2023 Water Heater Report: A Push Toward Greater Efficiency

Regulations and trends on decarbonization and electrification dominated many of the answers we received for our 2023 Water Heater Report.

“Electrification is surely gaining attention and momentum as efforts to reduce greenhouse gas emission and efforts in climate change takes priority,” said Chia Lin, product manager, Navien Inc. “The impact of electrification will dictate the design and direction for many gas-fired products in the coming months.”

We sent surveys to A. O. Smith; AERCO; American Standard Water Heaters; Bradford White; Bradley; Eemax; GE Water Heating; HTP; Intellihot; Lochinvar; Navien; PVI; Rheem; Stiebel Eltron; and Utica to see what was on the minds of water heater manufacturers. 

We heard plenty about the increasingly used tag line to “electrify everything” — both pros and cons — as well as viewpoints on demands for comprehensive energy-efficient products and installations, regardless of the power source.

First off, a little house-keeping: About a month after we finished compiling our answers, the Biden Administration announced new proposals designed to tighten efficiency standards on residential water heaters.

The new standards would require many electric water heaters to achieve efficiency gains with heat pump technology and gas-fired instantaneous or tankless water heaters to make improvements through condensing technology.

No surprise, the new proposed federal regulations caused a stir, what with one water heater manufacturer fully onboard supporting the proposals while another water heater manufacturer said the changes would “create an uneven market that effectively bans an already energy efficient product.”

The last time the feds updated residential water heater standards was 13 years ago. If approved, the regulations wouldn’t take effect until 2029 and what those final regulations will be are just now beginning to be debated. In the meantime, the industry has already been planning for federal regulatory changes that go into effect in 2026 for commercial installations 

While some of our respondents made passing references to the 2029 residential date (the routinely updated standards are years overdue), they didn’t have an opportunity to say what they thought about the announcement. We’ll have to wait until our 2024 Water Heater Report for more on that. However, there are other energy-efficient regulations and trends that currently are on the minds of our respondents 

Regulatory Mandate 

We asked the following question: 

What current regulatory mandates will impact the design of your products in the next 18 months? 

“Electrification is a major trend,” said Amy Turner, director of marketing, Intellihot Inc., a simple declarative statement shared by many other respondents. 

“We’re looking to expand our product lineup over the next few years, some of which will tap into this trend,” Turner added. “California is leading the move to mandates with its new state-wide code.” 

Starting this year, the California Energy Code strongly encourages builders to opt for all-electric designs that use heat pumps for water as well as space heating. 

“While many builders will still be able to use gas appliances in new buildings, depending on local codes,” Turner added, “some may be required to offset the higher emissions with other efficiency measures.” 

Intellihot introduced its Electron series earlier this year to “encourage commercial properties to think about the future of incorporating heat pump water heating in their designs.” Turner explained. 

California’s legislative mandates to reduce energy consumption can be traced back to 1978 when the state created the California Energy Code, most commonly called Title 24. Over the years, Title 24 has included a wide range of energy conservation standards to most homes and buildings throughout the state. The standards are updated periodically and, as Turner noted, as of Jan. 1, Title 24 started promoting the use of electric heat pump water heaters over gas-fueled water heaters. 

And it’s not just California pushing electrification. Colorado, New York and Washington have passed state measures that will prohibit new buildings from being connected to natural gas, with few exceptions, and local governments in Massachusetts, Oregon and Vermont have taken similar actions.

“Overall, decarbonization initiatives and incentives are pushing consumers to electric or heat pump water heaters,” added Robert Aldrich, residential segment development leader, A.O. Smith 

Pushback 

However, while electrify everything has become a common catchphrase, a sizable number of states have passed laws that prohibit bans on natural gas. 

“Building electrification continues to be a critical policy discussion impacting our industry,” explained Rebecca Owens, senior communication manager, Bradford White Corp. “While this movement seems to have some momentum, there are others who are pushing back. Twenty-five states have now passed Fuel Choice legislation, which prohibits local governments in their states from banning the use of natural gas in new buildings.” 

