Tankless actually had its beginnings almost 150 years ago when a painter named Benjamin Waddy Maughn invented the first instantaneous domestic water heater that did not utilize solid fuels. His invention had cold water at the top flowing through wires heated by hot gases from a burner at the bottom. Called the “gas geyser,” it didn’t have a flue for venting gas vapors, so it was too dangerous to use.

While there were other early pioneers in water heating, notably Edwin Ruud, it wasn’t until 1927 that Stiebel Eltron’s first small instantaneous water heater delivered 1,000 watts and featured then revolutionary two-stage technology.

Taco was also an early developer of tankless in the 1920s with a water heater and a tempering valve that mixed hot and cold water. In doing so the small company eventually came to control the household water heater market in America and the “Taco heater” became a generic name known throughout the developing indoor heating industry.

However, gas powered tank storage models dominated the market until the 1970s, when tankless began to be seen as an alternative. As efficiency increased in the 1990s, tankless systems began to make a bigger impact on the U.S. market.

Tankless is continuing to grow as Americans become more eco-conscious and are embracing the benefits of instant hot water. According to a report from Grand View Research, the global tankless market size was valued at $2.8 billion in 2018 and expanding at a compound annual growth rate of 7.5% through 2025.

MN PHCC Contractor asked several key players in tankless about market growth, and drivers, including: David Federica, Brand Director, Rinnai; Brea Figura, Rheem Tankless Marketing Manager; Dongtaek Lee, Senior Product Manager – Specialty Products, Bradford White; Julius Goodman, Head of Marketing, Steibel Eltron USA; Jeff Ogan, Director of Product Management, A. O. Smith; Andrew Tran, Marketing Manager, Noritz America.

Here are the questions and their responses.

WHAT TRENDS/INNOVATIONS ARE YOU SEEING IN TANKLESS?

Federico: Trends shaping the tankless market include driving technology with increased efficiency, as well as enhanced features to make the products easier to install. Rinnai has focused development efforts on providing more flexible and affordable venting solutions, features that minimize the need to change gas lines and other features designed to streamline the installation process. Additionally, we are seeing trends involving integration with home automation for greater control of hot water circulation schedules, which results in faster hot water at the faucet and less wasted water while waiting for it to heat.

Figura: In the U.S., many local governments, such as in California, are implementing higher efficiency standards. Tankless water heaters with recirculation, either built in or using an external recirculation pump, are trending as a result, since they can save significant amounts of water and limit wasting water while waiting for hot water. The Prestige Series Tankless Water Heater with Recirculation Pump from Rheem, for example, can save up to 12,000 gallons of water per year.

Also to minimize cold water bursts, Rheem engineered its line of Prestige Series High-Efficiency Tankless Water Heaters with its proprietary Hot Start Programming, which allows the tankless units to remain in a ready-fire state for back-to-back hot water needs.

Goodman:  More of a trend than an innovation is the appearance in the marketplace of new brands or models from existing brands with low pricing, but also low technology. As a technology and quality leader we hope these cheap devices will not turn off consumers to electric tankless, but rather turn consumers to the benefits of purchasing quality products.

Lee: One most certain and clear trend is the movement toward high-efficiency condensing products. Consumer awareness of energy savings, higher utility company subsidies and the innovation to adopt the lower cost venting material are the main driving force which lead the market to condensing products. Connectivity to control and diagnose the product with mobile devices, and smart recirculation with a built-in circulator are other current trends.

Ogan: Scale prevention is an emerging trend in the industry, particularly in residential applications. Scale buildup can shorten the life of any water heater, increasing the likelihood of premature failures and costly service requirements. There are a number of anti-scale filters on the market, but we suggest finding one that uses a non-chemical, non-salt scale reduction substance that causes the calcium and magnesium in the water to bind together, preventing it from sticking to the inner surfaces of the tankless heat exchanger. These products are designed so contractors can simply replace a cartridge in the filter every two years.

