Water Heater Regulations

In 2015, new federal regulations took effect that required water heaters to be more energy efficient. Here’s a recap of the standards, what’s happened since, and what’s in the pipeline going forward.

As of April 16, 2015, water heater manufacturers were to comply with new Department of Energy (DOE) efficiency standards, which required the use of new technologies to achieve efficiency gains. 

With the 2015 standards, residential water heaters were rated using Energy Factor (EF) and tested using Appendix E to Subpart B of 10 CFR 430.  Commercial water heaters were rated using Thermal Efficiency (TF) and/or Standby Loss using 10 CFR 431.106 (Subpart G of 10 CFR 431). 
The American Energy Manufacturing and Technical Corrections Act (AEMTCA) enacted on Dec. 18, 2012 required DOE to establish a uniform efficiency descriptor (UED) and test method for residential and commercial water heaters.  It also allowed DOE to exclude certain water heaters from UED if they (1) did not have a residential use, (2) were effectively rated using existing metrics.   

The Energy Policy and Conservation Act (EPCA) of 1975 — enacted to increase energy production and supply, reduce energy demand, provide energy efficiency, and give the executive branch additional powers to respond to disruptions in energy supply — generally requires that test procedures reflect energy efficiency during a representative average use cycle, and not be overly burdensome to conduct.  (As an amendment to EPCA, the National Appliance Energy Conservation Act (NAECA) was enacted in 1987 to cover exclusively residential products.) 

The EF was determined from a simulated use test that measured the heat out as well as the energy input over a 24-hour period.  The test imposed six large hot water draws on the water heater at one-hour intervals at the beginning of the 24-hour period, and the total hot water load was 64.2 gallons/day.

The procedure had several shortcomings, including the water use profile with six large draws was not representative of actual use conditions; the hot water load of 64.2 gallons/day was not representative of typical water use in most homes; and the range of products covered by the DOE standard excluded some of the recently developed water heaters.

On July 11, 2014, DOE published a test procedure final rule in the Federal Register (79 FR 40541), establishing the Uniform Energy Factor (UEF) metric.  

The UEF covers all residential water heaters, including those with storage volumes between 2 and 20 gallons; gas-fired water heaters between 100 and 120 gallons; oil-fired water heaters between 50 and 120 gallons; and gas-fired instantaneous water heaters with input capacity below 50,000 BTU/hr (the threshold for this product class is ≤199,000 BTU/hr) .  UEF also covers residential-duty commercial water heaters, which means the water heater uses a single-phase electricity; is not designed to provide outlet hot water at temperatures greater than 180 F; and meets certain specified limitations regarding rated input capacity and rated storage volume.  

The new test method consisted of a maximum GPM or First-Hour Rating (FHR) test for determining delivery capacity, and a 24-hour simulated use test (SUT) for determining UEF.  It requires that the thermostat is set based on delivery temp, and must be 125 F +/- 5 F; and to determine the UEF, the water heater has to be tested to one of four possible draw patterns, which vary in length, flow rate and number of draws, and the result of the GPM or FHR test has to be used to determine the appropriate draw pattern for the UEF test. 

The mandatory use of the UEF test methods began on July 15, 2015.

What’s happened since? 

“We’re in an interesting time,” says Joshua C. Greene, vice president of Government and Industry Affairs, A. O. Smith Corp.  “Last year, prior to the Obama Administration leaving office, the water heater industry was impacted by a number of rule makings mostly related to residential products.”

As of June 12 of this year, all water heater manufacturers that produce residential products must publically label their products with the new UEF metric, including the associated literature.  In addition to that, the industry is on a parallel track in working with the DOE on the new standards for commercial products.  The newest efficiency standards for what are defined as commercial products, were not concluded by the end of the prior Administration, and is under open rulemaking with a legal deadline for completion by May 2018.  It’s still unclear to manufacturers what the current Administration will want to do in regards to what’s left in open rulemaking status.   

One of the rules relating to commercial water heaters, which was decided last year, was in regards to the test procedure by which commercial products are to be tested and rated for their energy efficiency.  “Interestingly, there was a “clarification”  in those final regulations relating to the demarcation line as a matter of law that distinguishes a residential product from a commercial product,” Greene says. 

