ACEEE Blog

Implementation of clean vehicle standards: How’s it going?
March 26, 2015 - 8:14 pm

By Therese Langer, Transportation Program Director


Standards cutting greenhouse gas emissions from cars and light trucks and raising fuel economy are among the biggest environmental achievements of the Obama administration. The standards are projected to save consumers hundreds of billions of dollars in fuel expenditures over the next decade. In the process, they are helping to shape the US and global auto industries by establishing an expectation of continuing technological progress toward high efficiency, low-emitting vehicles.

A new report from the EPA presenting manufacturer performance data from the first two years of the greenhouse gas emissions standards shows how the program is shaping up. Manufacturers by and large met the standards in both 2012 and 2013, with room to spare. Average compliance values in 2013 were 12* grams per mile, or 4%, below (better than) what the program called for in 2013, and in fact a bit below the more stringent requirement for model year 2014.

The performance of a sampling of manufacturers (figure 1) helps to explain two important aspects of the program: how the size mix of vehicles sold affects the emissions requirements, and what the role of special credit provisions has been.

Figure 1: Performance of selected manufacturers, 2012 and 2013 

Data from EPA’s 2013 Manufacturer GHG Performance Report

Footprint Rules

The case of Ford underscores a key feature of the standards that press accounts often obscure: average fuel economy and greenhouse gas emissions levels required under the standards for a given year depend on the size mix of vehicles sold that year. Average emissions of both Ford’s cars and its trucks declined from 2012 to 2013, yet their average emissions overall increased, due primarily to a whopping 11% shift from cars to trucks in Ford’s sales mix. This shift also meant that Ford’s average vehicle footprint (the area of pavement defined by the four wheels), and consequently its emissions standard, increased in 2013. Ford easily met its standard in both years.

This illustrates one reason that the “54.5 miles per gallon equivalent” commonly used to describe the requirement of the 2025 standards is not quite what it seems – the actual value required in 2025 will depend upon the mix of vehicles sold in that year. By the same token, how easy or difficult it is to achieve the standards in a future year is unrelated to what size vehicles consumers choose in that year.

Emissions also crept up for Toyota, even though average footprint went unchanged from 2012 to 2013. Toyota still met its standard handily, however, thanks in no small part to the Prius: we estimate that 58% of Toyota’s emissions margin can be traced to the high fuel economy of the iconic hybrid, though it accounted for only 11% of sales. Meanwhile, Nissan went from a 3 gram per mile deficit in 2012 to a 20 gram per mile surplus in 2013 and achieved the largest year-over-year reduction in emissions of the large manufacturers. The battery-electric LEAF, treated as a “zero emissions vehicle,” substantially helped Nissan’s performance (18% of compliance margin, at 2% of sales), but several other models also contributed to its 28-gram-per-mile average emissions improvement from 2012 to 2013.

Extra Credit

EPA’s report also lays out manufacturers’ use of credit provisions and other flexibility mechanisms of the program. Air conditioning (A/C) credits and flex-fuel vehicle (FFV) credits make up the vast majority of these special credits claimed in both 2012 and 2013. Manufacturers are acquiring A/C credits faster than the agencies expected by reducing the leakage of refrigerants and producing more efficient A/C systems, both of which yield real-world reductions in greenhouse gas emissions.

By contrast, FFV credits, which are awarded for the sale of vehicles that can run on ethanol (E85), do not generally reflect any real emissions reductions, because FFVs in the United States run almost entirely on gasoline. Figure 2 shows how much credit manufacturers claimed under the program. (Manufacturers not shown claimed none.)

Figure 2: Flex-fuel vehicle credits by manufacturer, 2012 and 2013

Data from EPA’s 2013 Manufacturer GHG Performance Report

The Detroit manufacturers have taken far more advantage of the FFV credits than the industry has on the whole; they’ll need increasingly to do without as the credits are phased out in the coming years. As figure 1 shows, Chrysler came just shy of meeting its emission standard in both 2012 and 2013. The company has nonetheless stayed in compliance using other flexibilities of the program, including the purchase of a modest number of credits from other manufacturers in 2013. But without FFV credits, Chrysler’s emissions would have exceeded the standards by more than 20 grams per mile, or roughly two year’s worth of emissions reductions under the standard. Thus, continued reliance on FFV credits could leave the company behind in terms of real technological progress a few years hence.

As the fuel economy and greenhouse gas standards go under the microscope in an upcoming “midterm review” of the program, detailed accounts of progress such as the EPA report provides will be essential. The first two years of data indicate the program is on track and unfolding largely as planned.

Peter Slowik contributed to this blog post.

EDIT: Originally, we published 13 grams per mile. The correct value is 12.


Seizing a Critical Moment for Energy Efficiency Finance
March 19, 2015 - 12:23 am

By Casey Bell, Senior Economist and Finance Policy Lead


An unprecedented amount of capital is ready to be deployed into the market for energy efficiency investments. Deals are getting done, and pipelines are being filled for some. Momentum is growing, but we are still far shy of tapping this market’s $279 billion investment potential.

Simultaneously, the policy landscape is evolving in ways that may drive demand for projects in the near- and mid-term future. The Clean Power Planenergy efficiency resource standards, and benchmarking and disclosure laws may generate project development. In addition, improved collection, dissemination, and analysis of building and financial performance may reduce the perceived risk around energy efficiency investments.

At the state level, many are thinking about new paths for deploying energy efficiency through resiliency investment, the transactive grid, and green banks to leverage private-sector dollars. Other factors that may bolster demand include intelligent efficiency, advances in net metering, and innovations in building and financial-performance data collection.

With all this exciting activity, it is clear to us that energy efficiency finance is facing a critical moment. The question is: Can we seize the moment and match capital with projects? As the clean energy landscape evolves, how do we ensure the greatest energy savings and financial returns from energy efficiency?

We are excited to explore these developments and questions at this year’s ACEEE Energy Efficiency Finance Forum. The forum, designed for investors, financiers, utilities, and policymakers, is scheduled for May 31–June 2 at the Marriott Marquis in San Francisco. Please visit our website for more information. Registration is now open!

We are also pleased to announce that we are collaborating with the Council of Development Finance Agencies to bring the CDFA Deal Room to this year’s conference. In the Deal Room, project implementers will spotlight energy efficiency projects that need financial support, and financiers and lenders interested in the energy efficiency space will have green-light opportunities to invest. To learn more, please reach out to Matthew McNerney at mmcnerney@aceee.org.

So, if you’re going to San Francisco, we look forward to seeing you there.


