[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
H.R. 906, A BILL TO MODIFY THE EFFICIENCY STANDARDS FOR GRID ENABLED
WATER HEATERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MARCH 19, 2015
__________
Serial No. 114-23
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
95-601 PDF WASHINGTON : 2015
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania ELIOT L. ENGEL, New York
GREG WALDEN, Oregon GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
MIKE POMPEO, Kansas JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
BILL JOHNSON, Ohio JOSEPH P. KENNEDY, III,
BILLY LONG, Missouri Massachusetts
RENEE L. ELLMERS, North Carolina TONY CARDENAS, California7
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
PETE OLSON, Texas BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania PAUL TONKO, New York
ROBERT E. LATTA, Ohio ELIOT L. ENGEL, New York
GREGG HARPER, Vice Chairman GENE GREEN, Texas
DAVID B. McKINLEY, West Virginia LOIS CAPPS, California
MIKE POMPEO, Kansas MICHAEL F. DOYLE, Pennsylvania
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN P. SARBANES, Maryland
BILL JOHNSON, Ohio PETER WELCH, Vermont
BILLY LONG, Missouri JOHN A. YARMUTH, Kentucky
RENEE L. ELLMERS, North Carolina DAVID LOEBSACK, Iowa
BILL FLORES, Texas FRANK PALLONE, Jr., New Jersey (ex
MARKWAYNE MULLIN, Oklahoma officio)
RICHARD HUDSON, North Carolina
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 2
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 3
Hon. Peter Welch, a Representative in Congress from the State of
Vermont, opening statement..................................... 4
Witnesses
Gary Connett, Director, Demand-Side Management and Member
Services, Great River Energy................................... 5
Prepared statement........................................... 8
Steven Koep, National Utility Sales Manager, Vaughan Thermal
Corporation.................................................... 15
Prepared statement........................................... 17
Steven Nadel, Executive Director, American Council for an Energy-
Efficient Economy.............................................. 23
Prepared statement........................................... 25
Robin Roy, Director, Building Energy Efficiency and Clean Energy
Strategy, Natural Resources Defense Council.................... 34
Prepared statement........................................... 36
Submitted Material
H.R. 906, a Bill to modify the efficiency standards for grid-
enabled water heaters, submitted by Mr. Whitfield.............. 52
H.R. 906, A BILL TO MODIFY THE EFFICIENCY STANDARDS FOR GRID-ENABLED
WATER HEATERS
----------
THURSDAY, MARCH 19, 2015
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:03 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Shimkus, Latta,
McKinley, Griffith, Flores, Mullin, Hudson, Rush, Tonko, Green,
Welch, Loebsack, and Pallone (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Deputy Communications Director; Leighton Brown, Press
Assistant; Allison Busbee, Policy Coordinator, Energy and
Power; Patrick Currier, Counsel, Energy and Power; Chris
Sarley, Policy Coordinator, Environment and the Economy;
Michael Goo, Democratic Senior Counsel, Energy and Environment;
Caitlin Haberman, Democratic Professional Staff Member; and
John Marshall, Democratic Policy Coordinator.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call the hearing to order
this morning. I know we are going to have some votes. This is a
very important hearing, and we certainly want to give everyone
an opportunity to give their opening statement and ask
questions.
Today's hearing is about H.R. 906, a bill to modify the
efficiency standards for grid-enabled water heaters. Many of
you may remember a singing group called Dire Straits, and they
had this marvelous song, Money for Nothing and the chicks are
free. And in the lyrics of that song they talk about moving and
selling microwave ovens, refrigerators, and color TVs. And we
know in today's world, you can't sell a microwave oven or a
color TV or a refrigerator or anything else without the
Government dictating what is in the product.
So we find ourselves in a world where the Government is
really micromanaging through regulations really everything in
our society, whether we are talking about healthcare, the
requirements for a community bank to make to a farmer in
Kentucky, to make a loan. And now today--last March, I guess it
was--the Department of Energy came out with a regulation about
hot water heaters.
So we are here today to discuss a bill that will bring
regulatory relief to many electricity providers, manufacturers,
and consumers across the country. There are approximately 250
electric cooperatives in 34 States that utilize these large
electric resistance water heaters in demand response programs
to help with reliability and consumer costs during peak periods
of energy use.
As I said, the Department issued this new efficiency
standard in March of 2010, and they are prohibiting the
manufacture of water heaters that are 55 gallons or larger if
they are electric resistance heaters, and they are mandating
that they go to heat pump technology.
You know, all of us here in Congress, we have groups come
in all the time talking about the Government's control in what
kind of fan motor you can have, what kind of light bulb you can
have, whatever. This is one of those issues that I think just
about every Member of Congress agrees that when you are
interfering with demand response programs, it is
counterproductive.
So hopefully we can introduce this bill, and if people want
to try to amend it or whatever, do regular order and try to
bring some relief to the American consumer. I get really
excited when I think about hot water heaters, and I would like
to say more, but right now I am going to yield 1 minute to Mr.
Latta of Ohio.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
We are here today to discuss a bill that will bring
regulatory relief to many electricity providers and
manufacturers across the country. There are approximately 250
electric cooperatives in 34 States that utilize large electric
resistance water heaters in demand response programs to help
with reliability and consumer costs during peak periods of
energy use.
In March, 2010, the Department of Energy issued new energy
efficiency standards for large electric resistance water
heaters that would in effect prohibit the manufacture of these
water heaters that are 55 gallons or larger in favor of heat
pump technology for water heaters of 55 gallons or larger.
Many heat pump water heaters are not compatible with
certain utility thermal energy storage and demand response
programs that allow utilities to reduce or shift their load
during certain periods of energy use.
This legislation allows for the continued manufacture of
large electric resistance water heaters above 75 gallons
specifically for use in these energy saving programs.
H.R. 906 is a bipartisan piece of legislation that has been
voted on twice by the House and once by the Senate. I want to
thank my colleagues on both sides of the committee-
Representatives Welch, Latta, Loebsack, Cramer, and Doyle who
have worked to bring regulatory relief through this bill.
Mr. Latta. I appreciate the chairman for yielding, and you
are absolutely right. We all love those hot water heaters when
you get in there in the shower in the morning. But Mr.
Chairman, thanks again for having this very important hearing
today to discuss this very important legislation to modify the
efficiency standards for grid-enabled hot water heaters. I am
pleased to be a cosponsor of the legislation. I hope the
committee can advance the legislation quickly as you said, and
that there is great bipartisan support.
The rural electric cooperatives are very important in my
district. They provide power to agriculture and manufacturing
operations that are important to the local, State, and national
and global economy. In fact, I have seven rural electric co-ops
in my district, and all seven use voluntary demand response
programs to reduce peak demand, increase the use of renewable
energy, and decrease costs to the consumer. This legislation
permits the continued manufacturing of electric resistant hot
water heaters above 75 gallons for use in thermal energy
storage and demand response programs. Enabling the
manufacturing of these water heaters is vital for the demand
response programs. I look forward to today's testimony, Mr.
