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Water Heater Options For A Large Custom Home – Tankless vs Tank vs Heat Pump Water Heater

Heating and cooling may account for the two greatest utility loads in our homes, but water heating is not far behind in third.  As a builder who cares about the efficiency & reliability of our buildings, we find ourselves consistently having conversations about which water heating units are the best fit for our client’s needs. There is certainly not one end-all-be-all answer and there are plenty of variables to take into consideration when choosing what unit and system is right for you or your client. Considering the spectrum of options on the market today, we’d like to take advantage of one of our current projects as a case study.

If you’ve been following this blog or my YouTube channel you’ve seen that we’ve reviewed and posted about a Rheem HP-50 Hybrid Heat Pump (and an AirTap ATI 66), a Vertex High Efficiency Gas Condensing unit and  a Rinnai Tankless unit. We’ve liked and used each of these types of water heaters for different reasons and in different contexts and are continuing to learn not only how well these operate over time, but how well they are meeting the specific needs of the residents they serve. 

For this case study, the same three types mentioned above play a role (scroll to the end if you just want a numbers comparison of our three unit choices), starting with three(3!) Rinnai RU98i Tankless units currently slated for the project. To set the stage better we have a 7,000 square foot custom home for a family of 5 (2 Adults, 3 Teens), with the original intent behind the 3 tankless units being to keep the runs from unit to end user as short as possible and serve 3 zones – 1. Master Bath/Bed 2. Kitchen/Laundry/Bathroom and 3. the kid’s bathrooms. Although these are great units, with much to like, we decided to do a little research and look into other water heating options that we could then present to the client. Our main concern in initiating the research into alternative water options had to do with one particular obstacle with the tankless units – Maintenance. 

The first maintenance obstacle we are predicting for these tankless units has to do with the hard water here in Austin. These units are supposed to require service once every 12-18 or so months, but we’ve found this is too lenient for our water here and that service is definitely necessary every 12 months. Our experience is showing that the tankless boilers can have scale build up at a relatively rapid pace, and subsequently effect or clog a thermostatic valve cartridge or other filters found at fixture locations. The 199,000 Btu burners on these units are no doubt impressive at only 1,000 Btu under commercial boiler grade, but the high heat in combination with the amount of surface area and small diameter of the copper piping relative to a traditional ‘boiler pot’ of a tank heater, contribute to this unfortunate scale build up. That said we have seen but have yet to use or test the Rinnai scale control system (basically a mini water softener).

Tankless Water Heater Scale Clogging Aerators after 24 Mo without a flush.
The second maintenance obstacle is of a different nature and comes out of a concern for resident privacy. Each of the three units is located on the interior of the residence within tricky, tight closet space, one of which is in the master bedroom. In order to service and flush these units you need about a five-gallon bucket of an industrial strength vinegar cleaner, a sump pump and the usual basic tools etc.  This presents a cleanliness issue, with the potential for overspray, leakage and so forth, but more importantly an invasion of the most intimate and private space in the house – which makes us uncomfortable and most likely the resident too. 

We’ve seen that these units are excellent choices in certain contexts and although they are a good choice for this residence from the perspective of efficiently, meeting the high hot water demand, effective piping/zoning design and maximizing interior space; we think there are two alternatives that will allow us to avoid our maintenance concern and still meet the needs of the residents. 
Three Rinnai RU98i Tankless Units

1.Master Bed/Bath     2. Kitchen/Laundry/Bath    3. Kids Bathrooms

One 50 Gallon Vertex 100 Gas (Propane) Condensing Unit +2 Metlund Demand Pumps

Two 80gal Stiebel Eltron Accelera 300 Hybrid Heat Pumps + 2 Metlund D’mand Pumps
(AirGenerate AirTap ATI 80 also worth looking at)

