Heat pump water heaters 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% percent of new heating equipment sales (www.tinyurl.com/9kzxwj2w), according to data from the Air-Conditioning, Heating & Refrigeration Institute. Electric vehicles are at 8% of the auto market and growing fast (www.tinyurl.com/ycxuvx3w) and clean energy made up 96% of new capacity (www.tinyurl.com/3dknhxp4) added to the grid last year. 

HPWH on the other hand made up just 2.1% of (www.tinyurl.com/4enmes9a) 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 (full disclosure, I work at the Initiative), projects HPWH to explode 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 and expensive technology they are today into the leading type of water heater sold nationally in a short couple of years.

What is driving this rapid projected growth? Changes to policies and appliance standards and of course the climate crisis. 

Forces driving HPWH adoption

HPWHs are growing substantially on their own accord. Consumers are looking to save money and utilities are looking to save energy as we transition more equipment to run on electricity. 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, of course, that is likely not supportive of these standards. However, they will go into effect under the next administration (2029), so we’ll have to see how they are enforced. 

The other main driver of growth is air quality agencies that are phasing out appliances that combust fossil fuels in order 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 2 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 my previous PHC News column on the topic here.

Good news and bad news

The good news about this 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 of HPWHs with hundreds of models available. 

The bad news is that there is still a lot of work to do to get everyone ready for the big water heater transition already underway. The report lists out five big 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 HPWH 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 the climate and our pocketbooks but we advocates need to start preparing the nation for this transition.

Read AWHI’s State of the HPWH Market here.