The application of exergy (second-law) analysis to aquifer thermal energy storage (ATES) systems is investigated in order to facilitate proper assessments of overall system performances. An elementary ATES model is created, and the corresponding expressions are developed for efficiencies and for the quantities of energy and exergy that are injected and recovered. It is demonstrated that ATES performance measures based on exergy often are more useful and meaningful than those based on energy. Exergy efficiencies account for the temperatures associated with energy transfers to and from an ATES, as well as the quantities of energy transferred, and consequently provide a measure of how nearly ATES systems approach ideal thermodynamic performance. Energy efficiencies do not provide a measure of approach to ideal performance and, in fact, are often misleadingly high because some of the energy recovered can beat too low a temperature to be available for a useful purpose.