Energy Insights: High-Efficiency Gas Furnace Installations Surge
Consumers are making more energy-efficient gas heating choices.
According to the American Gas Association, the Inflation Reduction Act (IRA) introduced an Energy Efficient Home Improvement Tax Credit, which enhanced the existing 25C Nonbusiness Energy Property Credit. This enhancement increased federal tax incentives for a wide range of energy-efficient home improvements, including high-efficiency gas, propane, and oil furnaces. Under the 25C provision, incentives were raised to 30% of the project cost, up to a maximum of $600. To qualify, furnaces must have an Annual Fuel Utilization Efficiency (AFUE) rating of 97% or higher.
The Air-Conditioning, Heating & Refrigeration Institute (AHRI) tracks appliance shipments and reported that 3.3 million furnaces were shipped in 2020, including those for existing homes and new construction. Of these, only 2.8% had a 97%+ AFUE rating. This market share was calculated using state shipment data from a Department of Energy rulemaking analysis on consumer furnaces. Excluding the 520,000 gas and propane systems installed in new homes, approximately 78,000 of the furnaces shipped in 2020 were rated at 97% AFUE.
AHRI shipment data, combined with statistics on tax credits from the Internal Revenue Service (IRS), can provide insight into current market trends. The IRS reported that 283,390 taxpayers claimed the $600 IRA tax incentive for gas and oil furnaces (and boilers) on their 2023 returns. This incentive is available only for existing homes. In 2023, AHRI reported that 3,012,135 natural gas, propane, and oil warm-air furnaces were shipped, with 492,000 installed in new homes. Based on this, if 84% of the remaining furnaces were shipped for existing homes, it can be estimated that at least 11% of these had a 97%+ AFUE rating. Actual shipments in 2023 are likely higher since this analysis does not account for shipments of 97%+ AFUE furnaces that did not apply for tax credits.
