New Furnace Rule Built On Unverified Cost Savings Claims

High efficiency natural gas furnaces could soon be on the chopping block if a proposed new rule from the Department of Energy is implemented.

The proposed rules would raise minimum efficiency standards from 80 percent today to 95 percent efficiency by 2029. If approved, it would ban cost-effective and highly efficient natural gas furnaces in homes that are unable to accommodate the expensive venting requirements for a high-efficiency condensing furnace.

Quantified but Unverified

According to DOE, the plan is the latest in the Biden administration’s efforts to take 100 energy-efficiency actions this year to save the average family $100 a year and reduce 360 million metric tons of carbon emissions over three decades.

These findings are difficult to accept at face value after the DOE’s previous attempt to regulate appliance standards for consumer boilers were not economically justified. Comments filed in a 2021 docket for the DOE’s request for information pertaining to energy conservation standards for consumer boilers note:

“…the DOE’s use of projected prices increased [were] about 15 percent higher than those that actually occurred up to 2020 and about 25 percent higher than those that can be expected to occur between 2020 and 2025 based on current (AEO2021) projections.”

When Spire Inc. – a natural gas utility in Missouri – collected residential marginal price data for the state, it found that the DOE overestimated savings by roughly 40 percent.

And just last week, President Biden was fact checked by the Washington Post for claiming that his plan to fight inflation would save families $500 in annual utility savings. The Washington Post rated the claim at four Pinocchios – a score that goes beyond “significant factual error,” and found that the cited plan would actually be anywhere to a dollar higher or $5 less than under current policy.

Rules and Reality

If the Administration’s plan is to help Americans save money and reduce emissions now, it could do more with what it has, without removing viable options in an attempt to help Americans decades later. Through the Energy Star program, utilities invest upwards of $7-8 billion annually to help customers install tighter-fitting windows and doors, upgrade insulation and purchase increasingly more efficient natural gas appliances. And the program is serving the American people:

“In 2020 alone, ENERGY STAR and its partners helped Americans save more than 520 billion kilowatt-hours of electricity and avoid $42 billion in energy costs. These savings resulted in associated emission reductions of more than 400 million metric tons of greenhouse gases, roughly equivalent to more than five percent of U.S. total greenhouse gas emissions.”

And under the infrastructure bill, the administration included a $3.5 billion investment in the Weatherization Assistance Program, which will further improve residential energy efficiency.

To continue these successes, the administration would be better off increasing DOE’s budget for weatherization and pre-weatherization. There are almost 40 million homes across the country that are weatherization eligible and DOE only manages to address the needs of 35,000 homes a year. The $3.5 billion gave DOE the ability to do another 450,000 homes, which is still a drop in the bucket in Secretary Granholm’s opinion.

Instead of directing resources to a readily addressed issue with tangible benefits in the near future, the administration decided to invoke the Defense Production Act to speed up domestic manufacturing of heat pumps for domestic consumption and export to Europe.

But people in the United States aren’t clamoring for electric alternatives. According to the DOE’s proposal, about 7.3 percent of consumers would actually switch to a heat pump (disclaimer: the number includes those who would switch from a gas water heater to an electric water heater, too), and 1.6 percent of people would switch to an electric furnace.

The majority of individuals would rather keep their furnace or upgrade to an applicable system that fits their homes and increases their energy efficiency. Older furnaces have an efficiency rate as low as 56 percent, so there is room for improvement. A furnace achieving 80 percent efficiency would greatly improve residents’ standards of living, increase their savings, and reduce emissions.

The rule fails to consider that homeowners prefer their natural gas alternatives because it is 3.4 times more affordable than electricity and their homes might not have the chimney or other exhaust venting systems to allow the installation of condensing boilers.

To this day, the DOE has failed to incentivize or assist residents to upgrade to the 80 percent efficient furnaces, despite an upgrade satisfying the 1992 conservation standards setting natural gas furnaces to an annual fuel utilization efficiency of 78 percent. If older, less efficient appliances are still in homes 30 years after a rule change, their new strategy to remove options entirely might not be the right approach.

Improper Solutions

The idea of using the Defense Production Act to increase heat pump production was first published by climate activist, Bill McKibben, where he suggested using the emergency national defense law “to get American manufacturers to start producing electric heat pumps in quantity, so we can ship them to Europe where they can be installed in time to dramatically lessen Putin’s power.”

Confidential sources told the Washington Post that White House aides discussed this idea as they prepared to announce a ban on U.S. imports of Russian oil. The idea was then amplified thrice more. Once in a letter from environmental organizations in March, and again by a statement from the  Electrification Caucus in April, calling for the administration to “ramp up American manufacturing and adoption of electric appliances like heat pumps and work with the Senate to steer transformative investments in clean energy across the finish line.” And finally by U.S. Senator Martin Heinrich in an interview with Canary Media to promote using the American Defense Production Act to manufacture heat pumps to wean Europe off Russian energy and decrease natural gas reliance in the United States.

DOE’s proposed rule comes on the heels of the administration’s invocation of the Defense Production Act, a plan that was designed less for consumer benefit, than for foreign policy and climate goals. If the administration was paying attention to consumer need, they would realize the plan to electrify everything is not feasible and removing options from the market would further harm residents.

The White House had to provide an additional $385 million to lower home energy bills for American families this year. Having access to cost-effective and efficient resources, is one of the largest barriers to reducing energy costs and addressing residential needs, and it is not solved through a mandate to enable a switch to all-electric, and costlier, appliances.

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