What's the angle? Or, in other words, what's in it for your customer? Stop, look, and most importantly, listen. Your customer asks, "What's the least expensive way for making hot water?"

First you need to define the terms they already have in their minds: up-front, life-cycle, and/or operating costs. Over the past two years the federal tax credits and utility incentives have somewhat leveled the up-front costs, but my customer was most interested in the actual operating costs. To be fair, the answer really depends on which fuels they have available as a primary source: natural gas, propane, oil or electricity. One thing that I will be suggesting, every time, is solar thermal because those tax credits do not expire at the end of 2010 and remain available through 2016. Additional information on the tax credits is available at: www.dsireusa.org.

In this case, they were burning oil. Natural gas is not available, so that leaves propane and electricity for the alternates. Two people live there with children, spouses and grandchildren, creating a need for larger volumes of hot water around the holidays. They are, however, on a municipal water system, which means they will receive cold water that ranges from 40°F to 80°F in the winter and summer. Their net-input energy ranges from 666.4-BTUs to 333.2-BTUs per gallon, rendering an average 60°F rise if the targeted storage temperature is 120°F. They are using an average of 50 gallons per day. They feel that electricity is not worth considering due to the increase expected in 2011 of as much as 37% that would cause an increase from 11.4 cents per kWh to 15.6 cents per kWh.

They don't currently run out of hot water because they have an old 80-gal. oil-fired relic that's now sprung a leak. Judging by the look of the dome's rusty screws, it had been a long time (if ever) that this beast consuming 30% (on average) of their annual energy budget was properly cleaned and tuned.

You find out your customer has a service contract that for less than $100 the furnace and water heater is serviced annually. Fast forward to its removal and you could literally use that so-called service contract for its best most suitable purpose — toilet paper. The tank was coated in a thick years-in-the-making blanket of soot. No doubt the furnace was given a lick-and-a-promise too for its clean and tune!

Fifty gallons a day with an average yearly incoming 60°F cold-water temperature heated to 120°F requires a daily net-input of 24,990 BTUs. But that’s the end result and we must incorporate the EF (energy factor) of the potential replacements. For oil, the industry average EF is 0.53, thus, 24,990 ÷ 0.53 = 47,151 BTUs gross input required daily and at $3.35 a gallon, we’re looking at an annual bill of $430.25.

Our competitor has suggested the existing 20-year-old oil-burner be re-used. The customer doesn't know the difference between a campfire and a retention-head burner — ugh — and it's clear they won't want to be educated. It's the long-term operating costs that are driving this sales call and they are bringing up tankless.

Propane is an unregulated fuel, meaning the delivery company can arbitrarily charge pretty much whatever they decide, without any input from the PUC (Public Utility Commission) in my home state of Pennsylvania. Local News-8 ran an exposé on propane dealers last winter with one example of a widow lady in a trailer park paying more than $6 a gallon! But at $3.87 a gallon, we're looking at two different scenarios: 0.80- or 0.94-EF ratings for standard or high-efficiency tankless water heaters. (Bear in mind that the EF-ratings take a full 24-hour cycle into account with stand-by heat losses incorporated and in spite of their being a flash water heater, there are added losses to be considered.)

At that price for propane, we're looking at $480.66 vs. $409.27 each year (assuming no increase/decrease in cost for fuel). If they choose a tank-style instead due to the up-front lower cost, then they will, instead, be looking at an annual bill of $610.36.

Their breaker panel reveals they have a 200-amp service with numerous blanks that can be removed to accommodate a 30-amp 220-volt double-pole single-throw breaker. Aside from the stove, central A/C, and a sub-panel feeding the garage, the connected load is far less than 80% of the 200-amp service with room to grow the load.

Have they considered a heat pump water heater? Nope, no one else has mentioned that type of water heater. Well, we've been pounding the EF ratings enough that they understood the correlation between EF and operating costs, and now comes the 2.2-EF for the heat pump model. At 11.4-cents per kWh, they're looking at $138.45.

The customer asks, "But what happens next year after the rate caps come off and we're paying 37% more?"

The customer will be paying $189.45 each year. Let's assume propane and oil prices don't change — just the cost for electricity goes up. In 2011 we're looking at the following:

  • $430.25 for oil
  • $480.66 standard propane tankless
  • $409.27 high-efficiency propane tankless
  • $448.16 standard electric-resistance elements
  • $425.30 tankless electric
  • $189.45 heat-pump electric water heater (assumes a 37% increase in fuel cost)

The slower recovery in heat-pump mode was a concern expressed, but with an automatic ramp-up to faster electric-resistance (0.98-EF) incorporated when the on-board sensors "see" they’re out-pacing production, there's little concern for running out of hot water. But, just to be sure and add a layer of comfort, there was ample room for the 80-gal. model.

Still not convinced? Let’s take a gander into the crystal-ball for 20-year operating costs while adding a 5% per year increase for fuel costs:

  • $14,226.63 for oil
  • $14,893.48 standard propane tankless
  • $13,532.90 high-efficiency propane tankless
  • $14,818.84 standard electric-resistance elements
  • $14,062.95 tankless electric
  • $6,264.35 heat-pump electric water heater

You don't really need a tax credit to entice customers to make a choice that's in their own best interest. If you'd like a copy of my Excel spread sheet I use to clearly and rapidly illustrate these facts, send me an e-mail and I'll forward a copy to you.

Dave Yates owns F.W. Behler, a contracting company in York, Pa. He can be reached by phone at 717/843-4920 or by e-mail at Dave.Yates@fwbehler.com.

All Dave Yates material in print and on Contractor's Web site is protected by Copyright 2010. Any reuse of this material (print or electronic) must first have the expressed written permission of Dave Yates and Contractor magazine. Please contact via email at: dave.yates@fwbehler.com.