CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANLAYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION ......................................................................................................... 12-1

12.2 METHODOLOGY ........................................................................................................ 12-1

12.2.1 Phase 1: Industry Profile .................................................................................... 12-2

12.2.2 Phase 2: Industry Cash-Flow Analysis and Interview Guide ............................ 12-2

12.2.2.1 Industry Cash-Flow Analysis ............................................................ 12-2

12.2.2.2 Interview Guide ................................................................................ 12-2

12.2.3 Phase 3: Sub-Group Analysis ............................................................................ 12-3

12.2.3.1 Manufacturer Interviews ................................................................... 12-3

12.2.3.2 Revised Industry Cash-Flow Analysis .............................................. 12-3

12.2.3.3 Manufacturer Sub-Group Analysis ................................................... 12-3

12.2.3.4 Competitive Impact Assessment ....................................................... 12-4

12.2.3.5 Manufacturing Capacity Impact ....................................................... 12-4

12.2.3.6 Employment Impact .......................................................................... 12-4

12.2.3.7 Cumulative Regulatory Burden ........................................................ 12-4

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS ..................................... 12-5

12.3.1 General Interview Structure ............................................................................... 12-5

12.3.1.1 Key Issues ......................................................................................... 12-5

12.3.1.2 Shipment Projections ........................................................................ 12-5

12.3.1.3 Profitability ....................................................................................... 12-6

12.3.1.4 Product Mix ...................................................................................... 12-6

12.3.1.5 Conversion Costs, Manufacturing Capacity, and Employment Levels12-6

12.3.1.6 Market Shares and Industry Consolidation ....................................... 12-7

12.3.1.7 Product Utility and Innovation .......................................................... 12-7

12.3.1.8 Impact on Small Manufacturers ........................................................ 12-7

12.3.1.9 Cumulative Burden ........................................................................... 12-8

12.3.1.10 State Energy Conservation Standards ... Error! Bookmark not defined.

12.3.1.11 International Energy Conservation StandardsError! Bookmark not defined.

12.4 RESIDENTIAL DEHUMIDIFIERSPRELIMINARY MIA RESULTS ....................... 12-8

12.4.1 Key Issues .......................................................................................................... 12-8

12.4.2 Profitability, Product Mix, and Shipments ........................................................ 12-9

12.4.3 Conversion Costs, Manufacturing Capacity, and Employment Levels ........... 12-10

12.4.3.1 Impact on U.S. Production and Jobs ..... Error! Bookmark not defined.

12.4.3.2 Foreign Labor........................................ Error! Bookmark not defined.

12.4.4 Industry Consolidation ........................................... Error! Bookmark not defined.

12.4.5 Impact on Innovation and Product Utility ....................................................... 12-11

12.4.6 Cumulative Burdens......................................................................................... 12-11

12.4.6.1 Food Service Equipment Sanitation CertificationError! Bookmark not defined.

12.4.6.2 Potential Climate Change and Greenhouse Gas LegislationError! Bookmark not defin

12.4.6.3 Standards for Other Products Made by Residential dehumidifiers

Manufacturers .................................................................................................. 12-12

12.4.6.4 State and International Standards .......... Error! Bookmark not defined.

12.4.7 Impact on Small Manufacturers ....................................................................... 12-12

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CHAPTER 12. PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

The purpose of the manufacturer impact analysis (MIA) is to identify the likely 

impacts of amended energy conservation standards on manufacturers. The U.S. 

Department of Energy (DOE) will conduct this analysis with input from manufacturers 

and other interested parties and will apply this methodology to its evaluation of amended 

energy conservation standards for residential dehumidifiers. DOE will also consider 

financial impacts and a wide range of quantitative and qualitative industry impacts that 

might occur following the amendment of an energy conservation standard. For example, 

a particular energy conservation standard level, if adopted by DOE, could require 

changes to practices used in manufacturing residential dehumidifiers. DOE will identify 

and come to understand these impacts through interviews with manufacturers and other 

interested parties during the notice of proposed rulemaking (NOPR) stage of its analysis.

