Tankless Water Heaters are much smaller than a typical 40 galllon hot water heater tank and can be mounted to the wall. It heats water on demand, funneling the water through a heater in the device, saving approximatly 20-30% in energy heating cost and consumption.
The below linked artcile is a bit old therefore the cost of the devices have gone and the money savings is greater.
Hot water heater from Lowes can be found at http://www.homedepot.com/p/EcoSmart-18-kW-Self-Modulating-3-5-GPM-Electric-Tankless-Water-Heater-ECO-18/203316216
One disadvantge of a tankless hot water heater is that in the event of a disaster, you will be without the surplus and storage of the typical 40 gallons in your hot water tank.