Heat pumps are refrigeration machines that use changes in pressure to enable a refrigerant to transfer heat by condensing and evaporating at different temperatures. The key to the system is the refrigerant, such as freon, which can evaporate or condense at convenient temperatures, depending on pressure. A heat pump produces approximately 14,000 Btu per hour of heat for one kilowatt of electricity, contrasted with resistance heating which produces about 3,400 Btu per hour for one kilowatt.

A water heat pump system uses the heat pump to draw heat from the water. The captured heat is used in the winter for heating. During the summer, the heat pump draws heat from the building to cool the structure. The heat is then absorbed by the water. In some situations, well water is used instead of a cooling tower reservoir. Annual overall heating and cooling costs are substantially lower with a heat-pump system as compared to oil or electric-resistance heating.