DOE Efficiency Standards for Water Heaters
New Conservation Regulations Take Effect October 2026.
In efforts to reduce carbon emissions, the US Department of Energy (DOE) passed new efficiency regulations for gas water heaters. All water heater manufacturers will be required to meet these new 95% minimum efficiency requirements for commercial applications by October 6, 2026.
We’re breaking down what this actually means for end-users and your business.
What Does the New Ruling Mean?
After October 6, 2026, any commercial gas-fired water heaters that don’t meet the new efficiency requirement can no longer legally be manufactured or imported. All commercial gas water heaters built after that date, including all storage and tankless models, will be required to utilize condensing technology to reach or exceed a minimum Thermal Efficiency (TE) of 95%.
Water heater manufacturers, such as Rheem, AO Smith and Bradford White, will have to stop production of any models that don’t meet these new minimum efficiencies.
- Non-condensing water heaters, including standard efficiency chimney-vented (aka atmospheric) gas storage models, are getting phased out over the next year.
- Manufacturers have already begun shifting their production lines to adapt to these upcoming regulation changes.
- Non-condensing water heaters can still be sold after October 2026, but supplies won’t last long and they will eventually become obsolete.
What Type of Water Heaters Will Be Affected?
These new DOE regulations apply to all commercial grade gas-fired water heaters – both standard storage (tank-type) water heaters and instant (tankless) water heaters. Most tankless models already meet the new standards by default of their design. Lower efficiency tank-type models will be phased out of production.
Questions? We Have Answers.
Which water heaters will be impacted most?
Standard Efficiency Atmospheric Gas Storage Water Heaters have been the industry standard for decades, but will be phased out of production because they are considered “standard efficiency.” With a thermal efficiency rating between 80-86%, they can’t meet the new DOE minimums. Buildings that have this type of commercial water heater installed will feel the impact when their current atmospheric water heater needs replacing.
The simple but classic design has made them a reliable and widely popular water heating solution for businesses and consumers alike. With a burner at the bottom of the tank and a flue running up the center, these units burn gas to heat the stored water from the bottom up, through the flue, before exhausting out the chimney. But the exhaust gasses are still hot as they exit the top of the water heater, wasting about 10-15% of the fuel’s energy by sending usable heat out the chimney. The remaining inefficiency is a result of naturally losing heat just waiting for hot water to be used, also known as “standby loss.”
Why will "condensing" technology be required?
High Efficiency Condensing Gas Storage Water Heaters have already gained popularity over the last 20 years, but they will become the new industry standard thanks to the new DOE regulations. Their “condensing” design actually set the bar for the new minimum efficiency rules, because these highly efficient water heater models are able to extract virtually all of the heat from the burned gas (95-98%), causing the flue gasses to condense, hence their namesake.
In addition to just burning gas, the internal heat exchangers within the tank are designed to also utilize the hot exhaust gasses for additional water heating. This is accomplished by allowing exhaust gasses to exit the water heater slowly, either through a coiled tube or a series of vertical tubes, transferring all of their residual heat to the water on their way out. By the time the gasses reach the end of the heat exchanger, they’ve cooled so significantly that they generate liquid condensate from the temperature difference. The condensate signifies the water heater has successfully extracted as much heat from the gas as possible.
Why did the DOE change the efficiency rules for commercial water heaters?
These new regulations are just a small step in a much larger plan to help minimize the carbon footprint of the United States as a whole. The official DOE ruling documentation, finalized in 2023, gave water heater manufacturers 3 years* to prepare for these regulatory changes.
The full documentation consists of 139 pages of complicated technical details. Their full, long-term decarbonization plan is difficult to describe, because it covers various sectors beyond just commercial water heaters, including residential or “consumer water heaters,” vehicles, and other gas appliances. It also includes carbon management research & education initiatives. Their ultimate goal is to achieve net-zero greenhouse gas emissions in the power sector by 2035 and economy-wide by 2050.
Initially implemented under President Biden’s climate change goals and carbon management policies, it’s unclear of how much of the full plan could be changed again under different Administrations, before reaching the bigger timeline goals of 2035 (power sector) and 2050 (economy-wide).
*NOTE: There will also be new and different regulations on residential water heaters scheduled to take effect in June 2029, but as a strictly commercial business, to avoid added confusion we’re not discussing that.
What are the benefits of this transition to high efficiency water heaters?
While being forced to transition isn’t ideal for anyone, rest assured that high efficiency (HE) water heaters are definitely the “greener” choice to heat water for your business. HE Condensing water heaters:
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Save you money on your energy bills.
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Have low carbon emissions, making them environmentally friendly.
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Heat water faster and in multiple ways, wasting nearly zero energy.
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Have modulating controls that can fire on low for smaller hot water refills, and higher for full tank refills.
What are the other major differences between standard and high-efficiency water heaters?
