Biden Administration’s Latest Gas Appliance Target: Gas Water Heaters

The Department of Energy proposed a new rule on natural gas water heaters two weeks after the DC Circuit Court vacated DOE’s earlier natural gas boiler proposal for “[failing] to offer a sufficient explanation in response to the comments [from petitioners] challenging a key assumption in its analysis.” While the administration continues to say it isn’t banning residential natural gas appliances, the DOE’s new rule would result in a de facto ban.

A Record of Poor Savings Calculations

According to DOE, this new rule would save consumers an estimated $11.4 billion in annual energy and water costs, but the Department has a poor track record of announcing large consumer savings for natural gas appliances that have to be walked back.

In 2016, DOE amended its standard for consumer boilers because the proposed standards were not economically justified. Utility company, Spire Inc. pointed out at the time that the DOE estimate overstated consumer utility bills by roughly 40 percent.

A D.C. Circuit court sent DOE’s earlier 2020 boiler proposal back to the Department to address issues in its calculations. According to the DC Circuit Court:

“The Agency ‘explained that ‘[it] ha[d] not identified a source of comprehensive burner operating hour data for commercial boilers that could be used for such an analysis nor was such identified to DOE by stakeholders…’”

“[U]sing data ill-suited to the task is not excused by failure—even good faith failure—to locate suitable data, particularly considering that the Congress here required clear and convincing evidence before the Secretary can disturb the regulatory status quo.” (emphasis added)

The 2020 rule was vacated in July because its new methodology to calculate savings and impacts was developed without industry input and sufficient time for stakeholder comments. According to the July 2023 decision:

“The Agency failed to provide notice and comment despite its reliance on new studies and data critical to supporting its use of random assignment to assign boilers in the life-cycle cost analysis. The DOE also failed to address challenges to its 30 Btu/h assumption in calculating burner operating hours for the lifecycle cost analysis for the second time.” (emphasis added)

DOE’s alleged cost savings calculations are subject to additional criticism for the costs to manufacturers that are passed down to consumers. According to the Hill’s reporting:

“The department said in its proposed rule that it’s not clear whether the rule will ultimately cost or save money for manufacturers, saying its impacts could range between a loss of $207.3 million to a gain of $165.5 million through the year 2059.” (emphasis added)

Supposedly Not A Gas Ban

The proposed rule would require gas-fired instantaneous water heaters to achieve efficiency gains through condensing technology, ignoring the infrastructure requirement of new condensing technology and moving residents to electric alternatives when their homes can’t support the new gas water heater.

The tactic to target efficiency is sponsored by anti-consumer choice activists, who have come to understand that banning appliances aren’t viewed favorably by the public. In a comment to S&P Global, activists outline their strategy to encourage all-electric alternatives by raising efficiency targets to the point natural gas can’t compete:

“’I think that the term gas ban might not work’ beyond California, said Jenna Tatum, director of the Building Electrification Initiative, a group that helps its eight-member cities advance electrification efforts. ‘But I think that a policy that encourages or requires all electric new construction works everywhere.’”

The drive to “electrify everything” has been carried through the Building Innovation Panel at the White House’s December 14 Electrification Summit meant to showcase and accelerate electrification of buildings, all the way to its recent support for the City of Berkeley’s natural gas bans.

Industry stakeholders have consistently opposed the administration’s tactics and are chastising the rule for unreasonably restricting consumer access through this de facto ban, including American Gas Association CEO Karen Harbert, who directly called out the targeted energy efficiency strategy:

“[D]espite this tangible progress, DOE continues to put forward electrification proposals guised as energy efficiency initiatives that would in fact slow environmental progress and increase costs. DOE even emphasizes the cost impact this will have on customers in the [Notice of Proposed Rulemaking], confirming there would be ‘additional installation costs’ where this action would drive customers to switch from natural gas to electric water heaters.”

And Frank Windsor, the president of Rinnai America Corporation, a top water heater manufacturer, who said:

“As currently drafted, DOE’s proposed rule will create an uneven market that effectively bans an already energy efficient product and puts American jobs at risk.”

Bottom Line: The recent gas water heater rule is another attempt to de facto ban natural gas appliances and move residents onto higher-cost electric alternatives, removing their ability to choose the appliance that is right for their households. The new proposed standard comes shortly after the DOE’s boiler proposal was vacated by the court for erroneous cost calculations and a failure to solicit feedback, continuing the DOE’s attempt to rush a process and overestimate the benefit of “electrifying everything.”

The post was edited on 7.27.23 to clarify that the proposed standard affected natural gas water heaters, not natural gas boilers. 

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