How does a tankless water heater work? Tankless water heaters heat water directly without the use of a storage tank. When a hot water tap is turned on, cold water travels through a pipe into the unit. Either a gas burner or an electric element heats the water. As a result, tankless water heaters deliver a constant supply of hot water. Do tankless water heaters run out of hot water? Understanding the operation principle of tankless water heater, we can believe that that system