Mixed response to US push to regulate residential gas boilers [Gas in Transition]

The administration of US President Joe Biden has introduced stricter standards for residential boilers that run on natural gas. This comes as momentum builds across North America at the more local level to phase out natural gas appliances in certain types of buildings altogether. For example, in Canada, the city of Montreal is banning gas connections in smaller new buildings later this year and in larger buildings in 2025. And in the US, New York became the first state to ban the use of gas in most new buildings in 2023, with the restrictions due to be phased in from 2026.

The Biden administration has not made any plans to ban gas hook-ups in new buildings. However, it has moved to tighten the regulations for  gas appliances in a bid to reduce greenhouse gas (GHG) emissions from residential buildings and cut utility bill costs.

Under the new final rule for residential boilers – or furnaces – released in September 2023 and due to take effect in 2028, non-weatherised gas furnaces and those used in mobile homes will be required to have a fuel utilisation efficiency rate of 95%. This is up from a current market standard of 80%.

The Biden administration has claimed that the new standards will reduce household utility costs by $1.5bn/year – or $24.8bn over 30 years – while also resulting in a cut in GHG emissions. But while some have welcomed the tightening of standards, others have pushed back against the move, saying it would effectively phase out non-condensing furnaces and questioning the methodology used by the US Department of Energy (DoE) to establish the cost impact of the new measures.

Pushback

Unsurprisingly, natural gas industry groups are among those pushing back against the new rule. This comes as gas usage continues to divide opinion, with industry groups touting gas’ cleaner credentials compared with other fossil fuels while environmental groups want to phase out its use altogether and replace it with electricity generated from renewable sources.

Indeed, several trade associations have filed a lawsuit against the new furnace efficiency rule. According to a statement from the American Gas Association (AGA), the groups are arguing that the rule fails on the grounds of being technologically feasible, economically justified and aligned with statutory requirements. The groups involved claim that retrofitting homes with furnaces that are compliant with the new regulations will be costly for those households that will be required to do so, and have also questioned the emissions gains involved.

Another of the trade groups involved, the American Public Gas Association (APGA), provided some additional explanation of its position.

“We believe the Department of Energy’s model being used here is flawed and does not accurately reflect the actual marketplace, which then leads to a flawed cost-benefit assessment by DoE,” the APGA’s president and CEO, Dave Schryver, tells NGW. “Specifically, DoE uses random assignments in their modelling, which means that they randomly place furnaces in homes and cities throughout the US and calculate the cost/benefit justification of the rule based on the impact of the rule on homes where furnaces have been randomly placed,” he continues. “DoE's model is based on the core assumption that consumers do not make purchasing decisions based on economic factors. We do not believe that to be the case and the market has proven this to be true.”

Indeed, Schryver points to market penetration of newer, condensing furnaces, saying that it is occurring at a faster pace than previously estimated by the DoE according to its own analysis.

“Simply put, the market is working and consumers that should be purchasing condensing furnaces because it makes economic sense for where they live are already making this decision under the current standards,” he says. “If you take that into account and use economic decision-making in a model, as opposed to a random assignment, we believe the rule cannot be cost-justified given the amount of condensing furnaces that have already been installed,” he adds.

“We believe we have very strong arguments that will be made before the court, and we have made these arguments to Congress as well,” Schryver says. “APGA strongly believes that the proposed rule incentivises fuel switching. As well, should the rule go into effect, it will increase consumer costs and ultimately undermine energy efficiency as the direct use of natural gas is 90% efficient – almost three times the efficiency of electricity.”

Support

Not everyone agrees with the APGA, AGA and other groups involved in the legal challenge, though. Supporters of the Biden administration on this issue include the American Council for an Energy-Efficient Economy (ACEEE). The organisation has welcomed the Biden administration’s update to furnace efficiency standards, which is the first since 2007, and has questioned some of the pushback against it.

“We are not aware of any credible claims to faults in DoE’s analysis in its final standards,” the deputy director of the ACEEE’s Appliance Standards Awareness Project, Joanna Mauer, tells NGW. She adds that her group is “very concerned” about efforts to roll back the new regulations, which also include attempts by Republican lawmakers to challenge the rule in Congress, launched in early 2024.

“If these standards were undone in any manner, it would mean more needless costs and greenhouse gas emissions to operate inefficient furnaces,” Mauer says. “What we’re really talking about is whether we’ll still be installing brand new inefficient furnaces with outdated technology after 2028. That’s what undoing this rule would mean.”

Looking ahead

The two sides’ approaches differ in that supporters want regulations to ensure that all boiler models are efficient, whereas gas industry groups are calling for flexibility to choose furnaces that make the most economic sense depending on region.

“We do believe that the market is working and condensing furnaces are being installed at a significant rate in areas where it makes economic sense,” says Schryver. “Certainly, as technology advances, there may be innovations in atmospheric venting systems and other areas that may reduce some of the costs associated with converting from a non-condensing to a condensing furnace,” he adds.

“In cold weather states, condensing furnaces continue to have a greater share of the marketplace given their efficiency in keeping a home warm while minimising consumer costs,” Schryver continues. “APGA’s concern is that DoE is putting its finger on the scale and not allowing consumers the right to choose the appliance that best fits their needs.”

Other recent developments include the increased uptake of electric heat pumps instead of gas-fired boilers. According to the US Energy Information Administration (EIA), heat pumps accounted for 13% of US residential heating systems in 2020. However, Mauer cautions that heat pumps will remain a minority of heating systems for now.

“DoE’s analysis shows that the vast majority of consumers who would have purchased a gas furnace before the standard will still purchase a gas furnace, while about one in twenty households will choose to switch to a heat pump rather than install a condensing furnace,” she says.

How momentum to replace older boilers with newer models or heat pumps picks up depends on various factors, including costs and political appetite. The Biden administration’s policy also faces further uncertainty owing to the upcoming election. In the US, it appears for now that any decisive shift towards stronger regulation and away from natural gas is more likely to come at the local level.