A joint initiative of Australian, State and Territory and New Zealand Governments. Electric Storage Water Heaters: Consultation Regulation Impact Statement

A joint initiative of Australian, State and Territory and New Zealand Governments.

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, EnergyConsultOn behalf of the E3 Committee

• 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

Contents of Presentation

2

Introduction

3

• 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

E3 Overview

4

• 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 requiredIntroduction

The consultation process and next steps

5

Introduction

The consultation process and next steps

Submissions received

E3 makes recommendation(s)

Ministers consider

Changes to Standards

Implementation and compliance

Post implementation review

Project cancelled Minor changes Other / Direction change

Submissions

6

RIS – Scope and Rationale

7

• 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


Why electric storage water heaters?

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 Rationale9

• 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 pre-heat systems


Scope

10

• Ensuring regulations remain relevant and effective– Regulatory consistency– Regulatory effectiveness – Net-benefits

• Current options could save almost half a billion dollars over 10 years


Reason for Review

11

The Market – Sales, Stock and Energy

12

0

50,000

100,000

150,000

200,000

250,000

300,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Annu

al S

ales

Year

Current regulatory settings

Electric Storage: Aust

Solar-Electric: Aust

Heat Pump: Aust

Electric Storage: NZ

Solar-Electric: NZ

Heat Pump: NZ


Projected Sales of all ESWH – AU/NZ

Figure 2: Forecast sales of electric storage water heaters in Australia and New Zealand

13

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Inst

alle

d St

ock

Year



Heat Pump: Aust

Electric: Aust

Solar-Electric: NZ

Heat Pump: NZ

Electric: NZ


Projected Stock of all ESWH – AU/NZ

Figure 3: Forecast stock of electric storage water heaters in Australia and New Zealand

14

0

10,000

20,000

30,000

40,000

50,000

60,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Annu

al S

ales

Year

NZ Sales of ESWH

Solar-Electric: NZ

Heat Pump: NZ



NZ Projected Sales

Figure 20: Forecast sales of electric storage water heaters in New Zealand by technology

15

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Inst

alle

d St

ock

Year

NZ ESWH Stock


Solar-Electric: NZ

Heat Pump: NZ


NZ Projected Stock

Figure 21: Forecast stock of storage water heaters in New Zealand by technology

16

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Ener

gy U

se (G

Wh

p.a.

)

Year


Australia

New Zealand


Energy Consumption of Water heaters

Figure 4: Total annual energy consumption of all electric storage water heaters

17

0

2,000

4,000

6,000

8,000

10,000

12,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Gre

enho

use

Emis

sion

s (k

t CO

2-e

p.a.

)

Year



Heat Pump: Aust

Electric: Aust

Solar-Electric: NZ

Heat Pump: NZ

Electric: NZ


Greenhouse Emissions of all ESWH – AU/NZ

Figure 5: Annual greenhouse gas emissions of electric storage water heaters by technology

18

Standards and Requirements

19

• 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


Testing Standards

20

• 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


Current MEPS and Other Related Standards

21

• 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


MEPS Exclusions

22

• 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’.


Difference in MEPS Basis and Levels

23

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24 h

r)

Nominal Capacity (L)

Unvented WH - Heat Loss to ASNZS 4692.1 Equiv (TPR Allowance)

Current AU MEPS (Table A1)

Current NZ MEPS (Table A5)

Models AU

Models NZ


Comparison of MEPS – AU to NZ

Figure 6: Australian & New Zealand Minimum Energy Performance Standards levels and registered water heaters heat losses: unvented mains pressure water heaters

24

• 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


Compliance and Comparative Testing

25

• 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


International ESWH MEPS

26

Problems and Objectives

27

• Split incentives– Builder/owner, plumber/owner,

landlord/tenant

• Information failures– Operating costs and payback– Consumer behaviour– Magnitude of these failures is discussed

in RIS


Market Failures

28

• 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


Regulatory Shortcomings (1)

29

• 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


Regulatory Shortcomings (2)

30

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

Hea

t Los

s (k

Wh/

24 h

r)


Test results for Solar & HPWH


Solar Electric Water Heater

Heat Pump Water Heater


SWH and HPWH Heat Loss Test Results

Figure 11: Test results of heat losses for HPWH and solar electric boosted water heaters

31

0

1

2

3

4

5

6

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24 h

r)


Solar and Heat Pump Water Heaters

Air Source Heat Pump

Solar Electic - Pumped

Solar Electric - Thermosyphon




SWH and HPWH Heat Loss Declared ValuesFigure 10: Declared heat losses for solar electric and heat pump water heaters by storage volume; current models Australia

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 failures33

Policy Options and Impacts

34

Measure Proposal1 2 3 4 5

Streamlining existing regulations Strengthening Australian MEPS Scheduling additional MEPS review All ESWHs to be treated consistently Appliance labelling


Proposals Summary

35

• 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.


