If you have hard water deposits will build up in the bottom of the tank and thus reduce the amount of water the tank can hold. Electric heaters can be cleaned out by removing the lower heating element and scooping the sediment. I usually have to do that every two years with our tank. It's a good idea to replace the heating elements about every two years also. (not a good idea to do this if you don't know what you are doing ~ the tank must be shut off ann drained first)

Our hot water costs drop considerably during the winter months when the wood furnace is running. I put a heating coil in the fire box and we get most of our hot water through that system.

Never tried the demand type heaters but sounds like a good idea.

Cap't Bob