DOE announced changes to the MIA format through a report issued to Congress 

on January 31, 2006 (as required by section 141 of the Energy Policy Act of 2005 

(EPACT 2005)), entitled “Energy Conservation Standards Activities.”a

 Previously, DOE 

did not report any MIA results until the NOPR phase; however, under this new format, 

DOE has collected, evaluated, and reported preliminary information and data during the 

preliminary phase (the phase preceding the NOPR) of this rulemaking. Such preliminary 

information includes the anticipated conversion capital expenditures by efficiency level 

and the corresponding anticipated impacts on jobs. DOE solicited this information during 

the engineering analysis manufacturer interviews and reported the results below.

12.2 METHODOLOGY

DOE conducts the MIA in three phases and further tailors the analytical 

framework based on comments from interested parties. In Phase 1, DOE creates an 

industry profile to characterize the industry and conducts preliminary manufacturer 

interviews to identify important issues that require consideration. The preliminary

technical support document (preliminary TSD) presents the results of the Phase 1 

analysis. In Phase 2, DOE prepares an industry cash-flow model and an interview 

questionnaire to guide subsequent discussions. In Phase 3, DOE interviews 

manufacturers, and assesses the impacts of amended energy conservation standards both 

quantitatively and qualitatively. Using the government regulatory impact model (GRIM), 

DOE assesses industry and sub-group cash flow and NPV. Then, DOE assesses impacts 

on competition, manufacturing capacity, employment, and regulatory burden based on 

a This report is available on the DOE website at 

www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html. 

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feedback received during manufacturer interviews and subsequent discussions. The 

NOPR TSD presents results of the Phase 2 and 3 analyses.

12.2.1 Phase 1: Industry Profile

In Phase 1 of the manufacturer impact analysis, DOE collects pertinent qualitative 

and quantitative financial and market information. This includes residential dehumidifier

manufacturer market shares, corporate operating ratios, wages, employment levels, and

production cost ratios. Sources of information may include reports published by industry 

groups, trade journals, the U.S. Census Bureau, copies of Securities Exchange 

Commission (SEC) 10-K filings, and interviews with manufacturers. DOE also relies on 

information from its market and technology assessment, engineering analysis, life-cycle 

cost analysis, and markup analysis. 

12.2.2 Phase 2: Industry Cash-Flow Analysis and Interview Guide

In Phase 2, DOE will perform a preliminary industry cash-flow analysis and

prepare written guidelines for interviewing manufacturers.

12.2.2.1 Industry Cash-Flow Analysis 

DOE uses the GRIM to analyze the financial impacts of amended energy 

conservation standards on the residential dehumidifier industry. Standards will likely 

require additional investment, raise production costs, and affect revenue through higher 

prices and, possibly, lower sales. The GRIM uses several factors to determine a series of

annual cash flows for the year standards become effective and for several years after 

implementation. These factors include annual expected revenues, costs of sales, selling 

and general administration costs, and taxes, as well as capital expenditures, depreciation 

and maintenance related to new standards. Inputs to the GRIM include manufacturing 

costs, shipments forecasts, and price forecasts developed in other analyses. Another 

input, financial information, will be developed based on publicly available data and 

confidentially submitted manufacturer information. DOE compares the results of the 

GRIM against baseline projections where no standards are in place. The financial impact 

of amended energy conservation standards is the difference between the two sets of 

discounted annual cash flows. 

12.2.2.2 Interview Guide

DOE will conduct interviews with manufacturers to gather information on the 

effects of standards on revenues and finances, direct employment, capital assets, and 

industry competitiveness. Before the interviews, DOE will distribute an interview guide 

that will provide a starting point to identify relevant issues and help identify the impacts 

of standards on individual manufacturers or sub-groups of manufacturers. DOE 

anticipates that the interview guide will cover current organizational characteristics, 

industry infrastructure, manufacturer cash-flow analysis, a competitive impacts 

assessment, an employment impacts assessment, and a manufacturing capacity impacts 

assessment.

