experts anticipate that natural gas consumption will expand at a rate two to three times faster than the creation of new supply, and that this imbalance will continue to manifest in substantial price increases in the future. Electricity costs are also expected to rise, albeit at a somewhat slower rate.

In addition, owing to supply outages, seasonal demand, and overseas political factors (such as conflicts in the Middle East and Eastern Europe), gas prices tend to change more than electricity costs. The results might be significant rises in residential energy costs within a short period of time, although the price of electricity is often more stable. Most likely, within a few years, a tankless electric water heater will not only be less costly to purchase and install than a gas tankless heater, but it will also be less expensive to run.

3. Maintenance

Apart from making sure that the intake screen filter that prevents sediments from getting into the system is unobstructed, no maintenance is necessary for an electric tankless water heater.

In contrast, tankless gas heaters must be inspected annually to guarantee safe fuel combustion and optimal performance. Electric tankless water heaters are often easier and safer to inspect, diagnose, and repair in the case of a failure.

4. Environmental impact

The use of fuels such as natural gas and propane as sources of energy is becoming more controversial as concerns about both the dangers of fracking and global warming due to greenhouse gas emissions continue to grow. To that end, we as consumers are being urged to cut down on our contribution to global warming.

If you’re concerned about the environment, switching from a conventional water heater to a tankless system is a good idea. However, in most regions, switching to a tankless electric heater is an even better idea, especially in regions that generate electricity from sources that do not increase greenhouse gases (hydro-electric generators, nuclear power plants, wind, etc.).

Moreover, the long-term effect on landfill space is reduced with an electric tankless water heater because of its lower overall size, particularly when taking into account all of the venting materials and supplies necessary for a gas tankless heater. Manufacturing an electric tankless water heater also requires less energy and resources.

5. Purchase price and installation costs

In terms of initial cost, a high-quality electric tankless water heater typically costs between $500 and $750, but a typical gas tankless water heater costs between $1,000 and $1,200, particularly for units with an electronic ignition (no pilot).

The cost of installation depends on the type of heater, the site where it is to be installed, and the availability of an appropriate supply of electricity, natural gas, or propane. There are a few things you need to consider before installing each type of tankless water heater.

In order to heat water on demand, an electric tankless heater needs a significant amount of power to operate. It’s necessary for a home or business to have a 200 AMP electrical service connection to operate an electric tankless water heater, particularly in colder climates with high hot water demand. For less demanding applications or in warmer climes, an electrical service of 100, 125, or 150 AMP is often sufficient.

This is a crucial consideration since not all houses and businesses have access to such electrical capacity, and modifications or upgrades can be costly.

For gas tankless water heaters, ventilation and combustion airflow requirements are very complicated. Rarely can existing ventilation ducts be used. When side wall ventilation is necessary, the process might become even more complicated. Existing fresh air ventilation systems are often insufficient due to their high gas consumption. In the end, all these limitations can make installation quite costly.

While tankless gas heaters are much smaller than traditional tanks, electric tankless water heaters are even more compact, measuring about a third of the size. Due to their small size and lack of ventilation requirements, they are often positioned considerably closer to the actual point of use and in many spaces where a gas unit cannot be installed.

In most cases, the installation of an electric tankless heater will be much less expensive than the installation of a natural gas tankless water heater.

6. Life-span of the tankless water heater

Electric tankless water heaters are easier to troubleshoot, diagnose, and repair if something goes wrong, and because their design is so simple, electric tankless heaters tend to last a lot longer. Heat exchangers and fuel controls on tankless gas heaters are very complicated and hard to fix in the field. 

If the gas tankless water heater is not maintained on a regular basis, its service life may be significantly affected. It is common to see a 10-year warranty on the heat exchanger, a 5-year warranty on other parts, and a 1-year labor warranty. Typical warranties for electric tankless water heaters are 5 years for parts and 1 year for labor. For more information on the life-span of water heaters, read my article on the topic.

7. Homeowner preference 

Each homeowner should examine the advantages and disadvantages of both types of tankless heaters before selecting the best option. Taking into account the purchase price, installation expenses, running costs, efficiency, and hot water use requirements, the electric tankless heater is often the best option for the typical family.

Those who need more capacity, however, may benefit from a liquid propane or natural gas tankless water heater. Regardless of your decision, selecting a tankless water heater as opposed to an energy-guzzling tank type is a step in the right direction that may save you money and reduce your carbon footprint.

Final Thoughts

Tankless water heaters that use either electricity or gas work very well. You can improve your home water in any way you want. But if you only have a small area to work with, an electric system will work best. Electric tankless systems are small enough to fit in small places. A tankless electric water heater also needs less maintenance, is easier to install, and costs less money.

Gas systems also have their good points. Even though their installation cost is a little higher, the lower gas price might make up for it, depending on where you live and how much hot water you use. Since they produce a lot of water, they are often the best choice for large homes.

If you need more information on the best brands on the market, read my review of the best tankless water heater for your home. And if you’re still not sure if you should go tankless, read my review of the best water heater, tankless or not.

If you’re seeking additional information regarding comparisons of water heaters, we recommend referring to our articles “Indoor Vs Outdoor Tankless Water Heater,” “Cost of Tankless Water Heater vs Tank Water Heater,” and “The Complete Buyer’s Guide to Gas vs Electric Water Heater.”

These articles provide detailed insights into the distinctions and advantages of each system, allowing you to make an informed decision based on your specific requirements.

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Sharon Cruz

I had paloma propane, hot water on demand unit Back in 1993 what a wonderful unit it’s sad that they had to complicate them so much and make them so expensive the model I had what is a simple burner with a coiled copper pipe around it it was perfect and worked wonderfully it was so simplistic constructed. I wish I still had it. It was perfect. I sold my house the people that bought the house scraped the Paloma and bought a big tank hot water heater I thought that was ridiculous they obviously had no clue what they had thrown away!
My ex-husband that’s common sense and Construction know how and installed it above ground outside and it froze. I was able to fix it with solder it just split the coiled copper piping and used it until 2003 when we sold the house.
That’s why I searched Paloma now that I am looking for another tankless hot water heater.

James Layton

Hi Sharon. You cannot find the Paloma brand anywhere online. I did some investigating and discovered that tankless water heater brands Rheem, Ruud, Paloma, and Richmond heater brands appear to be the same water heater, based on a United States Consumer Product Safety Commission recall notice. All of these brands and specific models were manufactured in Japan, quite a few years ago (2007). It appears that the Paloma brand is no more. WeiWella, which appears to have sold tankless heaters under the Paloma brand now offers them branded as Rheem. I cannot tell you if they are manufactured in Japan. Rheem is a major brand and prides itself on quality water heaters.I recommend looking into Rheem and see if they have what you are looking for.