Owens also mentioned that the United States Court of Appeals for the Ninth Circuit ruled that federal law prohibits Berkeley, California’s all-electric new building requirement, the first such policy enacted in the nation. 

“While there is a lot of activity happening around the United States related to building electrification,” Owens added, “it remains very difficult to predict what legal and policy outcomes and the impact to our industry we’ll ultimately see.” 

Demand Response 

On other energy-efficiency matters, Aldrich and Ashley Pincott, senior product marketing manager, Rheem, discussed regulations in Washington and Oregon that require electric storage water heaters to be equipped with demand response controls. 

“This includes electric storage heat pump models and it has now been extended to include other electric storage water heaters,” Pincott added. 

Tank-type electric water heaters are straight-forward in their operations. When the temperature of the water is too low, the heater turns on. When the temperature gets too high, the heater turns off. We’re oversimplifying, but one way or another, the water heater doesn’t care what the local power company thinks. 

In recent years, demand response programs have gained traction as a key tool in managing electricity demand and reducing strain on the power grid. These programs let electricity consumers voluntarily reduce their electricity usage during times of high demand. 

“A.O. Smith is an industry leader in demand response and time-of-use capabilities,” Aldrich explained. “These features make it even easier to save money by integrating a heat pump water heater into the growing number of utility smart grid programs.” 

Many states have already passed measures to at least offer consumers demand response programs. However, as Aldrich and Pincott noted, Oregon and Washington now require water heaters installed in those states to be demand-response capable. 

• Oregon: On Sept. 25, 2021, Oregon passed House Bill 2062. It stated that electric storage water heaters manufactured on or after Jan. 1, 2022, must have a modular demand response communications port compliant with the March 2018 version of the ANSI/CTA-2045-A communication interface standard or a standard determined by the Director of the State Department of Energy to be equivalent; and the March 2018 version of the ANSI/CTA-2045-A application layer requirements. 

• Washington: On Sept. 25, 2021, the state of Washington passed RCW (Revised Code of Washington) 19.260.080. It stated that an electric storage water heater, if manufactured on or after Jan. 1, 2021, may not be installed, sold, or offered for sale, lease, or rent in the state unless it has a modular demand response communications port compliant with the March 2018 version of the ANSI/CTA–2045-A communication interface standard, or equivalent and the March 2018 version of the ANSI/CTA-2045-A application layer requirements. 

“Rheem has the largest rule compliant, built-in EcoPort (CTA-2045 port) electric water heater offering on the market,” Pincott added. 

Rheem water heaters that are compliant and demand response ready with built-in EcoPort include the ProTerra Hybrid Electric Heat Pump and the ProTerra Plug-in Heat Pump with Hydroboost, along with the Prestige Smart Electric, Classic Plus Smart Electric, and Classic Electric with Demand Response models. 

Trends 

While decarbonization, electrification and energy conservation took center stage in our answers to regulatory matters, they also returned for an encore for our next question: 

What water heating trends are you seeing in different parts of the United States?  

“We continue to see an increased effect from the electrification initiatives of recent years, especially in California,” said Julius Goodman, head of marketing, Stiebel Eltron Inc.  

These initiatives, Goodman added, are driving interest in sales and installation of electric tankless to new heights. 

“We’ve stated it before, but the electric tankless market will continue to grow throughout the U.S.,” Goodman explained. “And we’re not the only ones who believe that, if the increasing number of competitors into the market is any judge. Electric tankless is part of the green revolution, especially as electric energy through renewable technologies becomes a greater source than electric generation through the use of fossil fuels.” 

The “versatility” that electric water heaters provide is also driving the electrification trend, Pincott added. 

