Planning a retrofit could mean the difference between intentionally upgrading the system to save energy and space and increase reliability or hastily replicating the old system in a crisis. The National Renewable Energy Laboratory (NREL) notes there are several barriers when a system replacement is not planned. "The often-immediate need for a new water heater can be a serious obstacle to the adoption of energy-efficient technologies. Thirty percent of all water heaters are purchased because the previous unit has failed catastrophically; a customer rarely performs an extensive search for an efficient water heater in this case and instead takes whatever is 'on the truck.'"

Before a planned replacement, here are the issues that are considered:

• What is being replaced?
• What space is available?
• What is the coldest water temperature inlet?
• What is the desired hot temperature outlet?
• What is the tankless unit BTU?
• What is the unit efficiency?
• What is the highest peak GPM (gallons per minute)?
• What is the building piping distribution sizing?
• What is the gas capacity available?

Because the planned retrofit will negatively impact fewer people than an emergency, a planned retrofit/replacement layout is less expensive than an emergency replacement.

TAX DEDUCTIONS

Under the Inflation Reduction Act of 2022, tax deductions may be available. As the provision states: "Building owners who place in service energy efficient commercial building property (EECBP) or energy efficient commercial building retrofit property (EEBRP) may be able to claim a tax deduction. An increased deduction may be available for increased energy savings or meeting prevailing wage and apprenticeship requirements. The deduction is allowed under Internal Revenue Code (IRC) Section 179D. It was expanded under the Inflation Reduction Act of 2022."²

EECBP must be installed on or in a building that is located in the U.S. and within the scope of a specified Reference Standard 90.1 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) and the Illuminating Engineering Society of North America. It must be property for which depreciation or amortization is allowable, and installed as part of:

• the interior lighting systems,
• the heating, cooling, ventilation, and hot water systems, or
• the building envelope.

It must be certified as being installed as part of a plan to reduce the total annual energy and power costs for the above systems by 25 percent or more compared to a reference building meeting the minimum requirements of Reference Standard 90.1.

EEBRP must also be installed on or in a qualified building as part of:

• the interior lighting systems;
• the heating, cooling, ventilation, and hot water systems; or
• the building envelope.

A qualified building is a building located in the U.S. that was originally placed in service not less than five years before the establishment of a qualified retrofit plan for the building. EEBRP must be property for which depreciation or amortization is allowable, and it must be certified as meeting certain energy saving requirements."