Short answer
If you have an electric tank, or no gas service, a heat pump water heater is almost always the better replacement in Maryland: it uses roughly a third of the electricity and EmPOWER Maryland rebates through Pepco and BGE target it directly. If you have a working, properly vented gas tank, the decision is closer — the heat pump still runs cheaper, but the electrical circuit, condensate drain, basement space and chimney rework decide whether the switch pays.
Key takeaways
- Against an electric tank a heat pump water heater saves roughly $500 a year at round Maryland rates; against a gas tank, roughly $150 to $170.
- It needs a space between 40°F and 90°F with about 1,000 cubic feet of air, a condensate drain, and usually a 240-volt circuit.
- Upsize the tank: a 50-gallon gas household is usually best served by a 65- or 80-gallon heat pump unit, because heat pump recovery is slower than a gas burner.
- The federal 25C credit ended after 2025; EmPOWER Maryland rebates are now the main incentive.
- Montgomery County Bill 13-22 covers new construction. Nothing requires you to remove a working gas water heater.
On this page
Most water heater comparisons treat this as a fuel argument. In a Montgomery County basement it is an installation argument. The heat pump water heater wins on running cost almost everywhere in Maryland; whether it wins in your house comes down to four things the brochure leaves out — the air around it, the circuit beside it, the drain below it and the chimney the gas tank leaves behind.
If you are still choosing between storage and on-demand, start with tank vs. tankless in Maryland. This guide assumes you want a tank and are deciding what heats it.
Heat pump vs. gas at a glance
| Heat pump water heater | Standard gas tank | |
|---|---|---|
| Annual cost at illustration rates | About $188 | About $355 |
| Recovery speed | Slow in heat pump mode; faster with elements | Fast — about 40,000 BTU/h burner |
| Typical size for the same household | 65 or 80 gallons | 40 or 50 gallons |
| Space needed | 40–90°F room, about 1,000 cu ft of air | Combustion air and a working vent |
| Venting | None | Chimney, B-vent or power vent |
| Electrical | Usually 240 V, 30 A; 120 V plug-in models exist | None for standing-pilot units |
| Condensate drain | Required | Not required (non-condensing) |
| Effect on the room | Cools and dehumidifies it | None |
| Works in a power outage | No | Yes, with a standing pilot |
| Main incentive | EmPOWER Maryland rebates | Generally none |
How a heat pump water heater works
A heat pump water heater is a tank with a small heat pump on top. A fan draws room air across an evaporator, a compressor concentrates that heat, and a condenser wrapped around the tank puts it into the water. Backup resistance elements take over when demand outruns the heat pump or the room gets too cold.
Because it moves heat rather than making it, the U.S. Department of Energy’s heat pump water heater guidance puts it at two to three times the efficiency of a conventional electric tank. That is the whole case for it, and it is a strong one.
Most units let you choose how hard to lean on the heat pump:
- Heat pump only (often labelled efficiency or eco): lowest cost, slowest recovery.
- Hybrid (auto): heat pump first, elements when demand outruns it. The setting most households should live on.
- High demand: brings the elements in sooner. Useful for a houseful of guests; costly as a permanent setting.
- Electric only: the unit behaves like a standard electric tank. Use it only while the room is outside the heat pump’s operating range.
Running cost in a Maryland house
We use the medium-use pattern from the federal efficiency test (55 gallons a day, heated 67°F) and round illustration rates of $1.90 per therm and 20¢ per kWh. Substitute the all-in rates from your Washington Gas and Pepco or BGE bills — the ranking holds across any realistic Maryland rates, the gaps do not.
| Water heater | Typical UEF | Annual energy | Annual cost at illustration rates |
|---|---|---|---|
| Heat pump water heater | 3.5 | ~940 kWh | ~$188 |
| Condensing gas tankless | 0.95 | ~118 therms | ~$224 |
| Standard gas tank, 40–50 gal | 0.60 | ~187 therms | ~$355 |
| Standard electric tank | 0.92 | ~3,570 kWh | ~$715 |
Against an electric tank there is no contest: roughly $500 a year at these rates, which is why we recommend a heat pump unit on nearly every electric-tank replacement where the space allows it. Against a gas tank the saving is real but smaller, around $150 to $170 a year, and the installation scope decides whether it pays.
The UEF figure assumes the unit spends most of its time in heat pump mode. A unit undersized for the household, or left on high demand, spends more time on its elements and drifts toward the electric-tank row. That is why sizing matters more here than on any other water heater.
Sizing: store more, because it heats slower
A 40,000 BTU gas burner reheats a tank quickly. A heat pump moves heat far more efficiently but far more slowly. The practical result is that a heat pump unit keeps up with the same household by storing more hot water: a family well served by a 50-gallon gas tank is usually best served by a 65- or 80-gallon heat pump unit.
