A heat pump water heater moves heat from the surrounding air into the water tank instead of generating heat directly, so it uses much less electricity than a standard electric resistance tank. It works best in a warm, ventilated space.
It uses a small compressor and refrigerant loop to absorb heat from the surrounding air and transfer it into the water tank. Because it moves existing heat rather than creating heat with an element, it delivers more heating energy than the electricity it consumes.
It performs best in a space that stays warm year-round and has enough air volume and ventilation, such as a garage, basement, or utility room. In very cold spaces its efficiency drops and it may fall back on a backup resistance element.
It typically costs more upfront than a standard electric tank and runs a fan and compressor, so it makes some noise and slightly cools the room it sits in. Over time the lower running cost usually offsets the higher purchase price.
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