High-efficiency heat pump water heaters use 7 times less energy than gas water heaters and are 3.5 times less energy compared to electric water heaters. A heat pump water heater draws heat from the ambient air and transmits it — at a high temp — to heat the water in the storage tank, similar to how a refrigerator draws heat from within a box and delivers it into the air.
Heat pumps need a coolant that evaporates at lower temperatures to operate. The gas temperature rises as it is compressed, making it warmer than the tank water. The heated gas goes through a condenser and transfers its heat to the water, reverting to a liquid.