A gas condensing water heater is similar to a standard water heater in that it has a large storage tank which stores ready-to-use heated water for the home. It has one big difference, however. Instead of venting the combustion gases directly outside, those gases are captured and utilized to heat the water even more. This design difference increases the efficiency so much that most users can reduce their natural gas bills by over $100 per year, the equivalent of a 30% savings in water heating energy use. Families with higher than average usage will have increased savings.
In addition, because gas condensing water heaters are so efficient, the tank heats up almost as quickly as it is filled (Energy Star). The risk of running out of hot water with a condensing storage tank water heater is very low. Plus, unlike a tankless water heater, installation of a condensing storage tank water heater usually requires minimal changes when replacing a standard storage tank water heater.
To estimate your potential to save energy and money by installing this improvement, please see the U.S. Department of Energy's Home Energy Saver calculator.