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All About Heat Pump Water Heaters

Save Money and Energy by Pumping Up Your Water Heater Efficiency

When it comes to clean energy equipment, glitzier solar panels and electric vehicles often garner the most attention. But replacing an inefficient water heater with a heat pump water heater represents a prime opportunity to cut home energy costs and greenhouse gas emissions.

Water heating is typically a home’s second largest energy user after space heating and cooling, accounting for nearly 20% of energy consumption in the average household [1]. By switching to a heat pump water heater, the average home can expect approximately $200-$550 in annual savings, depending on their current water heating equipment [2].

What’s more, this climate-friendly equipment is eligible for New York State incentives and Inflation Reduction Act (IRA) tax credits, delivering one of the fastest payback periods for any clean energy technology. Consumers are already taking notice, with sales of heat pump water heaters growing 26% in 2022 and sales of gas water heaters declining by 17% [2].

Looking to make the switch? Here’s what you need to know about heat pump water heaters.

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How Do Heat Pump Water Heaters Work?

Heat pump technology is perhaps better known for heating and cooling air, but it’s also an ultra-efficient solution to water heating.

Heat pump water heaters run on electricity and work by moving heat from the surrounding air to heat water in a storage tank. A fan pulls in the ambient air and blows it across evaporator coils filled with refrigerant. The warmed refrigerant is then pumped through a compressor to increase its pressure and temperature before traveling through condenser coils to transfer heat to the water. Once cooled off, the refrigerant returns to the evaporator coils to repeat the process.

By transferring heat rather than creating it, heat pump water heaters require less energy to operate. Compared to standard electric or gas models, they deliver around three times more efficiency [3]. The process of transferring heat from the ambient air to the water tank also dehumidifies the surrounding space.


Over their 15-year lifespan, the superior efficiency of heat pump water heaters translates to thousands in home energy savings.


Most heat pump water heaters are built as hybrid systems comprising a water tank with both heat pump and electric-resistance elements. The hybrid design enables the equipment to alternate between heating methods to optimize efficiency and keep up in cases of increased demand – think extra hot showers and dishwasher runs while hosting overnight guests.

Key Factors When Choosing a Heat Pump Water Heater

There are several differences between heat pump water heater models to consider when choosing the right option for your home.

Sizing and First Hour Rating

Selecting a heat pump water heater that’s sized to your household’s needs is essential for optimal performance and efficiency. An undersized system will utilize resistance heating more frequently if it’s a hybrid model, reducing energy efficiency and total cost savings.

Water heater capacity is measured by the first hour rating (shown on the yellow Energy Guide label), which indicates how many gallons of hot water it can supply per hour. The first hour rating should be sufficient to accommodate your home’s peak demand for water heating. For context, showers typically use 20 gallons of hot water, followed by clothes washers (7-13 gallons) and dishwashers (4-7 gallons) [4].

While coming up with a ballpark estimate for peak demand can help narrow your search, it’s recommended to consult a qualified contractor Link opens in new window - close new window to return to this page. when sizing your heat pump water heater system.

heat pump

Equipment Energy Efficiency and Warranty

Once you’ve landed on the equipment size, check the Uniform Energy Factor (UEF) rating to compare energy efficiency and expected savings between models. Equipment warranties are another point of comparison to factor into your decision-making.

Home Electric Panel and Wiring

How a heat pump water heater model works with your existing electrical system is another factor to consider. Historically, heat pump water heaters have required a 240-volt outlet, but 120-volt models that plug into a standard outlet are emerging on the market. A lower-voltage heat pump water heater could save money on potential electrical upgrades and offer greater flexibility for installation.

Those replacing a gas water heater may need to run a new electrical line or upgrade their electric panel to install a 240-volt heat pump water heater. Whereas homeowners with electric resistance water heaters should already be equipped with a 240-volt outlet.

Note that an electric panel upgrade is an IRA-eligible home improvement that prepares a property for full electrification.

Heat Pump Water Heater Installation and Maintenance

Traditionally, water heaters are tucked away in a home’s basement or garage. Either of these locations could be suitable for a home heat pump water heater, assuming they meet a couple conditions.

