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What’s the Most Energy-Efficient Water Heater?

The new generation of eco-friendly heat pump water heaters will reduce your home’s emissions while also shrinking your utility bills

Jessica Russo/NRDC

Of all the appliances that compete for a homeowner’s attention, from vacuum cleaner robots to video-enabled door locks that double as security guards, the standard 50-gal. water heater is the most likely to be ignored. Hidden from view in the basement or a dark utility closet, the tall metal cylinder that heats water for our sinks and showers typically functions reliably for a decade or more with little or no maintenance.

But the day will come when that trusted water heater springs a leak and shuts down permanently—prompting an urgent call to the plumber. And it’s best not to wait that long. The technological advances and increasing energy efficiency found in the new generation of environmentally friendly heat pump water heaters (HPWH) make them a worthy investment for anyone looking to reduce both carbon emissions and utility bills at once. HPWHs, which produce heat using the same technology that refrigerators employ to stay cold, release no direct emissions and get the job done on as little as one-half to a third of the energy of a conventional electric resistance or gas water heater.

In other words, HPWHs use much less energy to provide the same level of service. Here’s all you need to know to make the switch.

How a heat pump water heater saves energy

Currently, water heaters of all types account for about 18 percent of U.S. households’ energy consumption—more than cooking and refrigeration combined. Many homes are equipped with electric resistance heaters that needlessly draw excessive amounts of energy from the national power grid and contribute to high utility bills. The impact of gas and propane water heaters, now operating in half of all U.S. homes, is even worse: They burn fossil fuels, releasing greenhouse gases and dangerous toxins like nitrogen oxides, which have been linked to numerous respiratory diseases.

In contrast to conventional gas-fired heaters, which generate heat from pollution-spewing combustion, or electric heaters, which use the same type of inefficient mechanism found in a toaster, HPWHs use an energy-efficient compressor that gathers heat from the atmosphere and concentrates it in a water storage tank. The result: savings for the average four-person U.S. household of $550 a year on electricity bills, or more than $5600 over the life of a typical HPWH, according to the Energy Star consumer website. (Actual savings will vary, depending on home size, location, and the municipal or private utility that supplies electricity to your home.)

Residential energy efficiency is an important tool in addressing climate change, and embracing greener technologies like this one is a meaningful contribution for the homeowner looking to help propel a low-carbon economy forward.

Teasing out the costs

Updating your water heater is easy and highly cost-effective in the long run. Of the several types of HPWHs now available from respected brands like A.O. Smith, Bradford White, and Rheem, the models marketed as hybrids are the most popular. In addition to compressors that warm water by trapping heat from the environment, they’re equipped with auxiliary immersion heating units. These components are set to activate automatically during periods of high demand, offering reassurance that the hot water won’t run out, even when the house is full of guests. It’s true that the initial cost of investing in new HPWH technology (from $1100 before incentives) is higher than what you’d expect to pay for a conventional water heater (from $300). But that additional cost will be more than offset by savings accrued over the lifetime of the appliance—in some cases, within just two to three years.

The Inflation Reduction Act’s federal tax credits make the HPWH an even sweeter deal. Specifically, the Energy Efficient Home Improvement [Tax] Credit will refund you up to $2000 per year for these appliances (among other carbon-saving equipment), whether you’re a homeowner or a renter. These funds will be returned to you when you file your federal taxes. And by early 2024, there will be additional incentives from the federal government to electrify water heating and other home equipment, offering rebates of up to $1750 for low- and moderate-income homeowners to install HPWHs. Some state and local governments and utility companies also offer mail-in rebates at the time of purchase ($1000 from both New York’s Con Edison and Southern California Edison, for example).

How to choose the right model

Unless you’re a skilled plumber (and possess the permit required by many municipalities), you’ll probably need to rely on a licensed contractor to buy and install a new heater. Plan to speak to several plumbers in your area to identify those who have experience with HPWHs. Since they currently account for just 1 percent of the water heating market, HPWHs will be unfamiliar territory to many contractors, who may even try to steer you away from energy-efficient options simply because they are more familiar with standard heaters. A qualified professional can also advise you on the right appliance to buy for your home; many municipal utilities list local qualified contractors on their websites.

As a rule of thumb, you may want to choose a heater with a water tank that is larger than the one typically recommended for the size of your household, which will help you to avoid using the hybrid unit’s less-efficient high-demand auxiliary feature. A larger tank that fills with hot water overnight, for instance, will prevent a shortage during bathroom rush hour the next morning. Considering the long-term value of an HPWH, going bigger is worth the additional cost. Water heaters with smart thermostats that initiate heating during off-peak hours (when there is less demand for electricity use) have the added benefit of allowing you to take advantage of clean energy at a lower cost, while still delivering plenty of hot water when you need it most. They essentially act as “batteries” for storing clean energy.

