Elephant Energy’s Guide to Heat Pump Water Heaters
There’s more than one way to heat water for your home, and chances are high you already have a solution in place — or at least one in mind that you’re more familiar with. So what is a heat pump water heater, and why should you consider making the switch?
A heat pump water heater (HPWH), sometimes known as an electric heat pump water heater or a hybrid heat pump water heater, uses electricity not to generate heat directly but to transfer heat from one place to another. This makes it the most energy-efficient type of water heater on the market. Unlike conventional storage water heaters, HPWHs operate at a lower cost and produce fewer greenhouse gas emissions.
What is an electric heat pump water heater’s effect on your household expenses?
Despite the higher initial installation cost than gas, electric, or tankless water heaters, homeowners in Colorado and Massachusetts typically save between $200 to $600 annually in energy cost savings because they operate efficiently.
It dramatically cuts costs by using up to 60% less energy than conventional water heaters. This efficiency translates to a higher upfront cost to offset within three to four years. Opt for an HPWH and embrace a cost-effective future for your home water heating needs.
Getting a heat pump water heater for your home
At Elephant Energy, we champion heat pump water heaters for their sustainability and cost savings benefits, providing your home with consistent hot showers and baths at the lowest overall cost. The heat pump system generally requires plumbing and electrical work, complicating emergency (overnight) installations. If your current water heater is aging — most last about 10-15 years — and you think an HPWH might be the right upgrade for your home, it’s important to plan ahead to avoid disruptions.
Are you still unsure of what a heat pump water heater is, or are you interested in making your home more efficient with a heat pump HVAC system and better insulation? Contact us today, especially if you’re in the Colorado Front Range or Boston area.
How do heat pump water heaters work?
Before you invest, you need to know the basics of a heat pump water heater. How it works isn’t like the traditional water heaters you’re used to. Heat pump water heaters extract heat from the surrounding air, employing a highly efficient process to warm your home’s water. So, what is a heat pump water heater’s approach to heating up your water?
- Heat transfer: Heat pump water heaters pull heat from the surrounding warm air and transfer it to the water in the tank, similar to how a refrigerator extracts heat from its interior. This method is more energy-efficient as it moves energy instead of generating it.
- Hybrid functionality: Most units feature a backup electric resistance heater that activates when the air temperature is too low to extract heat efficiently. This dual capability ensures reliable hot water availability, which is why these units are called hybrid water heaters.
- Optimal placement: These systems require placement in areas with mild temperatures (40º–90ºF) (4.4º–32.2ºC) and ample space (at least 700 cubic feet) (28.3 cubic meters) to operate effectively. Ideal locations include mechanical rooms, garages, crawl spaces, or unfinished basements.
Heat pump technology explained
So, how does a heat pump water heater work to utilize advanced technology when heating water?
Evaporator coils: These coils play a crucial role by capturing heat from the air. The heat is absorbed by a refrigerant, which is then compressed to increase its temperature.
Heat transfer to water: The heated refrigerant travels through coils surrounding the water tank, transferring heat to the tank, effectively raising the water’s temperature.
Energy efficiency: This process is inherently more energy-efficient than traditional heating methods, as it leverages existing thermal energy from the environment rather than generating new heat.
Today most heat pump water heaters include a backup electric resistance heater in case the surrounding air temperature isn’t warm enough. That’s why these are also called hybrid water heaters (hybrid = both heat pump + electric resistance).
Because they use surrounding air, heat pump water heaters should ideally be placed in an area of your home that remains in the 40º–90ºF (4.4º–32.2ºC) range year-round. Examples include a mechanical room, garage, crawl space, or unfinished basement.
They also need 700 cubic feet (28.3 cubic meters) of air space around the water heater in order to work.
Benefits of Heat Pump Water Heaters
Pros
Energy savings
High energy factor: Heat pumps are among the most energy-efficient water heating options, second only to solar water heaters. They are measured using a metric known as the “energy factor.”
Comparison: The energy factor of most heat pump water heaters is at least 2, which is significantly higher than the 0.6-0.98 range typical of conventional tanks.
Superior performance: Elephant Energy installs heat pump water heaters with energy factors above 3, ensuring that homeowners spend considerably less on electricity annually than traditional electric or gas water heaters.
Environmental impact
Reduced carbon footprint: Due to their high energy efficiency, heat pump water heaters have a carbon footprint 50% lower than conventional electric tanks and 66% lower than natural gas tanks.
Endorsements: Because of their eco-friendliness, environmental groups such as the National Resources Defense Council and the Rocky Mountain Institute advocate for the use of heat pump water heaters.
Rebates and incentives
Utility rebates: In Colorado, utilities like Xcel offer rebates ranging from $600 to $800 for installing heat pump water heaters.
Local incentives: Additional local incentives are available, such as in Boulder and Denver, where residents replacing natural gas tanks can receive hundreds of dollars in further incentives.
Federal support: The Inflation Reduction Act introduces significant rebates and tax credits for these systems. Prospective buyers are encouraged to contact Elephant Energy to learn about specific rebates available in their area.
If you’re in the Boston area, the Mass Save program offers a $750 rebate on a heat pump water heater installation.
