Heat Pump Water Heater Buyer’s Guide

By Michael Thomas

Heat Pump Water Heater Buyer’s Guide

A brief introduction to hybrid heat pumps

In the last few decades heat pump water heaters (HPWHs) have become increasingly popular in America. And for good reason too.

Heat pump hot water heaters — also referred to as hybrid hot water heaters — are generally considered the most energy efficient water heaters on the market. (Note: because they run on electricity, you may also hear people refer to them as electric heat pump water heaters).

As a result they are cheap to operate and have a much lower carbon footprint. Many homeowners can save $200 to $600 per year by switching to a hybrid water heater. The only two energy efficiency projects that will save you more money are replacing your heating and cooling system with a heat pump HVAC system and improving your home insulation.

They are more expensive to install than an electric water heater or a tankless water heater. But because the savings are so high these systems often pay themselves back quickly.

In the guide below we’ll cover everything you need to know before switching to a heat pump water heater. If you’re already sold on going with a heat pump water heater and want to see our recommendations on the best models and brands, check out our picks for best heat pump water heater.

How do heat pump water heaters work?

Heat pump water heaters — also referred to as hybrid water heaters — pull heat from the surrounding air to heat the water, rather than relying on electricity or gas. In other words they move energy instead of generating it. In this way, they use the same basically technology as heat pumps used for space heating and cooling.

As researchers at the Department of Energy put it, “Heat pumps work like a refrigerator in reverse. While a refrigerator pulls heat from inside a box and dumps it into the surrounding room, a stand-alone air-source heat pump water heater pulls heat from the surrounding air and dumps it — at a higher temperature — into a tank to heat water.”

Today most heat pump water heaters also include a backup electric resistance heater in case the surrounding air temperature isn’t warm enough to use. That’s why you may hear people refer to them as a hybrid water heater.

Because they use surrounding air, heat pump water heaters need to be placed in an area of your home that remains 40º–90ºF (4.4º–32.2ºC) range year-round. They also need at least 1,000 cubic feet (28.3 cubic meters) of air space around the water heater in order to work.

Pros and cons


  • Energy efficiency — With the exception of solar water heaters, heat pumps are the most energy efficient. Most of them have energy factors of at least 2 (compared to 0.6-0.98 for conventional tanks). That means you’ll spend less money on electricity each year than traditional electric water heaters.
  • Environmentally friendly — Thanks to their energy efficiency heat pump water heaters are also the most eco-friendly. Their carbon footprint can be anywhere from 2-4x lower than a conventional tank. That’s why environmental groups like NRDC and RMI love them.
  • Rebates and incentives — The federal government will give you a $300 tax credit for buying a heat pump. Some states like Maine will give you a $750 instant rebate. And many of the biggest utilities like Xcel will give you a $500 rebate. Visit the Database of State Incentives for Renewables & Efficiency to find which rebates and incentives you qualify for.


  • More expensive upfront cost — If you live in a place that doesn’t offer incentives for heat pump water heaters, it will likely cost more upfront. That’s because units are often more expensive than electric water heaters and tankless water heaters and the installation is more complex (which means more of a plumber’s time).
  • Some background noise — Some homeowners complain about a soft hum in the background when a hybrid heat pump is running. But if you install it in the right place this shouldn’t be a problem.

Upfront cost

The upfront cost of a heat pump depends on a number of factors including which unit you buy, how long it takes to install, and how many incentives you qualify for.

  • Unit cost — Heat pump (hybrid) hot water heaters cost between $1,200 for 50 gallon tanks to $2,500 for 80 gallon tanks made by the highest end manufacturers. The tank size and product quality influence the unit cost most.
  • Labor to install — According to HomeWyse, it should take a plumber about 6 hours and cost between $600 and $800 to install a hybrid heat pump water heater (HPWH).
  • Electrician labor — If you’re replacing a conventional electric tank then you’ll already have the electric set up for a HPWH. But if you’re replacing a gas heater, you may need to bring an electrician out to run a 220 volt circuit. According to HomeAdvisor, this should cost between $132-272.
  • Supplies and tools — Your plumber will need some supplies to set up your HPWH. According to HomeWyse this should cost between $172 and $218.
  • Disposal cost — Some plumbers charge between $25-75 to remove old hot water heaters. But many of them do this for free.

