Expectations for propane water heating rise at summer meeting

September 4, 2015 By    
Water heater

New governmental regulations on energy efficiency standards for water heaters could grow tankless sales. Photo courtesy of Navien Inc.

Here in downtown Cleveland, city leaders are preparing for the 2016 Republican National Convention with construction and renovation projects in progress.

U.S. presidential candidates are declaring their intentions for the White House, as the list of Republicans throwing their hat into the race continues to grow.

The propane industry made its own type of declaration in July during the Propane Education & Research Council’s (PERC) meeting in Park City, Utah.

Of note was Blossman Gas CFO Randy Doyle’s successful motion making propane-fueled water heaters a priority of the industry and council.

Water heaters gained a good deal of discussion, sparked by a staggering statistic. According to Tucker Perkins, PERC’s chief business development officer, 4 million homes using propane for space heating don’t have a propane water heater.

The propane industry wants to take advantage of new Department of Energy regulations – “a gift from the government,” Perkins says – that many believe will increase the size and cost of new electric and gas water heaters. Propane-fueled water heaters, especially tankless models, offer an efficient, space-saving solution for homeowners needing to replace old, worn-out units.

“You folks are thinking about residential, but water heating impacts every segment we talk about, short of engine fuel,” Perkins told the council, noting how water heating is a perfect use for propane. “It’s in agriculture, food applications, industrial – we get the belief and fervor in propane-fueled hot water.”

While the council deemed water heating a priority, it didn’t provide a clear path to achieving success in that area. Does it incentivize the purchase of water heaters or highlight features of the product? Perkins wondered. He did say a big part of PERC’s day is deciding how best to influence people in the housing industry, including builders, plumbers, HVAC personnel and homeowners.

Worth noting is PERC’s ability now to educate end users about the benefits of propane – after the federal government lifted a near six-year restriction on this council function.

Does water heating now become part of a new marketing campaign? After the water-heating declaration in Utah, we have a hot-button topic worth tracking.

On the commercial side
When talking commercial propane applications, the strategy is simple, Perkins says – push mobile generators into the market.

Kohler now offers four models that can help propane fuel backup power and expand into rental yards and other applications. Part of that process for the industry is learning how the rental market operates and what drives its decisions.

The vast number of mower manufacturers with propane-fueled models will always make the lawn and landscape segment worth watching. But the latest twist here involves a project in which R&R Products is supplying propane-fueled mowing equipment to eight U.S. golf courses. The council is receiving equipment runtime data in return.

“This gives us a chance to talk to golf course owners about propane,” Perkins says.

This lengthy discussion in Utah about residential and commercial markets might have been a welcome changeup for some in the industry seeking ways to grow their traditional customer base, gallons and margins.

Trends and forecasts
Moreover, Mike Sloan, principal at ICF International who presented to the council, says propane price declines are significantly increasing the opportunity in these markets and for space-heating applications, and propane’s market share in new construction has started to rebound, as well.

But the reality is residential propane demand will continue to decline slowly, by 4 percent through 2020, due to improvements in efficiency, Sloan adds.

There is an interesting hypothetical to consider, however, which takes us back to our earlier discussion: Residential propane consumption could actually increase by 20 percent if those 4 million homes that already have propane add a propane water heater, Sloan answered when asked by the council.

Sloan still sees overall propane demand growth of 6 percent between 2014 and 2020, driven by engine fuel markets. 

Brian Richesson

About the Author:

Brian Richesson is the editor in chief of LP Gas Magazine. Contact him at brichesson@northcoastmedia.net or 216-706-3748.

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