Heat pump style water heaters make use of the ambient heat energy that exists in the air or other sources to heat water. In effect, they move heat rather than generating it. Much like how an air conditioner takes warm air and extracts the heat from it, these water heaters apply much the same principle, using available heat sources and extracting the thermal energy, sending that through a heat exchanger to heat water. Depending on the geographical location and the season, this style may be a more efficient option than other forms of water heaters. But in colder climates where there is less thermal energy in the ambient air or in the ground, the efficiency of these units drops off, requiring other means to supplement hot water needs.