It is a new year and, as is often the case, new years bring new standards, codes and regulations. A big one impacting the plumbing and HVAC industry in 2015 is the latest update to the National Appliance Energy Conservation Act (NAECA). Known as NAECA 3, this new update will take effect on April 16, and will set a higher efficiency standard for water heaters in the U.S. But, what does this mean for the industry?

"It's the law that establishes minimum energy efficiency requirements for residential water heaters," said Ralph Perez, director of Residential Product Management at A. O. Smith. "Across the industry, every manufacturer's entire residential product line will have to meet more rigorous energy efficiency standards. While all of A. O. Smith's high efficiency products already surpass the standards, for our standard products, the new rules mean that we will be making changes to improve energy efficiency that should result in lower energy costs for homeowners."

"The new [NAECA] requirements call for higher energy factor (EF) ratings on virtually all residential gas, electric, oil and tankless gas water heaters, as well as some light-duty commercial products," explained Carl Pinto, director of marketing at Bradford White Corporation. "These changes will have an impact on how water heaters are manufactured, distributed and installed."

"The products that will be most affected by the new NAECA standards are large capacity residential gas and electric water heaters," said Chuck Rohde, wholesale market manager with Rheem Water Heating Division. "Most standard water heaters will undergo some changes to meet the new minimum efficiency levels, such as added insulation. Wholesalers and contractors may continue to sell existing water heaters manufactured before April 16, 2015, until inventory is depleted."

What will these changes mean for the products themselves? Achieving the new efficiency marks, in many cases, means more insulation, which will result in bigger heaters.

"Most standard residential water heaters will be larger," Perez said. "Electric heaters over 55 gallons in capacity must use heat pump water heating technology and certain gas water heaters over 55 gallons in capacity will have to be high efficiency condensing technology. Once the 2015 efficiency standards are in effect, homeowners and contractors will need to pay close attention to the type and size of water heaters during replacements because in some cases, similar units will be physically larger both in height and diameter. Contractors may need to recommend a technology different from the existing unit to fit tighter spaces."

"Tank water heaters with storage capacities from 20 to 50 gallons will see their physical dimensions enlarged to accommodate the additional insulation needed to meet the new efficiency requirements," explained Jason Fleming, marketing manager at Noritz America. "Because of the anticipated larger footprint for tank water heaters, post-NAECA 3, contractors will need to find solutions when the larger tank replacements do not fit the available space in a home."

"Engineers and designers will have to take into account some of the key product differences in terms of size and/or technology when specifying equipment," Pinto said. "This comes into play when looking at water heater requirements in existing space where there may be limited room or venting options. For new construction, engineers and designers will have to look at increasing what they have traditionally allotted for water heater space, or even consider alternate product placement locations or alternate product choices. Homeowners needing new water heaters will not be able to simply replace the exact same product they currently have, so contractors will need to be well-versed on the new NAECA-compliant products and understand what alternatives they have in meeting the water heating needs of their customers."

Understanding the product specs and choices will be vital for everyone down the chain, so that end users can have the information to properly select the right solution for a given application.

"It’ll be important for engineers and designers to be aware of what water heating solutions are available because the dimensions of many water heaters will change," Rohde said. "This means a unit they've previously specified for a certain project may no longer fit in that same space. In a situation where you don't want to modify the space plan, engineers will have to look at alternate solutions that don’t use as much space. Then, if you do choose a different water heating solution, there may be different requirements for gas lines and venting."

"For engineers and designers, building plans should be modified to accommodate for two extra inches in diameter and several inches in height," Perez said. "They may need to plan for heat pump electric or power vented high efficiency gas water heaters. Contractors who do new construction work should start discussing these changes with their clients now. If everyone is thinking about their future projects and designs, accommodating the 2015 products should be no problem."

"Tankless water heaters already comply with the new energy efficiency regulations," Fleming said. "In response to the new regulations, Noritz is offering a retrofit/replacement solution for water heater installations after NAECA takes effect."

"The 2015 NAECA water heater changes will have more of an impact on tankless sales then perhaps most have even thought about yet. With the elimination of larger gallon sizes and physically larger tanks, the cost gap will be closed significantly between tank and tankless," said Brian Fenske, specialty channel sales manager at Navien, Inc. "Even more so, those being forced into larger electric heat pump tanks … will probably consider a propane tankless as an alternative."

