Water heating requires a large amount of energy, both in residential and commercial applications. In fact, water heaters are the second highest source of energy usage in the home, often making up as much as 30% of a household’s energy cost.

In an effort to further reduce energy consumption and operating costs, new Department of Energy (DOE) efficiency standards for commercial and residential water heaters are expected to take effect in the coming years.

For residential products, the National Appliance Energy Conservation Act (NAECA) is proposing updated efficiency standards scheduled to go into place by May 6, 2029. The new standards, or NAECA4, will primarily affect electric storage water heaters, specifically those with capacities greater than 35 gallons, which will require heat pump technology. Slight efficiency increases will be required to gas-fired storage water heaters, as well. According to DOE, the standards are expected to save American households about $7.6 billion per year on their energy and water bills.

The new standards for commercial storage water heaters will move all gas-fired products to a high-efficiency (condensing) level, and manufacturers would be precluded from selling non-condensing technology. Electric storage water heaters will see an increase in stand-by loss requirements.

This standard is set to go into effect beginning Oct. 6, 2026. While the commercial storage water heating market has been steadily trending toward condensing gas water heaters over the last five years, DOE had not raised the standards in more than 20 years. Though the industry was anticipating these changes, it is also in a dialogue with the current administration on its views of the new standards. These updated standards will present new challenges and opportunities in the market. A. O. Smith has been manufacturing condensing storage water heaters for more than 20 years and is prepared for the transition.

Expertise in condensing water heating technology

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A. O. Smith has an extensive history as a leading producer of commercial condensing water heating technology. A. O. Smith’s Cyclone® family of commercial condensing water heaters was first launched in 1996. A. O. Smith’s in-depth knowledge of this technology puts the company in a position to provide expertise and guidance throughout the transition period.

One of the most important things manufacturers can do to support customers right now is to ensure there are national and regional distribution points stocked with commercial condensing products across the country. This will allow distributors and contractors around the U.S. to have access to the products they need to make this transition go as smoothly as possible.

Strong growth forecast for heat pump water heaters

In addition to condensing water heaters, heat pump water heaters (HPWHs) have become an increasingly popular solution for installations looking to improve operational efficiencies and reduce greenhouse gas emissions. HPWHs use heat in the surrounding air to heat water. Like air conditioners in reverse, heat is pulled into the storage tank, helping cool and dehumidify the room in the process. This technology can play an important role in applications where highly efficient, all electric water heating is desired.

Customers seek information and updates

It’s important for manufacturers to be a go-to source for relevant information on changing efficiency standards and product innovations. Right now, A. O. Smith is focused on educating customers on the logistics and specifics of the transition. We want to ensure customers are prepared and equipped with the knowledge they need to make this a smooth transition. As A. O. Smith continues to introduce new technologies, we are dedicated to educating customers on these innovations. Through A. O. Smith University, representatives and contractors can receive virtual and in-person training on a variety of products and technologies.

Additionally, A. O. Smith has created a page specific to the DOE changes to educate our customers and provide real-time updates to the DOE regulations and our products.