How Much Does a Tankless Water Heater Cost to Run?
About $49.80 a month for an electric whole-home unit serving a four-person household — 64 gallons of hot water a day, raised 65°F to 120°F, at $0.16/kWh. The storage tank it replaces costs $57.00, so going tankless saves $7.20 a month ($88 a year) — every cent of it standby loss you stopped paying, and none of it from heating water any more cheaply. Set your own household below.
Fuel
The water you draw, not the tank's size. This is the input that sets the bill.
Groundwater, so it falls in winter. A 65°F rise to reach 120°F.
120°F is the DOE recommendation. A tankless unit stores no water, so the Legionella argument for keeping a tank hotter does not apply to it.
Heat leaking out of a stored 120°F tank, around the clock. On electricity this is the entire saving — set it to zero and the two machines cost the same.
Cost to run this tankless water heater, per month
$49.80
64 gallons a day at a 65°F rise — $1.66 a day, or $605.95 a year. The electric storage tank it replaces costs $57.00 a month, so the swap saves $7.20 a month ($87.60 a year).
Energy used
10.4 kWh
a day — the tank burned 11.9 kWh
Heat into the water
10.2 kWh
a day — identical for both machines, because the water decides this
Energy saved
13%
all of it standby loss — none of it from heating water faster
64 gallons × 8.34 BTU/gal/°F × 65°F = 34,694 BTU of heat that has to end up in the water — 10.2 kWh, and not one BTU less whichever heater you buy. The tankless unit draws 10.4 kWh to deliver it; the tank draws the same and then 1.5 kWh more keeping itself warm all day. That 1.5 kWh is the whole difference — $7.20 a month at $0.16/kWh.
Can your panel actually run one?
A tank has all day to prepare a shower. A tankless unit has to deliver the whole temperature rise while the water is moving, so its power is set by flow rate, not by how much you use in a day.
Power it must draw
24.3 kW · 101 A at 240 V
Wired as a continuous load, that is a 127 A breaker — 63% of a typical 200 A service, before the oven, the dryer or the air conditioner have asked for anything.
Note what this does not depend on: how much hot water you use in a day. A household drawing 10 gallons and one drawing 84 need the identical 24.3 kW to run this shower. Meanwhile a 27 kW unit — a large one — delivers only 2.8 GPM at this 65°F rise. Spec sheets quote the flow at a gentle rise; your January groundwater will not cooperate.
Why the percentage saved falls as you use more hot water
A tank's standby loss is a fixed number of BTU a day. It does not care whether you took one shower or six. So it is a large share of a small bill and a small share of a large one, and since the saving is the standby loss, the percentage saved shrinks as the household grows. At 64 gallons a day the tankless unit here saves 13%. Halve the draw and the percentage climbs; double it and the percentage falls, while the dollars saved barely move.
This is the mechanism behind the Department of Energy's much-repeated figures — 24–34% more efficient in a home using 41 gallons a day or less, 8–14% in one using around 86. The spread is not measurement noise. It is a fixed loss divided by a growing bill, and it is also why the biggest tankless savings are claimed for the households with the least hot water to save on.
The recirculation pump that gives the standby loss back
Tankless units take a few seconds to fire and then push the cold slug already sitting in the pipe ahead of the hot water. The common fix is a recirculation pump that keeps the hot line primed — and a primed hot line is a small, uninsulated storage tank shaped like a pipe. Run one continuously and you have reinstated a standby loss, which on electricity was the entire reason the tankless unit was cheaper. If you want the saving, put the pump on a demand button or a timer rather than a loop that never stops.
The other quiet cost is the flow sensor. Below about 0.5 GPM the unit never fires at all, so a slowly running tap gives you cold water, and getting warm water out of it means opening the tap wider than you needed to.
Heating one US gallon of water by one degree takes 8.34 BTU, and a kWh is 3412 BTU; every energy figure here is those two constants and nothing more. Standby loss is stated as energy into the heater — what a meter would read watching an idle tank — so no efficiency correction is applied to it. Electric elements are taken at 98% recovery efficiency in both machines, because an immersed element does not know what it is bolted into; the electric saving is therefore exactly the standby loss. Monthly figures use a 30-day month and yearly ones 365days. Breaker sizing applies the NEC's 125% continuous-load rule at 240 V. Nothing here includes equipment, gas-line, venting or panel-upgrade cost, which is where a tankless retrofit usually spends its money. Not sure of your electricity rate? Check average rates by state.
