Planet Earth

Climate-Friendly Water Heating

A Santa Clara County Guide

How much will it cost?

Installation of a heat pump water heater usually costs $6-7,000. You can get rebates and tax credits of up to $3,400, which makes it cheaper than getting a new gas heater. You’ll also save about $130 per year in utility bills [1]. Better still, you'll eliminate the equivalent of 4,835 pounds of CO2 per year, equivalent to the total emissions of 18 Ugandans!

Most heat pump water heaters cost from $1,900-$3,000. Recent data from real householders in San Mateo in a Peninsula Clean Energy spreadsheet showed a median cost of about $6,500 to install, including any needed electrical work. SVCE has a similar median in their published data.

The remarkable news is that (as of Jun 2023) rebates will pay for most of this. Silicon Valley Clean Energy (SVCE) will give you $2,000, and  BayREN will give you another $400 if you use one of their approved contractors (if you live in San JosePalo Alto, or Santa Clara city, you are not covered by SVCE, but follow those links to find local rebates). You can also get a 30% tax credit under the Inflation Reduction Act, and low-income (CARE/FERA) customers can get an extra $1,000.

So, a $6,500 install drops to $4,100 after rebates, and $2,870 after the tax credit. You'll save about $1,950 [2] in utility bills over a 15-year lifespan, and you'll also 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.

Low-Income? IRA may pay your full cost

The Inflation Reduction Act will pay the full cost of energy-efficient upgrades, including heat pump water heaters, if your household income is less than $134,800 and will pay half the cost if your income is below $252,750 (for a 4-person household in Santa Clara county). See the Rewiring America calculator for more information. They have a limit of $1,750 for water heaters, but $2,500 for rewiring and  $4,000 to upgrade your breaker box.

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 Santa Clara county (Home Blue). Let's say an average of $3,000, for a 60-gallon tank. So if you have an old water heater, then you'll save big time with a heat pump, since your after-rebate costs will almost never be as much as 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 a few years longer - I can't find any concrete data, but heat pump warranties are usually 10 years, vs. about 6 years for most gas heaters (and hundreds of dollars to buy a longer warranty), so draw your own conclusions from that!

Extra costs for some houses

One issue that can drive up costs is electricity supply. Most heat pumps use 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 - SVCE will give you $1,000 and you can get that 30% tax credit from the IRA, up to $600. Together these would bring a $2,500 panel upgrade down to $1,050. You may also be able to avoid upgrading your panel with smart circuit management, an approach known as a watt diet.

A panel upgrade is 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, and probably an electric car too, so upgrading while incentives are available makes smart sense. 


[1] $130/year savings is estimated based on Santa Clara 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] 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.


Back to the Santa Clara County Guide to Climate-Friendly Water Heating.