Chairman, and I yield back. I appreciate it. Thank you.
Mr. Whitfield. The gentleman yields back. At this time I
would like to recognize the gentleman from Illinois, Mr. Rush,
for his opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. Thank you, Mr. Chairman. I want to thank you for
holding this hearing. Mr. Chairman, my first request is for
unanimous consent. We would like to hear you sing that song
that you mentioned.
Mr. Whitfield. I object.
Mr. Rush. Mr. Chairman, as you know, I have been
unavoidably absent, and I want to thank my friend from
California, Mr. McNerney--he is not here right now--for sitting
in the chair for me during my absence, and I want to also thank
you, Mr. Chairman, for holding today's hearing on this very
important bill, H.R. 906. This is a straightforward bill that
seeks to modify the Department of Energy's efficiency standards
regarding low-capacity electric resistant water heaters in
order to allow the continual manufacture and use of electric
resistant water heaters above 75 gallons for use in thermal
energy storage and demand response programs because as I
understand it, Mr. Chairman, in 2010, energy efficiency
standards issued by the Department under the Energy Policy and
Conservation Act require nearly 200 percent efficiency for
large-capacity electric resistant water heaters for those
manufactured after April 16, 2015.
Supporters of H.R. 906, such as National Rural Electric
Cooperative Association, argue that the rule as drafted would
effectively prohibit the continual manufacture of large-
capacity electric resistant water heaters which would then have
to be replaced by heat pumps that are not compatible with
certain utility thermal energy storage and demand response
programs.
So, Mr. Chairman, as you can see, this is a very important
hearing, and I look forward to hearing the testimony from the
expert witnesses today. And with that, I yield back the balance
of my time.
Mr. Whitfield. The gentleman yields back.
Mr. Rush. There is somebody that--
Mr. Whitfield. I tell you what. If you all wouldn't mind, I
will recognize you all for 5 minutes, and you can split it up
the way you want to. Is that OK? OK. All right.
Is there anyone on our side that would like to make any
comments about this bill? OK. Then Mr. Welch, I will recognize
you for 5 minutes.
OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF VERMONT
Mr. Welch. Well, I can't match your lyrics, but I can agree
with everything you have said and my colleague, Mr. Latta. You
know, the Department of Energy does really good stuff, and I
actually think standards are a very important tool. But we also
have to have it match what realistically can be done in order
to get the benefit of demand response. And there are a lot of
homes that have these water heaters that are going to benefit,
and this is going to save folks money. So the regulation I
think has to have as a goal the maximum deployment and the
maximum energy efficiency. And I think that is what is uniting
us in this effort here.
I am like Congressman Latta. The local cooperatives are
fantastic and really a lifeline for a lot of our citizens in
rural areas. And homeowners are doing everything they can to
try to save money on their bills. They need an opportunity.
They know that less is more if they can save some money. And
then when they have their cooperative working with them in this
demand response that actually integrates this opportunity of
savings with the technology that people actually have in their
homes, let us take advantage of it.
So this is great bipartisan legislation, and I am hopeful
that we can get this done. And I appreciate, Mr. Chairman and
Mr. Ranking Member, your cooperation on this in leading the
committee. Thank you. I yield back.
Mr. Whitfield. Did you want to yield to Mr. Loebsack or----
Mr. Welch. I yield to Mr. Loebsack. Thank you.
Mr. Loebsack. Thank you, Mr. Welch. Thank you, Mr. Chair.
My wife often refers to me as what Second City used to call
mainstream-challenged. I don't know if you know what I am
talking about or not. That probably means that I really am
mainstream-challenged if I am the only one who knows what I am
talking about. But talking about water heaters I think puts me
in the mainstream, and talking about Dire Straits really does--
I would love to hear you sing, Mr. Chairman, but I would like
to have Sting accompany you as he does on that song that you
mentioned.
But it is great to be here. It is really wonderful because
this is a bipartisan effort, something that the American public
and everyone in this room knows happens all too infrequently
here in the U.S. Capitol here in Washington, DC. A problem was
recognized, and a problem is going to get rectified with this
legislation. And also on a bipartisan basis, we are here to
really recognize the importance of these rural electric
cooperatives as well. You know, they date back a long ways to
the 1930s in Iowa certainly and about 15 percent of our
population are served by these RECs now. And I visit as many of
them as I possibly can. I have had meetings. They have let me
hold meetings there, not just to go see what they have to do
but so I can talk to other folks as well. But they get it. They
understand how to service the population in these rural areas.
And so their concerns I think need to be our concerns, and that
is in large part why we have this legislation today.
So I thank you, Mr. Chair, and thank all those folks on a
bipartisan basis who joined together on this, and I do look
forward to your testimony. Thank you. And I yield back to Mr.
Welch.
Mr. Whitfield. OK. They yield back. That concludes the
opening statements. Now I have just been notified that we have
two votes on the House floor right now, and they have already
started, 10 minutes left in the first vote. So we are going to
recess, and then when we come back, we really look forward to
the testimony of you four gentlemen because you all are very
much aware of the ramifications of this legislation, the impact
of the regulation as well. So we look forward to that. Did you
want to say anything? OK. So we will recess, and hopefully we
will be back within about 15 or 20 minutes. So thank you all
for your patience. I am sorry for the interruption, but we will
be back as soon as we can.
[Recess.]
Mr. Whitfield. I would like to call the hearing back to
order, and we do expect some of the other members to be here
shortly. As I said, we have a great panel of witnesses. I want
to thank all of you for coming, and I am just going to
introduce you individually as you prepare to give your
statement. So our first witness this morning is Gary Connett,
who is the Director for Member Services and Demand-Side
Management at the Great River Energy entity. So Mr. Connett,
you are recognized for 5 minutes. And I would just ask all of
you to pull the microphone up close enough so that we can hear
you clearly. And thank you for being with us, Mr. Connett.
STATEMENTS OF GARY CONNETT, DIRECTOR, DEMAND-SIDE MANAGEMENT
AND MEMBER SERVICES, GREAT RIVER ENERGY; STEVEN KOEP, NATIONAL
UTILITY SALES MANAGER, VAUGHN THERMAL CORPORATION; STEVEN
NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL FOR AN ENERGY-
EFFICIENT ECONOMY; AND ROBIN ROY, DIRECTOR, BUILDING ENERGY
EFFICIENCY AND CLEAN ENERGY STRATEGY, NATURAL RESOURCES DEFENSE
COUNCIL
STATEMENT OF GARY CONNETT
Mr. Connett. Thank you. Chairman Whitfield and members of
the subcommittee, thank you for inviting me to testify today on
legislation to protect grid-enabled water heaters.
