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Heat Pump VS. Tankless Water Heaters: Which Is Better?

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Sustainable water heater technology has greatly benefited from the development of heat pump water heaters (hybrid water heaters) and tankless water heaters. Both of these are excellent choices that can lower energy costs while also benefiting the environment.

We want to arm you with all the knowledge you require in this article so you can choose the best hot water heater for your house.

Compared to tankless heaters, heat pump water systems typically have a much higher efficiency. They don’t provide instant hot water, however, and they also require a good deal of space and generate a fair amount of noise. However, tankless water heaters use significantly more energy while providing a continuous, instantaneous supply of hot water.

Continue reading to see a breakdown of each benefit and drawback we just mentioned.

Heat Pump Water Heaters

How They Work

A tank is located on the bottom, and a heat pump is located on top, in a heat pump or hybrid water heater. This kind of water heater uses electricity to transfer heat from one area (the air) to another (your water), as opposed to producing heat directly. A heat pump water heater is two to three times more effective than a standard electric water heater at heating water, according to the U.S. Department of Energy.

Energy Source

Heat pump water heaters are powered by electricity, as was already mentioned. Because they have the capacity to directly heat water with electricity when necessary during times when a lot of hot water is being used by numerous sources, these water heaters are sometimes referred to as “hybrid” models.


Many heat pump water heaters have a control panel where you can change the settings to suit the hot water requirements of your household. For example, switching the setting to “hybrid” mode, also known as “high-demand” mode, will enable your water heater to provide you with enough hot water during periods of high usage.

Pros: Fast Roi

For their energy-saving appliances, everyone loves to see a good return on their investment. After initial installation, the ROI for hybrid water heaters can be as soon as four years. This simply means that you will be saving money for the majority of the appliance’s lifespan because it is quite quick for an appliance.

Pros: Utilizes Ambient Air

The fact that heat pump water heaters use the ambient heat from the air around the appliance to help heat the water is a huge pro. This can significantly lower the energy and financial costs associated with heating your water if you reside in a warmer climate.

Pros: Rebates & Tax Incentives

There are numerous rebates that may be used, depending on your location and the unit you select. Making use of these tax breaks and rebates may be able to cover most of your startup costs. Check out our complete article on the topic here for a detailed breakdown of these savings.

Pros: Long Lifespan

Heat pump water heaters have a lifespan of 10 to 15 years. A typical electric or gas water heater only lasts 3 to 5 years on average.

Cons: Higher Initial Cost

A hybrid hot water heater has a much higher upfront cost compared to a regular electric water heater. While a standard water heater typically costs less than $500, it can sometimes cost over $1,000. It can be challenging to cover the appliance’s initial cost, even though you will ultimately save a lot of money thanks to rebates, tax benefits, and energy savings.

Cons: Need More Space

Hybrid water heaters are taller than electric or gas counterparts due to the heat pump on top of the water heater. It’s advised to leave a 100 square foot area open all around the water heater because the appliance also uses the air in that area. As a result, the water heater is unable to circulate its own cool exhaust air.

Cons: More Effective In Warmer Climates

Warmer climates naturally yield better performance from heat pump water heaters. The efficiency of the heat pump in heating the water without using electricity increases with increasing air temperature. While they can still be effective in colder climates, warmer climates are where they perform at their best.

Heat Pump

Tankless Water Heaters

How They Work

Because of how they work, tankless water heaters are frequently referred to as “on-demand” water heaters. The heating element inside the unit heats the water “on demand” as it flows through it.”

Energy Source

Tankless water heaters can run on gas or electricity. A gas model can be installed with little to no difficulty if your home currently uses natural gas to heat the water. However, your house might need an expensive electrical upgrade to make room for an electric tankless water heater.


If you have never owned a tankless water heater and are accustomed to evaluating a water heater by its tank capacity, you should instead consider the gallons-per-minute rating (GPM) when making your decision. A unit with a higher GPM will be necessary if your family uses a lot of hot water in order to meet their needs. If you often require hot water for several uses at once, you might want to think about installing two separate tankless units.