Cons
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. In other words, it takes the plumber longer. However, with rebates and the right partner, the total cost of ownership can often be lower. The operating costs of a hybrid heat pump water heater are significantly lower.
Some background noise: The heat pump does create a bit of noise when it runs. But if you install it in the right place, this shouldn’t be a problem.
How much does a heat pump water heater cost?
What’s a heat pump water heater’s impact on long-term savings? They typically cost more upfront — before rebates — but cost significantly less over time to operate. So, while upfront cost is certainly an important factor, you should consider the bigger financial picture over the 10-15-year life of the appliance when evaluating an HPWH purchase.
Upfront cost
The upfront cost of a heat pump depends on the type of unit, installation complexity, and incentives.
Unit cost: Heat pump (hybrid) hot water heaters cost between $1,900 for 50-gallon tanks and $2,800 for 80-gallon tanks. Tank size and product quality influence unit cost the most.
Labor to install: Based on our experience, it should take a plumber 6-8 hours and cost $2,000+ to install a hybrid heat pump water heater (HPWH).
Electrician labor: If you’re replacing a conventional electric tank, you may already have the electric set up for an HPWH. But if you’re replacing a gas heater, you may need to bring an electrician out to run a 30A 240-volt circuit. This typically costs $1,000+, not including the cost of any drywall repair.
Supplies and tools: Your plumber will need some supplies to set up your HPWH. Elephant Energy typically installs a Thermostatic Mixing Valve (TMV) for safe, excellent temperature control. We also install a Thermal Expansion Tank (TET) for water pipe safety. While these add to the total cost, the TET is required by code, and the TMV enables your heat pump water heater to operate more efficiently and safely, especially when paired with Xcel’s Demand Response program.
Disposal cost: No extra cost for this. Let’s send this dinosaur to the recycling yard!
Financing cost: Depending on how you choose to pay for your water heater, you may incur financing charges. Similar to buying a car, financing can definitely make the upfront cost more accessible – but just be sure to account for the interest costs of financing the unit.
An average hybrid water heater installation costs $5,000 to $7,000. However, with financial incentives and rebates, many customers pay significantly less upfront. Given the lower operating costs, replacing your water heater is often the smartest financial and most sustainable choice.
Annual operating cost
The operating cost, or the expected annual cost to run your heat pump hot water heater, will depend on your HPWH’s 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 pump water heaters have an energy factor of 2, which is about 2-3 times as efficient as conventional tanks. As Elephant Energy, we only install the most efficient HPWHs, since they end up costing about the same upfront and significantly less over time. These energy factors are greater than 3.
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 water heater uses 2,195 kWh per year of electricity (kWh/yr). The bigger the tank, however, the more energy you should expect to use. In Colorado, at $0.12/kWh, that’s an annual operating cost of ~$263. Since we install the most efficient HPWHs at Elephant Energy, this is the high end of what you should expect to pay annually. Most units use significantly less energy, typically $150 / yr or less.
Cost of energy: This depends on how much electricity costs where you live. Electricity costs are measured in cents per kilowatt hour ($/kWh). In Colorado, Xcel customers typically pay about $0.12/kWh.
The average hybrid water heater installed by Elephant Energy costs less than $200 per year to operate compared to $400-800 for many conventional gas and electric tank hot water heaters, according to the DoE. For a family of four the average cost to run an HPWH is $200-300 per year compared to $600+ for electric storage water heaters, according to Energy Star.
Choosing the right HPWH for your Home
Brands
It is important to choose the right HPWH for your home. Elephant Energy works primarily with Rheem and AO Smith, manufacturers that produce the two most efficient, cost-effective units on the market. We can help you select the best unit for your home’s unique needs. Read below for our heat pump water heater size guide.
What is the best heat pump water heater size for your needs?
Selecting the right size heat pump water heater ensures efficient operation and optimal energy savings. Here’s a guide to help you determine the best tank size for your home:
- Standard sizes: The most common HPWH sizes are 50 gallons, 65 gallons, and 80 gallons.
- Family size and recommendations:
- 3-4 people: 50-gallon hybrid water heaters.
- 4-5 people: 65-gallon water heaters recommended.
- 5+ people: 80-gallon tanks suggested.
- Usage considerations: If your household frequently uses large amounts of hot water for activities like baths or hosting guests, consider sizing up for peace of mind, though this may increase costs.
Additional installation features:
- Thermostatic mixing valve: This valve allows the system to store more hot water by keeping water at 140°F but mixing it to a safer 120°F. This setup can reduce hot water usage by approximately 15% for each use, such as showers or running the dishwasher.
How to estimate your water usage
- First-hour rating: To determine the ideal size, assess the “first-hour rating,” which indicates how much hot water the heater can supply in one hour before needing to reheat more water.
- Calculate demand: Estimate your household’s maximum hourly hot water use by adding up the flow rates of showers, faucets, and appliances used simultaneously.
- Example calculation:
- Showers: Two people taking back-to-back 10-minute showers use about 40 gallons.
- Shaving: Using a sink for 2 minutes adds about 1 gallon.
- Dishwasher: Running a dishwasher uses about 6 gallons.