New York’s REV: Will the state’s new energy plan spur savings or slow progress?
March 09, 2015 - 12:55 am

By Steven Nadel , Executive Director


At the end of February, the New York Public Service Commission (PSC) released its final decision in Phase One of its Reforming the Energy Vision (REV) docket. We applaud the commission’s efforts to address 21st-century energy service needs and the improvements in this decision compared to the initial straw proposal. However ACEEE is concerned that the energy efficiency efforts outlined in the plan may not match the PSC’s stated intent to “not only achiev[e] current energy reduction goals, but accomplish[] higher goals consistent with State energy policy, and potentially, federal carbon reduction rules.” The decision leaves many details still to be determined, and these details will very much affect whether the state energy efficiency policy goals can be met. We also have concerns about several of the details provided.

The REV Decision

According to PSC Chair Audrey Zibelman, REV is designed to “reorient the electric industry and the ratemaking process toward a consumer-centered approach that harnesses new technologies and markets.” The emphasis appears to be on distributed energy sources like solar, wind, and combined heat and power systems, and on shifting loads away from times of peak demand. At the same time, a section of the decision (pages 72-82) specifically addresses energy efficiency programs. Under the decision, the state’s distribution utilities will take the lead in offering such programs which will gradually transition from a focus on “resource acquisition” to a focus on long-term “market transformation” that “will drive more market-based approaches.”

The PSC decision initially requires utilities to file energy efficiency programs for 2016 by the end of this month, but later this year each utility will need to file a three-year plan covering 2016–2018. The PSC decision establishes minimum energy-saving goals each utility must achieve in 2016. All of the utility goals combined total about 0.37% of statewide electricity sales. As discussed below, this is an extremely modest initial goal, and therefore we hope that the utility proposals will significantly exceed their minimum.

For 2017 and beyond, the utilities are told to propose metrics, both with the expectation that “longer-term goals should exceed existing targets,” and should include market progress metrics that go beyond kWh savings. Under REV, current statewide resource acquisition programs now operated by NYSERDA will largely end, the major exception being programs for low-income consumers that NYSERDA will continue to operate. NYSERDA will operate a set of market-transformation-focused programs in 2016 that will be finalized in a separate PSC docket.

The final decision is a significant improvement relative to a staff straw proposal issued in August 2014 that said energy efficiency budgets and targets would exist only for a transition period until “markets develop” and “utility performance measures…drive efficiency to become more integrated into utility operations.” In the final decision, programs continue “at least during the transition to REV markets,” and in various places the decision seems to support longer-term energy efficiency programs and goals that extend beyond a short transition period. In addition, the decision focuses much more on the market transformation approach to program design, an approach that ACEEE has long espoused.

However, even with these changes, we have concerns in three areas: energy-saving goals, how best to transform markets, and the transition from the present programs to the new construct.

Energy-Saving Goals

The energy-saving goals established by the PSC for 2016 are modest. While the PSC notes that it expects higher savings goals in the future, it offers no specifics. Developing these specifics will be critical. In 2007 New York set the goal of using energy efficiency to reduce electricity consumption by 15% below projected levels by 2015, an average of 1.9% savings per year. While building codes and equipment efficiency standards accounted for part of this goal, a substantial majority of the savings were to come from utility and NYSERDA programs.

In contrast, the 2016 minimum savings targets in the decision are only about 20% of this overall prior goal. Some of New York’s neighbors such as Massachusetts, Rhode Island, and Vermont have exceeded 2% annual savings (see p. 33 of our State Scorecard), showing that much higher savings are possible. The PSC should strive to meet these same goals and work with utilities to steadily ramp up savings to at least the prior goal of 1.9% per year if not higher.

As the PSC notes and ACEEE has found, the market transformation approach can increase energy savings in the medium and long terms. Energy saving goals should reflect this, complemented by goals for other key market transformation metrics. Our research indicates that states with binding energy savings targets save much more energy and money than states that leave energy efficiency decisions to utility planning processes.

Transforming Markets

As I wrote recently in a series of posts on the role of energy efficiency markets and programs, the most successful efforts meld the two. In particular, some market segments are riper for market-focused approaches than others. For example, private energy service companies have done well with large institutional customers. However other market segments such as small businesses and many residential customer segments have yet to see significant success. We should experiment with new market-based approaches for these unproven market segments, but we should also continue to use proven program approaches until alternatives prove their efficacy. The details of REV’s experimentation are critical and will be determined later this year in utility filings and an open docket on NYSERDA’s clean energy programs.

The market transformation approach to program design can help address the gap between current programs and an increasing reliance on markets. Market transformation programs work to overcome market barriers in specific market segments and also help with the development of promising technologies and services. Unfortunately, the REV decision seems to take a simplistic view of market transformation. For example, while we agree with the PSC that rebates are only one tool in the market transformation kit bag, they can be an important one, and the PSC is making a mistake by claiming that the place for a rebate program within a market transformation curve is “limited.” (We discuss the full kit bag including the role of rebates in Appendix B of an earlier ACEEE paper.)

Likewise, the PSC is too limited when it says “the end goal of a market transformation program for any particular measure is to eliminate further need for customer-funded subsidies of that measure.” Incentives can sometimes be ended once a market transformation initiative is successful, but sometimes it makes sense to continue a program and raise the eligibility level. For example, if efforts to promote air conditioners with a SEER (seasonal energy efficiency ratio) of 16 are successful, rather than end the air conditioner program, perhaps the target should be increased to SEER 18 or 20. At the same time the program might focus more on quality installation and maintenance to achieve additional energy and peak-demand savings.

Transitioning from the Present to the Future

It will take time until new market transformation initiatives have an impact, and time to experiment with other market-focused approaches. For example, a 2003 ACEEE study that examined 28 market transformation initiatives illustrates that it generally takes at least five years before a market transformation initiative has a significant impact, and often substantially longer. In the meantime, the recent REV decision leaves the fate of many successful programs in limbo. NYSERDA has had some very successful programs that ACEEE has recognized in the past such as its Multifamily Performance,Commercial and Industrial Existing Facilities, Commercial New Construction, Flexible Technical Assistance, Home Performance with Energy Star, and low-income programs. As part of REV, NYSERDA will retain the lead for low-income and many market transformation programs, but the others will end unless the utilities pick them up. We had hoped that the REV decision would direct the utilities and NYSERDA to carefully consider these proven programs and to develop transition plans for many of them. Instead the decision provides no direction on this issue and leaves decisions on these programs up to the individual utilities.