Tran: As always, energy efficiency is something the industry is trying to improve on, year over year. We’re seeing a lot more eco-conscious buyers shifting to tankless because of the energy efficiency. Also, Wi-Fi-capable products that connect into a smart-home ecosystem is something that’s attractive to many consumers at this point.

WHAT’S DRIVING THE TANKLESS MARKET?

Federico: One driver of the tankless market is the demand for higher efficiency rated products. Another driver is the general consumer awareness of the benefits offered by tankless water heaters, such as unlimited hot water, greater control for faster hot water at the faucet and a longer product lifespan. Additionally, we are seeing a greater acceptance of tankless technology by the trade as we work to continuously grow our network of highly trained installers. This in turn impacts consumer adoption in the market.

Figura: One factor driving the tankless water heater market includes an end user desire for uninterrupted hot water flow, even for larger residential or commercial spaces where a lot of water is used. Another factor is the ability for tankless water solutions to provide end users with unmatched energy efficiencies.

Goodman: The market continues to grow as people realize the benefits of endless hot water plus the energy savings of tankless. We continue to believe that growth in electric tankless in particular is due to the increasing desire of consumers to use clean electric energy through renewable technologies rather than fossil fuels. As electric generation becomes greener and greener and the desire to use fossil fuels leesseens this switch to electric hot water, especially to the benefits of tankless over tank, will accelerate.

Lee: Consumer demand for higher efficiency, energy-saving appliances in their homes. Plus, the space-saving product size and wall-mount installation is attractive to home builders to provide larger living space to homeowners.

Ogan: The tankless water heater’s biggest appeal is its ability to produce endless hot water, giving owners access to hot water as they need it. There’s no need to adjust lifestyle or water use habits. You could have one person showering, while the dishwasher and washing machine are running and still have hot water available for the next person who wants to shower without having to wait for a tank to reheat. Another big benefit is the space-saving component. Tankless units can be installed inside or outside of a home or building, freeing up additional space on the floor of a basement or garage.

Government regulations are also driving the tankless market. Many of the regulations we’re seeing today started in California with Title 24, Building Energy Efficient Standards, designed to reduce wasteful and unnecessary energy consumption in newly constructed and existing buildings. A majority of the new construction in California has included tankless units to adhere to these regulations and help net a positive HERS (Home Energy Rating System) Score.

Tran: I think the same things that are driving the trend to sustainable energy, as well as things like solar and electric vehicles. Consumers are looking for eco-smart solutions, and builders and developers are trying to satisfy that need.

IS CONTINUED GROWTH EXPECTED AND HOW HAS THE CORONAVIRUS IMPACTED THE MARKET?

Federico: While COVID-19 has impacted everyone’s lives, the demand for tankless has remained strong on the residential side of the business. COVID-19 had a temporary impact on commercial demand as some industries suffered during the pandemic, but we are confident as businesses continue to recover, tankless demand will continue to increase. We are already seeing this recovery begin to take place.

Figura: Yes, continued growth is expected. The coronavirus has created a rise in demand for endless hot water as more people are in the household and daily hot water needs are driven higher. Growth is expected to be strong especially as consumers look to add innovation as shifting consumer preference towards energy-efficient products is projected to remain a favorable factor for the industry growth. The continued introduction of innovative products is expected to open new avenues for the water heating industry.

Goodman: As demand for handwashing increased, people realized that electric tankless, or electric mini-tanks offered the possibility for a hand washing sink just about anywhere.

Lee: Growth in the use of tankless water heaters will likely continue to trend upward, but with major electrification initiatives, fuel sources may begin to evolve more that affect tankless technology or drive consumers toward alternative products such as heat pump or hybrid water heaters.  With more people at home right now due to COVID-19, people are taking stock of and better understanding their appliances and homes in general, so that may drive more proactive replacement.  Increased utilization due to people being at home more may also drive spikes in repair and replacement.

Ogan: The gas tankless market continues to be one of the fastest growing water heater categories in North America. States pursuing electrification legislation could also impact future gas tankless growth.

