Water Heater On Demand: Instant Hot Water Systems Explained

Oct 22, 2024

A water heater on demand heats water only when a hot tap is turned on. Instead of storing a full tank of hot water, an on-demand system heats water as it flows through the unit. These systems are often called instant hot water systems, continuous flow hot water systems or tankless water heaters.

For Australian homes, the most common on-demand options are instant gas hot water systems and selected instant electric hot water systems. The right choice depends on your household size, number of bathrooms, shower habits, gas type, water pressure, gas pipe sizing, electrical capacity and installation location.

Installed Today makes it easy to compare and order hot water systems online, with supply-only ordering available across major Australian metro areas and selected supplied-and-installed options available on eligible products in Brisbane and Gold Coast service areas.

Quick Answer: What Is a Water Heater On Demand?

A water heater on demand is a hot water system that heats water as needed rather than storing hot water in a tank.

As a general guide:

Instant gas hot water systems are the most common whole-home on-demand option
Instant electric hot water systems are usually more suited to point-of-use or smaller applications
On-demand systems do not store a full tank of hot water
Gas models must match the correct gas type: natural gas or LPG
Larger instant gas systems need suitable gas pipe sizing and water pressure
Instant electric systems can require significant electrical capacity
External gas units are outdoor units unless the model is specifically approved for internal flued installation

Before ordering supply only, confirm the selected system, flow rate, gas type, electrical requirements, water pressure, access, valves and installation location with your licensed installer.

How Does an On-Demand Water Heater Work?

An on-demand water heater activates when a hot tap or shower is turned on. Cold water flows into the unit, the heater detects water flow, and the system heats the water as it passes through.

The process generally works like this:

A hot tap or shower is turned on
The unit detects water flow
The burner or heating element activates
Water passes through the heat exchanger or heating chamber
Heated water travels to the fixture
The system turns off when hot water demand stops

This is different from a storage hot water system, which heats and stores water in a tank.

On-Demand vs Storage Hot Water

The main difference is how the water is heated.

System Type	How It Works	Best Suited To
On-demand hot water	Heats water as it flows through the unit	Homes wanting instant gas or selected point-of-use electric hot water
Storage hot water	Heats and stores water in a tank	Homes wanting stored hot water ready for use
Heat pump hot water	Uses heat from surrounding air to heat stored water	Energy-focused homes with suitable outdoor space
Solar hot water	Uses roof collectors and a booster to heat stored water	Homes with suitable roof space and sun exposure

On-demand systems can be compact and practical, but they still need the right energy supply, flow rate and installation conditions.

Main Types of Water Heaters On Demand

The two main on-demand hot water options are:

Instant gas hot water systems
Instant electric hot water systems

They are not the same. Instant gas is often used for whole-home hot water. Instant electric is more commonly used for smaller point-of-use applications unless the property has suitable electrical capacity.

Instant Gas Hot Water Systems

Instant gas hot water systems, also called continuous flow gas hot water systems, heat water only when a hot tap is turned on.

They may suit homes that:

Want continuous flow hot water
Already have natural gas or LPG
Have suitable gas pipe sizing
Have suitable water pressure
Have outdoor wall space
Want a compact alternative to a large storage tank
Are replacing an existing instant gas unit

Common instant gas sizes include 16L, 20L and 26L. The size refers to the approximate flow capacity under standard test conditions, but real-world performance depends on water pressure, incoming water temperature and the property setup.

16L Instant Gas Water Heaters

A 16L instant gas hot water system may suit smaller homes or lower-demand applications.

It may suit:

One-bathroom homes
Smaller households
Lower shower demand
Replacing an existing 16L unit
Properties where gas supply or water pressure does not support a larger model

Relevant options include:

20L Instant Gas Water Heaters

A 20L instant gas system may suit small-to-medium households with moderate hot water demand.

It may suit:

Smaller families
Moderate shower use
One-to-two bathroom homes, depending on usage
Replacing an existing 20L unit
Homes where a 26L system is not needed or not supported

Relevant options include:

26L Instant Gas Water Heaters

A 26L instant gas hot water system is often compared for family homes and higher hot water demand.

