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.

There are a couple of plumbing considerations to be made to be sure that you maximize the life and performance of your tankless water heater.

First, if you have hard water it’s a necessity with a tankless hot water heater that you add a water softener to your system.  It will protect your tankless water heater from scale build up in the heat exchanger and lines.  After time scale buildup will reduce energy and restrict water flow.

Second, I would recommend finding a plumber who can install a Manabloc system with your Tankless Water Heater.  The Manabloc system provides a cost effective distribution manifold for a plumbing system.   This system will allow hot water to reach all the faucets and showers in your house more quickly since each has its own line.  Think of this as a electric circuit breaker for your plumbing system.  You can also turn each individual line off at the manifold making repairs very easy.

ManaBloc and PEX Plumbing System

It won’t add cost to your project and in some cases with the right plumber it will be more cost effective than traditional PVC pluming.  Since the lines are flexible no joints are required between the source and the outlet so your chance of having leaks is much less likely.

This system uses flexible piping called PEX Plumbing and it is the future of the plumbing industry. PEX piping has been used in hot and cold water distribution systems and for hydronic radiant heating in Europe for decades.  PEX is much more resistant to freeze-breakage than copper or rigid plastic pipe.  Another benefit of plastic pipe is its small environmental impact compared to other materials, never hurts to be green.

Here are a few resources to do some more research on this product:

PEX Supply

PEX Information

PPFA