Will a tankless water heater work on a ½-inch gas line?

Yes and No. A typical residential gas system is a low-pressure system, meaning that the home is supplied with a gas pressure
around 7 in. w.c. (inches of water column). The piping must be sized sufficiently enough so that the pressure drop is a half an inch
of water column or less, when all the gas appliances are on. This can be the limiting factor when trying to use the existing piping
and upgrading from a typical tank-type water heater to a tankless water heater. Typically, the gas piping has to be upgraded to
support the tankless water heater due to the volume of fuel that is required. Tables 2 and 3 provide the capacity by pipe size and
length based on the maximum allowable pressure drops. In all cases, a near 200,000 BTU gas appliance will require a minimum
of a ¾-inch gas supply line.
In specific conditions a ½-inch gas line may be used. In the 2012 National Fuel Gas Code (NFPA54. ANSI Z223.1), a 3.0 in. w.c.
pressure drop chart was added for certain conditions. This chart allows a 200,000 BTU gas appliance to be installed on a ½-inch
gas line up to 40 ft. in length. However, the following conditions must be met: The minimum static gas pressure must be 8 in. w.c.
or greater; The calculated dropped pressure (the static pressure minus the 3.0 in. pressure drop), must be greater than the highest
minimum gas pressure required by any of the gas appliances on the system. See Table 4 for pipes sizes and capacities with a
3 in. w.c. pressure drop. To select the correct diameter pipe, first determine the natural gas supply pressure for the system. The
characteristics of the installation will specify the correct tables to use in ANSI Z223.1.

How would an undersized gas system affect the appliances?
An undersized gas system can cause poor performance in the appliances. It could cause the burners to soot, pilots lights and
burners to go out, or cause condensate to form in the heat exchanger of the furnace or water heater. Condensate will cause
corrosion and eventual failure in appliances not specifically designed for it. Sooting can clog burners or flues which can cause an
appliance to fail or produce harmful exhaust gases such as Carbon-Monoxide.