Microwave is easy to control, but may be lossy.

It is efficiant to heat food, because it heats just the food.

The element or flame in a water heater heats what you want heated, the water.

It takes energy to heat water, the same energy would heat it either way. More would be lost in the manetron PSU and in the magnetron itself.

The most economic form of water heater would be an on-demand heat pump. The heat pump would pull the energy from the surrounding air in addition to the compressor IR losses to transfer the heat through the condenser. I don't know of anyone producing heat pumps for the purpose of heating water. A typical air conditioner condeser is about 123 Fahrenheit when running. The unit cost would initially be expensive. And a novel method would need to be made to recover lost heat from your waste heat sources.

One method of doing this is to use solar collection panels on the roof of your house. The hot water produced by the panels would heat a holding tank and the heat pump would be used to boost the heat from the panels to make HOT water.

An electric heating element is the second most efficient hot water heater. The element is emersed in the water and almost all of the electricity that goes in, heats the water. There is no method of using ambient heat to boost the hot water heater temperatures in this system. Insulation of the electric hot water heater is the main loss.

A gas hot water heater is lossy because of the requirement for air to flow for combustion. Part of the heat goes out the stack. Unless the flue has a shutoff valve, air continues to rise and cool the hot water tank after the burner shuts off. Also, if there is a pilot, there is continuous burning of gas when the the burner is shut off. Though depending upon the fuel market, gas per BTU might be significantly cheaper than electricity. In Alabama, the opposite is true, electricity is cheaper than gas.

The more insulation you use, the more efficient your hot water heater.

Well, there are such products exists around the world. One such thing I know is Vulcanus Microwave Water Heater from Pulsar Advansed Tech

http://www.pulstech.com/orhttp://www.househacker.com/tags/mk4

The thought to create an on-demand microwave water heater hit me yesterday, when the water heaters at my college decided to die on us, leaving us to fend for ourselves food-wise (hot water is essential for cooking too many things, these days). It also meant cold showers for the few hours it took to get a repairman out - that is, for those of us who didn't pay attention in chemistry class.

Microwaves work by heating water. Basically, the microwave emits an EM wave at the harmonic frequency for the polarized water molecules, and so excites them and transfers most of its energy to them. The Microwave Oven in your kitchen heats the water in the food, not the food itself (there is generally a lot of water in microwaveable meals). The energy from the water molecules transfers to the surrounding structure, and so heats the whole meal. Microwaves are actually incredibly efficient at heating water compared to the energy required to generate them.

So then why not apply them to the task for which they are most suited? Electric water heaters, to my knowledge, work in much the same method as gas heaters, in that the water is heated indirectly by absorbing the energy some heating element in or under the water. While this works, I can see it as being horribly inefficient when compared to a method that directly heats the water molecules without any kind of heat-conductor. This is where I would suggest to use a microwave generator, as it doesn't require any kind of heat-conductor to transfer the energy.

By shooting microwaves directly into a tank of water (or a creative pipeline, if you're feeling adventurous), the water itself would be heated. This is opposed to a conventional system wherein something else is heated that, in turn, heats the water.

Radiation would not be an issue. For one, microwave radiation does not have too adverse of an effect on human beings (besides agitating the water in our bodies, which is easily prevented using a mesh shielding similar to what is found inside microwave doors). Secondly, microwave radiation has no secondary effects on the objects it heats (otherwise we would be seeing symptoms already, as people consume products heated by microwave radiation on a daily basis).

Truthfully, the only thing I haven't been able to look at is energy efficiency. To me, it seems as though a microwave heating element for water would be many times more efficient than a conventional heating element or some form of natural gas, especially when dealing with large quantities of water (nursing homes, apartment complexes, dorm buildings, etc.). One could conceivably eliminate their gas bill for a comparably cheaper increase to the electric bill. Again, though, I don't have any figures to back this up, and it is largely conjecture.

So, why not?

As noted, this is a very inefficient way to do it- less efficient than an immersion electric water heater.

Want more efficiency? Use demand water heaters- small ones- located throughout the house. There are huge energy losses involved in moving the hot water through cold pipes, and well as water wastage waiting for the hot water to arrive. Or use a solar collector to pre-heat the water.