Seems to work similarly to the 'instant' hot water heaters in some ways: smaller capacity and higher BTU's, keeps a supply of hot water on standby, but doesn't use as much energy as keeping 40,50, or more gallons hot. Funny thing about the instant water heaters is that people tend to take much longer showers and saving no energy, and using more water. I'm sure someone at the EPA will require timers for them in the (near) future.