Biting the 90 AFUE Bullet

Due to higher natural gas prices, the cost-effectiveness of 90 percent efficient furnaces has changed. But there are other reasons to make this move.

"We live in an age of 'urge'. We do nothing till somebody shoves us."
- WiII Rogers

"Do not give dalliance too much rein."
- Shakespeare, The Tempest

Not long ago, energy cater Steve Byers reported that a 200-homes-per-year Front Range builder wanted to qualify for the EPA's Energy Star performance threshold. Their pivotal question to him: did they have to step up to a 90 percent efficient furnace to do this?

In most cases, the answer is "yes." Yet, due to systems benefits, there are other reasons to make this switch. And thanks to rising prices for natural gas, the 90 percent efficient furnace is cost-effective in most new homes today.

Remember back in the 1993-9.5 time frame, when the Front Range market switched from metal to vinyl windows? Today's rapid evolution in the furnace market has the same feel to it.

If you're on the fence, or perhaps some of your building jurisdictions are ratcheting up their energy codes, here's some background data to consider.

Changing market

According to the Boston-based Consortium for Energy Efficiency Inc., 22 percent of homes built in 2002 were equipped with 90 percent Annual Fuel Utilization Efficiency (AFUE) furnaces. That's up from just 12 percent in 1998.

In Colorado, the market share varies between distributors. Dave Schrock with Comfort Air Distributing estimates one-third of Rheem furnaces rate 90 AFUE or higher. According to Skip Olsen, Lennox ships a similar volume of 90s. At Carrier, Gwen Davis calculated that 22 percent of their year-to-date
sales are 90s, matching the national number. Clint Stotts with Trane reports roughly 20 percent of total sales meet the 90 percent threshold.

The variability among dealers is much higher. Paul Kampbell, owner of Eastside Heating and Cooling, estimates 15 to 20 percent of their furnaces are 90 AFUE units. Gary Southern, sales manager for Four Seasons, figures about 25 percent are 90s. Gary Cooper, Cooper Heating and Cooling, estimates sales of 90s are running at one-third of their volume. Bill Goeschel, Steel-T's vice president of operations. reports that more than 50 percent of their furnaces sales are 90 AFUE units. "and that percentage is increasing daily." Jack Gustafson with Gustafson Heating and Cooling believes 90 percent-plus units make up 85 percent of their furnace sales, and that number is climbing. In the Fort Collins/Loveland area, Jim Woods with Woods Heating and Cooling reports 60 percent of sales are 90s.

Market drivers

There seem to be four drivers behind this market shift.

First, a number of Front Range builders simply switched to nearly 100 percent use of 90 AFUE furnaces, some virtually overnight. This small but growing list includes McStain Enterprises, Engle Homes, Sopris Development, Aspen Homes of Colorado (Windsor) and, most recently. Shea Homes. All these builders have either committed to or are moving toward the "systems approach" to higher-performing homes. Scaled-combustion furnaces with power-vented water heaters are essential parts of that package, for both their indoor air quality and energy performance benefits.

Second. numerous builders are installing 90 percent furnaces in full subdivisions and upper-end model lines. Centex Homes was an early adopter of this approach. Darrell Hensley. director of purchasing for KB Homes, says 90s go into about half their homes today. with the switch over to 100 percent likely next year. Mert Moret, vice president of construction for Sanford Homes, figures they install 90s in about two-thirds of their homes today. Oakwood Homes puts nothing but 90s in several of their neighborhoods.

Third, some builders having to comply with the International Energy Conservation Code (IECC), either to meet local codes or the voluntary Colorado Built Green standard, decided that installing 90 AFUE units simplifies the task. Hensley said, "We've found the most effective way to comply is with the 90 percent furnace. We leave low-e windows as an option." Moret reports that Sanford relies on both 90 AFUE furnaces and low-e windows to meet the IECC.

Educated consumers?

Fourth. there's the consumer. Apparently they are waking up to HVAC-related problems and solutions. Eastside's Kampbell says that a growing number of homebuyers opt for 90 AFUE units. sometimes even contacting his company as part of the buying process. Southern reports that, for several of their builders, a Four Seasons rep meets with buyers after a preliminary contract is signed. At that meeting, Four Seasons educates each buyer about the issues and their choices - AFUE. SEER, comfort issues, ventilation, filtration, humidification and, yes, mold. Southern estimates 90 percent of all buyers upgrade their HVAC system through that process.

