NATIONAL ENERGY SAVINGS

James E. McMahon, LBNL

DOE Workshop

November 9-10, 1998

1 >

EE-RM-97-900 COMMENT 38MM
Discussion Topics

* Water heater shipments

* Fuel switching

* Consumer marginal energy rates

* Energy price trends

* Primary energy conversion factors

* Economic factors: elasticities

2

EE-RM-97-900 COMMENT 38MM
Historical Water Heater Shipments

9

8 Total Elec. & Gas

7 , .._ Gas Water Heaters

Elec. Water Heaters

3 U,^^< ' " t ' (^ y'V)., '* ^ -

: ' ' ' *

16 'i . I S s( !" _ ,' /, /. /

.o_ O

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Year

3

3/11-12/98

EE-RM-97-900 COMMENT 38MM
New housing construction

* 1.3-2.1 million housing units are added

per year

* >90-95% have residential storage water

heaters of the type and size under

consideration for new standards

* New housing accounts for 1-2 million

residential storage water heaters per year

* 16-20% of annual residential water heater

shipments are to new housing, depending

on the year

EE-RM-97-900 COMMENT 38MM
Life expectancy of water heaters

* Electric water heaters have lifetimes

ranging from 4 to 19 years

(12 year average)

* Gas water heaters have lifetimes ranging

from 3 to 15 years (9 year average)

* Using lifetime distributions and historical

shipments, the replacement market is

estimated to account for 72-88% of total

shipments, depending on the year

5

EE-RM-97-900 COMMENT 38MM
Actual and Estimated Shipments

Residential Water Heaters

10

Total Shipments (Actual)

8

4~ - . ;- v

. S 2 ' ^ ^ : i -- F X t*i* ° New Housing (est.) I . .

2 - - a Replacement (est.) . |p; |.. :

61981 1981 1984 1987 19;9099 19931996 1993 199,

EE-RM-97-900 COMMENT 38MM
Estimates are within 10% of Actual

Total Shipments (100%) 110%

100% - - -

90%

80%

70%

60%

50% '

40% ___

a New Housing (est.)

30% " ''

,20% ".:, ,:: :: 1;" ;I .i: ' :' ':"' Replacements (est.) ' ..- : ;

20% . , ;.

10% . ;' , ' . , ,. ' ' .' : ', ..- , ' ' ' ',

0%

1981 1984 1987 1990 1993 1996

7

EE-RM-97-900 COMMENT 38MM
Water heater shipments:

fuel shares

* Gas has highest share 53-56% (1986-1996)(includes LPG)

* Electric is second 44-47% (1986-1996)

* Oil shares are low <1% (1969-1986)

100%

g 80% o Gas

.E D Electric

'¢"5~~~~~~~ ·~Oil ~ 

m 60%

C

C

0 40%

. 20%

0%, ,.. .,,,,,,- . I .. .. , , ........

1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 8

8

EE-RM-97-900 COMMENT 38MM
Regional fuel shares

* In existing homes, % with gas water heater:

- U.S. 52% (unchanged from 1987-1995)

- Northeast Increased 3%

- South Decreased 3%

* Gas availability, utility company programs, and

conversions from/to other fuels are likely

contributing factors to regional changes.

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EE-RM-97-900 COMMENT 38MM
Fuel switching

* Reasons: fuel availability, changes in relative

energy costs, utility programs, other factors

* In the period 1986-1996, American Gas

Association reports between 148,000 and

311,000 housing units annually converted from

another fuel to natural gas househeating.

* If the trend in water heating is similar, this

represents 2-4% of total water heater shipments,

or 3-7% of gas water heater shipments.

10

EE-RM-97-900 COMMENT 38MM
Consumer Economic Factors

* Operating expense: typically $100-300 per year,

depending upon fuel type, energy prices, and hot

water usage

· Purchase expenses: typically about $320-370,

including water heater retail price plus installation

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EE-RM-97-900 COMMENT 38MM
Elasticities for water heaters

* An elasticity is the percent change in a quantity

(such as shipments or market share) associated

with a percent change in a driving factor

* Driving factors may include:

- Operating expense

- Purchase expense

* Previous research indicated that market shares

by fuel types were related to operating expenses:

- Own-elasticities: elec, oil -1; gas -0.7; LPG, -0.5

- Cross-elasticities (share of one fuel as a function of

operating expense of a different fuel): 0 to 0.55

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EE-RM-97-900 COMMENT 38MM
Equipment price elasticities

