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Yearly Cost To Run On Demand Water Heater

Unlike regular hot water heaters, an instant water heater is tankless. It typically gets its energy to heat water from a source of gas, such as propane, or electricity. For heaters that use gas, water flows in a pipe over a burner, which heats the water. In electric water heaters, electricity provides the heat instead. The energy used to keep the water hot even when it's not being used is called standby heat loss. Tankless systems avoid standby loss by heating incoming water only as you need it -- they're also referred to as "on demand" water heaters for this reason. The elimination of the standby heat loss is what makes a tankless system more efficient. This is one of the reasons why on demand water heaters are preferred by customers. To understand the cost behind running these water heaters is fairly simple.

You need to calculate the cost based on the fuel source and the EF (energy efficiency) rating that is on your on demand water heaters. The EF rating defines how much your cost will be. Below is an explanation on the cost calculation of an on demand hot water heater.

For gas and oil water heaters:

You need to know the unit cost of fuel by Btu (British thermal unit) or therm. (1 therm = 100,000 Btu)
365 X 41045 ÷ EF X Fuel Cost (Btu) = estimated annual cost of operation OR 365 X 0.4105 ÷ EF X Fuel Cost (therm) = estimated annual cost of operation
Example: A natural gas water heater with an EF of .57 and a fuel cost of $0.00000619/Btu
365 X 41045/.57 X $0.00000619 = $163

For electric water heaters, including heat pump units:
You need to know or convert the unit cost of electricity by kilowatt-hour (kWh).
365 days/year x 12.03 kWh/day ÷ EF x Fuel Cost ($/kWh) = annual cost of operation
Example: A heat pump water heater with an EF of 2.0 and an electricity cost of $0.0842/kWh
365 X 12.03 ÷ 2.0 X $0.0842 = $185

The energy usage per day in the above equations is based on the DOE test procedure for hot water heaters, which assumes an incoming water temperature of 58°F, hot water temperature of 135°F, and total hot water production of 64.3 gallons per day, which is the average usage for a household size of three people.