An indirect water heater uses the home's main boiler or furnace to heat water that circulates through a storage tank's heat exchanger. The furnace is required to turn on less frequently due to the stored energy, making this an energy-efficient option.
An indirect heating system's tank stands adjacent to a boiler with a closed-loop water pipe that runs through the boiler, and the section of the pipe that coils inside the tank is known as the heat exchanger. As the water flows through the pipe and transfers the heat to the storage tank, the water is gradually heated and can then be used throughout the home. This type of combination system can be powered by gas, oil, electric, propane or solar energy. A well-insulated holding tank and a high-efficiency heating system make an indirect water heater the most cost-effective option for home water heating as of 2015, according to Energy.gov.
Although an integrated boiler and indirect water heating system generally cost more than purchasing separate units, users may save on installation and maintenance expenses due to fewer moving parts and fewer utility hook-ups. An indirect water heater's tank is also exposed to less stress than a standard tank heater, so it requires less frequent replacement.