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This year is a critical time for construction professionals to learn about the latest advancements and news in water heating technology.

As of April 2015, the National Appliance Energy Conservation Act (NAECA) has enacted new water heater efficiency requirements that fundamentally change the water heating options available in the U.S. market. And in an environment of rising energy costs, your customers will want to be sure that you’re recommending a solution that meets their needs for reliability and comfort without sending their utility bills soaring.

If you haven’t gotten around to learning about the changes, a new report from Davidsonville, Maryland–based research firm Newport Partners LLC provides a straightforward way to catch up. “Residential Water Heaters under the New 2015 Federal Standards: An Analysis of Energy, Economics, and Emissions” examines how the NAECA standards have affected the technologies available.

The report identifies a menu of 14 different water heating options that meet the latest product requirements. (Natural gas systems were not included, as they typically do not compete with propane systems.) It compares those options in three climate zones using three metrics: annual energy costs, annual cost of ownership, and environmental performance. By digging into the full report or checking out one of three climate-specific fact sheets, you can find the best water heating option for your projects in 2015.

New installation challenges

Installation costs and annual energy costs have always been important decision-making factors when choosing a water heater. But the Newport Partners report finds that the new technologies and standards have created an important new consideration: installation feasibility. “It’s not always going to be business as usual,” says Jamie Lyons, research engineer at Newport Partners.

Propane condensing tankless water heaters almost always provide the lowest annual cost of ownership, new research finds.


For instance, the NAECA efficiency standards raise the energy factor requirement for electric storage water heaters of 55 gallons or more, effectively requiring them to use heat pump technology. So remodelers and contractors replacing an 80-gallon electric storage tank won’t be able to simply do a like-for-like replacement. For tank storage water heaters smaller than 55 gallons, the increased efficiency requirements will make the units a few inches taller and wider to accommodate more insulation, which could affect installation in space-constrained projects.

Tankless water heaters, on the other hand, are largely unaffected by the new standards, as almost all units already meet the efficiency requirements.

Updated energy calculations

After calculating the annual energy use and cost of ownership for the menu of water heating options, the report identifies several key findings that building pros should be aware of.

In homes with moderate hot water demands, both propane tankless water heaters (C and D) and heat pump water heaters (G) have lower annual energy costs than traditional storage tank systems.  Heat pump water heaters have additional installation considerations  (requiring additional vertical clearance and 1,000 cubic feet of space around them), so they may not be an option on all projects. Energy Star offers a checklist of installation location questions you should ask if considering heat pump water heater technology.

When replacing large electric storage tank water heaters that are no longer available, some pros are turning to a strategy of using two smaller-capacity tank systems (Ex2). But the report finds that strategy results in relatively high energy costs compared with propane tankless or heat pump water heater systems, so switching to propane may be a more attractive option.

Another critical set of considerations for pros and their clients is a system’s first cost and how long it will last. The report compares each of the system options by its “Annual Cost of Ownership,” or ACO. The ACO approximates the annual costs the homeowner expects to pay for that system, including energy, equipment, and installation costs.

While the actual costs vary depending on climate, level of demand, and whether the system is used in new construction or replacement scenarios, propane condensing tankless water heaters have the lowest ACO in almost every scenario.

“The condensing tankless water heater has a couple things going for it,” Lyons says. “One, it’s increasingly cost-competitive. Two, we used benchmark industry data from several sources that offer tankless systems at 20-year life cycles. So it’s going to be a bit of a premium system going in, but it’s going to last for that amount of time. Plus they’re very efficient, so you roll those things together.”

The exact needs of your project or client might change the calculus of your water heating decision, so check out the full report or the climate-based fact sheets for a more in-depth discussion. In addition, the Propane Training Academy now offers a new course, Residential Water Heaters under the New 2015 Federal Standards, that offers a guided approach to the research and is eligible for continuing education credits.

Building codes and standards are constantly evolving, but the NAECA regulations could have an impact of immense magnitude. Industry data indicate more than 8.5 million water heaters are shipped each year. And with a typical water heater having a life expectancy of 13 years, hundreds of thousands of existing water heaters must be replaced each year. “That’s the canvas we have in the background,” Lyons says. “We have a new menu of options. And we have new decision-making factors. So it could have a pretty big market impact that will be felt as soon as this year.”

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Jeffrey Lee