It Might Be Time to Replace Your Water Heater

The humble water heater, like your fridge or septic tank, is the type of home technology that you only notice if and when it breaks. For most homeowners, that’s every 13 years. But if you’re on a mission to decarbonize your life, you might want to rethink your current set-up, and perhaps consider a makeover. Per the Department of Energy, water heating accounts for roughly 18% of the average household’s energy use, making it the second largest energy expense in any home.

Back in April, the DOE released new residential water heater standards that it says will save American households approximately $7.6 billion per year on their energy bills “while significantly cutting energy waste and harmful carbon pollution.” The standards will also, in effect, phase out electric resistance water heaters, which currently account for half the U.S. market, in favor of more energy-efficient heat pump water heaters by 2029. If any of that confuses you, read on. We’re breaking down everything you need to know about this oft-forgotten, basement-dwelling home technology, from the taxonomy of water heater types to tax credit and rebate tips to product recommendations.

THE EXPERT PANEL

Andy Meyer is a senior program manager at Efficiency Maine, an independent agency that implements energy efficiency programs in the state. His team is responsible for providing resources on heat pump water heaters to Maine residents, who buy one out of every 10 purchased in the U.S.

Ben Foster is vice president of operations at Barnett Plumbing & Water Heaters, a leading heat pump water heater contractor in California. He’s also developed loaner water heater programs supported by TECH Clean California, and notes that most contractors don’t have access to loaner programs:

Joseph Wachunas is a senior project manager at the New Buildings Institute, a nonprofit working to reduce emissions and deliver climate solutions through the built environment. At NBI, he heads up the Advanced Water Heating Initiative, which aims to decarbonize water heating through heat pump water heaters.

OVERVIEW OF THE PROCESS

• Understand the differences between water heater types.
  
• Take stock of your home’s specific considerations and water needs.
  
• Check your electrical system and research your options, including their associated risks.
  
• Determine what size water heater you’ll need.
  
• Find a trustworthy contractor or prepare to DIY.

THE BASICS

• The first step to switching your water heater is understanding the Uniform Energy Factor. This is the rating that determines a water heater’s efficiency, i.e. how much energy it uses to heat water versus how much it loses in the process. While there is no “ideal” UEF, a good rule of thumb is the higher the UEF, the more efficient the water heater.

• Most conventional water heaters are spectacularly inefficient. They work by heating a storage tank of water either by electric resistance (i.e. the same technology that powers a toaster) or natural gas. The UEF on conventional water heaters is generally around 0.6.

• Tankless water heaters heat water directly, without a storage tank. The power source — either an electric element or gas burner — warms cold water as it travels through a heat exchanger in the unit. Like conventional water heaters, tankless water heaters can be powered by either electric resistance or gas, and only heat water when the user needs it. The UEF on tankless water heaters is typically around 0.8.

• Heat pump water heaters and hybrid water heaters, meanwhile, work by gathering heat from the surrounding air — the classic comparison is to an air conditioner, but in reverse. Most heat pump water heaters also have a back-up electric-resistance mechanism that kicks in during periods of high demand (thus, hybrid). The UEF on heat pump water heaters is between 3 and 4, a gobsmacking five times more efficient than conventional and tankless water heaters, which is instead of quickly creating heat, they slowly move it around. Heat pump water heaters are by far the most energy efficient water heaters on the market.

“Heat pump water heaters are simple to install — any plumber or handy person can do it — but plumbers may not be familiar with them. So if you talk with a plumber who has concerns, consider calling another plumber,” Meyer told me. “Again, Mainers have installed over 70,000 in the last 12 years. They are no longer new.” 

• Solar water heaters use the sun’s energy to heat up water in a storage tank, and are either active or passive — active solar water heaters use circulating pumps, while passive heaters allow natural convection to move water from the collectors to the storage tank as it heats up. Solar water heaters have a different efficiency standard, the solar energy factor, which is the energy delivered by the system divided by the electrical or gas energy put into the system. The SEF of most solar water heaters is somewhere from 2 to 3, and these water heaters generally only work in areas where temperatures rarely fall below freezing.

• The last type of water heater to keep in mind is indirect water heaters or tankless coil water heaters, which use a home’s space heating system to heat water; indirect water heaters then store that in a tank, whereas tankless coil water heaters work on demand. These water heaters are generally only efficient during cold months or in cold climates, when houses’ heating systems are on regularly — and even then, tankless coil water heaters are notoriously inefficient.

