Tankless Water Heater Question

Saw my first original installed on exterior tankless system yesterday. Installation looked okay, customer reports that they are happy with the unit (only complaint was that if they run more than two things they see a big decrease in pressure.)

Anyway, my question is why did it have standard TPR valve installed to the plumbing just below it? My understanding has always been that a TPR valve protects against uncontrolled overheating / pressure / explosion of a TANK. As the TANKLESS has no TANK what the heck is the TPR valve gonna do?

I have two ideas:

  1. I guess it could come on and not go off and cause the pipe to burst, though I would think it would end up being more of a fire hazard with the small area being heated.

  2. City codes say a water heater gets a TPR valve so they put one in…

What say you?

It has a very small tank that is probably called a chamber. It is not safe to heat any volume of contained water without a TPR device.