Heat Pump Water Heaters
Will they save you money? Maybe. Can they dehumidify & save you space? Yes.
A reasonable amount of LC members get heat pump water heaters (HPWHs) when they install a heat pump to replace an oil furnace/boiler, then realize
Wait, if I get a new water heater, which I’ll probably need in a year or two anyways, I can just remove this entire oil tank/boiler/furnace!
This is true! This is a real case below:
But are HPWHs always better? Not necessarily. Here’s our take.
Laminar Quick Take
Look, if you have a relatively new, 2-year-old standard water heater, I wouldn’t junk it just to get a HPWH. But if you’re thinking about replacing an old water heater anyway, or getting rid of gas/oil entirely to free up space in the basement, I’d seriously consider it.
The main benefits will be dehumidification, and more space. Might save $$ too!
How do they work?
They’re just like normal water heaters, but they heat with a heat pump.
There are plenty of guides that already explain how they work, such as this one, this one, and this one. And if you want to see how they’re installed, there’s this:
If you prefer diagram form:
What sizes do they come in?
They usually come in 50, 65, and 80 gallon sizes. That’s the water capacity.
In terms of literal, physical size, they are typically taller than a standard non-heat pump water heater by 1 or 2 ft due to the heat pump + fan on the top of the unit.
3 Electrical Setups
There are three different types of HPWHs: 120 volts, 240 volts, and split-style.
120 volts: Can be a direct replacement of your gas heater! Lower voltage. Can go into a shared circuit.
240 volts: Replacement for resistance electric tanks. Uses up to 75% less energy than resistance water heater.
Split: The tank stores the hot water inside your house, but the compressor that heats the water is kept outside. Way smaller tank, but expensive and not great for retrofits. We wouldn’t recommend other than for a new build.
Want to see a discussion of the tradeoffs? Check out this Reddit thread.
Will I save money with a HPWH?
Okay, so first, if you have solar, the answer is yes.
Otherwise, probably, but over a significantly long period of time (3 to 5+ years).
This is because HPWHs tend to be slightly more expensive upfront, but more efficient over time. Here’s the technical explanation:
Heat pump efficiency is measured using the metric Uniform Energy Factor (or UEF). The UEF measures the amount of water a system can heat over a period of time. Conventional water heaters have UEFs of around 0.6-0.95, and HPWHs can have UEFs of up to ~4.
A UEF of 4 would be nice. It means the payback period would be quite short!
How long would it take to pay back?
Multiple years.
Smarter people than us have noted that UEF is like the MPG of your car: in real life, it’s never going to be as good as the lab testing conditions1.
In the case of HPWHs, the heat pump typically defaults to less efficient electric resistance heating in low temperatures, which drags down the UEF:
We decided to check that against the annual savings calculator from Efficiency Maine using 3.5 UEF and 27c/kWh. We found out that you end up with something closer to ~$100 to $200 in savings/year.
So, generally, our take is that you’ll save money over the lifetime of the system, but it’ll take years to get there.
Can they dehumidify my basement?
Yes. HPWHs act as a dehumidifier for your basement or garage which is a game changer in the Boston climate where humidity makes basement storage such a liability.
Any other benefits?
HPWHs sometimes come equipped with command systems which allow you to control the device from your phone.
Some startups have taken this to the next level. For example, Somerville-based Cala Systems is piloting a HPWH that can adjust heating schedule based on when you’re home or not, to further help you optimize savings.
Boston-based Reservoir Homes is another startup in this space. You can start playing around with fun scenarios, such as
Don’t heat the water as much when I’m at work, but heat the water a lot when the solar panel is producing a lot of electricity. Which is conveniently in the afternoon before I get back from work/before the kids get back from school.
Ultimately, that flexibility can help you get a bit closer to that ideal UEF in real life. And when time-of-use rates come out, it’ll help you save even more.
Cost
HPWHs vary in cost depending on the size, brand, and installer.
Equipment cost only: ~$1,800 (low end, 50 gal) to $3,000 (high end, 80 gal)
Overall cost (incl. labor, permitting, etc): Low quotes ~$4,250, high quotes $8,000.
Realistically, more complex jobs/bigger tanks will be more expensive.