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12.2.3 Phase 3: Sub-Group Analysis

Phase 3 activities include manufacturer interviews, revision of the industry cashflow analysis, manufacturer sub-group cash-flow analysis, competitive impact 

assessment, manufacturing capacity impact, employment impact, and cumulative 

regulatory burden. 

12.2.3.1 Manufacturer Interviews

The information gathered in Phase 1 and the cash-flow analysis performed in 

Phase 2 will be supplemented with information gathered during interviews with 

manufacturers during Phase 3. The interview process has a key role in the manufacturer 

impact analysis, since it provides an opportunity for interested parties to express their 

views privately on important issues, allowing confidential or sensitive information to be 

considered in the rulemaking decision.

DOE will conduct detailed interviews with as many manufacturers as necessary to 

gain insight into the range of potential impacts of standards. During the interviews, DOE

will solicit information on the possible impacts of standards on sales, direct employment, 

capital assets, and industry competitiveness. Both qualitative and quantitative information 

are valuable. Interviews will be scheduled well in advance in order to provide every 

opportunity for key individuals to be available for comment. Although a written response 

to the questionnaire will be acceptable, DOE prefers an interactive interview process 

because it helps clarify responses and provides the opportunity to identify additional 

issues.

All information transmitted will be considered, as appropriate, in DOE’s decisionmaking process. Interview participants will be asked to identify all confidential 

information provided in writing or orally; no confidential information will be made 

available in the public record. Participants will also be asked to identify all information 

they wish included in the public record but do not want to have associated with their 

interview. This information will be incorporated into the public record but reported 

without attribution.

12.2.3.2 Revised Industry Cash-Flow Analysis

In Phase 2 of the MIA, DOE will provide manufacturers with a preliminary 

GRIM for review and evaluation. During the interviews, DOE will seek comment and 

suggestions regarding the values selected for the parameters. Upon completion of the 

interviews, DOE will revise its industry cash-flow model based on manufacturer 

feedback.

12.2.3.3 Manufacturer Sub-Group Analysis

Using average cost assumptions to develop an industry cash-flow estimate is not 

adequate for assessing differential impacts among sub-groups of manufacturers. Smaller 

manufacturers, niche players, or manufacturers exhibiting a cost structure that differs 

largely from the industry average could be more negatively affected. Ideally, DOE would 

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consider the impact on every firm individually; however, it typically uses the results of 

the industry characterization to group manufacturers exhibiting similar characteristics.

During the interview process, DOE will discuss the potential sub-groups and sub-group 

members that have been identified for the analysis. DOE will look to the manufacturers 

and other stakeholders to suggest what sub-groups or characteristics are most appropriate 

for the analysis.

12.2.3.4 Competitive Impact Assessment

Section 342 (6)(B)(i)(V) of the Energy Policy Act of 1992 (EPCA) directs DOE 

to consider any lessening of competition likely to result from standards. It further directs 

the U.S. Attorney General to determine the impacts, if any, of any decrease in 

competition. DOE will make a determined effort to gather and report firm-specific 

financial information and impacts. The competitive analysis will focus on assessing the 

impacts on smaller, yet significant, manufacturers. The assessment will be based on 

manufacturing cost data and information collected from interviews with manufacturers.

The manufacturer interviews will focus on gathering information that would help in 

assessing asymmetrical cost increases to some manufacturers, the potential increase in 

business risks from an increased proportion of fixed costs, and potential barriers to 

market entry (e.g., proprietary technologies).

12.2.3.5 Manufacturing Capacity Impact 

One of the significant outcomes of standards could be the obsolescence of 

existing manufacturing assets, including tooling and investment. The manufacturer 

interview guide will have a series of questions to help identify impacts on manufacturing 

capacity, specifically capacity utilization and plant location decisions in North America 

with and without a standard; the ability of manufacturers to upgrade or remodel existing 

facilities to accommodate the new requirements; the nature and value of stranded assets, 

if any; and estimates for any one-time restructuring and other charges, where applicable.

