Monday, November 23, 2009

GE Hybrid Water Heater - Does the Heat Pump Design Really Save Money?

[Editor's Note - Please consider reading all of the visitor comments at  the end of this blog as well. They help provide some interesting insight, both pro and con.]

The old water heater decided to start leaking a few days ago. That was a sure sign that a more serious failure was pending, so we started shopping for a replacement. We live in an all-electric house that happens to be set in an all-electric neighborhood. There's no natural gas service in the area, and none close enough to justify the expense of having service extended to our home. Propane is an option, but the local distributors set their prices driven by visions of insane profits (in an unregulated market) and sadly are known to be less than customer focused. That left us looking for a new electric water heater.

The failing water heater was installed when the house was constructed a little more than ten years ago. In a typical minimize-construction-costs move, the contractor had installed what must have been the cheapest model available. It was a very basic, 50 gallon economy model, so it did well by lasting ten years. If the original Energy Star EnergyGuide label were updated to reflect the latest national average electricity cost of $0.1065 per kilowatt hour (re:, the annual expected operating cost would be about $534. Probably not the worst performer out there, but better models were certainly available.

Our first look for a replacement was at water heaters that use tankless technology. A recently popular choice for many homeowners. This certainly looked like a good idea for a home with natural gas service. However, the electric tankless model has such a high instantaneous demand for energy, that the costs to provide adequate electric service to the unit can be prohibitively expensive. Annual energy consumption data from the manufacturers also demonstrated that annual cost savings for the electric model would only be about $20. The break-even point would be much too long.

Then we learned of the newly introduced "hybrid" water heater from General Electric. Their Model GEH50DNSRSA. GE claims that this new, heat pump water heater design could save consumers $320 per year by using 62 percent less energy than an equivalently sized conventional electric model. We were intrigued.

Upon closer review, the GE Hybrid Water Heater appears to be a high-efficiency electric water heater with a head unit that pre-heats the incoming water using an air-to-water heat exchanger. The heat exchanger relies on the energy content of the ambient air, drawing heat out of the surrounding area. On the surface, this seems like a great idea; use the free heat in the house to pre-heat the water!

The basic concept is sound. Assuming that the incoming water temperature is somewhere between 45 and 55 degrees Fahrenheit (the actual water temperature depends upon your geographic location and water source), warming the water to approximately 65 degrees using the heat from the surrounding air means that you only consume electricity to heat the water 55 degrees instead of 75 degrees (the heat-rise needed to heat the water to 120 degrees). It was fairly obvious to see how GE could claim that this new design could save you 62 percent over a standard electric water heater. In fact their EnergyGuide label boasts that the unit's annual expected operating costs are a mere $198, about 40 percent of the cost to operate a comparably sized conventional electric water heater. That's pretty amazing, and made the engineer in me think about this a little harder.

Now I'm not going to suggest that GE is lying to consumers. The hybrid water heater probably does use 62 percent less electricity than a conventional electric water heater when you compare the energy consumed by the devices alone. However, therein lies the problem. My recollection from thermodynamics class may be a bit cloudy, but I seem to recall that there is no such thing as free energy. The heat that the hybrid model derives from the ambient air is not free. If the heat exchanger used some sort of ground loop or outdoor air source I would be better convinced that there are radical energy savings, but this model is simply going to spew cool air into the room where it is located as part of the heat-exchange process. In most installations, this will require the building's HVAC (heating, ventilating, air conditioning) system to work harder, resulting in more energy consumption. My very conservative guess is that about half of the 62 percent savings will be eaten-up by the need to produce more heat to keep the living area comfortable. The actual energy consumption could really be quite worse, but we will give GE the benefit of the doubt.

With this in mind, if the hybrid water heater was going to really save money, it would have to be available for purchase at a very reasonable price. The GE web site publishes the suggested retail price of the hybrid water heater at $1,699 and notes that availability may be limited. They were right. Our calls to local General Electric appliance dealers, plumbing supply dealers and plumbing services left us with only one purchase option within a 500 mile radius of a very large metropolitan area. The sole dealer who had them available for purchase told us that the new models were selling very quickly and that we better move fast if we wanted one. Their price was $1,800, an additional $100 than the manufacturer's suggested retail price... with installation an extra $300 minimum. Ouch! We found that a comparably-sized, high-efficiency, premium model from Whirlpool, Model 188414, could be purchased for only $438; only 24 percent of the GE dealer's price for the hybrid model.

Even though the Whirpool model is labeled as high efficiency, it doesn't match the published efficiency rating of the GE hybrid. The EnergyGuide for the Whirpool water heater suggests that the unit's annual expected operating costs will be $492. The GE dealer was quick to point out that there were also tax benefits to installing the hybrid model; a 30 percent energy efficiency federal tax rebate on the unit's cost and another 30 percent on the cost of installation. Obviously, between the tax breaks and the lower operating cost, the GE water heater must be the better deal... or is it? Let's do some math.

The all-in cost of the GE Hybrid Water Heater is $2,190 (water heater, 5 percent state tax and $300 installation). After the federal tax rebate ($567 on the water heater and $90 on the installation) the total cost is $1,533.

The all-in cost of the Whirlpool conventional water heater is $760 (water heater, 5 percent state tax and $300 installation).

Using the latest national average electricity cost of $0.1065 per kilowatt hour, the annual expected operating cost of the hybrid model is $198, and $492 for the conventional model; but if you factor-in the presumed extra HVAC operating cost, the hybrid really costs about $345 per year to operate.

Using these values, it would take eight (8) years before the hybrid model begins to save the homeowner any money. EIGHT YEARS. If you have to borrow money (i.e. use a credit card) to purchase the expensive hybrid model or if my conservative estimate of the house's total energy consumption is worse, the break-even point will be even longer.

So, is General Electric being deceitful? Well, I would kindly describe it as creative marketing. By isolating the operating cost to the unit itself, the hybrid model can be truthfully touted as less expensive. However, the savvy homeowner would be wise to carefully consider the impact of the hybrid model on the home's indoor temperature, and thus, the actual operating cost. Eight years, or more, is an awfully long time to wait before any savings occur. It was too long for us; we installed the high-efficiency conventional model and are very pleased.

[Editor's Note: Thank you for the thoughtful comments regarding the possible advantage of the heat exchanger cooling an area for installations located in warmer climates. I won't disagree that this could be a benefit. However, in my location, and for that of many other installations, the cooling effect will result in more energy use. My concern remains with GE's simplistic report of "point-of-use" energy consumption versus "whole house" or "full-fuel cycle" energy consumption. It's just downright misleading.]

[Editor's Note: Thank you to Keith Burkhardt, the Marketing Manager for GE’s Hybrid Water Heater for leaving some comments on my post. I found them interesting, but they do not change my mind. Just because GE relies upon the Department of Energy and Federal Trade Commission standard for publishing appliance efficiencies does not make them "right". The fact is, the Energy Star yellow labels are deceitful as they are for the appliance alone and do not take into account the full-fuel cycle impact, nor do they take into account the whole-house energy impact of the appliance. This matter is currently being debated within the energy industry as the comparison is made between appliances fueled by electricity versus natural gas (i.e. Natural gas is far more efficient when you factor-in the losses associated with generating and distributing electricity). I stand by my comments that in the instance of my installation of a water heater in the Mid-Atlantic United States, the GE Hybrid Water Heater would not provide the energy savings that are exclaimed by General Electric.]