Does using a water heater as an energy storage device make sense? Well, it’s complicated.

Here’s an  1200 word post for all you folks who can’t get enough energy efficiency information.

 A more accurate title for this might be “Who benefits from using water heaters as energy storage devices, the electric customer or the utility?” After reading-   Q&A: An energy storage solution mayalready be in your basement, I’m adding a post on this, as I’ve had some experience with a water heater program similar to the one discussed in the above link.  So, let’s dive a bit deeper into this issue.

The article opens with- “The much publicized Tesla Powerwall battery offers a way for homeowners with solar panels to store their energy for use at night as well as help utilities manage the grid.

Yet a decidedly less flashy piece of equipment residing in basements and closets of homeowners holds much greater potential as a residential battery – electric water heaters.”  

I’m not sure how to use my water heater to power our farm acreage if we experience a grid outage, but that snarky comment should be one of the few you’ll encounter in this post. The article describes a rural electric cooperatives (GRE) load shifting water heater program. It involves installing electric load controls on water heaters, and heating the water at night, when grid prices are low.

My rural electric coop offers a similar program. They sell subsidized, well insulated water tanks that use resistance heating elements, in return for installing load controls that can shut off the heaters during times of peaking grid prices, and probably recharging at night when they eventually move to “time of day” electric rates. I’m guessing GRE’s program is similar, though I didn’t check to see what type of heaters their distribution coops sell or subsidize, though the Q&A article mentions that “Each water heater absorbs 13 to 14 kilowatt hours (kWh) of energy every night.” That totals about 5110 KWHs annually. That’s typical electric usage for resistance element water heaters. Our farm house had a water heater of this type for about ten years. It was well constructed, we always had plenty of hot water available, but it used lots of electricity, about the same amount as the ones in GRE’s program. The energy tag from our old heater is pictured below.

So, the following info is not a product or retailer endorsement.

After doing some calculations, I passed on participating in my electric provider’s water heater program, and instead, selected this heat pump water heater, purchased at retail instead of the coops subsidized rate. Here’s the math to explain why.  My coop offers an 85 gallon water tank for $400, Energy Factor - .91.  Homedepot lists this water heater for $1,544.99, so my electric provider subsidizes and sells it more than 2/3 below retail. Home depot lists the heat pump model I chose at $2,399.00, energy factor 3.39. I purchased ours at another retailer on sale for about $2000 if memory serves.

  

People’s energy consumption habits vary widely, so I’ll stick to my own usage figures. I have some energy monitoring equipment that makes it fairly easy to determine energy usage. We used our previous tank about 10 years, and it consumed about 14 KWHs per day, or about 5000 KWHs annually.  The heat pump model was installed a couple years ago, and is using about 2 KWHs per day, or about 730 KWHs annually.  

The new heater should last 10 years, so, I estimated an average electric rate of 14 cents per KWH for that period. So far, I’m saving about 4270 KWHs, or just about $600 per year. The electric provider didn’t have our new heater in their program, but they decided to offer a modest rebate in return for an agreement to load control the new heater at their discretion, which they haven’t done yet. A modest federal tax credit was available for heat pump water heaters (now expired, I think).  Our pay off time for the additional cost of my non subsidized heated is 2.7 years. If it was as deeply subsidized as the coops heater, ROI would probably be reached in about 1 year.  

So, it appears the electric utility is distorting the market, making their water heater seem the most attractive choice. If you use this water heater for, say, floor heating a building, my utility further distorts the market by offing a special electric heating rate, forcing other utility customers to help subsidize the program.  It’s kind of amusing then, when utilities try to claim customers who generate their own electricity are receiving a subsidy that’s unfair to customers who don’t generate their own electricity.  Customer Self generators provide a benefit to other ratepayers, but that’s a topic for another post, I think. Many utilities also have no problem awarding large KWH consuming accounts with lower electric rates, another "subsidy" that small KWH using customers must bear. I’m feeling the snarky level rising again, so let’s move on.  

This type of utility program doesn’t meet my criteria for an energy efficiency program. It provides peak energy savings to the utility, increases sales of electricity (certainly not the only utility program that increases KWH sales), and possibly extends the life of old fossil fuel power plants. I was surprised to see at least one enviro group supporting an effort to roll this program out nationwide.

So, let’s tally up.

Water heater program - utility benefits. 

Additional KWH sales for several years

Peak Load savings

Continued use of power plants at risk of becoming stranded assets.

Water heater program - customer results 

Market distortion discourages purchase of a more efficient appliance. Choosing the correct water heater is one of the best opportunities for significant reduction of electric use in the home. As energy efficiency options go, water heaters have an excellent return on investment potential. Our previous water heater accounted for almost 1/3 of our annual electric usage.

Lower up front purchase cost, but several thousand dollars of increased KWH purchase over water heater life span. Money that could be used to help finance a solar array.  

If the home owner does wish to explore backup back up power options ( batteries, generator, etc), having a water heater that uses several thousand watts when running, makes it much more difficult(and costly) to adopt emergency back up power solutions. And, with utility load controls installed, will you be able to use your water heater in emergency back up situations?

usage limited to certain time periods. If the electric customer has a solar array and the utility recharges the water heater at night, while adopting time of day rates... well, you get the picture.   

Final thoughts

Our farm has a solar PV installation, which further complicates this discussion. The Q&A article notes that as more solar PV is connected to the grid, daytime electric usage makes more sense. It certainly does when the customer owns the solar array. It’s time that self-generators are properly compensated for peak load cost savings that they provide to the grid. Yeah, I’m a feed in tariff supporter (There might be a post  comparing feed in tariffs and net metering soon).   

Serious energy wonks will probably guess that I believe that net metering discourages energy efficiency efforts (subject of a future post). More food for thought. Do energy efficiency efforts slow the transition to renewable energy?  And, If you intend to generate your own electricity, it does makes a difference what type of appliances you should choose. Yeah, the utility business is a changin, and it seems like some utilities are going to fight change as hard as they can. The customer is always right, and a lot of customers will want to generate their own electricity.  

Also, resistance heating water tanks do interest me in certain applications. Floor heating in grid tied situations with renewable power. Pellet fired boilers, or solar assistance to keep electric use low. Or used off grid with the same tech. They would be a good choice for certain agriculture and commercial applications.  Sorry if I came off as overly critical of them. The main issue here seems to be monopoly market distortion.

They have their place, but I think most residential locations would be better off making another selection.   

Edit
P.S. Please note in my REC news letter, members are advised to maximize energy efficiency prior to considering solar installations. Hopefully all rural electric cooperatives water heater programs will soon include the most efficient water heaters available...

                                             photo living with energy in Iowa


Edit Oct 2016 

It's nice to see the RECs are now starting to "warm" up to Heat Pump water heaters, though I think the economics might be a little better than the coops are suggesting (REC uses a family of four rating). I haven't found a detailed explanation of the criteria energy star uses for heat pumps yet. 
The print version of the article from touchstone mentions that many RECs  are offering rebates for heat pump water heaters. I followed the recommendation and checked my zip code.  
 

No rebates from my REC, but a modest one from MidAmerican. In fact, no rebates were listed from my REC at all, but 3 pages of rebates were listed by MidAmerican. 

 

While I have no doubt some RECs offer rebates for heat pumps, are the rebate  economics designed to make resistance water heaters the more attractive option, or are resistance and heat pumps discounted by a similar percentage of their retail cost?

Another item to consider, the investor owned utility in my area seems to offer substantially more rebate programs than my cooperative. if that's true for other REC members as well, they might ask their own cooperative why.