### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS TABLE OF CONTENTS
8.1 INTRODUCTION

.............................................................................................. 8-1 8.1.1 General Approach for LCC and PBP Analysis

................................................................ 8-1 8.1.2 Overview of LCC and PBP Inputs

................................................................................... 8-3 8.1.3 New Construction and Replacement Fractions of Heating Product Shipments

............ 8-11 8.2 TOTAL INSTALLED COST INPUTS

.............................................................. 8-12 8.2.2 Water Heaters

................................................................................................................. 8-13 8.2.2.1 Baseline Manufacturer Cost

......................................................................... 8-13 8.2.2.2 Standard-Level Manufacturer Cost Increases

.............................................. 8-14 8.2.2.3 Overall Markup

............................................................................................ 8-15 8.2.2.4 Installation Cost

........................................................................................... 8-16 8.2.2.5 Total Installed Cost

...................................................................................... 8-22 8.2.3 Direct Heating Equipment

............................................................................................. 8-24 8.2.3.1 Baseline Manufacturer Cost

......................................................................... 8-24 8.2.3.2 Standard-Level Manufacturer Cost Increases

.............................................. 8-24 8.2.3.3 Overall Markup

............................................................................................ 8-25 8.2.3.4 Installation Cost

........................................................................................... 8-26 8.2.3.5 Total Installed Cost

...................................................................................... 8-27 8.2.4 Gas-Fired Pool Heaters

.................................................................................................. 8-29 8.2.4.1 Baseline Manufacturer Cost

......................................................................... 8-29 8.2.4.2 Standard-Level Manufacturer Cost Increases

.............................................. 8-29 8.2.4.3 Overall Markup

............................................................................................ 8-30 8.2.4.4 Installation Cost

........................................................................................... 8-30 8.2.4.5 Total Installed Cost

...................................................................................... 8-31 8.3 OPERATING COST INPUTS -- OVERVIEW

................................................... 8-32 8.4 ANNUAL ENERGY CONSUMPTION

............................................................. 8-34 8.4.1 Accounting for the Rebound Effect

............................................................................... 8-34 8.5 ENERGY PRICES AND ENERGY PRICE TRENDS

........................................ 8-35 8.5.1 Residential Natural Gas Prices

....................................................................................... 8-35 8.5.2 Residential Electricity Prices

......................................................................................... 8-36 8.5.3 Residential Oil Prices

..................................................................................................... 8-37 8.5.4 Residential LPG Prices

.................................................................................................. 8-38 8.5.5 Energy Price Trends

....................................................................................................... 8-39 8.6 MAINTENANCE AND REPAIR COSTS

......................................................... 8-41 8.6.1 Water Heaters

................................................................................................................. 8-42 8.6.1.1 Gas-Fired Storage Water Heaters

................................................................ 8-42 8.6.1.2 Electric Storage Water Heaters

.................................................................... 8-42 8.6.1.3 Oil-Fired Storage Water Heaters

................................................................. 8-43 8.6.1.4 Gas-Fired Instantaneous Water Heaters

.......................................................8-43 8.6.2 Gas-Fired Pool Heaters

.................................................................................................. 8-44 8.6.3 Direct Heating Equipment

............................................................................................. 8-44 8.7 PRODUCT LIFETIME

..................................................................................... 8-45 8.7.1 Water Heaters

................................................................................................................. 8-45 8-i

### 8.7.2 Direct Heating Equipment

............................................................................................. 8-47 8.7.3 Gas-Fired Pool Heaters

.................................................................................................. 8-47 8.8 DISCOUNT RATES

......................................................................................... 8-48 8.8.1 Discount Rate for New Home Products

......................................................................... 8-48 8.8.2 Discount Rate for Replacement Products

...................................................................... 8-49 8.9 EFFECTIVE DATE OF ENERGY CONSERVATION STANDARDS

............... 8-52 8.10 PRODUCT ENERGY EFFICIENCY IN THE BASE CASE

............................... 8-52 8.10.1 Water Heaters

................................................................................................................. 8-53 8.10.2 Direct Heating Equipment

............................................................................................. 8-54 8.10.3 Gas-Fired Pool Heaters

.................................................................................................. 8-55 8.11 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

