Installation costs for a heat pump water heater are usually about $6-7,000, and you can pay for most of that with rebates and tax credits. Because the new water heater will be more efficient, you’ll save about $170 per year in utility bills [1]. Better still, you'll eliminate the equivalent of 6,600 pounds of CO2, the total annual emissions of 23 Ugandans!
Most heat pump water heaters cost from $1,900-$3,000, and you’ll probably need a contractor to install it. Recent data from real householders in San Mateo in a Peninsula Clean Energy spreadsheet showed a median cost of about $6,500, including electrical costs. Recent prices are probably a bit higher, maybe about $7,000
The amazing news is that (as of Feb 2024) rebates will pay for almost all of this. Peninsula Clean Energy (PCE) will give you $2,000 and Golden State Rebates will give you another $900 ($700 for a tank <45 gal) and you can also get a 30% tax credit for any remaining cost, from the Inflation Reduction Act, bringing a $7,000 initial cost down to just $2,897 [2], a little cheaper than the typical cost of installing a gas water heater:
| Initial Cost | $7,000 |
|---|---|
| PCE rebate | $2,000 |
| Golden State rebate | $900 |
| Cost after rebates | $4,100 |
| 30% IRA tax credit | $1,203 |
| Net Cost | 2,897 |
You'll also save up to $2,250 [2] in utility bills over a 15-year lifespan, and you'll avoid the $2-4,000 replacement cost when your old water heater wears out or floods. So, not only will you slash your emissions, you'll almost certainly save money while doing it and gain peace of mind.
Burlingame city will also waive the permit cost, which will save a bit more - make sure your installer knows this and doesn't charge you!
Note: TECH Clean CA rebates were recently withdrawn when they hit their budget cap. There is a good chance that they will have additional rebates of >>$1,000 within the next 3-4 months, if you want to plan your water heater replacement now and wait a bit to install. Stay tuned!
Extremely generous TECH rebates are still available for low-income residents (income <$104,000 for living alone up to income <$149,100 for a family of 4), including to $4,885 for a water heater ($4,185 for <55 gal), and from $2,000 to $4,000 for electrical upgrades, making a new water heater essentially free for most qualifying residents:
| Initial Cost | $7,000 |
|---|---|
| PCE rebate | $2,000 |
| TECH rebate | $4,185 |
| Golden State rebate | $900 |
| Cost after rebates | $-745 |
| 30% IRA tax credit | $0 |
| Net Cost | $0 |
If you still don't have enough ready cash to pay for the upgrade, you can now get an interest-free loan from Peninsula Clean Energy, for up to 5 years. The beauty of this is that you pay it back by a surcharge on your utility bill. If you are saving $200 a year on power, then you can borrow $1,000 and not pay a penny extra on your bill! After 5 years, you will be saving that $200 per year.
Gas water heaters are meant to last about 10-12 years, less if you don't do regular maintenace. They cost about $2,000-$4,000 to replace in San Mateo county (Home Blue). Let's say an average of $3,000. So if you have an old water heater, then you'll save money with a heat pump, since your after-rebate costs will likely be cheaper than the cost of replacing with a gas heater. You'll also avoid the potential of your old water heater failing, flooding your house and needing an emergency replacement. Plus, heat pumps last quite a bit longer - I can't find any concrete data, but heat pump warranties are usually 10 years, vs. about 6 years for most gas heaters, so draw your own conclusions from that!
One issue that can drive up costs is electricity supply. Most heat pumps run on 220V electricity, so you may need to run a new circuit to supply it (this cost is included in the estimates above). If that maxes out your electrical supply at the breaker panel, it can cost up to a few thousand to upgrade the panel. You can also get rebates for that - PCE will give you $1500 and you can get that 30% tax credit from the IRA, up to $600. Together these would bring a $2500 panel upgrade down to $700. You may also be able to avoid upgrading your panel with smart circuit management, an approach known as a watt diet.
If you need a panel upgrade, consider it an investment, not a cost: California will phase out gas water heaters and furnaces starting in 2030, so you will need more electricity to power their replacements anyhow, and you'll likely want to have electric car charging by that time too, so upgrading while incentives are available makes smart sense.
[1] $170/year savings is estimated based on San Mateo county numbers and a 4-person 'average' household. You can find our assumptions and calculations here. You'll save less if you're living on your own and more if you have teenagers that spend forever in the shower...
[2] Several other rebates are listed at The Switch is On but the ones above are the best option if you live anywhere in San Mateo county. BayREN rebates are omitted because they are less than the Golden State rebate and you can't combine them.
[3] Your savings will probably increase with time as gas is predicted to become much more expensive (due to less people using it and higher infrastructure costs, plus climate regulations), and electricity will be relatively cheaper. If you have your own solar panels, electricity will be dramatically cheaper than these estimates.
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Back to the Burlingame Guide to Climate-Friendly Water Heating.