Gas Furnace Energy Efficiency Standards: A Smart New Approach

The Department of Energy (DOE) this week formally requested more input on analyzing a new approach to energy efficiency standards for natural gas furnaces, and although it's been 25 years since they've been significantly updated, taking some additional time makes great sense.

The approach, which NRDC and other stakeholders proposed to DOE in July, 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. DOE published an initial assessment this week, seeking further stakeholder input. It's great to see DOE act so promptly to launch the formal process to assess the two-tier approach.

Updated furnace energy efficiency standards will deliver very large benefits to consumers and the environment based on "condensing" furnace technology that has emerged over the past couple decades, and unfortunately have been delayed for far too long. With over 40 million U.S. households using natural gas furnaces, and with heating accounting for about 40 percent of all residential energy use, it's important to get the updated standards right.

DOE had previously proposed a single national 92 percent efficiency standard for household gas furnaces, which would mean 92 percent of the gas burned in the furnace is converted into useful heat. While a national 92 percent standard would deliver great overall consumer and environmental benefits, some households would not recoup their higher costs of more efficient equipment due to their lower than average heating needs (e.g., in relatively warm climates or in smaller homes) and, in some cases, higher installation costs due to particularly challenging building types.

Lots of Winners From a Strong Two-Tier Standard

NRDC suggested that a strong two-tier standard with 95 percent efficiency for larger furnaces and 80 percent for smaller models could have several major advantages over a single standard:

1. Consumers would win. A capacity-based standard would benefit many 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 load, and as a result, has relatively little savings benefit from a 95 percent efficient model compared to an 80 percent efficient one. However, those homeowners could still face the higher equipment and installation costs that currently come with a higher efficiency furnace in some instances. Relative to DOE's previously proposed standard, a two-tier standard could deliver significant improvement to total consumer benefits while not compromising the significant savings for the majority of homes that require larger furnaces and for which higher efficiency is more cost-effective.

2. Manufacturers would win. Being able to keep making some 80 percent efficient furnaces would mean that manufacturers would not have to retool as much. That's a plus. And wherever an 80 percent efficient furnace below the capacity threshold could potentially meet a given home's heating needs, manufacturers would still have the opportunity to differentiate their products based on higher efficiency.

3. DOE enforcement would be simple. A size-based standard would be easy for manufacturers to work with and for DOE to administer and enforce under existing legislation. It wouldn't require significant changes to the current DOE enforcement process or any additional requirements for equipment distributors and installers.

4. Gas utilities and efficient installers would win. A capacity-based standard would also provide significant benefits for residential energy efficiency programs. For example, gas utility energy efficiency programs that deliver whole home performance improvements (e.g., duct and air sealing, insulation, etc.) would be big winners, particularly for the small subset of homes for which upgrading to a condensing furnace would be unusually expensive. Installers would be encouraged to put in furnaces that are sized appropriately based on the industry standard heat load calculations and explore whole home performance measures that reduce heating requirements and thereby allow for continued application of a non-condensing furnace. The net impact for many households would likely be lower costs and the same or better efficiency than simply moving to a condensing furnace.

Choosing the Best Size Threshold

The biggest question is just what size threshold would be best for a two-tier standard. (There's also a question about whether to choose 92 percent or 95 percent efficiency for the larger models, although the analysis seems to point clearly to the higher level.)

A key objective in choosing a capacity threshold is 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 efficient furnaces where those are significantly more cost-effective. Encouraging utility efficiency programs that improve insulation and weatherization in new and existing homes, and reducing the risk and extent of negative impacts on manufacturers and utilities are valuable secondary objectives.

We've been working intensely with many stakeholders, including manufacturers, utilities, consumer groups, and other efficiency and environment groups to explore these issues, and will give our thoughts to DOE.

For now, it's great to have DOE's timely, thoughtful analysis in hand, and we're looking forward to finally having a strong, effective updated standard for furnace energy efficiency that delivers great consumer and environmental outcomes.