In both alternative A or B, the water heating units would be placed in the garage storage room, which immediately presents a different set of concerns as we lose the efficiency that came with the proximity of multiple tankless units throughout the house. The layout of hot-water piping can be an oft overlooked factor in gaining the most out of your heating units. Gary Klein has written a great article on just this subject in the March 2013 issue of JLC and it is well worth a read as we won’t get into the details here. That said, our primary concern by proposing tank units located in the garage was time-to-tap, standby heat loss and water waste given that the distance to the kitchen and master bathroom (the two anticipated high demand locations) are 80 and 170 feet respectively from the unit(s). We’ve used Metlund D’mand Pumps  (link to youtube video) on other projects and we think they’d be a great solution at each of the aforementioned locations. For anyone who may not be as familiar with these, they are referred to as ‘recirculation’ pumps, but we refer to them as recharging pumps. Placed at the desired fixture points, the pumps discharge the cold or cooled water from the pipes back to the water heater, meanwhile charging the system with hot water, all via the push of a button, or in the case of our master bathroom, a motion sensor. The pumps run (very quietly) for a few seconds and shut off automatically when the pump senses the water is hot.  Although these pumps will add an additional cost, they are vital in such long branch runs if you want fast hot water and not waste water down the drain waiting on hot. 

But let’s get to the good stuff – the two alternative water heating units. Why did we pick these two? 


We are proposing the Vertex as the more ‘standard’ option of the three possibilities. Our client’s site does not have accessibility to natural gas, so this and the Rinnai Tankless options would be utilizing Propane as their fuel source. This is not an inexpensive water heater (approx $2200), but we’re impressed with what these units can do. We’ve made a few posts about this exact unit in the past, with another video pending, but the main things to note about this unit are:

  • Lowest up-front cost of the three proposed units, with 1 tank being plenty sufficient to do the job (keep in mind that your average house of this size would have 2-3 water heaters)
  • Only requires inexpensive PVC venting for intake and exhaust and power vented (this unit it easy to put inside the tight conditioned envelope)
  • Impressive 96% thermal efficiency (compared to average of 60-75% of standard units)
  • High first-hour delivery rate – 164 gallons
  • Fast recovery rate – 129 (4.3 gal/min) = ability to run continuous hot water
  • Simple and user-friendly LCD interface
  • Single tank that can be hidden away easily

* Important to note that a condensate drain is required for these units
That’s a brief look at the Vertex, and it’s beast, that you couldn’t really go wrong with, especially if you have natural gas. That said, we don’t have natural gas for this house and  we’re excited about how good of a fit the Hybrid Heat-Pump units could be. 


 There’s a lot of good research and testing being done on these units and there is some great literature we’ve listed at the end of this post that we encourage you to check out if you want to get a little more in-depth understanding of the technology and performance of HPWH units. For those who might not be familiar with how this type of hot water works, they operate much in the same way as your air-conditioner or refrigerator compressor does, but instead of transferring heat away from the unit like an air conditioner, it extracts the warmth from the ambient air and transfers the heat to the water in the tank. This results in a thermal efficiency of about 250% or a 2.5 EF.  Martin Holladay notes in the article listed at the end of this post that the American Council for an Energy-Efficient Economy (ACEEE) has calculated that the electric heat-pump water heater has the lowest life-cycle cost compared to other units ($4125 over 13 years – for one unit), and they are also his personal recommendation if 1. natural gas is not available and 2. you have good location to install a heat-pump water heater. (See this video I shot about the AirTap ATI66 inside a Texas House)

Let’s get the main downsides out of the way first and why we’ve decided these are outdone by the benefits and strategic planning.

  • Expensive units = greater initial cost
  • Slow recovery rate at 8gal/hour after first-hour delivery
  • These can produce more noise than a standard unit
  • Placement is critical to gain full efficiency
  • need a condensate drain

These units can be used in just about any climate, but they are incredibly well-suited for our climate here in Austin. You need a minimum ambient air temperature of 42F for these units to operate but their coefficient of performance (COP) is directly tied to the air temperature. To put it in perspective, the COP at 42F is 2.0, but can increases to an impressive 7.0 at 108F.

With Austin’s 2012 annual average air temperature at 71.7F (http://www.srh.noaa.gov/images/ewx/aus/attmontemp.pdf), and by locating it in the unconditioned garage space we should have no problem getting a very high efficiency from this sort of unit year round. One of the best side benefits of these units is the production of cool air and dehumidification. This can be beneficial in an interior space, but also in a space such as the garage, (especially if there is workshop space allotted) which can often become a hot-box in our climate. The temperature factor, when combined with the sound level and the need for this particular to be placed in an area with 500 cubic feet of air space, makes the garage an excellent location for this unit. 