How much electricity does a tankless water heater use?
Energy per day = gallons × 8.34BTU/gal/°F × temperature rise
Worked example (64 gallons, 55°F in, 120°F out): 64 × 8.34 × 65 = 34,694 BTU, which is 10.2 kWh a day of heat that has to end up in the water.
Read that formula again and notice what is missing from it: the heater. A gallon does not know whether it is being warmed in a tank or in a heat exchanger, and it takes the same 8.34BTU per degree either way. The useful energy is a property of your household's hot water, not of the machine you buy.
An electric resistance element is about 98% efficient in a tank and about 98% efficient in a tankless unit, because an element immersed in water does not know what it is bolted into. So the tankless unit draws 10.4 kWh a day, and the tank draws the same — plus 1.5 kWh more that leaks out of its walls whether anyone showers or not.
That standby loss is the entire electric saving. Set it to zero in the calculator above and the two machines cost precisely the same to run, because at that point they are the same element heating the same water. Anyone promising that on-demand heating is intrinsically cheaper is describing a saving that thermodynamics does not offer.
Tankless vs. tank: what you actually save
Both columns below serve the identical household at $0.16/kWh and a 65°F rise, against a tank losing 1.5 kWh a day to standby. Watch the dollars saved stay almost flat while the percentage collapses: the standby loss is a fixed quantity, so it is a large share of a small bill and a small share of a large one.
| Hot water / day | Storage tank | Tankless | Saved / month | Saved % |
|---|---|---|---|---|
| 10 galDOE very-small draw — one person, few draws | $14.98 | $7.78 | $7.20 | 48% |
| 38 galDOE low draw — 1–2 people | $36.77 | $29.57 | $7.20 | 20% |
| 55 galDOE medium draw — 2–3 people | $50.00 | $42.80 | $7.20 | 14% |
| 64 galA typical four-person household | $57.00 | $49.80 | $7.20 | 13% |
| 84 galDOE high draw — 4+ people, long showers | $72.57 | $65.37 | $7.20 | 10% |
The saved column barely moves from top to bottom, because you are always saving the same 1.5 kWh a day. Only the denominator changes.
Where the Department of Energy's numbers come from
DOE's widely quoted figures — 24–34% more efficient in a home using 41 gallons a day or less, 8–14% in one using around 86 — are the two ends of exactly the table above. The model behind this page lands inside both bands when the tank leaks about 2.3 kWh a day, which is an older, thinly insulated one. Give it the 1.5kWh a modern well-insulated tank actually loses and the saving comes out below DOE's range. That is worth knowing before you spend: the headline is quoted against a tank you may not own, and the better your current tank is, the less a tankless unit can save you.
The 30 kW problem: what an electric tankless does to your panel
Running cost is the easy question. The hard one is power. A storage tank spreads a day's heating across twenty-four hours and gets away with a 4.5 kW element that cycles. A tankless unit has to add the whole temperature rise while the water is moving, so its power is set by flow rate alone. Nothing in this table depends on how much hot water you use in a day.
| Flow rate | 70°F in50°F rise | 55°F in65°F rise | 40°F in80°F rise |
|---|---|---|---|
| 1.5 GPM | 11.2 kW47 A | 14.6 kW61 A | 18.0 kW75 A |
| 2 GPM | 15.0 kW62 A | 19.5 kW81 A | 23.9 kW100 A |
| 2.5 GPMa standard showerhead | 18.7 kW78 A | 24.3 kW101 A | 29.9 kW125 A |
| 3.5 GPM | 26.2 kW109 A | 34.0 kW142 A | 41.9 kW175 A |
Amps at 240 V. Red figures need a breaker larger than a typical 200A whole-house service once the NEC's 125% continuous-load rule is applied.
Take the anchor case. A single standard 2.5 GPM shower needs 24.3 kW on 55°F water — and 29.9 kW on 40°F winter groundwater. That is 6.7× the 4.5 kW element in the tank it replaced, for the same shower.
At 240 V that is 125 amps. Wired as a continuous load it wants a 156 A breaker — 78% of a 200 A service — before the oven, the dryer or the air conditioner have asked for anything. Whole-home electric tankless units routinely need two or three double-pole breakers, and a service upgrade costs considerably more than the heater.
It cuts the other way too. A 27 kW unit — a large one — delivers 3.6 GPM on 70°F summer water but only 2.3 GPM in a 40°F winter, which is less than one showerhead wants. Tankless units never run out of hot water; they run out of flow, and they do it in January. Size for your coldest inlet and your worst simultaneous draw, never for your annual gallons.
