A new study from the NAHB Research Center suggests that on-demand water heating saves energy most dramatically in homes with lower daily hot water use. By Matthew Power

To compare the energy- and water-saving characteristics of home hot water systems, researchers created a complex laboratory environment and combined actual testing with mathematical modeling. They compared the efficiency of a point-of-use electric hot water system with PEX plumbing to a conventional hot water tank with copper plumbing.

Their results show that, given two levels of hot water use for a single-family home (41 gallons per day at the low end, 86 gallons per day at the high end), a distributed, on-demand water system reduces both energy demands and water use. The amount of savings varies by overall usage, but homes that use less hot water can save up to 21 percent in annual energy use, while higher-use homes may save 8 percent. These savings result from the fact that hot water is being used only as required. The point-of-use systems also reduce water waste, because homeowners do not need to run faucets waiting for hot water to reach the outlet.

The report also assessed installation costs. Its conclusion: "Combined system cost for a whole-house, electric demand water heater with PEX piping system would be about $1,984, whereas the tank-type water heater with copper plumbing system would be about $1,763." It adds that "annual energy savings for switching to a whole-house demand system with PEX piping is about $36 per year for the low-use home and $34 per year for the high-use home."

Point-of-use vs. Tank system
  Qelec*(kWh/yr) Qoutlet*(kWh/yr) System efficiency
Low Use
Distributed point-of-use 1,210 1,209 99.9%
Tank Tree 1,995 1,004 50.3%
High Use
Distributed point-of-use 3,529 3,549 100.5%
Tank Tree 4,986 3,635 72.9%
*Note: Qelec refers to electric energy into the heater; qoutlet refers to energy delivered at each outlet.
No waste: Point-of-use systems include small, "demand heater" tanks placed close to faucet outlets. Researchers note that proper system design is critical.