Annual Tankless Report
A look at where we’ve been and where we’re headed as it relates to tankless water heaters.
In 1889, George Eastman began selling his Kodak flexible rolled film for the first time; the World Fair opened in Paris with the completed Eiffel Tower; Daniel Stover and William Hance patented a bicycle with the back pedal brake; and Edwin Rudd, a Norwegian mechanical engineer and inventor who immigrated to the U.S., was awarded a patent for his design of a tankless water heater. It had a cast iron body with a copper heat exchanger, and his patent was on a gas actuator valve, which turned on the burner when a water faucet was opened.
Things have changed since then. Today, tankless water heaters are used throughout most of the world, and have gained significant popularity in North America. They last longer than tanked heaters, provide hot water when and for as long as it’s needed, and will save consumers money each month because they reduce the amount of energy used.
In today’s market place, energy efficiency is king.
Recently, the U.S. Department of Energy (DOE), revised the Energy Factor (EF) efficiency metric to create a new, more universally applicable measure called the Uniform Energy Factor (UEF), which requires manufacturers to change the energy efficiency labels on water heaters effective June 2017. With the UEF change, consumers will be able to make more informed decisions by comparing the efficiency of the entire range of water heaters.
We spoke to a few tankless water heater manufacturers, including A.O. Smith, AERCO, Bosch, Bradford White, Eemax, Intellihot, Navien, Noritz, Rheem, Rinnai and Stiebel Eltron to get their views on trends in the industry.
First, we asked what new regulations are impacting tankless water heater manufacturers, and if they anticipate any changes with the new administration.
While most mentioned the new UEF requirements and how they’ve impacted business, some discussed other changes in the pipelines, too.
Arthur Smith, product manager – specialty residential at A. O. Smith, says the UEF changes are mostly meant to help consumers compare technologies, but in addition to that, A.O. Smith has its eye on Title 24 in California.
“For Title 24 in California,” he says, “state officials are focused on water conservation and have required that some new construction include hot water recirculation systems and several other rule changes that make tankless water heaters an attractive choice. We don’t expect major shifts in the federal regulatory landscape.”
Joe Holliday, senior director of business development at Rinnai adds, “Recently, some states have integrated new energy-efficiency requirements into their building codes, and these updated regulations are driving the installation of tankless water heating systems. Title 24 in California is a prime example of this, and it makes the decision for a builder to install tankless technology in new construction very easy. As far as upcoming standards go, it is likely that we’ll see changes to more regulations on the state or local level. We often see regulations adopted on the West Coast spread throughout the country over time.”
Sammy Alvarado, marketing assistant at Noritz, says, “New Ultra-Low NOx regulations require tankless water heater manufacturers to create heaters that produce 20 ppm or less. We don’t anticipate many changes from the new administration since most regulations are coming from the states rather than the federal government. Emissions regulations have always been a factor to consider, but, as a tankless water heater manufacturer, we strive to always exceed emissions standards. It’s a common practice in the industry to strive to be green.”
Madison Phillips, category marketing manager – tankless at Rheem Mfg., adds, “Another big change was the $300 Federal Tax credit that expired Dec. 31, 2016. When a national rebate of this level is no longer available, there can be substantial changes to market demand, which in turn greatly affects manufacturing needs. On top of this federal credit, numerous regional credits and rebates also change or expire year to year, causing further volume swings in the market, which have to be anticipated and accounted for in manufacturing.”
Some of the manufacturers are looking ahead and waiting to see what the new administration does in regards to pending regulations and new initiatives.
Brian Fenske, specialty channel sales manager at Navien Inc., says, “I think a lot of us are waiting with bated breath. Historically, it has not been uncommon for legislature to pass policies long after a new administration takes over. This has happened in the past such as retroactive federal tax credits for tankless. I am confident this shall happen again, once the administration’s priorities are addressed. The rumblings and rumors of the DOE and its future, and the Buy-American policy may continue to circulate, but I’m confident the path taken will be for the best of the people.”