12.2.3.6 Employment Impact

The impact of amended energy conservation standards on employment is an 

important consideration in the rulemaking process. To assess how domestic employment 

patterns might be affected, the interview will explore current employment trends in the 

residential dehumidifier industry. The interview will also solicit manufacturer views on 

changes in employment patterns that may result from increased standard levels. The 

employment impacts section of the interview guide will focus on current employment 

levels associated with manufacturers at each of their production facilities, expected future 

employment levels with and without a standard, and differences in workforce skills and 

issues related to the retraining of employees.

12.2.3.7 Cumulative Regulatory Burden

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of 

amended energy conservation standards and other regulatory actions affecting the same 

products. DOE will analyze and consider the impact on manufacturers of multiple, 

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product-specific regulatory actions. Based on its own research and discussions with 

manufacturers, DOE identified regulations relevant to residential dehumidifier

manufacturers including standards for other products made by residential dehumidifier

manufacturers, and third-party certification programs. DOE will study the potential 

impacts of these cumulative burdens in greater detail during the MIA conducted during 

the NOPR phase.

12.3 PRELIMINARY MANUFACTURER IMPACT ANALYSIS 

During the preliminary rulemaking phase, DOE conducted a preliminary 

evaluation of the impact of potential amended energy conservation standards on 

manufacturer market share and financial performance, industry consolidation, 

manufacturing capacity, and product utility and innovation. The interviews also served as 

an opportunity to get feedback from manufacturers relating to other regulatory burdens 

they may face. 

The primary sources of information for this analysis were on-site or telephone 

interviews with manufacturers of residential dehumidifiers conducted in September and 

October of 2013. To maintain confidentiality, DOE did not identify the individual 

manufacturers that disclosed information. The evaluation only reports aggregated 

information and does not disclose sensitive or company-specific information. 

For the preliminary MIA, DOE conducted interviews with manufacturers 

primarily to identify key issues and gain insights into the qualitative impacts of amended 

energy conservation standards. For each product, DOE used an interview guide to gather 

responses from multiple manufacturers on many issues. Appendix 12A of this 

preliminary TSD contains a copy of the interview guide for residential dehumidifiers. 

12.3.1 General Interview Structure

 The manufacturer interviews included questions relating to the following topics. 

DOE received responses to most, if not all, of these topics from various manufacturers. 

12.3.1.1 Key Issues

Perhaps the most important aspect of the preliminary MIA is the opportunity to 

identify key manufacturer issues early in the development of amended energy 

conservation standards. During the interviews, DOE engages manufacturers in a 

discussion about what they perceive to be the key issues in the rulemaking. Key issues, 

once identified, are added to the list of topics explored during NOPR-phase interviews.

For example, key issues in previous rulemakings have included the ability to pass cost 

increases on to consumers. 

12.3.1.2 Shipment Trends and Projections

Shipment projections can be a significant factor in determining the impacts of 

amended energy conservation standards. The interviews provide an opportunity for 

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manufacturers to share information that can help DOE quantify the magnitude of any 

changes in shipments resulting from amended energy conservation standards. DOE is 

interested in information relating to the historical and current number of product 

shipments, broken down by product class, capacity rating, and efficiency level. DOE also 

seeks input on the forecast of future shipments absent amended energy conservation 

standards. Manufacturers are asked how they would expect shipments to change for the 

industry as a whole as a function of standard levels and why they expect these changes 

might occur. More specific questions aim to derive a price elasticity estimate for use in 

the national impact analysis (NIA) spreadsheet.

Another aspect of the shipments discussion is to understand the impacts of a 

reduction in shipments on individual manufacturers of residential dehumidifiers. 

12.3.1.3 Profitability

DOE requests manufacturers’ views on what they perceive to be the possible 

impact of potential amended energy conservation standards on their future profitability.

