When it’s time to replace your water heater, a heat pump water heater is the best option.
Heat pump water heaters are highly energy efficient, which makes them better for the environment and more affordable to run. Plus, they qualify for a $2,000 federal tax credit, bringing installation costs down significantly.
Not sure where to start? The Clean Energy Connection makes it easy to find trusted local installers who specialize in energy efficient home upgrades. Search the directory for free today!
How Heat Pump Water Heaters Work
Heat pump water heaters work by pulling heat from the surrounding air and transferring it into a water tank. They use a small amount of electricity to capture and transfer heat instead of burning fuel to generate heat directly the way that a gas or electric resistance water heater would.
Why Choose a Heat Pump Water Heater?
Heat pump water heaters have several advantages over other types of hot water heaters:
- Energy Bill Savings - Saves you money on your energy bills every month.
- Rebate-Eligible - Qualifies for up to $2,000 in federal tax credits, plus local rebates.
- Eco-Friendly - Reduces carbon footprint by using ambient heat instead of burning fuel or generating heat directly.
- Energy Efficient - Can be two to three times more energy efficient than electric resistance water heaters.
How Much Does a Heat Pump Water Heater Cost?
When you’re installing a new water heater (or any appliance), there are two costs you have to think about.
The first is installation. What will this cost me upfront for the equipment and labor?
The second is easier to overlook, and that’s operating costs. How much energy does this use, and what will it cost to run?
Let’s look at how both of these shake out for a heat pump water heater.
Installation Costs — How Much Does a Heat Pump Water Heater Cost to Install?
Heat pump water heaters generally cost between $1,500 and $3,000 to install, according to ENERGY STAR.
What Impacts Installation Costs?
But installation costs can vary depending on several factors, including:
- Rebates & Incentives - Incentives can bring your installation costs down significantly.
- Brand & Model - High-efficiency and ENERGY STAR water heaters tend to cost more, but they also save you more money over time.
- Size - Larger tanks cost more to install. A good contractor will size your system based on the size of your home and water usage.
- Installation Quality - Experienced, reputable contractors charge more, but it’s worth the cost. A bad installation can reduce your system’s efficiency and shorten its lifespan.
- Current Fuel Type - Switching from gas or oil to electric may require extra steps and cost.
Get a personalized estimate from a trusted heat pump installer near you. Find a contractor today with the Clean Energy Connection.
Operating Costs — How Much Does a Heat Pump Water Heater Cost to Run?
Heat pump water heaters consume less energy than gas or standard electric water heaters to provide the same amount of hot water.
The annual fuel cost for a heat pump water heater is around $104 to $160 a year—less than what it takes to run a tank electric, tank gas, or tankless gas water heater.
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How Much Do Heat Pump Water Heaters Save?
An ENERGY STAR® certified heat pump water heater is the most energy efficient option for hot water heating. A family of four can save $550 a year on their energy bill when replacing an electric resistance water heater with an ENERGY STAR® certified heat pump water heater!
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Heat Pump Water Heater Rebates & Tax Credits
Incentives are one of the top reasons to install a heat pump over another type of water heater. Heat pumps qualify for huge, money-saving incentives that other types of water heaters don’t, including:
Heat Pump Tax Credit
The heat pump tax credit reduces your federal tax liability by 30% of your heat pump installation costs, up to $2,000. Heat pump water heaters and heat pump HVAC systems are eligible for the tax credit.
Golden State Rebates
Customers of SDG&E, SCE, and PG&E can receive:
- A $700-$900 instant rebate when replacing a natural gas tank water heater with a heat pump water heater
- A $500 instant rebate when replacing a standard electric water heater with a heat pump water heater
How Heat Pump Water Heaters Compare to Other Types of Water Heaters
Heat Pump Water Heaters vs Electric Water Heaters
Electric resistance water heaters are common and relatively inexpensive to install, but they’re also one of the least efficient options. A family of four will spend around $550 less on energy costs every year with a heat pump water heater when compared to an electric resistance water heater. Read our full comparison of heat pump vs electric water heaters.
Heat Pump Water Heaters vs Gas Water Heaters
Gas water heaters heat water quickly and are often seen as a reliable standby—but they burn fossil fuels and can contribute to indoor air quality issues. Heat pump water heaters run on electricity and don’t produce combustion emissions, making them safer, cleaner, and more environmentally friendly. Plus, they cost less to operate. See how heat pump water heaters stack up against gas models.
Heat Pump Water Heaters vs Tankless Water Heaters
Tankless water heaters provide hot water on demand. Plus, they’re small, which saves space. But, heat pump water heaters offer better energy efficiency, especially for households that use a consistent amount of hot water throughout the day. See whether a heat pump or tankless water heater is better for your home.
So, Is a Heat Pump Water Heater Worth it in California?
If you're looking for a water heater that saves money, cuts energy use, and helps reduce your home's carbon footprint, a heat pump water heater is absolutely worth it. The long-term savings on energy bills—combined with rebates and tax credits—make it a smart investment. For most California homeowners, switching to a heat pump water heater pays off in just a few years.
Want a deeper dive into the cost-benefit analysis? Learn more about whether a heat pump water heater is worth it for California homeowners.
How to Find a Trusted Contractor for Your Heat Pump Water Heater Installation
The Clean Energy Connection makes it easy to find the right contractor—fast. Our free, easy-to-use directory helps California homeowners connect with licensed, vetted clean energy pros who have a proven track record of excellent customer service. You can filter by location, services, rebates, and more to find a perfect match.
Plus, because we’re a non-profit resource funded by Efficiency First California, we have no financial stake in who you choose. We’re just here to help you make an informed decision that reduces carbon emissions and saves you money.
Start your search now and take the guesswork out of finding a trusted installer.
Heat Pump Water Heater FAQs
Does Heat Pump Water Heater Installation Cost More?
Heat pump water heater costs are typically similar to gas and electric water heater installation costs, especially when you factor in rebates. If you do end up paying more, your energy bill savings will likely make up for it.
What Makes Installing a Heat Pump Water Heater More or Less Expensive?
The installation cost of your heat pump water heater will depend on several factors, including the size of your tank, the model and efficiency rating, and more. Additional factors that can increase the installation costs of replacing your old water heater with a heat pump unit include having to move the water heater, additional electrical work, the type of water heater you’re replacing, and more.