How does an electric water heater work without a tank?

Tankless electric water heaters operate without a tank; instead of storing hot water in a tank, the unit draws in cold water once a tap in the system is turned on, and it heats the water to the desired temperature as it is needed. This allows the water heater to be much more efficient since it does not use energy to keep water hot in the tank constantly.

Once cold water is pulled into the tankless electric water heater, the gas burner is activated and heats the water through the use of a heat exchanger. Once this process has started, the combustion gasses that result are then emitted through a sealed vent system.