Reservoir startup raises $8 million for heat-pump water

Boston-based startup Reservoir has raised $8 million in seed funding to expand beyond its roughly 100 local installations. The company offers a heat-pump water heater with a service that includes installation by in-house tradespeople.

Jonathan Cohen, a labor economist, paid a little over $4,000 for a Reservoir unit after federal and local incentives in late 2025. He chose the startup to avoid coordinating separate plumbers and electricians. "They definitely catered to me," Cohen said.

Efficiency and Market Barriers

Heat-pump water heaters are about three times as efficient as gas-fired or electric-resistance varieties. Switching from a resistance system can save a household almost $23,000 over the appliance's 15-year lifetime. They also act like air conditioners and can replace dehumidifiers in muggy basements.

Despite these benefits, the technology has not taken off. Americans bought about 5 million electric water heaters in 2024, but only an estimated 214,000 were heat-pump models, according to the New Buildings Institute.

"The biggest barrier is cost," said Noah Gabriel, a senior project manager at the institute. He cited the price difference between two Rheem products.

Installation adds another $1,000 to $4,000 or more. A federal tax credit of up to $2,000 was eliminated last year. Some states, cities, and utilities still offer rebates ranging from $150 to $4,000.

New Models and Features

Manufacturers are introducing new features to improve affordability and ease of installation. While most units require a 240-volt outlet, Rheem, A.O. Smith, and GE Appliances now produce versions that use a standard 120-volt socket. These are less powerful but suit households of one to four people. GE also offers a product with flexible voltage.

Space requirements are another consideration. Most models need 400 to 700 cubic feet of air around them. For tighter spaces, split systems move the heat-pump unit outdoors. SanCO2 has sold such a product for years, and A.O. Smith launched its own offering in April. Midea won a national competition for its split-system prototype this month.

Smart Grid Integration and Savings

To help users save money, most manufacturers provide apps for scheduling water heating when grid power is cheapest. The appliances can also join utility programs like California's WatterSaver, which rewards customers for reducing energy use during grid stress. Some users have reported glitches with these scheduling systems.

Startups Reservoir and Cala Systems are embedding onboard computers to automatically use cheap power. Their software learns a household's daily hot water needs to deliver it with minimal energy. Cala Systems, which has sold nearly 400 units across 36 states, says it reduced use of the backup electric-resistance element from a typical 35% of the appliance's energy use to just 7%.

Cohen is now recommending the technology to friends. His basement in Somerville, Massachusetts, no longer has a whiff of gas. "It's really nicely designed," he said.