This article was originally published in the March/April 1994 issue of Home Energy Magazine. Some formatting inconsistencies may be evident in older archive content.



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Home Energy Magazine Online March/April 1994


Evaluating Low-income Water Heater Fuel Switching



by Patti Witte, Marge Wilder and Martin Kushler

Patti Witte and Marge Wilder are research analysts with the Michigan Public Service Commission in Lansing. Martin Kushler is the supervisor of the commission's evaluation section.


A recent study sheds light on the practical potential of electric-to-gas water heater conversions.


The Michigan Public Service Commission (MPSC) staff was interested in conducting a pilot program to look at the feasibility, cost and energy savings of electric-to-gas water heater conversions. Fortunately, the staff was able to persuade Consumers Power Company (CPCo) to convert 100 water heaters in a sample of high-usage, electric and natural gas households that were participating in the company's Low-Income Weatherization Program. In conducting the evaluation of this pilot effort, we were particularly interested in


  • Talking to the contractors who actually worked on the conversions to get their impressions of the pilot.

  • Analyzing the costs associated with the conversion.

  • Conducting a before-versus-after fuel consumption analysis using the customers' elec- tricity and natural gas usage records.


To evaluate the pilot, we compared four different groups:

The participants were the first 100 eligible customers selected from a prioritized list of CPCo's highest-consuming, dual-fuel, electric-water-heat, Department of Social Services Positive Billing customers. Positive Billing allows for the automatic deduction of a portion of a client's assistance check to pay energy bills. These customers received a water-heater conversion, an energy audit, direct installation of up to eight low-cost measures and cost-effective weatherization measures.

The nonrespondent controls were similar to the participants described above, except they had not initially responded to the program marketing and, thus, received no services. Over time, households dropped out of this group as they began to sign up for and receive program services.

The electric-to-electric controls were also similar to the participants, except they received a high-efficiency electric water- heater replacement instead of a conversion. This group was not originally targeted for the study. We included them after we realized (from the program records) that some participants had received electric water-heater replacements instead of natural gas conversions. There were two possible reasons for this: In some cases, the contractor discovered that a conversion was not technically possible or would not be cost-effective due to the need for extensive structural modifications. In other cases, CPCo had already reached its goal of 100 conversions.

The randomly selected controls were a randomly selected sample of CPCo's residential, dual-fuel, electric water-heating customers (not necessarily low-income) that did not receive any program services.

Talking to the Subcontractors

To get a sense of the feasibility of electric-to-natural gas water heater conversion as a weatherization item, we called the five subcontractors who had converted the bulk of the water heaters in the pilot. When we asked for general impressions of the program, a Saginaw contractor, whose opinion reflected the responses of the others surveyed, said: The program brought us work. I like that. I think the electric-to-gas conversions make everyone win. Best measure possible.

On the other hand, there were some typical logistical problems. For example, several contractors mentioned the difficulty they had had with reaching customers by phone. As a contractor from Flint put it, Getting a hold of the homeowner/resident was a big problem, getting in to scope out the situation, finding out what needed to be done--setting up an appointment in the first place--after that, it was fine. Another contractor described a further problem: The time it takes to get paid is too long. Right now I'm waiting for a big chunk of money. Usually we get half down and half upon completion.

The mechanical problems also varied. These included needing to change the location of the water heater (which often involved extending water lines, special venting, and so on), working with old plumbing systems, and solving unusual problems in mobile homes. In general, the subcontractors noted that these problems were not unusual for conversions of this type. When asked if they had suggestions for improving the program, the contractors said: subcontractor payments for work completed should be processed more quickly; the auditors who are recommending the conversions should be well trained; building envelopes should be made more efficient; the implementation contractor should act as the general contractor rather than having another contractor hire the subcontractors and manage the work; and customers should clean the area around their water heaters prior to the subcontractor's arrival. In many cases, contractors had trouble getting to the water heaters. If these houses are cleaned up, we could probably do a little nicer job, said one contractor.

Conversion Costs

One important goal of the evaluation was to examine the costs associated with the electric-to-natural gas water-heater conversions (see Table 1). The basic natural gas water heater package cost was set at $475. This price included a 40-gallon gas water heater with an energy factor (EF) of 0.62 or above, a permit, and basic material and labor. The average base cost for the electric water-heater replacement was approximately $515 (based on a 52-gallon electric water heater with an energy factor of 0.95). Average total actual job costs for the conversion group and the electric-to- electric group were $630 and $554, respectively. (Neither cost reflects any program administration costs.)

