I installed an auxiliary heat pump water heater into a relatively new electric water heater. A thing to watch for when installing is buildup of sediment on the floor of the tank that will block the flow of water through the drain valve. How old is the water heater?
That's a good point.
Also, measuring temps in & out of the sidearm on both sides of it might tell a tale. Sidearms work good when the boiler water is very hot, but no so much when it isn't. Mine was pretty well useless by the time supply got below 150 or so. The setup itself looks OK from the pics - I also think the hot supply is supposed to go in at the top as mentioned, but don't think that would make it not work, as also mentioned.
Re. the possible check at top of tank mentioned above - that looks like it's plumbed into the relief port, where there certainly shouldn't be a check.
Another little thing is that you will be losing heat off the uninsulated pipe before it hits the tank - may or may not be significant. I've got all my pipes insulated.
How exactly do you know it's 'not working'? Maybe it is heating some? But not enough for the demand? Might also measure temps at in/out of the mixing valve to make sure it's not mixing too much.
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