The Path Forward

New York fell four places (from 3rd to 7th) in ACEEE’s 2014 State Energy Efficiency Scorecard, due in part to REV transition issues. Without robust and ongoing support for energy efficiency from the PSC, the state could drop further. For example, if New York had achieved only 0.37% electricity savings in 2013 and higher goals had not been established, it would have placed even lower in the 2014 Scorecard.

There is much the PSC can and should do to build on the energy efficiency intentions stated in its REV decision. First, it should encourage utilities to include robust energy efficiency programs and goals in their plans, and it should make these goals an important consideration for plan approval. As part of this effort, the PSC should encourage the utilities to work with NYSERDA and develop transition strategies for current programs. Second, with the completion of Phase One, REV now moves into a second phase which will focus on rates and rate making, including performance-based regulation under which performance metrics are set and utilities are rewarded for good performance on them. Energy efficiency performance should be one of the key metrics used to evaluate utility performance.

New York has been an energy efficiency leader for many years. It can build on this leadership if REV is implemented with strong energy savings and other market transformation goals while gradually transitioning from past programs to the future.


Challenges and Opportunities in the Land of Lincoln
March 04, 2015 - 3:51 am

By Steven Nadel , Executive Director


Illinois—the land of Lincoln according to its license plate—has made great strides in energy efficiency in recent years. In 2014 it ranked 11th overall in ACEEE’s annual State Energy Efficiency Scorecard, up 15 slots from its score 5 years earlier. The main reason for its rise in rank was the state’s performance on utility-sector energy efficiency programs and policies. Energy efficiency measures installed under utility-sector programs reduced statewide electricity use by about 1% of the state’s total electricity consumption in 2013, the most recent year for which data are available. This placed Illinois 13th among US states in electricity savings, up from a tie for dead last in the 2009 Scorecard.

Under Illinois law, utilities collect the money for efficiency programs through rates, keeping 75% of the funds to operate their energy efficiency programs. They remit the remaining 25% to the Illinois Department of Commerce and Economic Opportunity (DCEO), which uses these funds to operate energy efficiency programs for low-income households and for state and local government facilities. Both the utilities and DCEO have done well. A 2014 ACEEE analysis found that Illinois electric utilities have exceeded their energy saving goals every year, while the gas utilities have just about met theirs. A 2014 independent evaluation of DCEO’s programs estimated that they have an overall benefit-cost ratio of 2.26.

Unfortunately, in late February, Illinois’ new governor, Bruce Rauner, proposed a budget that would divert $265 million of ratepayer funds intended to be used for energy efficiency and low-income energy assistance to the state general fund, to apply to a state budget shortfall (further information here). This includes DCEO’s energy efficiency programs that are discussed above as well as the Low Income Home Energy Assistance Program (LIHEAP), which helps pay the energy bills of low-income families. Even though the proposed budget isn’t effective yet, it’s reported that senior staff at DCEO’s energy efficiency programs have already been laid off, and remaining staff told not to sign any new contracts or to approve any new rebate applications. Most legal observers believe the legislature must approve the diversion—its approval is far from certain—but the governor appears not to be waiting.

In addition to considering budget issues, the legislature will also be debating energy legislation this year that could increase energy efficiency activity in the state. Current Illinois law calls for savings that are double what the utilities are currently achieving. The savings are lower than the law requires since the law also includes cost caps that limit the amount of money the utilities can spend. This keeps them from reaching their full savings goals even if the additional spending is cost effective to ratepayers. As part of the forthcoming energy bill, a coalition of business, environmental and labor leaders is proposing to raise the cost caps while still requiring programs to meet cost-effectiveness tests.

If the governor doesn’t want DCEO to operate energy efficiency programs any more, it might also make sense to use this legislation to let utilities keep all the energy efficiency funds they raise instead of diverting a quarter of the money to the state. If such a change is made, the utilities should be directed to provide energy efficiency services to the customers DCEO used to serve.

While Illinois does have budget problems, the solution shouldn’t divert utility ratepayer funds that are intended by statute to achieve cost-effective energy savings and reduce energy bills for public facilities and low-income customers. This diversion is penny wise and pound foolish. These funds not only save energy, they reduce costs for all taxpayers and ratepayers in Illinois.


ACEEE introduces updated website and launches smarterhouse.org, new home of Consumer Guide to Home Energy Savings
March 02, 2015 - 8:32 pm

By Eric Schwass, Web Manager


ACEEE celebrates its 35thanniversary this year. To commemorate that milestone, we’ve updated the design of our online home, aceee.org, to include larger, darker text, a simpler layout, and bigger images.

But the changes are more than cosmetic. We’ve improved our site’s search function, combined the blog and press release sections into one feed, and improved the way the site displays on mobile devices.

We’ve also expanded our popular consumer resources section, putting it on its own brand-new website: smarterhouse.org. Besides offering advice on what options to consider when upgrading or replacing home appliances, SmarterHouse can help homeowners and renters discover energy efficiency improvements that fit their budgets and pay dividends in energy savings.

These improvements arrive on the heels of our redesign of greenercars.org, ACEEE’s vehicle ratings site. For the first time, all of the ratings are available to everyone, subscription-free! And, we’ve just released the ratings for model year 2015.

I hope you will take a few minutes to browse the three sites. It is our goal to provide energy efficiency information that’s relevant to you, as an energy manager, researcher, policymaker, homeowner, or new car shopper. Your feedback is welcome and appreciated!


California building codes: to analyze the forest you need to understand the trees
February 26, 2015 - 4:38 am

By Steven Nadel , Executive Director


ACEEE is a strong supporter of analyzing energy efficiency programs in order to see what they have accomplished and to learn lessons so we can do even better. It was thus with interest that we reviewed “How Much Energy Do Building Energy Codes Really Save? Evidence from California” by Arik Levinson. In this paper Levinson conducts several analyses and concludes that “there is no evidence that homes constructed since California instituted its building energy codes use less electricity today than homes built before the codes came into effect.” On the surface his conclusions about the efficacy of building codes are very different from other recent analyses such as papers by Aroonruengsawat et al., Deason and Hobbs, and Jacobsen and Kotchen, so we took a deeper look.