............................. 8-56 8.11.1 Water Heaters

................................................................................................................. 8-57 8.11.1.1 Base Case LCC Distributions

...................................................................... 8-57 8.11.1.2 Standard-Level Distributions of LCC Impacts

............................................8-58 8.11.1.3 Standard-Level PBP Distributions

............................................................... 8-60 8.11.1.4 LCC and PBP Results

.................................................................................. 8-62 8.11.2 Gas-Fired Pool Heaters

.................................................................................................. 8-69 8.11.2.2 Standard-Level Distributions of LCC Impacts

............................................8-70 8.11.2.3 Standard-Level PBP Distributions

............................................................... 8-70 8.11.2.4 LCC and PBP Results

.................................................................................. 8-71 8.11.3 Direct Heating Equipment

............................................................................................. 8-73 8.11.3.1 Base Case LCC Distributions

...................................................................... 8-73 8.11.3.2 Standard-Level Distributions of LCC Impacts

............................................8-75 8.11.3.3 Standard-Level PBP Distributions

............................................................... 8-77 8.11.3.4 LCC and PBP Results

.................................................................................. 8-79 8.12 REBUTTABLE PAYBACK PERIOD

............................................................... 8-86 8.12.1 Approach...

.................................................................................................................... 8-86 8.12.2 Inputs......

...................................................................................................................... 8-86 8.12.3 Results......

.................................................................................................................... 8-87 LIST OF TABLES Table 8.1.1 Water Heaters: LCC and PBP Input Summary

.............................................. 8-6 Table 8.1.2 Direct Heating Equipment: LCC and PBP Input Summary

........................... 8-8 Table 8.1.3 Gas-Fired Pool Heaters: LCC and PBP Input Summary

............................. 8-10 Table 8.1.4 Fraction of Shipments Going to New Construction and Replacement Applications

................................................................................................. 8-11 Table 8.2.1 Inputs for Total Installed Cost

..................................................................... 8-12 Table 8.2.2 Water Heaters: Baseline Manufacturer Costs

.............................................. 8-14 Table 8.2.3 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost Increases

....................................................................................................... 8-14 Table 8.2.4 Electric Storage Water Heaters: Standard-Level Manufacturer Cost Increases

....................................................................................................... 8-15 Table 8.2.5 Oil-Fired Storage Water Heaters: Standard-Level Manufacturer Cost Increases

....................................................................................................... 8-15

8-ii

### Table 8.2.6 Gas-Fired Instantaneous Water Heaters: Standard-Level Manufacturer Cost Increases

.............................................................................................. 8-15 Table 8.2.7 Water Heaters: Overall Markups

................................................................. 8-16 Table 8.2.8 Average Installation Cost for Gas-Fired Storage Water Heaters

................. 8-17 Table 8.2.9 Average Installation Cost for Electric Storage Water Heaters

.................... 8-19 Table 8.2.10 Average Installation Cost for Oil-Fired Storage Water Heaters

.................. 8-20 Table 8.2.11 Average Installation Cost for Gas-Fired Instantaneous Water Heaters

....... 8-22 Table 8.2.12 Gas-Fired Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost

...................................................................... 8-22 Table 8.2.13 Electric Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost

...................................................................... 8-23 Table 8.2.14 Oil-Fired Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost

...................................................................... 8-23 Table 8.2.15 Gas-Fired Instantaneous Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost

................................................... 8-23 Table 8.2.16 Direct Heating Equipment: Baseline Manufacturer Cost

............................ 8-24 Table 8.2.17 Gas Wall Fan DHE: Standard-Level Manufacturer Cost Increases

............. 8-24 Table 8.2.18 Gas Wall Gravity DHE: Standard-Level Manufacturer Cost Increases

...... 8-24 Table 8.2.19 Gas Floor DHE: Standard-Level Manufacturer Cost Increases

................... 8-25 Table 8.2.20 Gas Room DHE: Standard-Level Manufacturer Cost Increases

.................. 8-25 Table 8.2.21 Direct Heating Equipment: Overall Markups

.............................................. 8-26 Table 8.2.22 Average Installation Cost for Gas Wall Fan DHE

....................................... 8-26 Table 8.2.23 Average Installation Cost for Gas Wall Gravity DHE

