How Much Does a Tankless Water Heater Cost to Run? Gas vs. Electric

A tankless (demand) water heater has no tank to keep warm. It fires only while a hot tap is open, so what you pay depends on three things: how many gallons of hot water you use, how much the heater has to warm each gallon, and what your gas or electricity costs.

What it costs, at U.S. average prices

Months are 30 days. In energy terms, 41 gallons a day with 50°F water coming in takes about 7.6 therms of gas a month on an ENERGY STAR gas unit, or about 211 kWh on an electric one.

How the table is worked out

Every input comes from a primary source, so you can redo the math with your own numbers.

1. Heat per gallon. A British thermal unit (Btu) is the heat that raises one pound of water by 1°F, according to the EIA. The USGS gives water at 50°F as 62.408 pounds per cubic foot, and a cubic foot holds 7.48 gallons, so a gallon weighs about 8.34 pounds. The Department of Energy’s sizing guide says to assume 50°F incoming water unless you know otherwise and 120°F for most uses: a 70°F rise. That is 8.34 × 70 ≈ 584 Btu per gallon.
2. Efficiency. ENERGY STAR requires a gas tankless heater to have a Uniform Energy Factor of at least 0.95, so the gas column divides by 0.95. For electric, the Department of Energy notes that electric resistance heating turns all the incoming electricity into heat, so the table uses 1.0.
3. Prices. Gas: the EIA’s 2025 U.S. average residential price, $15.34 per thousand cubic feet, at 1,036 Btu per cubic foot (EIA), which is about $1.48 per therm. Electricity: 18.31 cents per kWh, the U.S. average residential rate for July 2026 (EIA), at 3,412 Btu per kWh.
4. Hot water use. The two rows use the Department of Energy’s own reference points for tankless heaters: 41 gallons or less a day, and around 86 gallons a day.

Monthly gas prices swing with the season: the EIA’s residential price for July 2026 was $26.45 per thousand cubic feet, against $15.34 for the 2025 average, so the table uses the annual figure. Your utility bill shows your real price per therm or per kWh; to use it, multiply the gas column by your price per therm ÷ 1.48, or the electric column by your price per kWh ÷ 0.1831.

Gas or electric?

1. Compare your own prices, not the averages.Safe check

   At the U.S. averages above, electric heating costs about three and a half times as much per gallon as an ENERGY STAR gas unit. Where electricity is cheap and gas is expensive, the gap narrows.

2. Check the flow you need.Safe check

   The Department of Energy says gas-fired tankless heaters typically manage a 70°F rise at about 5 gallons a minute and electric ones at about 2. A cheaper-to-run unit that cannot keep up with a shower and a dishwasher together is not a saving.

3. Know what the installation involves.Technician

   Installing or converting a water heater involves gas lines, venting or electrical circuits: jobs for a licensed plumber, gas fitter or electrician. The installed price is outside the scope of this guide.

Is it cheaper than a tank?

For the same fuel, usually yes, because a tank keeps losing heat while it waits. The Department of Energy’s Energy Saver page (archived copy) puts the saving at 24 to 34 percent for homes using 41 gallons a day or less, and 8 to 14 percent for homes using around 86 gallons a day. The more hot water you use, the smaller the advantage.

Bringing the cost down

• Lower the set temperature if you have it above 120°F; the Department of Energy’s sizing guide calls 120°F right for most uses, and every degree of rise costs energy.
• Use less hot water, with efficient showerheads and full loads in the washer and dishwasher.
• Keep it maintained. A heater that struggles to reach temperature is often a flow or scale problem: see a tankless water heater that is not getting hot.

If the whole electric bill jumped and you are not sure why, start with why an electric bill is suddenly high. For an old tank heater you are thinking of replacing, see how long water heaters last and the repair or replace calculator.