According to program service records, the electric water heaters that were converted or replaced had no added insulation blankets, and were between 35 and 55 gallons, more than six years old, and located in conditioned areas.

Energy Savings

To assess the energy-savings impact of the water-heater conversions, we compared the before- and after-program electricity and natural gas consumption records of the four groups mentioned above. We looked at three different time periods: summer (July and/or August '90 versus '91), winter (February '91 versus '92) and spring (April and/or May '91 versus '92). We screened for bad data and eliminated cases where the resident had moved between the pre- and post- time periods.

In general, the participants, as expected, demonstrated a significant reduction in their electric usage and a significant increase in their natural gas usage for each matching time period. The before and after consumption comparisons for the other three groups, for the most part, were not significant (see Table 2). Table 3 shows the net changes in fuel consumption for the participants, compared to the other three groups.

Because the samples in this study were changing over time (some of the nonrespondents began to participate in the program, and the high-efficiency electric water heater replacements were included later in the study), we felt that it would be most useful to examine the cost-effectiveness of the program by constructing a typical water heater fuel-switch situation (see Table 4). From the range of net changes in Table 3, we assumed a decrease in electric usage of 16 kWh per day (5,840 kWh per year) and an increase in natural gas usage of .6 ccf per day (219 ccf per year). Based on current rates of $.068 per kWh and $.41 per ccf, we estimated that the water heater conversion would save $307 per year. With a direct cost of $630, the conversion would have a simple payback of just over two years.

Estimating cost-effectiveness to the utility of water heater conversions as a resource option was beyond the scope of the study. (For example, there was no ability to measure kW demand of the water heaters in this study.) However, the results of this pilot could provide some useful input into planning efforts of those considering such a resource option (for instance the estimates of kWh savings, ccf increases, and the costs to complete the conversions). Looked at simply on the basis of kWh savings (assuming an electric utility just paid the total cost of the conversion and left the subsequent natural gas payments up to the resident and the gas utility), the cost of conserved energy (CCE) to the electric utility would be approximately $.012 per kWh (assuming a 15-year measure life and a 7% discount rate).

In summary, we realize that our study had two important caveats. First, the results are based on small samples in a far-from-ideal study design. Second, the study was conducted on low-income customers with relatively high usage so generalization to other populations is uncertain. Nevertheless, the pilot provides some interesting and important results. The pilot


  • Demonstrates that the conversions could be implemented with low-income customers.

  • Identified many of the mechanical and structural challenges involved with the conversions.

  • Indicated an average direct cost of $630 per participant.

  • Estimated annual electricity savings of 5,840 kWh and natural gas increases of just under 22 Mcf.

  • Estimated net annual bill savings of just over $300.

  • Estimated a 2.05-year payback.

  • Found no detectable electricity savings for the replacement high-efficiency electric water heaters.


Although the limitations of this study make its specific results illustrative rather than definitive, the study does help demonstrate the practical potential of electric-to-natural gas water-heater conversions. For now, we'll leave to others the thorny political and regulatory issues regarding inter-utility competition and allocation of conversion costs between the electric and gas utilities.


1. Krause, Rosenfeld, Levine, Brown, Connell, DuPont, Greely, Meal, Meier, Mills, Nordman, Analysis of Michigan's Demand-Side Electricity Resources in the Residential Sector, Volume I. Berkeley, CA: Applied Science Division, Lawrence Berkeley Laboratory, February 1987.

2. Raab, J., and M. Schweitzer. Public Involvement in Integrated Resource Planning: A Study of Demand-Side Management Collaboratives. Oak Ridge, TN: Oak Ridge National Laboratory, February, 1992.


