Tankless water heaters heat water the same way as conventional water heaters, except they don't store the heated water. Instead, they heat the water on demand when it's needed. This eliminates the energy required to keep a supply of heated water fully heated.
When a hot water tap is turned on, cold water is drawn into the water heater. A sensor detects the flow and activates a gas burner, which warms a heat exchanger. The flow of cold water circulates around the heat exchanger and exits the water heater at its set-point temperature.
By heating water only when needed, rather than maintaining a full tank of hot water at all times, tankless water heaters operate with greater efficiency than standard tank-type water heaters.
In addition to greater efficiency, tankless water heaters will last about five to 10 years longer than a conventional tank heater. They also take up much less space and provide you with an unlimited amount of hot water.
On the downside, a tankless system can cost up to three times as much as a tank-style heater and is more complicated to install than traditional water heaters.
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