You mentioned my name. My name is Gary Connett, Director of
Demand-Side Management at Great River Energy, a generation and
transmission cooperative that serves 28 member retail
distribution cooperatives located in Minnesota and Northwestern
Wisconsin. And I, by the way, am one of these people that
actually has one of these water heaters that we are talking
about today. I want to thank the subcommittee for addressing
this important and timely issue. Large-capacity electric
resistance water heaters are essential demand response tools
for electric cooperatives. Immediate action is needed to
mitigate the impacts of a 2010 Department of Energy efficiency
rule and help maintain our ability to use those water heaters
in voluntary demand response programs.
The DOE rule which goes into effect on April 16, as you
mentioned, effectively bans the manufacture of electric
resistance water heaters with this storage capacity of over 55
gallons. As manufacturers prepare to shut down production
lines, this widely supported legislation is urgently needed.
The electric industry is searching for a low-cost battery
to store electricity. At Great River Energy, we think we have
it. It is in the basements of nearly 100,000 homes in
Minnesota. It charges each night and discharges every day in
the form of hot water. It does this night after night, year
after year, storing and discharging over 1,000 megawatt hours
every day. I would argue that it might be the largest battery
in the upper Midwest. This battery consists precisely of the
same water heaters that the DOE wants to ban.
Through demand response programs offered by electric
cooperatives, these super-insulated, high-efficiency water
heaters store low-cost off-peak energy which is available in
the nighttime hours. We store it in the form of hot water. They
allow for the better utilization of renewable energy and more
efficient operation of the electric grid. More importantly,
water heaters play an important role in cooperatives' efforts
to provide its member-owners with safe, reliable, and
affordable electric energy.
Even when not tied to renewable energy, cooperatives across
the country use these water heaters to reduce demand for
electricity during peak hours which would otherwise be served
by additional and less efficient electric generators. Today
over 250 electric cooperatives across the country are engaged
in voluntary demand response programs using large-capacity
electric-resistance water heaters.
They are one of the best tools cooperatives have for
integrating renewable energy and encouraging demand response
and improving system reliability.
So on April 16 a new efficiency standard will take effect.
This standard will require all large-capacity electric water
heaters to operate at about 200 percent efficiency, a level
that only heat-pump water heaters can achieve. While heat pump
water heaters are energy efficient, they don't work so well
with utility demand response programs and they don't work so
well in cold climates, such as Minnesota.
The DOE, despite its good intentions, was unaware of the
impact that its rule would have on utilities' demand response
programs. However, due to regulatory hurdles, the DOE has not
been able to resolve the issue.
In a great cooperative fashion, the National Rural Electric
Cooperative Association worked with a large stakeholder group
to come up with a legislative solution that will not only help
protect these water heaters but will also advance water heater
technology by establishing criteria for grid-enabled water
heaters. The widespread stakeholder support for this solution
should make it an easy decision to pass this urgent legislation
immediately.
H.R. 906 doesn't repeal the DOE standard but rather permits
the continued manufacture of large capacity water heaters above
75 gallons for use in demand response programs. The legislation
includes language to prevent these water heaters from entering
the market unless they are used in utility demand response
programs.
As the subcommittee is aware, the consensus legislation has
been incorporated into numerous pieces of energy efficiency
legislation in both the House and the Senate over the past 2
years. Last March the House passed H.R. 2126, the Energy
Efficiency Improvement Act, by an overwhelming vote of 375 to
36. Three of the four titles of H.R. 2126 were recently
attached to S. 1, a bill to approve the Keystone pipeline, a
bill that passed both the House and Senate in this Congress but
was vetoed for reasons unrelated to the water heater title.
In summary, H.R. 906 is a good bill. It fixes things to
everyone's liking. On behalf of Great River Energy and the
other cooperatives across the Nation who face the threat to
this new DOE standard, I want to thank Chairman Whitfield and
Representative Welch as well as Representatives Latta,
Loebsack, Cramer, and Doyle for their leadership on the current
legislation and persistence in seeing it through. Thank you.
[The prepared statement of Mr. Connett follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Mr. Connett, thank you very much for your
statement. At this time, I would like to recognize Steven Koep
who is the Utility Sales Manager at the Vaughn Thermal
Corporation and the Vaughn Electric Water Heaters. Thank you
very much for being with us this morning, and we look forward
to your 5 minutes of testimony.
STATEMENT OF STEVEN KOEP
Mr. Koep. Good morning and thank you.
Mr. Whitfield. And if you wouldn't mind turning it on and
get it up closer so that we can hear you?
Mr. Koep. OK. Am I coming through?
Mr. Whitfield. Yes, sir.
Mr. Koep. Thank you.
Mr. Whitfield. Thanks.
Mr. Koep. Good morning and thank you. Chairman Whitfield,
Ranking Member Rush, members of the subcommittee, thank you for
inviting me to today. My name is Steve Koep. I am the National
Utility Sales Manager at Vaughn Thermal Corporation. We
manufacture electric water heaters in Salisbury, Massachusetts.
We also manufacture a wide range of water heating and
electronic control technologies. I would like to thank the
subcommittee for addressing this important issue and for
inviting me here today.
Vaughn has been in the business of manufacturing high-
efficiency, long-life electric water heaters for electric
utility programs for over 50 years. We are an active member of
AHRI, and as such, I am here to represent Vaughn but also the
other water heater manufacturers who support the legislative
effort. That would be A.O. Smith and Rheem and General Electric
who are all part of that stakeholder group.
Following the general outline of my written testimony, I
would like to touch on some pertinent questions and topics.
First is why the urgency? It has been almost 5 years since
the final rule was announced, and it has been 2 years since DOE
held a meeting on the proposed rulemaking to establish a waiver
process to address the concerns of the electric utility
industry. As we have heard, the DOE rule will most certainly
cause the erosion of existing demand response resources,
resources that by DOE's own admission the country needs and the
country wants.
Secondly, why are we all so concerned about this fraction
of a fraction of the electric water heating market? While
large-capacity residential electric resistance water heaters
make up less than 5 percent of the electric water heating
market, they are more than 90 percent of what gets installed in
utility demand response programs. That is why they are so
important.
As you know, the legislation contains the provision for a
grid-enabled product classification. I feel it is important to
point out that utilities, manufacturers, and public policy
organizations, all of those represented here today, all support
this legislation. This is as close as we can get to unanimous
support on any utility industry issue.
In addition, there is an activation key provision within
the legislation that will equate to a very low likelihood of
leakage for these products through traditional wholesale and
retail channels. In previous presentations on this issue, I
have used the phrase, ``change the technology or change the
source energy.'' It is fair to characterize the DOE approach as
change the technology since efficiency gains will lead to
reduced carbon emissions. But it is also true that changing the
source energy and maximizing of the renewable input to these
appliances reduces carbon as much or more. We need to pursue
both strategies simultaneously. It needs to be ``and,'' not
``or.'' We need to change the technology and change the source
energy, and by doing so we have the unique opportunity to
double the carbon reduction potential in the electric water
heating market. That is exciting.
