Heat pump water heaters (HPWHs) use electricity to transfer heat from the ambient air to stored water, as opposed to using electric resistance heat or natural gas for water heating. This enables them to be two to three times more energy efficient than conventional electric resistance water heaters. To move the heat, heat pumps work like a refrigerator in reverse. While a refrigerator moves heat from inside a box to ambient air of the surrounding room, a heat pump water heater moves heat from ambient air to water in a storage tank. Water heating typically accounts for 15 to 20 percent of electric energy use in homes with electric water heat. New HPWHs offer the potential to reduce electricity for water heating by 50 percent or more.
HPWHs work best in locations that remain between 40⁰ to 90⁰F year-round and provide at least 1,000 cubic feet of air volume around the water heater. Cool exhaust air can be exhausted to the room or outdoors. Locating the HPWH in an attached garage is ideal, but when installed in an unconditioned space, the lower temperature in the winter will reduce performance. Heat extracted by the HPWH from a conditioned space in the heating season may require more heat input from the existing space heating system.