What to do about the slow recovery rate though? The general and consistent recommendation is to go with the bigger tank. We’re actually proposing two of the larger 78 gallon tanks (these clients have three teenagers at home). The goal is to have the Heat-Pump units operating in Heat-Pump only mode. Typically you have the option to set these in High Efficiency mode (heat-pump only, my preferred setting), Hybrid Mode (Electric heating element kicks in on this unit after delivery of 50gal) or Electric only mode. High efficiency mode is of course just that, and in order to maintain that efficiency and utilize solely the heat-pump for recovery, a larger tank is needed to keep up, especially in times of high demand, and especially for a family of 5. Additionally, you also gain better performance, increased efficiency and a decreased standby loss within the tank. If you were a family of two, the large tank might be unnecessary, but for more than two persons as is our case, a larger tank, or a second tank becomes vital. This way, we are able to guarantee and achieve the highest possible water heating efficiency and volume in heat-pump only mode, whilst not compromising or effecting the capacity to meet the resident’s demands of hot water in any given situation. 

Although this system has an up-front cost not far behind the original tankless proposal, the operational costs over a ten year period are almost half according to our estimates, and the efficiency is by far the highest. The electricity costs for the Heat-Pump units is somewhat hard to anticipate on existing available data, but the important factor is that we are wanting/needing to run the tanks in High Efficiency mode only. As you can see in the chart below, the playing field levels out in terms of long-term cost for the Vertex and the Heat-Pump options over a 10yr period.

*based on Austin’s Oct-May rate for 1001-1500 kWh usage – and because this was a general estimation, we decided to multiply it by 150% to give some cushion in case we were on the low side
** (based on constant of 41045 Btu/day and 12.03kWh – the avg daily energy use of a gas or electric unit respectively                                                                                                                                    http://energy.gov/energysaver/articles/estimating-costs-and-efficiency-storage-demand-and-heat-pump-water-heaters


Our recommendation is definitely not the Tankless at this point. Concern over the maintenance combined with the projected long-term cost make it no-brainer for us to narrow it down to the other two options. The Heat-Pump option edges out the Vertex for us despite the comprable 10yr cost comparison. What sells us on the Heat-Pump over the Vertex is namely: 1. The potential to cool the garage to a very temperate level solely with this unit (it should deliver about a ton of cooling) and 2. The future possibility of tying the unit into solar options, which creates greater potential for a net-zero home. So, even though the Heat-Pump option requires two units, which means more space, and occupation of open space, we like the additional side-benefits enough to try and make a case for it. That said, our second recommendation, the Vertex is probably what will be installed, and we do not see this as ‘settling’ by any means. Propane is already being used in the house and so it makes a lot of sense to go this direction.  The Vertex is super efficient and provides a nearly limitless supply of hot water and a smaller foot print for the tank, which can also be hidden away easily in the garage.

Thanks for reading this lengthy case stydt, and in case you want to geek out some more on water heaters here are some good sources that we found quite helpful.


Holladay, Martin. (2013, June/July). The Water Heater Payoff. Fine Homebuilding. 236, 62-65.

Holladay, Martin. “Heat-Pump Water Heaters Come of Age.” GreenBuildingAdvisor.com. 13 April 2012.

[CARB 2012] Shapiro, C., Puttagunta, S., Owens, D. (Steven Winter Associates, Inc. 2012). Measure Guideline: Heat-Pump Water Heaters in New and Existing Homes. U.S. Department of Energy, Building America.

[CARB 2011] Puttagunta, Srikanth. (Steven Winter Associates, Inc. 2011). Measure Performance of Advanced Water Heating Strategies – Heat-Pump Water Heater. U.S. Department of Energy, Building America.

Special Thanks to my Summer Intern Mark Epler who compiled and wrote this article for me.  Mark is pursuing his Masters in Architecture at University of Texas at Austin.