In a tankless unit, the water flows back and forth through a copper heat exchanger. It becomes hot by soaking in the heat from the forced air that passes through the fins of the heat exchanger. Tankless heaters running on gas render an efficiency of 97%. In tank type water heaters, where water is stored in tanks, most of the heat in the stored water is lost over time. This is the reason for the low efficiency of tank-type heaters, which is at 75% approximately.
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