FREQUENTLY ASKED QUESTIONS

1. How does a heat pump water heater work?

A heat pump water heater is made up of a compressor, storage tank, condenser, evaporator coil, fan, backup heating elements, and refrigerant. The compressor, located in the upper compartment of the water heater, uses refrigerant to heat the water in the storage tank (via the condenser, which acts as a heat exchanger). The evaporator coil and fan work to change refrigerant from liquid back to gas after the water has been heated. The backup electric heating elements kick in only in periods of high demand to ensure consistent hot water supply.

2. It gets cold where I live. Can I still get a heat pump water heater?

A common misconception about heat pumps in general is that they don’t work in colder climates. This is not at all the case — half of electric water heaters in Maine, for instance, are now heat pumps. As long as they are installed indoors and in an area where pipes won’t freeze (typically, a basement), heat pump water heaters work throughout the year in all climates, according to Meyer and Wachunas. The rule of thumb, per the DOE, is to install your heat pump water heater in locations that remain in the 40 degree to 90 degree Fahrenheit range year-round.

3. How much can I save with a heat pump water heater?

Per the DOE, replacing your standard electric water heater with a heat pump water heater can save you up to 10% on your electricity bill, reducing your water heating energy consumption and costs by up to 70%.

BEFORE YOU GET STARTED

The number one mistake homeowners make when it comes to their water heaters is waiting until they’re broken to replace them. This severely limits your options for new water heaters — as Foster notes, no one “wants to go days without hot water, let alone weeks,” and it can take weeks or even months to fit your home for a heat pump water heater. (We’ll get into why a bit later.)

“A lot of contractors, if you want a heat pump and you have a leaking water heater that needs to be replaced today, they're just going to convince you to go with gas,” Foster said.

Some contractors have loaner water heater programs, so you can temporarily use a gas heater in an emergency situation, but these programs are few and far between. If you’ve had your water heater for 10 years or more — even if it’s working just fine — it might be time to think about replacing it. If you do, you’ll need to consider a few things about your home and lifestyle, especially if you’re considering a heat pump water heater:

1. The size and layout of your house

Heat pump water heaters require a significant amount of space. Per Pacific Northwest National Laboratory, heat pump water heaters can require more than 6 feet of height clearance to account for their air filters, as well as a 3-foot diameter space to provide clearance for the drain pan and other connections. Additionally, the heat pump water heater should be positioned so the exhaust outlet is at least 8 inches away from a wall, door, or ceiling.

Also, since heat pump water heaters work by drawing heat from the surrounding air, they require 700 cubic feet of unenclosed space surrounding the water heater location. While it is possible to install a heat pump water heater in a location with insufficient air volume (for instance, by installing the water heater with a door equipped with top and bottom grills), this would require extra work from your contractor. Taking all these measurements into account, this basically means that a heat pump water heater requires a 10-foot by 9-foot room with an 8-foot-tall ceiling.

2. Maintenance requirements of a heat pump water heater

Heat pump water heaters also require monthly and yearly service, Meyer told me. You should change the water filter every two to six months, and clear the condensate lines to ensure your unit doesn’t get clogged with mold or bacteria. Additionally, if your unit is a hybrid, you’ll have to keep an eye on its anode rod, which can become corroded over time and lead to heating issues. You’ll have to flush your heat pump water heater annually to avoid corrosion.

3. Your household’s size and water needs

If you’re going to DIY it, understanding your household’s water needs is key to sizing and installing a new heat pump water heater. First, determine your house’s peak hour demand (the maximum amount of water your house uses in one hour per day) using this worksheet from the DOE. You can then use that number (measured in gallons) to determine what size heat water heater to buy — look at the heater’s first hour rating, a.k.a. the amount of hot water the heater can supply per hour, starting with a tank full of hot water. You’ll want your heater’s first hour rating to be equal to (or ideally, higher than) your peak hour demand.

Though you should use the worksheet to determine your unique peak hour demand, a general rule is that households of one to two people should use a 50-gallon water heater, while households of three or more people should use a 65- to 80-gallon tank. The average family uses 50 gallons of hot water per day, Wachunas explained. “So even if you have lots of showers in the morning, your heat pump in two to four hours will heat that water back up and you have plenty of extra supply.”

