i'll lay a couple of thoughts on ya....
i personally believe the tankless popularlity is based on a lot of hype.
first, they require a significantly higher btu input. it is not uncommon for a tankless to run 180,000 btu input where a regular tankstyle may run 40,000. in a retrofit situation, going to a tankless will not only require a larger gas supply line but also a larger gas meter outside the home. this is because most residential meters are rated for 250,000 btus or so. if you have a gas fired furnace, theres 80-120K btus. if you are going with gas to save money, you probably have a gas cooktop/oven and a gas dryer. so, you can see that your originally correctly sized meter will not handle the tankless demand. add up the cost to change out the meter, replumb the line and install the tankless unit and payback period is not realistic. if you are building new, this is a lot easier and less work up front, but still needs to be factored into the payback equation.
second, to get the current 30% tax rebate, you have to install a qualifying system. most of these are either geothermal heat pump or solar systems costing 2,000 or more. MOST tankless systems, IF they save you money, do so by running on demand and not heating the tank of water. that doesn't mean they have a high efficiency rating when operating. ie, a significant percentage of btu's still goes up the extra large flue vent during the time they are on. this means you need to buy a high end tankless unit to get a high enough efficiency to get the 30% tax rebate. there goes the payback period again.
lastly, the tankless unit are being marketed as a one size fits all solution. they are not. they are best for empty nesters or single folks who are gone all day and only need hot water in the morning for showers and then not again until the next morning or something like that. a situation like this is where you MIGHT make a good savings by not having to heat a tank of water all day. if you for example have kids, do a lot of hot laundry or dish washing or have people home using hot water during the day, a tank model is the way to go. they will heat the water and have it ready for you and do so with less overall btu usage.
the newer, better insulated tankless units loose very little heat. i was recently away for 4 days weekend. turned the heater down all the way before leaving. when i returned four days later, i still had 110 degree water (down from 120). that's pretty good in my book.
one last tidbit. i know for a family of three with one being a toddler and doing lots of laundry that our bill to heat our hot water runs about 30 dollars a month on average. we use 4500 gallons a month of water. that was with our older 80% effecient tank style hot water heater that probably cost $350 when new. IF i was able to get a 95% efficient unit, i would be improving my water heating bill by 15% or saving $4.50 a month. over a typical life of say 20 years, the most i could spend on a new hot water system to BREAK EVEN is $1080. try to find a 95% efficient hot water heater of ANY type installed for less than 1100 bucks.
think about it. is it really worth it or is it all hype?
amp