Evolving technology: The space heater that also does air-conditioning

In addition to heating water, heat pump technology can also be used to heat and cool air as an energy-efficient alternative to standard air conditioners (ACs) and furnaces. Just like HPWHs, heat pump space heaters simply move heat from a cool space to a warm space instead of burning fuel to generate heat, thereby reducing emissions and lowering your utility bill. One of the biggest advantages to owning a heat pump is that it’s a two-in-one system—you get both heating and cooling for the price of one.

Right now, only 16 percent of homes in the United States use heat pumps for space heating and cooling. It is the job of policymakers to provide the right incentives to help consumers and installers get more familiar with and excited about these advanced, healthy, climate-friendly technologies. If this technology became the standard for people installing new ACs within the next three years, we could see them in every home by 2050.

This article originally appeared on It is republished with permission from NRDC.

Patrick Rogers has written on the arts, culture, health, and travel for NewsweekPeopleThe New York Times, and The Washington Post.


  1. this_page_left_blank | | #1

    I've been watching the development of heat pump water heaters for about 8 years. Or I should say, lack of development. There's been no improvement, no reduction in cost, and most importantly no move towards repairability. I have one I bought used, which I found out after installing only works in electric heat mode. I couldn't find anyone to take a look at it, and there is zero support from the manufacturer. I can only imagine there's a pretty big stream of these things going into landfills. Meanwhile, the selection of offerings is smaller now than ever, with no new brands coming to market in over a decade and others exiting the market. Rheem's latest model is riddled with problems that the previous model didn't have, and they appear to have made no effort to address them over the last couple of years. Add all this to the small mortgage you have to take out in order to buy it in the first place. They are a great idea in theory, but at this point it's still theoretical, which is frustrating because it's been like this for decades now.

  2. paul_wiedefeld | | #2

    You’re dreaming if you think a HPWH can be had for $1100. Total Installation costs are what, $4-5k?

    1. maine_tyler | | #3

      I just had a Bradford White 50 gal. installed. $735 for the unit (after rebate) and $455 install, totaling $1,190.

      1. paul_wiedefeld | | #4

        How much was the rebate? Here, the Rheem 50 gal starts at 1699 before tax.

        1. maine_tyler | | #6

          I actually don't know. It was taken off by the seller and they didn't disclose. Efficiency Maine Trust that administers the rebates is pretty hazy on how the water heater rebates in particular work. Not sure why. Other rebates seem much more straightforward.

          1. paul_wiedefeld | | #7

            Looks like $850 if you buy at any store, maybe more for the partners. That’d definitely change my mind !

  3. acrobaticnurse | | #5

    I've been tracking heat pump water heaters for a few years and hoping to see one that would make sense for my house. I and most of my neighbors have a lowboy electric water heater in a crawl space. Mine is now 24 years old and going strong since I replaced the anode rod and one of the heating elements last year. I realized that unless I reroute the plumbing to move a water heater either into the main part of the house or build a little shelter against the house for a water heater the SanCO2 43 gallon tank is the only heat pump water heater that would fit my space, and it's $6000 plus install costs provided I find anyone willing and able to install it. The inflation reduction act may bring that down a nice amount but financially the cost may still take longer to make up than the expected lifespan of the heater. I'm also unsure about how readily I could have the SanCO2 serviced over the next 30 years given that they're the only company making their kind of water heater. Meanwhile I can buy all the basic parts I need for my old water heater at local hardware stores and service it myself while keeping it out of a landfill. I'd love to see a quiet, easily serviceable heat pump water heater that I could personally maintain over the next few decades.

    1. severaltypesofnerd | | #8

      @acrobaticnurse I suppose there's the option of installing some PV and keeping the resistance heater, maybe with a shutoff switch during peak grid hours (hot days, 5-8 pm).

      1. acrobaticnurse | | #10

        I'd like to install solar but local contractors say I have too much shade and when I ask for recommendations on how much I'd need to trim nearby trees to make solar effective they say any shade is too much and won't give details on next steps such as an arborist familiar with solar installs, so I will likely eventually just have to DIY a few off grid panels to a battery and see what they can produce. I've tried google's online app to see my solar potential but it will only tell me based on my current situation vs trimming trees or adding a carport/shed that could host solar.

