Higher efficiencies mean higher price points, closing the cost gap between traditional and tankless water heaters.
Efficiency doesn’t always mean smaller. In the case of water heaters, it means bigger and heavier systems with more insulation, and more work to install them. Oh, and they’ll also be more expensive.
The U.S. Department of Energy is updating the National Appliance Energy Conservation Act codes for 2015, and requiring higher energy factor ratings on nearly all residential water heaters: gas, electric, tank and tankless.
“The NAECA changes are good for the environment, plumbing professionals, and manufacturers—but may leave the consumer a bit lighter in the wallet than anyone anticipated,” says Mike Stebbins, president of trutankless, which makes tankless electric water heaters.
The rise in energy factor means that systems need to be designed to be more efficient. Stebbins compares EF to a percentage. A water heater with a 0.96 rating is 96 percent efficient—meaning 96 percent of the energy output is used for heating water. The remaining four percent is exhausted as heat.
The new EF standard requires any electric water heater under 55 gallons to be 0.96 or 96% efficient. (Check out the handy graph from the DOE.) The update has two major ramifications: it will drive up the price of both equipment and installation.
Higher Prices, Higher Production
“A homeowner replacing a 50-gallon electric water heater in a closet will have trouble, because the new one may not fit in that spot. You may have to go to a 40-gallon tank just to fit in the space under the cabinet or in the closet,” Stebbins says.
“I think the tank manufacturers did a great job lobbying the DOE,” Stebbins says. “The price goes up, production goes up, and they make more money. And this is for a marginal increase in efficiency.”
Homebuilders are acutely aware of any change in price, and Stebbins says many are turning toward tankless water heaters because of the increased cost of traditional water heaters.
“From a macro level, because traditional ways of heating water is getting more expensive—it’s a big push in the way of going tankless,” Stebbins says. “Our price point will not change. The equipment cost, the installation cost, will remain the same.”
The new EF for tankless water heaters is 0.93 for electric and 0.63 for gas-fired heaters.
“Tankless is an upgrade. There is a higher price point for equipment and installation, but as these regulations take effect, the gap between tank and tankless starts to close,” he says.
Trutankless only builds electric heaters, which are popular across the Sun Belt and in areas where there is less natural gas infrastructure. Stebbins says his company’s product “bypasses many of the requirements,” due to its inherent efficiencies.
Quick Hit: 10 Questions about Tankless Water Heaters
Tankless as Standard?
While tankless water heaters are more energy efficient than standard heaters, some builders argue it’s not always the way to go.
“It’s an excellent energy saver but it’s not a water saver,” says Joyce Mason of Pardee Homes. “In a drought area, you have to pair that system with a recirculating pump and an on demand system, because if you’re going to add a reciculating pump to a hot water heater, you’ve taken away the efficiencies of the water heater. Now you’re making it work 24 hours, so you have to add the on demand system so the reciculating pump also doesn’t work 24/7.”
Pardee includes tankless as standard on some of its LivingSmart green homes. “We’ve moved that to a standard in some areas, partly to meet stricter energy codes. The tankless water heater gives a good bump in (Title 24) points,” Joyce Mason, vice president of Marketing for Pardee Homes, said on TecHome Builder’s Energy Advantage webcast.
Green home builder City Ventures installs tankless water heaters in some of its homes when space is tight. “Usually because of limited space available in the garage,” says Gregory Jones, City Ventures’ director of purchasing.
The other reason Pardee is making tankless standard—homebuyers love it.
“They love the idea of having continuous hot water and almost having an endless supply of it.”
That love is good for trutankless, and so are the updated codes. “These regulations are good for tankless manufacturers,” Stebbins of trutankless says. For builders, the updated codes, the higher cost and larger size of tank heaters could mean a turn toward tankless.