The big decision: standard electric vs. ENERGY STAR® certified heat pump water heater
Heat Pump water heaters are ~70% more efficient that standard electric water heaters and save the average households in the US $497* every year on their electric bills. A Heat Pump water heater is the only water heater that quickly pays for itself (payback) with the energy savings.
Heat Pump water heaters pull heat from the surrounding ambient air and pass it on to the water. They operate like your refrigerator, just in inverse. It is much more efficient to transfer heat than to create heat.
Heat pump water heaters get installed exactly like a standard electric water heater. The only difference is the need for a condensate drain nearby (or use a condensate pump to a sink) and a minimum of ~700 cubic feet (i.e 10′ x 10′ x 7′) around the water heater (consult the specific manufacturers’ Use & Care manual, louvered doors and air ducting options exist for smaller enclosures).
To operate properly Heat Pump water heaters cannot reside on a recirculation system that runs continuously. Install a timer or a motion sensor.
*Based on DOE test procedure and Energy Guide comparison of 50-gallon nominal capacity pre-2015 standard electric (3,609 kWh) and ACiQ 50-gallon heat pump water heater (866 kWh) using DOE EF to UEF conversion rates. Annual energy savings of 2,743 kWh/year and average US residential electricity cost of 18.12 cts/kWh. Savings may vary. Source accessed March 2026: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
Energy Savings Calculator
Based on Dec 2025 EIA Residential Rates
*Calculated at 2,743 kWh annual savings vs electric. Gas/Propane assumes typical 0.6 EF efficiency and local equivalent fuel costs.
*Heat Pump Water Heater Savings estimate compared to standard electric water heater: Based on DOE test procedure and Energy Guide comparison of 50-gallon nominal capacity pre-2015 standard electric (3,609 kWh) and ACiQ 50-gallon heat pump water heater (866 kWh) using DOE EF to UEF conversion rates. Annual energy savings of 2,743 kWh/year and average State residential electricity cost. Savings may vary. Source accessed March 2026: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
*Carbon Avoidance Estimate: Uses the state-specific grid intensity for the electric portion of the calculation.
References:
Department of Energy – Heat Pump Water Heaters
ENERGY STAR – Save more with ENERGY STAR certified Heat Pump Water Heaters
Which size Electric tank do I need?
Family of 1 to 2: 30 gallons
Family of 2 to 3: 40 gallons
Family of 3 to 4: 50 gallons
Family of 5 or More: 80 gallons
Source: https://www.lowes.com/n/buying-guide/water-heater-buying-guide
Utility Rebates for Heat Pump Water Heaters in your State
Currently AZ, CO, DC, GA, IN, MI, NC, NY and WI have broadly rolled out their up to $1,750 instant discount on Heat Pump Water Heaters and funding is available. NM is coming soon. The funds in CA have been committed. Check out if you are eligible based on your income:
The Home Electrification and Appliance Rebate [HEAR] Program is a State initiative funded Federally in 2022 that gives low-to-moderate-income households an instant discount of up to $14,000 to switch to high-efficiency electric appliances. Unlike a tax credit that you wait months for, this rebate is applied at the time of purchase, essentially acting like a high-value coupon.
1. High-Value Instant Savings
You don’t get a check in the mail; you get a lower price on the invoice.
Heat Pump Water Heaters: Up to $1,750 off.
Heat Pump Heating/Cooling: Up to $8,000 off.
Electrical Panels/Wiring: Up to $6,500 off (if needed for new appliances).
2. Eligibility is Income-Based
The program is designed for households earning less than 150% of the Area Median Income (AMI).
Low Income (<80% AMI): The rebate covers 100% of the cost (up to the caps above).
Moderate Income (80%–150% AMI): The rebate covers 50% of the cost (up to the caps above).
3. Point-of-Sale Convenience
Because this is a point-of-sale program, you must work with a state-approved contractor. You simply apply on the State portal and get your State Voucher. The contractor deducts the amount of the voucher directly from your quote.
If your main residence is in AZ, CO, DC, GA, IN, MI, NC, NM, NY and WI, the tool below helps you very quickly estimate if potentially you could qualify for the HEAR instant discounts based on your household income:
Disclaimer: Estimates provided by this calculator are for educational purposes only. Final rebate amounts, eligibility, and timelines are determined by federal, state, and utility providers and are subject to change based on available funding. This tool does not constitute tax, legal, or financial advice. We recommend consulting with a tax professional to verify your specific eligibility before making a purchase.
