For those homes using electricity to heat their water, an electric heat pump storage water heater can be a more efficient source of water heating. Energy Star estimates that these homes will have savings of $300 or more per year, with savings increasing as usage increases. While a qualified heat pump water heater costs more upfront, the savings will pay back the difference in about three years.
Energy Star recommends that heat pump water heaters be installed in interior spaces that remain between 40°-90°F year-round, and provide 1,000 cubic feet of air space around the water heater. They generally don't operate as efficiently in colder spaces, and can cool the spaces they are in. If possible, consider installing in a space with excess heat, such as a furnace room.
Note: A heat pump water heater can be used not only to heat the water for your home, but also to heat your pool. According to SC Edison, a heat pump water heater is much more efficient than gas or standard electric pool heaters. By combining water heater functions, you may be able to further reduce your overall energy costs.
To estimate your potential to save energy and money by installing this improvement, please see the U.S. Department of Energy's Home Energy Saver calculator.