How much does a heat pump water heater cost?

Replacing your water heater with a heat pump water heater is one of the best home upgrades you can make if you want to save on your utility bills. And it’ll keep your showers just as hot and steaming as before.

Heat pump hot water heaters — also referred to as hybrid hot water heaters or electric heat pump water heaters — are the most energy-efficient water heaters on the market, because heat pumps move heat from one place to another, rather than creating it.

But search the internet for how much a heat pump water heater costs, and you’ll likely end up with more questions than answers. That’s because, unlike many consumer products, heat pump water heater costs vary significantly based on factors like where you live and what kind of water heater you currently have. 

Fortunately, our expert research team at Rewiring America crunched the numbers on how much heat pump water heaters cost. In this article, we’ll cover what they found and what impacts the cost of a heat pump water heater.

Upfront Costs

According to a recent analysis by our team, heat pump water heaters cost between $3,600 and $6,500 upfront. 

The biggest factor that will impact the cost of installation is what kind of water heater you are replacing. We have found that replacing an electric water heater costs between $3,600 and $4,800. Replacing a gas water heater costs between $4,300 and $6,500.

Swapping out a gas water heater for a heat pump water heater costs more on average because it often requires additional electrical costs and wiring (e.g. adding a 240 Volt outlet). 

The exact upfront cost of a heat pump water heater 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 — The size and brand will make a difference in the unit cost. Heat pump (hybrid) water heaters cost between $1,200 for 50-gallon tanks to $2,500 for 80-gallon tanks made by the highest-end manufacturers. 

• Labor to install — Time is money! And the total time required to install a water heater can vary significantly depending on where your current set-up is located and how it’s situated in your home. 

• Electrician labor — If you’re replacing a conventional electric tank, then you’ll already have the electrical set up for a heat pump water heater. But if you’re replacing a gas heater, you may need to hire an electrician to run a 240 Volt circuit. Note: The manufacturer Rheem now offers a 120 Volt model that can be plugged into a regular outlet. 

• Supplies and tools — Your plumber will need some supplies to set up your heat pump water heater. Again, the total amount of supplies will vary based on your home and the complexity of your project.

• Disposal cost for your old water heater — Some plumbers charge a small fee to remove old hot water heaters. But many of them do this for free.

Operating costs

The exact operating cost, or the expected annual cost to run your heat pump water heater, varies significantly as well. 

According to our recent analysis, people can save $80–$230 on their water heating bills by switching to a heat pump water heater. The median annual energy cost of a conventional hot water heater is $230, while the median cost of a heat pump water heater is $90. That’s a 60 percent reduction in water heating costs.

The exact amount of savings will depend on a number of factors:

• Energy factor — This is how much electricity is needed for your heat pump water heater to heat your water. Most heat pumps have an energy factor of 2, which is about 2-3 times as much as conventional tanks. Exact energy factors depend mostly on your climate. In warm climates, where there is more energy in the air, you can expect more savings. 

• Energy consumption — 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). But exactly how much energy you use depends on factors like your household size and water use.

Cost of energy — This is how much electricity costs where you live. Electricity costs are measured in cents per kilowatt hour ($/kWh). The higher your utility bills, the more you can expect to spend operating your heat pump water heater. But in expensive geographies, savings tend to be higher too. This data by the EIA shows the average price of electricity in each state.

Rebates and incentives

The IRA provides households a 30 percent tax credit for heat pumps and heat pump water heaters, up to $2,000 per year. To qualify for the credits, heat pump water heaters must meet ENERGY STAR standards.

For low-income and moderate-income households, the Electrification Rebates in the Inflation Reduction Act (IRA) cover 50-100 percent of your HPWH costs, up to $1,750. Check out our IRA Savings Calculator to see how much your household is eligible to receive. 

Some states offer their own rebates and tax incentives. Massachusetts offers an instant rebate of $750-$1,500 depending on the model. California offers instant rebates of $500-$900. Check out this database to find any additional incentives in your state.

Are heat pump water heaters worth it?

For most households, heat pump water heaters are one of the most effective ways to save energy, cut utility bills, and do good for the planet. 

Here are some of the reasons to consider a heat pump over old-school water heaters:

Heat pump water heater vs. electric water heater

• Much cheaper operating costs — Heat pump water heaters are generally 4x more efficient than conventional electric water heaters. The average household will save between $80 and $230 per year by making the switch.

• Longer warranty — Heat pump water heaters come with longer warranties than conventional electric water heaters thanks to their longer lifespans (up to 10 years versus 6 years).

• Better rebates and incentives — The IRA provides up to $1,750 in rebates depending on household income and a 30 percent tax incentive when you purchase a heat pump water heater.

• Lower carbon footprint — Other than solar water heaters — which are still pretty expensive in most of the United States — heat pumps are the most energy-efficient water heater available. A heat pump water heater emits about 15% as much CO2 as a conventional tank does.

Heat pump water heater vs gas water heater

• Safer and healthier — Gas appliances like water heaters and furnaces are one of the leading causes of carbon monoxide poisoning. Avoiding gas appliances reduces your risk.

• 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. 

• Better rebates and incentives — Gas water heaters rarely have rebates. Heat pump water heaters, on the other hand, are eligible for up to $1,750 in rebates depending on household income and a 30 percent tax incentive.

Heat pump water heater vs tankless water heater

• More energy efficient — Heat pump water heaters are much more efficient than tankless water heaters. Since the heat comes from the surrounding air for the heat pump water heater, any heat loss can just be pumped back into the water to maintain it at a given temperature. In fact, bigger tanks kept at higher temperatures are the most efficient.

• Lower carbon footprint — Gas tankless water heaters emit a puff of methane when they turn on. While they claim to reduce emissions by 22 percent compared to gas tank water heaters, tankless water heaters actually only reduce emissions by 14 percent because of this methane puff, according to NRDC. Heat pump water heaters reduce emissions compared to conventional water heaters by about 85 percent.

• More immediate capacity —  Heat pump water heaters offer much more reliable hot water capacity than tankless water heaters. A 50-gallon heat pump water heater can easily handle a family of four showering in a row. A tankless water heater with low capacity (as measured by gallons per minute, or GPMs) will struggle to keep up with multiple showers.

Heat pump water heater vs solar water heater

• All-day energy efficiency — Solar water heaters save about the same amount of energy every year as HPWHs. But heat pump water heaters warm up water by moving heat instead of generating it, so they can maintain their high efficiency during overcast days and during the night, unlike solar water heaters. 

• Cheaper upfront costs — Solar water heaters are by far the most expensive type of water heater. A heat pump water heater is less than half the cost of a solar water heater. 

• Roof space — Solar water heaters need a significant amount of exposed roof to work. A heat pump water heater is a good option for homes that want to use their roof space for solar panels or don’t have the roof exposure necessary for solar water heating.