There are nine million water heaters sold in the U.S. each year, more or less, definitely less this year. Around 95% of them are conventional tank-type water heaters. Builder models, Home Depot models, gas, electric, it doesn't matter; it's tough to make a buck on any of them.
The Mr. Water Heater franchise (see Mr. Waterheater Promotes Conservation) has developed a system that maintains that, based on population, x number of water heaters are going to fail every year, and you can grab more than your share of those replacements, even more than the home centers.
Still, trying to make a living off replacing plain vanilla water heaters isn't easy, even if (especially if) you're willing to play the installed sales game with the big boxes or Sears or the utilities.
There's a portion of the market, however, about 5% now and maybe 10% in the next five years, that requires genuine plumbing skills — tankless, solar, condensing, heat pump and even geothermal water heating. They are the green technologies that leading edge plumbing contractors can sell based on return on investment and tax credits to customers who won't nickel and dime them.
“Contractors who are on the forefront of technology on new water heating products will have a real opportunity to grow their businesses,” says Bruce Carnevale, vice president of sales and marketing for Bradford White Corp.
Carnevale's take on the direction of the market is that it will move from high input, like tankless, to low input with high storage, such as solar, heat pump and even geothermal water heating. More on that later.
Proponents of each technology have plenty of reasons why theirs is the best way to heat water.
Condensing water heaters
David Chisholm, brand manager, and Jason Rowell, residential product manager, A.O. Smith Corp., maintain that their Vertex power vented condensing water heater that's up to 96% efficient is better than tankless heaters. The Vertex is eligible for federal tax credits.
“A condensing tank-type water heater is the best answer,” Chisholm says. “Tankless is the focus of consumer advertising that is driving that in the marketplace. The perception that tankless is more energy efficient compared with a standard model water heater is correct, but there are more efficient water heaters than tankless on the market. A gas product is measured in terms of thermal efficiency, how efficient is it in terms of taking the flame and putting that heat in the water. Tankless is usually 80%. The Vertex is 96%. We did a test with a standard model water heater, a tankless heater and a Vertex, and ran a shower to see how they would sustain the shower. The temperature of the exhaust of a standard water heater is around 500°F-550°F, a tankless is around 200°F, and the Vertex 90°F-95°F. The same test, measuring the output of water, showed Vertex models can give shower after shower after shower all day long until the cows come home.”
How big can the 90% efficiency market get? Chisholm points to the HVAC industry where 40% of heating sales are 90%-plus AFUE equipment.
Chisholm and Rowell say that they think tankless heaters have been oversold, especially from an energy efficiency standpoint. Chisholm is correct that most tankless heaters are in the 80% efficiency range, except for Navien, which has a model that's an impressive 98% efficient. They also argue that tankless heaters don't have the capacity to supply hot water the way Americans use it by, for example, running the shower and the washing machine at the same time.
Astute tankless marketing
To their credit, marketers of tankless heaters have crafted a simple and compelling message for consumers — no standby losses from heating a tank of water that's not being used most of the day, and an endless supply of hot water. CONTRACTOR has talked with homeowners with no technical background who understand and buy into that marketing message.
Butch Aikens, who's in charge of tankless marketing for Rheem Mfg. Co., notes that tankless heaters qualify for energy efficiency tax credits while most tank-type heaters do not.
(Here's an aside about those tax credits. Aikens says he walked a home and garden show and saw window installers, insulators, air conditioning contractors and only one plumber. All of those contractors are vying for the $1,500 energy efficiency tax credit, so if a homeowner buys new windows, the $1,500 will be used up before you can get to him.)
“Regarding energy ratings, since all uses of energy and heat losses are calculated for each appliance to determine its overall efficiency, it is difficult to offer a direct operating cost comparison when comparing a 100-gal. 199,000 Btuh input tank to a manifold of three tankless units with a variable on-demand input from 19,000 to 199,900 Btuh each,” Aikens says.
“The energy ratings are a good guide to compare the specific energy rating of how one product utilizes its energy compared to another, but this may not have a direct correlation to their performance in the field since there are many other factors that can impact their overall economic performance.”
In addition, Aikens maintains that tankless heaters have longer lives and longer warranties, use less space, save energy and provide unlimited hot water. Consumers can save 50% without changing their habits if they replace an old water heater with a tankless, he says. Tankless heaters are 20%-30% more efficient than a brand-new tank-type heater. Aikens says a utility recorded a 45% energy saving at a health club where Rheem replaced 400-gal. of storage and 800,000 Btuh of capacity with 12 tankless heaters. The space occupied by the tanks was converted to exercise space. Hotels can solve hot water delivery problems, especially if they have converted their showerheads with low flow fittings. All they need to look at is the hotel's instantaneous GPM usage, Aikens says.
While gas tankless heaters get more of the attention, there are also electric models, like the ones made by Florida-based Dolphin Industries. Dolphin has single chamber heaters made for point of use and booster applications and large 133 Amp four chamber heaters that can produce 4-GPM at a 60°F temperature rise.
The units carry a lifetime warranty on the water vessel and five years on the electric, it's certified by everyone, including the State of California, and it's all copper and hardened brass, says Robert Coleman, Dolphin's vice president of sales.
Coleman says he's selling the product nationwide, but he's focusing on areas with a strong hydroelectric presence, like the Tennessee Valley Authority region or the Pacific Northwest. He also says that Dolphin is negotiating with three photovoltaic solar manufacturers for a partnering agreement.
