One of the comforts of modern living is hot running water, but it comes at a price.  There are a number of ways to save money on heating the water in your home whether it is a conventional hot water tank or a demand heater. Most of us remember to turn down the furnace when we leave the house for the day or weekend, but how many of us turn down the hot water tank while on vacation? The vacation setting found on most tanks is a simple means to save energy costs on domestic water heating.

Demand Water Heater Problems

Reader comments in the article “saving energy around the house” indicate a thirst for information regarding demand water heaters. Some homeowners find themselves unhappy with their demand water heaters because of the initial cold shock when the water is first turned on or if the equipment purchased was under-sized for the demands being placed on it or if the source water is very cold. This would require up-sizing the heater. If your household has poor water pressure, the demand water heater might not be for you. Check the manufacturer’s recommended minimum water pressure and flow rates before making your purchase.

Solutions on Demand

A plumber can put a circulating pump at the end of the line to send the water back to the heater, keeping the water hot at the tap. This could be put on a timer or switch intended for use prior to high-load periods. For example, you get up in the morning and flick on the switch. By the time you are finished your morning toilet business, the hot water will be circulating. While you have the plumber in the house, get him or her to install a hot water recovery unit on the main sewer drain so that it preheats your supply water before entering the demand water heater. The total cost is typically between $600-$1000 Canadian to install and claims are that it will save 20-40% on costs depending upon the home’s individual circumstances. The recovery unit will pay for itself in 2-6 years.

Is a Demand Water Heater for You?

Before you purchase a demand water heater, do your homework. Confirm that the specifications of the heater will meet your household requirements and water conditions:

  • source water temperature (at its coldest)
  • number of hot water taps used at the same time
  • the distance from the heater to the furthest fixture
  • water pressure
  • water mineral content.

Insulating Your System

Another consideration is that many people neglect to insulate their hot water lines running from the demand heater. This can easily be accomplished by purchasing foam tubes from your local hardware store. It’s a great do-it-yourself project whether you have a demand heater or a conventional water tank.

With respect to insulating the conventional hot water tank, it is important to remember that wrapping or adding extra insulation to the exterior does not solve the heat loss going up the center tube and out the chimney. The most costly factor is that you are still keeping the water up to temperature all day long even though you are not using it.


Both conventional and demand water heaters need yearly maintenance. If they are not flushed, they will use more energy to heat the same quantity of water, thereby increasing your costs. Regions with higher mineral content may require flushing more often.

How much can you cut your water-heating bill if you implement these ideas?

About the Author: Dave is a builder, renovator, and do-it-yourself guy who has spent years researching and experimenting with home energy-saving concepts with the goal of saving money and the environment. He designed and built his own home in Alberta taking advantage of many of these ideas and is keen to update as new technologies become available.


  1. FrugalTrader on April 13, 2010 at 12:29 pm

    Dave, does insulating the lines coming out of an electric water heater make a significant difference? We have have a newer house that uses the plastic/rubber like lines and I don’t find they get too warm/hot.

    As well, does flushing a water heater help the longevity as well? Tyipcally here in NL, water heaters only last on average 5-7 years before they need replacing.

  2. Bryan Sr on April 13, 2010 at 12:45 pm

    Saving a little here and there is a great task to undertake.
    Anything we can do to help conserve is great. I do not have a tankless water heater. I know a good number of people that do. They work great as long as they work. They have at least in the earlier years been some maintenance/repair issues. There is no tank to keep multiple gallons of water heated just sitting around waiting to be used.

  3. carwel on April 13, 2010 at 1:05 pm

    Is there a huge cost difference in running a normal electric water heater (tank) versus a gas water heater (tank)? We rent a gas heater from Direct Energy and it costs over $25 per month just to rent, so we were thinking of buying one. It would be much cheaper and simpler to buy and install an electric heater than a gas one, but I just wonder about the difference in running costs?

  4. Ms Save Money on April 13, 2010 at 1:21 pm

    This is a great idea! A demand water heater would be suitable for my family and would definitely save us some money in the event that we are out of town.