“The units can be installed in a variety of locations near the point of use without the need for venting or a gas line and can also supply hot water to various housing types ranging from apartments to houses,” Pincott explained. “Electrification is a huge trend we are seeing in the market, and we don’t expect this to slow anytime soon. With more homeowners shifting to electric, and with new energy efficiency regulations and building codes, the water heating industry is rapidly expanding to provide different solutions.” 

While progressive “blue states,” such as California, are where you would expect to find electrification happening, Turner added that “red” and “purple” states are not far behind. 

“We see many engineering and contractor firms working towards electrification while straddling the mandates in multiple market-states,” she said. 

Good Old-fashioned Efficiency

Decarbonization and electrification may make the front page, But there are plenty more stories on the inside pages on gains in energy efficiency water heater manufacturers made long before this latest trend. 

“We are developing and introducing more condensing gas water heaters, Aldrich explained. “The most popular commercial water heater is now the condensing tank-type product. These outsell all other technologies in new construction for many reasons — with the first reason being proven efficiency that results in lower operating costs.”

Aldrich added that A.O. Smith’s Cyclone lines have been in the market for more than 25 years.

“Customers like the utility savings and performance they provide,” Aldrich said. “The tank-type condensing models also offer dependable operation and lower maintenance than other options available.”

At Navien, long known for tankless products, Lin said that “tankless water heaters are still popular in many parts of the United States. Higher efficiency condensing tankless water heaters are more popular than noncondensing tankless versions.”

So while in New England, Owens said contractors are becoming more comfortable installing heat pump water heaters thanks to rebates. Another trend Bradford White sees is in the Southeast with higher Uniform Energy Factor ratings on electric water heaters in multifamily applications. 

“By increasing the UEF a point or two higher, the energy savings adds up based on the number of units in the development,” Owens added. 

Meanwhile on the West Coast, another trend Bradford White sees is a shift in the design/construction of apartment buildings from an individual water heater per apartment dwelling to central systems. 

“This could be by way of high efficiency commercial gas water heaters (tank or volume) or commercial heat pump systems,” Owens explained. “As result, this is changing the installer base that was once used to installing single residential water heaters throughout the building to an entirely different technology and installation process. 

‘Economic Costs’ 

Although Nicholas Lane, product manager at AERCO, a Watts Brand, says decarbonization and electrification remain top agenda items for many customers, particular those in the Northeast and West Coast, “in the central and southern parts of the country there is still a greater focus on economic costs.” 

There are many factors at play, he added, including the regulatory environment, local policies, product rebates as well as utility costs and companies’ Environmental, Social and Governance investing strategies.

“This makes each market in the U.S. very unique in terms of how this topic is approached,” Lane explained. 

Lane’s corporate colleague, Mark Croce, senior product manager at PVI, a Watts Brand, agrees. 

“Another noticeable trend is a greater tendency in retrofit projects to replace with high-efficiency water heaters,” Croce added. “That is a trend that spans across the country, actually. This may be in anticipation of the DOE’s proposed updates to the minimum energy efficiency standards for commercial water heaters which would effectively ban noncondensing types.” 

For its part, PVI recently introduced the Centurion, its most advance, high-efficiency water heater to date, and extended its gas condensing Conquest water heater line to provide engineers and contractors with even more options to design the optimal water heating plant for their projects. 

Likewise, Dustin Wiggins, segment development manager, commercial water heating, Lochinvar, certainly sees plenty of demand in the Northeast and West Coast for the latest heat pump technology. 

“While Lochinvar has products to meet these specific needs, much of the country continues to demand highly efficient gas and electric-powered equipment,” Wiggins explained. “With the broad and deep product offering we have at Lochinvar, whatever trends emerge, we have a solution to fit most any application. Efficient products, intelligent, easy-to-use controls and consciousness of space requirements are always on trend.” 

Wiggins’ comment is key: No matter what the “trends,” water heater manufacturers have what the market needs, which is well summed up by Ansley Houston, director of national sales for American Standard Water Heating and HTP. 

