The right choice depends on what fuel your home has now, where the heater sits and your budget. Compare the yellow EnergyGuide label's estimated yearly cost, not just the efficiency number, because gas and electricity cost different amounts.
Heat pump water heaters
- ENERGY STAR: 60–70% less energy than standard electric resistance heaters, with estimated savings of about $550 a year for a household of four and a payback of about 3 years.
- Space: the area must stay between 40°F and 90°F year-round, with about 1,000 cubic feet of air around the unit. San Diego's mild climate may make a garage workable; check the space with your installer.
- They cool the space they are in, take more installation work and need periodic air filter cleaning.
Incentives in 2026
- Federal 25C credit: 30% up to $2,000 for heat pump water heaters, but only for units installed by December 31, 2025, per the IRS.
- TECH Clean California single-family incentives: fully reserved statewide since November 14, 2025; new projects go on a waitlist.
- HEEHRA single-family rebates: fully reserved statewide as of February 24, 2026.
- SDG&E: its rebates page lists a heat pump water heater rebate but says retail rebate offerings have ended; confirm with SDG&E before counting on it.
Gas and standard electric tanks
Gas tanks recover faster: A.O. Smith gives about 30–40 minutes for gas versus 60–90 minutes for electric. Standard electric tanks are simple to install but, per ENERGY STAR's comparison, use far more energy than a heat pump model. Switching fuel types usually means new gas, venting or electrical work and a permit.
General information, not professional or legal advice; follow your manufacturer's manual, and your installer and local permit office have the final word. Sources:ENERGY STAR, Heat pump water heaters; ENERGY STAR, Heat pump water heater savings; IRS, Energy Efficient Home Improvement Credit; TECH Clean California, single-family incentives; TECH Clean California, HEEHRA rebates; SDG&E rebates; A.O. Smith, Water heater not working (recovery times). SD Water Heaters is not affiliated with any manufacturer; brand names are used only to identify products, and codes can differ by model, so confirm in your own manual.
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