Pros: Heats Very Fast

Tankless hot water heaters provide you with hot water very quickly. They can heat very effectively and efficiently, and because they lack a tank, they never run out of hot water. By doing this, you can stop yelling at your family members for wasting all the hot water.

Pros: Great Roi

A tankless water heater has a great return on investment, much like the heat pump water heater. Research indicates that it can reduce electricity costs by up to 22%. In addition, a tankless hot water heater can qualify for a tax credit equal to 10% of the cost of the heater’s purchase and installation. Additionally, if the water heater breaks, their longer warranties may save you money.

Pros: Long Lifespan

A typical hot water heater made of gas or electricity lasts for 10 to 12 years on average. The typical lifespan of a tankless hot water heater is more than 20 years. Compared to almost all other water heater options, that is a considerable amount longer.

Pros: Saves Space

Tankless water heaters are compact in size. They are not at all on the floor; rather, they are mounted on a wall. This can free up a sizable amount of space in your house.

Cons: High Initial Cost

Similar to the heat pump water heater, a tankless water heater will run you more than a standard tank electric or gas water heater. Water heaters without tanks start at around $1,000.

Cons: Temperatures Can Fluctuate

Temperature fluctuations may occur if the water heater is overloaded with too many things, such as several showers and a dishwasher running simultaneously. There is no tank, so there is no hot water reservoir to draw from. So if it is stretched too thin, it might not heat the water fast enough.

Cons: Moving Gas/water Lines

Gas and water lines may need to be moved to make room for the tankless hot water heater depending on where your old water heater was located. Tankless water heaters are installed on a wall. Plumbing may therefore need to be moved if the current water heater is not where you want it to be.


Why Hybrid Heat Pump Water Heaters Are So Effective?

Hybrid water heaters move heat instead of creating it.

A hybrid heat pump water heater absorbs heat from the air surrounding it and transfers it to the water, which it then stores in a large tank.

The same technology that your refrigerator uses is used here. Heat is removed from a refrigerator and placed in your kitchen, which is located outside the refrigerator. The water heater’s heat pump performs the same function, but in the opposite direction. Heat is transferred from the environment to the water by removing heat from the outside.

And since moving heat is much easier (requires less energy) than creating it, hybrid heat pumps can be more than twice as efficient as standard and tankless electric water heaters.

Where Can You Buy Heat Pump/hybrid Hot Water Heaters?

The best thing about this new technology is that big box home improvement stores are starting to carry it, so there’s probably one close to you.

*There are some affiliate links in this section, and if you use them to buy the units, we will receive a small commission. It supports the blog and the authors who conduct the research and work to get this content published.

Home Depot and Lowes are the two main places to start your search. While Lowes carries the A.O. and Home Depot carries the Rheem hybrid heat pump units, Both are very reliable Smith brand products with a 10-year parts warranty.

Where Can I Purchase A Tankless Hot Water Heater?

It is now possible to have these units shipped to you because they are much less bulky and come in smaller packaging. They are sold at Lowe’s and Home Depot, but we can now also purchase them there thanks to this new feature.

Depending on the service to your home (if you have gas service), you’ll need to choose between gas and electric units. If electricity is ultimately more practical (or the only option), gas units may be the better option.

Which Is Better?

Both tankless water heaters and heat pumps have advantages and disadvantages. The choice depends on a variety of factors: cost, location, and the features of each type. Without a clear-cut answer, it will be a personal choice for each person or family, depending on what’s most important to them.

Both have high upfront costs but a quick return on investment and a long lifespan. Fortunately, whichever option you select will result in you living a life that is more sustainable and spending less money over time.


In conclusion, your unique needs and preferences will determine the best kind of water heater for you. For instance, an electric water heater might be your best option if you’re looking for a straightforward, low-cost water heater. On the other hand, a heat pump or a hybrid water heater might be your best option if you want to reduce your energy costs.

Do your research to make sure the water heater you select is the best choice for your home, regardless of the type you end up choosing.

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