So as you can see installing a hybrid water heater costs more upfront than smaller energy efficiency projects like installing LED lighting. But it’s still much cheaper than replacing your space heating and cooling (HVAC) with a heat pump.

Annual operating cost

The operating cost, or the expected annual cost to run your heat pump hot water heater, will depend on your heaters efficiency rating, energy costs where you live, and how much hot water you use.

Here’s what impacts the operating cost most:

  • Energy factor — This is a measure of how much electricity your HPWH will need to heat your water. Most heat pumps have an energy factor of 2, which is about 2-3 times as much as conventional tanks.
  • Energy consumption / usage — This is how much energy your heat pump will use each month or year. According to the Department of Energy, the average heat pump uses 2,195 kWh per year of electricity (kWh/yr). The bigger the tank, however, the more energy you should expect to use.
    Cost of energy — This is how much electricity costs where you live. Electricity costs are measured in cents per kilowatt hour ($/kWh). If you live in the South where electricity is cheap you’ll pay much less than if you live in California or Hawaii where electricity is more expensive. This data by the EIA shows the average price of electricity in each state. But to get an exact number you’ll need to look at your utility bill.

The average hot water heater costs about $225 per year to operate compared to $400-800 for many conventional tank hot water heaters according to the DoE. For a family of four the average cost to run a HPWH is $300 per year compared to $600 for electric storage water heaters according to Energy Star.

Sizing guide

In order to figure out what size hybrid hot water heater you’ll need, you should look at the “first hour rating” of each model you evaluate. The first hour rating tells you how much hot water you’ll be able to use in any given hour before the tank must refill and reheat more incoming water.

Then you’ll want to estimate the maximum hot water that you and your family will use in any given hour. The way to do this is to look at the flow rate of all your end uses (showers, faucets, dishwashers, etc) and then add up the ones that you’ll use within the same hour.

The average shower uses 2 gallons per minute (with low-flow shower heads using less). If two people live in your home and take 10 minute showers back to back, then that’ll require 40 gallons of hot water.

But let’s say one of you needs to shave after your shower. The average flow rate of a sink is 0.5 gallons per minute. If it takes 2 minutes that’s another 1 gallon of capacity you’ll need.

Now let’s say you want to run the dishwasher after your shower. The average dishwasher uses 6 gallons (with energy efficient models using 4 gallons).

If you add all those up you get 40 + 1 + 6 which is 46 gallons. That means you’d probably want to get a 50 gallon tank.

But remember the bigger the tank, the more it costs. So if you wanted to save money you could elect to run the dishwasher at night and shower in the morning. Or you and your partner could take 3 minute shorter showers and only need a 40 gallon tank.

Heat pump water heaters vs. electric

Heat pump water heaters are about $800 more expensive than the cheapest conventional electric water heaters. That begs the question: is it worth the extra money?

Much cheaper operating costs

In addition to looking at the upfront cost of a water heater, it’s important to look at the annual operating cost. And this is really where hybrid water heaters shine.

That’s because water heaters generally use about 20% of your home’s total energy. Considering the typical homeowner spends between $1,500 and $2,500 per year on energy that adds up.

Heat pump water heaters are generally 4x more efficient than conventional electric water heaters. That means the average household will save about $300-400 per year.

In other words a hybrid heat pump will pay itself off in 2 or 3 years. Over 10 years it’ll save you between $3,000 and $4,000. Not bad.

Longer warranty

As you’ll see in our review of the best heat pump water heater, most models come with a longer warranty than standard electric water heaters. The warranties are also much longer than the best tankless water heater we reviewed.

For example the base Rheem electric water heaters come with a 6 year warranty. To get a 9 year warranty costs about another $100. The heat pump on the other hand comes with a 10 year warranty.

Better rebates and incentives

As we mentioned above, there are also a lot of rebate opportunities when you buy a hybrid water heater.

As of writing the federal government will give you a $300 tax credit if you buy a hybrid water heater. States like Maine will send you $750 check in the mail if you buy one. And many of the biggest utilities in the country like Xcel offer $500 rebates.