On the product side, affected water heater manufacturers have been working diligently the past few years to prepare for the new requirements.

"We started the development process for the new NAECA updates back in early 2011 so we would be ready by 2015. The most noticeable change is the amount of insulation required for standard heaters to meet the new requirements," Perez said. "Gas water heaters will have twice as much insulation and electric water heaters will have about a third more insulation. We've essentially retooled much of our water heater production process to accommodate the required changes."

The other major aspect of industry preparation, however, is getting everyone informed and educated. Manufacturers have been playing a big role there, as well.

"Speaking for Bradford White, we’ve been working to help all parties affected by change, from increasing our manufacturing and design capabilities to engaging in significant educational efforts to help wholesalers, builders, engineers, and contractors understand how this change will affect their businesses," Pinto said. "We started these educational efforts in 2011, and they continue today."

"A. O. Smith started educating our contractors and wholesalers months ago, and we're communicating updates on a regular basis," Perez said. "We've produced a variety of informational pieces as well, such as a dedicated web page, presentations, flyers and videos. We're also educating local architects, plus the trade associations have done a fair bit, too. We're doing all we can to educate folks now because we don't want anybody on a jobsite in April saying they didn't know the product specifications and installation requirements had changed."

"With our Rheem and Ruud sales teams, we have already conducted a lot of contractor training," Rohde said. "Some training sessions have had more than 200 contractors in attendance. These sessions have been instrumental in making our customers aware of NAECA 2015 and the impact it will have on our products. Our goal is to layer training sessions and educational information leading up to the April compliance date so our customers don’t face any major surprises or hurdles after NAECA takes effect."

"Preparing ourselves for NAECA from a manufacturing perspective and helping customers transition to the new standards have never really been separate initiatives for us," Pinto said. "We recognized early on that our mutual success was dependent on one another, given our wholesale and contractor commitment. As soon as the education process started, so did our engagement of customers to determine what features and functionality would be most important to both preserve and add when developing new 2015 NAECA compliant water heaters."

For everyone involved in selling, specifying or installing water heater, knowledge is power and preparation is key. There are many educational resources available to get up to speed on the new standard, and there is no time like the present.

"Besides the information provided on our websites, we have specific brochures to help the contractor describe what NAECA is and what it means to homeowners," Rohde said. "We’ve also produced a fun, upbeat video about what contractors need to know about NAECA 2015, which is also available on the Rheem and Ruud websites. We will also continue training sessions as needed so our customers feel prepared."

"Talk to you your wholesalers, look at your preferred manufacturer's website for NAECA information, and start to prepare for the various installation scenarios you might face with customers when having to replace an existing water heater with a new, NAECA-compliant product," Pinto said. "Bradford White representatives will be prepared to help their customers work through potential installation challenges when NAECA requirements become the new normal."

"For those who need a crash course on NAECA, A. O. Smith has an army of talented contractor partners who are fully up to speed on the new standards," Perez said. "They will be able to walk homeowners through the changes and recommend high-efficiency products to fit all their hot water needs."

While the new standard will bring some big changes, there is great confidence that the products and the industry will be ready.

"Everyone who works with water heaters – from specifying engineers to wholesalers to contractors – needs to be aware of this extremely important change, and they need to understand how it affects the products they sell today," Rohde said. "It's overwhelming to consider that almost all water heaters on the market today will be different [after April 16], but manufacturers will help keep everyone up to speed. It’s also important to realize that many popular products already meet the NAECA 2015 guidelines, and industry professionals have likely already worked with these units."

"The overall message is to be prepared, but not to lose sleep over the changes," Perez advised. "In most cases, the equipment choices are easy decisions and only minor adjustments, if any, will be required to the layout and design of future projects."

As with any standard change, there are challenges to meet it. But, there are opportunities as well.

"We believe that the NAECA changes may actually lead to more business opportunities for our wholesale customers," Pinto said.

"As products become more sophisticated, it is less likely they will be purchased and installed by the do-it-yourself consumer. Therefore, a potential impact of the 2015 water heater changes will be to increase the share sold through wholesale distribution, and decrease the share sold at retail outlets."