Carl A. Pinto Jr., director of marketing at Bradford White Corp., adds, “The DOE is starting to look at the next round of efficiency regulations for residential water heaters, which will likely include tankless water heaters. For now, it’s too early to know exactly what changes we’ll see from the new administration regarding statutorily required rulemakings.”
Sridhar Deivasigamani, CEO at Intellihot Inc., adds, “While the Trump administration has made changes to NAFTA and is proposing other changes such as the border tax, we believe that those changes will not have a big impact on the production of tankless water heaters.”
Bill Riley, sales and marketing at Stiebel Eltron Inc., says, “At this point, it is impossible to speculate on what Mr. Trump will do or not do. He is finding out that things are more complex than originally anticipated.”
Updates to codes and standards aren’t anything new, and manufacturers surely anticipate changes with any new administration or consumer-driven initiatives.
We wanted to know how technology has been used to meet recent updates in codes and standards.
“Tankless technology by itself is a means by which to respond to specific codes requiring tankless installations, or in meeting codes where efficiency levels may be best achieved by using a tankless product.” — Pinto, Bradford White Corp.
“We’ve used technology to improve our heaters’ efficiency and adaptability, no matter which projects and applications installers undertake. We’ve improved our heaters’ usability by allowing them to use cost-effective materials for lower-cost installs while keeping their emissions levels lower than required. — Alvarado, Noritz
“At Rheem we are constantly striving to innovate our water heaters to provide comfort and convenience for our customers as well as more sustainable practices for the planet. One of the big technology focuses for 2017 is in recirculation. Creating water-heating solutions with recirculation not only provides more instant hot water for customers, but also can save up to 12,000 gallons per year for the average household. With the addition of on-demand recirculation pump accessories, Rheem is now able to meet new Title 24 standards in the state of California, a key tankless market.” — Phillips, Rheem Mfg.
“Stiebel Eltron now has available a temperature limiting control (TLC) device that is designed for external use with all of our Mini E and DHC-E series tankless, electric water heaters. The TLC is sold separately from the Mini E and DHC-Es for applications in public lavatories where UPC 413.1 code requires a separate device to eliminate risk of scalding. The unit comes as a complete assembly and includes an ASSE 1070-2004 compliant mixing valve. The new Mini Es can be internally set so as not to allow the water to heat beyond a prescribed temperature. This is especially useful when the units are set up in public restrooms for hand-washing. Coupled with our separate temperature limiting control (TLC) devices for external mounting, the units satisfy UPC 413.1 code requirements. — Riley, Stiebel Eltron Inc.
Using technology to keep up with codes and standards is one thing, but we were curious about any new developments in tankless technology that each company recently made.
“One of our primary goals at A. O. Smith has been to make installation easier for contractors. We’ve tackled this challenge in a variety of ways. Our gas convertible non-condensing models give contractors the ability to convert a unit from natural gas to propane in a matter of minutes on the jobsite using a factory supplied conversion kit. For commercial installers, we developed a commercial tankless rack system that combines the power of multiple condensing tankless water heaters to serve high-demand commercial applications, such as hotels and restaurants.” — Smith, A. O. Smith
Kunal Shah, product solutions manager, water heaters at AERCO International Inc., says “AERCO continually improves its all stainless steel, fire-tube heat exchangers to resist the varied water chemistries encountered in domestic hot water applications, for increased reliability. Enhancements have been made to our water heater management controls for more efficient operations. AERCO also developed Smart Size, an easy-to-use, comprehensive tool that ensures the best-sized guaranteed water heater solution is selected for a project.”
Freddie Molina, product manager at Bosch Thermotechnology, says, “Our latest innovation in tankless is our Greentherm 9000 Series. The units are smaller, which makes them suitable for installation in numerous locations in any home. It also simplifies work for installers, who are not required to replace a bulky water heater with an even bulkier one. Indoor units have top-mounted cold- and hot-water connections, similar in placement to those on tank-type heaters. Installers can use 3/4-inch or 1/2-inch gas lines. Each model includes a manifold injector kit for quick conversion to LP gas if needed. A built-in touch-screen control speeds the conversion process and eliminates lengthy setups.”