If you’re between two sizes of heat pump water heaters, always upsize, Foster said. This ensures that the heat pump is the primary source of heat, as opposed to the much less efficient backup electric mechanisms. In other words, it’s far more efficient (and less expensive!) for a larger heat pump water heater to heat a few extra gallons of water using the heat pump than it is for a smaller heat pump water heater to have to use its electric elements to keep up with excess demand.

4. Your existing wiring

Since many heat pump water heaters have certain voltage requirements, you may have to upgrade your electrical panel for 240-volt hardwired service. The cost and time involved in having your service upgraded can vary and depends on whether the power lines coming into your house are above ground. If they’re underground, Foster explained, a contractor will have to excavate and run new cables, which can take over a year. The best way to determine if you’ll need to upgrade your service is to have a trusted contractor do an assessment on your home. (This is also why it’s essential to plan in advance.)

5. Location, location, location

Basements are always the best places for heat pump water heaters, regardless of climate. Other common locations for installation include garages, interior rooms, and rooms outside the thermal envelope, like attached sheds and utility rooms. The garage does not have to be insulated if outdoor temperatures are usually above 50°F, but if temperatures dip below freezing and the garage is uninsulated, it’d be best to consider another location. Interior rooms, like laundry or IT rooms, are a great choice because a heat pump water heater can utilize any waste heat generated by the equipment in the room. Finally, rooms outside the thermal envelope, like attached sheds, can be even more efficient than interior spaces in hot or warm climates because of the excess hot air.

UNDERSTAND YOUR OPTIONS

Feeling ready to go shopping? Here’s everything you need to know about the buying and installation process.

• There are plenty of tax credits and rebates to take advantage of. The big one to note is the 30% tax credit from the federal government (thank you, Inflation Reduction Act!) for heat pump water heaters, which covers both the unit and installation, up to $2,000. You can read up on that program here. You can also use the Database of State Incentives for Renewables & Efficiency to research utility rebates specific to your region. Also be sure to check out Energy Star’s rebate finder and Rewiring America’s tax credit guide. (Rewiring America, as it happens, is also a sponsor of Decarbonize Your Life.) A heat pump water heater typically costs about $1,000 more than other types of electric water heaters before rebates and tax credits, but once you factor those in, you may find you have more budget to work with than you thought. It’ll also save you about $500 per year on your utility bills, according to Meyer, so “payback is quick.”
  
• Decide whether you want to hire a contractor or install the new heater yourself. Though a DIY water heater install sounds intimidating, it’s “surprisingly accessible for folks if you're semi-handy,” Wachunas told me. Efficiency Maine estimates that a third of its customers install heat pump water heaters themselves. Unlike HVAC heat pumps, heat pump water heaters are closed systems, so they come sealed in one packed unit that the customer simply has to install as they would any other electric water heater. (This also means that if and when the thing breaks — most heat pump water heaters have 10-year warranties — the whole unit has to be replaced, not just a part.)
  
• If you’re DIY-ing it, you can buy a heat pump water heater either online or at a local hardware or home improvement store. It’s important to keep in mind, however, that these units are quite heavy and cannot be taken apart. Depending on capacity, they can be over 300 pounds — so prepare accordingly to transport the unit to your house. As for installing, first, you’ll have to remove your existing water heater (this will involve draining the tank, removing supply lines, and disconnecting the power). Next, you’ll clean up your workspace and prepare your new plumbing material. Then you’ll position your new water heater, connect your supply lines to the new heater, fill the tank with cold water, and connect the heater to the electrical supply according to the manufacturer’s instructions. Voilà! Your heat pump water heater is ready for use. Check out this guide from Northwest Energy Efficiency Alliance. PNNL also has a great heat pump water heater installation tool that can walk you through the selection and installation process.
  
• If DIY isn’t your bag, it’s essential to find the right contractor, as not all water heater contractors are familiar with heat pump water heater models. This often results in plumbers undersizing their recommendations, “not taking into account the fact that they take longer to regenerate hot water,” Foster warned. The best way to find a quality contractor is to use a third party service that has already done the work of vetting plumbers, according to Foster, such as The Switch Is On, or state-specific organizations like Efficiency Maine or TECH Clean California. A properly-informed contractor will also be able to access special rebates that aren’t available to consumers, according to Foster.
  
• You might want to consider doing a whole-home assessment while you’re at it. If you’re already planning on making the switch from a gas stove to an induction stove in addition to replacing your water heater, for instance, you can consolidate your home renovation plans with help from organizations like Quit Carbon.