Amended energy conservation standards could affect financial performance in several 

different ways. Several of these impacts are captured in previous sections. For instance, 

the outlays of capital to upgrade manufacturing equipment before it has reached the end 

of its useful life and the investment in product development to redesign products to 

comply with amended standards can engender significant conversion costs that otherwise 

would not be expended, resulting in reduced cash flow and stranded investments. Higher 

energy efficiency standards also can result in higher per-unit costs that may deter some 

consumers from purchasing the products, or cause some consumers to choose less 

efficient products, thereby reducing shipments. Alternatively, if manufacturers wish to 

maintain a cost competitive product offering on minimally compliant products, the 

inability to pass-through increased per-unit costs to the consumer may decrease the 

manufacturers’ gross margin (as a percentage). 

12.3.1.4 Product Mix

DOE is interested in understanding if amended energy conservation standards 

might change a manufacturer’s product mix and if this change affects profits. For 

example, higher energy efficiency standards might limit a manufacturer’s ability to 

differentiate and market premium products that command higher profit margins. 

The interview guide also investigates how amended energy conservation

standards might affect a manufacturer’s consumer mix and its distribution channels, and 

how in turn this might change profitability. 

12.3.1.5 Conversion Costs 

During the interviews, DOE asks manufacturers to quantify and explain both the 

capital and product conversion costs necessary to raise the energy efficiency of their 

product lines to the proposed standard levels. In some instances, manufacturers may be 

able to meet proposed standard levels by modifying existing products. In other cases, the 

necessary changes may entail a complete product-line redesign. In these situations, an 

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increase in efficiency standards will cause manufacturers to incur one-time conversion 

capital expenditures and product conversion expenses. Capital conversion c costs are onetime investments in property, plant, and equipment. Product conversion costs include 

one-time investments in research, product development, testing, and marketing. 

12.3.1.6 Market Shares and Industry Consolidation

Amended energy conservation standards can alter the competitive dynamics of the 

marketplace. This can include prompting companies to enter the market, exit the market, 

or merge with other companies. The preliminary MIA interview questions ask 

manufacturers to share their perspectives on industry consolidation both in the absence of 

amended standards and assuming amended standards at various efficiency levels. The 

interview questions focus on gathering information that helps in assessing: 

• disproportionate cost increases to some manufacturers;

• increased proportion of fixed costs potentially increasing business risks; and 

• potential barriers to market entry (e.g., proprietary technologies).

12.3.1.7 Product Utility and Innovation 

DOE conducts an assessment of anti-competitive effects of proposed standards in 

order to protect the interests of the consumer. During the interviews, DOE solicits 

information to understand if amended standards could result in disproportionate 

economic or performance penalties for particular consumer/user sub-groups.

DOE also asks manufacturers if amended energy conservation standards could 

result in products that will be more or less desirable to consumers due to changes in 

product functionality, utility, or other features. 

Amended energy conservation standards may require investment in conversion 

costs, including research and development (R&D). This required spending may force a 

manufacturer to reduce funding usually allocated to product innovation. Amended energy 

conservation standards may also force manufacturers to eliminate innovative energyconsuming features from their products. During the interviews, DOE requests 

information on the effect of proposed standards on innovation. 

12.3.1.8 Impact on Small Manufacturers

DOE will consider the possibility of small businesses being affected by the 

promulgation of amended energy conservation standards for residential dehumidifiers. 

Should any small business manufacturers be identified, DOE will study the potential 

impacts on these small businesses in greater detail during the MIA.

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12.3.1.9 Cumulative Regulatory Burden

While any one regulation may not impose a significant burden on manufacturers, 

the combined effects of several impending regulations may have serious consequences 

for some manufacturers, groups of manufacturers, or entire industries. Assessing the 

impact of a single regulation may overlook this cumulative regulatory burden. 

Expenditures associated with meeting other regulations are an important aspect of 

DOE’s consideration of the “cumulative regulatory burden” the industry faces. The 

interviews help DOE identify the level and timing of investments manufacturers are 

expecting to incur as a result of these regulations. Manufacturers are also asked under 

what circumstances they might be able to coordinate expenditures related to these 

regulations and efficiency standards. 

