To start with the conclusion, instantaneous water heaters rule. The only thing better about tank water heaters, is if you turn the hot water tap off and on rapidly, the tank could care less, while the same action seriously stresses a machine that goes from idling to action with each opening of the tap, and back to idle with each closing of the tap.
I grew up with 40-gallon (later 50-gallon, and one 30-gallon) gas-fired hot water tanks that would heat the 40 gallons with a raging blaze of blue flames, and then drop back to a flickering pilot light when a certain temperature was reached. Hot water was pulled from the top of the tank, which was replenished by a cold water feed at the bottom of the tank, and when a water temperature sensor detected that the temperature had fallen to a certain point, the raging blue blaze would come back to heat the tank of water again. A hot-water-run-dry cold tank would take something like 20-30 minutes to come back up to fully heated temperature.
The tank was hidden away out-of-sight and out-of-mind in either a basement or garage, and the only thing that made you think about it was taking too long of a shower, which would run the hot water out and require a waiting period before the household had hot water again. First in to take a shower and you were likely to incur the wrath of subsequent shower users who ran out of hot water ("You used up all the hot water!"), and second in and you were likely to complain to the first user, "You used up almost all the hot water! It went cold on me after about two minutes!", etc.
So, one day in 1984, I climbed onto a Tokyo-bound 747, had dinner, watched a movie, fell asleep, and woke up in a land of instantaneous water heaters. Strangely, in that era of so many things being "Made in Japan", I noticed at the built-in-1928 YMCA I stayed at, that it had a "Made in USA" OTIS elevator and "Made in USA" silverware!!! I don't think I'd ever seen "Made in USA" silverware before - everything I used in the US was "Made in Japan", so I cross the Pacific and my first meal is with "Made in USA" silverware - in Japan!
But I digress. I got onto that line of thinking due to my experience of renting a room in a house in Chigasaki from a man who was long-term house-sitting (once a week) for the owners, who were friends of his parents. The owners had apparently lived overseas for some years and were keen to carry back to Japan some of the luxury that they had experienced while in the US. So they had their new house built with central heating (via a kerosene-burning furnace that was fed from a large tank behind the house that cost something like - at the current exchange rate - $500 to fill), and a US-made 40-gallon gas-fired water heater. How did those air and water heating systems transplant over here? In a word, badly! First, let's look at the central heating system.
The problem was, the house construction was not in line with the concept of heating the whole house (something practically unheard of in Tokyo at the time), so the house wasn't properly insulated (if it was insulated at all) and the heat just went through the walls and ceiling. The furnace produced enough heat to warm the house, but since the house couldn't hold that heat, the furnace just ran constantly. Energy costs were then (and still are) quite a bit higher here than in the US, so the only time we used the furnace was when guests were invited over, and then the furnace was fired up for a few hours. Otherwise we left that thing shut down, lest it bankrupt us and make us sleep under a bridge somewhere. Better to sleep in freezing cold under a roof than throw all your money away on sleeping in a warm house for a few months, followed by being kicked out for lack of rent money and having to sleep under a bridge! Space heaters slightly reduced the inside chill, but they lacked enough power to actually warm a room up.
Now - the water heater! In contrast to the nearly useless central heating system (if we had been filthy-dirty-stinking-rich, we might have actually used that on a daily basis), we did use the water heater, but the basic procedure was to fire the thing up 30 minutes before taking a bath/shower, and then to shut it off (completely shut it off, including the pilot light) right after taking a shower. Used in this way, the gas bill was manageable, but still higher than it would have been with an instantaneous water heater (provided it was used correctly). (Thinking back on those US-made things at a time when imported things here were pricey and rare, and how I ran into them in my first months after crossing the Pacific, it's almost as though there was some magnetic force putting a US-made biped in contact with US-made machinery.)
Now - finally we come to instantaneous water heaters. Wonderful devices, with many advantages over tank water heaters, and with only a few disadvantages. First, the advantages.
Since they heat fully cold water to warm/hot temperatures as it comes from the cold water supply, there is no warm up period and no running out of hot water. In a multi-person household, you can take one shower after another and no one ever (ever) runs out of hot water. When they are completely shut down (every night, etc.), there is zero gas consumption (in contrast to the constantly burning pilot light in a tank water heater).
Disadvantages: Instantaneous water heaters are more complicated than tank water heaters, and so the initial cost is probably higher. I'm not sure about the cost, but I am fairly certain about the complexity leading to more possibilities for malfunction. Over the 23 years or so I've been using them, I've had to have a few of them repaired or replaced. And... one of the advantages can be a disadvantage as well - never running out of hot water means that if you get to thinking about something while taking a shower and the clock speeds up on you, you can end up wasting a lot of water and gas through overuse.
Oh! And one other disadvantage (at least with the system I'm using now). The hot water is not mixed with cold - rather the hot water the machine generates is used directly, so you adjust the temperature of the heated water output - you don't mix it with cold water. This is done in two ways. It has three different flame settings, and fine-tuning adjustments are made by controlling water flow - more water is cooler and less water is hotter. In theory, this setup should work fine, but the gradation between gas settings one, two, and three is such that setting-one is virtually useless (too cold even on the hottest day with the minimum water flow setting); setting-two is usable in the summer if the water flow is turned way down; and setting three, while perfect for the coldest days of winter, requires typhoon levels of water flow to keep the water from being too hot in the summer. So when the weather is warm, as it is now, you end up bouncing between flame-two with not quite enough water coming out, and flame-three with a typhoon water blast. It would be perfect if flame-one was brought up to the current flame-two level and flame-two was brought up to a level between the current flame-two and flame-three settings.
More than you wanted to know about water heaters....
Lyle (Hiroshi) Saxon