The change made by the DOE in the final regulations was a clarification that rated inputs — for electric up to 12 KW, and for gas up to 200 BTU/hr — are the sole criteria that distinguish residential from commercial water heaters.  So for example, if an electric storage water heater is below 12 KW, regardless of the gallon size, and the outlet water temperature it’s considered a residential product.  If it’s above 12 KW, regardless of the volume size of the equipment, and outlet water temperature it is considered a commercial product.   

“This is meaningful,” says Greene, “because if your product is less than 12 KW, you have to become what’s called NAECA (i.e. residential) compliant and get your heaters in compliance for that, which impacts manufacturers.” 

As a consequence of this, the DOE has essentially required manufacturers that make water heaters that are below 12 KW for commercial applications, and thus meeting commercial efficiency standards, to now either convert those products over to NAECA standards, or essentially discontinue the product.  “We’re working through that as an industry,” Greene says.  The DOE has given the industry a year to make those transitions, but with the new Administration, the industry is in a dialogue now to potentially remedy that action.  At the end of the day there are some heaters that all manufactures make that are less than 12 KW of input, of different gallon sizes, that really don’t go into people’s homes.  They go into commercial settings such as restaurants, hair salons, stadiums, and commercial laundries, where residential standards make no sense in terms of the application.  

Was the standard not really thought out and a one-size fits all solution to attaining energy efficiency? Greene says, “I think the DOE was reacting to a negative that it perceived in the market place related to the circumvention of residential standards for electric storage water heaters that have the volume capacity of above 55 gallons.”

One of the new standards that went into effect in April 2015 was that water heater manufacturers were prohibited from selling electric storage water heaters at, or below 12 KW, but had volumes or tanks above 55 gallons, unless that particular product had heat pump water heater technology in it.  The exception to this prohibition on over 55 gallon electric storage water heaters is if the water heater is a “grid enabled” water heater.   The grid enabled water heater exception became federal law in April 2015.   However, a couple of years into the tenure of the new law, some manufacturers were perceived to be circumventing the heat pump legal requirement by marketing and selling what was essentially a residential  electric storage water heater — defined as less than 12 KW, above 55 gallons — but had a thermostat that delivered an outlet water temperature of a 180 F, which made it a commercial water heater under the DOE’s then regulatory definition of a commercial water heater. 

As a result, the DOE took the position that regardless of gallon size and outlet water temperature, an electric storage water heater of less than 12 KW of input, is a residential water heater and thus must meet NAECA requirements. 

“In identifying a problem,” Greene says, “the DOE took an ax rather than a scalpel  to alleviate what it perceived as circumvention going on.”  
The industry as a whole, now has to produce and manufacture electric storage water heaters less than 12 KW — some that may have volume capacities starting at 20, 30, 40 gallons, but many that are above 55 gallons — where heat pump water heater technology is just the wrong technology for the application in which it has been historically selling these products.  

Everyone in the industry is impacted and is hoping for some type of resolution with the new Administration. 

What’s coming up? 

As mentioned earlier, the new UEF labels will need to be displayed on all products beginning in June of this year, and it’s going to be a new market place essentially for consumers and manufacturers.  While there’s going to be volume of water heaters that flow through retail outlets and wholesalers that don’t have the UEF metrics on them, there’s recognition by the federal government that these products have to flow through the channels.  

But beginning in June, what will hit the market place are heaters that have this UEF descriptor and a new emphasis on the FRH of a particular water heater, and what consumers should really be looking at is the operational savings over the life of the product. 

“Some manufacturers are enthused about it,” says Greene, “others less so .” But the bottom line is this will probably be the biggest change that’s coming in the water heater industry.  Not only do manufacturers have to make changes, but they will also need to address consumer education — how to educate wholesalers, plumbers, contractors, and utilities.  “Especially the utilities,” Greene says.  Particularly in regards to rebates for having energy-efficient water heating equipment and getting them up to speed in what the UEF is and what it means.  

In regards to what the new Administration means to the pending regulations, Greene says the industry is very closely engaged and monitoring, and working on these issues almost daily.  Of course manufacturers support energy efficiency and innovative technology.  Partly because it allows for competitiveness, but also because it’s the right thing to do; it’s good for consumers, and it’s good for the country.  