Table 1. Cost of the Individual Components of the Water Heater Conversions/Replacements


Participants Electric-to- Electric _________________________________________________________ Component %Homes Average Cost % Homes Average Cost ________________________________________________________________________________________ Water heater package price 100%(n=62) $ 475 100%(n=19) $ 515 Additional costs -- Mobile home specialty tank 10%(n=6) $150 0%(n=0) - Gasline extension 53%(n=33) $64 0%(n=0) - Chimney work 45%(n=28) $51 0%(n=0) - Water piping added 31%(n=19 ) $112 0%(n=0) - Disconnect wiring 45%(n=28) $20 0%(n=0) - Disconnect water heater 2%(n= 1) $75 0%(n=0) - Zoning stipend 16%(n=10) $50 37%(n=7) $ 52 Conversion- related repairs 15%(n= 9) $213 11%(n=2) $ 193 ________________________________________________________________________________________ Overall Total $630 $ 554 ________________________________________________________________________________________ Note: These average costs are based only on the cost data of those homes that received that component. Water heater package price includes tank, permit, and typical material and labor costs associated with the installation of a water heater. Some contractors charged additional fees to complete the various components whereas others included the component costs in the base package price. Many of the mobile homes in the study received a water heater which met special mobile-home requirements. The cost indicated for a mobile home specialty tank represents the average price differential between the standard high-efficiency water heater installed and the water heater designed for mobile homes. The overall total is the average of total conversion costs for all households in each sample.



Table 2. Pre versus Post Electricity and Natural Gas Consumption Comparison


Average Average Sample Pre Usage Post Usage Change Group Size (kWh/Day) (kWh/day) (kWh/day) Significance1 ________________________________________________________________________________________ ELECTRICITY July/August Participants 39 45.7 30.3 -15.4 significant Random controls 24 29.5 29.8 .3 ns Nonrespondents 20 34.3 37.8 3.5 ns Electric-to-electric2 February Participants 46 52.2 31.9 -20.3 significant Random controls 9 34.1 33.1 -1.0 ns Electric-to-electric 10 48.1 46.9 -1.2 ns April/May Participants 54 40.9 25.4 -15.5 significant Random Controls 42 28.7 29.3 .6 ns Electric-to-electric 17 46.7 47.7 1.0 ns ________________________________________________________________________________________ NATURAL GAS (ccf/day) (ccf/day) (ccf/day) July/August Participants 39 .4 1.1 .7 significant Random Controls 24 .4 .4 .0 ns Nonrespondents 20 .4 .5 .1 ns Electric-to-electric2 February Participants 46 6.3 6.3 .0 ns Random Controls 9 5.9 5.6 -.3 ns Electric-to-Electric 10 5.2 5.1 -.1 ns April/May Participants 54 2.2 3.2 1.0 significant Random Controls 42 1.6 2.1 .5 significant Electric-to-Electric 17 1.9 2.0 .1 ns ________________________________________________________________________________________ 1. Two tailed t-tests with n-1 degrees of freedom. ns = not significant. 2. Only one electric to electric conversion was made prior to July 1991.


Table 3. Net Changes in Electric and Natural Gas Consumption. Participants versus Controls Electric Consumption (kWh/day) July/August February April/May ______________________________________________________________________________ Compared to: Random -15.7 -19.3 -16.1 Nonrespondents -18.9 n/a n/a Electric-to-electric n/a -19.1 -16.5

Natural Gas Consumption (ccf/day) July/August February April/May ______________________________________________________________________________ Compared to: Random .7 .3 .5 Nonrespondents .6 n/a n/a Electric-to-electric n/a .1 .9

Table 4. Net Bill Savings from Conversion

Annual kWh/ccf kWh/ccf Elec/Gas Annual $ Conversion Payback Change Change Cost Change Cost Period ______________________________________________________________________________ Electricity -16 kWh/day -5840 kWh $.068 kWh -$397 Natural Gas +0.6 ccf/day +219 ccf $ .41 ccf +$ 90 Net -$307 $630 2.05 yrs ______________________________________________________________________________ Note: These costs are somewhat understated because they do not include any utility administrative costs. On the other hand, direct costs were calculated on the basis of a small-scale pilot. Presumably, savings could be achieved in a large-scale program through bulk purchases and installation contract negotiations.



Related Articles

Making Low-income housing Affordable: The Northgate Retrofits (Patullo)
The Best Boiler and Water Heating Retrofits (Lobenstein and Hewett)
Controlling Recirculation Loop Heat Losses (Lobenstein)
Remodeling Bathrooms: Let the Energy Savings Flow (Johnston)
Wisconsin's 'Orphan' Solar Program (DeLaune, Bircher, Lane)

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