Yesterday afternoon, the Department of Energy issued a direct final rule with new energy efficiency standards for residential heating and cooling equipment that have been many, many years in the making. The rule is one of several we’re expecting imminently due to court and statutory deadlines. Of all these standards, yesterday's rule is the big one. Not only are there huge energy (and therefore, dollar) savings at stake, but the standards are supported by the HVAC industry, efficiency and environmental groups, and consumer advocates – groups that do not always sit on the same side of the table. They are also the first ever regional appliance standards set by DOE. When they take effect, the standards will save consumers a net of $18.7 billion cumulatively through 2045 and enough electricity to meet the needs of all the homes in Indiana for 3 years. The standards will also reduce harmful air pollution, including reducing emissions of carbon dioxide by 143 million metric tons over 30 years, and also reducing emissions of mercury and nitrogen oxides.
The new standards cover the large residential heating and cooling equipment – central air conditioners, heat pumps, and oil and gas furnaces. Given that space heating and cooling account for roughly half of the energy used in the average American home, improving the efficiency of this equipment has the potential to save consumers big bucks. Since these systems are often put in by builders, developers, and landlords who will not be paying the energy bills over time, the chosen equipment is often at the minimum standard, making today’s rule particularly important.
DOE set the standard levels at those recommended by a group of HVAC manufacturers, environmental and energy efficiency groups, and consumer advocates in a carefully negotiated agreement that was finalized in 2009. These negotiations were catalyzed by the upcoming June 30th court-ordered deadline for a final rule for ACs and furnaces, which was the result of a series of lawsuits against DOE over missed deadlines and unjustly weak standards which my colleague Kit Kennedy has blogged about in detail. The context of negotiations allowed the stakeholders to get to creative solutions, some of which were outside of the scope of the conventional rulemaking process.
One of these creative solutions was setting the first ever regional standards, which makes a whole lot of sense for heating and cooling equipment. For most appliances, one federal standard is appropriate and provides consistency for manufacturers. For heating and cooling equipment, regional standards are the most beneficial to consumers – not surprisingly you don’t need the same furnace in North Dakota as you do in Florida. Today’s rule will effectively require condensing furnaces (90 AFUE) in northern states where they will be cost effective for consumers, but will only require furnaces in southern states to meet an AFUE of 80. Similarly, high efficiency air conditioners are more cost-effective in southern states where a SEER of 14 (up from 13) will be required. Additionally, in the very hot and dry states of Arizona, New Mexico, Nevada and California, ACs will be required to meet a second efficiency metric that ensures they operate efficiently at very hot temperatures. These new standards will benefit consumers by requiring equipment that is most effective and efficient in their climate zone. It will also benefit manufacturers who have invested in developing this climate optimized equipment by creating a market for it.
The second creative solution contained in the agreement is allowing flexibility in state building codes to go beyond the federal standards for ACs and furnaces. Currently, it is illegal for states to require any equipment to meet higher standards than the federal standards due to preemption. While I’m not a lawyer and won’t pretend to understand the complicated ins and outs of preemption, as an engineer I know that even higher levels of equipment efficiency can be cost effective in new construction as you can design the surrounding building system from the start specifically to accommodate the equipment. This can be more complicated in a retrofit context where the new equipment may need a bigger space than previously allocated or a new drain for condensate. The agreement would provide states and localities the ability to capture these cost-effective savings by allowing performance based building codes to use a baseline 92 AFUE furnace and 15 SEER AC. We’ll have to wait on this part of the agreement though which is not part of today’s rule as it’s not within DOE’s existing authority. This is why we have been working simultaneously to pass legislation that contains these and other consensus standards, as I’ve blogged about previously. This legislation is working its way through congress, has passed out of committee in the Senate and we’re hoping to see it on the floor this summer.
Despite the fact that we’re still waiting on Congress for a key piece of the agreement, today’s rule is still a major win. In addition to the savings mentioned above, the new standards will save 31 billion therms of natural gas through 2045, which is enough to heat all the homes in New York State for over 11 years. They will also reduce peak electric demand by reducing cooling energy use on hot summer days by about 4,000 MW, which is the amount generated by about 13 natural gas power plants. Not only will this reduce the demand on the grid, lessening the risk of rolling blackouts, but will also reduce the emissions of dangerous power plant pollution on hot summer days when it is most deadly. This reduction in peak savings will also benefit consumers’ utility bills, not just in total annual savings but in those coldest winter and hottest summer months when peak bills can really break the bank. The natural gas savings will benefit all consumers, not just those using the new equipment, with lower prices due to decreased demand. We stand by manufacturers and consumer advocates to applaud DOE for issuing the direct final rule today because of these great consumer and environmental benefits.