Empowering Consumer Choices: Analyzing the Impact of the ENERGY STAR Program on the Adoption of High-Efficiency Gas Appliances

The American Gas Association developed the following analysis of the Environmental Protection Agency’s ENERGY STAR program and its effectiveness in promoting higher-efficiency gas appliances. This analysis provides data and context on the current space heating market to support the evaluation of the potential consequences of a recent proposal from the EPA to sunset the ENERGY STAR specification for gas furnaces.

The ENERGY STAR program encourages consumers to select energy-efficient appliances, including natural gas. From 2015 to 2021, the market for ENERGY STAR gas appliances, including furnaces, water heaters, and dryers, increased significantly. Shipments of ENERGY STAR furnaces grew by 123% during this period, with a market share rise from 26% in 2015 to 41% in 2021. Gas dryers and water heaters also experienced substantial growth in market penetration. ENERGY STAR gas tankless water heaters, which have the highest efficiency for gas, out-shipped heat pump water heaters at a pace of six to one.

There is still an opportunity for ENERGY STAR to improve the adoption of higher-efficiency gas appliances. Only 41% of furnace shipments received the label in 2021, increasing from 26% in 2015 with a seven-year average of 31% from 2015 to 2021. Based on reported data from EPA and manufacturer shipment data, there is room for the program to grow, and the label still has not captured a significant portion of the market.

High-efficiency natural gas appliances are often the most cost-effective and lowest emissions option for consumers. Natural gas homes typically consume less energy than homes with high-efficiency electric air source heat pumps. While electric applications can have a higher “site” rated energy efficiency, the full-fuel-cycle energy requirements—the energy used or lost in energy extraction, processing, transportation, conversion, and distribution, including the generation and transmission of electricity—are often lower for natural gas than electric applications, including air-source heat pumps. The energy costs associated with high-efficiency natural gas are also lower. A recent AGA analysis found that an ENERGY STAR-qualifying natural gas furnace energy costs $584 compared to $971 for a qualifying electric air-source heat pump.

There are negative consequences, particularly to lower-income consumers, to removing the ENERGY STAR label from gas furnaces and other gas appliances. Removing the ENERGY STAR label could lead to a decrease in adopting higher-efficiency gas equipment, as consumers may opt for lower-efficiency options due to first-cost burdens. Factors such as availability of natural gas service, cost savings, and regional differences influence consumer choices. Few households have installed a heat pump where natural gas service is available. Sixty percent of existing heat pumps are installed in homes that cannot connect to the natural gas system. Income also influences the installation of HVAC systems, with fewer lower-income owners installing heat pumps than natural gas furnaces.