My conventional natural gas water heater is 24 years old, and with increasing regulation on the horizon I have been looking into a replacement. My local utility is offering substantial subsidies to convert to a heat pump water heater (HPWH), so I delved into the numbers.
I have two natural gas powered appliances - my home furnace (forced hot air) and water heater (40 gallon tank). So my summertime natural gas usage is exclusively for hot water heating. Over the past four years my summer usage has averaged 5 therms per month. I pay $1.60 per therm of natural gas. That's the sum of Commodity, Distribution, Transport, CO₂ offset, and Cap & Trade. I'm not including the fixed connection charge. Thus a rough estimate of my cost to heat water with natural gas - including offset cost to make my gas usage CO₂-neutral - is $8/month.
My next step is to estimate how much it will cost me to run a HPWH.
The principal argument for modern heat pump water heaters is that they need less energy to produce hot water because they "pump" heat rather than generating it. Specifically, the claim is that a quality HPWH will have a "COP" (coefficient of performance) of 3.
1 therm of energy is approximately equal to 29.3kWh of electricity, so my current gas water heating (which consumes 5 therms of gas) is the energy equivalent, roughly, of 5 * 29.3 ≈ 150 kWh/month. A COP of 3 means that instead of requiring 150 kWh of energy per month, the HPWH will need only 150/3 = 50 kWh/month. My ex ante electrical use roughly fills electrical rate "tier 1" so my marginal electricity rate is 23¢ per kWh. 50 kWh/month means 50 * 0.23 = $11.50/month expected cost for hot water from a HPWH. (Using an average electricity rate of 21.5¢/kWh means $10.75/month). I conclude that a HPWH will cause an inconsequential increase on my monthly cost to heat water.
I don't think I'll need electrical work done - the HPWH consumes 440W on average and so can probably share the 120V circuit that serves my furnace. But the purchase price is far greater than a gas heater - $2000 vs $500-$700 - so there is no chance I will break even over its lifetime, even at a zero discount rate.
I live in a high density suburb and have underground utilities, so my electrical service is generally reliable. Outages are unlikely to affect hot water availability. Again, natural gas gets an inconsequential advantage for reliability.
Two "environmental" arguments are made in favor of HPWH. One is a "climate" claim which puts a negative value on CO₂ emission. But my utility imposes mandatory CO₂ offset and cap & trade fees, so my natural gas CO₂ emissions are fully offset. Furthermore, the extra CO₂ emissions involved in manufacturing the HPWH (which weighs 80 lbs more than the gas heater and includes a compressor and heat exchanger will never be offset by the emissions reductions from operation - if indeed there is any reduction. If I was genuinely concerned about minimizing CO₂ emissions, a far more effective use of my funds would be to purchase CO₂ offsets.
The second environmental argument is air pollution from burning natural gas. That argument is not persuasive either. Most of my hot water usage is in the evening when my electricity is produced by natural gas turbines. A gas turbine electrical generation facility may run cleaner than my hot water heater, but generation and transmission losses probably make the net difference minuscule.
The question I'm left with is - why is the City subsidizing this conversion?
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