HEATMAP RECOMMENDS

For small family homes, DIYers, or victims of a gas water heater emergency, get the 120-Volt Rheem ProTerra Plug-in Heat Pump Water Heater.

This plug-in model caused quite a stir when it came out two years ago, and for good reason. Its low voltage allows it to be plugged into a standard outlet, making it a great fit for smaller homes with fewer residents, or anyone in need of a quick fix. (This is also a relatively foolproof choice for DIYers because of the quick and easy installation process.) For those wanting a model with a bit more flexibility but still an easy install, there’s the A.O. Smith Signature 900 Plug-in Hybrid, which is more expensive but has the added benefit of back-up electric resistance elements that help with higher hot water demand. Alternatively, you can go for the 120-Volt Rheem ProTerra Plug-in Water Heater with HydroBoost, which utilizes a mixing valve for maximum hot water output.

If app functionality is especially important to you, Rheem’s ProTerra line might be particularly appealing. The EcoNet app allows users to monitor the hot water heater from their phone, with status updates on potential leaks as well as compressor health, hot water availability and the unit’s set water temperature.

For larger families with tons of hot water demand get the Rheem ProTerra 80 Gal. 10-Year Hybrid High Efficiency Heat Pump Tank Electric Water Heater.

Another solid choice for larger families, for roughly the same price, is A.O. Smith’s Signature 900 80-Gal. For further durability, consider Bradford White’s Aerotherm Series water heaters, which can only be purchased through a qualified contractor, but are frequently praised for their resilience and anti-microbial technology.

For your casual country estates or mini-mansions over 5,000 square feet, get the Sanden SANCO2 Heat Pump Water Heater.

Split-system heat pump water heaters are the answer for truly huge houses, where the heat pump itself is outside while the storage tank remains inside. “You can chain together as many heat pump units as you want with as many storage tanks as you want,” Foster said. “So you can create as big a system as you want.” While split-system heat pump water heaters are much less widely-available in the U.S. than they are in Asia and Europe, you can purchase this one online. SANCO is also shipping a new fifth generation unit soon, Quit Carbon advises, which may prove more cost-effective and will qualify for more rebates in California.

For those sensitive to sound or in tight living spaces get the Voltex AL Hybrid Electric Heat Pump Water Heater.

The quietest HPWH on the market, at 45 decibels, is made by A.O. Smith, according to Foster. It’s available in 50, 65, and 80 gallon sizes, so it can accommodate a variety of household types. Another quiet option is LG’s Inverter Heat Pump Water Heater, though LG is much newer to the heat pump water heater game than Rheem and A.O. Smith, so it may be more difficult to find qualified contractors.

WHAT’S NEXT?

A GIANT ASTERISK

Three more expert contractors I spoke with — Nate Adams, a longtime HVAC insulation and sealing contractor in West Virginia who specializes in electrification retrofits for homeowners; John Semmelhack, an HVAC consultant and the owner of Think Little, a building science consulting firm specializing in mechanical system design for passive house and net-zero energy homes; and Tim Portman, the owner of Portman Mechanical, specializing in electrification, heating and cooling, and home performance — had concerns about heat pump water heater installations.

Adams said heaters he’s installed have had a 50% failure rate, while Portman and Semmelhack cite a 60% failure rate. These issues have seemingly cropped up after 2018 and are almost entirely occurring with A.O. Smith and Rheem’s fifth generation of water heater models; older generations performed and continue to perform much better. “All my installs from 2014-2018 are still running to my knowledge,” says Adams. “Which is a big part of my frustration— we had this figured out already.”

The specific causes of these failures vary, spanning from tanks bursting to heat pumps losing charge, according to Adams. Semmelhack and Portman, meanwhile, pointed mainly to refrigerant leaks and compressor issues. (A.O. Smith and Rheem did not respond to requests for comment.) “All of the failures are happening inside the first year of operation,” noted Semmelhack. “So it's happening pretty quick, which makes us think that it's a factory problem and not an environmental problem inside the household.”

For those who don’t mind waiting, keep an eye on Cala, a promising water heater startup.

Semmelhack and Portman are hopeful about Cala’s new heat pump water heaters, which use an AI-powered control system to forecast hot water demand and heat the water in the tank accordingly with a heat pump. They’re aiming to start shipping those units in 2025, and you can preorder and learn more here.

NOW TAKE A BATH!