How Does a Tankless Water Heater Work? Understanding On-Demand Water Heating and Its Benefits

A tankless water heater heats water only when you need it, delivering instant hot water without storing gallons in a tank. Because there’s no stored water constantly losing heat, these systems eliminate standby loss, improve efficiency, and free up space in your home.

In this guide, we’ll break down exactly how tankless systems work, what components make the process possible, the differences between gas and electric units, installation considerations, and the key benefits for Denver homeowners.

If you live in the Denver Metro area and need expert help choosing or installing a tankless system, Comfy Cave Heating & Air offers professional Tankless Water Heater Services in Denver tailored to your home’s needs.

What Is a Tankless Water Heater and How Does It Operate?

A tankless water heater heats water on demand instead of storing hot water in an insulated tank. When you open a hot-water tap:

1. A flow sensor detects water movement
2. The system activates the burner or electric heating elements
3. Water passes through the heat exchanger, where it rapidly heats
4. Hot water is delivered directly to your fixtures

Because heating occurs only during use, tankless systems eliminate wasted energy and typically last longer than traditional tanks. Their compact, wall-mounted design also saves space—especially important for smaller homes or utility rooms.

Key Components of a Tankless Water Heater

A tankless system uses several components that work together to deliver consistent hot water:

• Flow Sensor – Detects when water starts flowing
• Heat Exchanger – Transfers heat from the burner or electric elements
• Burner or Heating Elements – The main source of heat
• Control Board/Thermostat – Regulates temperature and adjusts heat output
• Gas Venting or Electric Setup – Removes combustion gases or manages electrical load
• Safety Sensors – Monitor temperature, flow, and ignition

The sequence is simple:
flow sensor → activates heating system → water passes through heat exchanger → hot water delivered.

This predictable process is helpful for troubleshooting and ensuring safe operation.

Step-by-Step: How On-Demand Heating Works

Here’s the basic operation sequence every tankless unit follows:

1. Flow detection: The unit senses water movement.
2. Activation: The controller starts the burner or electric elements.
3. Heat transfer: Cold water flows through the heat exchanger and heats quickly.
4. Regulation: Temperature sensors adjust flame intensity or power to maintain steady output.

This is why tankless systems provide continuous hot water within their rated GPM capacity.

Types of Tankless Water Heaters: Gas vs. Electric

Tankless water heaters generally fall into three categories:

• Gas tankless water heaters
• Electric tankless water heaters
• Condensing gas tankless water heaters (a more efficient subtype)

Gas Tankless Water Heaters

Gas models use a burner to heat water and offer the highest GPM capacity. They are ideal for:

• Larger homes
• Families using multiple fixtures at once
• Homes with existing gas lines

Key points:

• Require proper venting
• May need upgraded gas lines
• Condensing models offer higher efficiency and require a condensate drain

Electric Tankless Water Heaters

Electric models use heating elements and do not require venting.

Best for:

• Small homes or apartments
• Point-of-use applications (e.g., a single bathroom)
• Homes without natural gas

However, whole-home electric models often require significant electrical upgrades, such as multiple dedicated circuits and sufficient panel capacity.

Gas vs. Electric Tankless Water Heater Comparison

Main Benefits of Using a Tankless Water Heater

Tankless units provide several homeowner-friendly advantages:

• Lower energy use (no standby heat loss)
• Unlimited hot water within unit capacity
• Longer lifespan compared to traditional tanks
• Compact, wall-mounted design
• Reduced leak risk (no large tank of water)

They’re especially attractive for Denver homeowners looking to maximize efficiency and save space.

How Tankless Water Heaters Save Energy

Tankless systems save energy by heating water only during use. Traditional tanks constantly heat and reheat standing water—even when no one is home.

Typical energy savings: 10–30%, depending on:

• Your hot-water usage
• The unit’s UEF rating
• Local utility prices
• Whether your system is gas or electric

A household with intermittent use tends to benefit the most from on-demand heating.

Installation Overview: What Homeowners Should Expect

Installing a tankless water heater involves:

1. Determining peak GPM demand
2. Choosing between gas or electric based on home setup
3. Reviewing permit and venting requirements
4. Preparing the installation site
5. Completing plumbing, gas, or electrical connections
6. Commissioning the system (testing temperature, pressure, and operation)

Denver homeowners should also consider cold inlet temperatures, which impact required GPM and heater sizing.

Gas vs. Electric Installation Differences

Gas Installation Needs:

• Correctly sized gas lines
• Proper venting
• Combustion air supply
• Condensate drain for condensing units

Electric Installation Needs:

• Adequate panel capacity
• Multiple dedicated breakers
• Potential panel or wiring upgrades

A professional installation ensures safety, efficiency, and code compliance.

Maintenance Requirements for Long-Term Performance

Routine maintenance protects the heat exchanger and keeps flow sensors accurate.

Common maintenance tasks:

• Descaling the heat exchanger (every 6–12 months in hard-water zones)
• Cleaning inlet filters
• Inspecting venting and combustion components (for gas models)
• Checking error codes

Denver’s water hardness makes descaling especially important. Comfy Cave Heating & Air offers full maintenance support through our HVAC Services in Denver.

Troubleshooting Common Tankless Water Heater Issues

Here’s a quick guide to common symptoms and likely causes:

If basic checks don’t resolve the issue, a licensed technician should diagnose the system safely.

Tankless vs. Traditional Water Heaters: How They Compare

Tankless is ideal when efficiency and longevity matter. Tanks are better for budget installations or extremely high simultaneous demand.

Which Water Heater Is Right for Your Home?

You may prefer tankless if you want:

• Lower standby energy waste
• A long-lasting system
• Space savings
• On-demand hot water

You may prefer a traditional tank if you want:

• Lower upfront costs
• Minimal infrastructure upgrades
• A simple replacement solution

Denver’s cold inlet water, water hardness, and local permit requirements make professional guidance especially valuable. Comfy Cave Heating & Air can evaluate your GPM needs, heater location, and local code requirements to help you choose the right solution.

Conclusion

Tankless water heaters offer a smart, efficient, space-saving alternative to traditional tanks—especially when sized and installed correctly. Whether you choose gas or electric, understanding how these systems work helps you make an informed decision for your home.

If you want expert help selecting or installing a tankless system, reach out to Comfy Cave Heating & Air, your trusted local provider of Tankless Water Heater Services in Denver and full-service HVAC Services in Denver. We’re here to help you choose the perfect system for comfort, efficiency, and long-term savings.