Tankless and mini-storage
Hot water guru Gary Klein, formerly with the California Energy Commission and now an independent consultant, has advocated tankless heaters combined with a small amount of storage and an on-demand recirculating hot water “structured plumbing” system. The advantage of such a system is that the tank can supply hot water draws that are too small to fire the burners on a tankless heater. The small tank and the on-demand recirculation eliminates so-called “cold water sandwich” (which tankless manufacturers say has been overcome with newer controls) and the recirculation eliminates running the water waiting for it to get hot. Klein also advocates insulating all of the hot water piping, a step that's been eliminated as a requirement in the Environmental Protection Agency's latest draft of the WaterSense for Homes standard (see p. 1).
Grand Hall's Eternal Hybrid is just such a combination in one box. Marketing and Product Development Manager Paul Home says the unit can handle four to six simultaneous loads. The Eternal comes in a small unit with a 3.8-gal. tank and a larger unit with a 6.4-gal. tank. Home says both are suitable for heavy residential or light commercial, and up to 16 units can be manifolded together. Home says his product has a minimum flow rate of 7.4-GPM at a 45°F rise. It contains a 70-lb. stainless steel heat exchanger that Home says retains heat between firings. The unit requires a ¾-in. gas line, but it only has a single orifice, so it can fire on gas pressure as low as 3.5-in. The Eternal has a 0.82 energy factor, and it is rated at 86% efficiency. The exhaust is 155°F and is vented with PVC. All of these features come at an expensive $3,500 to $4,000 installed cost.
Some combination of a tankless heater with a small amount of storage can be a good technological solution, but it's vulnerable to a marketing assault by tank makers — if storage is bad, why have a small tank, they say, plus it takes up space that tankless heaters are supposed to save.
Lochinvar makes gas condensing water heaters, and its version is based on its Knight condensing boiler. Continuing with the knight allusion, Lochinvar's water heaters are sold under the Armor and Shield brand names.
“I think the most important thing right now is controls,” says Director of Marketing Stirling Boston. “A lot of manufacturers are giving users an easier way to interface with the product with viable information. For example, on the Shield product and the Armor product there's an LCD display for the user to view in plain English. You can see data points, performance of the unit, things like that. There are no codes involved and no manuals involved to see how the water heater is working. You also have the capability to use a laptop with specialized software to get into the controls.”
The Lochinvar offerings can also be tied into a building automation system to take advantage of features such as a time clock and setback if the water heater is in a space that's not always occupied, such as a school.
Boston says that energy efficiency is the hot button for commercial owners these days. “We have a Web site, http://shield.lochinvar.com, with a payback calculator on the site so that you can compare replacing an existing heater with a high efficiency water heater, it shows the payback and fuel savings,” he says.
Boston also says that modulating condensing water heaters will be one of the next big things for commercial/institutional water heating.
Heat Transfer Products sells the Phoenix modulating condensing water heater with a solar tie-in. HTP President Dave Martin notes, “For us solar is still a growing part of our business. We added flat plate as well as the evacuated tubes that we had last year.”
HTP is packaging solar water heating kits with ½-in. and ¾-in. line sets. The packages are sized to provide around 70% of domestic hot water capacity and are drain back style to handle the excess heat in the collectors in summer. HTP has settled on a Taco VRT Series variable speed pump because it allows the water to flow through the collectors more slowly at a lower ΔT, says Martin, pointing out that on-off pumps need a ΔT of 5°F-7°F or else the pump shuts off.
The HTP water heater starts with solar before it fires the burners. The company has multiple heat exchanger configurations, giving the contractor options on how to use the system for hydronic radiant heat and domestic hot water.
Similarly, Italian hydronic controls maker Caleffi, with U.S. operations headquartered in Milwaukee, has put together a complete solar system in a crate. Mark Olson, general manager at Caleffi North America Inc., notes that they shipped the packages to wholesalers around the country just to make sure that all the components arrived undamaged, especially in less-than-truckload quantities. The box contains two flat plate collectors, the storage tank, controls, circulator, expansion tank and line sets.
Heat pump water heaters used to be a big thing 20 years ago, but they disappeared because they were too expensive to compete with commodity line tank-type water heaters in their day. Heat pump water heaters, however, are making a comeback. Look for an announcement from a major industry supplier by late summer.
At the Kitchen & Bath Industry Show, General Electric was showing a tankless heater, heat pump water heater and a solar system. GE is distributing the products through the same distribution channels that it uses for home appliances. Our sources have told us that sales of the tankless heater, manufactured for GE by a Japanese company, have been a fraction of what had been projected.
It is, nevertheless, alternative technologies like that where Bradford White's Bruce Carnevale sees the water heating market going long term.
“A lot depends on what the government decides to do,” says Carnevale. “There's a huge buzz about solar water heaters now and there seems to be more talk than actual sales, but there's a lot of people investing a lot of money in solar. That's also good for contractors because it's another opportunity for them to differentiate themselves.”
Bradford White has a large selection of solar tanks available, and Carnevale says the company will provide solar system packages in the future. That simple plug-and-play type system makes solar accessible to a larger contractor base and makes them feel comfortable installing the product.
Carnevale predicts a shift away from high input water heating, such as tankless, into low input high storage systems, such as solar, heat pumps and geothermal. If a contractor is installing geothermal for radiant floor heat, it makes sense to tie in DHW, similarly to how it makes sense to tie radiant floor heat into a solar DHW application.
Carnevale says he's seen a shift away from tankless heaters in Australia. He also warns plumbing contractors that they have to seize the water heating market away from interlopers, which has also happened in Australia and some places in Europe. A solar specialist, for example, installs most of the system and the plumber just sets the tank. This is already happening here. At the International Builders Show, Velux displayed their windows, skylights and solar collectors, which they are marketing to roofers. Some well drillers are going beyond digging holes and are installing geothermal systems.
“Contractors need to be careful not to allow other trades to come in and take this opportunity away from them,” Carnevale says.