“There is a major shift in the market toward electrification with hybrid heat pump water heater technology and smart electric water heaters,” Houston said. “In California, the Northwest, and Northeast, there is a major move toward this technology. In the Pacific Northwest, there is a shift toward demand response-capable electric storage water heaters. On the gas side, the nationwide market is shifting toward high-efficiency (condensing) technology.” 

Other Notable Trends 

In addition to high-efficiency equipment, we also heard about several other trends from respondents: 

Hard water: “Another trend that we see is an increasing awareness of mitigating the negative effects of hard water in terms of water heating inefficiency and equipment failure,” Lane noted. “A combination of these trends may be why, for example, we have seen an increased interest in our indirect water heaters, which are powered by electricity and where hard water is less of a factor than in gas-fired water heaters due to the lower temperatures, which bake scale at a lower rate.” 

Emergency applications: “Today’s specifiers and plumbing engineers are feeling greater pressure to cut energy consumption and costs while improving performance,” said Tony Clouse, industrial business development specialist, Bradley Corp. “When it comes to efficiently heating water for applications, such as emergency safety showers and eye/face washes, many are seeing the benefits of going tankless.” 

According to Clouse, ANSI/ISEA Z358.1–2014 American National Standard for Emergency Eyewash and Shower Equipment recommends that tepid water for plumbed emergency equipment be between 60 F and 100 F. 

“Tankless water heaters ensure that the water temperature is heated within this temperature range at all times,” he explained. 

Space savers: Clouse also added that another trend is saving valuable workspace. Bradley’s Electric Tankless Water Heaters, powered by Keltech, use a smaller footprint than bulky commercial tank water heaters. 

“One unit has the capacity to efficiently feed multiple safety showers at once,” he explained. “Using tankless electric water heaters make operations more efficient and functional because they provide benefits like reliable, on-demand hot water, consistent water temperature, high energy efficiency and easy installation.” 

Installation of these compact units requires only one electrical connection and a cold water line.  

“In all, Bradley’s tankless water heaters are designed to trim back everywhere plumbing engineers need it most,” Clouse said. 

We asked a couple of questions regarding innovation whether it be through manufacturing, engineering and product development. Here are verbatim answers:

“To further support corporate sustainability initiatives and ensure that facilities adhere to local regulation, we are introducing new models that will have lower Global Warming Potential (GWP) refrigerants. 

“Newly patented X3 Scale Prevention Technology is being integrated into our tankless gas units to extend the life of heat exchangers and eliminate efficiency loss over time due to scale build-up. 

“Our mobile app connects to the A. O. Smith iCOMM Remote Monitoring Platform and allows service professionals and homeowners to remotely monitor and control their water heaters to improve performance, increase savings and reduce downtime.” 

— Robert Aldrich, Residential Segment Development Leader, A.O. Smith  

“Our exclusive Vitraglas enamel tank lining provides unsurpassed protection from the corrosive effects of water. Our tank lining, now with Microban, an antimicrobial technology, provides additional product protection by helping to protect the growth of bacterial, mold and mildew on the surface of the tank lining. The enamel tank lining and product features are effective for the lifetime of our water heaters and included as standard equipment on nearly all Bradford White tank water heaters.” 

—Rebecca Owens, senior communications manager, Bradford White Corp.  

“We managed to engineer several groundbreaking components for our Electron series, which was first unveiled to the public at AHR earlier this year. The Electron units use a CO₂-based refrigerant (R744) paired with a specially designed water-propylene-glycol based thermal battery. The R744 refrigerant is environmentally friendly, with an extremely low Global Warming Potential of 1. It has superior heat transfer characteristics compared to synthetic refrigerants. It’s a naturally occurring substance and abundant in the atmosphere, and it’s safe because it’s non-flammable and non-toxic. The specially-designed thermal battery stores heat energy and enables heating water on-demand without the need to store large quantities of potable water.  

