Yes, it is possible to use solar hot-water panels with a tankless on-demand water heater. There are many design considerations in a solar hot-water system, the main choice being an open-loop versus a closed-loop setup. A tankless water heater can be used with either system, but you will need a large solar storage tank (either 80 or 120 gallons, depending on the size of your rooftop solar-collector panels) for the considerable amount of hot water produced during a sunny day. Because of the space requirements for the storage tank, many people opt for a single tank water heater, either electric or gas, that is solar compatible. However, if you have the necessary space for the equipment, an on-demand water heater will work just fine. The on-demand heater will have to be solar compatible. If you already have a tankless water heater, have your solar designer or contractor assess its suitability at an initial site visit. In effect, the solar-panel system preheats the water before it enters the on-demand heater. Many manufacturers make models that can work with solar systems. They have thermostatic controls that modulate the heat output of the water heater depending on the incoming water temperature. They are designed to provide maximum efficiency by using the minimum amount of energy to boost the temperature of the solar-preheated water to the desired level for domestic hot water. One such model is the Bosch AquaStar 1600PS.
A solar hot-water system is an excellent investment with a relatively short payback period, and with the added benefit of greatly reducing your CO2 emissions. For the feasibility and design of your system, you should consult with a licensed solar installer in your area. As a starting point, read these step-by-step recommendations for adding solar electric from the Massachusetts Technology Collaborative.
The venting requirements for an on-demand water heater do not differ greatly from those for traditional tank water heaters. Both must be vented to the exterior. Because on-demand water heaters operate at higher temperatures, double-wall stainless flues can be required, and these are more costly. In some cases, an on-demand water heater can be installed on the exterior of your house and will not need a flue at all?but in your climate zone, this is probably not recommended. Check with a licensed HVAC contractor and your local codes for the location of your water heater and for specific types and sizes of flues and restrictions on the placement of flues and their discharge.
For more information:
For a good overview of solar water-heating systems, see the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy website.
An excellent supplier of solar hot-water panels and systems is Heliodyne.