I think it is fair to look at this as a renewable storage
opportunity. Again, a phrase that I have used: ``What happens
when the forgotten appliance meets the Internet of things? You
get the grid-enabled water heater.'' High-speed, two-way
communication to this appliance and aggregation on the scale of
the Great River Energy Program, which means we have the
potential for the largest aggregated interactive thermal
battery probably on the face of the earth.
I am sure you are all familiar with the issues of curtailed
wind and spilled hydro. In this country we have excess low-cost
and no-cost renewable energy that goes for the asking at
certain times of the year and certain times of the day. So
please remember that electric thermal storage is the low-
hanging fruit when it comes to renewable storage and electric
storage technologies. ETS storage is \1/10\ the cost of
batteries or flywheels.
In summary I just want to touch briefly on the market
potential and the potential market impact of grid-enabled water
heaters. Within this country there are over 50 million
installed electric water heaters in households across the
country. Roughly 4 million of those are replaced annually. That
money is being spent, that investment is being made on an
annual basis. If we could divert or convert 10 percent of the
annual turnover to grid-enabled water heaters, that would be
400,000 water heaters a year. That would be like implementing
four Great River Energy Programs on an annual basis. But you
know, the potential here is very large. And as I said, the
investment is being made. We could do this for just the
incremental cost of the controls. The tanks are being
manufactured and sold and installed every year to replace the
water heaters that are failing.
Historically, my personal experience is telling me that
timing is everything. So if doing the wrong thing at the right
time or any other time isn't going to get us where we want to
go, even the right thing at the wrong time doesn't help. We
need to do the right thing at the right time, and this
legislation is the right thing at the right time. So I want to
thank you for the opportunity to visit with you today, and I
welcome any questions you may have.
[The prepared statement of Mr. Koep follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Thanks very much, Mr. Koep. At this time I
would like to introduce Mr. Steve Nadel who is the Executive
Director of the American Council for an Energy-Efficient
Economy. Thanks for being with us, and you are recognized for 5
minutes.
STATEMENT OF STEVEN NADEL
Mr. Nadel. OK. Thank you, Mr. Chairman, Mr. Ranking Member,
the members of the committee. As you noted, I am with the
American Council for an Energy-Efficient Economy. We are a non-
profit research organization that works on technologies,
programs, and policies to advance energy efficiency. We have
been doing this for 35 years now, and over this period,
substantial progress has been made on energy efficiency, due in
part to strong bipartisan support from Congress. As you, Mr.
Chairman, stated at a previous hearing I testified at, no one
is in favor of energy waste.
I am here today like the other witnesses to testify in
support of H.R. 906. Water heating is a major use of home
energy use, second only to space heating. For homes with
electric water heating, the water heater is generally the
single largest electricity user. Due to the high cost of water
heaters, they were included in part of Federal energy
efficiency standards passed by Congress in 1987 and signed by
President Reagan. Congress set the initial standards, and DOE
periodically revises these standards based on criteria that
Congress established.
A 2012 analysis estimates that the standards already
enacted on water heaters as well as other products are saving
consumers and businesses in the United States a cumulative
trillion dollars. So these are enormous savings, not million,
not billion, trillion.
In 2010, as we have already heard, after a multistep
rulemaking process, DOE established new efficiency standards
for water heaters that take effect next month. The standards
apply at the point of manufacture and do not affect water
heaters already in houses or in the sales distribution system.
The new standards require moderate efficiency improvements in
water heaters with a storage capacity of 55 gallons or less but
much larger efficiency improvements in both electric and gas
water heaters over 55 gallons. I would note that 50 gallons is
the average electric water heater. So these only apply above
those stronger standards, above that.
Households with very large water heaters use more hot water
on average, making higher efficiency levels cost effective.
When DOE established the standards, it estimated that the
average household with a very large electric water heater would
save over $600 over the life cycle of their high efficiency
unit.
Now, as we have heard, many electric cooperatives as well
as some other utilities have long sponsored programs to use
water heaters to heat and store hot water during off-peak
periods, such as overnight, permitting lower energy use during
peak periods. These programs help utilities manage their
systems by reducing peak loads. A timer or radio control or
other type of communication device controls the water heaters
to generally stop them from operating during peak periods.
After DOE issued the rule in 2010, some utilities realized
that the very large electric-resistance water heaters they
sometimes use in demand response and thermal storage programs
would no longer be manufactured. There are heat pump water
heaters, but these have not yet been fully evaluated and field
tested for use in demand response and thermal storage programs.
To address these concerns, as we have all heard, many
organizations negotiated the language in H.R. 906, and we very
much appreciate the chairman and the other cosponsors. It
carefully balances opportunities for saving energy via high-
efficiency water heaters with the benefits to utilities of
using large electric water heaters and demand response and
thermal storage programs. It allows for the continued
manufacture of these large electric resistance water heaters
with a variety of provisions to limit their use to homes
participating in demand response and thermal storage programs.
The bill also provides guidance so that DOE will carefully
consider both energy efficiency and demand response
opportunities in future rulemakings.
So, as I said, we do support this bill. We also recommend
that this committee consider other energy efficiency bills. We
hope that this is just the beginning of what we think could be
a very productive Congress in terms of energy efficiency. So
with that, I look forward to your questions, and thank you for
the opportunity to testify.
[The prepared statement of Mr. Nadel follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Thank you very much, Mr. Nadel, for that
statement. At this time I would like to recognize Mr. Robin Roy
who is the Director for Building Energy Efficiency and Clean
Energy Strategy at the Natural Resources Defense Council. Thank
you very much for being with us, and you are recognized for 5
minutes.
STATEMENT OF ROBIN ROY
Mr. Roy. Thank you, Mr. Chairman, and members of the
subcommittee. Thank you for the opportunity to share the views
of the Natural Resources Defense Council on grid-enabled water
heaters which we believe present a promising opportunity for a
more efficient, more economic, and ultimately lower emissions
electricity system overall. We really appreciate your
leadership on this issue and your sponsorship of this bill.
In brief, NRDC supports H.R. 906 to allow continued
production, use, and evaluation of grid-enabled water heaters.
One of NRDC's top institutional priorities is creating and
facilitating a clean energy future, and to that end we have
long supported and advocated for greater energy efficiency,
greater productivity, and using Federal energy appliance
standards as one tool in the portfolio for getting there.
Given our longstanding support for stronger energy
efficiency, it may seem surprising that we support this
legislation, which allows for continued production of electric
resistance water heaters that may use double or more the energy
of a heat pump water heater that would otherwise be required.
But there is a good reason. We explored the opportunities. We
talked to our colleagues here and many others in manufacturing
and among utilities, and we found the case persuasive. We
worked with these colleagues from manufacturing, utilities,
other efficiency and environmental organizations, and we came
up with an approach that delivers on the opportunity for
efficiency savings and delivers on the opportunity for grid-
interactive water heating, demand response and ancillary
services. It doesn't undermine the opportunities from the
efficiency standards. This language is a product of that work.
