Purchasing Energy-Efficient Residential Whole-Home Gas Tankless Water Heaters

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The Federal Energy Management Program (FEMP) provides acquisition guidance for residential whole-home gas tankless water heaters, a product category covered by ENERGY STAR efficiency requirements. Federal laws and requirements mandate that agencies purchase ENERGY STAR Certified products or FEMP-designated products in all product categories covered by these programs and in any acquisition actions that are not specifically exempted by law.

FEMP's acquisition guidance and associated ENERGY STAR efficiency requirements for residential whole-home gas tankless water heaters are technology neutral, meaning that one technology is not favored over another.

This acquisition guidance was updated in July 2018.

Find Product Efficiency Requirements

The U.S. Environmental Protection Agency (EPA) provides residential whole-home gas tankless water heater efficiency levels and product specification information on its ENERGY STAR website. Manufacturers meeting these requirements are allowed to display the ENERGY STAR label on complying models. Federal buyers can use ENERGY STAR's list of certified residential whole-home gas tankless water heaters to identify or verify complying models.

Make a Cost-Effective Purchase: Save $97 or More by Buying ENERGY STAR

FEMP has calculated that the required ENERGY STAR Certified residential whole-home gas tankless water heater saves money if priced no more than $97 above the less efficient model. The best available model saves up to $142. Table 1 compares three types of product purchases and calculates the lifetime cost savings of purchasing efficient models for households with typical water use. Federal purchasers can assume products that meet ENERGY STAR efficiency requirements are life cycle cost-effective.

Table 1. Lifetime Cost Savings for Efficient Residential Whole-Home Gas Tankless Water Heater Models
PerformanceBest AvailableENERGY STARLess Efficient
Energy Factor0.970.900.81
Annual Energy Use (therms)114123137
Annual Energy Cost$65$70$77
Lifetime Energy Cost$806$869$965
Lifetime Cost Savings$159$97======
View the Performance and Model Assumptions for Table 1

Performance Column

Energy Factor: A metric used to compare the energy conversion efficiency of residential appliances and equipment.

Annual Energy Use: Based on the test method referenced in 10 CFR 430, Subpart B, Appendix E, for a unit producing 20,075 gallons of hot water per year.

Annual Energy Cost: Calculated based on an assumed price of $0.57/therm, which is the average natural gas price at federal facilities.

Lifetime Energy Cost: The sum of the discounted values of annual energy cost with an assumed product life of 13 years. Future natural gas price trends and a 3% discount rate are based on federal guidelines (NISTIR 85-3273-33) from the Annual Supplement to NIST Handbook 135 and NBS Special Publication 709, Energy Price Indices and Discount Factors for Life Cycle Cost Analysis – 2018.

Lifetime Cost Savings: The difference between the lifetime energy cost of the less efficient model and the lifetime energy cost of the ENERGY STAR model or best available model.

Best Available Model Column

Calculated based on the April 2018 ENERGY STAR Certified Products List. More efficient models may be introduced to the market after FEMP's acquisition guidance is posted.

ENERGY STAR Model Column

Calculated based on April 2018 ENERGY STAR efficiency levels. Federal agencies must purchase products that meet or exceed ENERGY STAR efficiency levels.

Less Efficient Model Column

Calculated based on typical products used in non-federal applications.

There are additional cost savings associated with waste-heat recovery systems. Drain-water, or greywater, heat recovery systems capture the energy from waste hot water—such as showers and dishwashers—to preheat cold water entering the water heater or going to other water fixtures. Energy savings vary depending on individual household usage.

Determine When ENERGY STAR Products Are Cost-Effective

An efficient product is cost-effective when the lifetime energy savings (from avoided energy costs over the life of the product, discounted to present value) exceed the additional up-front cost (if any) compared to a less efficient option. ENERGY STAR considers up-front costs and lifetime energy savings when setting required efficiency levels. Federal purchasers can assume ENERGY STAR Certified products and products that meet FEMP-designated efficiency requirements are life cycle cost-effective. In high-use applications or when energy rates are above the federal average, purchasers may save more if they specify products that exceed federal efficiency requirements (e.g., the best available model).

Claim an Exception to Federal Purchasing Requirements

Products meeting ENERGY STAR or FEMP-designated efficiency requirements may not be life cycle cost-effective in certain low-use applications or in locations with very low rates for electricity or natural gas. However, for most applications, purchasers will find that energy-efficient products have the lowest life cycle cost.

Agencies may claim an exception to federal purchasing requirements through a written finding that no FEMP-designated or ENERGY STAR Certified product is available to meet functional requirements, or that no such product is life cycle cost-effective for the specific application. Learn more about federal product purchasing requirements.

Incorporate Federal Acquisition Regulation Language in Contracts

These mandatory requirements apply to all forms of procurement, including construction guide and project specifications; renovation, repair, energy service, and operation and maintenance (O&M) contracts; lease agreements; acquisitions made using purchase cards; and solicitations for offers. Federal Acquisition Regulation (FAR) Part 23.206 requires agencies to insert the clause at FAR section 52.223-15 into contracts and solicitations that deliver, acquire, furnish, or specify energy-consuming products for use in federal government facilities. To comply with FAR requirements, FEMP recommends that agencies incorporate efficiency requirements into technical specifications, the evaluation criteria of solicitations, and the evaluations of solicitation responses.

The FEMP publication, Contracting For Efficiency: A Best Practices Guide for Energy Efficient Product Procurement, may be of particular use to federal contract officers, technical specifiers, and other acquisition professionals in helping to write effective solicitations and other procurement documentation for these products.

