Choosing the Right Option for Energy Efficiency and Hot Water Needs

After years of working with water heaters, I noticed that many people are curious about the differences between a heat pump and a tankless water heater. Both water heater types are more modernized ways to heat water that have the environment and energy efficiency in mind.

A heat pump water heater is the best option to consider if efficiency is your main focus. Heat pump water heaters provide hot water with a very low energy cost, as it uses auxiliary air to heat the water. A tankless water heater is a better option if you are looking for instant hot water and are low on space. A tankless water heater is much more compact and can provide instant hot water, unlike a heat pump.

The rest of this guide will focus on the differences and similarities between the two water tank types so that you can choose which one is better for you.

What Are Heat Pumps And Tankless Water Heaters?

Heat pump and tankless water heaters are both more modern types of water heaters that focus on being eco-friendly and more energy efficient. They both share these advantages over standard electric or gas water heaters and are becoming more common in homes around the world.

Many areas offer additional incentives like rebates or tax credits to replace your standard electric or gas water heater with one of these more environmentally friendly models. You can find heat pump water heaters and tankless water heaters at your local appliance store.

Comparing The Features Of Heat Pump Vs. Tankless Water Heaters

The sections below will detail some of the pros and cons of each water heater type.

Pros Of Heat Pump Water Heater

Ambient Air

One of the biggest advantages that heat pump water heaters have is that they utilize ambient heat from the air to aid in heating the water inside the chamber. For those living in warmer climates, this self-heating process can significantly cut the costs of operation.

Fast ROI

One of the most important things to consider is the return on investment of using a more energy-efficient appliance. Heat pump water heaters can begin to show a return on investment as soon as four years after the initial purchase date.

This means that within those four years, you will have saved enough money using a more eco-friendly heat pump water heater than it cost you to purchase it initially. This return on investment will continue to appreciate the longer that you have your water heater.

Long Lifespan

Another benefit of heat pump water heaters is their extended lifespan. While most standard electric or gas water heaters have a life expectancy of around 8 years, a heat pump water heater can last up to 15 if maintained properly.

The longer lifespan, coupled with money saved each year on energy costs, make a heat pump water heater a much more financially beneficial option.

Rebates And Tax Incentives

Because of the push for eco-friendly appliances, there are several different rebates and tax incentives to encourage people to use heat pump water heaters. The specific rebates and tax incentives that you could possibly receive will vary depending on your location and the model of the water heater.

In some cases, these rebates and tax credits could pay for a large portion of your water heater. If you are planning on installing a heat pump water heater, be sure to check for any potential rebates in your area.

Better For Environment

Heat pump water heaters are much better for the environment than other water heater types, including tankless water heaters. Heat pump water heaters utilize green technology to reduce the carbon footprint of the appliance and reduce energy costs over time.

Those who are environmentally conscious will find that a heat pump water heater is currently the greenest operating water heater available. Now that you are aware of the advantages of heat pump water heaters, you can explore some of the disadvantages that I have noted over the years.

Cons Of Heat Pump Water Heater

Needs More Space

The additional heat pump on top of the water heater will cause it to take up more space than an average water heater. Because of the need for external air to properly heat the water, additional headroom is necessary. This means that you could need to clear a space as high as 100 square feet around the top of the water heater to ensure it works properly.

Less Effective In Colder Climates

Because heat pump water heaters use the surrounding air to help warm the water, the colder the air, the less effective the water heater will be. That being said, they will still warm your water efficiently, but it will be noticeably less efficient than during warmer temperatures.

Higher Initial Cost

The advanced green technology utilized to produce heat pump water heaters makes them much more expensive initially than other water heater types. Most heat pump water heaters, along with other hybrid hot water heaters, can cost well over $1000.

This is a sharp increase in price over the cost of a standard water heater, which averages out to around $525. Even if you receive some form of rebate or tax credit, a heat pump water heater could wind up being an expensive addition to your home.

Now that we have covered heat pump water heaters, the next section will detail the pros and cons of tankless water heaters. This will help show you how to use the two water heater types compare and contrast.

Pros Of Tankless Water Heater

Fast Heating

Tankless water heaters warm the water much faster than other water heater types. Because of how they are designed, they never run out of water and do not need time to warm up like standard water heaters.

Long Lifespan

Tankless water heaters have the longest lifespan of any water heater type, with some lasting more than 20 years. This is much longer than a standard water heater, with a lifespan of around 8 years. Because of this, they are a very solid long-term investment.


Tankless water heaters are much more compact than heat pump water heaters. Most tankless water heaters are mounted to the wall and do not require any floor space at all. This makes tankless water heaters a great option for someone looking to save space in their home.

