GE's GeoSpring water heater uses heat pump technology to warm water, which is typically more efficient than standard electrical heaters. Heat is drawn from the air instead of created through electrical resistance.
Heat pumps have long been used for heating and cooling homes but are rarely used in water heaters. Heat pumps use electricity to draw heat from the ambient air. Operating much like reverse air conditioners, heat pumps use compression to create heat. Instead of allowing heat to disperse outside the system, as air conditioners do, it is instead moved to the water heater.
Since heat pumps rely on warmth in ambient air, they function more efficiently in warmer areas. People in warm locations who place their water heaters in a garage or outdoors are likely to see the best efficiency as the air has plenty of warmth trapped in it. Cold water temperatures tend to be a bit higher in these areas as well, which provides even better efficiency.
However, the operating cost of GE's hybrid technology may be difficult to calculate. Since heat is drawn from the ambient air, units placed indoors draw heat from inside the home. People using air conditioners may see a slight reduction on their electric bills. People heating their homes, however, may see slightly higher heating bills as some of the heat generated is transferred to the water heater.