Heat pump water heaters projected to become dominant water heater by end of the decade
Heat pump water heaters (HPWHs) are a dark horse in the technological arms race to save the planet. Other clean energy technologies are further along the adoption curve, for example heat pumps for space conditioning make up 58% of new heating equipment sales, Electric vehicles are at 8% of the auto market and growing fast and clean energy made up 96% of new capacity added to the grid last year.
Heat pump water heaters on the other hand made up just 2.1% of water heater sales in 2023 (2024 data isn’t available yet). Sales have grown by 25% annually over the last five years but they still account for a small percentage of water heater sales.
Yet, a new report from the Advanced Water Heating Initiative (AWHI) projects heat pump water heaters to increase over the next five years to 40% of the water heating market by the end of the decade. This growth would transform HPWHs in unprecedented fashion, from the niche technology they are today into the leading type of water heater sold nationally in a short few years.
What is driving this rapid projected growth? Changes to policies and appliance standards, interest in efficient water heating, and of course the climate crisis.
Forces driving HPWH adoption
HPWHs are growing substantially on their own accord. Consumers are looking to save money over the long-term, utilities are looking to save energy as we transition more equipment to run on electricity, and governments are looking to save citizens before wildfires in January become commonplace in our brave new hothouse world. But 25% growth wouldn’t come close to 40% of the water heating market by the end of the decade (more like 9%).
The main driver of the extra anticipated growth is the new water heater standard set by the Department of Energy in April 2024. Mandatory efficiency levels under this new standard for electric water heaters over 35 gallons will effectively phase out electric resistance technology and require the use of heat pumps. DOE estimates that 61% of electric water heaters will transition to heat pumps after this rule goes into effect which equates to approximately 3 million sales annually. There is a new administration that is likely not supportive of these standards but they will go into effect under the next administration (2029).
The other main driver of growth is air quality agencies that are phasing out appliances that combust fossil fuels to reduce outdoor air pollution like NOx. California is leading the way on this front, followed by states in the Northeast and MidAtlantic. Starting in two years, consumers may be prohibited from buying a combustion water heater in some areas. This could be another large growth driver for heat pump water heaters (check out our in-depth article on this topic here).
Projections for growth
These two forces along with the general push to reduce carbon emissions lead AWHI to make the following projections for HPWH growth over the next five years.
As you can see from the table, in 2030, AWHI projects a substantial jump in heat pump water heater sales due to the new DOE water heating standards going into effect.
It’s hard to overstate the positive effects of such a rapid transition. Each of the 4 million heat pump water heaters projected to be sold in 2030 in the medium growth scenario would save around 3,000 kWh of electricity over traditional water heaters while still providing all the same steamy showers. That’s enough electricity saved cumulatively to replace three average coal fired power plants! And these savings would be repeated every year with new installations of HPWHs replacing inefficient types of other water heaters.
Are these projections overly optimistic? Most consumers still haven’t even heard of heat pump water heaters and most contractors aren’t installing them. Yet, Rheem, one of the leading manufacturers of heat pump water heaters (and water heaters generally) has a very similar projection of 40% of market share for HPWHs by 2030.
Good news + bad news of rapid HPWH growth
The good news about the growth is that lots of manufacturers see the HPWH tsunami coming and are getting into the game with new products and technologies. It’s the best of times to be a HPWH nerd. AWHI’s report counts over 10 manufacturers (see the table below, note that some of the manufacturers are subsidiaries of larger companies) of HPWHs with hundreds of models available.
The bad news is that there is still a lot of work to get everyone ready for the big water heater transition already underway. AWHI’s report lists five areas of work to help tackle the thorniest problems facing the industry at this point in time: consumer and contractor awareness, high upfront costs, scaling the installer workforce, different types of equipment still needed, and reliability.
So, buckle your seat belts. This transformative heat pump water heater technology may still be unknown to many, but it’s about to reshape the way most of us heat water over the next decade. This is good news for meeting our nation’s hot water needs while saving energy for utilities and utility bill expenses for consumers. Yet, we need to start preparing the nation for this transition.
The most important point of the article: "Overcoming the knowledge gap with increased educational outreach about HPWH technology to consumers and contractors is crucial for acceptance and adoption of HPWHs." Contractors, on the whole (don't @ me, there ARE folks doing great work), are not doing a great job of sizing and installing these properly, simply because there is much more to consider than the water heaters of yesteryear. Best practices exist, and even with current technology limitations we can be doing a better job to ensure something remotely close to nameplate performance. In areas with inexpensive electricity, this is less important. But if you pay 0.50/kWh, as in CA, performance matters. People have long memories and we cannot afford backlash against technology that will come if we blow up electricity bills with terrible performance.