An indirect-fired water heater utilizes a house's heating system to heat drinking water stored inside a tank. The hot-water tank is connected to a heater or boiler via a heat-exchange coil. Inside the coil is fluid that transfers heat from the furnace or boiler to the tank.
In a direct hot-water heater, electric immersion elements heat water within the storage tank. These electrical elements require an electrical supply, which increases the expense of electric bills. In an indirect water heater, these electrical elements are replaced by the heat-exchange coil. In this combination system, the furnace or boiler is sharing heat with the water heater, while also heating the home. This heat sharing helps lower energy consumption and decrease utility costs.