The objective of this thesis is to determine the suitability of an air source heat pump water heater (HPWH) for Canadian climates. The performance of a commercially available HPWH was evaluated at a series of air temperature and humidity set-points representing outdoor conditions in Canadian climates. The resulting cost of energy in each climate was compared to the cost when using the unit with basement air and when using an electric water heater. A computer model was developed to simulate the annual performance of the unit when installed in a house and coupled with a heat recovery ventilator (HRV). The effects of the HRV on the performance of the HPWH were found to be negligible when the heating and cooling loads were taken into consideration. It was found that HPWHs have a lower cost of energy than electric water heaters in regions with time-of-use utility rates.