................................. 8-27 Table 8.2.24 Average Installation Cost for Gas Floor DHE

............................................. 8-27 Table 8.2.25 Average Installation Cost for Gas Room DHE

............................................ 8-27 Table 8.2.26 Gas Wall Fan DHE: Consumer Product Price, Installation Cost, and Total Installed Cost

...................................................................................... 8-28 Table 8.2.27 Gas Wall Gravity DHE: Consumer Product Price, Installation Cost, and Total Installed Cost

............................................................................... 8-28 Table 8.2.28 Gas Floor DHE: Consumer Product Price, Installation Cost, and Total Installed Cost

............................................................................................... 8-28 Table 8.2.29 Gas Room DHE: Consumer Product Price, Installation Cost, and Total Installed Cost

............................................................................................... 8-29 Table 8.2.30 Gas-Fired Pool Heaters: Baseline Manufacturer Cost

................................. 8-29 Table 8.2.31 Gas-Fired Pool Heaters: Standard-Level Manufacturer Cost Increases

...... 8-30 Table 8.2.32 Gas-Fired Pool Heaters: Overall Markups

................................................... 8-30 Table 8.2.33 Average Installation Cost for Pool Heaters

................................................. 8-31 Table 8.2.34 Gas-Fired Pool Heaters: Consumer Product Price, Installation Cost, and Total Installed Cost

............................................................................... 8-32 Table 8.3.1 Inputs for Operating Cost

............................................................................. 8-32 Table 8.5.1 Average Annual Residential Natural Gas Prices

......................................... 8-36 Table 8.5.2 Average Annual Residential Electricity Prices

............................................ 8-37 Table 8.5.3 Annual Average Residential Oil Prices

....................................................... 8-38 Table 8.5.4 Average Annual Residential LPG Prices

..................................................... 8-39 Table 8.7.1 Water Heaters: Product Lifetime Estimates and Sources

............................ 8-46

8-iii

### Table 8.7.2 Water Heaters: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis

................................................................................. 8-47 Table 8.7.3 Direct Heating Equipment: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis

.................................................... 8-47 Table 8.7.4 Gas-Fired Pool Heaters: Product Lifetime Estimates and Sources

.............. 8-47 Table 8.7.5 Gas-Fired Pool Heaters: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis

................................................................. 8-48 Table 8.8.1 Data Used to Calculate Real Effective Mortgage Rates

.............................. 8-49 Table 8.8.2 Average Shares of Considered Household Debt and Equity Types

............ 8-50 Table 8.8.3 Average Nominal Interest Rates for Household Debt

................................. 8-50 Table 8.8.4 Average Real Effective Interest Rates for Household Debt Types

.............. 8-51 Table 8.8.5 Average Nominal and Real Interest Rates for Household Equity Types

..... 8-51 Table 8.8.6 Shares and Interest or Return Rates Used for Household Debt and Equity Types

................................................................................................ 8-52 Table 8.10.1 Water Heaters: Base Case Energy Efficiency Market Shares

..................... 8-54 Table 8.10.2 Direct Heating Equipment: Energy Efficiency Market Shares in the Base Case

..................................................................................................... 8-55 Table 8.10.3 Gas-Fired Pool Heaters: Energy Efficiency Market Share by Ignition Type in the Base Case

.................................................................................. 8-55 Table 8.11.1 Gas-Fired Storage Water Heaters: LCC and PBP Results

........................... 8-63 Table 8.11.2 Electric Storage Water Heaters: LCC and PBP Results

.............................. 8-64 Table 8.11.3 Oil-Fired Water Heaters: LCC and PBP Results

......................................... 8-64 Table 8.11.4 Gas-Fired Instantaneous Water Heaters: LCC and PBP Results

................. 8-64 Table 8.11.5 Gas-Fired Pool Heaters: LCC and PBP Results

.......................................... 8-72 Table 8.11.6 Gas Wall Fan DHE: LCC and PBP Results

................................................. 8-80 Table 8.11.7 Gas Wall Gravity DHE: LCC and PBP Results

........................................... 8-80 Table 8.11.8 Gas Floor DHE: LCC and PBP Results

....................................................... 8-81 Table 8.11.9 Gas Room DHE: LCC and PBP Results

