Your go-to resource for the latest advice from ENERGY STAR experts on saving energy at home and work.

Is a Heat Pump Water Heater Right for Your Home?

When was the last time you thought about your water heater? It is likely tucked away in a closet, down in your basement, or out in your garage, and rarely remembered unless your shower turns icy. But when it comes time to replace your water heater, are you up to date on the most efficient technology and the best options for energy and cost savings?

The Hype about ENERGY STAR Heat Pump Water Heaters

The most efficient current options on the water heater market are ENERGY STAR certified heat pump water heaters (HPWHs), which are electric. Compared to a standard electric resistant water heater, a HPWH can save a family of four as much as $427 a year on their energy bill. That is nearly a 50 percent savings over standard electric resistance water heaters, with a lifetime savings of around $3,704.

Chart showing payback for ENERGY STAR Heat Pump Water Heaters

Why Choose a Heat Pump Water Heater?

HPWHs are not only cost effective, but they are also much more environmentally friendly. Energy cost savings are such that if all electric water heaters sold in the United States were ENERGY STAR certified, we would save more than $8 billion each year and prevent nearly 150 billion pounds of greenhouse gas emissions.

But how are HPWH so efficient, and what makes them innovative? Heat pumps use electricity to move heat from one place to another – in this case, from surrounding air to water – as opposed to generating heat directly.

Who Should Get a HPWH?

Is a HPWH right for your house, in your neighborhood, with your climate? There are a few important considerations when answering this question.

Cold Weather: With advancing technologies, today’s HPWHs are efficient and effective even in cold climates. With most water heaters being placed indoors, the best practice of surrounding air temperatures of 40 degrees or more is not usually an issue. However, the EPA advises against placing HPWHs in conditioned spaces or garages in cold climates.

Space/Placement: HPWH efficiency will suffer in confined spaces, like closets. The EPA recommends placing your HPWH in a location with 750 to 1,000 cubic feet of surrounding air (approximately the size of a 10-foot by 10-foot up to a 12-foot by 12-foot room) to allow for adequate clearance around the heater for air entry and discharge. Remember, proper air flow matters!

Fuel Type: The most common type of heat pump water heater requires a dedicated 240 Volt outlet—perfect for homes with an existing electric water heater. If a gas water heater is being replaced or if a 240V outlet is not available, HPWH models that utilize 120V outlets are being piloted to help avoid expensive electric panel upgrades and make HPWHs more accessible. 

Who is Talking about HPWHs?

ENERGY STAR teamed up with “The Build Show” with Matt Risinger to provide free HPWH expertise and buying advice. Risinger’s channel has historically been a resource for contractors and tradespeople, but this video provides general guidance for homeowners as well. The Build Show compared HPWHs to other types of water heaters, including both gas and electric options, on six characteristics:

  1. Initial cost: The cost of the heater and installation.
  2. Annual fuel cost: The estimated cost - of the electricity or gas - to use the heater for a year.
  3. First hour recovery: How much hot water you get in the first hour of use.
  4. Max temperature:  The hottest temperature your water heater can reach.
  5. Gallon size: How many gallons of hot water your water heater can hold.
  6. Uniform energy factor: A measurement of a water heater’s energy efficiency. The higher the UEF, the better, because it correlates to how many dollars of hot water you get out per dollar put in.
Cost Factor HPWH Tank Electric Tank Gas Tankless Gas
Initial Cost $1,400-$3,000 $450-$1,200 $500-$1,500 $800-$2,000
Annual Fuel Cost $104-$160 $400-$500+ $200-$300 $175-$225
First Hour Recovery 60-100 55-72 60-85 100+
Max Temperature 140-160 140 140 140
Gallon Size 40-80 40-80 40-80 N/A
UE Factor 3.55-4 0.9 0.6-0.8 0.8-0.9
Rebates (Local) $300-$800 N/A N/A N/A

With combined local and federal* incentives and lifetime fuel cost savings when compared with tank electric, tank gas, and tankless gas, ENERGY STAR certified heat pump water heaters can have impressive lifetime cost and energy savings.

*Please note: The current federal tax credits for Residential Energy Efficiency (Equipment Tax Credits for Primary Residences) expired on December 31, 2021. As of April 5, 2022, there is no approved extension of these tax credits. Any extension/renewal of these credits is still pending approved legislation by Congress. We will update our website with updates when there is an approved bill.

Next Steps

Find out if a HPWH is right for you. Take a look at the ENERGY STAR Home Upgrade page. Then, check out rebates and special offers where you live, and find a qualified installer and retailer near you.

Author: Nate Jutras, ENERGY STAR Certified Products