Water Heaters Subject of New Efficiency Standards

New federal regulations on the efficiency of hot water heaters went into effect this past April. Realtors® need to understand this new policy in order to communicate the impact of the regulations to clients.

Under Department of Energy (DOE) rules, water heaters manufactured after April 16, 2015, must meet new efficiency requirements, including higher Energy Factor (EF) ratings. This standard applies to virtually all residential water heaters, whether they use gas, propane, oil or electricity. The new rules, prompted by the National Appliance Energy Conservation Act, will have impacts both positive and potentially problematic for homeowners who need to replace an aging or broken water heater.

POSITIVE IMPACT
The upside of the mandate is that new water heaters will save energy, reduce emissions, and cut energy costs. According to the DOE, the standards will help to save approximately 3.3 quads of energy and result in $63 billion in energy bill savings for products shipped from 2015-2044. The standard will help to avoid about 172.5 million metric tons of carbon dioxide emissions—equivalent to the annual greenhouse gas emissions of about 33.8 million automobiles. Depending on the size, type and technology used in a newly-installed water heater, consumers could see utility bills cut significantly; water heating amounts to nearly 20 percent of a home’s energy costs.

NEGATIVE IMPACT
The potential downside of the new rules is that the efficiency standards could limit the types of available water heaters, increase the initial cost of units, and in a worst-case scenario, require costly remodeling or relocation to accommodate the increased size of a new heater.

The latter consequence could impact larger units—those over 55 gallons—which will need increased insulation and new electric heat pump and gas condensing technologies to achieve the efficiency ratings. This means that water heaters with comparable capacity will be slightly larger and could require more space for installation. If the existing water heater is in a narrow, tight space with no room to spare, this could require buyers to relocate the appliance, opt for smaller capacity units, or choose different technology such as tankless water heaters. Most tankless water heaters already meet established efficiency standards.

"This regulation is imposed only on the manufacturer, not on retailers or consumers."

As with the introduction of any new technology, the initial cost of the updated water heaters will increase, possibly by as much as 30 percent. However, those costs will be recouped over time through energy savings.

This regulation is imposed only on the manufacturer, not on retailers or consumers. Retail outlets will continue to sell their remaining stock of water heaters beyond the April 16 effective date. Consumers are not required to install or upgrade to the more efficient units. From a Realtor® standpoint, there is no disclosure or buyer-beware requirement.  Realtors® should be aware of these requirements and potential impacts so that they can appropriately advise clients if it appears that a water heater will need to be replaced. 

More information on the standards can be found on the DOE’s Appliance and Equipment Standards website at: www.eere.energy.gov/buildings/appliance_standards

Josh Veverka is the NVAR Government Affairs Director.