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What is an Indirect Water Heater? How Does It Work?

Fact checked by Stephen Conklin

what is an indirect water heater

Answering the question of what is an indirect water heater is as straightforward as deciphering what “indirect” means. It is a water heating system that does not have its own fuel source or heat-generating mechanism.

An indirect water heater relies on space-heating technologies to heat the coils inside a storage tank to heat the water.

Continue reading to learn more.

Table of Contents

Indirect Water Heater: What is It?


As the name implies, an indirect hot water heater is nothing more than a water storage tank that derives energy for heating the water from another source, mainly from an existing residential space heating system.

Conventional water heaters have the heat source (i.e., gas burner, electric heating element) integrated into their designs.

An indirect water heater has the fuel source outside (and far from) the storage tank. Its principal heat source is a high-efficiency boiler, relying on the latter’s heated water passing through tubes in the indirect hot water storage tank to heat the water.

It is worth noting that indirect water heaters derive energy to heat the water from almost any source, including propane, natural gas, oil, electricity, and other fuels the boiler uses to heat living spaces.

You can check out the following illustration from the US Department of Energy to appreciate an indirect water heater.

What are its Functions and Purposes

The principal function of indirect fired water heaters is to deliver hot water to a residence or household. It relies on the energy supplied by a boiler or furnace system to heat the water.

An indirect heating system leverages a furnace or boiler’s space-heating capabilities. It optimizes heat generation by channeling some of the boiler-produced hot water to heat exchangers in the water storage tank and raising the water temperature.

It is like looking for another use for the hot water in the boiler, conserving energy and minimizing energy and heat losses.

How Efficient is an Indirect Water Heater?


An indirect hot water system differs from a conventional water heating system in that it does not have its own heat source. It does not have a vent where flue gases can escape. That is why an indirect water heater does not lose as much heat as traditional systems.

For example, conventional gas-powered storage tank water heaters are only 53 to 70 percent efficient, although newer versions can have an energy efficiency rating of at least 67%.

Meanwhile, an indirect water heater can be 99.9% efficient.

However, it is worth noting that an indirect water heater derives its energy for water heating from the boiler. Hence, an inefficient boiler system could lower the indirect water heater’s energy efficiency.

The good news is that condensing boilers are 92 to 95 percent thermally efficient, while non-condensing variants are 85% efficient. These energy efficiency ratings are still higher than conventional water heaters.

How Does it Work?


So, how does an indirect water heater work?

The best way to describe how this system works is by looking at a boiler with indirect water heater setup.

  • The boiler heats the water and moves it through a hot water port. This hot water passes along a pipe connected to the indirect water heater containing cold water.
  • Inside the indirect water heater is a heat exchanger coil. As boiler-fed hot water passes through this coil, it releases heat into tank water. It is almost similar to an electric water heater’s heating element, except it is hot water heating the water in the tank.
  • The boiler-fed hot water returns to the boiler to raise the water temperature.
  • Meanwhile, the water temperature in the indirect water heater tank gradually increases. When you open a hot water faucet or shower, hot water will move through the tank’s outlet port.
  • At the same time, cold water enters through the inlet port, lowering the in-tank water temperature.
  • Hot water continuously passes from the boiler to the indirect water heater to maintain the ideal water temperature or recover it after hot water use.

You can check out the following diagram from PM Engineer to appreciate how an indirect water heater works.

How to Install and Maintain


Installing an indirect water heater is as straightforward as connecting the water heater to the boiler. The steps are as follows.

  • Prepare the boiler by turning its water and power supply. Allow the boiler water to cool before draining.
  • Prepare the fittings, including a copper pipe forming the heat exchanger coil.
  • Refine and solder the connections to ensure a leak proof system.
  • Secure the water supply lines and install a shutoff valve. Add an electronic relay device to the boiler and a temperature sensor to the water heater.
  • Open the shutoff and purge valve. Close the purge valve and wait for the indirect water heater to fill with water.

Maintaining an indirect domestic hot water heater is almost similar to the maintenance requirements of conventional water heaters.

For example, Rheem advises owners of its indirect water heaters to inspect the anode rods every six months in the first year and once annually subsequently. It also recommends an annual maintenance check of the water piping and temperature-pressure relief valve.

Pros and Cons

Indirect water heaters are some of the most cost-effective mechanisms for heating water. Like anything else, indirect water heaters also have pros and cons.

  • Higher energy savings
  • Compatible with any furnace, boiler, or other space-heating systems
  • Infrequent and less complicated maintenance
  • Longer-lasting than traditional water heaters
  • Lower initial cost
  • Faster hot water recovery than traditional water heaters
  • Not ideal for a small family of fewer than four members
  • Not as space-efficient as traditional water heaters
  • Might require upgrading the boiler to a high-efficiency unit
  • Hard water can impact an indirect water heater’s longevity

Frequently Asked Questions


What is the difference between a direct and indirect water heater?

The principal difference between a direct vs indirect water heater is the fuel source.

Direct water heaters have a heat-generating mechanism integrated into their design (i.e., a heating element for electric units and a burner for gas versions).

Meanwhile, indirect water heaters heat the water by using the energy from a space-heating system (i.e., boiler or furnace) through heat exchanger coils.

Do indirect water heaters require electricity?

No, an indirect electric water heater does not run on any fuel source. It is dependent on existing space-heating technology (i.e., boiler). Hence, it is the space-heating system that requires electricity.

Are indirect water heaters expensive?

No, indirect water heaters should cost as much as a traditional storage tank water heater.

For example, a 40-gallon indirect water heater might sell for $350 to $1600. Meanwhile, a similar-sized direct water heater can cost $320 to $1600.

However, homes without an existing boiler can make indirect water heaters so expensive by adding the price of a high-efficiency boiler (about $5,000 to $11,000) to the overall cost.


You now know how to respond when folks ask you, what is an indirect water heater. An indirect water heater is almost similar to a storage tank water heater, except it does not have a gas burner at the bottom or heating elements in the tank.

However, an indirect water heater has heat exchanger coils that convey hot water from the furnace or boiler to heat the water in the storage tank. Hence, it is nearly identical to an electric water heater’s heating elements.

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