The Department of Energy announced in April it would delay enforcement of new energy efficiency standards for commercial gas-fired water heaters, and manufacturers are consequently faced with some hard choices.

The DOE ruled in 2023 that all commercial gas storage water heaters manufactured after Oct. 6, 2026, would be required to achieve 95 percent thermal efficiency (TE). Due to pending Supreme Court litigation, the DOE said it will delay enforcement until Oct. 6, 2027.

The decision seeks to avoid having the new efficiency standards take effect and perhaps repealed by some potential future decision by the DOE or the Supreme Court. For some, this is a welcome action. For others, it is seen as adding confusion, complexity and risk.

Policy opposition

The delay in enforcement is a response to opposition to the new commercial water heater (and consumer furnace) efficiency standards, including a petition from the American Gas Association (AGA), the American Public Gas Association (APGA), and the National Propane Gas Association (NPGA).

Those groups asked the DOE to amend the compliance dates for the energy conservation standards. The DOE received this on Feb. 19, and “is seeking comment on whether it should grant the petition and undertake a rulemaking to consider the proposal contained in the petition, as well as any data or information that may be relevant to DOE's consideration of the petition.”  

Also, the gas industry has filed a “Petition for Writ of Certiorari” to the United States Court of Appeals for the D.C. Circuit regarding a prior lawsuit alleging that the same new standards are not compliant with the Energy Policy and Conservation Act (EPCA) which dictates how these standards are created and revised. 

For all of us non-lawyers, according to the Legal Information Institute, a “Writ of Certiorari” orders a lower court to deliver its record in a case so that the higher court may review it. The word certiorari comes from Law Latin, meaning "to be more fully informed." 

Manufacturing impact

The recent actions around the commercial water heater (as well as the consumer furnace) standards are disruptive to manufacturers.  Manufacturers, really all businesses, can thrive in a stable, predictable environment. When the business climate is uncertain, as is the case with this regulation, it makes it very difficult to manage the product portfolio, which in turn causes issues with supply chain management and manufacturing readiness.

Manufacturers were well into the transition away from lower efficiency commercial water heaters. Essentially, at the 11th hour, manufacturers are left deciding how to respond to this development. Regardless of the action taken, revisiting plans at this late stage is disruptive, costly and risky.

The most immediate effect of this is that some manufacturers are likely to extend production of the equipment that would have been phased out.  Other manufacturers will likely be forced to follow.

Longer term, if the challenge is successful, it could set a precedent regarding what qualifies as a “performance characteristic,” and could influence future decisions. A successful challenge could also further embolden some to challenge other energy efficiency standards.  

One potentially good outcome of delayed enforcement is perhaps the industry will get a definitive answer as to whether non-condensing appliances offer unique performance-related features not found in appliances with condensing technology.

Costly renovations

The gas industry argues that removing non-condensing units from the market “would saddle families with costly renovations or eliminate gas as a home heating option.” 

Those renovations could be extensive, depending on the type of appliance being installed. In the case of changing out an atmospheric gas storage water heater for a high efficiency, condensing gas storage water heater, several things need to be considered:

Venting: When upgrading to a condensing unit, the venting that handles the exhaust will likely need to be replaced.  

Electrical: If the outgoing unit did not use electricity, a circuit may need to be run for the condensing unit.  

Condensate Management: Condensing appliances produce condensate.  This condensate is mildly acidic.  It needs to be treated and have a system, possibly including a condensate pump, to dispose of the condensate.

Space: A condensing unit may be larger than the outgoing unit.  If space is limited, this may limit options or mean structure modifications.

If the gas unit is being replaced with an electric unit, the installation is likely to involve electrical work and there could be space constraints to deal with. If the electric equipment being installed is a heat pump, these produce condensate as well, which would have to be managed. At least in the case of a heat pump, treatment of the condensate is not required, as the condensate is essentially pure water.

Crux of the debate

From the writ of certiorari, the crux of the issue is “whether an appliance’s ability to operate in existing homes and buildings without renovation is a ‘performance characteristic’ that EPCA prohibits the Department from eliminating.”  

In this case, renovations may be required due to the differences in the design, operational capabilities and installation requirements of condensing vs. non-condensing products.  

The best example of a likely required renovation is the replacement of the vent system, as the existing chimneys and other vent types for non-condensing appliances are typically not compatible with condensing appliances. Replacing the venting system in some structures could be expensive.

Also, atmospheric products do not need electricity to operate. If there is not an electrical circuit nearby, one will have to be run. Depending on the age of the building and the electrical panel, this could “snowball” into a complex and expensive upgrade. While the gas industry claims that these differences meet the definition of “performance characteristics,” the DOE and the D.C. Circuit Court disagree. The Supreme Court, if it elects to hear arguments, might have the final the word. 

Legal entanglements

The way this process has unfolded is unfortunate.  These rulemakings are involved and occur over a long period of time.  They require a significant investment of time and effort on the part of all interested parties.  Prolonging the process through legal proceedings and requiring additional work by all involved adds to it. 

In the end, some of these costs are likely to be seen as a waste, regardless of the outcome.

Because all of this is occurring extremely close to the compliance date, also at risk is the investment of time, effort and money spent to develop, certify and tool-up new products, which may never achieve the sales volumes planned for.  It takes a lot of money to create tooling and production lines to produce products like major appliances in high volume.

Regardless of the outcome, collectively we should try to avoid this happening again in the future by improving the process and ensuring that all data is given proper weighting.

Brian Pickett is the regulatory affairs manager at Ariston USA.