Water heaters use more energy than all other household appliances combined except for space heaters. Roughly eight million domestic hot water heaters are sold in the U.S. each year, almost evenly split between gas and electric models. According to the U.S. Department of Energy, households use on average 64 gallons of hot water each day, costing between about $300 and $600 a year, depending on the type of fuel, utility rates, and the efficiency of the unit.
Plumbers estimate that 80 percent of water heaters are sold on an emergency basis, when an existing water heater starts leaking or fails for some other reason. In such circumstances, owners reflex to capacity, availability, and lowest price in buying a replacement. The most sensible course, however, would be the price plus operating cost for annual fuel consumption. This is where water heater heat pumps gain a big advantage. Although unfamiliar to U.S. consumers, commanding only one percent of the U.S. market, they are widely selected as the heater of choice in Japan and Europe.
Air source heat pumps extract heat from the air without burning any fuel directly. This is exactly what refrigerators do, but in reverse. There are two types of water heater heat pumps: (1) the split system with the storage tank inside the house and a compressor outside, and (2) the hybrid, or integrated unit, that combines the compressor and storage tank along with a conventional electric resistance coil. The reason for this configuration is that while very efficient, heat pumps are slow. The coil provides faster heating when needed.