- On-demand allows the solar hot water to contribute the maximum amount of energy. If you have a tank-based backup, either integrated with the solar hot water tank or in a separate tank, the backup energy source will come on whenever the tank goes below 120F and will heat the whole tank, whereas the on-demand heater only comes on to heat the water you need.
- Electric on-demand is better than gas on-demand because the electricity can be directly offset by installing more solar PV. But even if you don't consider the offset, electricity is better because the electric grid is incorporating fossil carbon-free energy sources faster than the gas grid.
- Gas on-demand requires complex venting whereas electric on-demand is just another appliance you can fasten to the wall in a closet (which is what we are doing).
On the downside, electric on-demand units draw an enormous amount of current. Our unit has 3 220V/20 amp heating units. When all units are active, it will draw more current than the hot tub does. The utilities don't like that kind of draw because it causes transformers to heat up, and can cause lights to flicker in the house, especially if there is more than one on-demand heater active in a neighborhood at a time. You need to have a 200 amp residential service in order to install one, we have a 200 amp service upgrade on order from PG&E.
But the utilities are going to have to upgrade their transformers and circuits for electric cars anyway. Gas on-demand units also require a large (1" I think) gas main, which many residences don't have, so even with gas-on demand you may need a residential service upgrade from the utility. And, for solar backup, the on-demand heater must only heat the water from 80F to 120F, not from 60F which is the usual water main temperature here in winter (our solar hot water tank is now around 80F due to cloudy weather), so it is less likely that, in our case, all three heating units will fire at once. All things considered, electric on-demand seems to be a better option for solar thermal backup.