“All of our products are tankless, and the simple act of eliminating stored water greatly reduces the potential for Legionella. We recently introduced the Legionator, which is the world’s first point-of-use disinfecting tankless water heater. It reduces the potential for Legionella at point-of-use fixtures by using a built-in ozone generator and scale-free heating using quartz tubes. As hot water is exiting the unit, ozone gas is injected into the water. This has two effects: 1) it kills the bacteria in water; and 2) the ozone is also carried in the water to the faucets to kill the bacteria present within the faucet valve seats and aerators.” 

—Amy Turner, director of marketing, Intellihot, Inc.  

“As one of the leaders in the industry, Navien is always implementing new ways to improve efficiency and quality in both our products, including, better manufacturing processes, sourcing quality raw materials, implementing automation and setting high quality standards.  

“Navien has always been a leader in tankless water heaters with our built-in recirculation pump plus buffer tank, which addresses issues such as hot water delivery time and inconsistent flow rates.” 

—Chia Lin, product manager, water heaters, Navien, Inc.  

“Rheem Thermaforce Platform’s patented, labyrinth aluminum block heat exchanger with integrated copper waterways reduces thermal stress on copper tubing limiting lime scale and damage. (Platform consists of combi boilers, boilers and tankless water heaters.) 

“Rheem’s AllClear Water Treatment system is an optional accessory for the Rheem tankless water heater portfolio designed to help prevent scale from building up in the heat exchanger. This device is installed on the cold-water line just prior to the tankless water heater. As water passes through the filter cartridge located inside the clear plastic casing, a treatment medium slowly dissolves into the water supply to provide scale protection. 

“Additionally, Rheem tankless gas water heaters notify the homeowner through the Rheem EcoNet app and the on-unit display of both hard water and maintenance alerts.” 

—Ashley Pincott, senior product marketing manager, Rheem

“Scaling due to hard water minerals can be an issue in tankless water heaters. Our Direct Coil heating system in our newest electric tankless water heaters was designed to help prevent limescale buildup. The heating coil in our Direct Coil system was carefully engineered to noiselessly vibrate every time the water heater activates. This self-cleaning action vibrates any minerals that may have settled on the heating coils. While not preventing liming in every situation, these are the models to install in hard water areas. 

“In addition, we sell a Template Assisted Crystallization water conditioning system that has been proven to provide protection against scaling in the entire hot water system without the use of salts or other chemicals.  

“While not exactly a new development — as we invented and patented the technology decades ago — the DHC-E Plus series is the first point-of-use model to include our Advanced Flow Control. This technology guarantees hot water at the set temperature, extending what has been an exclusive feature of our whole house models to point-of-use models that guarantee water at the set temperature for multiple sinks at the same time.” 

—Julius Goodman, head of marketing, Stiebel Eltron Inc. 

We asked a couple of questions that boiled down to what manufacturers did for their customers, and more importantly, what they heard from their customers that, once incorporated, made for a better product. 

“Our product development efforts are guided by our customers’ evolving needs,” said Robert Aldrich, residential segment development leader, A.O. Smith. 

The company regularly solicits customer feedback in a variety of ways, including online reviews, customer visits and data gathered by third-party market research companies. 

“Our recent innovations in leak detection and water shutoff were driven by customer requests,” Aldrich added. “Consumer feedback also played a key role in the development of our advanced Wi-Fi and communication features, app connectivity, temperature set-point and air code delivery.” 

Bradford White Corp.’s Michigan-based customer service center is co-located with its design and manufacturing centers. 

“For new product developments, service team members are included in concept development and design reviews to ensure that customer feedback and ideas are considered and addressed in next generation product offerings,” said Rebecca Owens, senior communications manager, Bradford White. 

Customer feedback is collected across Bradford White’s organization, including in-person regional or factory training events, and contact centers in Michigan as well as in Pennsylvania. 

“Also, customer feedback on any issues related to performance, reliability, quality, etc., are quickly shared with the appropriate teams for consideration and corrective action,” Owens added. “This continuous improvement feedback loop generates quick response to any field issues.” 

