Here we present a basic development of a residential heat pump water heater for local use. It was designed, built and tested as a replacement for an electric resistance water heater. Results were succesful and proved energy efficiency heat pump water heater’s advantage. Based on an experimental design methodology, performance was improved by mean of adjusting parameters to appropriate levels. Also, a market analysis facing the possibilities of heat pump water heater was made realizing the economical capability of local users. Finally, we recomend some key points to direct the local development of this technology.