Tankless water heaters, or demand water heaters, are becoming more popular because of their energy efficiency. Unlike a tank-style heater that consumes energy heating and reheating water, a tankless heater only heats water once when a hot water tap is opened.
Standby heat loss is eliminated. Case studies have demonstrated that replacing an old tank-type water heater with a tankless model can cut water heating expenses by as much as 45 percent. Tankless heaters fueled by natural gas and propane are more efficient than electric models.
Tankless water heaters offer another advantage: They are very compact. A house-size model is about the size of a suitcase, and can be mounted on the wall. Most gas-fired models are direct-vent appliances, which mean that they don't require a chimney. Instead, exhaust gas is vented outside through a pipe that extends through the wall.