Building energy codes in the United Sates primarily address energy used for space heating and air conditioning, with some impact on water heating energy use. In addition, commercial building codes also address lighting in a substantial way. Therefore any analysis of the effect of codes needs to look at energy consumption for these end uses. Levinson is examining California, so we should start by looking at how California heats and cools its buildings and water. The California Energy Commission had a consultant prepare a report looking at residential appliance saturations in 2009. They found that 93% of California homes are heated with gas and only 5% are heated with electricity. Likewise they found that 87% of homes have gas water heating and only 7% use electricity for water heating. Central air conditioners are used in 49% of homes, with an additional 15% using room air conditioners. California added a limited lighting provision to its 2008 residential code, but the savings are too recent and too small to show up in a long-term analysis.

Based on this information, an analysis of California residential building codes should concentrate on natural gas use and only secondarily on electricity. Unfortunately, this is the opposite of what Levinson does. Most of his analysis is on electricity use, and he generally excludes homes with electric space or water heat. He does so because the saturation of electric space heat has been changing over time, and according to Levinson, therefore doesn’t fit well into his time series analysis. Thus his analysis looks for the effect of building codes on air conditioning energy use.

The fact is, though, that California has a mild climate, and, according to a recent analysis by the Energy Information Administration (EIA), only 4% of California home energy use is for air conditioning. Using EIA figures we can go on to calculate that air conditioning represents about 10% of home electricity use. If we make a ballpark estimate that codes reduce air conditioning electricity use by 30%, Levinson is looking for 3% savings in the data.

Furthermore, a majority of the savings in air conditioning energy use is probably due to air conditioner efficiency standards that also apply to replacement equipment in existing homes. Since Levinson is comparing new and existing homes, of the 3% savings mentioned above, perhaps 2% are also being achieved in his comparison group of existing homes. Thus he’s looking for a 1% savings effect in new homes. It’s very difficult to find such a small effect in a statistical analysis; with an effect that small, it would be more surprising to see such savings show up in a statistical analysis than if the savings did not show up. In addition, it should be noted that the rising saturation of electronic gadgets in US homes may be affecting new home energy use, a factor Levinson does not examine but that perhaps explains some of the increasing energy use he found in new homes.

A good analysis of the impact of California’s building codes should focus on natural gas use. Levinson does do one analysis of natural gas use, finding that homes built since California’s building energy code began use less natural gas than earlier homes. However he then dismisses this finding since the trend started before the building codes took effect. He presents no evidence that prior trends would have continued, and therefore his claim that building codes had no effect is speculation.

Finally, if the objective is to examine all building codes and not just some codes, then it’s also important to look at commercial buildings. According to an analysis by Pacific Northwest National Laboratory, nationwide about 69% of building code savings in 2012 were in the commercial sector and only 31% in the residential sector. More than 80% of the commercial savings were in electricity.

Bottom line: Levinson is on the wrong path if he’s trying to see the impacts of building codes. If he wants to see the forest—the impacts of codes or their absence—he needs to understand the trees. He needs to look where the impacts are supposed to be, and in California this means residential natural gas and commercial building electricity use.


Water heaters get an efficiency makeover courtesy of the Department of Energy
February 25, 2015 - 8:19 pm

By Marianne DiMascio, Outreach Director, Appliance Standards Awareness Project (ASAP)


From the rustic 1850s pump shower to the 1920s Humphrey automatic to today’s modern units, water heaters have made great strides in performance and efficiency. On April 16, 2015, water heaters will take the next great stride when manufacturers must comply with new Department of Energy (DOE) efficiency standards. The most common water heaters manufactured on and after this date will get a modest boost in efficiency, while units over 55 gallons will shift to next-generation technology, cutting utility bills by one-fourth to one-half depending on the technology.

What is covered?

Completed by DOE in 2010, the standards cover gas, oil and electric residential tank water heaters, usually between 20 and 80 gallons. (DOE also upped the efficiency levels for instantaneous—tankless—gas water heaters, but most models already meet the new efficiency levels.) Water heating is on average the second largest household energy expense behind space heating, representing about 18% of total household energy consumption in the US. Consumers annually pay an average of about $170 (gas) and $300 (electric) to operate a water heater just meeting current efficiency standards. About 50% of US households use natural gas water heaters, 41% electric, and the remainder propane or oil.

New standards will save money for consumers, save energy, and reduce emissions

DOE estimates that the new efficiency measures will save 2.6 quadrillion Btus (quads) of energy over 30 years and net consumers up to $8.7 billion in savings. Over the same period, the standards will reduce CO2 emissions by 154 million metric tons. To put these long-term savings in perspective, the savings are enough to meet the total energy needs of 13 million typical US homes for a year, and the CO2 savings are equivalent to taking 32 million passenger cars off the road for a year.

Most storage water heaters to get a modest boost in efficiency

For storage water heaters with volumes of 55 gallons and below (representing the vast majority of sales), the new standards will increase the efficiency of typical-sized units by 4% on average. Manufacturers plan to meet the efficiency levels with incremental improvements such as improved heat exchangers (gas) and more insulation. Water heaters that comply with the new standards are already on the market, including models from the three large domestic manufacturers (A.O. Smith, Bradford White, and Rheem) that make most water heaters sold in the United States.

Big jump in efficiency for storage water heaters over 55 gallons

Water heaters larger than 55 gallons will see a much bigger jump in efficiency. The new standards for these larger water heaters can be met using electric heat pump and gas condensing technology. Heat pump water heaters save at least 50% and condensing gas units about 25% compared to today’s conventional water heaters.

Heat pump water heaters (also known as hybrid water heaters) transfer heat from the surrounding air to the water. When hot water demand is very high or the ambient air temperature drops below a threshold level, the hybrids switch from heat pump mode to electric resistance mode. According to DOE’s analysis, a consumer purchasing these highly efficient units will save more than $600 over the life of the product compared to a water heater just meeting the current efficiency standards. While the upfront cost to purchase and install these products is higher, consumers will recoup the added cost in about six years on average through lower electricity bills. Consumer Reports tested heat pump water heaters and found that “Those we tested provided annual savings of about 60% over electric-only models.”

One key concern about heat pump water heaters is low temperature operation. When the heat pump water heater operates in electric resistance mode, it doesn’t save energy or money compared to a conventional unit. Research by the Northwest Energy Efficiency Alliance showed that some early heat pump water heater models were cutting over to electric resistance mode at relatively high ambient temperatures. Manufacturers have been working to lower the minimum temperature at which water heaters operate in heat pump mode. Recent models have made significant progress, ensuring heat pump operation down to ambient temperatures as low as 35 degrees. The vast majority of utility programs in the Northwest point to the Northern Climate Specification Qualified Products List to determine whether a heat pump water heater qualifies for utility incentives

Condensing gas water heaters are not as prevalent as heat pump water heaters, but consumers have more choices today than they did just a few years ago. Conventional gas water heaters lose much of the energy burned up the flue. Condensing water heaters are designed to reclaim much of this escaping heat by cooling exhaust gases well below 140 degrees F, where water vapor in the exhaust condenses into water.

