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Instead of housing water in a tank that is then heated to a target temperature, tankless water heaters are able to heat the water as it passes through, alleviating the chance that you'll run out of heated water. Gas tankless water heaters use high-powered burners to quickly heat water as it runs through a heat exchanger. In consumer reports tests, average gas models tend to be 22 percent more energy efficient on average than the gas-fired storage-tank models they were tested against.