If you want to see if your city, state or utility offers incentives, visit the Database of State Incentives for Renewables & Efficiency.

Lower carbon footprint

By far the best feature of heat pump water heaters is their low carbon footprint. Other than solar water heaters — which are still prohibitively expensive in most of the United States — heat pumps are the most energy efficient water heater available.

Thanks to their high energy efficiency, the average heat pump water heater emits 4x less emissions than traditional electric models.

Heat pump water heaters vs. tankless

Many people that consider heat pump water heaters also look at tankless water heaters (note: it’s common to hear people refer to these as an on demand water heater). That’s because both are more energy efficient than conventional gas and electric water heaters. Therefore both lead to savings over the long run.

So how do heat pump hybrid water heaters compare to tankless water heaters?

More immediate capacity

The best heat pump water heaters on the market offer much more immediately hot water capacity than tankless water heaters.

Let’s say you and your family get home from a camping trip or a soccer game and everyone wants to shower at once.

If you have a heat pump water heater, no problem. The Rheem 50 gallon water heater for example can give you 4 back to back showers.

But if you bought a low GPM tankless water heater your family will likely run into problems when three of you go to shower at once.

There are tankless water heaters that offer as much as 10 GPMs, but they start to get pricey. So if you need a lot of hot water at once, the heat pump water heater is the way to go.

Lower carbon footprint

While tankless water heaters are more energy efficient than conventional gas and electric water heaters, they still can’t beat hybrid water heaters.

The average heat pump water heater emits about half as much CO2 (200 kg per year) compared to on-demand water heaters (400 kg per year). Why? Heat pump water heaters move heat whereas on-demand tankless water heaters generate heat.

Heat pump water heater vs. gas

Heat pump water heaters are without a doubt a better option for most homeowners than gas water heaters (tankless or conventional).

Safer and healthier

According to the CDC, every year 50,000 people in the U.S. visit the emergency room due to accidental carbon monoxide poisoning. Tragically, 430 people die each year from it.

One of the primary causes of CO poisoning is gas appliances like water heaters and furnaces. So if you can avoid installing these, you can avoid much of the risk of CO poisoning.

More energy efficient and environmentally-friendly.

Heat pump water heaters are the most energy efficient option on the market today. Compared to gas water heaters they use far less energy and emit less greenhouse gas emissions.

With the recent spikes in natural gas, it’s becoming clear that the fuel is an unsustainable fuel for home energy. This winter experts expect natural gas prices to be up as much as 50% higher than last winter.

Better rebates and incentives

As we mentioned above, there are also a lot of rebate opportunities when you buy a heat pump water heater. Gas water heaters, on the other hand, rarely have rebates.

As of writing the federal government will give you a $300 tax credit if you buy a heat pump water heater. States like Maine will send you $750 check in the mail if you buy one. And many of the biggest utilities in the country like Xcel offer $500 rebates.

If you want to see if your city, state or utility offers incentives, visit the Database of State Incentives for Renewables & Efficiency.


One of the biggest factors that may drive your decision is the installation process (or possibilities). We wrote a whole guide here that covers tankless water heater installation and costs. So we won’t go too in-depth here.

But heat pump water heaters can be installed just like a normal electric water heater. They are basically just more efficient versions of the standard water heater you’ve probably seen all your life. A tankless water heater on the other hand is a bit different. Generally people install them for a specific use case. For example, in a house I used to rent we had one because there were no closets big enough to fit a big tank. So our landlords stuck a tankless water heater in the small attic. Why? Because it was the only thing that would fit. Or to draw from another personal experience, a friend of mine installed one near a guest bathroom since it didn’t need much hot water. It was easy to stick in the bathroom closet and didn’t take up valuable closet space.

So as a rule of thumb here’s my recommendation: if you can do it, install a heat pump water heater. You’ll save money, energy, and the investment will more than pay itself back. If you can’t fit it or can’t afford it, then go with a tankless water heater.

But please, for my future, your children’s future, and this beautiful planet’s future, don’t install a natural gas or fuel oil water heater. If you do, you’re essentially guaranteeing dozens of tons of carbon emissions for decades to come and burning dangerous gases in your home.

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