I have to say as a bit of an aside, sometimes when a lot of
folks get together, it is hard work to come up with something
that we can all agree on. We come with different perspectives.
And sometimes that goes into an abyss. We never hear anything
from it again. And it is so pleasing to see something like H.R.
906. I really do appreciate the effort. We see the result of
our hard work, and it kind of encourages us at NRDC to do more
of that, reaching out to other parties, and I really do
appreciate that. I know I burned some time on that, but it is
really important.
The key opportunity here is, as my colleagues have already
expressed, is the achievement of benefits at a system level.
Federal energy appliance standards focus on the component
level. We recognize the difference. We are looking towards
having while maybe more energy use, having that energy use at
more attractive times, lower cost, lower emissions, overall
just a much better outcome. We are very keen on that. We
recognize that that is the opportunity that is presented by
this water heater energy storage, this large battery as my
colleagues have said. We are very keen on it.
One of the key elements of H.R. 906 that we are so
delighted by is that it allows for, really encourages, much
more analysis of consumer and environmental impacts from grid-
enabled water heaters. It is built right in. There is so much
to be learned about the effectiveness of these water heaters.
Actually, there is so much to be learned about not just grid-
enabled water heaters but about heat pump water heaters and
what might be done to optimize our energy use delivering the
greatest consumer and environmental outcomes.
We are at a really early stage analytically. It is
inherently complex. There are a lot of other water heater
technologies existing and emerging. Conditions in Mr. Connett's
area are different from conditions in the Pacific Northwest,
and those are different from those in the South. Getting
analysis right is not always that easy, but it is really worth
doing for water heaters. They are 15 percent or more of
residential energy use. They are big. If we get this one right,
even small improvements can deliver great consumer and
environmental outcomes.
One issue that is often on some people's minds is whether
this grid-enabled water heater legislation will pose a problem
for heat pump water heaters. We don't think that is the case.
We think that grid-enabled water heaters, this legislation,
focuses on a fairly small market segment where heat pump water
heaters may not be most well-suited and in fact, the attention
to water heating, the further analysis that will come from
this, may actually end up delivering much more advance in all
sorts of water heater technologies, both in development of
technologies and understanding them and deploying them through
good utility programs and consumer choices.
I think that is really pretty much all I want to say. I can
talk a little bit more about our long and abiding love for
Federal energy standards as one of the tools in the portfolio
that give us a more efficient, economic future, but I think
that is already on the record pretty well. I appreciate the
opportunity.
[The prepared statement of Mr. Roy follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Mr. Roy, thanks very much, and thanks for
being here. At this time we will ask questions, and I would
like to recognize myself for 5 minutes.
First of all, I was not aware that hot water heaters were
the largest users of electricity in most homes, and I think
someone did say that. But Mr. Koep, I think you are involved in
the manufacture of water heaters, and let us say we are not
successful in adopting 906. Would a heat pump water heater that
would be manufactured under the new regulation, would that be
more expensive than the heat resistant water heater that is
currently being used?
Mr. Koep. Chairman, thank you for the question. Yes, it
would. Large-capacity heat pump water heaters in general will
be about twice the cost of a large-capacity electric resistance
water heater. You add the compressor cost and the installation
cost, and it is more expensive by about a factor of two. So it
does have a cost impact. The question has also been asked
whether heat pump water heaters can be grid-enabled and grid
interactive. The technology is taking us in that direction, but
you know, in the short term, we are just not there yet. There
is important work to do in that area, but right now the grid-
enabled large-capacity units are the tools that we need.
Mr. Whitfield. So what would be, if you double the cost,
what kind of costs are we talking about for a large hot water
heater?
Mr. Koep. Well, an 80-gallon heat pump water heater is
going to be in the $1,500 range----
Mr. Whitfield. $1,500?
Mr. Koep [continuing]. At retail.
Mr. Whitfield. Yes.
Mr. Koep. I think that an 80-gallon is the small end of the
range. Generally with large-capacity units for thermal storage,
you will see 100-gallon and we are gearing up to build 120-
gallon water heaters. So we are moving in that direction.
Mr. Whitfield. Well, without getting too technical and just
for laymen's understanding, why is it that a heat-resistant
water heater is more compatible with demand response than--heat
pump would be less compatible than the heat resistant?
Mr. Koep. Well, it has to do with the ability to control
the wattage of the element. You know, the finer element control
enables a lot of the ancillary services in terms of frequency
control and other things that the independent system operators
are willing to compensate for. So to the extent that we can
control those elements, we can provide these services.
The heat pump water heater with the compressor, we can vary
element wattage to the compressor. Turning a compressor on and
off in short periods of time shortens compressor life. It is
just not a real compatible technology for the fine level of
control that we can achieve with elements.
Mr. Whitfield. Right. And Mr. Connett, what do you think
would be the overall impact for electric co-ops around the
country if we are not successful in passing this legislation?
Mr. Connett. Mr. Chair, a lot of the electric cooperatives
have a fair amount of electric water heaters in their territory
today. We might call those uncontrolled water heaters. A lot of
the co-ops' service territory doesn't have natural gas. It has
propane as an option, and in many of those areas, the choice
for heating water would be an electric water heater. It is less
expensive to operate than a propane one.
Mr. Whitfield. OK.
Mr. Connett. And so if those were all to go in without any
control capability, we are going to add to our peak demands,
and if we start to add to our peak demands, that means
additional cost to our consumers. It means additional
emissions, additional fuel costs, additional power plants
potentially. And so having this ability to have a water heater
that is a large volume water heater that allows us to take that
entire electric load and shift it to an off-peak period is good
for our memberships and good for our co-ops.
Mr. Whitfield. OK. Well, I want to thank all of the groups
that work together. You know, we have a lot of issues up here
in which there are strong philosophical differences, and the
only way we are going to move forward is for groups to
recognize, including those on my side, we can't always get
everything we want. And that is why the regular order is so
important. So thank you all for working together on this, and
hopefully we can pass this legislation.
And at this time I would like to yield 5 minutes to the
gentleman from Illinois.
Mr. Rush. Thank you, Mr. Chairman. Mr. Nadel, in the
initial legislative effort to address this grid-enabled water
heater issue, you actually testified before the Senate Energy
and Resources Committee in June of last year, June of 2013
rather, expressing your organization's concern over the
legislative language proposed at the time. Would you assert
``allow widespread use of less efficient water heaters and
application without off-peak water heating or load
management''? Since that time your organization has been--at
the negotiating table and actually helped draft the new
language contained in this bill. Can you speak to your
organization's involvement and investment in this new language
and have your fears been addressed in the current bill that we
have before us today?
Mr. Nadel. Yes, I thank you for bringing that up. Yes, our
concerns have been addressed. In fact, after that hearing some
of the people here in this room came up to me and said can we
talk? Can we try to work something out? The bill originally
basically just allowed unlimited sales of these water heaters
for these applications. We have, as you have heard in the
testimony here, the bill has a number of provisions to
effectively limit its use to those households where there is a
demand response or thermal storage program. With those
limitations and those protections, and I describe them in more
detail in my written testimony, we are very comfortable with
this bill. It allows demand response programs but doesn't allow
widespread leakage.