  5. SilverEggplant on April 13, 2010 at 1:32 pm

    Great article! We just purchased a home with a tankless water heater and I found that it does take a while for the water coming from the tap to “warm up”. I am wondering if you would recommend buying the tankless water heater or renting it? I’m not sure what the maintenance costs and longevity of a tankless water heater are. Your thoughts would be appreciated.

  6. DavidV on April 13, 2010 at 4:15 pm

    Carwel, I bought my waterheater directly from Direct Energy. Mine was old, so I paid $25 to buy it (and was paying $25 a month to rent it).

  7. DG on April 13, 2010 at 5:18 pm

    I found I had a lot of heat loss on the plastic pipes above my electric tank heater, so I did the foam insulation thing. “Heat traps” are something I want to look at more closely someday:

    Heat loss from my tank doesn’t bother me too much, because it displaces space heating costs. On the other hand, you pay twice when you are trying to cool your home (once for the lost heat, again for the air conditioner to remove it from your house). But in Manitoba I’m heating most of the time. :)

  8. wx_junkie on April 13, 2010 at 5:22 pm

    So not to be a contrarian on this (i do like saving money, but…) I was told that you should NOT turn down your hot water tank while on vacation, as with a lower temperature, bacteria can form / live inside the tank. It needs to be kept at a high temperature to prevent this. Anyone else ever hear of this?!?!

  9. John on April 13, 2010 at 6:30 pm

    Yes, I heard of that also, Risk of bateria forming…I also asked Hydro -quebec ( provides hot water heaters to quebec residents) they reported the tank should not be turned off. the temp can be lowered, but not turned off. see link

  10. Melanie Samson on April 13, 2010 at 6:34 pm

    I’m wondering about these cold shock comments. I have a hot water tank and I consider it completely normal that it takes a while for the hot water to get to the tap (it can be initially VERY cold in the winter).

  11. ITS on April 13, 2010 at 7:23 pm

    I purchased a condo in a new “green” building with demand water heaters. I don’t mind the cold shock when I first turn on the tap. I takes up to one or two minutes for the water to heat up for a shower.

    The most annoying part is after the missus is finished taking a shower first, and steps out. Let’s say that by the time it takes her (3-4 minutes) to do this, the water heater goes completely cold again.

    What happens is that when I turn on the hot water next in the beginning the line comes out nice and hot for an extra minute or two, and then it goes to freezing, and then I have to wait another couple of minutes to go back to normal. This slows me down a good 5 minutes, which is a long time when you are trying to get ready for work.

    The lesson is, when you have a demand water heater, make sure to shower first in household. :D

    /We do love our low monthly bill, and with the inconvenience would still recommend it.

  12. bob on April 13, 2010 at 7:46 pm

    I looked pretty hard into tankless water heaters, but found that they do not save you nearly the money they claim to.

    The problem is that the “savings calculations” contain some unrealistic assumptions.

    If you take a look at your gas bill (at least in Alberta), 80-90% of the charge is not related to the amount of gas you actually use, but is related to fixed costs relating to administration, line upgrades, riders, etc. Only 10-20% of your gas bill actually reflects your gas usage. So, small savings in gas results in very small savings in money.

    The “savings calculations” ignore this and assume that the amount of gas you use reflects your entire gas bill.

    In reality, it is not realistic to expect that the unit will pay off. Yes, it will help you use less gas, but given how gas pricing works, you will not nearly save enough to justify them — even over the long term.

    In addition. as has been mentioned above, in a number of places the ground water is so cold that it takes a while for the water to heat up, which then wastes water (which further eats into your savings), unless you are coordinated enough to save the first few liters of water for plants or cooking or something every time you turn on the tap.

  13. Al on April 13, 2010 at 11:38 pm

    While not directly related to the topic I do have a question that I hope readers can answer since there are so many knowledgeable readers here.

    I bought a rental property which is generating $1200/month while my mortgage payments on the property are $1100, so I am getting $100/month cash flow.
    I know I can deduct the interest I pay on mortgage against my personal income, but here is something an accountant told me I never heard of before. He said that I don’t claim $100/month as my income from property, I HAVE to claim 100/month + any equity paid down by my tenant for me. I never heard of this before, is this accurate? Basically if out of $1200/month tenant pays for me, $300 goes against mortgage paydown and $900 goes against interest, I have to claim $300+$100=$400 as monthly income, and I can deduct remaining $900 against personal income at my tax rate.
    I was very shocked. Please let me know your thoughts.
    He also was very unhelpful with coming up with any ways to reduce rental income(other than CCA) as he feared loss on rental would trigger an audit which would result in me being sent to tax court & losing or just giving up and following CRA ruling on pretty much ANY deduction I suggested.

