This paper presents a method of characterising and evaluating the performance of hot water storage systems in terms of their temperature distribution. The change in exergy from the stratified state to the delivery state depends on the stored energy and the stratification. It can thus be used to define the storage efficiency for sensible heat storage devices. A new parameter that isolates the stratification component of the exergy is defined and called the stratification efficiency. The effect of temperature distribution, delivery temperature and tank cross-section on exergy and stratification efficiency is investigated. The advantage that stratification offers over a mixed tank is examined in terms of the storage efficiency and overall solar Mater heating system performance. Exergy is used to assess the operation of mantle heat exchangers in solar water heating systems and it is shown that exergy and stratification efficiency as well as energy, should be used to ascertain the performance of such heat exchangers.