They are weird in the way that their utility varies.

IIRC Dave Jones of EEVBlog fame has shown a air-to-water heat exchanger that he has at his home. It's outside. And the climate in Sydney is generally warm(ish), so it makes perfect sense there.

I can also see them being useful in parts of the American South where big garages being common and the weather gets hot: Take some of the heat from the garage and convert it into hot water for showering and cleaning. Win-win.

But they're not so hot, per se, in my part of Ohio, where unfinished basements are commonly used as utility spaces.

My own basement, for instance: As unfinished basements go, it's pretty good. It's not a bad place to hang out and work on stuff any time of year. But it's a big space, and it's cold down there in the winter because I don't want to pay to warm it up. Despite being cold, that's really the most-suitable place for a conventional water heater for this house -- and it's where the house was designed to have it, too.

But if I were to "upgrade" to a heat-exchanger water heater, then as a practical matter I'd be making my already-cold basement even colder.

If it ever got cold-enough down there to make supplemental heat desirable (or worse: necessary), then it'd be an absolute loss: Burn energy over here in one place in the basement to try to keep it warm, and use that energy down the way a bit to concentrate into a tank full of hot water, while the basement stays cold.

Even if it I had a nice modern mini-split down there to provide that supplemental heat: That would mean having air-to-water heat exchanger that is backed up by an air-to-air heat exchanger that is already at the edge of its efficiency curve because it's cold outside. The combination would be reprehensibly dumb: A complicated Rube Goldberg system that costs more to buy, more to maintain, and more to run than approximately anything else would. (I might even be better off just burning my dollars directly.)

(The smarter move for my own home, in Ohio, would probably be a gas-fired tankless water heater, since they leak almost no heat while not being used.)

The biggest heat pumps