Tankless Water Heater Cost in Ontario: Installation, Pricing, and Rebates

Is a tankless water heater really more expensive than a storage-tank unit? Yes, they cost more to install, but the benefits make them a practical choice. You’ll get access to on-demand hot water while lowering your energy bills and freeing up space in your house. Some homeowners can even apply for energy rebates. With smart usage habits, your unit can pay for itself in just a few years.

If you’re unsure about upgrading, this guide should help. We’ll break down the key cost factors for setting up tankless water heaters and share some tips for maximizing your long-term savings.

What Affects the Cost of a Tankless Water Heater?

The total tankless water heater cost depends on your home, your hot water needs, and the complexity of the installation. Some projects are straightforward, while others require retrofits that can quickly raise the price. Here are the main factors that affect how much you’ll pay.

Equipment Type and Size

Tankless units are sized by flow rate, the amount of hot water the system can deliver per minute, measured in gallons per minute (GPM).

• A small unit with a low GPM (e.g., 4 to 6 GPM) can simultaneously handle one or two fixtures.
• If your household runs multiple high-demand fixtures simultaneously, you’ll need high-GPM models (7+ GPM). Most of these variants cost more upfront.

You can also choose between a standard or a condensing tankless water heater. Condensing units are more energy efficient because they reuse heat from the exhaust to warm the water. They can lower your gas bill, but come with a higher upfront cost. They also require a drain line for condensation, which adds to the installation cost.

Installation Labour and Complexity

Basic projects, such as replacing an existing tankless unit in the exact location, fall on the lower end of the cost range at around $1,000. However, if you’re upgrading from a traditional tank or installing in a bare living space, labour hours can rise above $2,000. Installers may need to reroute pipes or update hookups.

Electrical and Venting Upgrades

If this is your first tankless water heating system, expect additional costs for venting, gas line installation, and electrical modifications. Venting, gas-line upgrades, electrical breaker installations, or panel work can cost an extra $700 to $1,500.

Tankless models have specific requirements you’ll also have to factor in:

• Electric tankless units typically need two to four 240V breakers
• Gas tankless models need sealed wall venting and larger gas lines to support high BTU loads.

Retrofits Required

Several retrofits can add up to the total cost of your installation project. These often include:

• Extending plumbing lines
• Adding a condensate drain for condensing models
• Installing a water softener to protect against scale buildup

The fees can quickly add up. Ontario’s high‑end gas condensing system might total $3,200 to $4,500, with $350 to $750 for gas‑line modification and $850 to $1,700 for electrical upgrades alone.

These changes aren’t always apparent initially, but they can push costs higher than expected.

Tank vs Tankless: Cost and Efficiency Comparison

Although a tankless water heater costs more than the average storage tank, its convenience and energy efficiency still make it a solid investment. On the other hand, not all households need endless hot water on demand.

To help you reach a decision, here’s a side-by-side comparison of the key differences between their cost and efficiency.

Is a Tankless Water Heater Worth It?

Tankless water heaters are worth the investment for many growing families. They provide hot water on demand, reduce energy consumption, and occupy less space than traditional tanks. While installation costs more upfront, their efficiency, reliability, and long lifespan can help you save money in the long run.

Here’s what to consider if you’re thinking of upgrading to a tankless system.

Hot Water Needs

A tankless unit gives you endless hot water on demand, making it ideal for large households, growing families, or homes with multiple bathrooms. No matter how long you and everyone else stay in the shower, you’ll never run out of hot water.

Energy Savings

Switching to tankless water heater units with an Energy Factor (EF) rating of 90% can reduce energy use by 30%. In contrast, storage tank units have an EF typically ranging from 0.60 to 0.68 (i.e., 60% to 68% efficiency).

Tankless units heat water only as needed. They use less energy and eliminate standby inefficiency, the most common inefficiency in traditional hot water tanks.

The average electric tankless water heater often has a higher EF rating than most gas tankless water heater models (around 98%) because they don’t lose heat through exhaust.

Living Space Size

With their space-saving design, wall-mounted tankless units free up floor space, perfect for compact rooms (e.g., laundry rooms or utility closets) and living spaces. On the other hand, a standard hot water tank can take up three to five square feet of floor space. That’s roughly the size of a small fridge.

Lifespan and Budget

Get double the lifespan of traditional water heaters. Research shows that tankless models last more than 20 years, while storage tank water heaters only last around 10 to 15 years. With the right tankless water heater, you’ll get a continuous flow of on-demand hot water for several decades.

Image source: Canva

Tankless Water Heater Rebates You Can Claim in Ontario

Ontario residents can apply for the Energy Savings Rebate Program through the Environment and Climate Change Canada.

Up to 25% off (up to $1,000) on an Energy Star-certified condensing tankless water heater unit. This point-of-sale rebate is applied at checkout when buying from participating Ontario retailers.

Here are the primary considerations to remember:

• Not all tankless models qualify. You can only get rebates on Energy Star-certified condensing tankless systems.
• Double-check the store. Double-check if you’re shopping at a participating retailer.
• It’s a POS rebate. Since the refund applies upon checkout, you can only save money on the actual unit. You’ll have to pay for professional installation out of pocket.
• Primarily in-store offer. Many participating retailers only apply this deal to in-store transactions, so online purchases might not qualify.
• Beware of fake applications. Again, it’s a POS discount, so you won’t have to fill out any post-purchase forms.

Note: Availability can change depending on budget and retailer policies

FAQs About the Average Cost of Tankless Water Heater

Can I replace my 40-gallon water heater with a tankless water heater?

Yes, but it may require retrofitting. Some considerations are required when replacing a 40-gallon storage tank with a tankless system. Depending on your unit, you might have to upgrade the electrical panel, resize the gas lines, install a condensate drain, or update the venting for sealed combustion. Expect the installation cost to increase accordingly.

How much does a tankless water heater cost?

Expect to pay $3,000 to $4,000 on average. The installation costs will depend on your preferred unit size, the labour rates in your area, and the job complexity. For reference, a large model that needs gas line modifications or an electrical panel upgrade may spike upward of $5,000.

What is the disadvantage of a tankless water heater?

The two biggest downsides of tankless units are their higher upfront costs and flow rate limitations. You might have trouble supporting multiple high-demand fixtures. Likewise, smaller households with very low water usage might not see a strong return on their investment compared to cheaper, efficient tank water heaters.