Abstract: A method and system is provided for controlling efficiency of a heating system which is a combination hot water and space heating system that can modulate energy transfer. The heating system includes a heat exchanger for transferring and modulating heat between a primary fluid system having a hot water supply and a secondary fluid system for space heating. The primary fluid system includes a storage container, temperature sensors, a heating element connected to the heating assembly within the storage container for increasing the temperature of the storage fluid therein, a heating assembly, and a storage pump for delivering storage fluid from the storage container to the heat exchanger. The secondary fluid system includes a heating supply structure for containing a heating supply fluid, temperature sensors, and a heating supply pump in connection with the heating supply structure for circulating the heating supply fluid.