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Canada's Energy Efficiency Regulations

Proposed Regulations
Bulletin – March 2007

ecoACTION - Using Less - Living Better.

Gas-Fired Furnaces

Residential gas furnaces are prescribed as regulated products under Canada's Energy Efficiency Regulations (the Regulations). Natural Resources Canada (NRCan) proposes to amend the Regulations and require dealers to comply with more stringent minimum energy performance standards for residential gas furnaces, imported or shipped inter-provincially for sale or lease in Canada and to implement a reporting requirement for the electricity consumption of the furnace fan blower motor.

This proposal is included in Canada's Clean Air Regulatory Agenda and accompanying Notice of Intent as published in the Canada Gazette October 21, 2006.

The purpose of this bulletin is to summarize feedback received from the February 21, 2006 workshop organized by NRCan on condensing gas furnaces and furnace fan electricity consumption, and to provide an update on the proposed amendments to the Regulations.

This bulletin attempts to put the proposed amendment in plain language. The legal text of the amendment will be published in the Canada Gazette, Part I.

Background

Furnace efficiency

For some time NRCan has been assessing the desirability of increasing the stringency of the minimum energy performance standard for residential gas furnaces. Given the nature of the technology, candidate standard levels are basically restricted to the current standard of 78% Annual Fuel Utilization Efficiency (AFUE) or thereabouts and a condensing standard level of 90% or higher. In recent years the gas furnace market has been characterized by an increasing penetration of furnaces with efficiencies above 90%. This has been driven by increasing gas prices and price volatility, utility and government incentive and awareness programs, and better availability and acceptability of high efficiency products.

As well, recently the Government of British Columbia, under its Energy Efficiency Act, implemented a more stringent efficiency standard at the condensing level for gas furnaces installed in residential new construction effective January, 2008. Ontario now requires furnaces to have a minimum efficiency of 90% AFUE for new residential construction through its building code.

Recently NRCan, in light of market changes has revised its original analyses of new gas furnace standards. The revised analysis used updated gas prices, furnace purchase costs and installation costs. From the revised data, NRCan conducted an economic and energy analysis.

From the revised study NRCan drew the following conclusions:

  • Installing condensing furnaces is more economic than standard furnaces in Canada;
  • There are sufficient models available to meet the needs of Canadians;
  • Maintenance costs and service life of condensing furnaces is no different than standard furnaces;
  • Condensing furnaces are readily available and may be installed across the country;
  • The energy savings analysis shows considerable annual gas reductions; and,
  • The net benefit analysis for Canada at the 90% AFUE standard level is positive. A 92% AFUE level provides a greater net benefit to the consumer, as well as a greater reduction in greenhouse gas (GHG) emissions, than 90% AFUE.

Gas furnace electricity consumption

Presently, there is no minimum energy performance standard restricting the electricity consumption of furnace fan blowers. This can represent in excess of 10% of the total energy consumption and in many cases is the largest consumer of electricity in the household.

For this reason NRCan is proposing that dealers must provide information on the electrical consumption of furnace fan blowers installed in the prescribed products. This information will be used to assess electricity consumption of these devices with the possibility of labelling or standards being prescribed at a later date.

Consultation

These proposals have been communicated to stakeholders through various workshops and bilateral meetings throughout the past year.

A collection of the comments raised and NRCan's response follows:

  • Furnace output vs. input: NRCan analysis originally sized the furnaces using the furnace input. Manufacturers suggested that this should be changed to output. NRCan agreed with this comment and has modified the study to reflect this change.
  • Baseline model: The study used a baseline furnace efficiency of 78% AFUE. Although it is the minimum standard, few furnaces with a 78% AFUE are sold today. Manufacturers suggested that NRCan should consider a baseline of 80% AFUE instead of 78% AFUE to better reflect the market. NRCan analyzed both numbers and used a baseline of 80% AFUE efficiency for energy savings analysis and 78% AFUE for cost benefit analysis.
  • Sidewall venting: Stakeholders noted that one builder installs standard furnaces that are sidewall vented. NRCan's review indicated that it is more expensive to install a side-wall vented standard furnace, when compared to a typical furnace installation.

Other issues that were raised by manufacturers such as markups, service life, installation and maintenance costs were not substantiated by further substantive evidence over the past 12 months. A summary of all comments made, including NRCan's responses, is included at the end of this document.

Following the workshop and comment period, NRCan revised the study to analyze the impact of the comments made. Those changes are reflected in the proposal presented below.

