Electric Storage Water Heaters:
Consultation Regulation Impact Statement
Stakeholder Consultation - Australia and New Zealand, 20 – 22 January 2014
Michael Whitelaw, Department of Industry
Paul Ryan, EnergyConsult
On behalf of the E3 Committee
A joint initiative of Australian, State and Territory and New Zealand Governments.
Contents of Presentation
•
•
•
•
•
•
•
Introduction
RIS – Scope and Rationale
The Market – Sales, Stock and Energy
Standards and Requirements
Problems and Objectives of the RIS
Policy Options and Impacts
Conclusions
Contents
2
Introduction
3
E3 Overview
• E3 = Equipment Energy Efficiency
– A committee jointly run by Aust federal,
state & territory, & NZ governments
• Aims to improve energy efficiency in
coordinated manner
– Energy efficiency impacts productivity,
demand levels and patterns, energy bills,
greenhouse gas emissions etc.
– Use national legislation and standards to
ensure consistent requirements
– Tools include information, energy
standards and labels
Introduction
4
The consultation process and next steps
• Consultation
– Physical sessions – ask preliminary questions
– Submissions – comments must be formally
submitted
– Jurisdictional E3 representatives – consider
and recommend
– Ministers – consider any recommendations
– Other – Standards Australia or other
consultation as required
Introduction
5
The consultation process and next steps
Submissions received
E3 makes recommendation(s)
Project cancelled
Minor changes
Other / Direction change
Ministers consider
Submissions
Changes to Standards
Implementation and
compliance
Post implementation review
Introduction
6
RIS – Scope and Rationale
7
Why electric storage water heaters?
• Water heating is a significant contributor
to the residential sector’s energy use
• Appears to be subject to market failures
• Potential scope for:
– Simplification/harmonisation
– Energy efficiency improvements
RIS – Scope and Rationale
8
Energy Consumption of Water Heaters in
Australia and New Zealand
• Australia
– 25% of energy use in homes for water heating
• 45% of this is electric water heating
• New Zealand
– 33% of energy use in homes for water heating
• 80% of this is electric water heating
• Options considered in this RIS are
estimated to save almost AU/NZ $0.5
Billion over 10 years
RIS – Scope and Rationale
9
Scope
• Products coverage includes most water
heaters with storage tanks and electric
boost/heating elements, i.e.
– Conventional electric storage water heaters
(ESWH)
– Solar (electric) Water Heaters (SWH)
– Heat Pump Water Heaters (HPWH)*
– Excludes gas water heaters or renewable preheat systems
RIS – Scope and Rationale
10
Reason for Review
• Ensuring regulations remain relevant and
effective
– Regulatory consistency
– Regulatory effectiveness
– Net-benefits
• Current options could save almost
half a billion dollars over 10 years
RIS – Scope and Rationale
11
The Market – Sales, Stock and Energy
12
Projected Sales of all ESWH – AU/NZ
Figure 2: Forecast sales of electric storage water heaters in Australia and New
Current regulatory settings
Zealand
300,000
250,000
Annual Sales
200,000
Electric Storage: Aust
Solar-Electric: Aust
150,000
Heat Pump: Aust
Electric Storage: NZ
Solar-Electric: NZ
Heat Pump: NZ
100,000
50,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
13
Projected Stock of all ESWH – AU/NZ
Figure 3: Forecast stock of electric storage water heaters in Australia and New
Current regulatory settings
Zealand
5,000,000
4,500,000
4,000,000
Installed Stock
3,500,000
3,000,000
Solar-Electric: Aust
Heat Pump: Aust
2,500,000
Electric: Aust
Solar-Electric: NZ
2,000,000
Heat Pump: NZ
Electric: NZ
1,500,000
1,000,000
500,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
14
NZ Projected Sales
Figure 20: Forecast sales of electric storage water heaters in New Zealand by
technology
NZ Sales of ESWH
60,000
50,000
Annual Sales
40,000
Solar-Electric: NZ
30,000
Heat Pump: NZ
Electric Storage: NZ
20,000
10,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
15
NZ Projected Stock
Figure 21: Forecast stock of storage water heaters in New Zealand by
NZ ESWH Stock
technology
1,400,000
1,200,000
Installed Stock
1,000,000
800,000
Electric Storage: NZ
Solar-Electric: NZ
600,000
Heat Pump: NZ
400,000
200,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
16
Energy Consumption of Water heaters
Figure 4: Total annual energy consumption of all electric storage water heaters
Current regulatory settings
16,000
14,000
Energy Use (GWh p.a.)
12,000
10,000
8,000
Australia
New Zealand
6,000
4,000
2,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
17
Greenhouse Emissions of all ESWH –
AU/NZ
Figure 5: Annual greenhouse gas emissions of electric storage water
heaters by technology
Current regulatory settings
12,000
Greenhouse Emissions (kt CO2-e p.a.)
