Heat Pump vs. Tankless Water Heaters: Pros & Cons

Both heat pump water heaters (also known as hybrid water heaters) and tankless water heaters have made a huge impact on sustainable water heater technology. Both are great options that can reduce energy costs while also having a positive environmental impact.

In this article, we aim to give you all of the information you need to make an educated decision on the best hot water heater for your home.

On average, heat pump waters are much more efficient than tankless heaters. But they also need quite a bit of space, they make a fair bit of noise, and they also don’t give instant hot water. On the other hand, tankless water heaters use much more energy, but give an instant, constant supply of hot water.

To see the breakdown of each of the pros and cons we just mention, keep reading!

Breaking Down Heat Pump Water Heaters

Heat pump water heaters are a great green technology that utilize the ambient air to help heat the water. This ultimately reduces the amount of energy needed to heat the water and can significantly minimize costs.

Pros

Utilizes Ambient Air

A huge pro is that heat pump water heaters use ambient heat from the air surrounding the unit to help heat the water. If you live in a warmer climate, this can significantly reduce the amount of energy and money you are spending to heat your water.

Fast ROI

Everyone loves a good return on investment for their energy-efficient appliances. The ROI for hybrid water heaters can be as soon as four years after the initial installation. This is quite fast for an appliance and simply means that you will be saving money for the majority of the unit’s lifespan.

Long Lifespan

Heat pump water heaters have a lifespan of 10-15 years. This is an average of 5 years longer than a standard electric or gas water heater.

Rebates & Tax Incentives

Depending on your location and the unit you choose, there are quite a few rebates that can be applied. Utilizing these tax credits and rebates could cover a good portion of your initial costs. For a full breakdown of these savings, check out our full article on the topic here.

Cons

Need More Space

Because of the heat pump on top of the water heater, hybrid water heaters are taller than their electric or gas counterparts. Additionally, the unit uses the air around it, so it is recommended to have about 100 square feet of open space surrounding the water heater. This prevents the water heater from re-circulating its own cool exhaust air.

More Effective In Warmer Climates

Heat pump water heaters are naturally more effective in warmer climates. The warmer the air is, the more efficient the heat pump can be in heating the water without using electricity. While they can still be efficient in cooler climates, they do work the best in warmer climates.

Higher Initial Cost

There is a significantly higher initial cost to a hybrid hot water heater as opposed to a standard electric water heater. It can be over $1,000 in most cases, whereas a standard water heater typically runs less than $500. While the rebates, tax incentives, and energy savings will end up saving you a lot of money in the long run, it can be hard to front the initial cost of the appliance.

Breaking Down Tankless Water Heaters

Pros

Heats Very Fast

Tankless hot water heaters get hot water to you very fast. They can heat very effectively and efficiently and, because they don’t have a tank, never run out of hot water. This means you will never be yelling at other household members for using all of the hot water again!

Long Lifespan

The average lifespan for a standard electric or gas hot water heater is usually from 10 to 12 years. Tankless hot water heaters have an average lifespan of over 20 years. That is significantly longer than pretty much any other water heater option.

Saves Space

Tankless water heaters are not very large. They are actually mounted on a wall and not on the floor at all. This can save a significant amount of space in your home.

Great ROI

Similar to the heat pump water heater, a tankless water heater has a great return on investment. Studies show it can save up to 22 percent on electricity bills. Additionally, there is a tax credit worth 10 percent of the purchase and installation costs of a tankless hot water heater. They also have longer warranties, which can reduce your costs if the water heater were to break.

Cons

Temperatures Can Fluctuate

If the water heater is overloaded with too many things, such as multiple showers and a dishwasher going at the same time, there can be some inconsistency in temperature. Because there is no tank, it does not have stored hot water to pull from. So if it is stretched too thin, it might not heat the water fast enough.

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. Tankless water heaters start at about $1,000.

Moving Gas/Water Lines

Depending on where your old water heater was, gas and water lines may need to be moved to accommodate the tankless hot water heater. Tankless water heaters are installed on a wall. So if the previous water heater is not where you want the new water heater, then plumbing may need to be moved.

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

The best thing about this new technology is that it’s becoming popular enough to become adopted by the big box home improvement stores, and there’s likely one in stock near you.

I recommend the Rheem hybrid heat pump units or the A.O. Smith brand. Both have a 10 year parts warranty and are very solid units.

For the netzero homes that I’ve renovated, I’ve actually tried both units. They are both great, but I prefer the Rheem unit. The main reason is that it’s a good bit quieter than the A.O. Smith model. While both units will make some noise, these will (should) be installed in an area where you don’t mind the noise of a heat pump.

We did a separate article on the noise where you can hear both units. You can see that article here which includes videos and the actual sound they both make.

Since the Rheem is our pick, here is the information on that one:

Rheem Performance Platinum Proterra Hybrid

This collection of heat pump water heaters is one of the most affordable and efficient lines on the market. It comes in four sizes: 40-gallon, 50-gallon (Probably the most common size for a 3-bedroom home), 65-gallon, and 80-gallon. No matter what size you purchase, the water heater has an average return on investment of two to three years and an average savings of $4,600 over ten years.

These units are also Wi-Fi enabled so you can control the water heater from your phone or other mobile device. They come with a 10-year warranty and a 1-year in-home labor warranty. This collection of hybrid hot water heaters also reduces energy usage by an average of 75 percent. All of the units in this collection are also EnergyStar certified.

The Rheem Performance Platinum Proterra Hybrid comes in these sizes:

Unit Size	Home Size	Cost
40-Gallon	2+ Bathrooms, 2-4 People	$1,609
50-Gallon	3+ Bathrooms, 3-5 People	$1,699
65-Gallon	3+ Bathrooms, 3-5 People	$1,879
80-Gallon	3+ Bathrooms, 5+ People	$2,689

Conclusion

There are pros and cons to both heat pump and tankless water heaters. The choice depends on a variety of factors: cost, location, and the features of each type. Without a cut and dried solution, it will be a personal decision for each individual or family, based on what’s most important to you.

Both have high initial costs but with a very fast ROI and a long lifespan. Luckily, no matter which you choose, you will be living a more sustainable life while also saving a lot of money in the long term.