...................................................... 8-81 Table 8.12.1 Water Heaters: Rebuttable Payback Periods

................................................ 8-87 Table 8.12.2 Gas-Fired Pool Heaters: Rebuttable Payback Periods

................................. 8-87 Table 8.12.3 Direct Heating Equipment: Rebuttable Payback Periods

............................ 8-87 LIST OF FIGURES Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

................. 8-5 Figure 8.5.1 Residential Natural Gas Price Trends in AEO2008

..................................... 8-40 Figure 8.5.2 Residential Electricity Price Trends in AEO2008

....................................... 8-40 Figure 8.5.3 Residential Oil Price Trends in AEO2008

................................................... 8-41 Figure 8.5.4 Residential LPG Price Trends in AEO2008

................................................ 8-41 Figure 8.11.1 Gas-Fired Storage Water Heaters: Base Case LCC Distribution

................. 8-57 Figure 8.11.2 Electric Storage Water Heaters: Base Case LCC Distribution

.................... 8-57 Figure 8.11.3 Oil-Fired Storage Water Heaters: Base Case LCC Distribution

.................. 8-58 Figure 8.11.4 Gas-Fired Instantaneous Water Heaters: Base Case LCC Distribution

....... 8-58 Figure 8.11.5 Gas-Fired Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 2

........................................................................................ 8-59

8-iv

### Figure 8.11.6 Electric Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 4

........................................................................................ 8-59 Figure 8.11.7 Oil-Fired Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 5

........................................................................................ 8-60 Figure 8.11.8 Gas-Fired Instantaneous Water Heaters: Distribution of LCC Impacts for Efficiency Level 5

.................................................................................. 8-60 Figure 8.11.9 Gas-Fired Storage Water Heaters: Distribution of PBPs for Efficiency Level 2

......................................................................................................... 8-61 Figure 8.11.10 Electric Storage Water Heaters: Distribution of PBPs for Efficiency Level 4

......................................................................................................... 8-61 Figure 8.11.11 Oil-Fired Storage Water Heaters: Distribution of PBPs for Efficiency Level 5

......................................................................................................... 8-62 Figure 8.11.12 Gas-Fired Instantaneous Water Heaters: Distribution of PBPs for Efficiency Level 5

........................................................................................ 8-62 Figure 8.11.13 Range of LCC Savings for Gas-Fired Storage Water Heaters

..................... 8-65 Figure 8.11.14 Range of LCC Savings for Electric Storage Water Heaters

........................ 8-66 Figure 8.11.15 Range of LCC Savings for Oil-Fired Storage Water Heaters

...................... 8-66 Figure 8.11.16 Range of LCC Savings for Gas-Fired Instantaneous Water Heaters

........... 8-67 Figure 8.11.17 Range of Payback Periods for Gas-Fired Storage Water Heaters

................ 8-67 Figure 8.11.18 Range of Payback Periods for Electric Storage Water Heaters

................... 8-68 Figure 8.11.19 Range of Payback Periods for Oil-Fired Storage Water Heaters

................. 8-68 Figure 8.11.20 Range of Payback Periods for Gas-Fired Instantaneous Water Heaters

...... 8-69 Figure 8.11.21 Gas-Fired Pool Heaters: Base Case LCC Distribution

................................ 8-69 Figure 8.11.22 Gas-Fired Pool Heaters: Distribution of LCC Impacts for Efficiency Level 4

......................................................................................................... 8-70 Figure 8.11.23 Gas-Fired Pool Heaters: Distribution of PBPs for Efficiency Level 4

........ 8-71 Figure 8.11.24 Range of LCC Savings for Gas-Fired Pool Heaters

.................................... 8-72 Figure 8.11.25 Range of Payback Periods in Years for Gas-Fired Pool Heaters

................. 8-73 Figure 8.11.26 Gas Wall Fan DHE: Base Case LCC Distribution

....................................... 8-73 Figure 8.11.27 Gas Wall Gravity DHE: Base Case LCC Distribution

................................ 8-74 Figure 8.11.28 Gas Floor DHE: Base Case LCC Distribution

............................................. 8-74 Figure 8.11.29 Gas Room DHE: Base Case LCC Distribution