Since you don’t need an EPA 608 license to buy these, you can actually find (equipment) prices right on sites such as Home Depot:
Performance & Reliability
Let’s break performance down into 3 components:
Reliability
Efficiency
Water Heating Speed
Reliability
So when HPWHs fail, it is typically the heat pump part that fails, because a lot of the manufacturers tend to be water heater specialists that decided to add a heat pump on top.
Perhaps this explains why Rheem saw it necessary to buy FUJITSU’s heat pump unit:
We expect to see more of this in the future, as HVAC specialists (see: LG) start pushing into the HPWH space. I would also note that this is an advantage of HPWH startups, particularly if they optimize for heat pump-first manufacturers/suppliers with known expertise in building high-quality, long-lasting heat pumps.
Efficiency
Rheem and Bradford White are the brands typically installed during past LC deals. Since Fall 2025, we’ve switched over to the higher end LG model, which has wifi built in.
Rheem is generally an efficient brand. Their (stated) UEF sits around 3 for their 120volt/15amp circuit models or 4.05 for their 240v models. And as you can see from above & below, Rheem is super common and you can find all their stuff on Home Depot:
We talked a bit about how UEFs aren’t as good as advertised in real life, typically. It’s worth going over that again. See, again, the following graphic about the 120V model:
This is why most of these models are called “Hybrid” Heat Pump Water Heaters, because they also come with electric resistance backup by default.
Overall, these HPWHs are efficient, but will still take a while to net a positive ROI.
Water Heating Speed
Pertinent to larger households (4+ people), HPWHs will also generally take a bit longer to heat the water vs. non-HPWHs. Some new models, however, such as this one from LG, that has a new turbo mode that can heat water faster:
I’d consider this if you think you’ll have like, 5+ people taking showers back-to-back on a regular basis, or if you’re like, taking baths all the time.
Of course, if you’re in that scenario, you may want to just opt for a larger capacity tank. But you could also just solve this problem by investing like $50 on a really good, comfortable, low-flow rate shower head, like so:
Things to Consider +/-
Do you have enough electrical capacity for the model you want?
If you have a 100 amp panel you might need an electrical upgrade.
Do you have 750 cubic ft. of space in the basement?
HPWHs needs 750 cubic feet of air to operate.
Don’t have a garage or unfinished basement? Maybe not a great option.
Ideally, the space should be protected from extreme temps. 50-90 F is perfect.
Are you okay with a slightly cooler space where the HPWH is located?
A HPWH extracts heat from the surrounding air, so it slightly cools the space.
Worth considering if you spend a lot of time in basement during winter. Or if you have a history of pipes freezing.. see below.
Are you looking to remove an oil tank?
Get a heat pump, and get a HPWH. boom. Done.
Will my basement get too cold?
Basements are generally okay, but if you have a basement with a super leaky window & a history of pipes freezing in the coldest days, I think that would warrant some consideration on this point. In the example above, we’re talking about a Cambridge row home basement, which naturally has conditioned basements on 2 sides.
Mass Save Rebates
There’s a $750 Mass Save rebate for replacing an existing electric, oil, propane, or natural gas water heater on top of whatever other rebates you qualify for. This is usually baked into the contractor quote itself.
If you are installing a split system, you can get up to $1500 in a rebate, but these are much more common in new builds so this likely won’t apply.
If you purchase your equipment prior to December 31st of 2025, you still will qualify for the annual Federal Tax Credit of up to 2k or 30% of the cost2.
Federal Rebates
You can get the 30% 25C federal tax credit, the same one that you’d get from a standard heat pump installation. But this single tax credit applies to everything you do in a calendar year, and $2,000 is the cap.
In the golden era of the IRA and IIJA, homeowners used to install their heat pump heating/cooling systems, and wait until the next calendar year to install a HPWH so they could use the Federal Tax Credit both years.
With the credits phasing out this year, there is no longer a benefit to waiting.
Our Recommendation
Look, if you have a relatively new, 2-year-old standard water heater, I wouldn’t junk it just to get a HPWH. But if you’re thinking about replacing an old water heater anyway, or getting rid of gas/oil entirely to free up space in the basement, I’d seriously consider it.
Oh, and also, if you have solar & have enough electrical capacity, definitely.
E.g. you’re not really going to be always driving at 50 MPH with no stops on a freeway.
Note: if you’re getting the HPWH along with a new heat pump system (e.g. mini-splits), then that $2,000 federal tax credit cap applies to your whole system replacement.