Side-by-side photo of a tankless water heater mounted on a wall and a heat pump water heater installed in a garage with the caption "versus"

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.


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.


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.

Photo of the heat pump water heater in the corner of the garage of the First Attainable Home
The black section at the top of the water heater houses the heat pump, making this unit a little taller than your standard water heater. The warm Florida climate made this unit the ideal choice for our First Attainable Home.

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


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.

Photo of a tankless water heater mounted on a green painted wall.
A tankless water heater can be a great space saver in a smaller home since it’s wall-mounted.

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.


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

Performance Platinum Series: ProTerra Hybrid Electric Water Heater - Rheem .ca

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 SizeHome SizeCost
40-Gallon2+ Bathrooms, 2-4 People$1,609
50-Gallon3+ Bathrooms, 3-5 People$1,699
65-Gallon3+ Bathrooms, 3-5 People$1,879
80-Gallon3+ Bathrooms, 5+ People$2,689


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.


  1. FYI that the Rheem water heaters have a manufacturing quality issue starting with their v5 model around Jan 1 2021. The quality problem causes them to be extremely loud, sounds 65 dB instead of the rated 49. I’ve filled warranty claims and have replaced it twice, and all 3 units have had the same issue. There are some buyers who say the noise problem has been fixed. But I just replaced our faulty unit yesterday and the replacement has the same problem.

  2. Hey Jonathan, that’s great info to know and thanks for giving everyone a heads up! I got my Rheem unit around May or June of 2021 and have lucky not had any issues yet. I’m sorry that your new unit is having issues too! I haven’t measured the decibels yet but it’s fairly quiet, and much more quiet than the A.O. Smith (sold at Lowes) one I got for the last house, so crossing fingers here.

  3. When it was time to get a new water heater, about 12 years ago, I got a tankless. It is much more efficient, saving me money. The other big reason I love it is, I have six people in my home; we take showers one after the other, and we never run out of hot water! I do annual maintenance, circulating white vinegar through the coils, and I have had zero problems! I recommend a tankless very highly!

  4. I love the idea of a heat pump water heater – mainly due to energy efficiency and that it can help cool your space in the summer (I would redirect the cold air outside in the winter). However, I’m a sucker for INSTANT hot water, so I have chosen multiple electric tankless units in my home. They are not as energy efficient, but because I have one for each bathroom and one very small model just for the kitchen sink & dishwasher, this means there will still be hot water in the house if one unit ever fails. Also, I appreciated running only cold water lines throughout the house and not having to insulate hot water lines. I would’ve preferred a heat pump water heater with a recirculating line but Rheem released a memo warning against this for the Proterra as it will not work in heat pump mode – only standard electric mode. Bummer. Maybe there are other heat pump units out there that will..

  5. #1. Everyone in the world has a water heater. We all know that they last well beyond 10-12 years. Why does anyone think that this new one (which is actually a normal electric water heater – which you say lasts 10 yrs) and whole new added system of heat pump components – is going to last longer. Don’t believe everything you read. Think about things.
    #2. The reason that I really came here was to find the ROI of heat pump vs insta-hot. Sure, it is easy to say somthing has an ROI of X yrs vs the worst out there, but what about vs a real entity such as a tankless water heater.

  6. I saw mention of tank type water heaters lasting only 10-12 years and tankless lasting 20 years. Somebody else mentioned that they had been regularly flushing the heat exchanger with vinegar and that maintenance prolonged the life. I have personally maintained 2600 tank type water heaters by flushing sediment out the bottom drain and replacing the anodes and I have water heaters that are well beyond 30 years

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