Aside from the internal construction and technology used, the biggest differences between standard efficiency and high-efficiency gas storage models will be the type and location of venting required, the gas connection points, and the overall height of the equipment. The drawings below illustrate the typical measurement ranges and connection locations for the non-condensing gas storage models being phased out, and the soon-to-be required high-efficiency condensing models.
Standard Atmospheric Gas-fired Storage (Chimney/Flue vented)
These lower efficiency models don’t have an intake vent; they pull combustion air from the surrounding room. The exhaust gasses exit at the top of the unit and are still relatively hot, so they must be vented through a metal flue or chimney.
High-Efficiency Condensing Gas-fired Storage (PVC vented)
These high-efficiency condensing water heaters cannot be vented through a chimney. They require access to an outside wall, to pull combustion air in from outside via one PVC vent, as well as a second PVC vent at to exhaust back outside.
How do I determine if the new DOE water heater standards will impact my business?
If you already have a high-efficiency condensing water heater installed, you can rest easy – you’re already good to go! But, if you currently have a standard-efficiency commercial gas water heater installed, be prepared to face some challenges and decisions when your current water heater needs to be replaced.
There are a couple easy ways to confirm the type of water heater you currently have installed:
- Check your water heater’s venting to see if your equipment is currently vented through a metal flue at the top, or via PVC piping. See images below for examples.
- Then look at the rating plate (label with model & serial #s) on the front of your water heater for more specific information on your current model’s thermal efficiency rating, as well as its storage capacity (in gallons) and gas input (in BTUs).
- NOTE: If you do have to convert to a condensing model, the storage capacity and gas input will likely remain the same for a comparable high-efficiency replacement model.
Chimney or Flue Vented = Non-Condensing
Water heaters that are vented at the top, via a metal flue or a chimney, indicate standard-efficiency (80-85% TE) non-condensing models.
PVC Vented = Condensing
PVC vented intake and exhaust pipes, and a smaller pipe connected at the bottom for condensate drainage, are all indicators of high-efficiency condensing models.
Check the informative label on your water heater – most commercial water heaters will list their thermal efficiency % directly on the label.
When my standard-efficiency commercial water heater fails, what changes should I expect?
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Standard-efficiency water heater models will be phased out as early as June 2026.
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Installation of condensing water heaters will require re-piping and new venting.
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Access to outside wall for new venting is required.
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Floor drain access for the condensate will also be required.
The reality is, upgrading from a standard efficiency to a high-efficiency water heater isn’t cheap, or fast. The equipment costs more, and there’s brand new venting connections and re-piping involved with the installation. While you will eventually get these initial costs back via lower energy bills from the increased efficiency, that will take time.
If you currently have a standard-efficiency commercial gas water heater installed, be prepared for these challenges when your current water heater needs to be replaced:
- Transitioning from chimney-vented equipment to the new high-efficiency models with outside-wall PVC venting will be time-consuming and labor intensive, causing slower and expensive installations.
- Same-day installations will be difficult to accomplish when transitioning to a condensing water heater.
- Manufacturers will start limiting the purchase of any non-condensing models months prior to the deadline. June 2026 is the estimated cutoff date for distributors to order more standard-efficiency models.
The above factors will likely lead to longer turnaround times and more downtime when replacing your water heater. Preparing for this inevitable transition before it becomes an emergency situation is highly recommended.
What if I rent my water heater from Reliable Water Services?
Whether you’re an existing customer or considering becoming one, we’re prepared to help make this transition as smooth as possible. We can help ease your upfront burden with our flexible install financing plans – that are customizable to meet your company’s needs!
Our Premier rental plans do cover basic installation costs, as well as future replacement costs, both included in our monthly rates – but those are based on a general estimated cost of parts and labor for a “like-for-like” installation that doesn’t require different piping or venting. With the significant amount of added piping and re-venting when upgrading models, the cost exceeds the generalized amount that’s included in our contracts.
But don’t worry, we can still help you finance those additional installation costs for a customized term length, and then drop your monthly rate back down once that extra install portion has been paid off.
If your current standard-efficiency water heater fails before June 2026, you’ll have the luxury of choices! You can proceed with a like-for-like replacement under your rental agreement, pushing your forced conversion out until your next replacement. Or, you can decide to upgrade to a high-efficiency model, so you don’t have to worry about it later.
If your current standard-efficiency water heater fails after June 2026, we may be unable to acquire a like-for-like replacement model due to dwindling supplies, so you may need to upgrade/transition to a condensing model at that time. Additionally, the turn-around time to transition your equipment will likely take us longer than usual to complete.
Whenever you decide to proceed with this inevitable upgrade, we can help you finance the extra install costs that fall beyond your typical replacement coverage. Once your conversion to HE is complete, any future replacements of your new high-efficiency equipment will be like-for-like and therefore covered.
Reliable Water Services provides affordable rental & service options on a variety of commercial equipment – water heaters, boilers, water softeners & more – throughout Wisconsin, Indiana & surrounding portions of the Upper Midwest. As a B2B company, our specialty is helping businesses where no hot water is not an option – and we’re available for service 24/7 because that’s when our customers need us.
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