    He is a CA, so he must know what he is talking about….right?

    Coincidentally if you know anyone in Canada who is experienced in real estate, or real estate tax, and is willing to provide some guidance please send me over his name.


  14. SilverEggplant on April 14, 2010 at 1:34 am


    That is correct. You do need to report the gross rental income of $1,200 per month as revenue-it doesn’t matter how you spend the remaining $300 of revenue (whether it goes towards your mortgage or something else). The “equity” that your tenant helps you to pay down is still considered rental revenues/income and is therefore taxable. You can then deduct expenses paid with respect to your rental property (i.e. mortgage interest, property taxes, repair costs, CCA, etc.). You can’t create a loss on rental properties by claiming CCA unless your principal business is rental properties, but you can claim enough CCA to reduce your rental income to nil. Hope this helps!

  15. used tires on April 14, 2010 at 5:16 am

    Water heating is something I’ve been doing without for some time now. I’ve found that taking a cold shower actually helps you stay awake better whereas a hot one makes you feel drowsy after awhile. So I grit my teeth and bear the cold water and save a good deal of energy bills too. :)

    Till then,


  16. FrugalTrader on April 14, 2010 at 8:02 am

    Al, As SilverEggplant mentioned, you need to report your entire rental income, but then expenses are deducted against it. Here are a list of rental expenses that you can claim.

  17. Rachelle on April 14, 2010 at 10:00 am

    A tankless heater sounds great but only if you already have gas in the house.I do not have gas in my house so the cost of getting gas into the house plus the cost of getting the tankless water heater would be too much.

    Electrical tankless water heaters use a 60 Amp supply. Plus you have to rip up the ceiling in a finished basement to bring it over to the tank.

    I personally do not care for Enbridge gas. I used to have a wood shop and I would shut off the heater every year as soon as the spring hit. In spite of that I would get bills with usage on them every month. I have no idea how. When I called Enbridge their response was you must have used it. I coped by calling them to come and shut off the gas entirely every year, then they still wanted to charge me all year long. It’s an nice gig if you can get it but not so good if your paying for it.

    So for me… tankless hot water heaters are out.

  18. Gerry on April 14, 2010 at 11:36 am

    We thought about going tankless a few years ago but just couldn’t justify the price. To assess it, we looked at our average gas consumption in the summer months (no heating, no pilots on). In those months, we were using about 1 m3 a day; costing less than $10 a month in gas. But, a significant portion of that cost actually goes into heating the water we use, so we’d only save a portion with a tankless system. With a maximum savings of only $10 a month it just didn’t add up for us.

    I might still install one to save some space in the basement when we finish it. They are a lot smaller can can really save on wasted basement space.

  19. nobleea on April 14, 2010 at 1:32 pm

    as mentioned above tankless water heaters don’t really pay off. gas is just too cheap and the heaters are just too expensive. if you feel like you are making a difference and are building a new house, it’s fine to get one in, but retrofit installs might be a stretch.

    getting a heat recovery loop to preheat the water going in to the heater with water going down the drain helps regardless of which type of heater you use.

    i can’t understand how backwards some provinces/cities are that you have to RENT a hot water tank. that’s part of the house, it should be bought. do they make you rent lightbulbs and copper wiring too?

