Standard hot water tanks have an energy factor of only 59% when they are BRAND NEW, and over time the accumulation of sediment in the bottom of the tank further reduces the energy efficiency of the unit. These tanks simply were not made to be efficient, just cheap to rent.
Another misconception is that gas water heaters that exhaust out the side of the house are high efficient. Where this may be the case with your furnace, it is NOT with you water heater. It is the exact same hot water tank design with an added fan on top to allow for side-wall exhaust. This allows for more installation possibilities without having to build a chimney for the house. The disadvantage is that the fan on the top of that hot water tank is usually quite noisy. .
INSPECTOR HOMES "The People's Inspector" Remo Colantoni (905) 325-6976 NACHI member