............................................ 8-75 Figure 8.11.30 Gas Wall Fan DHE: Distribution of LCC Impacts for Efficiency Level 3

.................................................................................................................... 8-76 Figure 8.11.31 Gas Wall Gravity DHE: Distribution of LCC Impacts for Efficiency Level 3

......................................................................................................... 8-76 Figure 8.11.32 Gas Floor DHE: Distribution of LCC Impacts for Efficiency Level 3

........ 8-77 Figure 8.11.33 Gas Room DHE: Distribution of LCC Impacts for Efficiency Level 4

....... 8-77 Figure 8.11.34 Gas Wall Fan DHE: Distribution of PBPs for Efficiency Level 3

.............. 8-78 Figure 8.11.35 Gas Wall Gravity DHE: Distribution of PBPs for Efficiency Level 3

........ 8-78 Figure 8.11.36 Gas Floor DHE: Distribution of PBPs for Efficiency Level 3

..................... 8-79 Figure 8.11.37 Gas Room DHE: Distribution of PBPs for Efficiency Level 4

................... 8-79 Figure 8.11.38 Range of LCC Savings for Gas Wall Fan DHE

........................................... 8-82 Figure 8.11.39 Range of LCC Savings for Gas Wall Gravity DHE

.................................... 8-82 Figure 8.11.40 Range of LCC Savings for Gas Floor DHE

................................................. 8-83 Figure 8.11.41 Range of LCC Savings for Gas Room DHE

................................................ 8-83 8-v

### Figure 8.11.42 Range of Payback Periods for Gas Fan Wall DHE...................................... 8-84 Figure 8.11.43 Range of Payback Periods for Gas Wall Gravity DHE ............................... 8-84 Figure 8.11.44 Range of Payback Periods for Gas Floor DHE............................................ 8-85 Figure 8.11.45 Range of Payback Periods for Gas Room DHE........................................... 8-85

8-vi

### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 8.1 INTRODUCTION This chapter describes the Department of Energy (DOE)’s methodology for analyzing the economic impacts of possible energy conservation standards on individual consumers. The effect of energy conservation standards on individual consumers includes a change in operating expense (usually decreased) and a change in purchase price (usually increased). This chapter describes three metrics DOE used in the consumer analysis to determine the effect of energy conservation standards on individual consumers:

• Life-cycle cost (LCC) is the total consumer expense over the life of an appliance, including purchase expense and operating costs (including energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the equipment.

• Payback period (PBP) measures the amount of time it takes consumers to recover the estimated higher purchase price of more energy efficient equipment through lower operating costs.

• Rebuttable payback period is a special case of the PBP. Where LCC and PBP are estimated over a range of inputs reflecting actual conditions, rebuttable payback period is based on laboratory conditions, specifically DOE test procedure inputs. Results for the LCC and PBP analysis are presented in section 8.11, while the rebuttable PBP is discussed in section 8.12. Key variables and calculations are presented for each metric. DOE performed the calculations discussed here using a series of Microsoft Excel spreadsheets which are accessible on the Internet at (http://www.eere.energy.gov/buildings/appliance_standards/). Details and instructions for using the spreadsheets are discussed in Appendix 8-H, User Instructions for the LCC Analysis Spreadsheet. 8.1.1 General Approach for LCC and PBP Analysis Life-cycle cost is the total consumer expense over the life of an appliance, including purchase expense and operating costs (including energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the equipment. DOE defines LCC by the following equation:

N 

### OC LCC = IC +

# ∑ t t 

## (1+ r

## ) Where: t=1



### LCC = Life-cycle cost in dollars, IC = Total installed cost in dollars, 8-1

### ∑ = Sum over the lifetime, from year 1 to year N, N = Lifetime of appliance in years, OC = Operating cost in dollars, r = Discount rate, and t = Year for which operating cost is being determined. The payback period is the amount of time it takes the consumer to recover the estimated higher purchase expense of more energy efficient equipment as a result of lower operating costs. Numerically, the PBP is the ratio of the increase in purchase expense (i.e., from a less energy efficient design to a more energy efficient design) to the decrease in annual operating expenditures. This type of calculation is known as a “simple” payback period, because it does not take into account changes in operating expense over time or the time value of money; i.e., the calculation is done at an effective discount rate of zero percent. The equation for PBP is:
Δ IC PBP = ΔOC Where:


