Heat-pump hot water systems use a refrigeration cycle to extract heat from the surrounding air. They then use a heat exchanger to heat water in an insulated storage cylinder. These systems work in a similar way to reverse-cycle air conditioners when run on a heating cycle, but heat water instead of the air inside your home. A heat-pump hot water system can be thought of as a type of solar water heater because the heat in the air ultimately comes from the sun. Unlike solar hot water systems, heat-pump systems don’t have an electric or gas boosting system. But they do use electricity to operate the evaporator fan and compressor when they’re heating water.