An HPWH works by transferring heat, not by creating heat. Through a reverse application of the standard vapor compression refrigeration cycle, a heat pump water heater uses an electrically driven compressor to remove heat energy from a low-temperature heat source (ambient air) and move it to a higher-temperature heat sink, the water stored in the hot-water tank.
    The components used in the vapor compression refrigeration/heat pump cycle: compressor, condenser, evaporator, and expansion device. In the compressor, refrigerant vapor is compressed, thereby raising its temperature and pressure. This vapor then moves to the condenser. In the condenser, heat flows from the hot refrigerant to water surrounding the condenser. As heat leaves the refrigerant, the refrigerant condenses to a high-pressure, liquid state. The heat removed from the refrigerant as it changes to a liquid is transferred to the water. This continuing cycle results in movement of heat from the ambient air to the higher-temperature residential hot-water supply.