Industry Shares Strategies for Adding Water Heaters

Growing residential load by boosting the number of propane customers who also heat their water with propane can be beneficial to a retail propane company. Several industry leaders with experience growing gallons by adding water heaters spoke at a breakout session at the 2018 National Propane Gas Association’s Southeastern Convention & International Propane Expo in Atlanta. Mike Peacock, director of energy sales at Rinnai North America, moderated the session. He was joined by Mark Jaynes, central procurement director at Blossman Gas; John Jessup, president & CEO of the North Carolina Propane Gas Association (NCPGA); and Jeff Stewart, president of Blue Star Gas.

The panel discussed Dead River Co. in the Northeast U.S., where Jeff Roth, director of sales, and the company’s staff recognize the same challenge that all on the panel were aware of: nearly 20% of a home’s energy use represents water heating. But for the propane industry, 60% of its retail customers have electric water heaters. At Dead River, the challenge is addressed with the help of various rebates offered by states in the Northeast territory it serves. In Maine, for instance, the availability of a $750 rebate, combined with savings using propane over 10 years, should ultimately save a customer $3000.

“Dead River has residential energy advisors that can help customers choose the water heating system that works best for their lifestyle,” Roth told BPN. “We share the benefits of less emissions to reduce the carbon footprint, less energy use and more savings, abundant hot water, and the saving of valuable floor space.”

While rebates are offered by nearly all state propane organizations, as well as many companies, to get customers interested in propane water heaters, Jessup of NCPGA agrees with Dead River’s approach and cautions that rebates alone don’t sell units. He cited a survey by the consultancy Warm Thoughts. It showed five factors rank higher than rebates and more deeply influence a customer’s buying decision. While 31% considered rebates very important, a full 70% considered energy efficiency very important. Sixty-four percent cited cost as very important; produces hot water quickly was viewed at a high level of importance by 60%; 44% felt strongly about consumer reviews; and recommendations from family, friends, coworkers, and neighbors was very important to 32% of respondents.

According to Jessup, the propane water heater rebate is the most successful of many propane product rebates. “We were processing $40,000 rebates a month for water heaters and had to drop each rebate from $200 to $150 to ensure the program could run year-round.” Jessup said his association leaders felt that marketing directly via mail to propane households was the best strategy for attracting new propane water heater customers. While the rebate is part of the “hook,” Jessup follows through by promoting all the benefits the Warm Thoughts survey identified.

Rinnai works collaboratively with many retail propane marketers. Peacock said he believes water heater sales will quadruple in the coming years. “We recognize that 30% of our products run on propane now,” he said. His company expects some of the coming growth will be for products that run on natural gas, but he sees most growth among products fueled by propane. “The development of tankless water heaters about 15 years ago has helped attract more consumers to the propane water heater market,” Peacock said.

Stewart said that Blue Star Gas has worked closely with Rinnai to gain customers, to the mutual benefit of both companies. “We worked with a company that had a building with old-fashioned boilers,” he said. “Tour buses would show up at this company, and when a lot of people needed to use water, the hot water wouldn’t last more than 20 minutes.” Rinnai sent people out to analyze the situation. “Through the installation of a number of tankless water heaters, Rinnai and Blue Star Gas were able to jointly provide a major improvement to the company.” Stewart is confident a partnership with a variety of service providers is important to the success of the retail propane marketer. “It is imperative retailers be looking for burner tips and spark plugs,” he said. “Our goal is to always have a highly trained staff to do installs.”

At Blossman, Jaynes echoed Stewart’s sentiments about adding burner tips and spark plugs, and said regarding water heater growth the number one enemy is the plumber who carries an electric water heater on the truck. “Propane often doesn’t have a chance to make its case when a customer is making a quick decision about replacing a water heater,” Jaynes said. “At Blossman, we partner with plumbers to help build our market share. Sometimes these plumbers do our installs, especially during the busy winter months.”

Jaynes stressed the importance of being competitive with electric water heaters. “We know a water heater can help us nearly double the propane load for customers currently buying about 300 gallons a year. A water heater alone could add 200 to 250 gallons a year, and cooking appliances may add 50 to 75 gallons a year,” he said. “Considering the high return on investment, especially when you look at some other profit centers in our business, it makes sense to help customers afford a propane water heater.” —Pat Thornton