Should North Carolina require more efficient water heaters in homes? A cost-benefit analysis

Abstract

In 2015, water heaters were the second largest end-user of residential energy. Heat pump (HP) water heaters are several times more efficient than the electric resistance (ER) water heaters common in homes. Currently, North Carolina only requires electric water heaters with tanks larger than 55 gallons to be HP water heaters in new homes, thus allowing inefficient ER water heaters in smaller residences. We considered a hypothetical change to North Carolina's building code requiring HP water heaters in all new residential units constructed in 2018. Using housing data from the US Census Bureau, along with electricity rates and emissions factors from the US Energy Information Administration, we quantified changes in costs expected from tightened efficiency requirements. We estimate that requiring HP water heaters in all new residential construction incurs a one-time statewide cost of $29.5 million, but leads to a total 10-year savings of $108.7 million for residents, as well as 10-year reductions in carbon dioxide emissions of 441,000 metric tons. When rebates from electric utilities are included, total 10-year statewide savings increase to $125.3 million. Our results show that economic and environmental benefits can be realized through changes to state building codes, thus obviating the need for legislative action.