“We are deploying ETWH with tanks on skidded systems, and we’ve launched a booster product to add onto tanks.” — Jens Bolleyer, vice president of marketing and retail sales, Eemax
“We launched two distinctive offerings this year, both are a first in this industry:
telliZero service — this service brings Wi-Fi connectivity to all our tankless products and allows us to offer prognostics and ship parts ahead of time when any replacements are needed.” — Deivasigamani, Intellihot Inc.
“Navien introduced NaviLink for Wi-Fi remote control of all our gas-fired equipment, which allows the capability of remote access for all Navien tankless water heaters (NPE series), combi-boilers (NCB-E series) and gas condensing boilers (NHB series) through Wi-Fi control and mobile application. Now, smartphone and tablet owners will be able to control temperatures remotely, access usage data, receive diagnostic notifications and remotely activate recirculation on the NPE-A series tankless water heaters. We also created some add-on options, including the HotButton accessory, which is a recirculation demand control that can be added to our NPE-A recirculation models, controlled by a remote demand button or the Wi-Fi app. Also, our H2Air control accessory allowing air handler integration for simple tankless combi applications. Applied to our NPE-A models it offers tankless pump operation, dual temperatures, outdoor reset, DHW priority and AHU fan interlock. Finally, in 2nd Q 2017, we will have available our Ready-Link tankless rack system. With localized field available components such as the modular racks, manifold systems, tankless units and accessories, a cascaded commercial rack system with up to 16 tankless units providing more than 80 gpm at an 80 F rise could be installed the same day it’s needed.” — Fenske, Navien Inc.
“In May, Noritz will release the EZ Series of high-efficiency, condensing tankless water heaters, consisting of the Energy Star-rated EZ98-DV and EZ111-DV. Engineered expressly for the North American residential market, these ultra-high-efficiency tankless units offer a faster, easier and less costly replacement of larger tank water heaters with their top-mount water connections, multiple venting options and 1/2-inch gas line capability.” — Alvarado, Noritz
“Rheem has recently launched its newest improvement in condensing tankless water heaters to reach higher levels of efficiency. This has allowed us to provide flow rates (gpm) at a level, which can meet the requirements of customers in all climate regions. Along with the residential applications, there has been concerted effort in developing technologies with common venting to bolster our commercial tankless offering.” — Phillips, Rheem Mfg.
“We’ve greatly expanded our commercial products and offerings to bring tankless technology to the commercial environment. Our Demand Duo commercial hybrid water heating system pairs a durable, energy-efficient 119-gallon storage tank with a Rinnai C199 tankless unit. Because it has connections similar to those of most high-efficiency tanks, the Demand Duo is a direct-replacement solution that provides continuous hot water. Plus, it has a longer lifespan than a traditional commercial tank. We’ve also introduced freestanding, wall-mounted and corner tankless rack system design solutions for increased installation flexibility in commercial applications. Also, our Application Engineering Center of Excellence is available to help size and design commercial tankless systems, and we’ll even assemble the system before it is shipped.” — Holliday, Rinnai
“Tempra Plus tankless electric water heaters feature our exclusive advanced flow control to automatically adjust the flow rate, if needed, in order to keep the output temperature constant and supply continuous hot water to the open draw-off points. In other words, if the water flow rate is greater than what the heater can provide given the outlet temperature setting, the advanced flow control automatically adjusts the flow rate just enough to maintain that set point temperature. There’s no need to worry about a cold water surprise in the shower!” — Riley, Stiebel Eltron Inc.
Next, we asked: what are some trends regarding space, size and materials that impact manufacturing?