It may suit:

Larger households
Higher shower demand
Some two-bathroom homes
Homes replacing an existing 26L unit
Properties with suitable gas pipe sizing
Properties with suitable water pressure

Popular options include:

A 26L unit is not automatically the best choice for every home. It must be supported by the gas supply, pipe sizing and water pressure.

Natural Gas vs LPG On-Demand Water Heaters

Natural gas and LPG systems are different. They are not interchangeable.

Before ordering, confirm:

Whether the property uses natural gas or LPG
The correct model for the gas type
Whether gas bottles or gas mains are used
Existing gas pipe sizing
Distance from gas meter or bottles
Other gas appliances on the property
Whether a licensed gas fitter has confirmed suitability

Ordering the wrong gas type can make the unit unsuitable for the property.

Instant Electric Water Heaters

Instant electric hot water systems heat water on demand using electric heating elements.

They may suit:

Small sinks
Offices
Kitchenettes
Granny flats
Low-demand fixtures
Point-of-use hot water
Space-limited applications

Instant electric systems can have high electrical requirements, especially if used for showers or higher flow rates. They are not always suitable for whole-home hot water.

Before ordering an instant electric unit, confirm:

Electrical capacity
Circuit requirements
Switchboard suitability
Flow rate
Intended fixture use
Water pressure
Installation location
Whether a licensed electrician is needed

On-Demand Hot Water vs Electric Storage

Electric hot water systems store hot water in a tank. On-demand systems heat water as it flows.

Electric storage may suit homes that:

Want a simple like-for-like replacement
Do not have gas
Need stored hot water
Have suitable space for a tank
Want familiar electric storage operation

On-demand hot water may suit homes that:

Want a compact system
Have suitable gas or electrical supply
Want continuous flow from an instant gas unit
Want point-of-use hot water for a small fixture
Do not want a large storage tank

Common electric storage categories include:

If your home needs normal whole-house hot water and has no gas, electric storage or heat pump hot water may be more suitable than instant electric.

On-Demand Hot Water vs Heat Pump Hot Water

A heat pump hot water system is not an on-demand system. It stores hot water in a tank and uses heat from the surrounding air to help heat the water.

Heat pump hot water may suit homes that:

Are replacing older electric storage
Want to reduce hot water electricity use
Have suitable outdoor space
Have clear airflow
Can manage condensate drainage
Have suitable electrical supply
Want to pair hot water operation with rooftop solar where timing suits

Many homes compare:

A heat pump may be a better option than an on-demand system where the home has no gas and needs whole-home hot water.

Benefits of On-Demand Water Heaters

Compact Design

On-demand water heaters are usually smaller than storage tank systems. Instant gas systems are commonly wall-mounted outdoors, while instant electric systems can suit compact point-of-use areas where the electrical setup supports the unit.

No Large Storage Tank

Because the water is heated as needed, on-demand systems do not require a large tank of stored hot water.

Continuous Flow Potential

A correctly sized instant gas unit can provide continuous flow hot water while demand is within the unit’s capacity and the property has suitable gas and water supply.

Good Replacement Option for Some Homes

If your home already has an instant gas hot water system and it has worked well, replacing with a similar system may be practical where the site still complies and the new unit matches demand.

Reduced Standing Heat Loss

Because on-demand systems do not keep a full tank hot all day, they avoid some heat loss associated with storage tanks.

Limitations of On-Demand Water Heaters

On-demand systems are not perfect for every home.

Potential limitations include:

Instant gas systems need suitable gas pipe sizing
Larger units need suitable water pressure
Natural gas and LPG models are different
Gas work must be completed by a licensed gas fitter
External gas units must not be installed indoors unless approved as internal flued models
Instant electric systems can have high electrical requirements
Some homes may notice a short delay before hot water reaches fixtures
Performance depends on correct sizing and installation
Multiple simultaneous outlets can exceed the system’s capacity
Temperature controllers may be extra depending on the model

The system must suit the home’s actual usage, not just the product description.