Frank Stanonik, chief technical advisor, AHRI adds, “There is considerable uncertainty, as there would be with any new administration.  While rulemakings are on a schedule established by law, there is always a period at the beginning of a new administration where rulemakings that are underway are put on hold and those that have not yet been published in the Federal Register are held back for review by the new people in charge.”

There are currently two regulations in front of the industry and the new Administration.  At the very end of the Obama Administration there was a final rule issued increasing the minimum energy efficiency standard for commercial package boilers.  However, that final rule was published within the window of time that it was not technically published in the Federal Register, and thus not become law.  

When President Trump took office, he issued an executive order that basically put a 60 day freeze, starting on Jan. 20, in effect for all federal agencies, which meant no rules, proposals, or guidance could be issued.  At the time of writing this article, those 60 days had not yet passed.  As a caveat of the presidential memo however, notwithstanding that 60-day freeze, when a cabinet secretary is appointed, the memo directs the secretary to potentially evaluate whether or not the 60-day freeze should be continued by notice and comment.  

“One of the things that they’re evaluating on the commercial package boiler efficiency standard final rule is whether or not that rule should be further delayed although there are some in the industry that would like to see it go away,” Greene says.  “Without going into all of the legality of it all, is that possible? Potentially, but it’s more likely than not in our estimation that that final rule does get published.  It’s just a matter of when.”  

The other pending regulation is on new minimum energy efficiency standards for commercial water heating equipment.  As mentioned earlier, that rulemaking was not completed by the end of the Obama Administration, and as a result, is now pending.  The issue with that rulemaking is it has a legal deadline by which the DOE has to issue the new final rule on new minimum efficiency standards for commercial water heating equipment by May 2018.  Because this rulemaking was not completed, it is not subject to the 60-day freeze in the sense that you’re not really freezing anything because they never finished it.  “But with the new Administration coming in,” says Greene, “there is the prospect that it may say, ‘Well we don’t really think this is necessary and we’re going to attempt to roll it back.’”  

In addition to the ongoing rulemakings on revised standards for commercial water heaters and pool heaters, Stanonik says, “There is a new rulemaking for revising residential water heaters again that is scheduled to begin later this year.” 

Are there benefits to regulations? 

“Sure,” says Greene, “there’re two benefits in our view.  Federal regulations help provide one standard across the country as opposed to 50, and also help to drive technology and innovation to further distinguish our products from our competitors.  The insularly benefits of course is to help our customer save energy, which helps with their operational costs and provides environmental benefits.”

Stanonik agrees that there are two benefits and adds that it might seem to the casual observer that regulations have no discernible benefit to manufacturers, but insists that that is untrue.  “While rulemakings can be contentious affairs sometimes, overall, the nation’s regulatory scheme under the EPCA has two main benefits for manufacturers: One, the Act has federal preemption, which proscribes states and localities from enacting stricter (or looser) standards for covered products.  This allows manufacturers to build products for a national market, which maximizes the benefits of spreading costs across large production volumes.  This also helps with the second benefit: Predictability.  Because rulemakings are on a schedule, manufacturers know that new rules are coming down the pike, even if they don’t know exactly what they will contain.  In this way they can manage the changes to produce more efficient water heaters in conjunction with their normal activities to develop new, more efficient and innovative products to meet the needs of their customers.”

What does it all mean? 

We can agree on the benefits of regulations, but we also know there are challenges.  “I think the challenges are primarily trying to bring about some needed reforms to the process so that we do not continue on a never-ending cycle of ever-higher efficiency levels without careful consideration for the consequences for the entire product chain, from manufacturers to distributors to contractors to consumers,” cautions Stanonik. 

With all the recent changes and pending regulations, one thing that is consistent is the industry’s resilience and ability to adapt.  Stanonik adds that you, “should know that the associations that represent the manufacturers, distributors, and contractors are very engaged in the rulemaking process and in working with each other to ensure rules provide real cost-effective energy savings for consumers without disadvantaging any significant subset of those customers, and, perhaps more important, do not adversely affect the safety and reliability of the water heaters.”  

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