Details on the new standard levels

The table below shows the current and new standards for typical-sized storage units. The water heater standards vary as a function of tank size. The energy factor (EF) is the ratio of useful energy output from the water heater to the total amount of energy delivered to it.

Size change: a bit bigger, but there are options

A review of manufacturer websites shows that the height and/or diameter of some conventional products will increase 1 to 2 inches due to added insulation (some less than an inch). For many homes, particularly those with basement installations, the small increase in size will have little impact. Consumers with space constraints (e.g., water heaters in closets or crawl spaces) should consult manufacturer websites or local installers for options. Consumers may find that a product from one manufacturer fits better in their tight space than a similar product from a different manufacturer.

Manufacturers prepared for changes

Manufacturers are offering webinars, online videos, and educational materials to guide consumers, contractors, and installers through the changes. Several website include cross-reference guides to help consumers compare current models to models meeting the new standards. You will find most of the educational materials on manufacturer websites under NAECA (National Appliance Energy Conservation Act), the legislation that authorized appliance efficiency standards.

What about grid-enabled water heaters?

Utilities represented by the National Rural Electric Cooperative (NRECA) and the American Public Power Association, along with PJM Interconnection (regional grid operator) raised concerns that demand-response programs for water heaters over 55 gallons would suffer if they were required to switch to heat pump water heaters. In these programs, utilities control the use of grid-enabled (connected) water heaters to manage energy use at peak times, resulting in large savings. Though some stakeholders claim that heat pump water heaters can provide the services that NRECA and others desire, not all stakeholders are convinced that they will work as well. A legislative fix to establish a class of water heaters for demand-response programs is pending in Congress. In addition, some manufacturers have petitioned for waivers for this application.


Looking to the future of energy efficiency markets and programs
February 23, 2015 - 11:00 pm

By Steven Nadel , Executive Director


Part Three in a series where ACEEE examines the most effective roles for energy efficiency programs and market-driven solutions in scaling deployment of energy efficiency. To read Part One click here. For Part Two, click here.

My first blog post addressed the false dichotomy of choosing between energy efficiency programs and market-driven solutions, pointing out the successes and limitations of market-based solutions and the need for markets and programs to work together in order to maximize societal benefits. My second post reviewed the history of efforts to increase reliance on market-driven solutions, finding success in a few market segments, difficulties in some other market segments, and a tendency to focus on “low-hanging fruit.” However, the clean energy landscape is changing, and new approaches can and are being tried that may potentially have better outcomes in the future. In this final blog post in the series, we’ll explore recent developments and potential opportunities ahead, including both market-driven opportunities and opportunities for market-driven solutions and energy efficiency programs to work together.

Much has changed in energy efficiency and related markets in recent years, and further major changes are likely. New technologies and services continue to be developed, and new players enter the market every year. Recent developments include many new intelligent efficiency opportunities and the growing saturation of smart meters that make a wealth of new information available to customers and those who serve them. New firms are offering behavior-based services and nurturing interest in new financial products, such as those from green banks and from private firms. The utility industry is also going through profound changes, which could affect how energy efficiency services are offered. And proposed new regulations to reduce carbon pollution from existing power plants will likely increase the need to capture as much energy efficiency savings as possible.

In this environment, it is useful to divide energy efficiency opportunities into three segments: (1) those in which markets are largely functioning well, and in which only limited energy efficiency programs are needed; (2) those in which market barriers are particularly large, and in which programmatic support is likely to be needed for the foreseeable future; and (3) a large in-between category, in which it is appropriate to experiment with new approaches in the hope that many will work, but with the expectation that some will not.

Where market-driven approaches are largely functioning well

There are some market segments where market-driven approaches are doing well. Energy service companies (ESCOs) have refined their service offerings for the so-called “MUSH” market (municipalities, universities, schools, and hospitals) and now are doing nearly $6 billion a year in business, primarily in energy-saving performance contracts  (ESPCs) that guarantee a level of savings, often for ten years or more. Energy-efficiency programs can sweeten ESCO offerings by encouraging ESCOs to go broader and deeper with their energy efficiency retrofits and to reach some customers they might not reach on their own, particularly customers somewhat smaller than those they normally serve. A 2014 Lawrence Berkeley National Laboratory study found that 36% of ESCO projects involve energy efficiency program incentives.

ENERGY STAR® now certifies more than 70 different energy-consuming products, identifying roughly the top 25% to receive the ENERGY STAR label. More than 85% of consumers recognize the label. Market penetration ranges from about 1% (for electric water heaters) to nearly 100% (for some categories of televisions) with the average roughly 50%. Most of these products receive promotional assistance from energy efficiency programs but not direct incentives. However, a companion program, ENERGY STAR Most Efficient, recognizes the very best products on the market and needs help from energy efficiency programs, both promotion and incentives, to encourage both sales and increased product offerings.

Very large industrial customers often have in-house energy managers who are able to effectively manage a firm’s energy use and identify promising projects. Allocation of capital to fund energy efficiency programs remains the primary barrier to greater implementation of these projects. Energy efficiency program incentives, either in the form of cash or in-kind services can be a major inducement to move these projects up the list for project funding. For these large customers with well-established internal programs, self-direct programs have proven effective in providing incentives to customers for their internal energy management efforts.

Areas for experimentation

A number of additional market segments and services could potentially be attractive for market-focused strategies, although for many of them there are also significant roles for energy efficiency programs. Examples include:

ESPCs in Large Commercial Facilities and New Takes on the ESCO Model. ESCOs see substantial opportunity to serve the large commercial market, applying lessons they have learned in the MUSH market. The development of insurance products to manage risk around these types of projects could provide comfort to more building owners and ESCOs around deeper retrofits. The Vermont Energy Investment Corporation (VEIC) has also established a low-profit limited liability company (L3C), Commons Energy has developed a Public Purpose ESCO that hopes to address underserved markets including small- to mid-size multifamily affordable housing.