Product description

NRCan is proposing that the Regulations apply to gas-fired furnaces intended for installation indoors. For the purposes of the Regulations, a gas furnace means an automatic operating gas-fired central forced air furnace that uses propane or natural gas and has an input rate not exceeding 65.92 kW (225 000 Btu/h). Furnaces for use in a mobile home or a recreational vehicle are not included in the Regulations at this time but will be examined at a later date.

Proposed minimum performance levels

NRCan proposes to increase the minimum performance level, the Annual Fuel Utilization Efficiency (AFUE), for gas-fired furnaces with an input rate not exceeding 65.92 kW (225 000 Btu/h) to 90%. NRCan used a cost-benefit analysis to determine the economic attractiveness of improving the energy efficiency of equipment. The improved efficiency required by these changes to the Regulations is expected to provide positive benefits to Canadians.

With more than 4.6 million homes using gas furnaces, the impact of improving their efficiency has major benefits to Canada in terms of energy conservation; operational cost savings; improved air quality; and, reduced greenhouse gas (GHG) emissions.

A minimum efficiency level of 90% will generate energy savings of about 1 petajoule in its first year of implementation. It will then increase exponentially to more than 21 petajoules annually by 2030. In terms of greenhouse gases, emissions will be reduced by 1.12 megatonnes in 2030, the equivalent of removing 228,000 cars off the road.

The annual savings to consumers who install a 90% AFUE furnace in their new home ranges from $40 to $230. For those who replace their existing standard efficiency furnace with a condensing furnace, the annual savings are between $50 to $260.

Energy performance test procedure

The proposed test method is draft CSA P.2-07, Testing Method for Measuring Annual Fuel Utilization Efficiency of Residential Furnaces and Boilers.

The draft test method standard is available from:

Canadian Standards Association
5060 Spectrum Way, Suite 100
Mississauga ON  L4W 5N6
Tel.: 1 800 463-6727
In Toronto, call (416) 747-4000
Web site or can be purchased online.

Effective date

NRCan proposes that this revised energy efficiency regulation come into effect on December 31, 2009. All gas-fired furnaces that have their manufacturing process completed on or after the specified date, and that are subject to the Regulation, will be required to meet the stated efficiency levels.

NRCan is proposing that the mandatory reporting of the furnace blower electrical consumption come in effect at the same time.

Labelling requirements

There is no label requirement showing the unit's energy efficiency proposed for this amendment.

Verification requirements

There is no change at this time for the verification requirements.

Reporting requirements

Energy efficiency reports

In addition to the current reporting requirements for gas furnaces, the energy efficiency report required for this product will include the following information:

  • Blower motor consumption (BE) in watts, and voltage (V) in volts at heating speed
  • Power burner motor consumption (PE) in watts, and voltage (VPE) in volts
  • Blower motor consumption (BEc) in watts and voltage (Vc) in volts at circulation speed
  • As an alternative to conducting the additional measurements at circulation speed as stated above, a manufacturer may opt to select a default value as follow:
    • Brushless permanent magnet DC type motor: BEc = 0.20 × BE
    • Permanent Split Capacitor (PSC) type motor: BEc = 0.80 × BE.

Importing reports

A dealer who imports these products into Canada must include the following information on the customs release document:

  • Type of product
  • Model number
  • Brand name
  • Name and address of the dealer importing the product
  • Purpose for which the product is being imported (i.e. for sale or lease in Canada without modification; for sale or lease in Canada after modification to comply with energy efficiency standards; or for use as a component in a product being exported from Canada)

Harmonization

The proposed efficiency level harmonizes with regulations in effect in the Province of Ontario and to come in effect for the Province of British Columbia:

  • Under Ontario's building code, all gas furnaces installed in new residential constructions must meet a minimum condensing efficiency level effective January 1, 2007.
  • For British Columbia's building code requirements, all new residential constructions using gas furnaces will require condensing levels starting January 1, 2008.

The additional furnace electrical consumption reporting requirements will not affect the AFUE calculation method or its overall value.

Comments invited

The purpose of this bulletin is to provide stakeholders with a concise interpretation of the proposed amendment, as they apply to residential gas furnaces. The full legal text will be as pre-published in the Canada Gazette Part I, which will amend the official regulations once published in the Canada Gazette Part II. All correspondence should be forwarded to:

Terry Brennan
Office of Energy Efficiency
Natural Resources Canada
580 Booth Street
Ottawa ON K1A 0E4
Tel.: (613) 996-2230
Fax: (613) 944-6365
E-mail
Web site

Workshop on gas furnaces – February 21, 2006

The following table is included to provide more information on the comments and issues raised at the workshop and NRCan's response.

