DOE Issues Hot Mess of a Rule on Furnaces and Water Heaters

Just as many Americans are turning up the thermostat for winter, the Department of Energy (DOE) just issued a rule regarding residential fossil fuel fired furnaces and commercial water heaters that puts energy savings on ice. As a result, the United States will miss out on billions of dollars in energy bill savings and suffer millions of tons of extra carbon pollution.

Siding once again with fossil fuel interests, the Trump administration has done an about-face on how it defines classes of products that use fossil (aka "natural") gas and propane–reversing a long-held DOE definition–which sets the stage for billions of dollars in unnecessary fuel use. It's a win for the gas industry and a loss for millions of households and businesses that depend on gas for heat and hot water – and it will need to be reversed by the Biden administration before any further progress can be made to improve the efficiency of this equipment.

Achieving the next level of efficiency in these gas appliances would require the use of condensing technology, which captures additional heat from flue gases that would otherwise be lost up the chimney, returning usable heat. DOE proposed condensing-level standards in a 2015 proposal for residential furnaces and a 2016 proposal for commercial water heaters. Condensing technology is widely available and DOE analysis found that it makes economic sense–and saves loads of energy. A residential gas water heater with condensing technology will use about 25 percent less energy, according to a recent report from the Appliance Standards Awareness Project. Instead, the Trump DOE caved to an industry demand to create a separate class just for inefficient products, with the sole purpose of keeping them on the market. Instead of the entire market moving toward condensing technology, this action creates a loophole for manufacturers to keep producing and selling inefficient equipment.

This inexcusable move has far-reaching effects: At least half of homes in the U.S. depend on fossil gas for space heating, which accounts for about 45 percent of our energy bills. There are around 2.5 million new units shipped each year. In commercial buildings, gas- or propane-fired water heaters are also widespread, used for about half the total floorspace.

Standards for residential gas furnaces, which haven't seen a significant update in nearly 30 years, are already long overdue for an improvement. Making these appliances more efficient with condensing technology could cumulatively save consumers $24 billion on their utility bills by 2050 and cut carbon pollution by nearly 85 million metric tons (equivalent to the annual emissions from 22 coal-fired power plants). And the thing is: condensing furnaces and water heaters are widely available today, and already make up a significant portion of market share in some parts of the country. Stronger standards help ensure that all products on the market perform better and save energy, and that better technology become more affordable and accessible over time, which is especially important for renters or those with limited incomes.

DOE itself estimated in September 2016 that consumers would save about $700 on average by purchasing a furnace that complies with the improved standard DOE originally proposed, even after accounting for all costs (including any relevant venting and plumbing costs related to installation). Using condensing technology is the only way to achieve the higher efficiency levels that would have been required if DOE hadn’t reversed course with this loophole.

Because the condensing-type equipment requires different venting and a plumbing connection to dispose of the condensate, gas industry groups argued that these more-efficient products would preclude access to certain features or "performance characteristics"—and therefore should have its own product category. Yet there is no performance-based reason to grant special consideration to non-condensing furnaces and water heaters, unless you consider wasting gas a "feature."

DOE's rule is based on the idea that installing high-efficiency gas appliances is much trickier than it actually is. There are numerous solutions for venting these appliances. But instead of acknowledging these and other options in development, DOE decided that appliances must comply with a specific type of venting—a short-sighted decision that essentially freezes venting technology options—and equipment efficiency—in place, to the detriment of consumers.

This furnace and water heater rule is far from the first time this DOE has attempted to weaken efficiency standards. At the end of 2020, DOE needlessly established new classes of household washers and dryers that would not be subject to any water or energy efficiency standards, and also separately issued a new definition of showerheads to skirt their water and energy efficiency rules.

In October 2020, DOE exempted dishwashers that wash and dry dishes in one-hour or less from efficiency standards, a proposal opposed by environmental groups and manufacturers as most dishwashers on the market already offer quick cycles. Meanwhile, NRDC, joined by consumer and low-income consumer advocates as well as a number of states, recently sued the agency over its inaction on 25 standards that would save households and businesses at least $22 billion annually on their utility bills. Lawsuits also have been filed over DOE’s rollbacks of light bulb standards, changes to its efficiency standards process that will slow down—and create hurdles to—future standards, and its failure to finalize four standards issued under the Obama administration. 

Here, too, DOE has disregarded the intent of the law—which is to update standards to reflect improved technology—and reversed its previous, well-reasoned rejections of gas industry requests. DOE rubber-stamped the continued manufacturing of an inferior set of products, slowing down progress that could have been made by requiring the energy performance that condensing technology can deliver. Now the burden will be on consumers and building operators to avoid these wasteful furnaces and water heaters. Perhaps unwittingly, though, many will end up with inferior products, locking in years of unnecessary gas consumption—to the detriment of their wallets and our planet.