Heat Pump Water Heaters – Savings for All Seasons 

Water Heating by the Numbers 

Have you ever wondered how much you are paying for hot showers? You may not realize how much money Is going down the drain, literally! Often overlooked, water heating is the second highest source of energy consumption in a typical U.S. home, accounting for 19% of utility bill expenses. Although homeowners have a variety of water heating options to choose from, there is one technology that stands above the rest in terms of energy efficiency and savings. Heat Pump Water Heaters boast annual energy usage and operating costs that are less than half of conventional electric water heaters, which can save the average consumer close to $340 every year. Despite high cost savings, heat pump water heaters only make up around 1% of annual electric water heater sales. If you’re unfamiliar with how this technology works or what incentives are available, not to worry, the Compact is here to help.  

Heat Pump Water Heater: Technology 

Unlike traditional electric water heaters, which use electricity to generate heat directly, heat pump water heaters utilize ambient heat from the surrounding air in order to heat water. Imagine a refrigerator working in reverse: rather than removing heat from inside of a fridge to keep your food cold, a heat pump water heater uses similar technology to pull heat from the surrounding air and transfer it into the enclosed tank, heating the water inside of it. Because of this process, heat pump water heaters produce cool air as a by-product. 

Because heat pump water heaters simply move heat instead of generating it, they use approximately 60-70% less energy than traditional electric water heaters.  

Heat Pump Water Heater: Installation Considerations 

There are multiple factors to take into account when considering a heat pump water heater, so it’s important to understand how installation locations and conditions will affect the performance and efficiency of your unit.  

Most Heat Pump Water Heaters include a fan and compressor housed directly on top of the water tank. This design requires installation in an unconditioned or semi-conditioned space with substantial clearances, where the by-product of cold air won’t be an unwelcome addition. Installing your heat pump water heater in a conditioned space may lead to higher heating costs during the winter months because your heating system may over-compensate due to the cold air exhausted by the unit. In addition, when choosing an installation location, you may want to keep in mind that heat pump water heaters create noise similar to that of a running refrigerator or dehumidifier. To ensure your unit operates at peak performance, remember to clean the air filter routinely to prevent dust buildup that can reduce airflow to your water heater.  

 To determine the ideal installation location for a heat pump water heater in your home, considering the following criteria:   

  1. Choose an unused and unconditioned or semi-conditioned space.  
  2. Find a location that offers ample room for adequate airflow and clearances around air entry and discharge (approximately the size of a 12×12 room). 
  3. Find an area where the temperature of surrounding air consistently stays between 40- and 90-degrees Fahrenheit (installation outdoors or in unheated garages is not appropriate in cold climates). 
  4. Make sure the ceiling is high enough to accommodate the vertical dimensions of the unit. 
  5. Determine if the location already contains, or has room for, a condensate drain or pump. 

Heat Pump Water Heater: Rebates 

In addition to savings from lower operating and monthly water heating costs, if you are a residential customer of the Compact, you may be able to save even more with a rebate of up to $600, depending on the water capacity and energy efficiency rating of the heat pump water heater and the fuel type of your existing water heating system. To qualify, a licensed plumber will need to install an eligible heat pump water heating unit. The new equipment must replace an existing residential electric, propane, or oil storage tank or tankless water heater or be installed in a new construction home.  

Once you’ve purchased your new heat pump water heater, you can submit the digital rebate application online, or print out the water heater rebate form and mail it in. After you have your new heat pump water heater installed, don’t forget to check out our energy-saving guide that will help you maximize your equipment’s efficiency. 


Making any upgrade to your home is a big decision, especially when it requires a serious financial investment. If you’re hesitant about considering high-efficiency water heating equipment due to the financial commitment, be sure to check out the Compact’s HEAT Loan. This zero-percent interest loan for up to $25,000 can help finance an assortment of energy efficiency upgrades, including water heaters, so you can install the equipment that’s right for you.  

No matter the time of year, hot water is always in season, so you can enjoy cost savings year-round. To learn more about how you can start saving today, visit capelightcompact.org/hot-water-heating-rebates/.