This is an exciting time for water heating efficiency. It was not so long ago that consumers had few options when their water heater failed beyond purchasing a new version of the same electric-resistance or atmospherically-vented storage water heater they had previously owned. Now, consumers can chose from a wide array of storage, tankless, and hybrid (small tank units that heat water on-demand) models. But high efficiency products are still on the fringe—most water heater sales are for conventional storage units.
In our recent study of emerging technologies in the water heating sector, we found that there are many underutilized technologies that could provide significant energy and water savings. This finding led us to ask, “What efforts are being made to hasten market adoption of these promising technologies?” In our latest report, Market Transformation Efforts for Water Heating Efficiency, we assessed current utility-sponsored programs targeting high efficiency water heating equipment and found that many programs are not reaching the full cost-effective energy efficiency potential of modern technologies. In other words, many of these programs focus on products that achieve only small incremental savings above federal minimum efficiency standards, overlooking the emerging technologies that offer 30-50% energy savings (e.g., electric heat pump and condensing gas water heaters). Such programs could be inhibiting emerging technologies from gaining market share.
Utility incentive programs have long served a pivotal role in market transformation efforts for high efficiency appliances. Not only do the financial incentives help homeowners justify investing in better equipment, utilities also help advertise the availability of high efficiency equipment, and the endorsement of the utility company offers consumers reassurance about the equipment’s performance. Coupled with high efficiency labeling programs, such as ENERGY STAR, utility-sponsored programs help to assure consumers that they are making smart, cost-effective decisions. What we found in our evaluation, however, is that for high-use customers, higher efficiency water heaters, such as condensing gas water heaters, are more cost-effective than some of the products frequently featured in the programs (e.g., 0.67 EF ENERGY STAR-qualified gas storage water heaters). This is true despite higher equipment costs. It will be very important for consumers to understand the cost effectiveness of emerging technologies in order to increase market penetration of these products and bring down costs.
We found that incentives for products that are only marginally better than minimum standards, such as 0.62 EF gas storage and 0.94 EF electric storage water heaters, virtually eliminate incremental costs, and could steer consumers away from purchasing higher efficiency products. These lower efficiency models offer savings of only about 5% compared to condensing gas and heat pump water heaters, with savings in the range of 40-50%. Directing consumers to lower efficiency products constitutes a big lost opportunity for energy savings, as water heaters typically last about 13 years.
While some utility programs may retard market transformation, we found several programs offering incentives for heat pump and condensing gas water heaters, in addition to equipment to improve distribution system performance, such as drain water heat recovery devices. While in the minority, these programs recognize the large energy-saving potential of high efficiency equipment and offer large incentives, ranging from about $200-500, to encourage consumers to invest in efficient equipment. Considering that the emerging technologies we evaluated hold less than 2% market share, these programs serve as a valuable step toward increasing awareness and sales. We’re happy to see these utility-sponsored programs leading the way with incentives for emerging technologies and hope to see more utilities follow suit in the near future.
To read more about our study on market transformation efforts for high efficiency water heating equipment, download the report.