- Total: This adds up to 47 gallons, indicating a 50-gallon tank is appropriate.
- Example calculation:
Cost-saving tips:
- Strategic usage: To save on costs, consider using high-water appliances like dishwashers at night or reducing shower times. Additionally, choosing a smaller tank (e.g., 40 gallons) by adjusting usage habits can also lower expenses.
Heat pump water heaters vs. other types
In case we haven’t made it clear already, here at Elephant Energy, we think that HPWHs blow the competition out of the water. If you’re not yet convinced, below is an overview of some of the other options on the market today and their pros and cons.
HPWH vs. traditional electric water heaters
While it’s true that heat pump water heaters are approximately $800 pricier than the most affordable conventional electric water heaters, this cost difference prompts an important question: what is the electric heat pump water heater’s advantage over standard models?
Much lower operating costs
Heat pump water heaters excel in operational savings. These units typically use about 20% of your home’s total energy compared to conventional electric water heaters. With the average homeowner spending between $1,500 and $2,500 annually on energy, heat pump water heaters, being 2-4 times more efficient, can save approximately $300-400 each year. This means they can pay for themselves in just 2-3 years, accumulating savings of $3,000 to $4,000 over a decade.
Warranty
Hybrid water heaters often have a longer warranty than a conventional electric water heater. For example, the base Rheem electric water heaters have a 6-year warranty. Getting a 9-year warranty costs about $100. On the other hand, the heat pump water heaters installed by Elephant Energy come with a 10-year warranty.
Better rebates and incentives
The market is filled with financial incentives for choosing a heat pump water heater. Colorado utilities, including Xcel, and programs in Massachusetts like Mass Save, offer rebates ranging from $600 to $750. Additionally, a federal tax credit of $1,750 is available, with local incentives in areas like Boulder further reducing the cost. The Inflation Reduction Act promises even more savings.
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.
HPWH vs. tankless water heaters
Many people that consider heat pump water heaters also look at tankless water heaters (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? Read below for our hot water heat pump design guide.
More immediate capacity
The best heat pump water heaters on the market offer much more immediate hot water capacity than tankless water heaters.
With a heat pump water heater, this isn’t a challenge. Take the Rheem 50-gallon model — it easily supports four consecutive showers without a hitch. In contrast, a low GPM tankless water heater might falter, struggling to meet the simultaneous demand. While some tankless models reach up to 10 GPMs, they come with steep price tags and hefty electrical requirements — often exceeding 80 Amps! A heat pump water heater proves far superior for families needing abundant hot water quickly.
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? They move heat, whereas on-demand tankless water heaters generate heat.
HPWH vs. gas water heaters
Heat pump water heaters are a better option for most homeowners than gas water heaters (tankless or conventional). This is due to a multitude of factors, including safety and cost.
Safer and healthier
According to the CDC, 50,000 people in the U.S. visit the emergency room every year due to accidental carbon monoxide poisoning, and 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 unsustainable for home energy. Gas prices are up 50-100% in 2022 compared to 2021.
Better rebates and incentives
What are heat pump water heater’s economic advantages over gas units? These systems are often accompanied by 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. And many of the biggest utilities in the country, like Xcel offer $600 – $800 rebates.
If you want to see if your city, state or utility offers incentives, visit the Database of State Incentives for Renewables & Efficiency.
Installation and cost considerations
Upfront costs and installation
The installation process is one of the biggest factors that may drive your decision. Heat pump water heaters can be installed just like a normal electric water heater. However, if you’re transitioning from a gas system, be prepared for some additional electrical work, such as upgrading panels or circuits, which could influence your initial expenses.
It’s important to consider that these units do produce some noise from their fans, similar to a portable fan, and emit cold air. Installation in non-living areas like garages or basements is ideal to minimize discomfort. If these options don’t fit your home’s layout, specialized ducting can be installed to direct cold air outside, maintaining your indoor comfort.
Long-term savings
What is a heat pump hot water heater going to cost in the long term? These systems stand out for their efficiency and the significant savings over time. Heat pump water heaters operate on less energy than traditional models, which translates to lower monthly utility bills. Their durability and lower operational costs offset the investment in these systems, offering homeowners substantial savings over the unit’s lifespan.
Moreover, the adoption of heat pump technology is often encouraged by various rebates and tax incentives provided by utilities and government entities, further reducing the long-term financial impact of your initial investment.
Ready to switch? Contact Elephant Energy today
Now that you know what a heat pump water heater is, here’s our recommendation, based on optimizing for lowest operating cost and lowest carbon emissions: 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.
Discover how Elephant Energy makes a difference. Visit our FAQ page or explore our case studies, including testimonials from customers who have transformed their energy usage with a heat pump water heater from Elephant Energy.
Get in touch with Elephant Energy today to receive a detailed quote. Our team specializes in consultations, streamlined installations, and handling rebates to make your transition as smooth as possible.
Editor’s Note: This guide initially incorporated much of the information from Carbon Switch‘s Hybrid Heat Pump Water Heater Guide (with their permission). We have adapted it based on our experience installing dozens of hybrid heat pump water heaters in Colorado’s Front Range and New England.