Advanced Electric Water Heaters Could Save Money and Cut Pollution

The humble water heater used to heat water for bathing and washing dishes in America's homes also may be a promising new tool for cutting residential utility bills, promoting clean energy, and strengthening the reliability of the power grid - something we've suggested before (see here and here). An analysis released today bears this out and gives a glimpse into just how large of an untapped resources they might be: advanced water heaters can cut costs by perhaps $50 to nearly $200 annually, and reduce greenhouse gas emissions by perhaps 30 percent to 50 percent under favorable circumstances.

How is this possible? First, electric water heaters can be thought of as pre-installed batteries that are sitting idle in 50 million U.S. homes. If they were grid-interactive--e.g., with the local utility or grid operator having real-time communications and control capability--the water in the tanks could be heated when the grid is cleaner and more economic, storing the hot water in the tank for when households need to use it. Second, all major manufacturers have now introduced advanced heat pump water heater technology that draws heat from the surrounding air to heat the water, and can cut energy use by some 50 percent and reduce carbon pollution.

Only a few percent of residential water heaters are being used today for energy storage, and perhaps just 1 percent of electric water heaters use heat pumps, but as "The Hidden Battery: Opportunities in Electric Water Heating shows, it looks like much more should be done. The study was commissioned by the Natural Resources Defense Council (NRDC), the National Rural Electric Cooperative Association (NRECA), and the Peak Load Management Alliance (PLMA), and conducted with assistance from Great River Energy.

This opportunity matters: water heating represents about 14 percent of household energy costs, and about 18 percent of household energy use. Because it's such a large use and large cost, even modest improvements can deliver large benefits. And to be clear, the improvements we're talking about from advanced water heating--using heat pump technology or real-time communication with the grid for dynamic energy storage--are much more than small. This is an area that's ripe for development, and should deliver large economic and environmental benefits.

What's new?

The concept of using water heaters to do more than heat water isn't entirely new. Some 250 electric cooperatives in 35 states have used electric resistance water heaters to reduce demand during peak energy periods--when prices are usually higher, saving their members money on electric bills, for example. However, as our report confirms, there's a huge potential for more use of both heat pumps and advanced storage approaches.

The analysis, conducted by The Brattle Group, found that under the right conditions, electricity cost savings could add up to $200 annually for a home with a grid-interactive water heater -- enough to pay for the water heater and the controls in just five years. Utilities could use them to heat the water when power is cheaper and cleaner, such as at night when wind power may be plentiful but in low demand, and deferring heating when power is expensive and the grid is stressed. (The analysis found that a 50-gallon tank can be interrupted for several hours with little risk of hot water runouts across a range of customers with diverse hot water needs.)

Key findings of the study, which modeled scenarios involving both types, include:

  • Reducing water heating load during higher cost peak times---either through an overall reduction in energy consumption by more efficient heat pump water heaters or load shifting through grid-connected electric resistance water heaters--can reduce energy costs across the system and help defer the need for expensive new power plants. Both types of water heaters can reduce the use of older, costlier and often dirtier electricity generating units.
  • Heat pump water heaters provide ``the most consistent environmental benefit'' on a per-water heater basis through overall reductions in energy consumption, generally reducing carbon emissions resulting from water heating by about 50 percent.
  • Electric resistance water heaters can also offer environmental benefits, although they are more nuanced; cuts in carbon pollution depend on the fuel mix used to generate electricity and the water-heating control strategy. Still, grid-connected electric resistance water heaters offer the potential to reduce carbon pollution by up to 30 percent, partly because they give utilities greater flexibility to use lower polluting fuels or clean energy such as solar and wind power.
  • Both heat pump water heaters and grid-connected electric resistance water heaters can have very strong positive economics, depending on market conditions. Controlled electric resistance water heaters provide the largest economic benefit on a per-water heater basis under the electricity market scenarios examined in the study.

So what is today's best electric water heating technology, given all of the potential benefits for cost reductions and the environment? In short, it's likely to be a mix of these advanced approaches. Given the large role of water heating in the nation's energy use, the sooner we move on to adopting more efficient or grid interactive water heaters, the better.

Where to from here?

Going forward, we'll continue our longstanding work at NRDC to promote energy efficiency through utility programs, equipment standards and other approaches. These have been enormously successful for consumers and the environment, and we'll work to increase the adoption of high efficiency heat pump water heating through those approaches.

A second action we're taking has to do with using water heaters as dynamic storage devices, meaning they are controlled in real time. NRDC is delighted to join with NRECA and PLMA as founding supporters of the Community Storage Initiative. The intent is to make a welcome home that encourages manufacturers, utilities, consumer interests and other stakeholders to look at and exchange ideas and experience on the use of energy storage opportunities using customers' equipment, to deliver a more flexible, economic, renewables-ready and clean electricity grid. Certainly, water heaters as storage devices have a key role to play. Other technologies do as well, including electric vehicle battery charging, and some smart AC and heating approaches that shift energy use across hours while meeting consumers' needs. We will be encouraging work on these opportunities, and look forward to much more.


There still is much to be learned about the potential of water heaters to establish a more efficient and less-polluting power system. But it is clear that switching from uncontrolled electric resistance water heaters to either heat pump water heaters or grid-connected units offer benefits to consumers, the environment, and the grid.