This paper presented a new approach to energy consumption prediction from a domestic air source heat pump water heater (ASHPWH) based on grey system theory. An improved GM (1, 1) (i.e. a single-variable first-order grey model) applied in domestic hot water system was developed and its prediction accuracy was tested. Comparison of the measured and predicted values of heat from hot water and electricity consumed by the ASHPWH for two typical families (with 4 members and 2 members) were done. Results showed that, the prediction accuracy of the improved GM (1, 1) increased with increase in the data sample interval. The data sample interval of four weeks produced the best prediction accuracy. Based on the improved GM (1, 1) and weather data of Shanghai, the electricity cost saving, the monthly average heat and electricity consumption and the annual carbon emission reduction related to the use of the ASHPWH for the two typical families were evaluated and compared with those of the conventional electric resistance water heater. (C) 2011 Elsevier B.V. All rights reserved.