### ΔIC = Difference in the total installed cost between the more energy efficient design and the baseline design, and 

### ΔOC = difference in annual operating expenses. Payback periods are expressed in years. Payback periods greater than the life of the product indicate that the increased total installed cost is not recovered with the reduced operating expenses. Because DOE gathered most of its data for the LCC and PBP analysis in 2007, DOE expresses dollar values in 2007$. Recognizing that several inputs to the determination of consumer LCC and PBP are either variable or uncertain, DOE conducted the LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. A detailed explanation of the use of probability distributions is included in this chapter. DOE developed LCC and PBP spreadsheet models incorporating both Monte Carlo simulation and probability distributions by using Microsoft Excel spreadsheets combined with Crystal Ball (a commercially available add-in program). In addition to characterizing several of the inputs to the analysis with probability distributions, DOE also developed a sample of individual households that use each of the appliances. By developing household samples, DOE was able to perform the LCC and PBP calculations for each household to account for the variability in energy consumption and/or energy price associated with each household. As described in Chapter 7, Energy Use Determination, DOE used the DOE Energy Information Administration (EIA)’s 2001 Residential 8-2

### Energy Consumption Survey (RECS) to develop household samples for each of the above three 1 

### products. By using RECS, DOE was able to assign a unique annual energy use and/or energy price to each household in the sample. Due to the large sample of households considered in the LCC and PBP analysis, the range of annual energy use and/or energy prices is quite large (the actual ranges of energy consumption were presented and discussed in Chapter 5). Thus, although the annual energy use and/or energy prices are not uncertain for any particular household, their variability across all households contributes to the range of LCCs and PBPs calculated for any particular energy conservation standard level. DOE displays the LCC and PBP results as distributions of impacts compared to the baseline conditions. Results are presented at the end of this chapter and are based on 10,000 samples per Monte Carlo simulation run. To illustrate the implications of the analysis, DOE generated a frequency chart depicting the variation in LCC and PBP for each energy conservation standard level considered. 

### 8.1.2 Overview of LCC and PBP Inputs The LCC is the total consumer expense over the life of the equipment, including purchase expense and operating expense (including energy expenditures). DOE discounts future operating expenses to the time of purchase and sums them over the lifetime of the equipment. The PBP is the change in purchase expense due to an increased energy conservation standard divided by the change in annual operating expense that results from the energy conservation standard. It represents the number of years it will take the consumer to recover the increased purchase expense through decreased operating expenses. DOE categorizes inputs to the LCC and PBP analysis as follows: (1) inputs for establishing the purchase expense, otherwise known as the total installed cost, and (2) inputs for calculating the operating cost. The primary inputs for establishing the total installed cost are:

• 

### Baseline manufacturer cost: The costs incurred by the manufacturer to produce equipment meeting existing minimum energy conservation standards.

• 

### Standard-level manufacturer cost increases: The change in manufacturer cost associated with producing equipment to meet a particular energy conservation standard level.

• 

### Markups and sales tax: The markups and sales tax associated with converting the manufacturer cost to a consumer equipment price. The markups and sale tax are described in detail in Chapter 6, Markups to Determine Product Price.

• 

### Installation cost: The cost to the consumer of installing the equipment. The installation cost represents all costs required to install the equipment other than the marked-up consumer equipment price. The installation cost includes labor, overhead, and any 8-3

### miscellaneous materials and parts. Thus, the total installed cost equals the consumer equipment price plus the installation cost. The primary inputs for calculating the operating cost are:

• 

### Energy consumption: The energy consumption is the site energy use associated with operating the equipment. Chapter 7, Energy Use Determination, details how DOE determined the equipment energy consumption based on various data sources.

• 

### Energy efficiency: The product energy efficiency dictates the equipment energy consumption associated with standard-level equipment (i.e., equipment with energy efficiencies greater than baseline equipment). Chapter 7, Energy Use Determination, details how energy consumption changes with increasing equipment energy efficiency.

• 

### Energy prices: Energy prices are the prices paid by consumers for energy (i.e., electricity, gas, or oil). DOE determined current energy prices based on data from the DOE- EIA.