As a result, “some of our most valued features have been suggested by many trade professionals,” Owens said, including snap lock draft diverters, brass drain valves and installed T&P values. 

Intellihot follows a continuous process improvement approach, starting from the executive level on down throughout the organization. 

“We constantly collect customer feedback, follow market trends and improve our offerings to better serve customer needs,” said Amy Turner, director of marketing. 

Thanks to this CPI process, Intellihot’s drop-in tankless unit, the Neuron iN199, now comes with an ASME-certified option — called the iN199A. 

“This decision was taken when we found that some of our customers could not find a reliable, ASME-certified tankless water heater under 200,000 BTUs/hour,” Turner explained, “since manufacturers are not mandated to certify units that are below 200,000 BTUs/hour. Even though it is not a regulatory requirement, we still provide this option to satisfy the needs of some customers who prefer having the peace of mind that comes with an ASME certification.”

Customer feedback and the voice of the customer are invaluable, said Chia Lin, product manager, water heaters, Navien, Inc. 

“They have led to many features being built into the product, such as Navien’s on-demand function, the HotButton and easy-to-use, advanced controllers,” Lin added. 

Ashley Pincott, senior product marketing manager for Rheem, said the company regularly consults with professional installers to “ensure simplified and flexible installation and servicing of all water heater designs.” 

She added that this feedback resulted in all service parts and condensate line positioned in the front of the Rheem ProTerra Heat Pump Water, simplifying service and earthquake strap installs. 

“Additionally ProTerra models are the same dimensions as standard water heaters and have zero clearance requirements making installation flexible and perfect for replacement,” Pincott added.

Stiebel Eltron Inc.’s products are always under continual development.

 “Since the beginning of the company the philosophy has always been to make products the best they can be made, then to work to improve them,” said Julius Goodman, head of marketing, Stiebel Eltron. “It makes sense that customer feedback about a product is always considered. How could you make the best products if you didn’t consider how they work for your customers?”

Customization

We also asked about how the companies went about customizing their water heater lines to meet specific requirements or specifications. 

All offered some custom capacity, particularly on the commercial side. Cascading, for example is a common option, according to Lin with Navien’s Ready-Link Racks and manifold kits also available to simplify installations.  

At Bradford White, “water quality, power availability, installation constraints and performance needs all drive the many models and model options offered across our product portfolio,” Owens added. 

The company’s technical staff also stands ready to professional installers to customize products that work best for their region and customer needs, assuring best in class performance and reliability. 

“This is one of the key advantages the professional has over ‘do-it- yourself’ water heater suppliers,” Owens said. 

Intellihot specializes in commercial products that are “purposefully designed with a modular approach, which allows us to scale up or down based on the need very easily,” Turner explained.

 Intellihot customers can size their projects using an online sizing calculator which provides them with multiple options. 

“They are able to convey their specific requirements and choose the best fit,” Turner explained. 

Goodman added that there wasn’t a lot of customization to Stiebel Eltron’s models, if only because “each model was designed to perform superbly for the task it was engineered for.” 

Some point-of-use models can have the hot water set point temperature customized for special applications, but those are all user customizations, Goodman explained, and not factory-ordered options. 

“Our C Series commercial/industrial electric tankless water heaters are a little different in that the range of models and options available can make them essentially appear as custom models for a particular use,” Goodman added. 

Specially engineered for heavy industry, the C Series is available in four different models, in sizes from 12 kW to 144 kW, and in all common three-phase voltages, including 208V, 240, 480 Delta, 480 Wye and 575. A number of performance options can be selected for most of these models, in addition to different enclosure options and some other choices.  

“Ordering the C Series water heater with any special options needed for an application is simple,” Goodman said. “It starts with a few questions about the application need and the infrastructure available at the site. This can be done by filling out a simple form on our website or with a call to our dedicated experts.”