Before we head into the winter months when people start taking longer showers or baths to warm up on a cold winter day, stop and think about how your water is getting heated and if you could be saving money.

I'm talking about your water heater. Heating water accounts for about 25 percent of all the energy used in a home. Many homeowners have a traditional tank-storage-style water heater. But a growing trend is to go tankless and save between 20 to 30 percent in the energy used to heat water.

Marty Fischbeck, owner of In Line Plumbing has installed more than one hundred of the Noritz tankless water heaters since he launched his company three years ago. He says homeowners love them and so does he. Fischbeck has one in his own home.

"They're a lot smaller than your traditional tank-storage water heater. So you save on space," says Fischbeck.

Tankless water heaters get bolted on the wall in place of a tank-storage water heater. Then the unit heats the whole water system for the house, but it is the unique way that water is heated that allows it to save you money. Here's how.

"As you turn on the hot water faucet, as water runs through it, that's when it heats the water. It'll never heat water until water is actually running through the system," says Fischbeck.

However, the way the typical tank-storage water heaters work "is they heat water and then re-heat and re-heat and re-heat," says Fischbeck.

Tankless water heaters essentially heat water on demand using a heating element (heat exchanger). The heating begins when a flow-activated switch is triggered. The heat can be from electricity or gas. Typically the gas units have a more significant heating capacity and are better for whole-house heating. Because tankless water heaters heat the water without the use of a storage tank, they avoid any standby loss of heat that occurs with the traditional tank-storage water heaters. Standby heat loss happens with traditional tank-storage water heaters when energy is wasted to heat the water and then have it sit in the tank. This is why installing a tankless water heater is touted as an energy-efficient system and cost-saver to homeowners. However, the upfront cost can be double to triple that of a traditional tank-storage water heater.

"The biggest scare is the price," says Fischbeck. But he says the amount you'll save in your gas bill will make it worth while. "You're going to pay it off in probably five years."

However, tankless water heaters aren't something that you should just jump right into. If for instance you're selling your home and need to replace the water heater, then this is an option you might want to consider. Fishbeck says he believes it adds value to the home and should be pointed out to potential buyers.

Keep in mind that the tankless water heater has some special considerations that you need to be aware of, such as how to properly size the tankless water heater unit for your home. You need to consider the amount of water the unit will need to heat, the temperature of the cold water that will enter the unit, and then the temperature of water that you want the unit to produce for your house. These factors will help you decide which unit is best for your household needs a point-of-use tankless water heater or a whole-house water heater.

The point-of-use style can be installed for several hundred dollars in places such as under a kitchen sink and can enable you to have hot water instantly.

The whole-house-style unit provides higher gallons per minute flow-rate capacity to ensure that your entire water-heating needs are met. For instance, you need to make sure that you get a unit that can handle two showers running, a dishwasher, and the washing machine. This could mean that you need more than one whole-house tankless water heater installed. These units typically run thousands of dollars.

Either way, going tankless could keep the cash flow from flowing out of your pocket and into the utility company's hands.

Published: August 22, 2008

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Phoebe is a writer, speaker, and author. She is the Director of Business Development for Quality Service Certification and a trainer in customer service for the real estate industry. She is a Realtor with The Guiltinan Group, a division of Prudential California Realty. Her articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, and Rancho Santa Fe Review in San Diego. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received. She is the author of If the Trash Stinks, TAKE IT OUT!: 14 Worriless Principles for Your Success. Contact Phoebe at 858.259.3646 or . Visit PhoebeChongchua.com for more information.