Tran: The tankless industry has been fairly lucky as far as market impact. We’re in the plumbing industry, which is considered essential, so the impact has been low. We saw an uptick in tankless demand during the past year due to two factors: more home renovations getting done and more homes being bought, due to the low interest rates right now.

RESIDENTIAL TANKLESS OUTPACES COMMERCIAL. WHY IS THAT AND WILL IT REVERSE?

Federico: The biggest challenge in the commercial business is general awareness of the wide variety of commercial solutions offered. Rinnai commercial solutions includes a wide variety of customized solutions and are backed by our 100% sizing guarantee from our application engineering team.  Rinnai’s commercial business is one of our fastest growing segments and we expect it to continue in the coming years as we expand our product and service offerings.

Figura: There are many factors that have driven residential demand for tankless, such as regulations in new construction that favor high- efficiency products, consumer demand for endless hot water, and utility rebates that make the jobs more affordable. Many of which are not as big of an impact to commercial decision making compared to residential. That said, we do expect to see an increase in demand for tankless in commercial applications as well. There are considerable benefits for tankless in businesses including the redundancy, allowing businesses to stay up and running, and scalability, allowing business needs to grow.

Goodman: The new administration has committed to a clean renewable energy future and a move away from fossil fuels. As electrification moves ahead, more and more large industrial/commercial projects will commence. It makes sense that residential electric took the lead. Stiebel Eletron manufactures all electric tankless water heaters; whole house, point-of-use from 2-36 kW and our newest Tankless Inc. line of 3-phase commercial/industrial up to 144 kW. This positions us to help move toward electric tankless for all.

Lee: There are two things we can consider:

1. Throughout this pandemic period, there have been a lot of home improvements made because of the time people spent at home and the higher usage of the home equipment, including the water heater. On the other hand, the commercial premises such as schools, restaurants, hotels, etc., where the commercial water heaters are installed, have been shut down or rarely used.
2. Tankless manufacturers vary in how they categorize their tankless water heaters between residential and commercial. Some manufactures are supplying into both product categories with one product by either changing settings, adding additional components or by ganging more than one tankless water heater.

Ogan: Energy efficiency, sustainability and green product solutions will continue to drive purchasing and installation decisions, making tankless water heaters a top choice for residential and commercial applications. Tankless is a common choice in residential applications in both new construction and in the replacement market because of the space savings and the benefits of continuous hot water as described above.

Many commercial businesses rely on hot water to remain open. When a commercial tank-type water heater fails, it’s easier and faster for the business to replace that existing tank-type water heater with another tank-type water heater. The gas line and venting infrastructure is already in place for the new heater.

In new commercial construction, we’re seeing locations choose pre-built tankless rack systems to provide hot water. These systems come in a variety of configurations and provide easy installation since the water and gas lines are manifolded at the factory. This simplifies installation on the job site and provides the benefit of redundancy for the commercial end user.

Tran: I think it has a lot to do with the home buying market right now. With historically low interest rates, it’s very attractive for buyers. In addition, with COVID-19 concerns, it’s been tough on our commercial partners’ business and their ability to expand.

DO YOU OFFER TRAINING AND/OR HOW IS YOUR COMPANY HELPING CONTRACTORS?

Federico: Rinnai offers a robust training program for contractors to become experts at installing and servicing our products. We have training programs that are available live and in person, remote via webinars and online to accommodate the needs of our growing network of Rinnai Pros.

Figura: We work diligently to properly train plumbers who install our products and ensure they have access to the right tools and resources that allow them to recommend the best water heating solution for any scenario. These tools and resources also allow Rheem plumbers to install units efficiently and be able to service or troubleshoot as needed with ease.