Smart Buildings and Smart Manufacturing. Sensors, controls, software, and data analysis are being used to optimize buildings and manufacturing. For example, new smart building services can help optimize building operations, saving 10% or more in some applications. There are similar opportunities in manufacturing. Payback periods are commonly only a few years, and can be expected to decline with time. Energy efficiency programs can help to encourage initial installations and document benefits, but over time, vendors may be able to sell these services without incentives, particularly in large facilities. Likewise, new smart thermostat products can optimize heating and cooling based on current weather and a household’s patterns. Heating and cooling energy savings of 10% or more have been documented in a few studies, although more data are needed. Sales are growing, but due to the high purchase cost, marketing has so far targeted upscale consumers. Upscale markets could flourish, although energy efficiency programs are likely to be needed if more downscale consumers are to enjoy the benefits as well. Integration of these thermostats with other sensors and controls could enable truly smart homes and businesses.

New Financing Strategies. There is a lot of creative activity happening to develop new financing strategies that hopefully will have much broader appeal than past programs. For example, on-bill finance and PACE finance have received a lot of buzz in the last few years for their ability to attract secondary markets, and for their potential to serve traditionally harder-to-reach markets. In a few cases thus far, PACE in particular has achieved significant market penetration. For example, Renovate America’s HERO Program has used PACE in California to finance approximately 25,000 home upgrades and has completed two rounds of securitization. It is important to note, though, that many entities realizing success with financing are also leveraging ratepayer incentives. In addition, there are new private sector start-ups that are closing deals, including NoesisKilowatt Financial, Joule Assets, and SparkFund. And, multiple states have started green banks to explore new models for delivering energy efficiency across multiple market sectors.

Home and Building Rating and Disclosure. Developing standardized energy efficiency ratings for homes and buildings, and disclosing this information to potential purchasers and tenants, can make it much easier for shoppers to consider energy efficiency as they make purchase and lease decisions, creating an incentive for home and building owners to improve efficiency before they sell or lease. Quite a few cities have established commercial building disclosure programs. Residential programs are also offered, but thus far are more limited.

Energy Use Feedback and Data. Providing consumers with information on their energy use and how it compares to peers has been shown to reduce energy use about 2% for monthly mailed reports, and by roughly 4% when feedback is in real time. Such approaches have also been used to reduce demand during peak times by an average of 3% without incentives. So far these efforts have been primarily offered under contract with utilities, but private firms could potentially offer these services if either they receive performance incentives from utilities, or if energy pricing is structured in ways to reward consumers who purchase these services. More broadly, with much more data now available from smart meters, and increased attention on ways to glean insights from “big data,” there should be many opportunities for both utilities and contractors working with customers to extract targeted information on specific opportunities for saving energy, and for targeted marketing of these opportunities.

Jointly Marketing Efficiency and Solar. Quite a few firms are aggressively marketing photovoltaic systems. A few of these, such as Solar City, are also marketing energy efficiency services, both as a way to increase bill savings and as a way to reduce system costs, since when loads are smaller, systems can be smaller. We see this trend growing.

Electric and gas vehicles. Electric vehicles generally use less energy per mile traveled than gasoline and diesel vehicles, even when considering the full fuel cycle, including energy losses at the power plant. As a result, while purchase costs are high, operating costs are generally lower, even after allowing for the fact that electricity is generally more expensive per Btu of energy than gasoline. Likewise, natural gas vehicles also generally have lower operating costs, due to the lower costs of their fuel, although their efficiency is similar to gasoline vehicles. We see growing efforts to promote these technologies, including by vehicle manufacturers, other private service providers, governments, and utilities. For example, the California Public Utility Commission originally asked utilities to not build charging stations in order to leave this field to private vendors, but recently reversed course, concluding that utilities have an important role to play in the development of this market.

These are just a sampling of potential areas where it is worth experimenting with market-oriented approaches but also where energy efficiency programs can perhaps partner with service providers in order to achieve savings while also providing valuable services to customers. If I were to revisit this topic in a few years, I am sure there would be additional examples to add, as the market for efficiency services is currently very dynamic.

Where market barriers are large and energy efficiency programs are clearly needed

Other market segments are likely to continue to be reliant on energy efficiency programs for at least quite a few years, although market-driven strategies can also play a role. At the top of this list are programs for low-income households, where, without significant incentives, energy efficiency actions are likely to be limited. The barriers to energy efficiency in low-income households include limited income to pay upfront costs and poor credit histories, making loan approval difficult.

Other challenging market segments include rental housing and small businesses. Rental units face the split incentive problem, where landlords have little incentive to invest if tenants pay the energy bills, and tenants have little incentive to use energy smartly if the landlord pays the bills. If buildings are rated on energy efficiency, and this becomes a factor in leasing decisions, then landlords will have some incentive to improve their units, although outside of high-rent buildings, there will likely be a long-term need for best-practice energy efficiency programs.

Likewise, small businesses can be hard to reach as owners and other decision makers generally have little time or expertise to consider energy efficiency opportunities; plus, marketing costs are high per unit of energy saved. So far, the most effective approach for this segment has been "direct installation” energy efficiency programs (see section starting on p. 186), where specific services are offered, and all the owner has to do is say “yes.” Noesis has done some small-commercial projects, working through contractors and providing financing, but thus far many of these projects are lighting only, and their large commercial projects significantly outnumber their small commercial projects.

Markets and energy efficiency programs working together

In most market segments there is a role for both market strategies and energy efficiency programs, with the relative mix of each varying by market segment. Of the areas discussed above, markets are ultimately likely to dominate in the large MUSH market, but help from programs will likely continue to be needed for smaller facilities. After the market develops further and benefits are clearly demonstrated, smart-building and smart-manufacturing systems may do well without incentives, particularly for large facilities, and as prices come down, medium-sized facilities may also benefit. For smart thermostats, markets may dominate for upscale homeowners, but programs are likely to be needed to promote their use for households where the high upfront cost is an issue.

For energy-efficient equipment, ENERGY STAR can generally promote equipment of above-average efficiency, but for the very best equipment, more active promotion from energy efficiency programs will be needed, helping to grow availability and market share until those levels can become the ENERGY STAR standard, and ultimately, levels mandated by minimum efficiency standards. A similar situation exists for new construction, where modest efficiency improvements can be encouraged by ENERGY STAR homes and LEED certification, but more extensive improvements, such as net zero energy homes and buildings, will need more active assistance from energy efficiency programs, such as providing technical assistance to architects, engineers, and developers on state-of-the-art design practices.

For existing single-family homes and small/medium-sized businesses, both markets and energy efficiency programs have important roles to play. Contractors often sell efficiency services to these markets and have achieved some success, but energy efficiency programs can substantially increase the number of customers who purchase these services and can also increase the depth of savings. For these market segments, neither the market nor efficiency programs can do it all, and new creative approaches are needed. To note just one potential approach, Nate Adams, founder of Energy Smart Home Performance, has proposed that programs just pay per unit of energy saved and leave all other details to the market.