Gas tankless saves more, and for an extra reason
On electricity a tankless unit saves the standby loss and nothing else, because both machines convert electricity to heat equally well. On gas it saves twice: no standby loss, and a better burn. A gas storage tank runs its hot flue straight up through the middle of the water it is trying to keep warm, which is both why its recovery efficiency is only about 76% and why it leaks roughly 0.12therms a day standing still — more than twice an electric tank's loss.
| Machine | Efficiency | Standby loss | Cost / month | vs. its tank |
|---|---|---|---|---|
| Electric storage tank | 98% | 1.5 kWh/day | $57.00 | baseline |
| Electric tankless | 98% | none | $49.80 | −$7.20 (13%) |
| Gas storage tank | 76% | 0.12 therm/day | $25.94 | baseline |
| Gas tankless (non-condensing) | 82% | none | $19.04 | −$6.90 (27%) |
Electricity at $0.16/kWh, gas at $1.50/therm, both serving 64 gallons a day at a 65°F rise. Compare each tankless unit against the tank on its own fuel — the gap between the fuels is a fact about your two utility prices, not about tanks.
Gas also carries that peak power far more easily than copper does. Delivering 2.5 GPM through a pipe is a plumbing problem; delivering it through a 156 A breaker is an electrical service problem. That, plus the larger saving, is why most tankless water heaters sold are gas — and why an electric one makes most sense as a small point-of-use unit under a distant sink rather than as a whole-home replacement.
Monthly cost by electricity rate
An electric tankless unit runs every day, so your rate multiplies straight through to the bill. Monthly cost for the anchor household (64 gallons a day, 65°F rise), and the tank it replaced, across the usual spread of US rates.
| Rate ($/kWh) | Tankless | Storage tank | Saved / month | Saved / year |
|---|---|---|---|---|
| $0.10 | $31.13 | $35.63 | $4.50 | $55 |
| $0.13 | $40.47 | $46.32 | $5.85 | $71 |
| $0.16 (US avg) | $49.80 | $57.00 | $7.20 | $88 |
| $0.20 | $62.26 | $71.26 | $9.00 | $110 |
| $0.30 | $93.38 | $106.88 | $13.50 | $164 |
Note that a higher rate raises the saving in dollars but never changes it as a percentage. The percentage is fixed by the standby loss and the household's draw, and by nothing else.
When a tankless water heater does not save you money
When a recirculation pump gives the standby loss back
Tankless units take a few seconds to fire and then push the cold slug already standing in the pipe ahead of the hot water. The usual fix is a recirculation pump that keeps the hot line primed — and a permanently primed hot line is a small, uninsulated storage tank shaped like a pipe. Run one continuously and you have reinstated exactly the loss you paid to eliminate. Put it on a demand button or a timer.
When your existing tank is already good
The saving is the standby loss, so the better insulated your current tank, the less there is to win. A post-2015 tank losing 1.5 kWh a day gives up only $7.20 a month. An insulation blanket on an older one captures a large share of the same prize for a rounding error of the price — which is the comparison a tankless quote should always be made against, and rarely is.
When the install cost swamps the saving
At $88a year of electricity saved, a retrofit that needs new 240 V circuits, a heavier service, a gas line upsized from ½" to ¾", or stainless venting will not repay itself out of running cost within the unit's life. Tankless heaters have real virtues — endless hot water, a small footprint, a longer service life, no stored water to grow Legionella or to flood a basement. A large fuel saving is not among them. Buy one for the virtues, and treat the $7.20 a month as a rebate.
When a heat pump water heater would have been the better swap
If the goal is a smaller bill rather than endless hot water, the tankless unit is fighting over the standby loss while a heat pump water heater goes after the 10.2 kWh a day of useful heat itself — moving that heat from the room air instead of making it, for roughly 60% less electricity. That is several times the prize, on the same hot water. See the water heater cost guide for the comparison.
Related Guides
Cost to Run a Water Heater
The storage tank this page compares against, by household size
Old vs. New Appliances
When an upgrade pays for itself, and when it quietly does not
Cost to Run a Heat Pump
Moving heat rather than making it — the same trick a hybrid tank plays
Cost to Run a Dishwasher
Most of its cost is the hot water your heater made
Electricity Rates by State
Find your state's average rate
How to Save on Energy Bills
Practical tips by room with savings
Frequently Asked Questions
How much does a tankless water heater cost to run per month?
