Can neutral be used instead of ground for a tankless water heater?
There's a weird little ... glitch ... in Code that I don't know what to make of.  Except such exceptions rarely make it in by mistake, and certainly don't survive two editions by mistake.  

The glitch says this:  Neutral wires must be naturally white* their entire length, even in concealed parts of a cable.  And if ground wires are green** insulated, then ditto.  However, ground wires that are bare only need to be bare where visible.  

Code seems to be tipping the hat to annihilating wire insulation at all places it is visible, and calling a wire (of any color) a ground.  

This action is irrevocable; once this is done, it can never again be used for the "formerly grandfathered" role of a 120/240V split phase range. 

A more versatile method would be to retrofit ground from that location to anywhere with a #10 or larger homerun, including the Grounding Electrode System or any metal conduit. 



* or gray or colored with 3 white stripes 

** or yellow with green stripe