• 

### Energy price trends: DOE used the EIA

### Annual Energy Outlook (AEO) 2008 to forecast energy prices into the future. For the results presented in this chapter, DOE used the 

### AEO2008 reference case to forecast future energy prices.

• 

### Repair and maintenance costs: Repair costs are associated with repairing or replacing components that have failed. Maintenance costs are associated with maintaining the operation of the equipment.

• 

### Lifetime: The age at which the equipment is retired from service.

• 

### Discount rate: The rate at which DOE discounted future expenditures to establish their present value. The data inputs to PBP are the total installed cost of the equipment to the consumer for each energy efficiency level and the annual (first year) operating expenditures for each energy conservation standard level. The inputs to the total installed cost are the equipment price and the installation cost. The inputs to the operating costs are the annual energy cost, the annual repair cost, and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except that energy price trends and discount rates are not required. Since the PBP is a “simple” payback, the required energy price is only for the year in which a new energy conservation standard is to take effect. The energy price DOE used in the PBP calculation was the price projected for that year. Discount rates are also not required for the simple PBP calculation. Figure 8.1.1 graphically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. In the figure below, the yellow boxes indicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the final outputs (the LCC and PBP).

8-4Baseline Manufacturer Cost Std-Level Manufacturer Cost
Manufacturer Markup
Retailer or Distributor

Markup

Sales Tax Installation Cost

Energy Consumption Equipment Price

Lifetime Operating Expense Annual Energy Expense

Lifetime Repair and Maintenance Cost Discount Rate
Energy Price Trends Annual Operating Expense Payback Period Life-Cycle Cost

Energy Prices Total Installed Cost



### Figure 8.1.1	 Flow Diagram of Inputs for the Determination of LCC and PBP Tables 8.1.1 through 8.1.3 summarize the input values that DOE used to calculate the LCC and PBP for the three types of heating products. Each table summarizes the total installed cost inputs and the operating cost inputs including the lifetime, discount rate, and energy price trends. DOE characterized all of the total cost inputs with single-point values, but characterized several of the operating cost inputs with probability distributions that capture the input’s uncertainty and/or variability. For those inputs characterized with probability distributions, the values provided in the following tables are the average or typical values. Also listed in the following tables is the section of the technical support document (TSD) where more detailed information on the inputs can be found.

8-5

### Table 8.1.1 Water Heaters: LCC and PBP Input Summary Input Product Class Average or Typical Value Characterization TSD Chapter Reference Total Installed Cost Inputs
Baseline Manufacturer Cost Gas-Fired storage-type 40 gal = $160 Single-Point Value 8 Electric storage-type 50 gal = $122 8 Oil-Fired storage-type 32 gal = $510 8 Gas-Fired Instantaneous 199 Kbtu/h = $225 8

Standard-Level Manufacturer Cost Increase Gas-Fired storage-type (40 gal) 0.62 EF = $7.00 0.63 EF = $15.0 0.64 EF = $116 0.65 EF = $123 0.66 EF = $131 0.77 EF = $265 Single-Point Value 8

Electric storage-type (50 gal) 0.91 EF = $6.00 0.92 EF = $10.0 0.93 EF = $14.0 0.94 EF = $22.0 0.95 EF = $38.0 2.20 EF = $368 Single-Point Value 8

Oil-Fired storage-type (32-gal) 0.54 EF = $8.00 0.56 EF = $19.0 0.58 EF = $29.0 0.60 EF = $24.0 0.62 EF = $37.0 0.66 EF = $30.0 0.68 EF = $41.0 Single-Point Value 8

Gas-Fired Instantaneous (199 Kbtu/h) 0.69 EF = $10.0 0.78 EF = $45.0 0.80 EF = $118 0.82 EF = $136 0.84 EF = $154 0.85 EF = $163 0.92 EF = $418 Single-Point Value 8

Manufacturer Markup Storage Water Heaters 1.38 Single-Point Value 6 Gas-Fired Instantaneous 1.45 Single-Point Value 6 Retailer Markup All Baseline=1.45; Incremental=1.15 Single-Point Value 6