10,000
8,000
Solar-Electric: Aust
Heat Pump: Aust
6,000
Electric: Aust
Solar-Electric: NZ
Heat Pump: NZ
Electric: NZ
4,000
2,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Year
The Market – Sales, Stock and Energy
18
Standards and Requirements
19
Testing Standards
• Current AS/NZS 4692.1
– Electric water heaters- Part 1: Energy,
consumption, performance and general
requirements
• Legacy
– AS 1056 or AS 1361 in Australia
– NZS 4602 or NZS 4606.1 in NZ
Standards and Requirements
20
Current MEPS and Other Related
Standards
• Minimum Energy Performance Standards
(MEPS) for AU and NZ is AS/NZS
4692.2:2005
– Electric water heaters Part 2: Minimum Energy
Performance Standard (MEPS) requirements and
energy labelling
• Solar and Heat Pump
– AS 4234 Solar water heaters—Domestic and
heat pump—Calculation of energy consumption
– AS/NZS 5125 Heat Pump Water Heaters
Standards and Requirements
21
MEPS Exclusions
• SWHs and HPWHs are provided an
exclusion from the AU/NZ MEPS standard
(AS/NZS 4692.2) if
• electric-resistive heating provides less than 50% of
the energy supplied in a typical year (e.g., heat
pump and solar water heaters) when simulated to
AS 4234 under Climate Zone 3 with an energy
delivery of 22.5 MJ/day for an electric boosting
heating unit and energization profile specified by
the manufacturer
Standards and Requirements
22
Difference in MEPS Basis and Levels
• Multiple tables in AS/NZ 4692.2 depends on
– In AU, standard used to measure and rated hot
water delivery
– In NZ, standard used to measure and nominal
tank capacity
• Comparison of MEPS levels between AU/NZ
– AU MEPS levels vs delivery have been converted
to equivalent capacity; based on ratios of capacity
to delivery for registered units grouped by MEPS
‘step’.
Standards and Requirements
23
Comparison of MEPS – AU to NZ
Figure 6: Australian & New Zealand Minimum Energy Performance Standards levels
and registered water
heaters
losses:
unvented
mains
pressure water heaters
Unvented
WH - heat
Heat Loss
to ASNZS
4692.1 Equiv
(TPR Allowance)
4.5
4
3.5
Heat Loss (kWh/24 hr)
3
2.5
Current AU MEPS (Table A1)
Current NZ MEPS (Table A5)
2
Models AU
Models NZ
1.5
1
0.5
0
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Standards and Requirements
24
Compliance and Comparative Testing
• E3 committee tested 14 Australian and five
NZ registered ESWHs
– Most Australian tanks meet the MEPS
– Three NZ tanks had comparable heat loss
levels to the Australian ESWHs
• Further testing is being carried out to
validate results
Standards and Requirements
25
International ESWH MEPS
• Both USA and EU are strengthening the
MEPS requirements for water heaters
– USA – effectively banning ESWH over 200 L
from 2015
– European Commission – efficiency
requirements from 2015, stringent heat loss
from 2017
• Australia and New Zealand committed to
following worlds best regulatory practice
Standards and Requirements
26
Problems and Objectives
27
Market Failures
• Split incentives
– Builder/owner, plumber/owner,
landlord/tenant
• Information failures
– Operating costs and payback
– Consumer behaviour
– Magnitude of these failures is discussed in RIS
Problems and Objectives
28
Regulatory Shortcomings (1)
• Usage of multiple test standards, different
basis for MEPS (AU/NZ), information
provide (delivery and capacity)
– Difficult to compare and ensure compliance
– MEPS ‘steps’ (17 AU vs 37 NZ)
– Potentially reducing consumer choice and
innovation
• Harmonisation of MEPS levels may not be
possible at this stage
– non HCFC insulation vs HCFC
Problems and Objectives
29
Regulatory Shortcomings (2)
• Heat loss MEPS for SWHs and HPWHs
– Exclusions based on modelled system results
– SWHs and HPWHs may operate less
effectively than modelled
– Non-validation of claims
– E3 Tested 10 models
• All recorded lower measured vs claimed efficiency
• Two models recorded Es < 50%
– Compliance loop-holes
• Solar ready and AS/NZS 4234 claims
Problems and Objectives
30
SWH and HPWH Heat Loss Test Results
Figure 11: Test results of heat losses for HPWH and solar electric boosted
water heaters
Test results for Solar & HPWH
4.5
4
3.5
Heat Loss (kWh/24 hr)
3
2.5
Current AU MEPS (Table A1)
2
Solar Electric Water Heater