        One possibility I see would be to build a tiny insulated shelter on the back of the house solely to protect a heat pump water heater with venting connecting it to the encapsulated crawlspace that stays about the same temp as the rest of the house year round. It would only require extending the plumbing ~6 feet but that would still be more complicated than a standard switch out of a tank so I'm not sure how readily a contractor would go for it and have it still be more cost effective than maintaining my current electric water heater. Soon I'm hoping to set up an emporia vue energy monitor and I could have it track exactly how much power the water heater is requiring.

        I suspect there are millions of homes in the US with similar lowboy water heaters so hopefully there will be a heat pump water heater option for them other than a $6,000+ split system with no local service people.

        1. Tim_O | | #11

          Just take a look at your roof or preferred install location throughout the day. If a panel gets partially shaded, it will not produce. If you have spots on your roof that are partially shaded only at parts of the day, you can use microinverters on your panels. The problem is that the simpler/cheaper arrays to install do not use microinverters or optimizers. If one panel in a string like that gets shaded, all panels in the array stop producing. Solar installers are busy these days and as mentioned in another thread, don't want to bother with even slightly complex installs.

          If you just wanted water heat from solar, the cheapest/easiest way would be to add a couple panels with a DC water heater element. Skip the inverters and efficiency losses. Put this in another water heater piped inline with your primary one or if you have a two element water heater, you could replace one with the DC element. You just reduce the ability to make hot water faster on cloudy days. Panels are one of the cheapest parts of solar. Mounting, inverters, batteries, etc are where it starts to get pricey.

        2. Chris_in_NC | | #13

          Yep, I'm in the same situation, lowboy heater in the crawlspace. No practical way to retrofit a water heater in the main house, except remodeling another room and reducing space there (Making the already-small laundry room even smaller...? Adding a utility closet to a bedroom?). Love the concept of the SANCO2, but can't stomach the installed cost and the potentially high-risk gamble for aftersale service.

          Cheaper split system HPWH are sold all over the world it seems, except here.

    2. adrienne_in_nj | | #27

      Does your crawlspace have a dirt floor with or without a vapor barrier (as opposed to concrete?). If so, have you considered digging out a section to get more height? A consultation with an engineer might be required.

  4. Danan_S | | #9

    I've been reading and hearing about the 120 volt heat pump water heaters for quite a while now, but neither I nor anyone I know can seem to find them for sale.

    These seem like a game changer in terms of simpler installation, especially for homes where they will be within the conditioned envelope, or in mild climates.

    I'm not sure why they still aren't available to purchase, has anyone seen them in the wild?

    1. bcade | | #12

      A quick search on home depot turned this up showing it would be delivered in 2-3 weeks. Presumably the 12ov models don't sell enough to be worth stocking them at brick and mortar locations.

  5. n7ws | | #14

    "In contrast to conventional gas-fired heaters, which generate heat from pollution-spewing combustion (hyperbolic editorial), or electric heaters, which use the same type of inefficient mechanism found in a toaster, ..."

    Except the toaster heating element is in air, which removes a lot of the BTUs and lowers toasting efficiency while the water-heating element is in---wait for it---water, which absorbs 100% of the heat, making the process 100% efficient. Big difference, but never let facts get in the way of a good story.

    1. lance_p | | #18

      “Patrick Rogers has written on the arts, culture, health, and travel…”

      And there in lies the problem, lol.

      I also like how no one ever seems to mention that HPWHs can reduce the cooling load on a house, but also INCREASE the heating load on a house. This means if you heat your house with gas you’re also heating your water with gas (during the heating season), but at a lower efficiency than your gas furnace is performing since it takes additional electricity to move that gas heat into the water.

      Ditto if you heat with a heat pump. If your heat pump is running at 2:1 COP during cold weather and your HPWH is running at 3:1 in your cool basement, you’re only getting an overall COP of 1.3:1 for your water heating.

      I still think HPWHs are worthwhile in many climates when you consider the added cooling during shoulder seasons and summer, but people never seem to tell the whole story. The math gets messy, but the truth should be told.

      Maybe arts and travel authors should stay in their lane. Just a thought.

      And why is it up to the government to subsidize and convince people to adopt? Let the market decide!!! As soon as subsidies became a thing Rheem increased their prices by 50%. Who does that help besides Rheem?!? I’m in Canada where those subsidies don’t exist, but now it’s going to cost me $2800 for that darn HPWH! Raheem is about the only commonly available unit here.

