What Is an On-Demand Electric Water Heater and How Does It Work?

An on-demand electric water heater heats water only when a faucet opens, using electric resistance elements activated by a flow sensor inside the unit.

Opening a hot-water tap starts a chain reaction inside a box mounted near the point of use. A flow sensor detects moving water, the control board energizes electric resistance elements, and the unit modulates power to hit your selected temperature. No tank, no standby loss, no waiting for a 40-gallon reservoir to recover. Rheem’s documentation says the control system “activates the heater only on demand.”

Here’s how that cycle works, what model numbers tell you, and where these units fall short.

How Does An Electric Tankless Water Heater Heat Water So Fast?

Water passes through a heating chamber lined with electric resistance elements, which raise its temperature on the way to the fixture. Rheem’s RETEX line uses copper immersion elements; some models use replaceable threaded elements rather than sealed ones.

1. Demand detection. A flow sensor registers water movement and signals the control board.
2. Element activation. The board energizes heating elements inside the chamber.
3. Power modulation. Self-modulating controls, as on Rheem’s RTEX-18 and RTEX-27, adjust electrical input to match flow and required temperature rise.
4. Temperature regulation. Rheem Performance and Professional Classic models adjust in 1°F increments, typically 80°F–140°F.
5. Shutoff. Flow stops, elements de-energize, and a high-temperature limit switch protects the unit.

That last piece matters: on Rheem’s RTEH012240T point-of-use model, the temperature-limit switch keeps a failed control sequence from turning the chamber into a hazard.

What Do The Specs Actually Tell You?

Flow rate depends on the model, incoming water temperature, and desired outlet temperature — manufacturer “maximum” figures aren’t universal. A 4.4-GPM rating applies under specific test conditions, not in a cold basement in January.

Note the RTEX-18 discrepancy: the product page advertises up to 4.4 GPM while the spec panel says 1.8–3.2 GPM. Maximum GPM assumes warm inlet water and modest temperature rise. If groundwater comes in at 45°F and you want 120°F at the showerhead, the real number lands near the bottom of the range.

Wire and breaker requirements are the other hard limit. A 27-kW unit draws enough current to need dedicated circuits, and the RTEX-18 208-V model calls for two 40-A breakers and 8-AWG wire. If your panel can’t carry that, you’re sizing down or rewiring — and rewiring usually costs more than the heater. For units that fit common household service, see the tested on-demand electric water heater roundup. Rheem lists specifications, UEF ratings, and warranty terms on each product page; Rheem’s residential tankless lineup is the source for the model data above.

Where Do On-Demand Electric Heaters Fall Short?

They lose on simultaneous demand and cold inlet water, and no marketing fixes physics. A storage heater buffers a house with 40 to 50 gallons of already-hot water; a tankless unit has no buffer — it makes hot water at the rate its elements allow, in the moment.

Run the shower and dishwasher together and a mid-range unit splits its capacity. Colder supply water takes more energy to reach setpoint, lowering usable flow, so southern households with warm groundwater get more GPM from the same model than northern ones.

Point-of-use units are different. Rheem’s RTEH012240T is designed for a single faucet or limited application, not a whole house, and activates at just 0.2 GPM. That’s right for a remote bathroom sink, not three showers.

One honest note: retail prices move constantly, and manufacturer pages carry update dates rather than firm pricing. Check a current retailer before budgeting.