Can an On-Demand Water Heater Run Multiple Showers?

It depends on the system size, flow rate, water pressure, gas supply and household demand.

For instant gas systems, common factors include:

Unit capacity
Incoming water temperature
Gas pipe sizing
Water pressure
Shower flow rate
Number of bathrooms
Whether showers run at the same time
Distance from the unit to fixtures

A 26L instant gas system may suit some homes with higher demand, but only where the gas and water supply support it. A licensed gas fitter should confirm suitability before ordering.

Can Instant Electric Hot Water Run a Shower?

Some instant electric systems can supply shower-style demand only where the electrical infrastructure supports the unit. Many homes do not have the electrical capacity needed for high-flow whole-home instant electric hot water.

Instant electric is often more practical for:

Small sinks
Kitchenettes
Handwashing
Low-demand fixtures
Point-of-use applications

A licensed electrician should confirm electrical suitability before ordering.

Indoor vs Outdoor On-Demand Water Heaters

Most external gas hot water units are designed for outdoor installation.

Do not install an external gas unit indoors unless the specific model is approved for internal flued installation.

Before ordering, confirm:

Whether the unit is external or internal flued
Required clearances
Ventilation requirements
Wall location
Flue requirements where applicable
Access for servicing
Gas supply route
Water pipe route
Electrical connection where required

Choosing the wrong unit type can create installation and compliance issues.

Installation Requirements for On-Demand Water Heaters

Installation requirements depend on whether the unit is gas or electric.

Before ordering, check:

Current system type
New system type
Natural gas or LPG supply
Correct gas model
Gas pipe sizing
Water pressure
Electrical requirements
Outdoor or indoor suitability
Clearances around the unit
Pipework route
Drainage and overflow where relevant
Access for installation
Access for future servicing
Whether new valves are needed
Whether old unit removal is included
Whether disposal is included
Whether compliance upgrades are required

Hot water systems involve plumbing, electrical work, gas fitting, water pressure, valves and drainage. Use licensed trades where required.

What Is Not Included in Supply-Only On-Demand Water Heater Pricing?

For supply-only products, the listed product price generally covers the product only.

It does not usually include:

Installation labour
Licensed gas fitting
Electrical work
New valves
Pipework changes
Gas pipe upgrades
Drainage changes
Tempering valve upgrades
Pressure limiting valve upgrades
Expansion control valves
Old unit removal
Disposal
Compliance upgrades
Flue kits unless listed
Temperature controllers unless listed
Gas type conversion
Relocation of the system
Site assessment

Always check the product page and confirm full site requirements with your licensed installer before ordering.

Supply-Only vs Supplied-and-Installed

Installed Today offers supply-only ordering across major Australian metro areas. This can suit customers who already have a licensed installer organised and want to order the product online.

Supply-only may suit you if:

Your installer has confirmed the correct model
The correct gas type has been selected where relevant
Gas pipe sizing has been checked
Water pressure has been checked
Electrical requirements have been checked
Outdoor location and clearances are suitable
Access and drainage are suitable
You understand what is not included in the product price

Selected supplied-and-installed options are available on eligible products in Brisbane and Gold Coast service areas. Availability depends on the product, address and installation requirements.

Brisbane and Gold Coast Considerations

For Brisbane and Gold Coast homes, on-demand water heater selection often depends on the existing system, natural gas or LPG availability, access and installation location.

Common considerations include:

Replacing older instant gas units
Changing from gas storage to instant gas
Natural gas vs LPG availability
Gas pipe sizing for 26L systems
Water pressure
Outdoor wall location
Clearances near windows and doors
Existing valve condition
Electrical connection for ignition or controls
Old unit removal and disposal
Whether supplied-and-installed options are available for the selected product

Installed Today offers selected supplied-and-installed options on eligible products in Brisbane and Gold Coast service areas, with supply-only ordering available across major Australian metro areas.

