Tankless vs tank water heater is a choice between heating water as it is used and keeping a tank of it hot. ENERGY STAR describes both types and sets a different efficiency level for each. This page uses ENERGY STAR's own pages, checked on October 13, 2026. It gives no prices, because ENERGY STAR publishes none.
What Is the Difference Between a Tankless and a Tank Water Heater?
A tankless water heater heats water only when a tap is opened and has no storage tank. A tank water heater keeps a full tank hot at all times. ENERGY STAR's description was checked on October 13, 2026.
ENERGY STAR explains the tankless side on its how it works page. When a hot tap opens, cold water flows into the heater, a flow sensor starts the gas burner, and the water leaves at the set temperature.
| Gas tankless | Gas storage tank | |
|---|---|---|
| When it heats water | Only when hot water is needed | Keeps a tank hot at all times |
| How its size is rated | Gallons of hot water per minute | Gallons in the tank, plus a first hour rating |
| Hot water supply | Continuous delivery | Measured by its first hour rating |
Is a Tankless Water Heater More Efficient Than a Tank?
It can be. ENERGY STAR says tankless heaters can reach greater efficiency than standard tank heaters because they don't lose energy keeping stored water hot.
The reasoning is on the how it works page, linked above. ENERGY STAR's water heater criteria show the gap in the levels each type must reach for the label. The measure is the uniform energy factor, or UEF, and a higher UEF means a more efficient water heater.
| Certified type | Minimum UEF | Other minimum |
|---|---|---|
| Gas tankless | 0.95 | 2.8 gallons per minute over a 67° rise |
| Gas storage, over 20 and up to 55 gallons | 0.81 (medium draw) or 0.86 (high draw) | First hour rating of 51 gallons per hour |
| Gas storage, over 55 gallons | 0.86 | First hour rating of 51 gallons per hour |
| Heat pump water heater, integrated | 3.30 | First hour rating of 45 gallons per hour |
These are the minimums for certified models, not typical figures for every water heater on sale.
Can a Tankless Water Heater Replace a 40-Gallon Tank?
ENERGY STAR doesn't convert tank gallons into a tankless size. A tankless unit is sized by the gallons per minute the home uses at one time.
The ENERGY STAR tankless page lists these average flows:
| Fixture | Average flow, gallons per minute |
|---|---|
| Shower and bathtub | 2.5 |
| Clothes washer | 3.3 |
| Kitchen and bathroom sink | 2.2 |
| Dishwasher | 1.3 |
The more fixtures likely to run at once, the larger the unit. ENERGY STAR says an experienced plumber should estimate the demand.
What Does a Tankless Installation Involve?
The installer has to confirm three things: that the gas line is sufficient, that electricity is available near the heater, and how the combustion gases will be vented.
That list is in the buying guidance on the tankless page, linked above. The how it works page adds that certified gas tankless models are a condensing design. They need venting through a vertical PVC pipe and a condensate drain.
ENERGY STAR also says a certified gas tankless model uses 9 percent less energy than a conventional gas tankless one.
How Is a Tank Water Heater Sized?
By its capacity in gallons and its first hour rating. ENERGY STAR says a tank that meets your needs most of the time can probably be replaced with the same size.
The first hour rating measures how much hot water the unit can deliver in a busy hour under standard test conditions. ENERGY STAR's gas storage water heater page says a better first hour rating can mean more hot water without a larger tank. The capacity of the current unit is on its nameplate or the yellow EnergyGuide sticker.
Is a Tankless or a Heat Pump Water Heater Better?
ENERGY STAR doesn't rank them. Its criteria set a far higher efficiency minimum for heat pump water heaters: a UEF of 3.30, against 0.95 for gas tankless.
Both minimums are in the criteria table above. The criteria don't compare what each type costs to run.
Rebates can change the comparison. The guide to heat pump water heater rebates in California covers the programs DuloCore has verified, and the eligibility check shows them for a specific address.
Frequently Asked Questions
Does a tankless water heater run out of hot water?
ENERGY STAR says certified gas tankless models provide continuous hot water delivery. The limit is the flow rate, measured in gallons per minute.
What warranty does a certified water heater carry?
For a gas tankless model, ENERGY STAR requires at least 6 years on the heat exchanger and 5 years on parts. For a gas storage model it requires at least 6 years on the system.
Is anything in this comparison specific to California?
No. The ENERGY STAR levels are national. What differs in California is the set of utility rebates, which depends on the address.
Replacing a water heater? See the verified rebates for your address with the free rebate calculator.