In addition to the amended energy conservation standards for residential 

dehumidifiers, several other Federal regulations and pending regulations apply to these 

products. DOE will investigate these cumulative regulatory burdens in greater detail 

during the NOPR phase of the rulemaking. 

12.4 RESIDENTIAL DEHUMIDIFIER PRELIMINARY MIA RESULTS

During the preliminary MIA interview, manufacturers identified key issues 

surrounding DOE’s rulemaking for residential dehumidifiers and provided feedback 

regarding the potential impact of amended energy conservation standards. DOE 

summarized the feedback below. 

12.4.1 Key Issues

One of the central questions of the preliminary analysis manufacturer interview 

guide is: “What are the key issues for your company regarding the residential 

dehumidifier energy conservation standards rulemaking?” This open question initiated 

dialogue with manufacturers, enabling them to identify key points that DOE would 

explore and discuss during the interview. This section describes the key issues 

manufacturers felt were of the highest importance and that would have the most 

significant impact on the industry. Manufacturers indicated that, for the most part, the 

risks associated with these issues increase with more stringent energy conservation 

standards. The issues are overall concerns that many manufacturers expressed and in 

some cases, are specific to a given product class.

Residential dehumidifier manufacturers cited concerns regarding a number of 

issues that are covered in greater detail elsewhere in this chapter. Detailed descriptions of 

these manufacturer concerns are provided in the appropriate sections that follow; only 

brief descriptions are provided here. 

• Impacts of higher selling prices – A number of manufacturers cited that the higher 

selling prices necessitated by increased manufacturing costs would be detrimental 

to the industry, and could effectively price-out a segment of the dehumidifier 

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consumers. Price increases could be particularly severe in the whole-home 

segment due to the two-tier distribution structure. 

• Application constraints for whole-home manufacturers – A manufacturer of 

whole-home dehumidifiers noted that size constraints exist for certain wholehome dehumidifier applications, which limit the ability to make higher efficiency 

products. 

• Impacts on consumer utility – Manufacturers of residential dehumidifiers believe 

that increased product efficiency will come at a cost to product size, noise level, 

and performance at low temperatures. 

The other issues of key importance to manufacturers are the conversion costs associated 

with new efficiency standards and disproportionate impacts on small businesses. 

12.4.2 Profitability, Product Mix, and Shipments

DOE asked manufacturers during the preliminary manufacturer interviews about 

trends in shipments absent amended energy conservation standards as well as about how 

amended energy conservation standards would affect their overall shipments, 

profitability, and product mix. 

One portable dehumidifier manufacturer stated that overall shipments of portable 

dehumidifiers have declined by at least 40 percent since 2007. Absent amended 

standards, two manufacturers believe that small regional climate changes (i.e., rain and 

flooding) will have the greatest impact on the residential dehumidifier market, while 

another manufacturer believes that changing building practices, including increased 

emphasis on sensible load and HVAC system optimization, will increase the demand for 

dehumidifiers in the home. Another manufacturer expressed concerns that increased 

efficiency of residential cooling products could have negative impacts on the demand for 

dehumidifiers. 

Nearly all manufacturers stated that amended energy conservation standards 

would have a negative impact on total industry shipments, although the magnitude of the 

decrease would depend on the efficiency levels chosen. Two manufacturers emphasized 

that the residential dehumidifier market, particularly the portable segment, is a highly 

price-competitive market in which pricing has a large impact on sales. Three 

manufacturers affirmed that increased production costs can only be passed through to a 

certain point, after which demand would decline. Relatedly, one of these manufacturers 

suggested that consumers may opt to rent units as-needed, instead of buying one, as price 

increases. Another manufacturer noted that its margins decreased following the last 

standard, as it was not able to fully pass on cost increases to retailers. 

Among portable manufacturers, it was generally felt that small increases in 

manufacturer production costs on the order of 5 percent to 10 percent are tolerable. 

