V. PG&E's Tankless Water Heater Pilot Program

Tankless water heaters save energy by heating water as it is needed, rather than storing large quantities of hot water for future use. When a customer opens the hot water tap, cold water travels through a pipe into the unit and activates a heating element that heats the water as it makes its way to the faucet.

PG&E seeks funding in its 2006 LIEE budget for a tankless water heater pilot project with the California State Department of Community Services and Development (California Community Services) and the Community Action Agency of San Mateo County, Inc. (SMCA), a community-based organization providing weatherization services to low-income clients. California Community Services oversees California's participation in the federally-funded Low-Income Home Energy Assistance Program (LIHEAP) program.

PG&E explains the purpose of this pilot project would be to determine whether tankless water heaters should be included among the energy efficiency measures being offered to qualifying low-income households as part of the LIEE program.

The pilot program would include a field assessment during which SMCA would gather information from 20 homes that qualify for Low-Income Energy Efficiency and/or LIHEAP services. It would then install tankless water heaters in five of the homes, and assess their viability as part of the Low-Income Energy Efficiency and LIHEAP programs. Another purpose of the field component would be to identify logistical barriers to measure installation and criteria for measuring program success.

The following tasks are included in the field assessment component:

· Developing water distribution system requirements

· Developing an assessment protocol

· Income qualifying potential pilot participants

· Conducting an assessment of 20 homes using the assessment protocol

· Developing installation criteria for crews (and conducting installation training)

· Selecting five homes for tankless water heater installations (and conducting the installations)

· Conducting training for pilot participants

· Developing a monitoring protocol (for data collected from pilot homes)

The second component would be a laboratory comparison of a conventional 40-gallon gas water heater and a tankless water heater to determine:

· The amount of energy and water savings derived from the tankless water heater unit.

· The energy usage of an older 40-gallon gas water heater.

· The amount of gas saved (by using a tankless heater) by reducing the warm-up time.

· The amount of gas/electricity saved by reducing tank (heat) loss.

PG&E states that the primary focus of the pilot project is not a determination of cost effectiveness (savings derived from the use of tankless water heaters) because the California Energy Commission and Lawrence Berkeley National Laboratory are studying this issue. PG&E argues that the pilot project would complement the work of these two agencies because it would focus on barriers unique to low-income customers, such as system type and location, structural problems, and delayed maintenance.

PG&E proposes to run the pilot program for 15 months. The total program budget is approximately $62,000. PG&E states that it can cover the cost for this program with its existing LIEE funding.

Compared to PG&E's overall program budget, $62,000 is a small sum. However, the size of the request does not justify approving it if the proposal cannot stand on its own. Consumers in Asia, Europe, and the United States already use tankless water heaters. Whether or not the technology is reliable and cost-beneficial should be a matter of public information. If, beyond this, the California Energy Commission and Lawrence Berkeley National Laboratory are studying the commercial viability of this measure, it is not clear why we should approve the use of low-income program funds to conduct a side-by-side water heater laboratory comparison. It is also unclear why a program leading to the installation of five water heaters should require thousands of dollars for education and outreach, and similar amounts to assess each installation.

However, we share PG&E's interest in determining whether the tankless water heater could be a promising addition to the package of LIEE measures offered to low income customers. It is reasonable for PG&E to install five such heaters and to assess their performance. Working cooperatively with California Community Services and SMCA in this effort should enhance the likelihood that PG&E can make a realistic assessment of the feasibility and merits of adding tankless water heaters as a Low-Income Energy Efficiency program measure. The comments on the draft decision by various parties underscore the level of interest in exploring this measure. We will allow PG&E to proceed with the pilot study, while encouraging the utility to provide greater detail and justification for future requests of this nature.