The relative energy efficiency of these systems depends a lot on other factors such as the amount of heat loss from a more traditional storage tank system or the length of time hot water is stored before it is used. In practice they require a good deal more energy per volume of heated water than conventional systems and they cannot usually provide enough hot water for more than one fixture at a time. The traditional storage tank type of water heater can be quite efficient if the tank and the hot water pipes are properly insulated.

The on-demand type heaters have their uses in the appropriate situation. I have found them practical and efficient in situations where hot water is used only occasionally such as in some shop situations or where a fixture is at a considerable distance from a traditional storage tank water heater, such as in a guest house or pool house. They can also be handy if you are adding hot water to a structure that has been cold-water-only and the cost or inconvenience of adding a complete hot water piping system will be prohibitive.