Over the past decade, as natural refrigerants – CO2, ammonia and hydrocarbons – have emerged in North America, they have been increasingly used in commercial and industrial applications like supermarket display cases, vending machines and cold storage warehouses.

On the other hand, household appliances ­– refrigerators, air conditioners and heat pumps – have largely not yet made the transition to naturals in North America, though they have elsewhere in the world.

But that scenario appears to be changing.

For example, The Association of Home Appliance Manufacturers (AHAM) is expecting a transition in domestic refrigerators and air conditioners to hydrocarbon refrigerants.

And change is coming now to the heat pump water heater market. Sanden, a major Japanese manufacturer, is marketing its CO2-based SANCO2 domestic heat pump water heater, which extracts heat from the outside air, in the North American market. The system has been widely adopted in Japan as well as in Europe and Australia.

Introduced in North America in August 2016, the SANCO2 units have been approved by ETL (Electrical Testing Laboratories). The Environmental Protection Agency allows CO2 to be used in heat pumps designed for heating water (but not space heating).

The original CO2 heat pump water heater – dubbed the Eco Cute – debuted in Japan around 2001. Today several companies, including Sanden, Mitsubishi, Fujitsu, Panasonic and Daikin, market a similar product in Japan, selling about 500,000 units annually, out of a total of three million domestic water heaters (including 2.3 million gas-driven units), according to John Miles, general manager for Eco Systems, Sanden International (USA), based in Plymouth, Mich.

In the U.S., he added, 8 million water heaters are sold annually, including 3.9 million electric-resistance and 4.1 million gas units. The market also includes 70,000 to 80,000 heat pump water heaters, using mostly R134A.

In North America, the Sanden CO2 unit faces some headwinds. The first cost of the unit is higher than that of electric-resistance, gas and HFC refrigerant heat pump water heaters. Operating costs for gas water heaters may be tough to compete against because of low gas prices, though not all areas receive gas distribution. And the water heater market in the U.S. is a traditional one, so it’s hard for a new product like Sanden’s to penetrate, noted Miles. “The [first] cost and the uniqueness of the product make it difficult.”

But the CO2 unit is a climate-friendly system, and Sanden is positioning it as a more efficient – and less costly to operate – alternative, particularly in the “green early adopter market,” said Miles. Among its early adopters are grant-supported low-income housing developers.

With its much-greater efficiency, the Sanden CO2 units “could replace electric water heaters in the U.S.,” said Miles. He puts a three-to-four-year payback on the cost premium of a Sanden unit replacing an electric unit at

Focus on energy costs

In the U.S, the Sanden unit caught the eye of Charlie Rogers, property rehabilitation specialist for the HomeWise Weatherization Program, part of the City of Seattle’s Office of Housing.

HomeWise, which receives funding from local, state and federal sources (including the U.S. Department of Energy and the Bonneville Power Administration), focuses on reducing the energy burden and utility costs for low-income households.

Rogers and his team collaborate with the nonprofit owners of these housing developments “We go to sites and conduct energy audits,” said Rogers. The audits include an assessment of mechanical systems like space heating, lighting, and water heating, followed by recommendations for energy-efficiency improvements.

Using energy-modeling software, HomeWise calculates grants for low-income housing providers to cover the cost of efficiency enhancements. “Our grants are a function of cost effectiveness and energy savings,” said Rogers. “The more energy saved, the larger the grant.” He requires a “savings-to-investment ratio” of one or more for any grant to be awarded.

The nonprofits regard the HomeWise agreement “as a way to help pay for rehabilitation costs, [maintain] their properties, and reduce the energy burden on their clients,” Rogers said.

Rogers, who has been with the City of Seattle for two, years, previously ran his own consulting firm doing third-party home comfort and energy inspections for eight years. So he finds the work he is doing now – designing energy efficient solutions for low-income housing developments – personally fulfilling.

He noted that grant programs for low-income-housing energy improvements exist in municipalities throughout the U.S. He suggested that contractors or building owners look for funding at the city or county level. “A lot of times it’s a nonprofit that administers the grant funds,” he said. “We’re a little unique in that we’re housed in a city [agency].”

HomeWise determined that 24 low-rise town homes in six buildings at the Kingway Apartments in Seattle, owned by Bellwether, were a good fit for the Sanden heat pump water heaters, with a savings-to-investment ration was determined to be 1.05.

Each of the homes comprises large households, averaging six people, and requires a large amount of hot water. The Sanden system mixes cold water with the hot water to bring the temperature down from one of three settings – 130°F, 150°F or 170°F – to “a safe 120°F, which is what the tenant sees,” said Rogers.

HomeWise thought Sanden was a good technology in part because of its high heat-recovery rate – much higher than that of a heat pump using R410A, said Rogers. The unit has a first-hour rating of 97.8 and a water-heating rate of 0.3 gallons/min.

“It refills the tank with hot water very quickly, and I wanted something that without question would provide hot water when the occupants needed it,” Rogers said.

