How This Heat Pump Water Heater is Also a Battery

Heat pump water heaters have been around for over a decade. If you follow this channel, you probably know they're three to five times more efficient than a standard electric tank. ^{1 2} Maybe you've got one. I do.

But here's what most people don't realize. Even if you own a heat pump water heater, it's still pretty dumb. It heats reactively. The tank drops below the setpoint, the compressor kicks on. It doesn't know your schedule. It doesn't know your electricity rates. And it definitely doesn't know when your solar panels are cranking.

Two Boston startups think that's a massive missed opportunity. They're treating the water heater as a thermal battery, a cheap, insulated vessel that can store energy as heat, shift electricity use to cheaper hours, and participate in grid services.³ One of them, Wilmington, Massachusetts-based Cala Systems, invited me to tour their factory. Their predictive software is licensed from the National Renewable Energy Lab. According to a California Energy Commission study, intelligent scheduling on time-of-use rate plans alone can cut costs by 15 to 19 percent beyond what a standard heat pump water heater already saves.³

So I went inside to find out: is a smart water heater actually worth the premium? Or is "intelligent" just a buzzword bumper sticker slapped on a tank of hot water?

Cala Systems was founded in 2020.⁴ They started with 100 square feet at Greentown Labs, the climate tech incubator in Somerville.⁵ Now they're in a 25,000 square foot manufacturing and R&D facility, and they're shipping product. I met up with Mike Ting, the VP of Hardware and co-founder, who walked me through the operation.

Mike's background is in consumer hardware. He spent years at Bose on their headphone team and then at SharkNinja on Ninja kitchen products.^{5 6} His co-founder, Michael Rigney, is a mechanical engineer with 20 years in the electricity market. That includes a stint at EnerNOC, the demand response company that IPO'd in 2007.^{5 6} Between them, they've got the hardware chops and the energy market knowledge to pull this off.

But before we got into how the factory works, I wanted to understand what makes this water heater different from the Rheem or A.O. Smith heat pump units you can buy at Home Depot. Because on the surface … it's still a tank that heats water. So what's actually changed?

The Intelligence

I sat down with Michael Rigney to get at the core issue.

“There are two fundamental ways to think about how Cala saves money versus a different heat pump water heater. Let's talk about the basics in all homes first.”

“First, with the variable speed compressor we run at a lower speed, and that increases the efficiency of the heat transfer process.”

“Second, by preheating the tank, we're able to avoid the use of the electric resistance elements. And that is a tremendous use of energy.”

“Third, a typical heat pump water heater is going to reheat as soon as it's cold. Well, you don't need to do that if it's 9 o'clock and no one is going to use hot water until 7 o'clock in the morning. We're able to identify that. We're able to avoid some of that heating, and that gives us increased efficiency.”

“Finally, some units are installed in a garage or an attic where the temperature changes throughout the day. If we're able to coordinate the heating with warmer air, you get a really nice efficiency boost from that as well.” – Michael Rigney

Four ways to squeeze efficiency out of a heat pump water heater without changing any external infrastructure. Just by being smarter about when and how you heat.

Let me translate those. A variable speed compressor is like driving 55 instead of 80. You get better mileage. Predictive preheating means the resistance backup elements almost never fire. One field study found that older GE units burned nearly a third of their electricity on resistance backup.⁷ Every time those elements kick in, you're basically running an old-school electric heater.

One thing I find so frustrating about my Rheem heat pump water heater is that it has an “energy saving” mode that you would think will save you energy. The app has a giant banner yelling at me to change into that mode every time I take a look, but in my testing the energy saver actually uses more energy … not less. It’s because it’s kicking on the resistive heating elements after we use hot water to speed up the hot water recovery time. If I leave my unit in heat pump only mode, it uses a lot less energy overall.

I also talked to Reid Kornman about his experience with a smart heat pump water heater. Reid's been a moderator on my Discord channel for years. By pure coincidence, he's also one of the first people in the country to own a Cala unit. He swapped out a natural gas water heater and has been tracking the data ever since. His take on the day-to-day?

"I'm a data nerd. I go into the app every other day and look at the charts. But I don't actually change any settings. It just works. And if you get low, like maybe less than a third of a tank of hot water, it goes into boost mode and it recovers and everything's fine. I don’t have to change any settings." – Reid Kornman, Cala owner

That's the contrast. My Rheem screams at me every time I open the app. Reid doesn't touch a thing.