  20. morgan on April 14, 2010 at 3:33 pm

    as an hvac nechanic I looked at the cons and pros of tankless and I came to the conclusion that they aren’t worth it, first off, they cost more then double of your regular tanked power vented Hieff..unless you think that your tankless is going to last you 3 decades then forget about it. Another issue is that components such as the main board are very expensive and circuit boards these days dont last too long, there were some tests done regarding gas savings and the average was about $50/annualy..GperM reduce drastically as you demand hotter and hotter water. my 2cents, take it or leave it

  21. Pipewrench on April 14, 2010 at 4:24 pm

    I have to jump in here:
    “The total cost is typically between $600-$1000 Canadian to install”
    I find this price unrealistic you may be able to find a tankless system for about this by itself if you are lucky but the piping costs anywhere from $100-$300 just to vent it and you have to have usually a min. 3/4″ gas line running to the system as opposed to 1/2″ for a Hot water tank. You will need a power source to run the controls and the cost to move the gas and water lines over to the new system. If you live in Alberta you will probably need a softener installed too as they are recommended with these systems so that’s another $1000-$1300.
    So all this being said if you get a plumber to install this which is recommended you are looking anywhere from $3000-$4000 as an upgrade to your system instead of about $1000 for a new hot water tank.

    I am a master plumber and find that the time to put these systems in are when building a new house or undertaking a major renovation. Putting it in when you build a house the costs just get added to your mortgage. If your hot water tank is on the way out that is still a BIG cost to switch if even possible, on some of the 2 story houses I just find that it’s not adequate enough. Very little goes wrong with your Hot water tank and usually there is a grace period of a day or two before you need to get a plumber in where as with these tankless systems if something goes wrong you need a plumber same day. That means extra cost to you. These systems are fantastic for smaller homes or condos IMO.
    I agree with Morgan above me the cost just doesn’t add up right now and they are pricey to fix. Hot water tanks have come a long way they now direct vent out the side of your house instead of up through you chimney.

  22. Erick on April 14, 2010 at 5:40 pm

    After doing a lot of research, we went tankless last August. Here’s a few points that may be useful to others:

    1. The break even point between buying a tankless and continuing to rent a 20 year old tank was about 5 years…after factoring in ecoEnergy rebates/home reno tax credit.

    2. The upfront cost was $3100 for the unit, installation, and running additional gas line. The rebates knocked about $1000 off that price. Without the government incentives, it wasn’t worth doing.

    3. We selected a Navien unit…mainly because it has a mini-boiler that mitigates the cold-water-sandwich issue.

  23. Pipewrench on April 14, 2010 at 5:44 pm

    Erick is right on the money IMO that price of $3000 is more realistic!
    Erick what size of house (ie: 2 story 1800 sq ft…) is this unit supplying and have you been happy with it?

  24. Erick on April 16, 2010 at 3:44 pm


    The Navien CR-180A is supplying 2 people with 2.5 bathrooms in a 2 story townhouse (1200 sq ft).

    No complaints so far…it had no problem meeting simultaneous hot water demands during Ottawa winter conditions.

  25. Dave on April 17, 2010 at 12:56 am

    orry it took so long to get back here:  it’s been a busy few days. 
    There are many variables to the demand heater as pointed out by the numerous posts.   Something to remember is that gas and power prices fluctuate.   What seems like a small bill now may be significantly higher in the future.   I can’t comment on the cost of repair because I’ve never had to do it.   Perhaps the time to install a demand heater is when your present tank is on its last legs.   I bought one at a good price on Ebay.  (900.00 with delivery and vent)   If you are not in a hurry, you can watch for one of these for years.  I was quoted $3000 locally to supply and install. 
    One of the reasons we opted for a demand system was that as we replace or do maintenance around our home, we are gearing for eventual retirement.   The goal is to eliminate or reduce overhead for retirement years.   Claims are for a 25-year life, so it addresses that goal, and our conventional tank needed to be replaced.
    For years we used the vacation setting on our tank when we left for a weekend or extended vacation.  We never had a bacteria problem and don’t know anyone who has.  #1  if you have insufficient chlorine going in, that might cause a problem.  #2  When you return home, you crank up the heat to “hot” or higher than normal and don’t use it for at least 30 minutes after it has heated to kill any bacteria that may have been there.  # 3 Run the water immediately for laundry to flush the tank. 
    Frugal Trader:  insulating plastic lines may not make as big a difference as insulating copper lines, but it is a minimal extra cost, and it does keep  the water from cooling in the lines when the taps are off, so you get hot water quicker and don’t need to run the tap.    Yes, flushing a regular tank yearly increases longevity and fuel efficiency. 
    Carwel:  It is difficult to compare electric to gas in your situation because costs of energy vary across the country and from year to year.   Here in Alberta, almost nobody heats with electricity because power is so expensive compared to gas.   Cost is one issue; our responsibility to conserve energy and address global warming is another issue.  Just because something is cheap, it doesn’t mean I should waste it.   Every region and household needs to weigh advantages for their own situation and cost.  
    Pipewrench:  The numbers you refer to ($600-$1000) were actually for the recovery system, not the demand heater.  Your estimate for the demand heater is in line with what we were quoted locally, but I installed it myself.  I intend to take advantage of the government rebates because we did the energy audit prior to installation.  
    A few people talked about renting these.  I’ve never of this before and wonder why you would want to.  If you rented for $25.00 a month for 25 years, the expected lifetime, you’d be paying more than double the cost in the end.  This only makes sense if you move after a short period of time.
    Erick:   You bought the Navien, the Cadillac as far as technology goes.   This was my first choice, but I didn’t get it because in my rural area there are no local parts.   I went with the Rinnai because I can get parts locally if necessary.