Issue / Comment From NRCan's response
Furnace sizing
Furnace sizes in the study were too big for the house archetypes chosen. B. Bach – Consultant HRAI The furnace sizes were the same as the ones used in the 1999 study. Typical over-sizing factor can range from 25% to over 100%. However, the sizing of the furnace does not affect operational costs or gas consumption, which is based on the house's heat loss value.
Typical over-sizing is between 30% and 50%  
Efficiency level
78-per-cent is too low an efficiency standard to be used for studies. Lennox –Bill Vale 78% AFUE is used as the worse case scenario. NRCan understands that 80% AFUE has the greatest share of the standard furnace market. However, if 78% AFUE furnaces are available to consumers at a lower price, this must be used when calculating the "net cost benefit". The updated analysis considers an 80% AFUE level for the energy conservation calculation to reflect real energy and GHG savings to the environment.
80-per-cent should be the baseline, because 78-per-cent furnaces do not reflect realistic consumer options B. Bach – Consultant HRAI
Type of furnace
The study should broaden the categories beyond annual fuel utilization efficiency (AFUE) ratings to include the different types of furnaces. For example, there are upflow, downflow, and horizontal furnaces. Most furnaces in Canada are upflow. B. Bach – Consultant HRAI Considering only the upflow configuration, which represents 80% of the market, is a realistic method for this analysis.
Condensing furnaces are not available for rooftop units and mobile homes. Are these included in NRCan's analysis. Lennox – B. Vale NRCan's analysis excluded rooftop units. The market for mobile home furnaces is small and will have minimal affect on the analysis.
The analysis properly excludes condensing oil furnaces and condensing weatherized furnaces. To date, the long-term corrosion concerns with condensing oil equipment are significant, and are not widely available. Also, there are no condensing weatherized furnaces available today, mainly due to concern over condensate freezing and disposal in an outdoor ambient environment. Carrier – D. Dempsey At this time, NRCan is focused on gas furnaces, which represents the largest portion of space heating products regulated. NRCan will be looking at other space heating products in the future.
Venting / installation
NRCan's margin analysis for the new construction market was incorrect in which there is a preference to use sidewall venting. B. Bach – Consultant HRAI NRCan was unable to confirm the builder preference for sideway venting.
Cost
The estimate of 10% contractor markup on the furnace is underestimated, and in actuality ranges from 40 to 60% Lennox –Bill Vale Caneta's study is based on market information. The total markup is 57%.
The inclusion of additional costs for a 2 hr fire-proof enclosure for B-vents was questioned. Expense is standard and absorbed within the cost of construction. Lennox –Bill Vale The study includes any costs associated with installing the equipment. Therefore, the 2 hr fire-proof enclosure for new construction was included in the analysis.
The cost of installing B-vents is hidden within installation fees, and therefore should not be counted separately. Lennox –-Bill Vale
For a given model line, there is a cost difference between a 90% AFUE and a 92% AFUE model. Consult the US Department of Energy Residential Furnaces and Boilers ANOPR Technical Support Document. One reason for the higher cost would be the greater heat exchanger surface area necessary for the 92% AFUE furnace. GAMA – D. Knowles The cost difference between a 90% and 92% AFUE gas furnace was reviewed and adjusted accordingly. The installed cost is about $100 greater for 92% AFUE units. Caneta's study provides Canadian data on the cost of installing both standard and condensing furnaces. An increase of $125 was noted to cover installation and material costs related to the venting and condensate.
Fuel switching
Eliminating less expensive gas-burning furnaces would make electric heaters more appealing. Participant at workshop When replacing a standard furnace, the owner is already facing a significant price difference with less costly electric baseboards. Going to a condensing furnace is not relevant as an incentive to consider electric baseboards or heat pumps, especially when the operational cost savings for a condensing furnace are factored.
Fuel switching will encourage heat pumps Participant at workshop
Predict more people will switch to transfer systems Carrier – D. Dempsey
Will new installation of condensing furnaces drive the replacement of gas-fired DHW to electric DHW to avoid B-vent problems?   The replacement of a gas water heater with an electric water heater is unlikely, given that in few cases will the B-vent be oversized and need to be resized. For a vast majority of townhomes, the B-vent is sized appropriately for venting of the water heater if the natural draft furnace is removed from service. For larger homes, if the vent needs to be resized the economics of installing a condensing (sidewall vented) furnace and resizing the B-vent for the remaining gas water heater makes it favourable over the life of the furnace.
Furnace service life
Condensing furnaces are affected by weather. Colder temperatures are harder on condensate lines. Carrier has found that the Canadian winter is 50% harder on condensing furnaces. It tends to be longer and harsher than even the northern American states. Condensing furnaces, particularly the condensate lines themselves, are very sensitive to cold temperatures, and tend to break down more often when exposed to extreme lows. Carrier – D. Dempsey NRCan has not received documented information substantiating this claim. NRCan has no reason to believe that increased run time will reduce the service life of gas furnaces. The Canadian climate actually increases the service life of gas furnaces when compared to the warmer American climate since a colder climate will increase the run time and lower the number of cycles. The number of cycles is much more harmful than run time, given that gas burners are clean and efficient. Various studies substantiate a 20 year furnace average lifetime before replacement.
