Efficiency - the term energy factor characterizes the efficiency of both tank and tankless water heaters. The energy factor is the portion of the energy going into the water heater that gets turned into usable hot water under average conditions. It takes into account heat loss through the walls of the tank, up the flue, and in combustion. The higher the energy factor, the more efficient the heater. Because tankless water heaters don't have the losses associated with tanks, their energy factors are normally higher (although well-insulated, ultra-efficient tank heaters also have high energy factors).
Standing pilot or electronic ignitions. Tankless water heaters with standing pilot lights waste energy, but they can be cost effective in applications where water use is high, i.e., in a beauty salon. An electric ignition is your best bet where water use is lower, i.e., in your own home.
Modulating or fixed energy input. Older tankless water heaters have a fixed energy output, so water temperatures vary inversely with flow rate. As the flow rate increases (more taps are turned on), the water becomes cooler. Conversely, as flow rate decreases the water becomes warmer. Newer models come with a modulating control that increases or decreases energy input to maintain the desired temperature in spite of varying flow rates and inlet temperatures. Use units with modulating controls when a steady temperature is required and also to prevent scalding in applications where people or animals may come in contact with the water. A modulating unit is not necessary when temperature fluctuations are acceptable as they are in a commercial laundry.
Energy inputs. Electric heating element and gas requirements for tankless water heaters are much larger than for storage water heaters. A typical gas storage water heater has a gas input of 40,000 Btu/h. A gas tankless heater, however, may use up to 170,000 BTU/h and so may require larger gas lines and vents than conventional water heaters.