For Cala, skipping unnecessary reheating means if nobody needs hot water until 7 AM, the system lets the tank coast and reheats at 5 AM, when electricity might be cheaper. And ambient temperature coordination means if the unit is in a garage that hits 75°F in the afternoon, it runs the compressor during the warm hours. Simple physics, but no standard heat pump water heater does this.

And that's before you add solar or time-of-use rates.

The Thermal Battery Concept

“Can you describe how thinking about a water heater as a battery changes the approach to the design?” – Matt

“My background is mechanical engineering with a focus in thermal sciences, basically how heat and energy behavior in a system. And then I've spent 20 years working in the electricity market, primarily in demand response and energy efficiency. If there is one thing you learn working in those fields, it's that when electricity is used has value.” – Michael Rigney

“I came into the space by encountering the predictive control technology that we ultimately licensed from the National Renewable Energy Lab. And if you have that background, it's just this light bulb moment where you're like, of course that's better. Because it maximizes shiftability. And shiftability is that capability to change in time when the electricity is used. That is the fundamental driver of the design.” Michael Rigney

Shiftability. That's the word. A regular water heater heats reactively. The tank gets cold, it turns on. Cala's system heats predictively. It knows when you'll need hot water and pre-builds it when the conditions are most favorable. And the software decides the when.

But here's the hardware trick that makes the whole thermal battery concept click: the mixing valve.

A traditional water heater stores water at the temperature you want to use it. Maybe 125°F. Cala's system stores water hotter than that.^{8 9} It's overcharging the battery. You're packing in more thermal energy than you need right now, so you can draw it down later.

The obvious problem? Nobody wants scalding water from the faucet. The mixing valve solves that. As hot water leaves the tank, the valve blends in cold water to hit exactly the temperature the homeowner prefers. Perfectly tempered every time.

And here's the practical upside. A 65-gallon tank full of extra hot water, mixed down on the way out, delivers far more usable hot water than 65 gallons at a normal setpoint.⁸ You effectively get a bigger tank … without a bigger tank.

So the insulation holds the heat. The mixing valve meters it out at the right temperature. And the software decides when to charge. That's what makes this a thermal battery. You charge when electricity is cheapest or when solar is producing. You discharge the battery whenever someone turns on the tap. The mixing valve and software are the pieces that connect the energy strategy to the everyday experience of just … having hot water.

Reid's household put that to the test.

"The tank is 65 gallons, but it's big enough to have a buffer. I have six people in my house and we never run out of hot water." – Reid Kornman

Six people. Never runs out. That's the mixing valve doing its job.

But I wanted to see how these actually get built. Because if the intelligence depends on precise hardware, the manufacturing has to match.

How a Heat Pump Water Heater Works

Before the factory tour, a quick primer for anyone new to heat pump water heaters. Mike had the perfect way to explain it.

“When people realize that it’s the same basic principle as why an air conditioner takes heat from inside my house and moves it outside, they go, oh that makes sense. We go, exactly the same thing. Instead of toasting the water or burning a fossil fuel to heat the water, you're using the electricity to power the compressor, which is a pump. And so you get efficiencies that are three to five times higher than those systems.” – Mike Ting

That's the fundamental difference. A traditional electric water heater converts electricity directly into heat. A heat pump moves heat from the surrounding air into the water. Same principle as your fridge running in reverse. Three to five times less energy for the same hot water.

The Design Process

Mike pulled out a lineup of every prototype they've built over the last four years. I can't show you these on camera, but the progression tells the story of this company. They started by hacking a competitor's unit. Strapped a Raspberry Pi to it with external sensors everywhere. Installed them in real homes for six months to a year, just to prove the core idea worked.

“Let's take a competitive unit. Let's hack on the hardware that's going to be unique for us. So we added on a variable speed compressor, put on a mixing valve, put on our flow sensor. And then we had external controls. This was like Raspberry Pi, all sorts of external sensors of like, let's just get into homes and get some learning. So we built a handful of pilot units this way. This was like 2022, 2023, that time frame. And had them in the homes anywhere from like six months to about a year. And just learning, okay, does the core of MPC work? Is our hypothesis around variable speed compressors correct? All of that. And so this was really just proof of concept. Let's use someone else's water heater with our sort of advancements and prove that the core idea works. And obviously it did.” – Mike Ting

From there, they built from scratch. Ugly first. Then functional. Then polished. Four years of iteration.

