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In years past, recommending the right water heater for homes without natural gas was complicated. The decision involved a variety of considerations, including performance, operating cost, and upfront installation cost. Even if your homeowner desired the utility savings of heating water with propane, this often required significantly more cash coming out of the homeowner’s pocket upfront.

But that’s changing now. New water heating standards from the Department of Energy that go into effect this year are rewriting the price-point differential between electric and propane water heaters, especially for tank storage units above 55 gallons.

As the new National Appliance Energy Conservation Act regulations go into effect in 2015, every new water heater will be required to meet a higher efficiency rating. This will affect contractors when it comes to installation and homeowner education.

The new standards require that all water heaters, regardless of size, type, or heating source, be more efficient. For tank storage units smaller than 55 gallons, the increases are negligible. The minimum energy factor (EF) on a gas, 50-gallon tank heater will increase from .58 to just .60; the EF on the same size electric unit will increase from .90 to .95. Keep in mind that EF cannot be used to compare the energy costs of systems using different energy types, such as propane and electricity. An electric storage tank water heater with an EF of 0.95 could have a higher energy cost than a propane storage tank water heater with an EF of 0.67.

Manufacturers say those increases can be achieved simply by using more insulation, which might make the storage tank units a few inches wider, at a cost of about $50. That increased girth will likely affect space-constrained projects such as multifamily housing, where a relatively small gas tankless unit may be an easier fit than the new, wider tanks.

But the real jump comes for higher-volume water heaters.

For tanks of 55 gallons or more, the new rules get a lot more stringent. For instance, EF requirements for a 65-gallon electric tank heater will more than double, from .88 to 1.98. But the only way to get that efficiency out of an electric unit is to use heat pump technology. That adds significant costs — 65-gallon units start around $2,000 — along with installation concerns. Heat pump water heaters (HPWHs) require a higher vertical clearance and at least 1,000 cubic feet of space around them. Plus, without external venting, a HPWH will cool the air within that surrounding space, potentially increasing the demand on the space-heating system.

“New water heating standards from the Department of Energy that go into effect this year are rewriting the price-point differential between electric and propane water heaters.”

Gas tank storage units will need to use condensing technology to meet the new standards. Condensing technology adds its own costs, as well as a need for a condensing drain and an electrical outlet.

With these regulatory changes, the upfront cost gap between propane tankless units and electric storage tank heaters might not be so large — or it may even turn in favor of propane.

“It really takes the upfront cost difference out of the decision-making process,” says Roy Setliff, sales and marketing director at Plantation Propane & Petroleum in Thomasville, Georgia. Plantation has installed more than 600 propane tankless water heaters in the last 10 years, with the performance of the units often as much of a selling point as the ongoing utility cost savings over time. “Now, you can talk about performance and the unlimited hot water they can get from these units when the whole family is in town during the holidays,” he says.

Joe Holliday, director of business and product development at tankless water heater manufacturer Rinnai, says the new requirements, which go into effect April 16 for manufacturers, provide a new selling opportunity for construction pros that install or specify propane water heaters.

“If you’re talking about an electric storage tank heater that used to cost $300 to $400 now being priced upwards of $1,000, that really closes the gap,” Holliday says. “You’ve got a good potential to convert them to propane, with the lifestyle benefits of tankless.”

Rinnai estimates that, industrywide, 265,000 tank storage heaters of 50 gallons or larger were sold in 2013, or approximately 5 percent of the water heater market. “There are a lot of those heaters out there,” Holliday says.

The old “yank and replace” practice won’t work when it comes time to replace those large storage tank units. That should provide plenty of opportunity for you to upgrade those customers to high-efficiency propane water heating.

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Joe Bousquin