Heat Pump Water Heater
1.5
1
0.5
0
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
Nominal Capacity (L)
Problems and Objectives
31
SWH and HPWH Heat Loss Declared
Values
Figure 10: Declared heat losses for solar electric and heat pump water heaters
and Heat
Pump Water Heaters
by storage volume; currentSolar
models
Australia
6
5
Heat Loss (kWh/24 hr)
4
Air Source Heat Pump
3
Solar Electic - Pumped
Solar Electric - Thermosyphon
Current AU MEPS (Table A1)
Current NZ MEPS (Table A5)
2
1
0
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Problems and Objectives
32
Objectives of Government Action
1. To streamline regulations and at the same
time increase their effectiveness
2. To save consumers money by improving
the energy efficiency
Policy options considered:
– Improve regulatory consistency
– Improve regulatory effectiveness
– Deliver strong net-benefits through
addressing market failures
Problems and Objectives
33
Policy Options and Impacts
34
Proposals Summary
Measure
Streamlining existing regulations
Strengthening Australian MEPS
Scheduling additional MEPS review
All ESWHs to be treated consistently
Appliance labelling
Proposal
1 2 3 4 5
  
 



Policy Options and Impacts
35
Business-As-Usual (BAU):
• Existing MEPS requirements, standards
and definitions to continue to apply (with
the period 2013-2033 modelled). The
majority of conventional ESWHs would
still be required to meet established heat
loss requirements.
Policy Options and Impacts
36
Proposal 1: Streamlining Existing
Regulations:
• Remove regulatory overlap by moving to a
single (existing) test standard
• Align the Australian and New Zealand
MEPS basis
• Mitigate against MEPS loopholes
• Enable compliance-checking of existing
HPWH and SWH MEPS and mitigate
against loopholes
Policy Options and Impacts
37
Removal of Australian ESWH sizing
constraints
Figure 12: Example smoothed MEPS for Australia and heat losses of registered
Smoothed AU Line - TPR
Australian models
4.50
4.00
3.50
Heat Loss (kWh/24 hr)
3.00
2.50
Models Registered
AS/NZS AU MEPS, Table A1
2.00
Proposed Smooth AU MEPS
1.50
1.00
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 ℎ𝑒𝑎𝑡 𝑙𝑜𝑠𝑠 ≤ 0.4 + 0.19 × 𝐿0.44
0.50
0.00
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Policy Options and Impacts
38
Removal of NZ ESWH sizing constraints
Figure 13: Example smoothed MEPS for New Zealand and heat losses of
registered New Zealand models NZ Smoothed MEPS
4.50
4.00
3.50
Heat Loss (kWh/24hr)
3.00
2.50
Models Registered
Current NZ MEPS (Table A5)
2.00
Proposed Smooth NZ MEPS
1.50
For tanks with nominal capacity less than or equal to 90 litres
Maximum heat loss ≤ (0.0084 × V + 0.40)/1.011 +0.06; and
For tanks with nominal capacity greater than 90 litres
Maximum heat loss ≤ (0.0048 × V + 0.72)/1.011 +0.06
1.00
0.50
0.00
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Policy Options and Impacts
39
SWHs and HPWHs Subject to
Compliance
Figure 14: Proposed reduced heat loss MEPS for solar electric and heat pump
Heat Pump
Water Heaters
water heaters for AustraliaSolar
andand
current
models
6
5
Heat Loss (kWh/24 hr)
4
Air Source Heat Pump
3
Solar Electic - Pumped
Solar Electric - Thermosiphon
Current AU MEPS (Table A1)
Proposed HPWH/Solar AU MEPS
2
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 ℎ𝑒𝑎𝑡 𝑙𝑜𝑠𝑠 ≤ 0.42 + 0.39 × 𝐿0.35
1
0
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Policy Options and Impacts
40
Proposal 2: Streamlining Regulations &
Strengthening Australian MEPS:
• Implement Proposal 1: Streamlining
existing regulations; and
• Strengthen the Australian MEPS
– Not equivalent to NZ MEPS (as Product
Profile suggested)
– Next chart shows why MEPS works
Policy Options and Impacts
41
Example that MEPS Drives Improvements
Figure 8: New Zealand sales weighted average heat loss trends for conventional
Sales Weighted Heat Loss (per unit per day)
ESWHs
2.20
2.00
1.80
Heat loss (kWh/24hr)
>180 litre
1.60
180 litre
under 180 litre
1.40
1.20
1.00
2000
2001
2002
2004
2005
2006
2007
2008
2009
2010
2011
2012
Policy Options and Impacts
42
Example of Proposal 2: Strengthening
Australian MEPS
Figure 15: Proposed new heat loss MEPS for conventional storage electric
water heaters for
Australia
current
models
