A tankless water heater, however, is a more efficient method of water heating. A demand water heater just heats the water needed for instant use. Unlike a tank water heater, this method comes with no energy loss. Home and business owners can choose from electrical, natural gas, geothermal, heat pump, fuel oil, propane, and solar energy water heaters. Of all these options, the one that has the most energy-saving method of hot water heating is a demand electric water heater.