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Clean energy journalism for a cooler tomorrow

Heat-pump water heaters are a winner for the climate — and your wallet

The tech costs more than conventional options upfront, but federal tax credits, new 120V models and strong savings have made them more appealing than ever.
By Alison F. Takemura

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cutout of top half of a heat-pump water heater, a metal cylinder, against colored background with words 'Electrified Life'
Meet the heat-pump water heater. (Binh Nguyen/Canary Media; Energy Vanguard)

Canary Media’s Electrified Life column shares real-world tales, tips and insights to demystify what individuals can do to shift their homes and lives to clean electric power. 

Water heaters toil away, often unseen in basements and garages, to keep our showers hot, clothes cleansed and pets bathed — and in the U.S., almost all of these machines are voracious energy hogs.

But there’s a technology that can heat water more efficiently, cheaply and without burning fossil fuels: electric heat-pump water heaters. These appliances are two to four times as efficient as the gas and electric-resistance models that are ubiquitous in the U.S. While the heat-pump variety makes up less than 2 percent of the country’s water-heater sales, the New Buildings Institute reports that the tech is ascendant: In 2022, sales grew by 26 percent. Gas-powered water-heater sales, by contrast, fell by 17 percent.

Regulations are also pushing toward heating water with heat pumps. At the federal level, for example, the Inflation Reduction Act created a tax credit that can make heat-pump water heaters 30 percent less expensive, and the U.S. Department of Energy is also considering more stringent energy-efficiency rules that would supercharge sales of the tech.

Eager to get to know more about this up-and-coming appliance? Here’s your guide to heat-pump water heaters.

Are heat-pump water heaters worth it?

Heat-pump water heaters benefit both the climate and consumers’ wallets, according to Joseph Wachunas, project manager at the nonprofit New Buildings Institute.

It’s a crucial decarbonizing technology that may not be on many people’s radar screens,” he told Canary Media. Wachunas himself was an early adopter of the heat-pump water heater, and he says he’s been over the moon” about their performance and energy and cost savings.

Conventional water heaters burn gas or use electric-resistance approaches to heating water that make them the second-biggest energy consumer in homes after space heating and cooling. Water heaters account for, on average, 17 to 32 percent of a home’s energy usage.

Heat-pump water heaters can drastically reduce that footprint. The most efficient models can use 80 to 85 percent less energy than the least efficient gas and electric-resistance varieties. If used to replace a gas-powered unit, they avoid on average a ton of carbon emissions annually — the equivalent amount of carbon stored by growing 15 tree seedlings for 10 years.

However, because heat-pump water heaters utilize more sophisticated technology than their gas or electric-resistance counterparts, they do have a higher upfront price tag. For example, a 50-gallon heat-pump water heater from premiere manufacturer Rheem has a list price of $1,699 — more than double the $799 price tag of a top-rated 50-gallon electric-resistance Rheem model. Installation can also cost more with heat-pump water heaters, especially when contractors are unfamiliar with them, Wachunas said.

But the lean energy profile of heat-pump water heaters can save owners lots of money every year. The U.S. Environmental Protection Agency estimates that a family of four could cut energy costs by about $200 per year if they’re switching from a gas water heater, or nearly $550 per year if switching from electric-resistance, which adds up to more than $7,000 over the product’s expected lifetime of 13 to 15 years. Switching from an electric-resistance model pays for itself in about two to four years, giving heat-pump water heaters one of the fastest payback times of any clean-energy technology, Wachunas said.

Utility and local programs across the country are also giving consumers a financial boost to encourage them to switch to heat-pump water heaters. Check out the EPA’s Energy Star rebate finder for local incentives. It can be well worth digging them up; residents of Maine, for example, can get an instant rebate that allows them to buy a new heat-pump water heater for as little as $429.

There’s help even for those of us not lucky enough to live in Maine. All U.S. taxpayers can claim the 25C tax credit to cover 30 percent, up to $2,000, of the installation and equipment costs for a qualifying Energy Star heat-pump water heater. (The $2,000 limit resets annually and can be used toward heat-pump HVAC systems as well; you can get the full value of the tax credit for both upgrades if you do them in different years.)