About $49.80 a month for an electric whole-home unit serving a four-person household — 64 gallons of hot water a day, raised 65°F from 55°F groundwater to 120°F, at the 2024 US average rate of $0.16/kWh. That is $606 a year. The electric storage tank it replaced costs $57.00 a month on the same hot water, so the tankless unit saves $7.20 a month — $88 a year, or 13%. Your own figure moves with how much hot water you draw and how cold your incoming water is, not with the size of any tank.
Does a tankless water heater actually use less electricity?
Yes, but by less than most people expect, and for a reason that is worth understanding. Heating a gallon of water by one degree takes 8.34 BTU whether that gallon is sitting in a tank or moving through a heat exchanger. The energy that ends up in your hot water — 10.2 kWh a day in this example — is therefore identical for both machines. An electric element is about 98% efficient in either one, because an immersed element does not know what it is bolted into. What the tankless unit removes is the tank's standby loss: the 1.5 kWh a day a stored 120°F tank leaks through its walls whether or not anyone runs a tap. That loss is the entire electric saving — $7.20 a month here. Nothing else about the machine is cheaper.
Why does an electric tankless water heater need so many kW when my tank only had 4,500 watts?
Because a tank has all day to get ready and a tankless unit has none. The tank warms 64 gallons over twenty-four hours using a 4.5 kW element that cycles on and off. A tankless unit must add the whole temperature rise while the water is moving past it, so its power is fixed by flow rate, not by daily usage. A standard 2.5 GPM shower on 40°F winter groundwater needs 29.9 kW — 6.7 times the tank's element, for exactly the same shower. At 240 V that is 125 amps, and wired as a continuous load it wants a 156 amp breaker: 78% of a typical 200 amp service, before the oven, dryer or air conditioner ask for anything. This, rather than the running cost, is what usually decides whether an electric tankless heater is possible in a given house.
Is a gas tankless water heater cheaper to run than a gas tank?
By a wider margin than on the electric side, and for an extra reason. A gas tankless unit saves the standby loss like any tankless unit, but it also burns better: roughly 82% efficient for a non-condensing model and 94% for a condensing one, against about 76% for a storage tank that runs a hot flue straight up through the middle of the water it is trying to keep warm. That flue also makes the tank's standby loss much larger — around 0.12 therms a day. On this page's household at $1.50/therm, gas tankless runs $19.04 a month against $25.94 for the tank — a saving of $6.90 a month, or 27%, against 13% on electricity. Gas also carries that peak power far more easily than copper does, which is why most tankless heaters sold are gas.
Why do tankless savings percentages vary so much between sources?
Because the saving is a fixed number of BTU — the tank's standby loss — divided by a bill that grows with the household. It is a large share of a small bill and a small share of a large one. The Department of Energy's much-repeated figures say a demand heater is 24–34% more efficient in a home using 41 gallons a day or less and 8–14% in one using around 86 gallons. Both bands come out of the same arithmetic, and the model behind this page's calculator reproduces them when the tank leaks about 2.3 kWh a day — an older, thinly insulated one. Give it the 1.5 kWh a day a well-insulated modern tank actually loses and the saving lands below DOE's range. The headline is quoted against the tank you probably do not own.
Will a recirculation pump cancel out the savings?
It can cancel them entirely on the electric side. Tankless units take a few seconds to fire, and then push the cold water already standing in the pipe ahead of the hot. The usual fix is a recirculation pump that keeps the hot line primed — but a permanently primed hot line is a small, uninsulated storage tank shaped like a pipe. Run it continuously and you have reinstated the standby loss, which was the whole reason the tankless unit was cheaper to run. Put the pump on a demand button or a timer instead. A related quirk: below about 0.5 GPM the flow sensor never fires the heater at all, so a slowly running tap gives you cold water no matter how long you wait.
Does a tankless water heater run out of hot water?
It never runs out, but it does run cold if you ask for too much at once — a different failure, and a more predictable one. A tank holds a fixed reserve and refills slowly; drain it and you wait. A tankless unit has an unlimited reserve and a fixed power, so what it rations is flow rather than volume. A 27 kW electric unit — a large one — delivers about 3.6 GPM on 70°F summer groundwater but only 2.3 GPM on 40°F winter water, which is less than the 2.5 GPM a standard showerhead wants. Spec sheets quote the flow at a gentle temperature rise; January does not cooperate. Size a tankless unit for your coldest incoming water and your worst simultaneous draw, never for your annual gallons.