Mr. Rush. Thank you. Mr. Roy, are you convinced that this
bill will have a positive impact on both consumers and the
environment by allowing the use of grid-enabled water heaters?
Mr. Roy. Yes, I am, sir. I believe the light that will be
shown on this opportunity for grid-enabled water heaters, the
analysis that will come with it will focus a lot of attention.
So we will get benefits not just directly from the application
of grid-enabled water heaters as they are called for here, but
I think we will have more utilities, more demand response
service providers and aggregators for utilities. I see that we
have a representative from a Pennsylvania, a PJM, transmission
organization in the room here today. We will have much more
attention on the broader set of opportunities that are
available in water heating.
I think the direct and spillover effects both can be great
from this. I know my organization will be working hard with all
these parties to see what can we do now that we have something
that is powerful and productive in this space? How can we
really work forward and help each other with the programs, help
deliver better consumer and environmental outcomes?
Mr. Rush. Thank you. Let me ask across the table. Is there
anyone who has any concerns with this bill in thinking that it
may have unintended consequences that we have not covered
today? Does anyone of you all think that there is anything that
we haven't focused on, that we haven't covered, that may have
an unintended consequence that we should be aware of?
Mr. Roy. I think we always find some unintended
consequences in most things we do, either as actions or through
inaction. What is important is that we are aware of it, are
responsive, and we work forward.
What we have here is an industry segment and a degree of
attention that I think will help us all address any unintended
consequences in a timely fashion and deal with those and move
onto the great opportunities that are available.
Mr. Rush. Mr. Chairman, with that I yield back the balance
of my time.
Mr. Whitfield. The gentleman yields back. At this time I
recognize the gentleman from West Virginia, Mr. McKinley, for 5
minutes.
Mr. McKinley. Thank you, Mr. Chairman, and thank you for
having this hearing. I am curious back on the comment that I
think it was you, Mr. Koep, said about the heat pump water
heater at around the cost of $1,500. Also labor would be a
little higher, too, wouldn't it, installing that?
Mr. Koep. Yes. Installation costs with heat pump water
heaters are generally higher than electric resistance.
Mr. McKinley. And so building on that, what kind of
payback, what should someone expect to pay back on that?
Mr. Koep. On a heat pump water heater in general?
Mr. McKinley. Yes, 10 years, 15 years?
Mr. Koep. I think in the marketplace today there are a lot
of incentives for heat pump water heaters, and generally heat
pump water heaters are operating at twice the efficiency of
electric resistance. So most of our experience is with 50-
gallon heat pump water heaters replacing standard 50-gallon
electric resistance. And I think payback is less than 5 years.
Mr. McKinley. Even in a place other than--in West Virginia,
we are probably paying around 7 cents a kilowatt hour, but in
New York it is 19, 20 cents a kilowatt hour. So are you saying
generally speaking across the country or are you talking----
Mr. Koep. Well, generally, I am saying that there are--as
an example in Iowa, there are a number of cooperatives that
have $500 rebates on heat pump water heaters. So they are
buying down the cost of this technology, and that is what makes
the payback period more attractive. In the Pacific Northwest we
have seen $900 rebates on heat pump water heaters. But that has
helped to make them more cost effective and reduce the payback
time. But the fact remains that, you know, trying to control a
heat pump water heater for grid-enabled functionality, that has
not been worked out yet.
Mr. McKinley. OK.
Mr. Koep. And that is the major difficulty.
Mr. McKinley. Mr. Nadel?
Mr. Nadel. Yes. Department of Energy did examine the exact
question you ask, and they estimate the average simple payback
is 6 years for a heat pump water heater. That is the average.
If it is more expensive electricity, it will be less. If it is
only 7 cents a kilowatt hour, it will be more.
Mr. McKinley. Yes.
Mr. Nadel. I think that is based on about 11 cents as I
recall, average.
Mr. McKinley. Mr. Koep, back on, you know, we received some
promotion--my former firm, we had an architectural engineering
practice, and so we were always being promoted to put those in-
line electric units so that weren't storing water. We never
used those, but how inefficient are they to be able to have
instant hot water instead of having a 50- or 100-gallon tank
sitting there trying to maintain a low temp or a high
temperature for a period of time? How inefficient is it to have
just simply the in-line augmented?
Mr. Koep. The in-line or instantaneous electric water
heating technology at an efficiency level is very high in terms
of converting kilowatt hours, you know, to BTUs. But the
general consensus is that whole-house applications of
instantaneous electric or electric tankless, they cause
problems in terms of transformer sizing, demand charges for the
home or the business, impact for the cooperative or the
utility. Most electric tankless technologies that I refer to as
point-of-use are the ones who have the best application because
you can run one line to one location and put a point-of-use
water heater in for a lavatory or for hand-washing or something
like that. But whole-house applications have been problematic.
Mr. McKinley. OK. The last question more is about
efficiency. What should we be anticipating in the industry,
should be the next move in efficiency, whether it is hot water
heaters or other appliances that we have in our households?
What is the next generation of efficiency we should be
anticipating?
Mr. Koep. Well, I think heat pump water heater technologies
will continue to gain in efficiency. In 5 years, you know, they
have moved from 2.0 to somewhere over 3.0 in terms of
performance factor meaning that for every kilowatt hour you
provide to that compressor, you can move 3 kilowatt hours'
worth of heat. So I would say that is probably going to be the
major improvement. I don't see a new major technology on the
horizon. I think that, you know, the introduction of water
heaters to the Internet of things and high-speed,two-way
communication to the appliance offer us multiple levels of
efficiencies that we can explore. But in terms of raw
technology, you know, it has taken us 20, 25, 30 years to get
heat pump water heaters into the market.
Mr. McKinley. Sure. Mr. Nadel, do you have a comment about
that?
Mr. Nadel. I totally agree with that. I'd just expand
slightly for gas water heaters. We have condensing water
heaters. During the break a number of us were talking about
opportunities to meld the water heater with the space heating
and cooling systems, combination appliances. So this is
something----
Mr. McKinley. Eventually we have run out of our time, but
condensing and non-condensing, I would like to have more
discussion about that. Thank you.
Mr. Whitfield. If you would meet Mr. McKinley right after
the hearing to talk about that? At this time I would like to
introduce and recognize the gentleman from New York, Mr. Tonko,
for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair, and welcome to our
panelists. Mr. Connett, what are your estimates for savings to
the utility and to the customer, to consumers, achieved through
the use of demand-response programs?