“So it was actually fun to pull these out because it's a really friendly reminder. Like, as a startup, you're always, like, heads down. Every day is a battle. Every day is a battle, and then you sort of pick your head up and you go, wow, like, doing all this in four years as a startup, limited resources, you're learning how to do it the first time. You actually made a lot of progress and have gotten something out in the world that people want to buy and you know so far customer satisfaction scores have been really high so it was really nice to pull these out and show the team of like hey everyone like work really hard on these and don't forget that like even when things are crazy like this is impressive and most people go their entire careers without sort of doing something like this where you take something that's you know just a hacky prototype to something that you are going to ship and scale at mass volumes.” – Mike Ting

One thing Mike didn't expect: people keep complimenting the design. They worked with an ex-colleague from Bose on the industrial design. Most water heaters look like … well … water heaters.

“Most of the water heaters out there are sort of boring and utilitarian. We wanted to create this modern but not sort of ostentatious design. Overwhelmingly, that's one of the things that we've gotten comments about that we weren't expecting.” – Mike Ting

Now let me walk you through the three manufacturing steps that matter most for understanding why this product works the way it does. I've always been curious what it looks like to make a water heater like this.

The Tour

Building The Tank

“Okay, so basically what happens is we start and we get a raw tank. The tank comes in. The first thing we do is we bring it over here, and this is a stud welding station. So there's a gun over here that basically is a capacitive discharge gun, and we put threaded studs in there and weld them on various locations in the tank, and those studs are then used to hold brackets which hold various parts on. " – Mike Ting

From there, the tank moves to a rotating palette where they apply thermal grease to the walls. Think of it like thermal paste on a CPU. It improves heat transfer through the carbon steel. Every manufacturer does this in some form. Cala had to figure out their own process from scratch.

"We literally started by buying buckets of this stuff. It's sort of like peanut butter smearing it on, which is really inconsistent. From there it was like how do we develop a process for manufacturing." – Mike Ting

Now they've got a dialed-in method that gives every tank the same thin, even coating. Consistent and repeatable.

Next comes the part that actually makes this a heat pump.

“But basically, the aluminum coil wraps around the tank. And this is what the refrigerant flows through, right? So you have your refrigerant, which is a fluid really good at absorbing heat. That gets sent around this loop by the compressor, which is just a pump. And so it flows in through the top, down around the bottom. And that's what transfers heat into the tank. And so this is where you've got aluminum coil, you've got the thermal grease, so you've got really good heat conductivity through here. So that’s where you’re getting your efficiency gains by using that heat pump instead of using the electric elements.” – Mike Ting

At this stage, it's basically just an electric water heater. Elements, wiring, control boards … but nothing smart yet. The heat pump components come after insulation. The tank moves to the foaming station, where they inject liquid polyurethane, the same stuff that might be in your home's walls.

This is the step that makes the thermal battery concept possible. Two inches of polyurethane foam means the tank holds heat extremely well. You can heat the water hours, even half a day in advance, and barely lose anything.

The foaming process was a challenge to master. It turns out, foam wasn't built in a day.

"This operation is superficially really easy because it's just like hold the foaming gun and shoot, but actually dialing in the recipe for how much foam you want, making sure that you get good packing without having foam sort of shooting out is actually very challenging." – Mike Ting

The liquid form is the key. Unlike spray foam, it flows around the tank and fills every gap before it cures. About 90 seconds later, you've got a perfectly insulated shell. From there, final assembly starts. Everything on top of the tank … the heat pump components … goes on next.

Brazing and Leak Testing

Brazing is where the refrigerant lines get joined. Cala uses induction brazing instead of open flame, so every joint gets the exact same amount of heat. More repeatable, more reliable. Then they leak test with a helium sniffer, which is not a special breed of dog, but a specific tool.