  26. McGoo on April 19, 2010 at 4:43 pm

    A way to save money, don’t rent your services like they promote here in Ontario (which to me seems like the only place that it happens). They push extremely hard here for the “services” they provide if your hot water tank possibly breaks down, which in my dealings are not very good services at all. There is not a high probability of this happening unless they give you a cheap tank and/or its 10+yrs old. With my rental rates, you could potentially buy a new tank every 5yrs, installed and still pay less then renting. My thoughts, would rather pay the one time cost with the “risk” then rent for a service you might use.

  27. cannon_fodder on April 23, 2010 at 1:04 pm


    It sounds like you had a tankless job…

    Dave – is flushing the tank anyone can do (and I mean even the dumbest of us out there) or is this something a professional should perform?

  28. Dave on April 24, 2010 at 5:20 am

    Just hook a garden hose to the drain valve at the bottom side of the tank. Open the valve, and the water will flow out the hose to a pail or floor drain. Run it until it runs clear. 5 min. ?

  29. cannon_fodder on April 24, 2010 at 10:15 pm

    Dave – should we turn off the water heater first? We have our hot water tank near a floor drain but I’ve never thought of whether our hose could withstand water that is that hot.

  30. Thommegun on May 2, 2010 at 4:27 pm

    The prices quoted here sound pretty close to realistic, I was quoted $3000 installed. If a new house I could see installing one but they require yearly maintenance and are very pricey to repair. Also my plumber friend says you will probably have to upgrade the gas line to the heater as well as upsize your feeder water line to 3/4″ instead of the usual 1/2″ line for volume.
    I am going to replace my water heater this year with a high efficieincy tank model(because of the gov’t rebates). One that I own and not rent (you spend $250/year just on rental) with a intrinsic heat trap and bottom feed cold water. I am also going to put this gas heater on a timer so that it only fires for the evening hours and maybe 2 hours in the morning. Reason being I turned off our heater for vacation came back unexpectantly late the next evening and my teenaged daughter was in the shower for 15 min. with the heater off and still didn’t notice any change in water temp. This is a 8 year old heater. These units are very well insulated. The bacteria issue I don’t get. You shouldn’t be drinking hot water from the tank! Cold water is a separate line.

  31. Pipewrench on May 4, 2010 at 2:23 am

    cannon_fodder it’s not a big deal just consider shutting off the supply to your HWT found on the cold side or don’t run it for more than 5 min.

  32. ford on July 31, 2010 at 4:02 am

    consumer reports did not seem to recommend tankless as the payback period was so long and they were less convenient. only if gas prices increased would the payback get shorter.
    using less hot water might be easier. yes, insulate pipes where near the tank esp.

  33. Greg on February 15, 2013 at 12:08 am

    We bought a Navien 240A. The system cost about $2000 plus another $1500 for installation (totalled about $4000 with BC HST). We looked at the numbers and it really doesn’t make sense to buy tankless if your only criteria is saving on gas. For us it was a space issue. We were renovating and needed the space where the old tank was. We also have a basement suite, so with the new system, there are no more cold showers if everyone is showering at around the same time. Also, the Navien has a built in 2 litre tank, so you can set it to pre-heat water at certain times of day (like shower time in the morning or evening) and you get instant hot water like a tank system.

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