“The real estate and building industry is placing a premium on space, specifically home building strategies that free up space inside the structure. To meet this market demand, we’ve developed a variety of space-saving tankless models — both indoor and outdoor — that allow homebuilders to give buyers the maximum usable square footage. Another trend we’ve acted on is to create tankless water heaters with lighter materials to allow for a one-person installation. — Smith, A. O. Smith
“Customers continue to place a high priority on solutions with a smaller footprint because it creates many benefits. A compact solution allows for a smaller mechanical room or other equipment to be housed in there to create space for revenue-generating activities. It also allows for retrofitting of an existing mechanical room without making structural changes to get in and out of the building or room. Customers are more conscious of the need to put a redundant unit (N+1) to allow for 100 percent design load coverage in the event of a unit failure. More efficient materials and equipment can be used in these designs to create a total solution that saves considerable time and money.” — Shah, AERCO International Inc.
“We believe there will be an increase in modular devices that will drastically improve manufacturing efficiency.” — Deivasigamani, Intellihot Inc.
“The new trend impacting tankless water heater manufacturers involves developing venting materials that effectively withstand temperature demands. For example, in some regions, one can only use CPVC pipe, which can hold up better in colder and hotter climates. It can also hold up better to the heater’s exhaust temperature.” — Alvarado, Noritz
“One of the biggest selling points of tankless water heaters is the opportunity for space-savings. In commercial applications, when multiple tankless units are needed in a series, the size of the unit is not the only factor to consider, but also the clearance space needed between units for safe operation. When installing up to 8 or 10 units, this required spacing could become quite substantial. In order to safely provide an industry best side-to-side clearance to combustible materials, Rheem manufactured an exclusive Guardian Overheat Film Wrap. This overheat wrap will shut down the tankless water heater if it reaches unsafe temperatures, thereby allowing a clearance to combustibles of just 1/2 inch.” — Phillips, Rheem Mfg.
We wanted to know what are some ways in which installation costs, time, etc. have been addressed.
“AERCO can considerably reduce engineering and installation cost by providing the necessary, engineered accessories and components in a mechanical room with boilers and water heaters. Installation costs can be lowered further by developing a custom skid system that integrates highly efficient water heaters (or boilers) with all required pumping and piping. AERCO provides customers with a fully assembled system that saves installation time, lowers construction costs and delivers superior performance.” — Shah, AERCO International Inc.
“The Greentherm’s patented Optiflow combustion management system offers dynamic CO2 control and automatically adjusts for various installation conditions, including flue length and altitude. This eliminates the need for a combustion analyzer in most installations. Installation allows up to 60 feet of venting with 2-inch pipe, or 280 feet of venting with 3-inch pipe, using a wide range of venting material options. Built-in drain ports, an anti-freeze kit and an atmospheric pressure sensor cut down on installation time and eliminate the need and extra cost to buy additional accessories. In the Greentherm 9000 Series, there are dedicated models for indoor or outdoor installation. Outdoor vent kits don’t need to be stocked or installed.” — Molina, Bosch Thermotechnology
“An important factor in addressing installation costs, time, etc., has been training by manufacturers, to ensure that contractors are comfortable with tankless products and prepared to address a variety of new or replacement installation situations.” — Pinto, Bradford White Corp.
“We created the first tankless product to be forgiving and flexible with new and existing gas distribution and supply lines. With the lowest in the industry inlet supply pressure allowance of just 3.5-inch W.C. natural gas and 8-inch W.C. propane, allows for higher pressure drop of supply piping feeding our tankless units. Allowing the use of PVC, CPVC and polypropylene for exhaust venting, all venting options are available depending on application and location.” — Fenske, Navien Inc.
“All Intellihot systems are designed to be drop-in, plug-n-play systems without any need to rebalance the building’s recirculation system.” - Deivasigamani, Intellihot Inc.
