A gas tankless water heater typically costs about $200-$500 per year to operate, while an electric model often costs $350-$850. Household hot-water use, local gas and electricity rates, climate, and the equipment’s efficiency drive the difference; installation and maintenance are separate expenses.
| Item | Low | Average | High | Notes |
|---|---|---|---|---|
| Gas tankless annual energy | $200 | $350 | $500 | Typical household; includes modest operating electricity |
| Electric tankless annual energy | $350 | $575 | $850 | Varies with use and local electricity price |
| Gas annual maintenance | $100 | $175 | $300 | Inspection and periodic descaling or flushing |
| Electric annual maintenance | $50 | $100 | $200 | Inspection and descaling where needed |
Estimates assume roughly 2-4 occupants, normal hot-water use, and typical U.S. utility prices; high-use households or unusually expensive utilities can exceed these ranges.
Annual energy bills for gas and electric models
For many homes, the gas unit’s yearly energy expense lands around $200-$500, including roughly $15-$60 for electricity used by controls and the exhaust fan. An electric tankless heater commonly uses about 3,000-6,000 kilowatt-hours annually, costing approximately $350-$850 at electricity rates of 12-14 cents per kWh. More expensive utility territories can push that total above $1,000.
Gas usually has the lower operating bill where natural gas is affordable, but electric avoids combustion venting and gas-line requirements. These figures cover energy, not loan payments, installation, repairs, or replacement. A propane system can cost more than natural gas because propane prices vary considerably by location and delivery arrangement.
What the utility-rate math includes
Energy cost can be estimated by multiplying annual fuel use by the household’s actual utility rate. A gas unit using 180 therms at $1.50 per therm costs $270 for gas; an electric unit using 4,500 kWh at $0.13 per kWh costs $585. Monthly fixed service charges usually remain on the bill regardless of which heater is installed.
| Cost component | Gas tankless | Electric tankless | What changes it |
|---|---|---|---|
| Annual energy | $150-$440 for gas; $15-$60 for electricity | $350-$850 for electricity | Fuel rate, use, incoming water temperature |
| Routine service | $100-$300 per year | $50-$200 per year | Water hardness and local service rates |
| Typical installed equipment | $2,500-$5,500 | $1,000-$3,500 | Capacity, venting, panel or gas-line work |
| Possible added work | $500-$3,000 | $500-$4,000 | New vent, gas line, circuit, or panel |
Installation ranges reflect replacement or new installation, not annual bills. Complex retrofits can cost more than the equipment itself. For labor estimates, a basic installation may take 4-8 hours; labor is often $75-$150 per hour, with local rates and electrical or plumbing scope affecting the quote.
How household use and inlet temperature shift the bill
Water use and the temperature rise required are major cost drivers. A household using 40-60 gallons of hot water per day may fit near the middle of the ranges, while use above 80 gallons daily can increase energy spending by roughly 30%-60%. Long showers, frequent laundry, and simultaneous fixtures add demand.
Cold incoming water also raises consumption. In northern states, winter water may be below 40°F, requiring a 70°F or greater rise to reach 110°F. In warmer regions, incoming water may be 60°F or higher. A gas unit’s input capacity, often 150,000-199,000 BTU per hour, and an electric model’s required 18-36 kW circuit capacity determine whether it can meet peak demand efficiently.
Regional utility prices change the gas-versus-electric result
At low electricity rates near 10 cents per kWh, an electric heater using 4,500 kWh costs about $450 annually. At 20 cents per kWh, the same use costs $900. Natural gas at $1 per therm makes 180 therms about $180, while $2.50 per therm makes it $450, before small electrical use.
The local price gap matters more than a national average. Electric operation may be competitive in areas with low-cost power or expensive gas; gas often leads where gas is inexpensive and electricity is costly. Compare the energy charges on recent bills, not just advertised supply rates, and account for seasonal rate changes.
Maintenance and repairs add a separate yearly allowance
Hard water can leave scale on either type of heat exchanger. Annual flushing or descaling often costs $100-$250 when performed by a plumber; service may be less frequent in soft-water areas if the manufacturer permits. Gas models also require attention to burners, air intake, exhaust venting, and condensate drains on condensing units.
Set aside about $100-$300 per year for gas service and $50-$200 for electric service, averaged over time. These are budgeting allowances rather than mandatory annual fees; actual service intervals depend on the manual, water quality, and warranty terms. An unexpected control-board or heat-exchanger repair can exceed routine maintenance by several hundred dollars.
When the lower gas bill offsets its higher installation price
Gas equipment may cost more to install if the home needs a new vent, larger gas line, or combustion-air work. Electric models can be less expensive as equipment, but a 24-36 kW heater may require dedicated circuits and a panel upgrade. Panel work can add $1,000-$4,000, while venting or gas-line changes may add $500-$3,000.
For example, if gas saves $250 per year but costs $1,500 more upfront than an electric installation, simple payback is about six years. That calculation excludes financing, maintenance differences, and future energy prices. A quote should itemize equipment, permits, venting or circuits, removal, and warranty rather than compare equipment prices alone.
Lower yearly tankless costs through sizing and rate checks
Choose capacity to match the home’s peak simultaneous demand instead of paying for an oversized unit. For example, a household that rarely runs two showers together may not need the largest available model. Avoid temperature settings higher than necessary, repair dripping hot-water fixtures, and insulate accessible hot-water pipes to reduce wasted heat.
Get itemized bids from at least three licensed installers and verify that each quote includes the same capacity, venting, electrical or gas work, permit fees, and disposal. Check utility rates and eligible local incentives before choosing a fuel. Compare the estimated five-year energy, service, and installation totals—not just the first-year bill.