Heat Pumps are a newer technology, increasing in popularity becuase of their compatibility with existing electric hot water systems as well as their low impact on the environment.
They operate by removing heat from the air surrounding the unit and applying to the water. This is one of the most efficient ways to heat water as well as one of the most environmentally friendly. Best installed at ground level and approximately the same size as a standard hot water tank. Heat pumps that use an electric booster to maintain an adequate supply (best for colder weather) are also available.