"We actually fill the system with helium and we use this little sniffer gun, sniff around all the joints and make sure there's no micro leaks that wouldn’t show up just from auditory or a grosser measurement of pressure. That helium sniffer can detect like a couple of grams over the course of a year. So it's really trying to make sure that the heat pump is bulletproof." – Mike Ting

For a product that's supposed to last 15 to 20 years in your basement, that kind of precision matters. And the refrigerant they're using, R513A, has about half the global warming potential of the R134A in most competitors.^{8 10}

Quality Control: The Human Sign-Off

“The final thing we do is a safety check called a high pot test, a high potential test. We apply about 2,000 volts for 60 seconds to make sure there's no breakdown. Once that passes, we power the unit on and run our own internal diagnostic test. We actually turn the compressor on, make sure heat's getting into the tank. It runs through some software checks to make sure all the sensors are reading, make sure it's able to connect to Wi-Fi.” – Mike Ting

After the Sale

Once a unit ships and gets installed, Cala can see when it comes online. And they monitor new installations for the first few days.

“We have an internal alerting system where if any one of a set of abnormal conditions is triggered in a unit, we get alerted, we'll go take a look at the data. Most of the time it's just a false alarm, but we are very conservative and would rather be safe than sorry. If there does happen to be an issue, we can pinpoint what the issue is. And we can either, hey, we’re going to reach out to the homeowner directly and we can walk them through how to fix it. Or if for whatever reason we do have to send an installer we can say this is exactly what's wrong. This is the part you're going to need.” – Mike Ting

The ability to remotely diagnose a unit before a technician shows up is a legitimate advantage. No wasted truck rolls. No guessing. The installer knows exactly what they're walking into. I really wish my water heater had this as part of the system.

Reid heard the same thing from his installer.

"And he said back to me that these are one of the highest quality water heaters we've ever installed. They'd love to install more because they're just great to work with." – Reid Kornman

That kind of feedback matters. Installers recommend the brands that are easy to work with. If the people putting these in are impressed, that's a good sign.

So the manufacturing is solid. The intelligence is real. The remote monitoring is a genuine differentiator. But now comes the question I've been building toward: does all this actually pay for itself? Do all the bells and whistles make dollars and sense?

The Real Economics

The whole point of a smart heat pump water heater is that it saves you more money than a regular one. So how much more does it actually save? Well … it depends.

“46 percent of households in America have electric resistance water heaters. 6 percent have oil and propane. And roughly 47 percent (the balance) have natural gas. And the reason I bring that up and it’s not a short answer is because the savings is going to be a function of where you are, because the price of electricity and natural gas are massively different in different parts of the country.” – Michael Rigney

“Someone at the national average price of electricity with an electric resistance water heater is going to save about $5,000 over the lifetime of the product for a family of four.” – Michael Rigney

I dug into the research, because the numbers tell a more nuanced story than any marketing pitch.

The biggest chunk of savings comes from the heat pump itself. ENERGY STAR estimates a family of four saves roughly $550 a year switching from electric resistance to a heat pump water heater.¹ That accounts for the vast majority of savings. Smart or not, that's the math. Your electricity rate will determine exactly how much.

On top of that, smart controls earn their keep through time-of-use optimization. A California Energy Commission study found 15 to 20 percent cost savings from intelligent scheduling on TOU rate plans.³ That translates to roughly $70 per year on a standard TOU rate, with a potential $700 in lifetime value.¹¹ There's a catch. Storing water hotter drops efficiency from about 2.8 COP to 1.8.³ The mixing valve partially offsets that, letting the tank deliver more usable hot water even at higher setpoints. The bigger the gap between your peak and off-peak rates, the more that tradeoff pays off.

Then there are demand response payments. Utilities pay homeowners $10 to $110 per year to allow load-shifting events.^{12 13} A DOE-backed field study across 250 water heaters and 10 utilities showed twice-daily load shifts with only a 4 percent consumer opt-out rate.¹⁴ In fact, that study found connected heat pump water heaters cut 90 percent of evening peak load compared to standard electric resistance units.

And remember that field study where older GE units lost nearly a third of their energy to resistance backup?⁷ Smart scheduling avoids that. Another $20 to $50 a year. Not huge on its own. But it stacks.

Add it all up: a smart HPWH replacing electric resistance saves roughly $630 to $810 per year. But only $100 to $310 of that comes from the smart features. The rest comes from the heat pump.

The unit costs $2,999 before rebates.⁴ Michael says that's cost competitive with comparable heat pump water heaters in the professional installer channel.

The biggest savings come replacing electric resistance in a warm climate with steep time-of-use rates. The smallest from replacing gas in a cold climate on a flat electricity rate … but even then, there are still savings .¹⁵

And then there's the comfort angle. There's nothing smart about a water heater if you're taking cold showers.