In response to COVID-19, Rheem’s in-person training programs at the company’s five Innovation Learning Centers throughout the U.S. and Canada have shifted to e-learning and online webinars. Also, earlier this year, Rheem moved up the launch of its on-demand online training courses in Rheem Academy thanks to a partnership with Interplay Learning. Rheem’s 46 new courses provide interactive, highly engaging training classes that feature VR technology and 3D simulations. All courses are NATE recognized and eligible for CEU credit. More information on Rheem’s online training can be found at rheemacademy.com/.

Goodman: We have been hard at work to energize and equip our manufacturer’s representatives with the tools they need to reach out to the people and companies they deal with.

Lee: Bradford White is committed to the professional, so providing training for the professional is an important part of who we are. That’s especially true today, when new, advanced technology is making training even more important than ever before. We offer training options at our International Technical Excellence Center (iTEC™), in the field at various regional locations, including special arrangements for sites convenient to you, and online via Live Training Broadcasts.

Ogan: As an industry leader, A. O. Smith is always looking for ways to increase the value we provide to our downstream channel partners. We understand the importance of proper training and are proud to invest the time and resources into educational tools that support our contractors, wholesalers and specifying engineers. Training is led by our full-time staff of dedicated technicians. We offer virtual training at university.hotwater.com, which combines online digital classes and web-based interactive sessions. Online certifications are available in multiple categories, including tankless, residential and commercial. We’re also in the process of updating the product support pages on A. O. Smith University to include just-in-time training — short videos highlighting top service questions on controls, error codes and other how-tos to help simplify installation and maintenance in the field.

Tran: We offer training by request or with our weekly “Tuesdays with Noritz” webinars we host. We also have been producing much more YouTube tutorial content, such as short features on technical tips.

WHAT IS YOUR NEWEST RESIDENTIAL AND/OR COMMERCIAL TANKLESS PRODUCT?

Federico: The Demand Duo R-Series was launched by Rinnai this year, positioned as an affordable upgrade when replacing an old, regular efficiency atmospheric tank. Because all the heating of water takes place in the tankless unit and not the tank, the R-Series has more hot water capacity (276 gallons first-hour delivery) and puts zero thermal stress on the tank. This means our customers can enjoy reliable hot water with a product built to last longer and comes with a 5-year warranty (6 years on the tank). Plus, installation is a snap because the R-Series easily connects to existing 6″ B-Vent and comes with a pre-installed drip leg and gas swivel flex line. These installation enhancements demonstrate our goal to offer commercial products that can save our Rinnai Pros time and money, so they can install Demand Duo R-Series quickly and profitably.

 

Figura: Rheem’s newest residential product is the Prestige Series Condensing Tankless Gas Water Heaters with Built-in Recirculation.

Goodman: We are introducing in the U.S. new water heater models that use our Direct Coil™ heating technology. Our Mini™ water heaters have used this technology in the U.S. for years, and this technology has been proven in our European models for more than a decade. Our Direct Coil heating technology offers several important features, not the least of which is an exceptionally low failure rate. Other benefits include self-cleaning for superior limescale resistance, fast heat-up and response time, plus our dry-fire prevention, already robust with a flow sensor and microprocessor control, now has an air-detection system, adding one more layer of protection.

Lee: We are preparing to launch enhancements to our Infiniti tankless water heater line in 2021. Those announcements are forthcoming.

Ogan: In late 2019, we launched our ProLine Electric Tankless Series for residential and commercial applications. All models come with Dry Fire Protection, meaning the element will only turn on when the chamber is full of water, so contractors can work without fear of costly dry fires. Each model also comes with Scale Reduction Technology to help minimize scale formation on the elements and chamber walls. The largest unit in the family, the four-chamber model, can produce up to 4.25 gallons of hot water per minute, enough to support two-and-a-half bathrooms.

Tran: Our latest residential product is the NRCR Residential Condensing Tankless Water Heater, which is our flagship tankless with recirculation product. It features a built-in pump that helps deliver hot water almost instantly. Our newest commercial product is the NCC199CDV Commercial Tankless Water Heater, which now offers a 10-year warranty and an industry-leading Uniform Energy Factor of 0.97.