Tankless water heaters — also called instantaneous, continuous flow, inline, flash, on-demand, or instant-on water heaters — are water heaters that instantly heat water as it flows through the device, and do not retain any water internally except for what is in the heat exchanger coil unless the unit is equipped with an internal buffer tank. Copper heat exchangers are preferred in these units because of their high thermal conductivity and ease of fabrication. However, copper heat exchangers are more susceptible to scale buildup than stainless steel heat exchangers.
Tankless heaters may be installed throughout a household at more than one point-of-use (POU), far from or without a central water heater, or larger centralized whole house models may still be used to provide all the hot water requirements for an entire house. The main advantages of tankless water heaters are a plentiful, practically limitless continuous flow of hot water (as compared to a limited flow of continuously heated hot water from conventional tank water heaters), and potential energy savings under some conditions due to the use of energy only when in use, and the elimination of standby energy losses since there is no hot water tank.
The main disadvantage of these systems other than their high initial costs (equipment and installation) is the required yearly maintenance.
In order to provide on-demand, continuous hot water, tankless units use heat exchangers with many small passageways consisting of parallel plates or tubes. This increased number of passageways and small internal size create a large surface area for fast heat transfer. Unfortunately, this design can result in scale build up that can block the small channels of the heat exchanger reducing efficiency and eventually cause the unit to shutdown from over heating. For this reason most manufacturers require accurate water testing and installation of a water treatment system before installing the unit and yearly descaling using permanently installed service valves. Due to the high efficiency ratings of tankless water heaters, these costs are usually offset by the energy savings and rebates from utility, state, and federal programs for installing energy efficient equipment.