New national furnace standards will save consumers money, but stronger standards could save even more

Posted on February 11, 2015 by
Andrew deLaski

On February 10, 2015, the US Department of Energy (DOE) issued a proposed rule for furnaces that would provide significant savings for consumers on their home heating bills, and be among the biggest natural-gas saving standards ever completed by the agency. The new standards would reduce gas and propane furnace energy consumption by about 13% relative to basic furnaces sold today.

Improved furnace efficiency standards are a crucial energy-savings opportunity for homeowners and the nation, since about one-fifth of all the energy consumed in US homes goes to operate gas and propane furnaces. These furnaces provide heat for more than 40% of homes, and their minimum efficiency standards have been virtually unchanged since 1992.

DOE’s analysis published yesterday shows that efficiency levels higher than those in the proposed rule would achieve even larger savings for consumers, and increase national energy savings by 50% compared to DOE’s proposal. The agency cited concerns about potential impacts on manufacturers to explain its selection of the lower proposed levels. 

Based on DOE’s analysis, ASAP estimates that typical consumers would save $600 to $800 over the lifetime of a furnace meeting new standards, depending on the standard level. A preliminary DOE analysis published last fall showed that consumers save money in both northern and southern regions, whether purchasing their furnace for a newly built home or to replace an older furnace, and at either the proposed standard level or the higher potential level. An updated version will likely be released soon.

On a national level, furnaces meeting the proposed new standards sold over 30 years would save about 3.1 quadrillion Btus (quads) of energy—enough to meet the gas and propane heating needs of all of New England for 17 years—and net savings of $4-19 billion for consumers. The higher potential standards would save 4.4 quads, or enough to heat New England for 24 years, netting consumers up to $25 billion. These estimates include standby electricity standards also. 

The current furnace standards can be met using non-condensing furnaces, which send much of the heat from the combustion process up the flue and cannot achieve efficiencies higher than about 80%. (For DOE standards, furnace efficiency is measured by calculating annual fuel utilization efficiency, or AFUE.) The new proposed standards could be met with condensing furnaces, which extract additional heat by condensing the water vapor in the flue gases, resulting in efficiency ratings of 90% or higher. Condensing furnaces make up about 45% of current sales.

Improved furnace standards have been a long time coming. Efficiency advocates and states sued DOE over the first revision completed in 2007, because it did very little to improve efficiency. As a result, the agency committed to redo the standard. In 2011, DOE completed a new standard based on a consensus agreement between manufacturers and efficiency advocates that would have raised the minimum efficiency level for furnaces effective in 2013, but only in the northern region. However, the American Public Gas Association (APGA) filed a lawsuit objecting to the expedited process used to adopt the 2011 standards. In 2014, a settlement agreement was approved that vacated the 2011 standards and required DOE to complete yet another new rulemaking. Yesterday’s proposed rule is a key step in the process for achieving improved standards.

Critics of improved furnace standards argued that the prior DOE analyses for the 2011 final rule failed to fully take into account potential switching to electric heat and the full impact of new furnace standards on the installation cost of new furnaces. The agency’s new analysis is substantially revised to address those critics’ concerns and now estimates that about 10% of furnace purchasers would switch to electric heat, primarily heat pumps, as a result of the standard. Most fuel switching would likely occur in those regions of the country where heat pumps are a cost-competitive option compared to gas heating. DOE also updated its estimates of installation costs. A small portion of consumers may face unusually high installation costs when replacing an 80% efficient furnace with a condensing product. ASAP and our allies have worked to develop approaches that would potentially exempt very high cost installations and remain open to exploring options to provide relief for consumers facing unusually high installation costs. Fortunately, new venting technologies already are bringing down the cost of venting condensing furnaces in even the most difficult circumstances, and may make any special treatment unnecessary. Examples are here, here and here.

Yesterday’s proposed rule would apply to non-weatherized gas furnaces. Non-weatherized furnaces are the most common type and are located indoors, while weatherized furnaces are generally part of an outdoor unit that provides both heating and air conditioning. DOE completed standards for weatherized furnaces in 2011 that took effect on January 1 of this year.

DOE is required by the settlement agreement to publish a final rule for new efficiency standards for non-weatherized furnaces by April 2016, and the standards would take effect five years later.  ASAP and our allies look forward to working with other stakeholders and DOE to come up with a final standard that will deliver on the large savings possible with improved standards.

Note (March 11, 2015): Updated information released by DOE confirms the above numbers.

Gas Furnace Fact Sheet