“To address the costs of installation and time, while meeting the needs of the American market, Noritz has developed products such as the EZ SERIES of tankless water heaters. Top-mount water connections and a bottom-mounted gas connector significantly streamline installations and make direct replacements of tank water heaters simple for the American contractor.” — Alvarado, Noritz
“Improving the installation time and costs for our plumbers and contractors is fundamentally important to Rheem. With Rheem’s condensing tankless water heater line, installers can vent with 2-inch, 3-inch and 4-inch PVC venting, which saves time and money. In addition, these models contain built-in condensate neutralizers to allow for safe disposal of condensate without the added cost and installation steps involved with an accessory kit. Finally, for our retrofit and replacement markets, Rheem ensured all tankless models are compatible with ½-inch gas lines to allow for an easier transition from tank-type to tankless models (please check local gas codes and regulations) and offering a recirculation accessory kit that uses cold water line for return.” — Phillips, Rheem Mfg.
“We’re always looking for ways to streamline the installation process of our products. Our condensing models feature flexible venting options, with concentric polypropylene or dual-pipe PVC/CPVC venting possible. This provides installers with greater flexibility. Our products are also designed to operate using a ½-inch or ¾-inch gas line, as long as the gas flow is sufficient. Because we offer a broad portfolio featuring a wide range of tankless units, customers can be sure to receive the right size unit for their specific application, allowing them to save money on smaller units when appropriate.” — Holliday, Rinnai
“The plumbing installation of a tankless electric water heater is easy if locating the unit where a tank-type once stood. All that is necessary is to bring the cold and hot water connections to the inlet and outlet points on the Tempra via 1- to 2-foot-long flexible quick-disconnect hoses and utilize the existing household pipe runs. Also, since tankless electric water heaters do not have to be vented to the outside, this opens up many more location and mounting possibilities within houses and buildings, as well as simplifying the installation.” — Riley, Stiebel Eltron Inc.
Happy customers make for a successful business. We asked what customer feedback our manufacturers have received about tankless water heaters in the market.
“The tankless offerings continue to grow as the commercial markets begin to understand the benefits of safer, more efficient and smaller footprint solutions. As the tankless technology has become more reliable and economical, customers have come to specify it with regularity in both retrofit and new designs.” — Shah, AERCO International Inc.
“Installers are impressed with ease of installation and quicker set-up. We are increasing deliveries to replenish inventory to fill orders from wholesalers and contractors. Customers especially like the integrated Wi-Fi control that enables remote control of water heater from a free mobile app on their smartphone and devices. In addition, built-in recirculation pump on selected models allows easy plug-and-play installation of a home recirculation system to save water waste.” — Molina, Bosch Thermotechnology
“What has been loud and clear is that wholesalers and contractors alike are looking to find the right balance between cost and performance.” — Pinto, Bradford White Corp.
“Our customers have been delighted with the performance of our products and in their ability to lower both capital expenditure and operational expenditure simultaneously. Usually, in order to achieve increased operational efficiency, one has to spend more, but this is not the case with Intellihot’s systems.” — Deivasigamani, Intellihot Inc.
“The stubborn and holdout plumbing contractors seem to be finally coming around to accepting tankless units. A combination of the NAECA water heater standards implemented last year, changing the tank selection options and rising costs along with consumer awareness has resulted in a surge of interest in tankless products. The wide selection and availability of tankless products, high operation efficiencies and product reliability has advanced the popularity and sales for all tankless manufacturers.” — Fenske, Navien Inc.
“We had found that Wi-Fi capability was on many of our customers’ minds. Today’s digital age and the trending Internet of Things phenomenon makes Wi-Fi connectivity a requirement to compete in the market. Allowing homeowners to monitor their water heaters’ performance and temperature from their mobile phones or tablets gives them the flexibility they expect from technology.” —Alvarado, Noritz
“The customer feedback on tankless is very positive. The main selling points that resonate with customers are the endless hot water and compact size for increased storage possibilities. There is also a growing demand coming from the commercial segment for tankless. More and more commercial applications are finding tankless is right for the job as it is able to provide energy savings, redundancy in the system and endless hot water for business needs. With this in mind, Rheem will be launching a dedicated lineup of Commercial tankless products.” — Phillips, Rheem Mfg.