Mr. Connett. Thank you. In terms of the consumers, we sell
the energy that goes to these large-capacity water heaters. We
call them off-peak water heaters if you will. We sell the
energy to them at a fairly low price. And so they can heat
their water for around $240 a year. And that compares to say
propane. And propane is rather volatile, at least it is in
Minnesota, or has been. And so sometimes propane for that same
amount of water could be $500 or $600 or $700 cost. It would
vary. In terms of natural gas, it would be competitive with
natural gas if you could heat your water for $240 we will do
the same with an off-peak water heater.
Mr. Tonko. And the savings to the utility?
Mr. Connett. Those are savings to the consumer. In terms of
the utility, it has to go back to this notion that without
these programs, we would have to buy high-cost energy in the
market. And the notion is is that we have a peak at every
utility every day, and that peak for a lot of co-ops occurs at
suppertime. That is when we are all home and we are having
dinner. And by the way, that is usually the largest time of hot
water consumption. And so if all these water heaters were not
able to--if we weren't able to control them, they are adding to
our peaks and we would have to build peaking plants to serve
that load or buy high-cost energy. The cost to build the
peaking plant for 100 megawatts is about $80 million. It gets
fairly expensive to serve that peak power that we can avoid.
Mr. Tonko. I hear you. Thank you. What percentage of the
demand-response programs used by our rural co-ops are due to
the use of electric thermal storage devices?
Mr. Connett. You know, I would say it this way, that
premier program for the co-ops, demand-side management programs
is water heating.
Mr. Tonko. OK.
Mr. Connett. It is by far the most successful and the most
widespread program that we have.
Mr. Tonko. And in that regard, what proportion of your
customers participate in the demand-response programs using
electric thermal storage?
Mr. Connett. Yes, I can speak to Great River Energy. And
about 20 percent of our membership has a demand-response water
heater.
Mr. Tonko. And just as to how the consumers benefit from
the use of water heaters that are incorporated into a demand-
response program?
Mr. Connett. Again, for the consumer, it is cost savings.
They are not going to spend as much to heat hot water as they
would otherwise.
Mr. Tonko. OK. And obviously the ancillary piece of the
avoidance of peak capacity plants, that would have to be
addressed.
For Mr. Nadel and Mr. Roy, a question about water heaters
and the fact that they are replaced about every 15 years, often
when they have failed. So consumers often need to make quick
choices about replacement. I have a few questions related to
consumer purchasing. Will water heaters exempted from the
standard be identified as such to the consumer?
Mr. Roy. Yes, there is a clear requirement for labeling
that is permanent, water resistant. They will know for a long
time. Also importantly, they won't be that readily available
unless they are part of a utility program because there is a
lock-and-key arrangement required by the legislation.
Mr. Tonko. And then for either of you, will the consumer
know that these products will not deliver more than 50 percent
of hot water if they are not part of a utility-demand response
program?
Mr. Nadel. The warning label on it says they will only
operate properly. I don't think it gives the exact details, but
it does say they will not operate properly unless enrolled in a
program and enabled by a technician associated with that
program.
Mr. Tonko. But it doesn't mention a percentage? It just----
Mr. Nadel. No.
Mr. Tonko. OK. And then consumers do use the yellow energy
usage information on appliances to make purchasing decisions.
Do these labels need to reflect the dual nature of the energy
usage of these systems?
Mr. Nadel. On the labels, they will have to talk about
their current--the energy use of these products under this
typical test procedure, and they give a range of comparability.
I have to look at the exact details of the Federal Trade
Commission rules to say what will be on the range of
comparability for these particular types of water heaters.
Mr. Tonko. And if they are installed and are not part of a
demand-response system, aren't they less efficient than the
identical appliance installed as part of a demand-response
program?
Mr. Nadel. Yes, they are not as efficient, so they do use
more power that is compensated for the ability to control them.
But if you somehow defeat the protections which are quite
substantial, yes, you will get higher energy use and you won't
get the benefit. But we I think very carefully constructed it
to minimize the chances of leakage.
Mr. Tonko. OK. Gentlemen, I thank you. With that, Mr.
Chairman, my time is----
Mr. Whitfield. OK. Did you want to say anything, Mr. Koep?
You look like you were----
Mr. Koep. No, I don't have anything to add at this time.
Thank you.
Mr. Whitfield. OK. At this time I would like to recognize
the gentleman from Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you very much, Mr. Chairman. I
appreciate you all being here, and listening to your testimony
today is making me think I should go ahead and get a new hot
water heater because mine clearly is not going be nearly as
efficient as what you all are talking about.
I am concerned about some things. The gentleman just
brought up the warning label. I do think that we probably need
to take a look at that and see if we can make sure we let folks
know that it will go to 50 percent of efficiency if it is
tampered with, and the whole lock-and-key mechanism concerns me
some. I will tell you that when this was a part of a Senate
amendment to a House bill, I looked at it, and fortunately the
penalties do not include incarceration for trying to get around
the system by doing something to the machine. But it does
include a fine penalty which causes me concern. It always makes
me nervous when we are mandating things. And so I am trying to
figure out--and I know most consumers will just, you know, this
is what is available on the market. If something happens, their
plumber tells them this is what you need to buy. They will buy
that or they will go to the Home Depot and get something off
the shelf. But if somebody really wants to have 100 gallons
ready whenever they want it, what would keep them from buying
two, 50-gallon hot water heaters under this program or this
bill?
Mr. Koep. Thank you for the question. There is nothing that
stops a consumer from buying two smaller-capacity water
heaters. There is nothing that prevents them from buying a
commercial water heater and putting it into their residence.
Mr. Griffith. Let me ask that question because I am trying
to find answers, and anytime the Government is mandating stuff,
it makes me nervous. So if I wanted to buy a commercial hot
water heater, this wouldn't be a problem?
Mr. Koep. No. This relates specifically to residential.
This goes back to the DOE ruling which is specifically for
residential----
Mr. Griffith. But I could put a commercial hot water heater
into my residence?
Mr. Koep. My understanding, there is no law that prevents a
homeowner from buying a commercial water heater, gas or
electric, and putting it into their residence.
Mr. Griffith. OK. Now, let me ask this because I know a lot
of people will have this question, too. I read somewhere that
if you have the heat pump type water heater and it is in an
area that is normally heated, it may actually cool the air a
little bit as well. Is that accurate?
Mr. Koep. A heat pump water heater will cool and dehumidify
the space that it resides in because it is pulling heat out of
that space and putting it into the tank. There are some ducting
options that are being developed for heat pump water heaters
that would allow them to pull outside air in and expel, you
know, cool air. You know, so the technology is evolving in that
direction. But most of the technology that is on the market
today does cool and dehumidify the space that it resides in.
Mr. Griffith. OK. And so when you say that the unit would
cost more if you had it say in the middle of your basement and
you converted the basement or the house had a basement
converted into a living space, you would have to spend some
more money getting the outside air brought in so that you
wouldn't cool your basement where perhaps your daughter has
taken up residency? Just saying.
Mr. Koep. Well--go ahead.
