High efficiency furnaces with over 90% efficiency and running up to 97% efficiency are all condensing gas furnaces. Here is how Manitoba Hydro explains this.
High-efficiency condensing furnace
One of the by-products of burning natural gas is water
vapour, which contains approximately 10 per cent of the
fuel’s energy. However, in conventional and mid-efficient
furnaces all of the energy contained in the water vapour
escapes through the chimney.
A high efficiency furnace has a secondary heat exchanger
that extracts most of the energy from the water vapour by
condensing it to water. The water is then drained to a floor
drain, via gravity or an optional condensate pump system.
These units cannot use a conventional metal chimney.
The lower temperature flue gases are vented outside using
a special plastic venting system. Plastic pipe is used for
its corrosion resistance properties. The AFUE ratings for
high-efficiency, condensing furnaces is between 90-96
per cent. It is estimated that a high efficiency furnace can
reduce your home’s annual heating bill by up to 35 per
cent compared to a conventional furnace.
Your existing natural gas water heater can be left alone on
the existing chimney as long as it works properly and the
chimney meets the requirements of the National Natural
Gas Installation Code.
However, once the water heater is isolated on the existing
chimney, it may not work properly. Problems such as flue
gases condensing in the chimney, back-drafting or other
venting problems can occur. The chimney may have to
be modified to correct these problems. The most common
modification is installing a smaller diameter chimney liner
into the existing chimney.
The above material is quoted directly from a Manitoba Hydro publication. As they explain a condensing gas furnace actually cools burnt gases and extracts heat from them till they become cool enough to condense the water vapor portion of the gases. the liquid water is then drained from the furnace into a floor drain.
For more information about high efficiency furnaces see buy gas furnace and high efficiency furnaces