The application of exergy analysis (Second-Law analysis) to aquifer thermal energy storage (ATES) systems is investigated in order to facilitate proper assessments of overall system performances. The investigation involves the creation of an elementary ATES model, and the development of the corresponding expressions 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 only account for energy transfer quantities, and thus do not provide a measure of approach to ideal performance. In fact, energy efficiencies are often misleadingly high because some of the energy recovered can be at too low a temperature to be available for a useful purpose. However, it is shown that the use of an appropriate threshold recovery temperature can partially eliminate the inherent misleadingness in ATES energy efficiencies.