One of the best decisions I made when building my own house was to use a Tankless Hot Water Heater.  You’ll enjoy as much as 40% energy savings over a traditional tank-style water heater because you’ll only heat water on demand rather than constantly reheating 40+ gallons. That being said although these are more energy efficient that are not necessarily more economical since they may cost twice as much. It would take the life of the heater 15-20 years to experience enough savings to justify the extra cost.

Rinnai Tankless Water Heater

Here is a list of advantages of a Tankless Water Heater vs Tank Style Water Heater as I see them:

• Endless hot water and up to 40% energy savings
• Space savings, you can install a tankless in a variety of places
• Most models have commercial-grade heat exchangers
• Clean, fresh hot water, no sediment from your tank
• Consistent tempature for your hot water
• Tankless Water Heaters are “Green” using less energy and lowering greenhouse gas emissions
• Many models offer digital controls for precise temperature control
• Won’t flood your garage because your tank burst
• These things are tough, most have a life span of 20 years or more

These units are so energy efficient that if you replace your old tank style heater you can get a $300 tax credit from Uncle Sam if you put your Tankless Water Heater into service between January 1, 2009 and December 31, 2009. There are several reliable brands to choose from some of which I’ve listed below.  I would personally recommend a Rinnai, I’ve had extremely good luck with mine its a R85 .  It will be on the higher end of the price scale but worth every penny. Here is a list of the top brands to compare:

• Rinnai Tankless Water Heater
• Rheem Tankless Water Heater
• Bosch Tankless Water Heater
• Noritz Tankless Water Heater
• Paloma Tankless Water Heater

Don’t forget to read my post on plumbing tankless hot water heaters. Here is the latest on what Consumer Reports has to say about  Are Tankless Water Heaters worthwhile? This is focused more on replacement of and old tank style heater rather than new construction but provides an interesting contrasting opionion.