After learning about the Sanden CO2 heat pump water heater, Rogers realized that “none of our contractors had installed it.” So he organized a training session and “invited everyone we could.” John Miles of Sanden, who was brought in as the trainer, was able to “get our contractors comfortable and knowledgeable on how to do installations.” He selected Resicon, Tacoma, Wash., as the contractor for Kingway.

Previously, each of the 24 apartments at Kingway Apartments used a dedicated electric-resistance water heater, which was replaced by a Sanden unit. The Sanden installations began last summer and were completed in December. Fewer Sanden units could have been used, but “there was no easy way to do that because of the way the previous unit were metered,” said Rogers.

In addition to the heat pump water heaters, Resicon installed ductless heat pumps (using an R410A refrigerant) for space heating and added upgrades to lighting, insulation and air sealing; all equipment costs were covered by the program.

Bellwether Housing, the owner of Kingway Apartments, “has always looked for opportunities to upgrade our systems to be more energy efficient and better performing,” said Martin Gleaves, senior facilities manager for Bellwether. Its partnership with HomeWise offered an opportunity to “remove inefficient [water heater] equipment prior to failure and replace it with the best option based on energy usage and maintenance savings.”

Given that water heaters tend to only get noticed when they don’t work well, “Sanden’s must be working great because to date I have not heard a word from our tenants,” he added.

“It refills the tank with hot water very quickly, and I wanted something that without question would provide hot water when the occupants needed it.”

Charlie Rogers, City of Seattle

The Sanden unit’s split configuration – the heat pump is located outside and connected to a 43-gallon water tank inside in a small closet underneath a staircase – also suited it to the design of the apartments.

A traditional HFC-based heat pump water heater positions the compressor on top of the tank, requiring a certain volume of surrounding air to operator effectively. A small closet would have to be fitted with a duct or passive grill to bring more air in. “It gets complicated,” said Rogers. “It’s doable but not easy.” In addition, the compressor makes noise while the evaporator generates cold air that would need to be ducted to the outside. Moreover, an inside installation could result in increased energy use from the interaction between the heat pump water heater and space heating equipment.

Ultimately, the biggest benefit of the Sanden unit is its energy efficiency compared to the previous units. Rogers calculated that the 24 heat pump water heaters at the Kingway Apartments would save 81,500 kWh per year compared to the previous electric resistance water heater. “That equates to about $300 per year in avoided electric bill costs for each family,” said Rogers, though some of the families had already cut their utility costs through a program administered by Seattle City Light.

All the energy-cost savings is accrued by the tenants. “The owner isn’t seeing that but is getting lower maintenance costs,” Rogers said.

He used an energy factor (EF) of 2.9 for the Sanden unit, compared to an EF of 1.0 for an electric resistance unit. “So Sanden should be using about one-third as much energy, a huge savings,” he noted.

Rogers derived the 2.9 energy from a study done by the Bonneville Power Administration and Washington State University Energy Extension showing that the Sanden heat pump water heater provides an average EF of 2.9 in Seattle’s climate. According to the Northwest Energy Efficiency Alliance’s qualified product list, Sanden’s models range from 2.9 to 3.3, which are comparable to competitive HFC heat pump water heaters.

Sanden rates its heat pump water heater at a maximum of 3.84 EF, compared to 3.0 for an HFC heat pump, 0.95 for an electric-resistance water heater, 0.95 for a tankless gas water heater and 0.67 for a gas storage model. The Sanden unit has a maximum COP of 5.2. “The more hot water used, the more efficient [the Sanden unit] becomes,” said Miles.

Rogers noted that with above-average hot-water use, “it’s possible that the [HFC] R410 system EF would drop significantly, given that those systems have lower [heat] recovery rates and begin to use electric resistance heat when the compressor can’t keep up with demand.”

By contrast, the Sanden unit “has very high recovery rates and doesn’t even have electric resistant back-up heat, so we can feel more certain about its performance.”

Rogers pointed out other aspects of the Sanden unit that motivated him to install it. For example, all of its heat pump equipment is contained in the outdoor unit, which results in much less risk of installer error.

In addition, the Sanden unit is factory-built, so “the chances for refrigerant leaks [due to faulty installation] are much lower,” he said. Cleaning the system would only be necessary if got clogged by outside vegetation.

Another advantage of the Sanden unit, he said, is the durability of the tanks, which are made of glass-lined stainless steel. “There’s not as much corrosion so the tanks should last a long time,” he said.

“I think the system should be much more durable and have less maintenance issues” than any other water heaters, he said, noting that there is no need to change out electric-resistance elements. “And water is the only thing flowing besides electricity. That’s really nice.”

One challenge associated with the Sanden system, Rogers acknowledged, is its higher cost, said Rogers. The equipment cost of a Sanden unit was about $3,000 ($5,500 with everything included), about twice that of a standard water heater, he said. “But in this application, with very large family sizes, so much hot water use and much greater energy saving, we were able to justify the cost.”

To read the complete, original version of this article in Accelerate America magazine, click here.

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