However, manufacturers affirmed that a cost increase of 25 percent would have major 

impacts on the portable dehumidifier market. According to manufacturers interviewed, a 

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cost increase of 50 percent or more would cause the market to collapse entirely. A wholehome dehumidifier manufacturer stated that a 10-percent increase in cost would have 

significant impact on the whole-home market because any increases in manufacturer 

production costs are magnified due to the two-tiered distribution channel that is 

characteristic of the whole-home market.

Additionally, in some homes, whole-home dehumidifiers must fit into a small 

attic space. If amended energy conservation standards for whole-home products cannot 

be met within the size constraints associated with this type of application, part of the 

whole-home market segment may move to portable products, shifting the product mix of 

the industry at large and adversely impacting whole-home segment shipments and 

revenues.

12.4.3 Market Share and Industry Consolidation 

Portable dehumidifier manufacturers have differing views of the impact of 

conservation standards on manufacturer market share and industry consolidation. One 

manufacturer expects that the industry will consolidate in order to share the burden of 

costs associated with compliance. Another manufacturer believes market shares will 

remain relatively stable, but overall industry profits will decline, as manufacturers are 

forced to internalize some of the increased production costs in order to maintain demand. 

Yet another manufacturer sees new energy conservation standards as an opportunity to 

develop new technology and ultimately improve its competitive position. 

In the whole-home segment, absent energy conservation standards, one 

manufacturer commented that it does not expect consolidation between the whole-home 

and portable dehumidifier market segments because of the fact that the two markets have 

entirely different distribution channels. However, with new standards, and because 

portable dehumidifier manufacturers are generally larger, more diversified and better able 

to handle absorbing cost increases, this manufacturer fears that a portion of the wholehome consumer base may switch to higher-capacity portable units. This would have a 

negative impact on whole-home manufacturer market share relative to the entire 

residential dehumidifier industry.

12.4.4 Conversion Costs, Manufacturing Capacity, and Employment Levels 

DOE asked manufacturers what level of conversion costs they anticipate if 

amended energy conservation standards were to take effect. Manufacturers said that 

conversion costs would be significant if amended standards require new product 

platforms, in the form of increased product envelope size. One manufacturer estimated 

that total conversion costs associated with changes to product envelopes would be ten 

times the cost of adjustments that do not require changes to chassis size. The cost of such 

changes varies by manufacturer, depending on the volume of production and the mix of 

capital, tooling, and engineering investments required. The magnitude of conversion 

costs also depends on whether the manufacturer produces its own products or imports 

them. One importer noted that it takes on a portion of the capital conversion costs of its

OEM based on the portion of the OEM’s production that it imports. Manufacturers 

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indicated potential per product conversion costs could range from 0.5 million dollars to 1 

million dollars. 

12.4.5 Impact on Innovation and Product Utility 

Several manufacturers expressed concerns that stringent energy efficiency 

standards could have a negative impact on product characteristics and performance from 

the consumer standpoint. 

 Manufacturers cited multiple points of impact brought about by stricter 

standards including price, size, noise level, and product performance at low temperatures. 

Manufacturers agree that amended standards would increase the costs of residential 

dehumidifiers across the board. Manufacturers also believe that the price increases would 

force some lower income customers out of the market altogether, and may force some 

middle income customers to rent dehumidifiers, as needed, when moisture issues arise. 

Some manufacturers also raised concern over the need for residential dehumidifiers to 

become physically larger to deliver the same moisture removal capacity at the new 

efficiency standard. As such, for customers with significant space constraints, amended 

standards may inhibit these customers from getting the product that best fits their needs. 

For example, relating to the market for whole-home dehumidifiers, a growing segment of 

the market (southern homes) has size constraints in the form of small attic spaces, so a 

new efficiency standard might prevent them from buying a whole-home dehumidifier 

and/or force them to accept a lower-capacity unit. 

