I stopped by a new Stanley Martin townhouse development today and was unpleasantly surprised. The all brick models had all the visual bells and whistles. You know, stainless steel appliances, granite countertops, hardwood floors, yada, yada, yada. And the prices are great. I looked at all the nice upgrades on my way to find the utility closet. What was I looking for? The hot water heater. What I found was the source of my disappointment-a big old energy wasting 80 gallon hot water heater-heating and holding all that water that no one is going to use until the house sells. And even after the townhouse is occupied the tank will go on wasting energy keeping unused water hot.
What was I looking for? A tankless or on demand hot water heater. It was simply incongruous to me that in this age of cutting our devastating energy consumption, that a major builder wouldn't step into the forefront of the movement and make this simple but cost effective change in standard design.
Demand water heaters are extremely common in Europe and Japan. Although they were introduced in the US about 25 years ago, they are only now getting some love, if you will. On demand hot water heaters heat water instantaneously, and only when it's needed. They don't waste energy keeping water hot that isn't being used. There's no storage tank so there are no standby heat losses. There are whole house on demand hot water heaters and point of use ones. The smaller, point of use heaters can be installed under a bathroom or kitchen sink. The size and GPM (gallons per minute) will depend on the size of your family and house.
Bob Forisano of about.com has a great section on tankless hot water heaters. So if it's near time to replace your current water heater I highly recommend going tankless.