DOE’s advice for any storage water heater is to compare first-hour ratings against your peak hour of use, and that is the number to read on the EnergyGuide label here. Matching tank sizes — 50 for 50 — is how heat pump owners end up running on the backup elements every evening.
The basement it sits in
DOE’s guidance is a location that stays between 40°F and 90°F year round with about 1,000 cubic feet of air around the unit; manufacturers allow smaller rooms with louvered doors or ducted intake and exhaust. An unfinished basement in Silver Spring or Bethesda clears that easily. A tight utility closet in a townhouse often does not.
The part homeowners notice is that the unit cools the room it is in. Running the numbers above, it pulls something like 8 million BTU a year out of the surrounding air — about 2,300 kWh worth of heat. In a humid Maryland July that is free dehumidification and a cooler basement, and many households retire a dehumidifier. In January, in a finished basement, part of that heat comes back out of your furnace or heat pump. In an unfinished basement it mostly comes out of the ground and the foundation, which is the best case.
It also hums. The fan and compressor sound about like a dehumidifier; under a bedroom or beside a home office, that matters.
The circuit, the drain and the chimney
Three pieces of installation scope separate an easy switch from an expensive one:
- Electrical. Most heat pump water heaters need a dedicated 240-volt, 30-amp circuit. Replacing a gas tank means running one, and on an original 100- or 150-amp panel in a 1950s Silver Spring or 1980s Olney house, we check capacity first. Newer 120-volt plug-in models are built for exactly this replacement and can avoid the new circuit, at the cost of slower recovery.
- Condensate. The evaporator makes water. It needs a floor drain, a laundry sink or a condensate pump, and a drain pan if there is finished space below.
- The chimney. When a gas water heater shares a chimney with an atmospheric furnace or boiler, removing it changes how that chimney drafts for the appliance left behind. The fuel gas code requires the remaining venting to be re-evaluated, and a liner is a common result. The reverse case — a furnace that went high-efficiency years ago and left the tank alone in an oversized flue — is the one we find most often, and there the heat pump conversion removes the problem. Our power vent vs. atmospheric guide walks through that chimney problem and every way to fix it; we check for it on every furnace installation for the same reason.
Removing a gas water heater also means capping its gas line, which is gas work under a WSSC Water permit in most of Montgomery County, and the new circuit is electrical work. We handle both on the same job.
Rebates, the end of 25C, and Bill 13-22
EmPOWER Maryland utility rebates through Pepco and BGE target heat pump water heaters directly, and they usually require an ENERGY STAR certified model. Amounts change by program cycle; we confirm the current figure when we quote.
The federal 25C credit — 30% of cost up to $2,000 for a qualifying heat pump water heater — ended for equipment placed in service after December 31, 2025. Older articles and some sales sheets still quote it. It no longer applies to a 2026 installation.
Montgomery County Bill 13-22 is the other thing people ask about. The Council’s bill directs all-electric building standards for new construction, phased in from the end of 2026. It does not require existing houses to convert, and replacing a gas water heater with another gas water heater remains an ordinary permitted job. If you are switching, switch because the numbers work in your house, not because you think the county requires it.
Maryland note: in parts of Potomac with no gas main — much of Glen Hills and Travilah — the real alternatives are propane or an electric tank. There the heat pump water heater is the clear choice, provided well-water sediment is managed with the right anode and an annual flush.
Which one to choose
Choose a heat pump water heater when:
- you are replacing an electric tank;
- there is no gas service, or the gas tank is the last gas appliance in the house;
- it will sit in an unfinished basement or garage with space around it;
- a 240-volt circuit is easy to run, or a 120-volt plug-in model fits your household’s demand.
Stay with gas when:
- the gas tank is properly vented and you want the lowest installed cost;
- the only location is a small finished space you need to keep warm and quiet;
- you want hot water through power outages;
- the household’s peak demand would push a heat pump unit into its backup elements every evening.
If gas stays and you want unlimited hot water rather than a tank, the comparison becomes gas versus electric tankless — and in that matchup, gas is the one that works through a Maryland winter.
How we quote it
A water heater installation quote from us prices gas and heat pump options side by side: unit, circuit, condensate, venting changes, permit and the current rebate. If the existing tank is leaking now, the water heater repair visit starts with whether a same-day like-for-like replacement buys you time to plan the switch properly — our repair or replace guide explains how we make that call. Send us the tank’s age and location and we will tell you which way it leans.
Sources
- Heat Pump Water Heaters U.S. Department of Energy, Energy Saver Two to three times the efficiency of electric resistance; 40–90°F location range and about 1,000 cubic feet of surrounding air.
- Heat Pump Water Heaters — ENERGY STAR certified products U.S. EPA and DOE, ENERGY STAR Certified models and their efficiency ratings — the listing utility rebate programs reference.
- Bill 13-22, Buildings — Comprehensive Building Decarbonization Montgomery County Council All-electric building standards for new construction; existing buildings are not required to convert.