Heat pump water heater guide: What homeowners need to know

Whether your old water heater has gone kaput, you’re looking to save some money on your utility bills, or you’re on a quest to get off gas and electrify your home, you may want to consider switching to a heat pump water heater. Using the same tried and true heat exchanging technology that has long-powered refrigerators, a heat pump is an extremely efficient way to get a hot shower.

There are significant benefits for making the switch from a gas water heater or an electric resistance water heater to a heat pump model. But there are some tradeoffs as well. Whether it makes sense for your home will depend on what you value.

A heat pump water heater looks an awful lot like any other water heater, except it’s a little bulkier owing to a chamber on top that houses the compressor and fan. Much like a heat pump for space heating, it operates essentially as a refrigerator or air conditioner in reverse: drawing warmth out of the air, transferring heat into the water in the tank, and sending the cold air back out.

If you keep your water heater in a musty basement or garage, this process carries a nice side benefit. “Lots and lots of people appreciate heat pump water heaters because they dehumidify the basement,” said Sean Armstrong, managing principal of sustainable housing firm Redwood Energy in California. “You get a dry basement out of the deal.”

By comparison, electric water heaters pass electricity through resistance coils that heat up and, in turn, heats up the water in the tank. Gas-powered heaters effectively use a flame to heat up the water in the tank. 

Heat pumps are capable of pulling warmth out of the air even on really cold days. Heat pump water heaters operate well in temperatures as low as 37 degrees Fahrenheit – a temperature that is higher than heat pumps for space heating, which can operate at close to 0 degrees. However, if the heat pump is kept in a basement, it is probably unlikely that temperatures would dip that low.

Heat pump water heaters also come with a backup plan; they are often referred to as hybrid water heaters, because they are usually equipped with electric resistance technology as a complementary option if the surrounding air temperature is too cold or demand for hot water is high.

For something that you probably don’t give much thought about, it turns out heating up hot water for your home requires a lot of energy. According to the U.S. Department of Energy, water heating is usually the second-largest energy expense in a home, accounting for about 18% of household energy usage.

Because heat pump water heaters do not actually generate heat themselves and use relatively little power compared to a standard gas or electric water heaters, they are incredibly efficient – more than three times as efficient as a typical electric resistance or gas water heater, according to ENERGY STAR. That, in turn, can bring a significant reduction in utility bills over the course of a year.

If you’re upgrading from an electric resistance water heater to a heat pump water heater, you may reduce your water heating costs by two-thirds or more. It’s a little more complicated to make the same comparison to gas heaters because it depends on the comparative costs of gas and electricity where you live. But most likely you will wind up paying less for hot water with a heat pump system.

There may be some differences depending on where you live, but you can probably expect to spend between $3,000 and $6,000 to have a heat pump water heater installed. 

The unit itself can range in price from between $1,200 and $3,000, largely based on the size of the storage tank (they are available in increments between 40 and 80 gallons). 

Labor costs are mostly a function of how long it takes to complete the installation, and there may be additional costs for shutting off gas or adding electricity and wiring. You may also be able to save some money by purchasing the heater yourself and hiring somebody just to install it – although some installers may be unwilling to take that job on.

For comparison, a new electric resistance water heater may run you about one-third the cost of a heat pump model. The price for a gas model is typically somewhere in between those for electric resistance and heat pump models – though more environmentally friendly gas heaters, which may be required in some states or regions, are closer in cost to heat pump heaters. 

There are tax incentives available for installing heat pump water heaters. The federal government’s Inflation Reduction Act provides a 30% tax credit on heat pump water heater installations, up to a maximum of $2,000, in order to encourage the adoption of cleaner and more efficient technologies. Those with tax liabilities can claim the credits when filing their returns for the year the heater was installed. State governments or utilities may offer additional incentives or rebates to reduce the cost even further, but that will depend on where you live.

One of the main disadvantages of a heat pump water heater is that it takes a lot longer to reheat water compared to gas models. Reheating can take a couple of hours or more, depending on the temperature of the surrounding air and the size of the tank. Gas heaters, by contrast, can reheat in as little as 30 minutes.

If you’re upgrading from an existing gas water heater and generally don’t have issues running out of hot water, then the difference probably won’t be much of a concern. But if you have a growing household that may demand more hot water in the future, or if you already tend to run out of hot water and don’t want to wait more than twice as long for it to reheat, you may want to purchase a larger-capacity heat pump unit than your existing tank to ensure it has enough hot water on demand.

The decision between a gas water heater, electric resistance water heater, and heat pump water heater will depend on your priorities. Mostly, it comes down to a series of decisions about costs, whether you want a cleaner or more efficient product, and how highly you value quickly heating your tank, said Jon Shelton, a solutions expert at Water Heaters Now in Minnesota.

Gas water heaters have the advantage of restoring hot water much more quickly than heat pump water heaters. However, many people still choose heat pump water heaters because they can be more affordable to operate – potentially much more affordable, depending on how the price of electricity compares to gas in your area. For those looking to move away from gas-powered appliances entirely, heat pump water heaters will do the trick. And if your home is equipped with solar panels, "it would be silly" to choose gas over a heat pump, Shelton said, since you’re generating your own power.

The advantages of a heat pump water heater over an electric resistance model are even more clear. While a heat pump is more expensive upfront, potential federal and state incentives can help narrow the gap. Even without those incentives, heat pump heaters are so much more efficient and affordable to operate that in most places you'll recoup the costs on utility bills alone within five to seven years.

“If you're paying a third of what you normally would for electricity, every day that thing’s operating you're saving money,” Shelton said. The only real argument for not opting for a heat pump model, Shelton said, is "if the upfront cost is too much.”

Redwood Energy’s Armstrong noted one exception in which it may make more sense to opt for electric resistance over a heat pump: if you live in a place with very low electricity rates. That’s because the reduction in an already-low electric bill may take much longer to pay off the difference between installation costs.

Space

If you have one of those taller, skinnier water heaters and no space for a larger tank in your home, then it may be more difficult to set up a heat pump water heater. One solution is a split system, which puts a compressor outdoors that can be used to heat a skinnier or smaller tank indoors. However, these models tend to be more expensive.

Electrical work

Traditionally, heat pump water heaters have required a 240-volt outlet. If you don’t have one where you’re putting your water heater, then you may need to get one installed -- which can work out to several hundred extra dollars in installation costs. However, in the last several years manufacturers have introduced 120-volt models that can be plugged into any outlet. It may be a good alternative if you want to skip the electrical work, but it could come with some tradeoffs in terms of costs, efficiency, and speed.

Installation

Ideally, a plumber will install it. Heat pump water heaters are not obscure, and many plumbers will take on the job. If you need help, ENERGY STAR can point you in the direction of qualified contractors.

How loud is a heat pump water heater?

Heat pump water heaters generate some noise during the few hours a day they’re operating, with the level of noise varying depending on the manufacturer and the model but generally ranging from between 42 and 55 decibels. That puts them somewhere between the sounds of a quiet library on the low end and a dishwasher on the high end, according to the Decibel Pro sound app.

Who makes heat pump water heaters?

AO Smith, Rheem, Bradford White, and LG are among the brands making heat pump water heaters easily available in the United States. 

Heat pump water heaters are equipped with a screen filter that should be taken out and cleaned regularly. Some experts define “regularly” as “monthly”;  others say every six months is fine. You’ll also want to clean the unit’s evaporator coils every now and then, as you would for an HVAC system. Consult with your installer or your water heater’s manufacturer for details, but this is easy work that can be done by most homeowners.

A heat pump water heater can be expected to last about as long as a refrigerator – well over a decade, and perhaps 15 or more years.