Why is my shower water luke warm (at best) in the morning, but HOT in the afternoon?

It sounds as if your water is sitting in the heater all night and then you are starting itscycle with your shower. Meaning that the water has cooled and at startup you are resupplying it with cold water that has not had time to heat. Experiment by trying the hot water in the morning until the heater turns on and wait a little bit. If you then get a hot shower you will know this is the problem.