WASHINGTON — The U.S. Department of Energy has proposed higher efficiency standards for gas and electric water heaters. The increases are nominal and won’t take effect until 2015, if they are finalized and promulgated. Environmentalists criticized the proposals for being too meek; they would prefer more gas condensing and electric heat pump water heaters. Water heater manufacturers, however, pointed out that DOE is constrained by law from going overboard on new efficiency standards.

The proposed rules call for gas-fired storage water heaters at or less than 60-gal. to have an Energy Factor of 0.675, while those larger than 60-gal. would have an Energy Factor of 0.717. Electric storage water heaters of 80-gal. or less would have an EF of 0.96 and those above 80-gal. would have an EF of 1.088. Oil-fired storage water heaters of all capacities would need an EF=0.68, while gas tankless units would need an EF=0.82.

DOE is aiming to finish the rulemaking by this March, with the rule to take effect five years from now.

“My understanding is that both the timing and the fact that the proposed rules are evolutionary are what is required under NAECA law,” said Mike Parker, vice president of marketing and strategic planning for A.O. Smith, State and American Water Heaters. “NAECA puts limits on what DOE can do and my understanding is that the timing and nature of the changes are within that. This is the third round of these [efficiency increases], and like the first two, there are challenges here. This is not a slam dunk, but I think from our perspective that we can achieve these changes within the time frame and achieve them without putting any undue impact on the end user in terms of the cost of the products. And that’s also in the legislation, the requirement that the rules shouldn’t have undue impact on consumers, and doubling or tripling the cost of a water heater would be undue.”

DOE cites the law specifically in its Notice of Proposed Rulemaking when it states, “The Energy Policy and Conservation Act (42 U.S.C. 6291 et seq.; EPCA or the Act), as amended, provides that any new or amended energy conservation standard DOE prescribes for certain consumer products, including residential water heaters … shall be designed to ‘achieve the maximum improvement in energy efficiency . . . which the Secretary determines is technologically feasible and economically justified.’ Furthermore, the new or amended standard must ‘result in significant conservation of energy’.”

DOE argues in the proposal that the rules would do both.

“DOE’s analyses suggest that consumers would realize benefits from the proposed standards. Although DOE expects that the purchase price of the more-efficient heating products would be higher than the average prices of these products today, for most consumers, the energy efficiency gains would result in lower energy costs that would more than offset the higher purchase price. For water heaters, the median payback period is 2.7 years for gas-fired storage water heaters, 5.8 years for electric storage water heaters, 0.5 years for oil-fired storage water heaters, and 23.5 years for gas-fired instantaneous water heaters.”

The proposed rule would add 4 points in EF for gas water heaters and 5 points of EF in electric, said Chuck Rohde, wholesale market manager for Rheem Water Heaters. Water heater manufacturers will experiment with a variety of technologies to meet the standards, Rohde said, such as adding vent dampers, which would mean running electricity to gas water heaters. They might try new burner configuration, flue baffles or spark ignition. The biggest change, however, Rohde noted, will be the addition of more insulating foam, which could result in downgrading of capacities. Fifty-gallon water heaters would become 40, 40s would become 30s, and so on, in order to fit the new water heaters into the same utility closet or basement space occupied by the water heaters being replaced. Niche products, such as low-boy electrics, may be most impacted.

Environmentalists are calling on DOE to mandate condensing or heat pump technologies for the largest capacity water heaters.

“Big energy savings sometimes requires big changes in technology,” said Andrew deLaski, executive director, Appliance Standards Awareness Project. “We’re disappointed that the Obama Administration has shied away from making even a modest first step to transition America to the most efficient types of water heaters.”

The American Council for An Energy Efficient Economy agrees with DOE that a total shift to condensing and heat pump water heaters would be too disruptive to the market.

ACEEE advocates a “middle ground standard” that would require the use of the more efficient advanced technologies for only water heaters larger than 55-gal., which represent 4% and 11% of the gas and electric water heater markets, respectively. The middle ground standard would save 3.7 quads of energy, save consumers $22 billion and reduce CO2 emissions by 217 million metric tons, ACEEE said.

A quad is enough energy to meet the total needs of about 5 million typical U.S. households for one year.

“We agree that it’s too early to mandate next generation technologies for the entire water heater market,” said Steven Nadel, executive director of ACEEE. “But if DOE required this shift for the very biggest water heaters, the energy, economic, and CO2 savings would increase by about 40% compared to the department’s proposal. That would also pave the way for a longer term transition to the best, advanced technologies, which is where the biggest savings can be found.”