For one, heat pump water heaters run most efficiently when installed in locations where temperatures remain between 40 °F and 90 °F. Additionally, they require a minimum of 1,000 cubic feet of air space to operate – the rough equivalent of a room measuring 12 x 12 x 7 feet. Installing a heat pump water heater also requires connecting to a drain to handle the accumulated condensation.

Staying on top of maintenance can preserve operational efficiency and extend the equipment’s lifespan. The equipment manual will likely detail maintenance instructions specific to the model, but you’ll have filters that need routine cleaning with any heat pump water heater.

When to Consider Replacing Your Water Heater

It’s a good idea to start considering replacement if your water heater is more than 10 years old. If you’re unsure when the equipment was installed, check for a date of manufacture or serial number on the water heater to determine the water heater’s age.

Equipment age isn’t the only consideration for replacement. Visible corrosion on the water heater or water lines is a warning that equipment is at risk of failure. Leaks, as well as sediment or rust in your water, are other telltale signs that a water heater is nearing the end of its useful life.


Switching from a standard electric or gas model to a heat pump water heater saves around one ton of greenhouse gas emissions annually[5].


Available Incentives for Heat Pump Water Heaters

New Yorkers can leverage IRA tax credits and NYS Clean Heat rebates to get the most bang for their buck on a heat pump water heater.

The IRA 25C tax credit Link opens in new window - close new window to return to this page. covers 30% of the cost, up to $2,000, for a heat pump water heater. Again, you can also claim a $600 tax credit for an electrical panel upgrade if required for a heat pump water heater installation. Meanwhile, NYS Clean Heat rebates Link opens in new window - close new window to return to this page. shave off $700-$1,000 on the cost of a heat pump water heater, on average.

These combined incentives help put the cost of a heat pump water heater on par with conventional water heaters. Once installed, the equipment’s top-notch efficiency delivers monthly energy savings that help households further recoup their investment. A household of four can expect to save $5,610 over the lifetime of a heat pump water heater if replacing a standard electric water heater [6].

More on Energy-Efficient Home Appliances

Ready to cut your home energy costs and carbon footprint? Dive into the guides and stories below for further insights and inspiration on creating an efficient, all-electric home.


  1. Water heating. Energy.gov. (n.d.). https://www.energy.gov/energysaver/water-heating#:~:text=Water%20heating%20accounts%20for%20about,energy%20expense%20in%20any%20home Link opens in new window - close new window to return to this page. Back to content
  2. Wachunas, J. (2023, December 11). Heat pump water heater sales in 2022 signal a decisive shift in water heating trends. New Buildings Institute. https://newbuildings.org/heat-pump-water-heater-sales-in-2022-signal-a-decisive-shift-in-water-heating-trends/#:~:text=Sales%20of%20heat%20pump%20water,electric%20powered%20water%20heating%20systems Link opens in new window - close new window to return to this page. Back to content
  3. The cost of heat pump water heater installation. ENERGY STAR Ask the Experts | Products | ENERGY STAR. (n.d.). https://www.energystar.gov/products/ask-the-experts/what-goes-into-the-cost-of-installing-a-heat-pump-water-heater#:~:text=An%20ENERGY%20STAR%20certified%20heat,a%20standard%20electric%20water%20heaterLink opens in new window - close new window to return to this page. Back to content
  4. Sizing a new water heater. Energy.gov. (n.d.-a). https://www.energy.gov/energysaver/sizing-new-water-heater Link opens in new window - close new window to return to this page. Back to content
  5. Wachunas, J. (2023a, July 19). This Earth Day Invest in a heat pump water heater and do the equivalent of planting a tree (or forest). New Buildings Institute https://newbuildings.org/this-earth-day-invest-in-a-heat-pump-water-heater-and-do-the-equivalent-of-planting-a-tree-or-a-forest/#:~:text=Replacing%20your%20water%20heater%20with,Environmental%20Protection%20Agency%20(EPA) Link opens in new window - close new window to return to this page. Back to content
  6. Save money and more with Energy Star Certified Heat Pump Water Heaters. ENERGY STAR. (n.d.).  Back to content

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