Hard work over the past few months paid off when manufacturers and utilities agreed to specification tiers for gas water heaters, both tank and tankless. Initial discussion in St. Louis focused on the draft high efficiency residential water heating initiative description. This document was released to manufacturers for comment earlier in September, and the Industry Partners Meeting was an excellent chance to discuss it before making recommendations to the CEE board.
Market Barriers Discussed
A number of market barriers have made it difficult to identify an appropriate efficiency standard for residential gas storage water heaters, primarily because 80 percent of gas water heaters are purchased as emergency retrofits. Customers frequently do not anticipate the need for a new water heater, don't have the money set aside, and need a replacement as soon as possible.
As a result, plumbers and contractors have developed a business model that emphasizes selling the water heater cheaply and profiting from time spent on installation. Plumbers aren't prepared to market a more energy efficient model, and consumers usually just want the flood cleaned up and hot water restored as quickly as possible. Suppliers and retailers support this model by stocking cheaper models and assuming consumers are not interested in further information. Consumers are not aware that spending more up front reduces their operating costs.
Because of these market pressures, volume is the primary factor in profitability for manufacturers. Discussion ensued regarding the interplay of educating consumers versus contractors, efficiency and technical considerations versus price, and model availability versus accessibility to contractors.
With five million gas water heaters sold each year, changing the energy factor (EF) from .58 to .62 generates a large efficiency gain on a mass market basis. When the EF rises to .65, power venting is required, meaning that the homeowner also has to spend money providing an electric outlet in addition to the new hot water tank. While this works in new construction situations, it's a significant obstacle to increasing efficiency in retrofits.
The manufacturers present supported the proposed Tier 0 of .62 EF, followed by a Tier 1 of .67, and a Tier 2 of .80. Both members and manufacturers emphasized the importance of a coordinated approach with the proposed ENERGY STAR water heating program and were supportive of a short term opening tier of .62 EF.
Tankless Water Heaters also Considered
The afternoon session began with a discussion of whether efficiency specifications for tankless water heaters should be set at either .80 or .82 EF. The lower level is in line with federal tax incentives, but there's no efficiency gain or need for incentives since most tankless water heaters qualify at this level today. Again, harmonization with ENERGY STAR is an important consideration in setting these specifications. Other manufacturers recommended a stretch Tier 2 set to support condensing levels of efficiency. Some manufacturers were concerned with the inconsistency with storage water heater efficiency specifications, but these were addressed when they were assured that the tiers are not intended to be promoted directly to consumers, rather they would be used purely for program design. The Gas Committee will consider these issues further as it finalizes its proposal to the CEE Board of Directors for this initiative.
Education is Key
Educating consumers, installers, and retailers is as important in increasing gas water heater efficiency as making better heaters available on plumber's trucks. Members from New York, Iowa, Massachusetts, and Ontario reported on programs they've developed. All of them focused on price or savings; only Canada emphasized the reduction in greenhouse gases by listing the equivalent number of cars taken off the road as a benefit. Massachusetts targeted builders as well as consumers, while the other programs focused only on consumers.
Rich Karney of DOE ENERGY STAR described their consumer education plan as four-fold: price and savings, availability, familiarity, and technology and efficiency. He also mentioned that ENERGY STAR discusses proper sizing of units. DOE is in the early stages of planning this communications strategy, and would like to work with CEE to promote water heaters to consumers at stores and through builders. Karney indicated that DOE supports the CEE tiered approach and many members and manufacturers present indicated how valuable the ENERGY STAR label would be to their promotion of efficient water heating. CEE remains committed to continuing to work with DOE to coordinate efforts in this area and to providing support to the ENERGY STAR program for water heating. More discussion is needed before either the CEE or ENERGY STAR specifications are finalized.
Discussion Continues
While no conclusion on message points was reached, manufacturers were eager to continue the conversation. They suggested that further conference calls to bring together manufacturers and efficiency programs to develop a national marketing plan.
The final session did a great deal to facilitate information exchange and communication between the energy efficiency industry and water heating manufacturers. Manufacturers indicated they need to know more about where and when rebates are offered. While the CEE program summaries provide this information, manufacturers said it would be helpful to have the program summaries updated more frequently and to make them easier to search by state or region. Manufacturers also suggested simplifying the rebate application process and standardizing the forms wherever possible.
CEE pointed out to manufacturers that it is helpful when evaluating the impact of energy efficiency programs to have sales date by energy factor available. Finally, manufacturers stressed the need to also address electric water heaters as well as gas-fired water heaters. At this time, the CEE Gas Committee will be moving forward with development of a high-efficiency residential water heating initiative primarily focused on gas technologies to make use of the momentum generated thus far. Marc Hoffman, CEE executive director, agreed that CEE could pursue the electric water heating options if electricity efficiency programs are interested.
This sort of communication did a great deal to build trust between the water heater manufacturing and energy efficiency program industries. Efforts to promote the adoption of efficient water heating technologies have been shown to be mutual goals, and while there's still work to do, there's interest in moving the process forward from both sides of the fence.
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