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Both propane tankless water heaters and heat pump water heaters (HPWHs) are considered to be high-performance systems. But research compiled recently by Newport Partners, a building-industry research firm in Davidsonville, Md., shows that in five significant areas-energy source, economics, installation requirements, hot water delivery rates, and carbon dioxide (CO2) emissions-propane tankless water heaters are the better option.

According to the Department of Energy, residential water heating is often the second largest user of energy in the home and can account for up to a quarter of all household energy consumption. Given the significance of this energy load, for something that homeowners use every day no matter what the climate, construction pros should train to know what the different systems have to offer. Here are some highlights from the Newport’s research compilation:

Energy Source

  • Even though HPWHs, which typically run on electricity, might have high efficiency ratings, the upstream electricity that powers them results in significant CO2 emissions. Comparable propane systems emit less than half the greenhouse gases as systems running on electricity to produce the same amount of energy.
  • Understanding the true meaning of an appliance’s Energy Factor (EF) is crucial when making comparisons. EF is a standardized measurement of a water heater’s ability to convert incoming energy into hot water. Using EF to compare propane vs. electric systems doesn’t work; it’s like predicting fuel costs for two identical trucks, with one running on diesel and the other gasoline. The comparison doesn’t work unless the price of the energy is factored in.


  • Installed first costs for HPWHs in new construction are nearly 34 percent higher than costs for installing a propane tankless water heater. In a replacement scenario, HPWHs are at least 18 percent more expensive to purchase and install.
  • On average, running an HPWH costs about $40 less per year than a propane tankless water heater. But that $40 difference doesn’t take into account a complicated installation that can cost $400 to $650 more.
  • It’s important to calculate a water heater’s Annual Cost of Ownership (ACO), which is the cost for buying a unit-spread out over the system’s rated service life-and its annual energy bill. The ACO for a propane tankless unit’s service life 18 percent lower than for an HPWH in new construction and 13 percent lower in a replacement scenario. Another factor: The service life of a propane tankless unit is five to seven years longer than an HPHW.

Installation Requirements

  • A propane tankless water heater can be located inside or outside, and can be used as a central system or point-of-use. Their compact sizes saves 16 square feet of space compared to HPWH units, which require at least 1,000 cubic feet of air space around the appliance. HPWHs require installation in locations that remain in the 40- to 90-degree F range year-round, eliminating garage locations in many climates.
  • A tankless unit has a dedicated air intake and exhaust; an HPWH exhausts cool air into the home, which can add to the heating costs.

Hot Water Delivery Rates

  • Tankless systems deliver triple the hot water flow rate, on average, compared to HPWHs. Even the Energy Star qualification requirements show this difference in delivery rates.

CO2 Emissions

  • The CO2 emissions for a propane tankless unit are 39 percent lower that for an HPWH.

The full study by Newport Partners is due to be published later this year. In the meantime, learn more about the advantages of water heating with propane by taking the free online CEU courses available at the Propane Training Academy.