Unvented
WH - and
Heat Loss
to ASNZS
4692.1 Equiv (TPR Allowance)
4.5
4
3.5
Heat Loss (kWh/24 hr)
3
2.5
AS/NZS AU MEPS, Table A1
AS/NZS NZ MEPS, Table A5
2
Models AU
Proposed New AU MEPS
1.5
𝑀𝑎𝑥𝑖𝑚𝑢𝑚 ℎ𝑒𝑎𝑡 𝑙𝑜𝑠𝑠 ≤ 0.42 + 0.16 × 𝐿0.45
1
0.5
0
0
100
200
300
400
500
600
700
800
Nominal Capacity (L)
Policy Options and Impacts
43
Proposal 3: Proposal 2 & Scheduling
Additional MEPS Review
• Implement Proposal 2; and
• Scheduling Additional MEPS review
– Conduct a market review of average efficiency
levels in 2016, with view to harmonising MEPS
levels
– The review will enable E3 to vary each nation’s
MEPS arrangements by up to 10% with the goal of
full harmonisation of MEPS levels by 2017
– A 10% strengthening modelled – actual impact
will differ
– Only apply to conventional ESWH
Policy Options and Impacts
44
Proposal 4: Streamlining regulations and
all ESWHs to be treated consistently:
• Implement Proposal 1; and
• Fully close compliance loopholes and
improve heat loss characteristics of SWH
and HPWH by subjecting all ESWH to the
same MEPS requirements
– Would mitigate the market failure associated
with inconsistent information on heat loss
– But likely to shift sales to conventional ESWH
at expense of SWH and HPWH
Policy Options and Impacts
45
Proposal 5: Appliance Labelling
• Investigate an energy rating label
framework to apply to all water heaters
(not just ESWHs) which provides both
energy use and sizing information.
• Consistency with existing international
labelling explored as a priority
• E3 has commenced a project to explore
water heater appliance energy labels in
general
Policy Options and Impacts
46
Impact Analysis – Benefits and Costs
Approach
• Government benefits and costs
– Costs of preparing RIS, managing and preparing
regulatory changes, gazetting any changes, etc.
– Costs of check testing, administration already incurred and
not included
• Business benefits and costs
– Costs of compliance (where additional)
– Costs of redesign and manufacture increase product costs
• Consumer benefits and costs
– Costs of more efficient product (passed on by supplier)
– Benefits of reduction in water heating costs
Policy Options and Impacts
47
Proposal 2: CBA Impact – Australia
• Main assumptions
• Increase in product costs is 10% for all updated
models (~50% of market)
– $20 for a small EWSH, $30 Med, $40 large
• Average energy savings per ESWH is estimated to
be $10 p.a
Table 5: Proposal 2 Cost Benefit Analysis – Australia – 20 year period (various discount rates)
Total Australia to 2033
Total Costs $M
Total Benefits $M
Net Benefits $M
Benefit Cost Ratio
NPV Low (3%)
$26.9
$462.9
$436.1
17.2
NPV Med (7%)
$20.7
$244.9
$224.2
11.8
NPV High (10%)
$17.3
$160.1
$142.9
9.3
Policy Options and Impacts
48
Proposal 3: CBA Impact – Australia & NZ
• Main assumptions
• Increase in product costs is 10% for all updated
models (~100% of market)
– $40 for a small EWSH, $60 Med, $80 large
• Average energy savings per ESWH is estimated to
be $34 p.a
Table 8: Proposal 3 Cost Benefit Analysis – Australia + NZ – 20 year period (various discount rates)
Total Australia to 2033
Total Costs $M
Total Benefits $M
Net Benefits $M
Benefit Cost Ratio
NPV Med (7%) AUD
$44.3
$497.9
$453.6
11.2
NPV Med (5%) NZD
$9.6
$78.0
$68.4
8.2
Policy Options and Impacts
49
Initial Conclusions
• Revised MEPS options combined with appliance
labelling project is currently considered the most
effective approach to meet all the stated objectives
– Proposal 3 – (Proposal 2 & Scheduling Additional MEPS Review)
is considered the most effective option but is based on a future
market review
– Proposal 2 – (Streamlining Regulations & Strengthening
Australian MEPS ) could be considered as it appears to provide
greater certainty
• Proposal 5, an appliance labelling project, is
recommended to decision makers as it will assist in
addressing information failures
50
Providing a submission
• Email energyrating@industry.gov.au by 14
February – NOTE CHANGE of EMAIL
• No format or length requirements
• Responding to the supplied questions is helpful
• If you disagree with an element, explaining why
will help us to better understand your position
• Alternative suggestions/comments are welcome
51