Business-As-Usual (BAU):

36

• 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


Proposal 1: Streamlining Existing Regulations:

37

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24 h

r)


Smoothed AU Line - TPR

Models Registered

AS/NZS AU MEPS, Table A1

Proposed Smooth AU MEPS


Removal of Australian ESWH sizing constraintsFigure 12: Example smoothed MEPS for Australia and heat losses of registered Australian models

𝑀𝑎𝑥𝑖𝑚𝑢𝑚h𝑒𝑎𝑡 𝑙𝑜𝑠𝑠≤0.4+0.19×𝐿0.44

38

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24hr

)


NZ Smoothed MEPS

Models Registered


Proposed Smooth NZ MEPS


Removal of NZ ESWH sizing constraints

Figure 13: Example smoothed MEPS for New Zealand and heat losses of registered New Zealand models

39

0

1

2

3

4

5

6

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24 h

r)


Solar and Heat Pump Water Heaters

Air Source Heat Pump

Solar Electic - Pumped

Solar Electric - Thermosiphon


Proposed HPWH/Solar AU MEPS


SWHs and HPWHs Subject to ComplianceFigure 14: Proposed reduced heat loss MEPS for solar electric and heat pump water heaters for Australia and current models

𝑀𝑎𝑥𝑖𝑚𝑢𝑚 h𝑒𝑎𝑡 𝑙𝑜𝑠𝑠≤0.42+0.39× 𝐿0.35

40

• 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


Proposal 2: Streamlining Regulations & Strengthening Australian MEPS:

41

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2000 2001 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hea

t los

s (kW

h/24

hr)

Sales Weighted Heat Loss (per unit per day)

>180 litre

180 litre

under 180 litre


Example that MEPS Drives Improvements

Figure 8: New Zealand sales weighted average heat loss trends for conventional ESWHs

42

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0 100 200 300 400 500 600 700 800

Hea

t Los

s (k

Wh/

24 h

r)


Unvented WH - Heat Loss to ASNZS 4692.1 Equiv (TPR Allowance)

AS/NZS AU MEPS, Table A1

AS/NZS NZ MEPS, Table A5

Models AU

Proposed New AU MEPS


Example of Proposal 2: Strengthening Australian MEPS Figure 15: Proposed new heat loss MEPS for conventional storage electric water heaters for Australia and current models

𝑀𝑎𝑥𝑖𝑚𝑢𝑚 h𝑒𝑎𝑡 𝑙𝑜𝑠𝑠≤0.42+0.16×𝐿0.45

43

• 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


Proposal 3: Proposal 2 & Scheduling Additional MEPS Review

44

• 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


Proposal 4: Streamlining regulations and all ESWHs to be treated consistently:

45

• 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


Proposal 5: Appliance Labelling

46

• 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


Impact Analysis – Benefits and Costs Approach

47

• 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


Proposal 2: CBA Impact – Australia

Total Australia to 2033 NPV Low (3%) NPV Med (7%) NPV High (10%)Total Costs $M $26.9 $20.7 $17.3

Total Benefits $M $462.9 $244.9 $160.1Net Benefits $M $436.1 $224.2 $142.9

Benefit Cost Ratio 17.2 11.8 9.3

Table 5: Proposal 2 Cost Benefit Analysis – Australia – 20 year period (various discount rates)

48

• 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


Proposal 3: CBA Impact – Australia & NZ

Total Australia to 2033 NPV Med (7%) AUD NPV Med (5%) NZDTotal Costs $M $44.3 $9.6

Total Benefits $M $497.9 $78.0Net Benefits $M $453.6 $68.4

Benefit Cost Ratio 11.2 8.2

Table 8: Proposal 3 Cost Benefit Analysis – Australia + NZ – 20 year period (various discount rates)

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 [email protected] 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

mailto:[email protected]

Documents

A joint initiative of Australian, State and Territory and New Zealand Governments. Electric Storage Water Heaters: Consultation Regulation Impact Statement