A heat pump water heater (HPWH) uses the same refrigerant-based technology as your AC — but instead of cooling your house, it pulls heat from the surrounding air and uses it to heat water. The result: it uses 3–4 times less electricity than a standard electric water heater and about half as much energy as gas.
Right now, in 2025–2026, California rebates stack on top of a 30% federal tax credit to make this the single best-ROI appliance swap available. The rebates will not always be this good. This is the window.
A Rheem ProTerra 50-gallon costs ~$1,400. Subtract: TECH CA rebate ($1,000) + utility rebate ($300–$500) + 30% federal tax credit on what’s left. Your net cost can drop to $200–$400. Install cost on top of that is typically $300–$600.
HPWHs need at least 700–1,000 cubic feet of surrounding air space (roughly a 10×10 ft room) to work efficiently. A garage, basement, or utility room usually works. A tight closet doesn’t. They also produce a small amount of cool, dehumidified air — a bonus in California summers.
You’ll also need a 240V electrical outlet nearby (same as a dryer). If you’re replacing a gas water heater, you’ll need an electrician to run a new circuit — factor ~$300–$600 into your budget.
The TECH Clean California program offers up to $1,000 for heat pump water heaters. You don’t need to apply ahead of time — your contractor or retailer claims it on your behalf if they’re a participating contractor. Make sure they are before you sign anything.
Your utility may offer a separate rebate on top of the TECH CA rebate. These stack. Enter your zip code or select your utility below to find your specific offer.
These two dominate for good reason. Both are Energy Star–certified, both qualify for all rebates, and both have solid track records in California climates. The Rheem ProTerra has a slightly better efficiency rating (UEF 4.0 vs 3.75) and a built-in leak detector. Either is a great choice.
Buy the 50-gallon or 65-gallon for most households. Avoid the 40-gallon unless you’re solo.
Installation by a licensed plumber typically costs $300–$600 for a straightforward swap. If you’re converting from gas, add electrical work. Always confirm your installer is TECH CA–enrolled before signing — that’s how the rebate gets applied at point of sale, meaning you never pay it out of pocket and wait for a check.
The Inflation Reduction Act provides a 30% tax credit (not a deduction — a dollar-for-dollar credit) on the purchase and installation cost of a qualifying HPWH. File IRS Form 5695 with your tax return. Keep your receipts. There’s no income limit. The credit applies to whatever cost remains after rebates.
Available statewide. Contractor applies on your behalf at point of sale.
techcleanca.com →Stacks with TECH CA. Paid after installation. Submit receipt online.
PG&E HPWH rebate →File IRS Form 5695. Applies to purchase + installation. No income limit.
IRS tax credit →| Model | UEF Rating | Tank Size | List Price | Buy |
|---|---|---|---|---|
| Rheem ProTerra 50-gal | 4.0 (highest) | 50 gal | ~$1,400 | Home Depot → |
| A.O. Smith Voltex 50-gal | 3.75 | 50 gal | ~$1,200 | Lowe’s → |
| Rheem ProTerra 65-gal | 3.75 | 65 gal | ~$1,600 | Home Depot → |
Some contractors offer a “free” water heater that’s actually a long-term service lease. Read the contract carefully. You want to own the unit outright to claim the tax credit and maximize your long-term savings.