Hot Savings On Deck from Revised Furnace Efficiency Standard

The U.S. Department of Energy (DOE) today released a revised and long-awaited proposed minimum efficiency standard for residential natural gas furnaces, which are found in about 40 percent of U.S. homes, making them the most prevalent heating equipment in America. DOE estimates the updated standard will deliver up to $21.7 billion in energy bill savings to consumers and avoid approximately 143 million metric tons of carbon pollution over a 30-period, making it one of the most significant natural-gas saving efficiency standards in agency history.

And it’s been a long time coming.  In fact, it’s been almost 25 years since there’s been a significant update to the energy efficiency standard for this common household equipment and with heating accounting for about two-fifths of all residential energy use, a new standard can make a significant difference to household budgets, saving consumers $698 on average over the life of the furnace.

Setting a strong efficiency standard will mean new furnaces must achieve a minimum level of energy efficiency, ensuring all U.S. households that heat their homes with natural gas aren’t needlessly wasting energy. This is especially important to the many renters who have no control over how efficient their furnace is because it was purchased by the landlord, while the tenants are responsible for paying the energy bills. Given that a large portion of low-income households in America are renters, a strong standard will protect them from unnecessarily high energy bills.

The details

The standard proposed today would establish the national minimum efficiency standard for new furnaces at 92 percent efficiency beginning five years after the rule becomes final—meaning 92 percent of the fuel burned in the furnace is converted into useful heat. While this is a significant step forward, 92 percent efficiency falls short of its full economic value, even by DOE’s own analysis. A 95 percent efficient furnace would deliver even greater energy and environmental savings, and that technology is currently available.

As well, DOE proposed adopting a new approach, which NRDC and other stakeholders suggested to the agency last year that would set standards that vary depending on a furnace’s heating capacity, with higher efficiency and higher total energy and cost savings for larger models, and lower efficiency and lower up-front cost for smaller models.

This approach has several major advantages and represents a superior path to good environmental and consumer outcomes. Most importantly, consumers win big with this approach because it would provide options for a small subset of households for which high efficiency furnaces are not the most economic choice at the moment. For example, a reasonably well-insulated existing home in a moderate or warm climate has little heating requirements, and as a result, would receive relatively little savings benefit from a 92 percent efficient model compared to an 80 percent efficient one. A two-tier standard could deliver significant savings for the majority of homes that require larger furnaces and for which higher efficiency is more cost effective.

Getting the size threshold right is important to capture most of the energy- and cost-savings potential of high efficiency furnaces, while simultaneously allowing homes with the lowest heating load, either because of their location in warm climate zones or their small size and appropriate weatherization, to use the 80 percent furnaces where those are significantly more cost-effective. DOE has set the size threshold at 55kBtu/hr input, and we look forward to continued engagement to ensure that the final minimum standard is maximizing cost-effective energy savings for consumers in a reasonable and effective way.

An updated standard matters

Getting the furnace standard back on track is a big deal—especially for low- and fixed-income families, which spend a higher proportion of their income on energy bills. In fact, a recent study by the American Council for an Energy-Efficient Economy and the Energy Efficiency for All organizations found that low-income households, households of color, and renters experience higher energy burdens than the average household in the same metropolitan area and on average, low-income households spend 7.2 percent of their income on utility bills, more than triple what is spent by higher-income households. 

Standards for furnaces and other equipment and electronics make sure that energy isn’t being wasted when there’s technology available that leads to smarter energy use. Cutting energy waste not only reduces utility bills, it also reduces the need to burn fossil fuels to run our appliances and electronics – and avoids the associated carbon pollution driving climate change.

Two trillion dollars: that’s the energy cost savings that will be generated for consumers and businesses from the national appliance and equipment standards program through 2030. The proposed minimum efficiency standard for gas furnaces proposed today adds to this huge and growing number, making it just another reason to finalize this standard once and for all.

Note: NRDC will be publishing a fact sheet on the new standard next week.