Tankless water heater, also known as an on demand system, heats water only when you need it—eliminating the standby energy loss of traditional storage tanks. Instead of keeping 40–80 gallons of water hot around the clock, a tankless unit activates the moment you turn on a hot water tap.

When you turn on a hot water tap or start an appliance that uses hot water, cold water flows into the unit. Inside, a gas burner rapidly heats the water as it passes through. The hot water then flows directly to your faucet, shower or appliance.

Because it heats water instantly rather than storing it in a tank, a tankless system provides a continuous supply of hot water without taking up much space. It also avoids the energy waste of keeping a large tank of water hot all the time, making it more efficient than traditional water heaters.