Pushing the Boundaries: Using regulations to stimulate innovation in the

water heater market

Presentation to the ACEEE Water Heater Forum

Katherine MuncasterJune 9, 2009

Energy Efficiency BranchMinistry of Energy, Mines, and

Petroleum Resources

BC Context

• Legislated target: 33% reduction in greenhouse gas (GHG) emissions by 2020

• Electricity is mostly renewable but commitment to meet half of demand growth through efficiency improvements

• Target: Reduce average energy demand per home 20 per cent by 2020

• In Canada, provinces can regulate ahead of feds• Provinces do building code• BC sells ~130,000/yr; Canada 970,000/yr• 60% electric; 40% gas

Our Philosophy

• Harmonize where possible but do it faster and lead the way

• Regulation can lead to economies of scale and reduction of e.e. ‘premium’

• Use a phased approach (gradual increases in minimum efficiency requirements)

– Pros: early wins, gradual cost and design changes

– Cons: frequent design changes/obsolescence

• Provide clear signals years ahead of time

Market Transformation Process

Commercialization

Market Maturity

Increased Share Standard Practice

RD&D, information, education and training

Pricing and Incentives

Voluntary Measures

Market Share

Lower

Higher

Regulated Standards

Objectives

• Improve energy efficiency

• Promote innovation (performance-based not technology-based)

• Focus on efficiency not fuel-switching

• Maintain consumer choice and product quality

Water Heaters – Proposed Phase 1 Regulations

• Short term (Sept 2010): Modest efficiency improvements

• Gas/Propane:

• 3-9% capital cost increase; positive NPV (~$35)

• Eliminate 66% of currently available models; some gaps in small sizes

Efficiency Factor = 0.70 – (0.0005*V)

where V is volume in litres

Litres

US

Gal

Min.

EF

113 30 0.64

151 40 0.62

189 50 0.61

227 60 0.59

264 70 0.57

302 80 0.55

340 90 0.53

378 100 0.51

Water Heaters – Proposed Phase 1 Regulations

• Electric:

• Incentive to switch to bottom inlet• Roughly equiv EF: from 0.87 to 0.88 (60 gal); 0.89 to 0.90• Installation requirements: Heat trap (13 W); Pipe insulation

(2.4m/R4) (7 W) - enforcement issues• 5-12% capital cost increase; usually positive NPV (~$130)• Eliminate 68% of currently available models; some gaps in sizes

Volume adjusted, examples:

Top inlet 40 imp gal: ≤ 61 W standby loss (10 W less)

Top inlet 60 imp gal: ≤ 80 W standby loss

Bottom inlet: 15 W greater

Water Heaters – Potential Phase 2 Regulations

• Mid term (2012): More serious efficiency improvements

• Gas: 0.67 (2010 Energy star)

– Positive NPV

• Electric? Need new standard (chairing C191)

Or drop entirely and go to….

Water Heaters – Potential Phase 3 Regulations

• Longer term (2014): Large efficiency improvements

• Gas: 0.80 EF– Currently uneconomic for replacement

– Condensing: NPV worse at higher EFs

– Tankless: NPV better at higher EFs (Navien 98% has +ive NPV)

• Electric: 2.0 EF– HPWH is economic

– Solar is borderline

– Drainwater heat recovery (economic)?

– Piping design?

• Risk: fuel switching to gas

Water Heaters – Potential Phase 3 Regulations

• Ideally also system design with menu options– New buildings can use building code (enforceable)

– Replacement: legal power / enforcement problematic

• Alternative regulating approach: portfolio standard– X% of products sold in 2011; y% of products sold in 2013…

– Tradeable credits btwn sellers

– Pros: guaranteed savings; longer timeframe; economic applications first

– Cons: More admin; legislation change

Market Transformation Plans

• Focus on phase 3

• Options:

– Incentives for consumers; installers; retailers

– Financing or leasing

– Installer training / capacity building

– Consumer education

– Stocking agreements/incentives

– Government procurement

Acknowledgements

• My attendance thanks to BC Hydro

• Market Study by Caneta Research Inc.

• Study funding by:– Natural Resources Canada

– Ontario Ministry of Energy and Infrastructure

– Canadian Gas Association

– Ontario Power Authority

– Enbridge

– Manitoba Hydro

Contact Info

For more information, please contact:

Katherine Muncaster

Senior Policy Analyst, Energy Efficiency Branch

Tel: 250-952-0154

Email: Katherine.Muncaster@gov.bc.ca

www.energyplan.gov.bc.ca/efficiency

www.livesmartbc.ca