Experimenting, but not gambling, with energy efficiency savings

Much of this blog post talks about new market-based approaches that show some potential for achieving energy savings and other benefits. I strongly encourage experimenting with these approaches, but we should be careful not to phase out proven, more traditional approaches until new approaches are proven to achieve similar participation rates and savings. If we phase out programs prematurely or rely on approaches that are less effective than current programs, the result will be less energy efficiency savings and more need to rely on new energy supplies. As discussed in the first blog post in this series, energy efficiency is generally the lowest cost resource. It helps keep energy bills down, and helps meet environmental objectives, such as reducing greenhouse gas emissions. We do not want to sacrifice these important objectives. Therefore the measuring stick for both programs and markets is to maximize the amount of energy savings that can be achieved at a cost below that of new power plants and other energy resources.

Conclusion

Clearly, markets are a major component of the success of today’s energy efficiency efforts, and can probably play an even larger role going forward. This post points out some potential market opportunities over the next five years or so; in the longer-term even more may be possible, although it is hard to predict where. The fundamental question in this debate, though, is not which policy works best, markets or energy efficiency programs, but how to build a mutually cooperative strategy, taking the best from markets and energy efficiency programs.

In addressing this question, two overriding issues apply, regardless of the market segment or service in question. The first is: Which approach is most cost-effective for a given market? Our research shows that right now, most traditional energy efficiency programs are hard to beat. The second is a question of reach: Which approach is more likely to scale to meet the breadth of the potential efficiency market, and which approach can reach the depth of consumers in any given segment? So far, the answer seems to be mixed. Finance and other market-based approaches can leverage resources to reach a scale that traditional programs may have trouble achieving, while those same market approaches may be fundamentally incapable of reaching the full spectrum of energy consumers—a critical consideration, particularly where ratepayer funds are being deployed. At the end of the day, the winning strategy will be the one that takes the best from markets and energy efficiency programs in order to maximize benefits to all ratepayers and to society as a whole.


A look at the history of efforts to increase reliance on market forces to drive energy efficiency
February 18, 2015 - 1:23 am

By Steven Nadel , Executive Director


Part Two in a series where ACEEE examines the most effective roles for energy efficiency programs and market-driven solutions in scaling deployment of energy efficiency. Click here to read Part One.

Last week, I wrote about the false dichotomy between energy efficiency programs and market-driven solutions, pointing out the successes and limitations of market-based solutions. We should encourage the private market where it works well, experiment with new market-based approaches in other promising market segments, but also continue to use other proven approaches, such as utility and state energy-efficiency programs, particularly for market segments where the success of market-focused approaches has yet to be proven. In this post I summarize research on the role of market-focused programs over the past few decades. In the final installment next week I will look at recent developments and potential opportunities ahead.

As philosopher and essayist George Santayana wrote in The Life of Reason (1905), “[t]hose who cannot remember the past are condemned to repeat it.” Things can and do change, so the past is far from an absolute guide to the future, but understanding the past is useful so we can better plan paths forward.

The recent history of market-based energy efficiency

There was a major push toward market-based approaches to delivering energy efficiency in the 1990s. ACEEE reviewed the success of these efforts in a 2001 report, which interviewed more than a 100 energy service companies, retail electricity service providers and distribution utilities. The research concluded that:

  1. While energy service companies played an important role, they tended to reach primarily institutional and large commercial customers and showed little interest and ability to serve residential and small business customers. They also had difficulty serving industrial markets.
  2. At the time, the competitive retail electricity suppliers had not demonstrated themselves to be effective vehicles for achieving energy efficiency improvements, due to a number of challenges, including: a high failure rate among supplier firms, a mixed interest in energy efficiency among suppliers, a lack of competitive electricity suppliers actually marketing tangible energy efficiency measures, and a lack of customer interest in obtaining energy efficiency from competitive suppliers.
  3. Absent legislative or regulatory requirements, there was strong evidence that in a restructured electric industry, utility companies would not choose to provide substantive energy efficiency programs. If they provided anything at all, they were more likely to provide minimal "information" type programs, largely as a customer service and customer relations mechanism.

Similarly, in the 1990s some electricity markets were deregulated based on the theory that retail competition among power providers would lower costs and improve service (both energy efficiency and other services). MIT economist Paul Joskow reviewed these efforts in 2003 and found that “the performance of retail competition programs has been disappointing almost everywhere, especially for residential and small commercial customers.” This should serve as a cautionary tale, particularly for services for residential and small business energy consumers.

Financing

Likewise, some observers have suggested greater reliance on financing options, such as loans, rather than incentives. Financing is an important and useful tool, but while some customers will take out loans, others will not, for a variety of reasons ranging from poor credit rating, aversion to debt, or accounting procedures which make “on the books” financing difficult for some companies. The limitations of loan programs are documented by a 2011 ACEEE report that looked at many of the leading energy efficiency loan programs around the country, operated by a variety of organizations (including utilities, states, non-profit and for-profit organizations and financial institutions) and found only two that had served more than 5% of eligible participants. Limited interest in energy efficiency loans is confirmed by reports from private small lenders convened as part of ACEEE’s Small Lender Energy Efficiency Community (SLEEC).

Also, if funds available for incentives are limited, past experience indicates that most customers prefer direct rebates to subsidized loans. For example, Wisconsin Electric and Puget Power in the 1980s found that when commercial customers were offered a choice of a zero-interest loan or a rebate of the same value, over 90% chose the rebate (see p.158-159). There are older studies on residential customers that found 15-49% of customers preferred subsidized loans, with the rest preferring grants equal to the loan subsidy. If the goal of customer-funded efficiency programs is to reach the broad base of energy customers, financing efforts can’t be the only or even the primary tool for achieving that goal.

The cost problem

There is also a question of whether relying on the market will raise or lower costs. In the 1990s and early 2000s there were experiments in which bids were solicited for energy efficiency improvements and the least expensive viable options were chosen. Likewise there were “standard performance contracts” in which standardized incentives per kWh and/or kW-saved were offered to energy service companies and other private firms. In these efforts there was a tendency to get only certain types of savings, and for the prices to be relatively high. Specifically, the bids received tended to emphasize projects at large commercial and industrial facilities, with little for small businesses and only a modest amount for residential customers. The service providers targeted the largest customers because these customers provide large savings per successful marketing effort. Marketing costs tend to be high when you need to recruit many small customers and as a result most private sector energy efficiency firms have shied away from the small business market.