Find Federal Supply Sources

The federal supply sources for energy-efficient products are the General Services Administration (GSA) and the Defense Logistics Agency (DLA). GSA sells products through its Multiple Awards Schedules program and online shopping network, GSA Advantage!. DLA offers products through the Defense Supply Center Philadelphia and online through DOD FedMall (formerly DOD eMALL). Products sold through DLA are codified with a 13-digit National Stock Number (NSN) and, in some cases, a two-letter Environmental Attribute Code (ENAC). The ENAC identifies items that have positive environmental characteristics and meet standards set by an approved third party, such as FEMP and ENERGY STAR.

The United Nations Standard Products and Services Code (UNSPSC) is a worldwide classification system for e-commerce. It contains more than 50,000 commodities, including many used in the federal sector, each with a unique eight-digit, four-level identification code. Manufacturers and vendors are beginning to adopt the UNSPSC classification convention and electronic procurement systems are beginning to include UNSPSC tracking in their software packages. UNSPSCs can help the federal acquisition community identify product categories covered by sustainable acquisition requirements, track purchases of products within those categories, and report on progress toward meeting sustainable acquisition goals. FEMP has developed a table of ENERGY STAR and FEMP-designated covered product categories and related UNSPSC numbers.

Residential Whole-Home Gas Tankless Water Heater Schedules and Product Codes

GSA offers residential whole-home gas tankless water heaters through Schedule 51 V, Category 639 001 and Schedule 56, Category 563 28

The DLA ENAC for residential whole-home gas tankless water heaters is DM.

The UNSPSC for residential whole-home gas tankless water heaters is 40101825.

Buyer Tips: Make Informed Product Purchases

Tankless water heaters (also called demand-type or instantaneous) heat water as it is needed. When an application (e.g., faucet, shower head, or clothes washer) is turned on, the flow of water activates the burner. For some products, a minimum flow of 0.5 gallon per minute (rpm) is needed to activate the burner. If the water flow is below this level, hot water will not be provided. When installing tankless water heaters, make sure the minimum flow of each application is sufficient to activate the burner.

Groundwater temperature will have an impact on the performance of tankless water heaters. A very low inlet temperature can reduce the amount of hot water delivered. Tankless water heaters are limited in the number of applications they can satisfy simultaneously. The largest tankless water heaters available provide around 5 gallons per minute (rpm). While this is enough hot water for several low-flow applications (e.g., bathroom faucets) or a couple moderate-flow applications (e.g., a shower and clothes washer), most tankless water heaters are unable to satisfy two high-flow applications (e.g., tub spigot, multi-head shower) at the same time.

The installation requirements for gas tankless water heaters are slightly different from storage type. The burners on gas tankless water heaters can have outputs as high as 200,000 Btu/h whereas the burners in storage type water heaters have outputs of 75,000 Btu/h or less. The supply line must be sized to provide enough gas for the larger burners. The venting requirements for gas tankless water heaters are different as well, especially for the most efficient products. Because of the low exhaust gas temperature and condensation that occurs as a result of efficiency improvements, corrosive-resistant materials are needed for the vent. The vents are typically run horizontally through walls instead of vertically through roofs and are limited to about 10 linear feet. Tankless water heaters must be connected to drain lines to dispose of the condensate.

Annual maintenance must be evaluated when considering tankless products, especially in areas with hard water. Consult with a reputable local installer who has experience with tankless water heaters to determine the proper unit, sizing, installation, and maintenance requirements for your particular situation.

When comparing different types of residential whole-home gas tankless water heaters, it is important to consider the household's anticipated water usage. As shown in Table 2, the cost savings resulting from ENERGY STAR-qualified products being more efficient than other models are increased with more water usage. Buyers can use this table for supplemental information when replacing standard residential whole-home gas tankless water heaters with more efficient residential whole-home gas tankless water heaters.

Table 2. Comparison of Lifetime Cost Savings for ENERGY STAR Residential Whole-Home Gas Tankless Water Heater Models at Different Water Use Levels
Water UsageVery SmallLowMediumHigh
Daily Water Usage (gal/day)10385584
Annual Energy Savings (therms)291421
Annual Energy Cost Savings$1$5$8$12
Lifetime Cost Savings*$19$73$105$161

*Compared to less efficient models with the same draw.

Many states and electric utilities offer rebates or other incentives for the purchase of ENERGY STAR Certified products. Use the ENERGY STAR Rebate Finder to see if your local utility offers these incentives. FEMP's Energy Incentive Program helps federal agencies take advantage of these incentives by providing information about the funding-program opportunities available in each state.

User Tips: Use Products More Efficiently

When used and handled properly, energy-efficient residential whole-home gas tankless water heater models provide years of safe and effective service. Federal users should be aware of the following user tips.

  • Install aerating, low-flow faucets and showerheads.

  • Repair leaky faucets promptly; a leaky faucet wastes gallons of water in a short period of time.

  • Set the thermostat on your water heater to 120°F to get comfortable hot water for most uses. Dishwashers require the hottest water of all household uses, typically 135°F to 140°F. However, they are usually equipped with booster heaters to raise the incoming water temperature by 15°F to 20°F. Setting the water heater between 120°F and 125°F and turning the dishwasher's booster on should provide sufficient hot water while saving energy and reducing the chances for scalding.

  • Insulate your natural gas or oil hot-water storage tank, but be careful not to cover the water heater's top, bottom, thermostat, or burner compartment. Follow the manufacturer's recommendations; when in doubt, get professional help.

  • Insulate the first 6 feet of the hot and cold water pipes connected to the water heater.

  • Install heat traps on the hot and cold pipes at the water heater to prevent heat loss. Most new water heaters have built-in heat traps.

  • Drain a quart of water from your water tank every 3 months to remove sediment that impedes heat transfer and lowers the efficiency of your heater. Follow the manufacturer's directions.

Lawrence Berkeley National Laboratory provided supporting analysis for this acquisition guidance.