Tank, Tankless, or Heat Pump Water Heater?

All three of these are good products. None of them is the right answer for every house, and the marketing for each tends to skip the part where it does not fit.

Conventional tank

A tank of water kept hot, ready when you want it.

Good: Lowest up front cost. Simple, well understood, easy to service, and anybody can get parts. Delivers a big volume at once, so a household with three showers running back to back does fine until the tank is drawn down. Works with any water quality.

Less good: Standby loss, because you heat water around the clock whether you use it or not. Finite capacity, so when it is out, you wait. Takes up floor space. Typical life eight to twelve years, less on hard water.

Fits: Most houses, honestly. Lowest cost to install, predictable, and if your current one is in a tight utility closet, often the only thing that fits without a project.

Tankless

Heats water on demand as it flows through, no storage.

Good: No standby loss. Endless hot water for a long shower. Compact, wall mounted, frees up floor space. Long service life, often twenty years, and serviceable components rather than a tank that eventually rusts through.

Less good, and these matter:

• Flow rate is the limit, not volume. It delivers a certain number of gallons per minute at a certain temperature rise. Two showers and a dishwasher at once can exceed that. Endless does not mean unlimited simultaneous.
• Temperature rise in winter is the New Hampshire catch. Incoming water is much colder here in February than the rating assumes. A unit that produces plenty of hot water in August can fall short in January. Sizing must use realistic winter inlet temperature, and a unit sized on the annual average will disappoint you exactly when you care most.
• Higher install cost. Gas units usually need a larger gas line and dedicated venting. Electric units often need serious electrical capacity, sometimes more than an older panel has.
• Hard water is hard on them. The heat exchanger passages are narrow, and scale closes them up. On our well water, annual descaling is not optional, and a softener ahead of it is a good idea. Skip that maintenance and you will be disappointed with the lifespan.
• The cold water sandwich. Short draws can produce a slug of cool water. Minor annoyance, but people notice.

Fits: Households that run long showers, houses where floor space is at a premium, people who will keep up with descaling, and situations where the gas and venting work is not prohibitive.

Heat pump water heater

A tank with a heat pump on top. Instead of making heat, it moves heat out of the surrounding air into the water.

Good: By far the cheapest to run, typically a fraction of the operating cost of standard electric resistance. Often eligible for efficiency rebates. It also dehumidifies and cools the space it sits in, which in a damp New Hampshire basement is a genuine bonus most of the year.

Less good:

• It needs air. Manufacturers specify a minimum space volume, commonly around 700 to 1000 cubic feet, or ducting to bring air in. A small closet does not work.
• It cools the space it is in. Great in a basement in July. Less great if the heater is in conditioned living space in January, where you are effectively stealing heat you already paid to make.
• Slower recovery than a gas tank. Most have a resistance backup element for heavy demand, but leaning on that gives up the efficiency.
• It makes noise. Roughly like a window air conditioner. Fine in a basement, noticeable next to a bedroom.
• Taller than a standard tank, and it needs a condensate drain.
• Higher up front cost.

Fits: Houses with a decent sized unfinished basement or garage that is not living space. That describes a lot of houses here, which is why we install more of these than we used to.

How I actually advise people

Unfinished basement with room, on electric now: heat pump water heater, and it is not close. The operating cost difference is large and the dehumidification is a real side benefit.

Tight utility closet, existing gas: conventional gas tank, or tankless if you want the space and will do the maintenance.

Big household, long showers, gas available, willing to descale: tankless, sized on winter inlet temperature.

Hard well water and you know you will not keep up with maintenance: conventional tank, and put a softener in.

Replacing on an emergency basis with water on the floor: whatever we can get in today, usually a tank. Which is the argument for deciding this before yours fails.

Bring us your water test if you have one, tell us how the household actually uses hot water, and we will give you a straight recommendation. Sometimes it is the least expensive option on the list.