Getting Pumped About Water Heaters - Do the Math

Pop Quiz: What do air conditioners, refrigerators, and high-efficiency water heaters have in common?

Answer: They all contain heat pumps. OK, what's a heat pump? The simple definition is that is an electromechanical device for moving heat from one environment (the source) to another (the sink). When this happens, the source becomes cooler and the sink, warmer. In a refrigerator or air conditioner, the source is the interior (or room) and the sink is on the outside. In a heat pump-based water heater  (or hot air furnace), this is reversed. There is a good YouTube video that does a pretty good job of illustrating this. The is also a pretty good explanation in Wikipedia if you want to dive into the details.

A well-designed heat pump with a high Coefficient of Performance (heat pump people don't like to use the word "efficient") is a cost-effective way to heat and cool stuff. Some are designed to do both. A heat pump-based water heater uses environmental warmth (source) to stored water (sink). In fact, geothermal heating systems are just heat pumps on steroids (the steroids being underground warmth).

A number of companies have developed heat pump-based water heaters. The one I am most familiar with, by General Electric, is called the GeoSpring™ which will save on average $325/Year over a conventional water heater. Here on Cape Cod, it should save nearly $540/Year given the high cost of electricity. Other brands should offer comparable savings. They also contain a conventional heating coil to supplement the pump when demand is high. Now, these guys aren't cheap - close to $1,500 plus installation. I have seen them on sale for $1,000. This still is a fair amount of money up front, even with the fast payback.

But the real incentive here (at least in Massachusetts) is the $1,000 mass save rebate. This means, with a little judicious shopping, you can knock a huge chunk off your electric bill for the cost of the installation only. This is not a DIY job - it must be performed by a licensed and certified plumber to be eligible. On a related note, I generally tell people that it is not cost-effective to replace an electric water heater with a gas one, even though gas water heaters are more energy efficient, because the payback is way to long. However, replacing an electric or gas water heater with a heat pump-based unit should generally be an economic no-brainer.

Do the math...