Rather than storing a fixed reservoir of heated water, tankless water heaters also called on-demand water heaters, do not rely on a storage system. Instead, these units consist of a heat exchanger coil (typically copper) and a heating element that has the capacity to rapidly raise the temperature of the cold water feed that is input to the unit to the desired hot water temperature. As with the traditional tank water heater, these units can be sized to suit the hot water consumption needs of the installed application. While tank water heaters are rated in gallons, the tankless models are rated in gallons per minute (GPM). Some units offer recirculation pumps, which are designed to loop the water that sits in the piping from the output side to the outlet (faucet) and recirculate it back to the heater to save water. This feature eliminates the need to run the faucet initially and clear the piping of cold water until the hot water from the heater reaches the faucet. Other units can reduce the flow of water to the tap initially until the desired water temperature has been reached.
One variety of tankless heater is called a tankless coil. These units operate on the same principles with the difference being that they use an existing combustion source, typically the heat generated in a boiler, to produce hot water. The tankless coil is immersed within the water jacket of the boiler, using the thermal energy of the boiler water to transfer heat to the domestic water.