* Historical data on water heater prices is lacking

* Derive equipment price elasticity from operating expense

elasiticity

* Eq = Eo (Equipment price) / (Operating expense x PWF)

- Eq = equipment price elasticity

- Eo = operating expense elasticity

- PWF = present worth factor

-= (/r) (1-(1 +r) -n)

- r = discount rate

- n = life expectancy

* Result depends on assumed equipment price and

discount rate

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EE-RM-97-900 COMMENT 38MM
Discount rates and elasticities

* Previous research assumed discount rates of 12-

15% real, and obtained equipment price (own)

elasticities of -0.1 to -0.7

* If consumer discount rates are much higher,

equipment price (own) elasticities are higher, -0.5

to -2.4.

* This is a significant area requiring further

research.

· Interim results use sensitivity analysis to

characterize a range from low to high discount

rates. 4

EE-RM-97-900 COMMENT 38MM
Interim results:

Projected shipments

Projections are within 10% of historical total

shipments of water heaters, based on:

- replacement (historical shipments and life expectancy

of existing water heaters)

- new housing construction

* Fuel shares are expected to depend on:

- fuel availability

- operating expenses

- installed costs

- utility programs

* New factors may include:

- cost for mitigation of gas vapor ignition

- future energy prices

- new energy efficiency standards

EE-RM-97-900 COMMENT 38MM
Projected electric water heater

shipments

9

8

History Projected

~7 Historical (1951-1996)

A Calculated (1981-2030)

6 .. .. Calculated without elasticities

0,

34

3 I2'

/'

I . ... , . * (.. 

O --r-i -r-' [-T- -rl-'-'-[ [ X r T I r X i 'I r l | s-I- II' I r r [ i T r I T- r Tl I vT I I ' I 'l ''I'

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

16

EE-RM-97-900 COMMENT 38MM
Comparison of projections:

electric water heater shipments

6

4=

. 3

j * Actual

2 * GAMA

- Appl. Mag.

o- Accounting

0 T i x , T - - - T r T ~ ' v' I I T 1 ' -" , X-- -~ - --------r T I

1990 1995 2000 2005 2010 2015 2020 2025

Year

17

EE-RM-97-900 COMMENT 38MM
Projected gas water heater

shipments

9

8 D

History Projected

Historical (1951-1996)

A-Calculated (1981-2030)

.. -.. Calculated without elasticities

5

2 '

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 1818

EE-RM-97-900 COMMENT 38MM
Comparison of projections:

gas water heater shipments

8

7

6

4

3 * Actual

* GAMA

- Appl. Mag.

~1 - ~~~~~~o Accounting

0 - f r- - I I -- - r- I r ----- r

1990 1995 2000 2005 2010 2015 2020 2025

Year

19

EE-RM-97-900 COMMENT 38MM
PRELIMINARY BASE CASE RESULTS

National Energy Savings Spreadsheet

for Residential Water Heaters

20

EE-RM-97-900 COMMENT 38MM
Projected water heater shipments

15

10

IO

21

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Projected water heater saturations

by fuel type

1.0

0.9

0.8

0.7

Electric

0.6

_- ...... Gas

0.5

0.4 a

0.3

1995 2000 2005 2010 2015 2020 2025 2030

Year

22

EE-RM-97-900 COMMENT 38MM
Projected Primary Energy Consumption:

Residential Water Heaters, Base Case

4.0

3.5

3.0

2.5

2.0

1.5 -A-Ar

o o..... ^(-....o C-( ) -(-... v Total

0.5 Electric Water Heaters 0.5

A-o-_ Gas Water Heaters

0.0 -1I I I I I I ' I 1 -1- '- - f -' I ', I- r - I

1995 2000 2005 2010 2015 2020 2025 2030

Year

23

EE-RM-97-900 COMMENT 38MM
Projected Consumer Expenditures:

Residential Electric Water Heaters,

Base Case

18

16

12

10

4- Operating Cost

8

6P -· Equipment Expenditure 6

1995 2000 2005 2010 2015 2020 2025 2030

Year

24

EE-RM-97-900 COMMENT 38MM
Projected Consumer Expenditures:

Residential Gas Water Heaters,

Base Case

18

16

14 -*-Operating Cost

12 -A- Equipment Expenditure

o

102 

Year

6

4

1995 2000 2005 2010 2015 2020 2025 2030

Year

25

EE-RM-97-900 COMMENT 38MM