Curious About Tankless Water Heaters? Here’s How They Work

Even after a decade of experience, I’m still amazed by how tankless water heaters work! Seriously, if you think about it, these ‘small wonders,’ as I like to call them, don’t have a storage tank, yet they provide an endless supply of hot water on demand.

And that’s not even the best part—their unique design explains why they’re so effective, energy-efficient, and environmentally friendly.

If you’re curious about how these sleek water heaters operate without a storage tank like traditional models, you’ll find this article quite informative. So, let’s dive in!

Key Components Of A Tankless Water Heater

Before we explore how a tankless water heater works, it’s important to first familiarize ourselves with its key components to better understand its functionality.

• Cold Water Inlet Pipe: The inlet pipe is the entry point through which cold water flows into the tankless heater to be heated.
• Hot Water Outlet Pipe: The outlet pipe is where heated water exits the heater and is directed to household fixtures such as faucets and showers.
• Burner Or Electric Heating Elements: Depending on the model, the primary heating component is either a burner or a heating element. In electric tankless water heaters, resistance coils or thick copper wire rods heat the water. In gas tankless units, the burner ignites small flames to warm the water. The burner is connected to two pipes—one supplies fresh air for combustion, while the other serves as an exhaust for byproducts like carbon monoxide. A fan linked to the burner functions as a bellow, aiding the combustion process.
• Inlet and Outlet Thermistor: These temperature sensors measure the temperature of water entering and leaving the heat exchanger, ensuring accurate heating and preventing overheating.
• Control Panel: The control panel serves as the user interface, allowing temperature adjustments and displaying system information. In addition to temperature control, it monitors burner performance and records operational data for user convenience.
• Heat Exchanger: The heat exchanger is the core component that enables tank-free water heaters to provide instant and continuous hot water without a storage tank. Typically made of copper, it is connected to the burner and heats the cold water to a preset temperature as it flows through the exchanger.
• Thermostat: The thermostat monitors and controls the water temperature by adjusting the heating element or burner operation to maintain the desired temperature.
• Hot Water Valve/ Flowmeter: This flowmeter (in some cases valves) regulates the outflow of heated water and is connected to the hot water outlet pipe of the tankless heater.
• TRIACS: These semiconductor devices regulate power to the heating elements in electric tankless water heaters, allowing for precise and efficient temperature control.
• Electric Or Gas Inputs: Tankless water heaters are powered by either electricity or gas (natural gas or propane), with designated pipes or lines supplying the required energy. Here is a detailed comparison.

The Science Behind Tankless Water Heating

Tankless water heaters have become incredibly popular in recent years, but I was surprised to discover that they’ve actually been around since the early 1900s. Of course, the first models were pretty basic compared to the sleek, high-tech versions we use today.

Still, the core technology has stayed pretty much the same, allowing these on-demand heaters to give us hot water exactly when we need it—without the need for bulky storage tanks (read tank vs tankless heater).

The magic behind instant water heaters lies in HEAT EXCHANGE TECHNOLOGY. Essentially, the heat exchanger quickly warms cold water to the perfect temperature before it flows out. What’s really cool is how the heat exchanger is designed: it’s made up of tiny channels with parallel tubes or plates, giving it a LARGE surface area for fast, efficient heat transfer.

With this tech in mind, tankless water heaters are generally split into two types: condensing and non-condensing. Let’s see how they work and what makes them different.

Condensing Technology

Condensing tankless water heaters take efficiency to the next level. Instead of wasting the steam or water vapor produced in the heating process, these systems RECYCLE it to warm incoming water, squeezing out every bit of heat before releasing the exhaust. When the collected condensate needs to be drained, an internal filtration system takes care of it.

That’s not all! Many condensing models even feature an extra heat exchanger to capture and reuse any leftover heat from exhaust gases—kind of like getting a bonus round of energy savings.

The biggest perk? HIGHER ENERGY EFFICIENCY, which translates to lower utility bills. From my own experience, another huge plus is that these heaters don’t require specialized ventilation since the exhaust cools down inside the unit. That means installation is easier and cheaper.

My water heater servicing team also swears by condensing models because they tend to LAST LONGER—less heat stress means fewer breakdowns. No wonder they’re becoming a go-to choice for so many homeowners. Here is a detailed guide about the longevity of tankless heaters.

Non-Condensing Technology

Unlike condensing models, non-condensing tankless water heaters use a single heat exchanger and have a simpler process. As the water passes through the heat exchanger, the hot byproducts or exhaust aren’t recycled; instead, they’re vented outside the unit and cool down in the open air.

Since the exhaust is extremely hot—around 150°C (302°F)—my team always makes sure to install specialized venting systems with heat- and corrosion-resistant materials to keep things under control. Safety is always our first priority.

Non-condensing units aren’t as energy-efficient as condensing ones, with about 20% of the heat being wasted in the EXHAUST process. Because of this, both installation and operational costs tend to be higher for non-condensing models.

That said, both types—condensing and non-condensing—are much more popular than traditional tank-style water heaters. Why? They’re highly energy-efficient, environmentally friendly, and offer LONG-TERM savings on operational costs.

Also Read: Types Of Tankless Water Heaters

How Does Water Flow Through the System?

Now that we’ve explored the critical components of a tankless water heater and understand its basic technology, let’s dive into how water flows in and out of the unit. To make it easier to follow, we’ll trace the water’s path step by step and uncover what happens inside the heating unit.

A. Water Enters The Heater Through The Inlet Pipe

It all begins the moment you turn on the faucet (or any other water fixture). As the water flows in, it enters the tankless heater through the inlet pipe. That’s when the flow sensor springs into action, detecting the cold water and sending a signal to the control panel, gearing up the system to heat the water on demand. Pretty clever, right?

