The heater is normally turned off, but is equipped with flow sensors which activate it when water travels through them. A negative feedback loop is used to bring water to the target temperature. The water circulates through a copper heat exchanger and is warmed by gas or electrical heating.[1] Since there is no finite tank of hot water that can be depleted, the heater provides a continuous supply.[2][3] To protect the units in acidic environments, durable coatings or other surface treatments are available. Acid-resistant coatings are capable of withstanding temperatures of 1000 °C
A gas hybrid water heater uses a modulating infrared burner that is triggered by water-flow or thermostat. The multi-pass heat exchanger drives heat down then recycles it through baffled pipes for maximum efficiency. Water fills the reservoir from bottom up and spreads evenly around the heating pipes, producing continuous hot water with consistent pressure and temperature.

During low-flow situations, the hybrid behaves like a tank-type heater by having minimum fixed fuel usage and thermostat activation. Although equipped with some storage capacity, the small volume minimizes standby fuel usage. Hybrids also share additional traits with tank-type heaters like a floor-standing installation, standard PVC venting, draining pan, and they can be installed with a recirculation pump for even more water efficiency.[8]

During high demand, high-flow situations, hybrid technology behaves more like a tankless heater, with high BTU capacity and full modulation to supply a continuous stream of hot water across multiple applications. This produces fuel efficiencies similar to tankless heaters, but with higher flow capacity.