Electric vs Gas Tankless Water Heater
Electric and gas tankless water heaters both deliver hot water on demand without a storage tank. But they differ significantly in installation cost, running cost, and what your home needs to support them. Here is a direct comparison to help you choose.
Updated 28 March 2026
Head-to-Head Comparison
| Electric | Gas | |
|---|---|---|
| Unit cost | $200 to $700 | $500 to $1,500 |
| Installation cost | $200 to $500 | $500 to $2,000+ |
| Total installed | $500 to $1,500 | $1,000 to $3,500 |
| Energy efficiency (EF) | 0.96 to 0.99 | 0.82 to 0.96 |
| Annual running cost (average home) | $400 to $700 | $250 to $500 |
| Flow rate (whole house) | 2 to 4 GPM (limited by power) | 4 to 10 GPM |
| Electrical requirements | 200A service, dedicated 240V circuit | Standard outlet only |
| Gas line required | No | Yes (3/4 inch or larger) |
| Venting required | No | Yes (PVC or stainless flue) |
| Lifespan | 7 to 15 years | 15 to 20 years |
Electric Tankless: What You Need to Know
The electrical capacity problem
Whole-house electric tankless heaters typically require 24 to 36 kilowatts of power to heat water on demand at adequate flow rates. This requires a 200-amp electrical service and multiple dedicated 240-volt circuits.
Many older homes have 100-amp service. Upgrading the electrical panel from 100A to 200A costs $1,500 to $3,000 additional. This can make an electric tankless heater more expensive overall than a gas unit. Before choosing electric, have an electrician assess your current panel capacity.
Where electric tankless makes sense
- + Point-of-use (one sink or bathroom): small electric units cost $100 to $300 installed
- + No gas line in your home or cost to run one is very high
- + You have solar panels or off-peak electricity rates that reduce running costs
- + Warm climates where incoming water is already at 60 to 70 degrees F
- + You want no gas combustion in the home
Running cost example
A family of four using 60 gallons of hot water per day with an electric tankless heater (99% efficiency) at $0.14 per kWh pays approximately $450 to $550 per year in energy costs. The same household with a gas tankless heater at $1.50 per therm pays approximately $200 to $350 per year. Gas saves $150 to $200 per year in most US markets, though electricity rates vary significantly by region.
Gas Tankless: What You Need to Know
Installation complexity and cost
Gas tankless heaters require a larger gas supply line than most traditional tank heaters. The unit draws up to 199,000 BTU at peak demand, which requires a 3/4-inch or even 1-inch gas line. Many homes have existing 1/2-inch lines at the water heater location, which need upgrading.
Venting is the other major installation cost. Gas units must vent combustion gases outside the home through a flue. Concentric PVC venting (intake and exhaust in one pipe) is common and can be routed through a wall, but adding new venting typically costs $200 to $500. Units that require stainless steel venting cost more.
Where gas tankless makes sense
- + Households with 3 or more simultaneous hot water users
- + Cold climates where incoming water is below 50 degrees F
- + Homes already on natural gas with adequate supply line
- + High-electricity-rate markets where gas is relatively cheap
- + Long-term ownership where the higher upfront cost amortises
Gas line upgrade costs
| Situation | Additional cost |
|---|---|
| Existing 3/4-inch line at correct size | $0 |
| Upgrade 1/2-inch to 3/4-inch line (short run) | $200 to $600 |
| New gas line run from meter (long run) | $500 to $2,000+ |
| No gas in home, new service connection | $2,000 to $5,000+ |
Payback Period: When Does Gas Pay Off?
Gas tankless heaters cost more upfront but save money annually on running costs in most US markets. Here is how long it takes to recoup the higher installation cost.
Sample calculation
If the gas unit lasts 20 years and the electric unit lasts 12 years, the total cost of ownership over 20 years favours the gas unit in most markets. However, if electricity rates are low or declining (due to solar, off-peak tariffs, or regional pricing), the payback can extend beyond the useful life of the unit.
Which Should You Choose?
- You have 200A service and no panel upgrade needed
- Gas is not available or is expensive to run in your area
- You want a point-of-use heater for a single bathroom
- You have solar panels or low-rate electricity
- You live in a warm climate (higher inlet water temperature)
- Minimising upfront installation cost is the priority
- You already have natural gas in the home
- Your household has high simultaneous hot water demand
- You live in a cold climate
- Natural gas rates are low in your area
- You plan to stay in the home 8+ years
- You want maximum hot water flow rate
Cost and efficiency figures are typical US market values as of early 2026. Actual installation costs vary significantly by home, location, and existing infrastructure. Energy costs depend on local utility rates. Get quotes from licensed plumbers and electricians before making a decision. This page is for informational purposes only.