Cautioned against applying American data to the Canadian market when calculating furnace life spans. Canadian furnaces run 50 per cent longer every year than furnaces in the US, resulting in a shorter lifespan. Carrier – D. Dempsey
Furnace manufacturers find their furnaces last approximately 18 years, not 20. Lennox –Bill Vale  
The average life of a mid-efficiency furnace is 15 years and the average life of a high efficiency furnace is also 15 years. HRAI
People in the US do not have their furnaces serviced annually any more, "only calling the service men when the thing conks out." This also reduces the lifespan of a furnace. GAMA – David Knowles
Gas rates
Gas rates will be going down over the next five years. The US Department of Energy and most other energy information agencies agree. Participant at workshop NRCan's economic analysis forecasted national and regional residential electricity and natural gas prices based on the National Energy Board's publication – Canada's Energy Future 2003 . This is a long term forecast used to evaluate the rates of gas on average for the next 30 years. Also, the US Department of Energy uses the US Energy Information Association's gas forecasts has increased their 2006 long-term gas price forecast.
Price of gas forecast – Enbridge is forecasting lower rates for the last 2 years… rates are still going up! Participant at workshop
Maintenance
There are a number of venting issues associated with condensing furnaces because they are adversely affected by the cold. These furnaces shut down if they are not properly maintained. Charges associated with these shutdowns qualify as service charges, and are not warranty issues. Participant at workshop HRAI confirmed Caneta's findings that there is no cost difference between the maintenance of standard and condensing furnaces.
Condensing furnaces have condensate traps that can become blocked so the furnace will not operate. The cost to clear the drain system is born by the consumer since it is not covered under a standard warranty Carrier – D. Dempsey
Condensing furnaces require significantly more servicing than non-condensing furnaces when exposed to very cold weather.
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Condensing furnace vent systems can ice-up during extended periods of very cold weather. The cost is covered by the consumer since it is not covered under a standard warranty
Carrier – D. Dempsey
The maintenance markup on high efficiency repairs is typically higher than with 80-per-cent furnaces Carrier – D. Dempsey
Market
What is the split between retrofit and new installation? Participant at workshop The study has been updated and it was estimated that 60% of condensing furnaces shipped in Canada are used in retrofit applications while new construction installations account for the remaining 40% of units.
Economic analysis' actual trend of stock replacement – should be increasing, not constant   NRCan used the available data to forecast the trend of stock replacement and has no relevant information to change the calculated trend.
Most manufacturers would not be able to accommodate the mandatory efficiency rating. "We are simply not positioned properly to comply." Lennox –Bill Vale Only one manufacturer supplied information to NRCan regarding its ability to furnish condensing furnaces to the Canadian market by the proposed regulation date of 2008. After reviewing the information, NRCan could not consider their argument to be representative of the industry.
If a regulation for condensing furnaces goes into effect in 2008, the result may be a shortage of product and a short-term rise in prices. The manufacturers require more leadtime to retool their facilities. GAMA – D. Knowles
The target 2008 implementation date for a condensing minimum efficiency standard does not provide manufacturers enough lead time to facilitize for the step-increase in demand. A minimum of three years is required from the final ruling in order to plan and facilitate for the increased demand. Carrier – D. Dempsey
NRCan has neglected to include the impact on Canadian distributors and contractors. It will not only be the manufacturer's profits that are squeezed by a 90% regulation. The impact may be most severe on distributor and contractor's business performance, and no analysis has been provided by NRCan. Lennox –Bill Vale
Social
NRCan could not remove 80-per-cent furnaces from the market without offering a rebate or incentive. "You will really hurt a lot of people, especially lower-income households if you do." Participant at workshop Given the advantages of the proposed standard there is a positive economic benefit.
Financial incentives are needed for those consumers least able to afford the higher-efficiency furnaces. "If there's no financial incentive it will drive the poorer population to look for the cheapest option—they'll resort to using a storage-tank heater instead of a high-efficiency option." Participant at workshop
A US study that said consumers are not interested in any investment where the return exceeds seven years. It will be difficult to convince consumers to wait 20 years to see a return on their furnace investment. GAMA – David Knowles To determine the economic feasibility, NRCan considers the net benefit over the life of energy products.