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Tankless water heaters only heat water when it is needed. About 8% to 30% of the energy consumed by a standard water heater goes to keeping the water hot while it's not being used. New tankless systems heat the water instantly when you turn on the faucet, rather than keeping a tank full of hot water 24/7 whether you're using it or not. Tankless heaters run on either electricity or gas, just like regular heaters. They start out at about $300 for electric and $600 for gas. Either kind is cheaper to run than an electric tank.