Note an advance warning on this last driver. A consumer education campaign is slowly rolling out from the city of Fort Collins, with support from E-Star, the Home Builders Association of Northern Colorado and other stakeholders. The campaign includes a large brochure plus a packet of flyers called "What to Look for in a New Home: A Buyer's Guide to Comfort, Health, Durability and Value" (see www.coloradonewhomechoices.org for the first few pieces). The objective is a better-educated consumer who knows what to ask for, knows what to look for, and - among other objectives - knows why they should he willing to pay a little more for a better HVAC system.

Reaching Energy Star

For Energy Star qualification, a home has to score at least 86 points on the E-Star 0-to-100 home energy rating scale. To consistently achieve that level, the most cost-effective package includes house tightening. duct tightening, a better water heater, higher R-value wall insulation and a 90 AFUE furnace - in roughly that order of priority. (Actually, reducing window area would top the list - and save you money - but marketing departments don't want to hear about that, so it's left off the list here.)

The problem is that leaving out the 90 percent furnace may leave you just short of the 86 threshold, depending on total window area. In fact, if you build with more windows than average, you'll absolutely have to include a 90 AFUE furnace. And since house tightness is a variable, E-Star's ratings indicate that anyone aiming to consistently reach Energy Star performance should upgrade to a 90 percent unit.

Costs

A builder's cost for a 90 percent furnace upgrade seems to vary between $500 and S1,000. Some figures come in even higher and lower than that range. The lower end applies to production builders, the higher to customs. But there are a number of systems-related factors beyond just the equipment that impact this cost bump.

According to Kampbell. builders can save as much as $200 when they downsize equipment and ductwork from 125,000 Btu units into the 45,000 to 60,000 Btu range. Any switch to low-e windows, tighter construction and better insulation, as part of a systems approach that actually includes equipment sizing calculations, makes the above scenario viable. Woods says he can trim $200 off the HVAC system if a builder opts for a centralized, simplified return-air system. K13 Homes and others manage to squeeze out a lower price through volume purchasing agreements with national equipment manufacturers. These and other systems-related factors (degree of duct sealing, effectiveness of duct design. amount of performance testing, etc.) impact the cost difference.

Cost-effectiveness

An E-Star home energy rating calculates how much energy a particular upgrade will save. When you input the cost differential to the consumer for that upgrade, the rating also generates a cost-effectiveness figure. As used below, "cost-effective" means that lower monthly energy bills will offset higher mortgage payments.

• The following observations come from a review of 22 randomly selected recent ratings that included 90 percent furnaces.
• Thanks to the March 21 increase in gas rates by Xcel Energy (39 percent increase), a 90 percent efficient unit is now cost-effective for most homebuyers.
• In homes scoring 85 and lower, the 90 percent unit is consistently cost effective.
• In homes scoring 88 and higher, savings may or may not offset the higher cost for a 90 AFUE furnace.
• In larger homes, using a single 90 percent unit is consistently cost effective but using two furnaces may not be.
• In smaller attached homes, the 90 percent unit will typically not he cost effective.
• Finally, to state the obvious, the lower the cost passed on to the homebuyer and the higher the unit efficiency (e.g.. 93 percent vs. 91 percent). the more cost effective the 90-plus AFUE furnace will be.

Two-stage vs. 90 percent units

Sonic builders favor the smaller cost bump for and the comfort advantages of a two-stage 80 percent furnace vs. a 90 percent furnace. While two-stage units do provide a potential comfort advantage, the efficiency rating of the appliance doesn't change from the lower to the higher burn rates (say 60,000 Btu on low to 100.000 Btu at the higher level). If the two-stage unit is rated as 80 percent AFUE, then plain and simple it has the same combustion efficiency as a standard 80 percent AFUE furnace. To supply the equivalent amount of heating, the blower simply runs longer at the lower speed.

Variable speed ECM motors - available as an upgrade - substantially reduce electricity consumption by blower motors. For installations including an AirCycler controller that uses the blower and ductwork to circulate fresh air throughout the home, an ECM motor is probably cost-effective. But this doesn't impact the furnace's AFUE rating: 80 percent is still 80 percent.

Steve Andrews consults with builders for E-Star Colorado and writes on energy issues (sbandrews@att.net). E-Star (www.e-star.com), is a nonprofit home energy rating system that works with both new and existing homes statewide.

2008 Built Green Colorado

Home Builders Association of Metro Denver, 9033 E. Easter Place, Suite 200, Centennial, CO 80112
(303) 778-1400 fax: (303) 733-9440  info@builtgreen.org

Last Updated: 10/05/2007