On demand hot water

It's really not feasible to live without some phantom loads.  E.g. my smoke and carbon monoxide detectors are drawing from AC power (w/battery backup).  My septic system overflow alarm is AC.  I have home automation switches which draw a few micro-amps each.  I have a home security system which obviously draws some power when armed (though I'm looking into powering that with DC through its emergency battery terminal).  In order to remember my favorite stations, my stereo remains in standby.  And the big one -- in order to record television shows automatically, your DVR and satellite receiver must be on all the time.  Thus, it doesn't concern me that my water heater may be consuming a few micro-amps to monitor if there's any water flow so that it can turn on.  Even if all of these phantom loads together consumed 20 watts, that's only 480 watt-hours per day.  And since my batteries are full for most of the day, this doesn't concern me much.   

The batteries are the weak point of the system -- it's much cheaper to add a few extra solar panels to your system so that your batteries are only depleted at all during the night than to add more batteries to carry a really sunny day over a few extra days.  Actually, in my system, my batteries often are fully charged at night because of my wind turbine -- the wind usually picks up in the evening just as the sun goes down.  But if you're finding that you must cut out phantom loads because your system just can't swing the extra power, a single 80-100 watt panel (costing under $500) could more than cover all of your phantom loads.  To me, that is cheap peace of mind.  I don't want to have to worry that leaving my DVR on might shut down my whole system. 

I'm not really sure how "sleep mode" works, but I can run small loads while my Outback inverter is in sleep mode (they call it "search mode").  It constantly checks for loads and I think it can handle small loads on a separate circuit than when it's fully awake.  Maybe something like a little inverter inside the big one?  I'm not sure about that though.  Maybe my inverter is just on all the time because the phantom loads draw enough to prevent it from sleeping.  In any event, my batteries don't get drawn down excessively so I don't worry about it.

If you're really concerned, perhaps, as Dave suggested, you could put the water heater on its own dedicated inverter.  You could use one of those cheap car inverters meant to run a laptop since the load is small.  Sort of the reverse of a power brick.  But first ask yourself if this is truly the only phantom load you'll need to consider.  If, like me, you'll have multiple, then just forget about sleep mode.  There's a point where you can take efficiency too far.  Remember, the reason we have electricity in our homes is to provide comfort and convenience.  To worry about your inverter and to eliminate all phantom loads defeats the entire purpose.  Then it becomes a chore instead of an asset.

Also, I wouldn't recommend a pilot light water heater, as that's a waste of propane.  The amount of electricity drawn to spark and run the fan are negligible (and free from the sun!).  Don't waste propane, which must be trucked in.