How do heat pump water heaters work?
A heat pump water heater uses electricity to move heat from one place to another instead of generating heat directly. To move heat, a heat pump works like a refrigerator in reverse.
A refrigerator pulls heat from inside a box and transfers it into the surrounding room.
A heat pump water heater pulls heat from the surrounding air and transfers it - at a higher temperature - into a tank to heat water.
The upshot is that a heat pump water heater operates up to 3 times more more efficiently than a conventional electric water heater. According to ENERGY STAR, a heat pump water heater saves a family of 4 about $330 a year or $3,470 over the life of the system. Here is an overview of expected energy savings.
ESTIMATED PAYBACK AND SAVINGS FOR ENERGY STAR HEAT PUMP WATER HEATERS