      1. Expert Member
        MALCOLM TAYLOR | | #21


        I'm definitely interested in an author's background as it relates to why they may hold certain positions - someone who owns a solar installation company, or consults on fracking for instance - but other than that I usually approach articles with an open mind, and don't worry much about credentials.

        I'm curious as to whether you advocating that people "should stay on their lanes " extends to commenters? Should GBA establish a hierarchy where you can't comment if your background isn't sufficiently related to design or construction the way JLC did?

  6. DavidJones | | #15

    Article skipped one of my favorite benefits of HPHWs. In New England most homes have basements. Many existing homes require dehumidifiers in the basement, where the hot water heater is located. The HPHW often replaces all or most of the need for running an energy intensive dehumidifier in the basement. If you already have to run a dehumidifier, the cost to produce domestic hot water is essentially zero.

    1. lance_p | | #17

      In the summer… but in the winter when you would not be using a dehumidifier and the basement gets extra cold from the HPWH running, it runs less efficiently as it works harder to remove heat from the cool environment. Still better than resistance electric, but definitely not the 4 COP you might be expecting, and your basement is COLD.

      I’m not against HPWHs, I’m planning to get one, but the drawbacks need to be considered along with the benefits.

      1. Expert Member
        DCcontrarian | | #20

        I have a HPWH and I haven't noticed that the basement gets excessively cold in winter. The basement is part of the conditioned space of the house and it's heated in winter.

  7. billw2 | | #16

    Seems like dehumidification is a pretty decent ancillary benefit to not include. Now, if there were only some sort of national resource available online to help us just BARELY informed CONSUMERS on who we can contact to have these things installed by competence and not Incompetence. Or even worse, be talked out of moving forward and sticking with the ol’ standby tech from the last what, 40-50 years?!?

  8. jollygreenshortguy | | #19

    I'm an American living in France. I'm living in an old stone house I completely remodeled. Due to physical constraints of the place I ended up with 2 bathrooms at opposite ends of the house. I put small on-demand water heaters right in each bathroom. Again, due to quirks of the place I ended up with one electric and one natural gas. The setup works really well though. I was able to avoid running hot water lines all over the place, just a single cold line to each bathroom. I have practically no wait time since the units are in the bathrooms, wall mounted above the toilets. And I was able to get rid of 2 old tanks, giving the space over to closets.

    When I'm not using hot water the units just sit there, doing absolutely nothing, drawing no energy at all. I have no tanks taking up space and losing heat to the surroundings.

    In a few years I plan to build a new house. I may go with an HPWH. The gov't seems to subsidize it generously here. But my current setup works so well I'm tempted to repeat it. The only difference is I'll go all electric.

    1. pesc | | #22

      You seem happy with your electric on-demand water heater. Does it use a lot of electricity? Do you see any difference in performance between it and the natural gas water heater? I have been discouraged from even considering one in the US

      1. paul_wiedefeld | | #23

        The only reason to install on demand is a lack of space for a tank. Otherwise, an electric tank outperforms.

        1. Expert Member
          MALCOLM TAYLOR | | #25


          I'm sure there are circumstances where they make sense, but to me there are too many downsides to consider them in most situations.

          - Expense compared to tank heaters.
          - Periodic maintenance is required.
          - Poor performance for small demands like hand washing.
          - No ability to provide hot water during power failures, and most generators can't run them.

          1. paul_wiedefeld | | #26

            Agreed. Plus they can’t handle high volumes of hot water, which is a big deal! A shower, no problem, but a shower while a washing machine’s cycle has intermittent large hot water draws is a recipe for discomfort.

            I liken it to going to the store for a single sugar packet every time you need sugar. Sure, maybe you have 5% per year on sugar costs, but sugar and hot water are cheap to store. Just store it.

      2. jollygreenshortguy | | #24

        pesc, I'm very happy with it.
        The electric heater has its own circuit. I don't recall the details but it does require larger wiring. The electrician was surprised when he saw the specs. But he was inexperienced with this sort of thing. As far as using a lot of electricity, it places a high demand when it's on. But that's only for minutes a day, the time it takes for a person to take a shower. The advantage of an electric over a gas heater is that there is no venting, so, no penetrations that have to be weather sealed. That's why I would go with 2 electrics in the future. I also like keeping the heater close to the use point, to minimize the time it takes for hot water to reach the tap. That's easy to do with a small electric model.
        So -
        No penetrations
        No energy going to maintain a tank that's slowly leaking heat 24/7
        Saved space
        Saved water and more convenience (no waiting)

        I don't know if this approach would scale up to a large household. But there are only 2 people living in my home, with the occasional guest. I would, and will, do it again.

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