With bidding programs, the firms quickly learned what the market-clearing price was likely to be and then bid just below it. As a result, as shown in the graph below compiled by Lawrence Berkeley National Laboratory, the bidding and performance contracting programs ranged in cost from about 5.5 to 8 cents/kWh saved. The average ratepayer-funded energy efficiency program had a total cost of about 4.4 cents/kWh saved, according to a report by Lawrence Berkeley National Laboratory, when both program administrator and customer costs were included. In other words, the bidding programs have tended to be more expensive, not less. Not all market-based efforts will cost this much, but to date, evidence is lacking that market-based efforts will cost less.

 

Cost per kWh Saved of U.S. Demand-Side Bidding and Standard Performance Contracting Programs

Source: Chuck Goldman, Lawrence Berkeley National Laboratory, presentation to the Oregon Public Service Commission. http://www.puc.state.or.us/meetings/pmemos/2012/040512/Goldman.pdf. The red and light blue inner bars are the costs per kWh if the analysis includes savings for the full measure life and not just the contract term.

Cream skimming

In addition to concerns about costs, past experience indicates that left to their own devices, many private sector firms will tend to do "cream skimming." For example, a Lawrence Berkeley National Laboratory study on the results of bidding found that these efforts emphasized lighting measures. These tended to be low-cost measures with a high return on investment, but that also only scratch the surface of cost-effective efficiency options. To address this, some programs established lower ceiling prices for lighting than for other measures, in order to encourage a diversity of approaches.

There are some markets where private suppliers of energy efficiency have done well, but many others where the success of market-only approaches has been limited. Financing approaches are useful because they can leverage private capital, stretching energy efficiency program funds further, and have proven useful for some customers. But the past indicates that markets alone will likely only reach a minority of customers, and only with some energy efficiency measures. Much more energy efficiency can be delivered if markets and energy efficiency programs work together.

Next, in the third blog in this series, I will talk more about paths forward, with an emphasis on recent and potential near- and medium-term developments that could potentially allow us to improve upon the results from the past. I will discuss areas where markets can lead and ways that markets and programs can work together to maximize positive synergies.


New national furnace standards will save consumers money, but stronger standards could save even more
February 11, 2015 - 10:30 am

By Andrew deLaski, Executive Director, Appliance Standards Awareness Project (ASAP)


Yesterday, the US Department of Energy (DOE) issued a proposed rule for furnaces that would provide significant savings for consumers on their home heating bills, and be among the biggest natural-gas saving standards ever completed by the agency. The new standards would reduce gas and propane furnace energy consumption by about 13% relative to basic furnaces sold today.

Improved furnace efficiency standards are a crucial energy-savings opportunity for homeowners and the nation, since about one-fifth of all the energy consumed in US homes goes to operate gas and propane furnaces. These furnaces provide heat for more than 40% of homes, and their minimum efficiency standards have been virtually unchanged since 1992.

DOE’s analysis published yesterday shows that efficiency levels higher than those in the proposed rule would achieve even larger savings for consumers, and increase national energy savings by 50% compared to DOE’s proposal. The agency cited concerns about potential impacts on manufacturers to explain its selection of the lower proposed levels.

Based on DOE’s analysis, ASAP estimates that typical consumers would save $600 to $800 over the lifetime of a furnace meeting new standards, depending on the standard level. A preliminary DOE analysis published last fall showed that consumers save money in both northern and southern regions, whether purchasing their furnace for a newly built home or to replace an older furnace, and at either the proposed standard level or the higher potential level. An updated version will likely be released soon.

On a national level, furnaces meeting the proposed new standards sold over 30 years would save about 3.1 quadrillion Btus (quads) of energy—enough to meet the gas and propane heating needs of all of New England for 17 years—and net savings of $4-19 billion for consumers. The higher potential standards would save 4.4 quads, or enough to heat New England for 24 years, netting consumers up to $25 billion.

The current furnace standards can be met using non-condensing furnaces, which send much of the heat from the combustion process up the flue and cannot achieve efficiencies higher than about 80%. (For DOE standards, furnace efficiency is measured by calculating annual fuel utilization efficiency, or AFUE.) The new proposed standards could be met with condensing furnaces, which extract additional heat by condensing the water vapor in the flue gases, resulting in efficiency ratings of 90% or higher. Condensing furnaces make up about 45% of current sales.

Improved furnace standards have been a long time coming. Efficiency advocates and states sued DOE over the first revision completed in 2007, because it did very little to improve efficiency. As a result, the agency committed to redo the standard. In 2011, DOE completed a new standard based on a consensus agreement between manufacturers and efficiency advocates that would have raised the minimum efficiency level for furnaces effective in 2013, but only in the northern region. However, the American Public Gas Association (APGA) filed a lawsuit objecting to the expedited process used to adopt the 2011 standards. In 2014, a settlement agreement was approved that vacated the 2011 standards and required DOE to complete yet another new rulemaking. Yesterday’s proposed rule is a key step in the process for achieving improved standards.

Critics of improved furnace standards argued that the prior DOE analyses for the 2011 final rule failed to fully take into account potential switching to electric heat and the full impact of new furnace standards on the installation cost of new furnaces. The agency’s new analysis is substantially revised to address those critics’ concerns and now estimates that about 10% of furnace purchasers would switch to electric heat, primarily heat pumps, as a result of the standard. Most fuel switching would likely occur in those regions of the country where heat pumps are a cost-competitive option compared to gas heating. DOE also updated its estimates of installation costs. A small portion of consumers may face unusually high installation costs when replacing an 80% efficient furnace with a condensing product. ASAP and our allies have worked to develop approaches that would potentially exempt very high-cost installations and remain open to exploring options to provide relief for consumers facing unusually high installation costs. Fortunately, new venting technologies already are bringing down the cost of venting condensing furnaces in even the most difficult circumstances, and may make any special treatment unnecessary. Examples are herehere and here.

Yesterday’s proposed rule would apply to non-weatherized gas furnaces. Non-weatherized furnaces are the most common type and are located indoors, while weatherized furnaces are generally part of an outdoor unit that provides both heating and air conditioning. DOE completed standards for weatherized furnaces in 2011 that took effect on January 1 of this year.

DOE is required by the settlement agreement to publish a final rule for new efficiency standards for non-weatherized furnaces by April 2016, and the standards would take effect five years later. ASAP and our allies look forward to working with other stakeholders and DOE to come up with a final standard that will deliver on the large savings possible with improved standards.