B. Water Gets Heated In The Heat Exchanger

As soon as the cold water enters the system, it starts flowing through the heat exchanger, where it’s quickly warmed up by the heating elements/units, depending on the source of power.

1. For Electric Tankless Water Heaters

Here, the control panel activates resistance rods, turning them into fast-acting heaters that raise the water temperature as it circulates. This process relies on electrical power input, which supplies heat energy to the water, causing its temperature to rise.

Electrical Power Input (Watts)

The power consumed by the heating element is given by: P=V×I

where:

• P = Power (Watts)
• V = Voltage (Volts)
• I = Current (Amperes)

For example, a 240V water heater drawing 30A consumes: P=240V×30A=7200W (7.2kW)

Heat Energy Supplied to Water

The amount of heat energy transferred to the water is: Q=P×t

where:

• Q = Heat energy (Joules)
• P = Power (Watts)
• t = Time (seconds)

Since 1 watt = 1 joule per second, a 7.2 kW heater supplies 7200 joules per second.

Temperature Rise of Water

The temperature increase in the water is determined using: Q=m×C×ΔT

where:

• Q = Heat energy (Joules)
• m = Mass of water (kg)
• C = Specific heat capacity of water (4186 J/kg·°C)
• ΔT = Temperature change (°C)

Since m=V˙×ρm, where V˙ is the volumetric flow rate (L/s) and ρ (density of water) is approximately 1 kg/L, we get:

P=V˙×ρ×C×ΔT

Rearranging for ΔT:

ΔT=P/(V˙×4186​)

Flow Rate and Temperature Relationship

Rearranging the above formula, we get:

V˙=P/(4186×ΔT)

For a 7.2 kW heater, heating water from 10°C to 50°C (40°C rise):

V˙= 7200/(4186×40​)= 0.043 L/s≈ 2.58 L/min

Read More: Electrical Requirements For A Tankless Heater

2. For Gas Tankless Water Heaters

For gas-powered tankless heaters, things work differently. The fan and gas valve work together to ignite the burner, creating COMBUSTION that directly heats the water as it flows through the exchanger.

Assuming methane (the main component of natural gas) undergoes complete combustion in the heater, the fundamental chemical reaction formula for gas tankless heaters is:

CH₄ + 2O₂ → CO₂ + 2H₂O + Heat

Where, CH₄= methane, O₂= oxygen from the air, CO₂= carbon dioxide, and H₂O= water vapor.

Meanwhile, the temperature sensor ensures that the water reaches your desired temperature, so when you turn on that faucet, you’re greeted with the perfect, on-demand warmth.

C. Water Exits The Heater Through The Outlet Pipe

As the water heats up quickly and reaches your desired temperature, it continues its journey through the pipes, flowing out of the heater and into the faucet or water fixture connected to the hot water outlet. This results in an immediate supply of hot water—just when you need it.

Tank-free water heaters come in various types, each designed for different flow rates and capacities, such as whole-house units, point-of-use (POU) models, and outdoor heaters. However, no matter the model or variant, the way water moves through these systems and the core heating process remain the same.

Energy Efficiency And Performance

As someone who’s been in the water heater installation and servicing business for a while, I can tell you firsthand how satisfying it is to see clients amazed by the PERFORMANCE of their new tankless systems.

Honestly, I have one at home myself, and it still blows my mind how these efficient, smartly designed heaters always provide hot water on demand while saving energy. Switching from a traditional tank-style system to a tankless water heater? You won’t regret it.

In the following graph from a paper published on ResearchGate by Paul Glanville, Hillary Vadnal, and Michael Garrabrant, you can see a comparison of efficiency with daily hot water output for condensing and non-condensing tankless and storage water heaters, where condensing tankless models clearly come out on top.

From the above graph, it is clear that, traditional storage heaters come with a lot of drawbacks—like standby heat loss. This means that even when you’re not using hot water, the heater keeps wasting energy to maintain the temperature of water sitting in the storage tank. Tankless units, on the other hand, don’t have that issue. They heat water only when you need it, ensuring no energy is wasted and offering long-term cost savings.

For example, gas-powered tankless heaters can reduce your hot water heating costs by around 33% compared to regular tank heaters, but the exact savings depend on how much hot water your household uses. If your daily hot water consumption is over 10 gallons, the energy savings are more noticeable.

The efficiency of a tankless system is reflected by its uniform energy factor (UEF). In my home, I’ve found that I see the greatest energy savings when our household uses around 50 gallons of hot water a day.

“The energy factor for a typical tankless water heater of 0.8 suggests a 33% reduction in gas use relative to a typical 0.6 energy factor (EF) storage water heater.”

–Department of Energy, United States

When it comes to performance, electric tankless heaters shine because they deliver hot water instantly, with no waiting around for a tank to refill. However, the flow rate—usually between 2 to 5 gallons per minute (7.6 to 15.2 liters)—can be a limiting factor depending on your needs.

Gas tankless water heaters typically have HIGHER FLOW RATES than electric ones, but even the largest gas-powered tankless systems might struggle if you’re using multiple water outlets at the same time in a large household.

For instance, trying to shower while the dishwasher is running could push the system to its limits. A great solution is to install two or more units to meet the demand or choose a system rated at least 20% higher than your maximum flow rate to ensure it can handle those high-demand moments smoothly. (read pros and cons)

So, whether you are upgrading your home or building from scratch, choosing a tankless water heater will be a surefire futuristic investment that ensures reliability, comfort, and a greener footprint for years to come.