Always follow manufacturer recommendations on water testing, installation, and maintenance to ensure a long life for your tankless heater. The bottom line is that electric-tankless water heaters do not make sense in most whole-house applications. However, in applications where small models can be installed at a point of use, doing so may be a reasonable option.
A relatively new type of water heater includes features of both storage and tankless models. These gas-fired models have small buffer tanks that eliminate the cold-water sandwich problem and deliver hot water even at very low flow. (Note that “hybrid” is also often used to describe heat-pump water heaters, which are quite different.) There are at least three manufacturers of hybrid water heaters: Grand Hall, which produces the Eternal Hybrid water heater; A.O. Smith, which produces the NEXT Hybrid water heater; and Navien, with its CR-240A. Hybrids use condensing technology to achieve very high efficiencies (greater than 90%) and high flow rates that should satisfy almost any residential situation.
Drawbacks include high cost and standby heat loss—which is the most common reason to choose a tankless model in the first place. These units have small tanks with little or no insulation. In a recent study of tankless water heaters in Minnesota, the Navien hybrid model performed abysmally, which was attributed to the uninsulated buffer tank.
Indirect water heaters generally operate as one zone of a boiler system that is used for space heating. They have an insulated tank and a heat exchanger to transfer heat from the boiler into the stored water. Because combustion does not occur at the storage tank, the tank can be better insulated than a conventional gas- or oil-fired storage water heater.
An indirect water heater is usually preferable to a tankless coil (a common feature in gas- and oil-fired boilers) because heat from the boiler is not called for every time hot water is drawn. A tankless coil installed in a boiler functions much as a tankless water heater, with the boiler having to fire every time hot water is needed. The difference is that the boiler has a lot more mass than a tankless water heater, so there is significantly more energy used to heat it up and it takes longer to cool down. Tankless coils in boilers can make sense during the winter in cold climates, when the boiler is hot much of the time, but they are not usually recommended for year-round use.
Coupled with a high-efficiency boiler, indirect water heating is often one of the most cost-effective water heating options. There are some inherent efficiency losses from the heat exchanger, and electricity is required for pumping, but this can still be a very efficient system. It can also be adapted to SHW preheating.
A step beyond indirect water heaters are integrated space- and water-heating appliances. Several approaches can be taken with these “combo” systems. There are a number of high-efficiency boilers with integrated storage tanks—quite different from the tankless coil systems that can be added to standard boilers, but some such products have disappeared.
While there is a lot of appeal to a space-saving system that serves multiple functions, combined systems are more complex. If one component fails, you may lose both heat and hot water until it is fixed.