How To Compare Running Cost Electric Tankless Water Heaters Versus Gas Fired Heaters?

In a previous article we did a comparison between converting a storage heater using propane to a tankless water heater using natural gas and the saving was enormous. This article we showed how easy it is t do a good approximate comparison quickly based upon knowing only 2 things for each system assuming the water heating load does not change. Electricity is the most costly fuel available for heating water and tankless hot water heaters tend to be the most efficient of all so let's see if it makes sense to buy an electric heater instead of a natural gas one using the parameters from the previous article ...

Summary Propane Conversion To Natural Gas Tankless Heater ... click here for full heater comparison article

Propane is a component of natural gas that is separated and liquefied and is often called Liquefied Petroleum Gas or LPG. If you look at the table below you'll see that propane costs about 55% more than natural gas for the same energy quantity

If you are thinking of changing your system you can make a quick estimate in percentage terms (ie what your new cost will be as a percentage of your old cost assuming load is same) of what you will save as follows ... Saving was .... 100 x (0.46/0.75) x (1.42/2.202) = 39.5. In other words the new natural gas water heating running cost will be only 39.5% of the old propane system hot water heating cost.

Somebody told me electric is cheapest so before making a final decision I need to check if I can save more money by using electric instead of natural gas to heat 1,000 lbs (about 260 gallons US) of water every day from 40 degrees to 80 degrees (ie 40 degrees Fahrenheit increase) because I suspect an electric tankless hot water heater will cost me less. Am I right?

The Energy Costs ... Natural Gas Versus Electricity ... refer energy cost page here

We have already decided that the load will be identical in both cases so all we need to do is compare the energy factors for the different systems and the cost of fuel for the different systems (shown in table below) using the simple formula we worked out before namely ...

100 x (energy factor1/energy factor2) x (energy cost 2 per million Btu/energy cost 1 per million Btu)

Energy Source	Cost in common unit of measure	Cost per million Btu
Electricity	11.78 cents / KWh (kilowatt hour)	$34.52 (energy cost 2)
Natural Gas	$1.42 / therm (100,000 Btu)	$14.20 (energy cost 1)

Lets review the energy factors for the two types of tankless hot water heaters ... and because we believe strongly in saving energy we opt for the top of the range models in both cases. You can see immediately that the energy factor rating for the electric heater is much better at 0.99 than for the natural gas heater at 0.75 (table below) but at the same time the cost of electric power is more than double that for natural gas (table above).

Type Of Heater	Energy factor Max	Energy factor Min	Energy factor Avg
Tankless hot water heaters ... gas	0.85	0.64	0.75 energy factor 1
Tankless hot water heaters electric	0.99	0.8	0.99 energy factor 2

Let's apply the heater comparison formula for running costs ...

100 x (0.85/0.99) x (34.52/14.20) = 2.08

So we were wrong the cost of electricity is so much more (more than double the cost of natural gas) than the relative efficiency improvement that the running cost using electricity would be 108% higher (more than double) than for a natural gas tankless water heater.

Common Terms used By the Hot Water Heating Industry ... Important

In any industry there is a degree of jargon and the hot water heating industry is no different. I've tried to define the important terms in a simple to understand practical way.

Energy Factor ... This factor relates to how efficient a unit is and can be interpreted as follows ... if the Energy Factor is high then the annual cost of energy (gas, propane, oil or electricity) to run the tankless hot water heater or the storage heater will be lower than it would be for a system with a lower Energy Factor. Energy Factors for Gas tankless water heaters range from 0.64 to 0.82 normally.
Average Gas Energy Cost ... it is assumed that national US average fuel cost of 1.42 $/therm will be used.
Electricity Energy Cost ... it is assumed that average national cost is $0.1178 per kiloWatt Hour

Take a look at how to choose a new tankless water heater