“Typically, once a customer has installed a tankless unit, they are thrilled with the decision; however, the specific benefits they tout are dependent on their reason for going tankless in the first place. If a customer ran out of hot water with their old system, they love the endless supply of hot water. If it's a commercial application, they often appreciate the reduced utility costs that result from energy savings and the redundancy that accompanies the installation of multiple units.” — Holliday, Rinnai
“Tankless technology has now become rather mainstream. Customers in general are much better informed about tankless benefits and operation today. Contractors are knowledgeable about installation procedures, operation of a tankless water heater and understand the parameters that go into sizing properly.” — Riley, Stiebel Eltron Inc.
Finally, we asked their thoughts about an outlook or forecast for the tankless water heater market.
“Tankless water heaters are the fastest-growing segment in the residential water heater market. For the past few years, sales have seen double-digit increases. There are two main factors driving the adoption of tankless technology: home builders and consumers. Homebuilders are offering tankless water heaters as a selling feature — energy efficiency and maximizing usable space in the home. Homeowners in search of those same benefits, as well as hot water on demand, are exploring tankless technologies when it comes time to replace or upgrade their hot water systems.” — Smith, A. O. Smith
“Our high-efficiency water heating solutions and ability to design skid packaged systems create a growth environment in several markets. For example, hospitality and lodging provide tremendous opportunities for AERCO. The health care market also presents growth opportunities because tankless water heaters such as the AERCO Innovation are safer options because they can control Legionella and scalding.” — Shah, AERCO International Inc.
“Tankless water heaters offer a number of benefits from energy and monetary savings to endless hot water and better use of space. According to the DOE, demand water heaters can be 24-34 percent more energy efficient in homes that use 41 gallons or less of hot water daily. With all these added benefits, it’s no wonder Technavio’s market research analyst predicts the global tankless water heater market to grow at a CAGR of almost 9 percent from 2016-2020.” — Molina, Bosch Thermotechnology
“The tankless market continues to grow and their popularity, has been driven, in part, by their regular presence on home improvement shows that like to highlight their energy and space saving potential. In other cases, legislation is contributing to a higher level of growth in certain areas. For example, California’s Title 24, was amended in a way that effectively makes tankless water heaters the most viable option in new construction scenarios. That requirement went into effect on Jan. 1, 2017 and other states or regions may follow in the years ahead.” — Pinto, Bradford White Corp.
“For commercial applications, we continue to see an uptick in specifications for our products. We are expecting to continue to grow in this segment. In residential, the consumers continue to demand tankless products, more and more contractors are jumping on the train. We are very optimistic.” — Bolleyer, Eemax
“We see strong growth in the commercial segment as businesses continue to search for increased operational efficiency and a smaller footprint.” — Deivasigamani, Intellihot Inc.
“If 4th Q 2016 and 1st Q of 2017 are the indicators, record tankless water heater sales increases seem to be the new norm. Hovering in sales with small increases for the past 12 years, we at Navien are incredibly optimistic this trend will continue and not slow down.” — Fenske, Navien Inc.
“We predict that as the market and demand for tankless water heaters grows, so will the need to develop products that can ‘do it all,’ such as combination boilers/tankless water heaters. Furthermore, just as car manufacturers created hybrid cars to be efficient and produce fewer emissions each year, so too will tankless water heater manufacturers like Noritz develop products that can meet and surpass any regulations that may be presented before them.” — Alvarado, Noritz
“We see tankless continuing to grow across all market segments with particular opportunities in commercial and residential new construction.” — Phillips, Rheem Mfg.
“Industry reports are predicting double-digit growth for the tankless market, and we expect it to maintain this pace for the foreseeable future. As more of the North American population becomes familiar with tankless, the popularity of the technology is sure to grow.” — Holliday, Rinnai
“Stiebel Eltron is quite optimistic in our outlook for tankless sales in 2017. Last year, and so far this year, tankless sales have been increasing, and we expect this trend to continue, especially given the current general demand for more energy efficient products. Public incentives to invest in these products vary presently, but since people are generally more aware of tankless benefits, things are trending upward.” — Riley, Stiebel Eltron Inc.