This is a video of the next generation of water heaters; the hybrid design of using standard electric and heat pump technology. During low demands, only the heat pump is on (the section on top of the water heater), during higher demand periods, the electric heating elements also turn on to the assist the heat pump.

The small, white electrical port that can be seen on the heat pump section is a data port that communicates with your utility company so the unit consumes less electricity during perios of higher electrical cost.

The vent seen on top of the unit is the exhaust port. Once the heat pump has extracted the heat from the air, the cold air is exhausted back out. This cold exhaust air can be vented into the home during summer months - a small amount of free air conditioning!