Upgrading to a Hybrid Heat Pump Water Heater

The Pros and Cons of Making the Switch

For those with an electric water heater in their basement, this article is for you. The next upgrade in water heater technology is here. It is the energy star certified heat pump water heater, an efficient hybrid model designed to perform with great savings, greater rebates, and the greatest fuel efficiency.


The difference between a hybrid heat pump water heater from an electric water heater lies is the process of how water gets heated. The hybrid water heater captures ambient warm air and transfers it to the tank at a higher temperature to generate hot water, which is the reverse process of a refrigerator. The electrical water heater on the other hand heats water directly on the spot using electricity, like when you are boiling water in a tea kettle. It is beneficial to place the hybrid water heater in an already warm room, like the furnace room where it will have a reliable supply of warm air.

Let’s break down the costs, savings, and incentives.


Cost & Savings


The average price of a 50-gallon electrical water heater runs between $700-1,000 ($850 for table below), and the hybrid model is $1,600+. We can also assume the installation cost is roughly $600.

Here is a comparative table of costs and savings associated with a 50-gallon water heater with data from an Energy Star data package:



Energy Cost / Year

Electrical Savings / Year

Water Heater Cost

Installation Cost

First Year Cost

Lifetime Cost










2,544 kWh





Yes, the unfortunate truth is the hybrid water heater is going to cost more upfront that first year. However, assuming the water heater has a 10 year lifespan, we can estimate the electrical water heater will cost $5,810 versus the hybrid water heater costing $3,420.


Tax Credits & Rebates


If the lifetime savings aren’t convincing enough, keep reading. There are local, state, and federal tax credit and rebate programs to incentivize you to make the switch. Starting on the federal level, there is a $300 federal tax credit for purchasing an electrical heat pump water heater, valid until the end of 2021. Rebates for electrical heat pump water heaters and many other appliances can be custom to your zip code at the Energy Star Rebate finder website.


These credits and rebates add up and can bring the lifetime cost of the water heater down even greater.


Who is this Water Heater Ideal for?


There are a few requirements for the location you are placing the water heater. Firstly, you need an electricity supply of at least 240 Volts. Secondly, you need a consistent room air temperature above 40 degrees, in a space at least 100 square feet. Thirdly, there are ceiling height requirements that change based on the amount of people living in the home. If there are five or less people in the house, the ceiling height is 6 feet. If There are six or more people in the house, the ceiling height is 7 feet. Lastly, you will need access to a floor drain to allow proper drainage.


The more the merrier. Depending on your locality, rebates may be higher with the more people living in the home. If you are planning on moving relatively soon, maybe save the purchase for the next place you move to since these hybrid water heaters do take a few years to pay off.


What is the Next Step?


Now that you have had a brief introduction to this appliance upgrade, it is time to do some research! Getting an energy audit on your home is a good first step, as a professional can walk you through the energy efficiency upgrades and rebates available to your home.

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