“Comfort matters. Ample hot water at times of peak demand, that's what people buy the water heater for. So how homeowners really think about it as, hey, yeah, I’m getting savings, but they also think about as I have greater confidence that I'm going to have ample hot water when my family wants it. The last person to take the shower gets a hot shower too.” – Michael Rigney

Honest assessment? The economics work, but they're layered. If someone on social media tells you a smart water heater will save you thousands … they're right about the heat pump part. The smart premium? That depends on your rate structure, your solar setup, and whether your utility has demand response programs. It's real savings, not life-changing savings.

The Competition

Cala isn't the only company trying to raise the IQ on a HPWH. Another Boston-area startup, Reservoir,¹⁶ is taking the opposite approach: less software, more hardware.

Their 50-gallon unit packs in a recirculation pump, ultrasonic leak detection, an electronic anode rod rated to 20 years, and four independent heating elements. They claim a UEF of 3.53¹⁷ and a virtual 150-gallon capacity.¹⁸ Their units cost about $6,500, are fully installed by their own crews, and are currently limited to the Boston Metro area.¹⁹

The philosophical split is clear. Cala is intelligence-first, sophisticated predictive software paired with targeted hardware upgrades.²⁰ Reservoir is hardware-first, commercial-grade components in a consumer product. Different bets. Same thermal battery idea.

Both treat the water heater as a thermal battery. Both are in Boston.

The big story here isn't about which company wins. It's that the water heater, an appliance most of us never think about, is becoming a smart, grid-connected device.

One smart design choice: Cala doesn't need a direct connection to your solar inverter. You tell it about your system, which direction the panels point, your address, and it pulls a solar forecast. It works with any system from day one. Direct integrations add precision on top, but the baseline coordination is already there.

Reid confirmed that's how it works in practice.

"I have a small solar setup that only covers maybe 50% of my energy usage. But I gave them the specs by uploading my Con Ed bill. You can see the energy usage during the day. When it's real sunny, it bumps up the heat generation and it’s really cool." – Reid Kornman

A modest solar setup. No special wiring. The system just figures it out. If that's not smart, I don't know what is.

They've also announced Home Assistant support, which for the smart home crowd opens the door to connecting with pretty much anything. And they're heading toward Matter, the emerging smart home standard, which should unlock a wave of integrations all at once.

My Take

So after spending the day walking through this facility, watching every step from raw tank to finished product, talking to the people who designed and built it … here's my take.

The biggest win is still the heat pump itself. Switching from electric resistance to any heat pump water heater saves you about $550 a year (or more).¹ That's the dominant move. Smart or not, that's the math.

Stack those up and the intelligence adds another $100 to $310 in savings per year.³¹¹¹² Meaningful but incremental. It earns its keep if you have solar, if you're on a time-of-use rate plan, or if your utility runs demand response programs. If you're on a flat rate with no solar … the smart premium might be harder to justify on economics alone.

But here's what I keep coming back to. Cala's system avoids the resistance elements. It preheats before you wake up. It coordinates with whatever energy source makes sense. And it gets better over time through software updates. The hardware is the vessel. The intelligence is what evolves.

Is this the future of the water heater? I think so. Not because the $100 to $310 in smart savings is transformative on its own. But because treating a water heater as a thermal battery, a grid-connected, predictive device, changes the category. And it's not just water heaters. Every major home appliance, and every piece of energy consuming home infrastructure is going smart.

Quilt is doing the same thing with HVAC. Span rebuilt the electrical panel from scratch. Impulse Labs put a battery inside a cooktop. Sensors plus intelligence plus better hardware. Michael calls it "intelligent home infrastructure," and that's exactly what it is. Cala is building one version of that future. Reservoir is building another. And the major manufacturers will eventually follow.

Reid summed up the way a lot of early adopters feel.

"It's totally worth it. It’s going to be more worth it every year you have it. And I feel like that’s what it’s going to be with this." – Reid Kornman

Cala is still a startup. They're ramping production. They've got a facility capable of serving customers nationwide when they’re at full capacity, but they're not there just yet. Every unit that rolls off that line gets a human sign-off. And every unit that goes online gets monitored. For a company that's five years old, that's a … pretty hot start.

… okay, that pun was tepid at best. But hey, heat pump water heater puns? They can take a while to warm up.

I want to thank Mike, Michael, Phil, and the entire Cala team for giving us full access to the facility and answering every question.