Regarding product innovation, one manufacturer believes that stringent energy 

efficiency standards would decrease consumer-focused product innovation by diverting 

finite human and capital resources. In contrast, another manufacturer affirms nonefficiency innovation is purely market driven and, in the residential dehumidifier market,

consumers are only concerned with price. This manufacturer cites the market rejection of 

liquid desiccant technology as an example. Finally, another manufacturer believes that

new efficiency standards will cause manufacturers to produce better quality products 

overall. 

12.4.6 Cumulative Burdens 

Based on its own research and discussions with manufacturers, DOE identified 

the following regulations relevant to residential dehumidifiers, including: 

• standards for other products made by residential dehumidifier manufacturers; and 

• third-party certification requirements. 

Complying with such regulations requires corporations to invest both human and 

capital resources. The following subsections discuss in greater detail regulations affecting 

the residential dehumidifiers industry. 

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12.4.6.1 Standards for Other Products Made by Residential Dehumidifier

Manufacturers

In addition to the efficiency regulations for residential dehumidifiers, several 

other Federal regulations and pending regulations apply to other products manufactured 

by the companies that manufacture residential dehumidifiers. Several of these companies 

also manufacture residential air-conditioning and laundry equipment. In July of 2013, 

DOE published a notice of proposed determination regarding portable air conditioners. If 

DOE issues a final determination that portable air-conditioners are a covered product, 

DOE may prescribe test procedures and energy conservation standards for portable airconditioners. For residential clothes washers, DOE published a notice of effective date 

and compliance dates for the direct final rule in October 2012. For residential clothes 

washers, DOE published a new standard in 2011 and a new test procedure in 2013. 

Other Federal conservation standards that may impact manufacturers of 

residential dehumidifiers include the standard for residential furnaces, central air 

conditioners and heat pumps, the standard for residential furnace fans, and the standard 

for packaged terminal air conditioners and heat pumps. 

12.4.6.2 Third-Party Certification Programs 

Several manufacturers were concerned with the fact that changes in the DOE 

energy conservation standards, and the resulting re-design of their equipment, would 

require them to re-certify all of their equipment with other organizations aside from DOE. 

This would include re-testing and certification by Underwriters Laboratories (UL).

Additionally, one manufacturer cited increasing requirements of “big box” 

retailers, which are a crucial component in the portable dehumidifier distribution channel, 

as a cumulative burden. Retailers such as Walmart and Home Depot have adopted their 

own certification systems for suppliers in efforts relating to quality assurance and the 

fulfillment of “ethical sourcing” commitments.b,c 

12.4.7 Impact on Small Manufacturers

The Small Business Administration (SBA) defines small business manufacturing 

enterprises for North American Industry Classification System (NAICS) code 335210, 

Small Electrical Appliance Manufacturing as companies with 750 or less employees and 

code 333415, Air-Conditioning and Warm Air Heating Equipment and Commercial and 

b For more information on Home Depot’s supplier requirements, please see: 

https://homedepotlink.homedepot.com/enus/Related%20Documents/Import%20Supplier%20Handbook%20092811.pdf

c For more information on Walmart’s supplier requirements, please see: 

http://cdn.corporate.walmart.com/0e/ca/52eda3d84f828f82da0e9a02f021/standards-for-suppliersmanual_129833075555266802.pdf

12-12

 
Industrial Refrigeration Equipment Manufacturing, as companies with 750 or less 

employees. SBA lists small business size standards that are matched to industries as they 

are described in the NAICS. The size standard defines the maximum allowable size of a 

for-profit small business for Federal Government programs. Size standards are generally 

based on the average annual receipts or the average number of employees at a firm. 

Initial research and manufacturer interviews indicated that the majority of wholehome manufacturers are small businesses, under the above definition. In general, due to 

the more limited product offerings of these manufacturers relative to larger, more 

diversified portable dehumidifier manufacturers and the low-volume nature of the wholehome dehumidifier market, it is believed that DOE efficiency standards will place a 

disproportionate burden on these businesses. 

DOE will study the potential impacts to these small businesses in greater detail 

during the NOPR phase of this energy conservation standards rulemaking for residential 

dehumidifiers.

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