Most houses have a central water heater. It could be gas or electric but it has a large tank — from 20 to maybe 100 gallons — of water that it continually keeps warm. There are two inefficiencies here.
The tank is insulated but no insulation is perfect. Thus, there are energy losses through the insulation. The other issue is the losses between the tank and the point of use. You have to run the water until the hot water reaches the washer, shower or faucet where you are going to use the hot water. It’s not just a waste of water but there is all the hot water still in the pipe when you close the faucet.
If you just replace your water heater with a tankless one, you address the losses from the tank. Adding point-of-use tankless heaters near the faucets, washer and such can address both types of losses. Let’s talk about one central tankless heater first.
You just remove the tank-type unit and connect a tankless unit at the same location. If it is a gas unit there should be no issues but electric units will present possible problems. Tank-type water heaters exist so that a relatively low demand heating unit can create sufficient hot water — over time — so you have enough hot water for your next bath or load of laundry. With a tankless system, the water heater must have sufficient capacity to heat water at the rate it is being used. Thus, while the total energy used is no more than with a tank-like system, electric demand when you are, for example, filling your bath tub, will be much higher.
This may not be an issue if you hare an all-electric house and the water heater location is not far from the electric panel. Your tank-type water heater might consume 3000 to 6000 watts. At 240 volts, that is 12.5 to 25 amperes. For house-wide tankless water heaters you will typically see them in the 9000 to 16,000 watt range. That means they would require 37.5 to 67 amperes. This certainly means new wiring and may be beyond the capabilities of your electric service.
An alternative to one big tankless water heater is a set of point-of-use units. For example, you might have a unit in each bathroom. Point-of-use units typically come in power ratings from 1500 watts to 7000 watts. It would mean needing sufficient electrical circuits at all the locations where you intend to install these units but we are not talking a huge demand.
What sort of power you will need depends on the use and the temperature of your cold water. A 1500 watt heater will do no more than make the water in the sink of your guest bathroom no more than comfortable. A 3000 to 7000 watt unit will, in most climates, be sufficient for a hot shower. Most point-of-use water heaters will have specifications to show you how many degrees they can raise the temperature of your water at various flow rates.
The “less interesting” point-of-use heaters just apply their maximum power when water is flowing. A better choice is a unit where you can set the temperature and it will regulate the power to maintain that temperature. They generally cost no more than the “full on” units and are much easier to work with. The likely buzzword is “self modulates”.