Forthcoming rebates will also make heat-pump water heaters more affordable for lower-income families in the U.S., covering the costs of new heat-pump water heaters up to $1,750. State energy offices are working on how they’ll roll out their rebate programs, the earliest of which are anticipated to go live next year.

How do heat-pump water heaters work?

Heat-pump water heaters are typically hybrids: They comprise a tank equipped with both electric-resistance elements and a heat pump sitting on top. The electric-resistance elements can be used for backup in case the heat pump can’t keep up with demand.

The heat-pump portion is basically like a window air-conditioning unit; it takes heat from the ambient air. But while an AC dumps that heat outside, the heat pump instead releases heat to water via refrigerant lines that snake down into the water tank. Voilà — hot water!

A diagram showing how heat pump water heaters work
How heat-pump water heaters work, including 1) drawing in warm air, 2) compressing it to increase the temperature, 3) using refrigerant lines to transfer heat to water and 4) connecting to the grid via smart controls to help manage energy use. (New Buildings Institute)

What to consider before getting a heat-pump water heater

Heat-pump water heaters do have a number of differences that are worth considering and planning for.

Most models need a 220-volt outlet. If you’re replacing an electric water heater, then that shouldn’t be a problem — that’s what they use, too. But if you’re replacing a gas unit, then you may need to run an electrical line or even upgrade your panel or electrical service.

Alternatively, there are finally 120-volt heat-pump water heaters on the market. Since these plug into a standard outlet, they can be swapped in without electrical work, making them a prime choice for households with gas water heaters and low to medium demand (one to four people), according to a pilot study conducted by the New Buildings Institute.

It’s a game-changing technology,” said Wachunas, who has installed four heat-pump water heaters in his family’s properties since 2017, including most recently 120-volt model: You just plug it into a normal outlet.”

Another feature of heat-pump water heaters is that because heat pumps suck heat out of the air, they need lots of air to pull from. The EPA recommends installing these units in spaces with about 450 cubic feet of air space, roughly the amount in an 8-foot-by-8-foot room. But using a smaller space with some tweaks to improve airflow can also work.

As heat-pump water heaters suck heat from the air, they also strip its ability to hold moisture. That means they double as dehumidifiers. They’re able to capture 2 to 4 liters of water per day, according to Wachunas, so they need to be hooked up to a drain.

Heat-pump water heaters produce noise like other appliances that use heat-pump technologies — from a window AC (60 decibels) to a fridge (45 decibels), depending on the model — which might influence where to place them. Don’t put them near a bedroom,” Wachunas advised.

Likewise, heat-pump water heaters can make their surrounding spaces cooler by a few degrees, depending on the size of the space and how hard the water heater’s working. If the cooled air is a concern, Wachunas said, you could vent it to an attic, basement or outside.

What about maintenance? Like ACs, heat-pump water heaters have a filter that needs regular cleaning. Most of the appliances now come with apps to alert their owners when the filters need a scrub, Wachunas said.

Something else to note is that, as with many newer technologies, there can be issues with the devices themselves. Some installers have reported experiencing higher-than-expected fail rates, according to Nate Adams, CEO of HVAC 2.0 and an advocate of home electrification. But the machines typically come with 10-year warranties, Wachunas said, and other installers, including Helio Home, have found the tech to be sufficiently reliable so far.

But being early to the game also has its perks: Wachunas points out that the rebates and tax credits are there to help push heat-pump water heaters up the adoption curve. And the incentives won’t last forever.

So now is the time to take advantage of all this funding that’s out there to make a switch,” Wachunas told Canary Media. You’ll end up saving on your utility bills,” reducing your carbon emissions — and still get all the hot showers you need.”

Do you crave more insight on heat pumps? Check out Canary’s beginner’s guide to the different types of heat pumps, 10 questions to ask before buying a heat pump and why heat-pump clothes dryers could be coming soon to a laundry room near you. Dig into the details of the IRA’s efficiency and electrification incentives with this cheat sheet.

Alison F. Takemura is staff writer at Canary Media. She reports on home electrification, building decarbonization strategies and the clean energy workforce.