Great ROI

Tankless water heaters also have a stellar return on investment rate. Because the lifespan of tankless water heaters is so long, the money you save on energy bills will compound over the years. In addition, there are tax credits that can be claimed to further raise your return on investment rate.

Now that you are aware of the advantages of tankless water heaters, you can explore some of the notable disadvantages that I have noticed over the years.

Cons Of Tankless Water Heater

Inconsistent Temperatures

Because of the tankless design, tankless water heaters do not have a reservoir of hot water to pull from. This can cause the water to come out at inconsistent levels of heat when too many people are using the water at once.

For example, someone showering while the dishwasher is running could notice that the water is not heating up as fast as it normally would.

High Initial Cost

Much like heat pump water heaters, tankless water heaters are much more expensive than standard water heaters. With costs that can exceed $1000, they are quite costly to purchase and install. Of course, the return on investment and rebates and tax credits can help mitigate these costs.

Moving Gas/Water Lines

You may find yourself needing to relocate gas or water lines depending on where you are planning on placing your tankless water heater. Tankless water heaters are required to be installed on a wall near the gas and water lines.

If you wish to place your tankless water heater in a place away from these lines, they will need to be relocated to accommodate the water heater. This can be frustrating and time-consuming so plan your installation carefully.

Regular Descaling

A tankless water heater will need much more frequent descaling than heat pump types. Descaling is a part of regular maintenance that clears the water heater of any debris or buildup. If the proper descaling schedule is not adhered to, it can shorten the lifespan of your water heater.

Heat Pump Vs. Tankless Water Heater Cost

Heat pump and tankless water heaters are very similar in price, with most averaging around $1000. Price will vary depending on the model and brand of the water heater that you choose. Both heat pump and tankless water heaters are much more expensive than standard electric or gas water heaters.

The next section will detail a special kind of heat pump water heater that you can consider for maximum efficiency.

Split Heat Pump Water Heater

A split heat pump heater, also known as a point-of-use water heater, uses a similar method of heating water as standard heat pumps. One key difference is that a split heat pump water heater consists of two parts, an external unit and an internal unit.

The external unit contains the compressor and condenser, which help extract heat from the air, which is then used to heat the water in the tank. The indoor unit contains both the evaporator and expansion valve, which utilizes the air extracted to warm the water.

A split heat pump water heater shares all the same benefits as standard heat pump water heaters. These include increased efficiency and a high return on investment rate. Generally, split heat pump water heaters are able to utilize ambient air more efficiently than standard heat pump water heaters.

Hot Water Dispenser Vs. Heat Pump Water Heater Vs. Tankless Water Heater

When it comes to instant hot water, there are three main ways to achieve this. These are hot water dispensers and heat pump and tankless water heaters. Choosing the one that is best for you will help ensure a fully operational and efficient heating system for your water.

The instant hot water dispenser is the simplest way to get instant hot water. You will typically find hot water dispensers in businesses and storefronts, as they require a direct connection to a water line. To use them, simply turn on the water, and hot water will begin to flow instantly.

A heat pump water heater is more complex and uses the heat in the surrounding air to heat the water inside. Heat pump water tanks are more efficient and eco-friendly than hot water dispensers, though they are much more expensive to install.

A tankless water heater does not require a reservoir of hot water to pull from and warms the water instantly when it is turned on. A tankless water heater is the most compact form of water heater, though the initial cost is quite high to install.

You may be wondering where to purchase your heat pump and tankless water heaters. This will be covered in the next section.

Where Do You Buy Heat Pumps/Hybrid Hot Water Heaters?

The best place to purchase a heat pump or any other hybrid hot water heater is your local hardware or appliance store. As heat pumps become more popular, they are more commonly found in stores like Home Depot and Lowes than ever before.

Where Do You Buy Tankless Hot Water Heaters?

Much like heat pump water heaters, tankless water heaters are also commonly found in hardware and appliance stores like Lowes and Home Depot. In the past, it was much more difficult to find a tankless water heater in stores, as they were considered a specialty item.

Now that there are incentives for using a more eco-friendly water heater setup, tankless water heaters can be found more commonly in storefronts like these.


Choosing the right water heater type for your home can help save you money on operating costs over time. Heat pumps and tankless water heaters are both more eco-friendly options to consider that have a great return on investment value.

Heat pumps are great if you live in warmer climates and have the space to fit one. If you are looking for a more compact water heater, tankless water heaters hang on the wall and do not require any floor space. Both water heater types can be found for around $1000.

This is a steep increase in price over standard water heaters, which typically only cost around $500. Rest assured that once the initial cost has passed, you will begin to save money with either of these more eco-friendly water heater types.