Tankless water heaters heat water directly without the use of a storage tank and only operate when hot water is needed. When a hot water tap is turned on, cold water travels through a pipe into the tankless unit. Either a gas burner or an electric element heats the water. It will adjust the amount of gas and the size of the flame used to heat the water depending on the demand of water and heat. As a result, tankless water heaters deliver a constant supply of hot water when it is needed. Every step is efficient, saving energy when possible.