On-Demand Water Heater Brands to Compare

Installed Today stocks a range of major hot water brands, including:

Brand matters, but correct sizing, gas type, water pressure, gas pipe sizing, electrical suitability and installation location matter more than brand alone.

Common Mistakes When Choosing a Water Heater On Demand

Assuming Tankless Means Unlimited for Every Home

An instant gas system can provide continuous flow hot water within its capacity, but it can still be exceeded by multiple simultaneous fixtures.

Choosing 26L Instant Gas Without Checking Gas Pipe Sizing

A 26L system needs suitable gas supply and water pressure.

Ordering the Wrong Gas Type

Natural gas and LPG models are different. Always select the correct model.

Assuming Instant Electric Suits a Whole House

Instant electric systems can require significant electrical capacity and may be better suited to small point-of-use applications.

Installing an External Gas Unit Indoors

External gas units are outdoor units unless the specific model is approved for internal flued installation.

Comparing Supply-Only and Installed Pricing Incorrectly

A supply-only product price is not the same as a full installed price.

Not Checking Water Pressure

Poor water pressure can affect instant hot water performance.

Choosing by Brand Alone

The right system is the one that suits the home’s hot water demand and site conditions.

Before Ordering Checklist

Before ordering a water heater on demand, confirm:

Whether you need whole-home or point-of-use hot water
Current system type
Number of people in the home
Number of bathrooms
Shower habits
Peak hot water demand
Natural gas, LPG or electric supply
Correct gas type where relevant
Required flow rate
Gas pipe sizing
Water pressure
Electrical capacity
Outdoor or indoor suitability
Required clearances
Access for installation and servicing
Whether temperature controllers are needed
Whether new valves may be needed
Whether old unit removal is included
Whether disposal is included
Whether supply-only or supplied-and-installed is the right option
Installer confirmation before buying supply only

Frequently Asked Questions

What is a water heater on demand?

A water heater on demand heats water only when a hot tap is turned on. It does not store a full tank of hot water.

Is a water heater on demand the same as instant hot water?

Yes, in most cases. It may also be called an instant hot water system, continuous flow hot water system or tankless water heater.

Is instant gas hot water good for a family?

Instant gas can suit some families where the system is correctly sized and the property has suitable gas supply and water pressure. Larger homes often compare 26L systems.

Is instant electric hot water good for a whole house?

Not always. Instant electric systems can have high electrical requirements and are often better suited to point-of-use applications unless the property has suitable electrical capacity.

Does on-demand hot water run out?

An on-demand system does not run out like a storage tank, but it can be limited by flow rate, gas supply, water pressure or electrical capacity.

Is gas or electric on-demand hot water better?

It depends on the home. Instant gas is more common for whole-home continuous flow hot water. Instant electric can suit smaller point-of-use applications where electrical capacity supports it.

Can I use LPG with a natural gas instant hot water system?

No. Natural gas and LPG models are different. Always select the correct gas type.

Can an external instant gas unit be installed indoors?

No. External gas units are designed for outdoor installation unless the specific manufacturer model is approved for internal flued installation.

Does supply-only pricing include installation?

No. Supply-only generally means the product only unless installation is selected or clearly shown. Installation, gas fitting, electrical work, valves, pipework, drainage, removal, disposal and compliance upgrades are usually separate.

Can I install a water heater on demand myself?

No. Hot water systems involve plumbing, gas fitting, electrical work, water pressure, valves and compliance requirements. Use licensed trades where required.

Final Word

A water heater on demand can be a practical option for homes wanting hot water without a large storage tank. For whole-home use, instant gas hot water is usually the main on-demand option to compare. For smaller sinks, kitchenettes and point-of-use applications, instant electric may also be worth considering where electrical capacity supports it.

The right system depends on your household demand, gas type, water pressure, gas pipe sizing, electrical setup, installation location and whether you need whole-home or point-of-use hot water.

Before ordering supply only through Installed Today, confirm the selected product with your licensed installer. If choosing a supplied-and-installed option in an eligible Brisbane or Gold Coast service area, check exactly what is included before placing the order.

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