Mr. Nadel. Yes. A good question. In fact, there was a study
published just a few weeks ago in the Pacific Northwest looking
at this issue. It found that yes, it does occur. It was
relatively rare. As I recall, they found out across a sample of
homes with heat pump water heaters in the Northwest relatively
cold, instead of getting that co-efficient performance of two
when you factor this in, it might be 1.9 or something.
Mr. Griffith. All right.
Mr. Nadel. On average.
Mr. Griffith. Let us translate that into that alleged
daughter's bedroom area. How much is the temperature going to
drop? Are we talking 1 degree or we talking, you know, she is
going to notice 10 degrees cooler? Do we know?
Mr. Connett. I should speak for Minnesota. And we have
installed a number of heat pump water heaters in employees'
homes just to get a sense of how well they do work, and there
is no doubt about it. In Minnesota, every water heater is in a
basement, and those basements are conditioned. And we heat
those basements. And so to put a heat pump water heater into I
will call it the furnace room, it is going to cool that furnace
room down quite a bit. It has been described as I can hang dead
deer in there now. It is cold. And what it is doing is a heat
pump water heater extracts heat from that room. That is what a
heat pump does. It extracts heat and puts that heat into the
water heater.
Think of a refrigerator for a minute. That is extracting
heat from inside the refrigerator and putting it into your
kitchen. That is a heat pump in action. This is another heat
pump. It is going to extract heat from its environment. You
need a fairly--the heat pump manufacturers will tell you, you
need so much area in your furnace room to have a heat pump
water heater because it has to extract heat from that space,
and it is going to condense it and squeeze it all together and
put it into the water heater. So that mechanical room is going
to be a little cool. And that might spill over into the family
room or the living room down in the basement as well.
Mr. Griffith. All right. I do appreciate it. Thank you all
so much for being here. We are all trying to be more efficient,
but we want to make sure we balance out all the interests
concerned. Thank you so much. I yield back.
Mr. Whitfield. Thank you, Mr. Griffith. At this time, I
recognize the gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I would like to put my
statement into the record, and I can go straight to questions.
Mr. Roy, I have some questions, and I have to admit, coming
from Texas and refining and oil, we normally don't agree with
the NRDC. But today that is a different case. Does NRDC have a
sense of why new efficiency standards were proposed by DOE?
Mr. Roy. There have been a series of efficiency standards
on increasing numbers----
Mr. Green. I was just going to say.
Mr. Roy [continuing]. In 1987, signed into law by President
Reagan. This is an update on the water heater standards that
were first put in then.
Mr. Green. In 1987?
Mr. Roy. Yes.
Mr. Green. We would hope the technology has changed since
then.
Mr. Roy. The technology is moving at a quick pace but in
part because of this. I think the major manufacturers now are
introducing products. Vaughn is introducing great new products
in the heat pump water heater space and condensing gas water
heaters. It really is moving.
Mr. Green. Your thoughts on the DOE proposed waiter
authority for water heaters. Is that something you all support?
Mr. Roy. We talked to the other stakeholders, the
manufacturers, the utilities consumer groups, other efficiency
environment groups after it was brought to our attention that
there was a challenge with the DOE standard. We heard what they
said. It made sense to us. So we worked together to support a
waiver approach by DOE under their existing legislation. We
would still like to see that move forward.
Mr. Green. OK. Mr. Koep, on your position as National
Utility Sales Manager, can you describe what the U.S. water
heater market looks like? For example, coming from Texas, we
don't mind--how many natural gas versus electric water heaters
are sold. Have we seen it in the last few years particularly
with the cost of natural gas cheaper?
Mr. Koep. I think that would have been expected, but from
what I have seen from the industry numbers, it is still roughly
a half-and-half market, that half is electric and half is
natural gas. It varies greatly by region. The Pacific Northwest
has much more electric water heating. If you go to California,
it might be 95 percent gas. There is also a split between rural
and urban. Metro areas are usually decidedly more gas water
heating because natural gas is readily available.
Mr. Green. Pipelines are available and everything else.
Mr. Koep. Yes. But on the national average that I have
seen, it hasn't moved much from just about a 50-50 split
between gas and electric, and that is sustained over the years.
Mr. Green. OK. What is the standard size for a home now?
Because I know I have heard over the years our homes have
gotten so much bigger compared to the last generation. What is
the standard size of a water heater now?
Mr. Koep. The 50-gallon electric is still the most popular
size, and you know, it might be 80 or 85 percent of the
marketplace. But this is an uncontrolled 50-gallon electric
water heater generally not part of a demand-response program or
an off-peak program because of the size limitation. On the gas
side I think the most popular historically has been the 40-
gallon gas, but I think that is moving--both electric and gas
seem to be slightly toward larger capacity units because we are
building larger houses, and we have more uses for hot water
within the home.
Mr. Green. Yes. What are the market share for new
technologies like the tankless and heat pump water heaters, the
pump heaters?
Mr. Koep. That is a great question, and we talk about that
at the ACEEE Hot Water Forum that they hold fairly regularly.
Tankless gas technology was introduced roughly 15 years ago,
and they spent a lot of money promoting that technology, and it
is just within the last couple years they have gotten about 5
percent market share or now they might be slightly above that.
So you know, that concerted effort has garnered them some
market share.
Heat pump water heaters as a generally available technology
has only been in the market about 5 years, and after 5 years,
they are just approaching or have just gone over the 1 percent
market share mark. So despite all the best efforts and the
money and the promotion and the education efforts, there seems
to be a regular schedule for technology adoption by the
American public. Nobody is running out to buy the newest water
heater. People buy a water heater when they need one.
Mr. Green. When they need it, yes. OK. Given that the DOE
standards take effect next month, have the supply chains for
larger water heaters closed down or do you think that it --
because sometimes when the standards change, the supply is not
there because plants haven't been doing it. Do you think there
is enough supply to match what the DOE is doing?
Mr. Koep. Well, I think the supply chains are beginning to
be impacted. A lot of the electric cooperatives and utilities
that buy product directly for their programs had preordered in
order to put in a stock of qualifying products so that when the
rule goes into effect, they would not be immediately impacted.
In terms of the manufacturers and the supply chains, they are
already making the changes.
Vaughn is a very small manufacturer. You know, the big
players in the industry, A.O. Smith and Rheem, you know, they
are 80 percent or more of the water heating market with two
companies. So you know, their production facilities, you know,
they can stop building large-capacity residential, but they
will still be building large-capacity commercial units. So the
impact will not be that great.
Mr. Green. OK. I know I am over time. Thank you, Mr.
Chairman.
Mr. Whitfield. Notice how patient we are, Mr. Green. Well,
that concludes the questions today, and I want to thank the
panel for joining us and for your input and working with us in
trying to formulate this legislation. And we look forward to
working with you as we move forward, and we will keep the
record open for 10 days for any material that needs to be
inserted, and that will conclude today's hearing. Thank you
very much.
[Whereupon, at 11:34 a.m., the subcommittee was adjourned.]
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