Distributor Markup Gas-Fired, Oil-Fired Storage WH, Gas-Fired Instantaneous WH Baseline = 1.35; Incremental = 1.11 Single-Point Value 6
Electric Storage WH Baseline = 1.28; Incremental = 1.10 Single-Point Value 6 Contractor Markup All 1.10 Single-Point Value 6 Builder Markup All Baseline = 1.31; Incremental = 1.26 Single-Point Value 6 Sales Tax All 1.068 Variability based on region 6 Installation Cost Gas-Fired storage-type $601 Single-Point Value 8 8-6(baseline) Electric storage-type $409 8 Oil storage-type $625 8 Gas-Fired Instantaneous $987 8 Operating Cost Inputs
Annual Energy Use (baseline)* Gas-Fired storage-type Gas = 16.9 MMBtu Variability determined from household sample. 7 Electric storage-type Elec = 2,703 kWh 7 Oil-Fired storage-type Oil = 19.4 MMBtu Elec = 56 kWh 7 Gas-Fired Instantaneous Gas = 16.9 MMBtu 7
Energy Prices All Elec = 10.88 ¢/kWh Gas = 11.89 $/MMBtu Oil = 15.15 $/MMBtu LPG= 25.64 $/MMBtu Variability based on region. 8

Repair and Maintenance Costs (baseline) Gas-Fired storage-type Repair = $94 Maintenance = $0 Repair-variability based on product failure Maintenance - Single-Point Value 8 Electric storage-type Repair = $0 Maintenance = $0 8 Oil-Fired storage-type Repair = $0 Maintenance = $153 8
Gas-Fired Instantaneous Repair = $147 Maintenance = $85 8

Lifetime Gas-Fired storage-type 12 years Weibull distribution = 7 to 20 years 8 Electric storage-type 14 years Weibull distribution = 6 to 20 years 8 Oil-Fired storage-type 9 years Weibull distribution = 5 to 13 years 8
Gas-Fired Instantaneous 20 years Weibull distribution = 8 to 30 years 8

Discount Rate Gas-Fired storage-type 4.0% Custom distribution 8 Electric storage-type 5.9% 8 Oil-Fired storage-type 4.0% 8 Gas-Fired Instantaneous 5.3% 8 Energy Price Trend All AEO2008 Reference Case Two sensitivities: High & Low Growth Cases 8
* Annual use provided for baseline product only. Annual use decreases with increased product energy efficiency.

8-7

### Table 8.1.2 Direct Heating Equipment: LCC and PBP Input Summary Input Product Class Average or Typical Value Characterization TSD Chapter Reference Total Installed Cost Inputs
Baseline Manufacturer Cost Gas Wall Fan DHE 74% AFUE = $355 Single-Point Value 8 Gas Wall Gravity DHE 64% AFUE = $198 Single-Point Value 8 Gas Floor DHE 57% AFUE = $338 Single-Point Value 8 Gas Room DHE 64% AFUE = $221 Single-Point Value 8

Standard-Level Manufacturer Cost Increase Gas Wall Fan DHE 75% AFUE = $27.0 76% AFUE = $41.0 77% AFUE = $58.0 80% AFUE = $113 Single-Point Value 8

Gas Wall Gravity DHE 66% AFUE = $26.0 68% AFUE = $33.0 71% AFUE = $61.0 72% AFUE = $86.0 75% AFUE = $139 Single-Point Value 8

Gas Floor DHE 58% AFUE = $15.0 61% AFUE = $30.0 62% AFUE = $45.0 65% AFUE = $72.0 78% AFUE = $130 Single-Point Value 8

Gas Room DHE 65% AFUE = $16.0 66% AFUE = $31.0 67% AFUE = $46.0 68% AFUE = $61.0 70% AFUE = $86.0 78% AFUE = $140 93% AFUE = $331 Single-Point Value 8

Manufacturer Markup All 1.38 Single-Point Value 6 Distributor Markup All Baseline=1.35; Incremental=1.11 Single-Point Value 6
Contractor Markup All Baseline=1.32; Incremental=1.32 Single-Point Value 6
Builder Markup All Baseline=1.31; Incremental=1.26 Single-Point Value 6 Sales Tax All 1.075 Single-Point Value 6

Installation Cost (baseline) Gas Wall Fan DHE $793 Single-Point Value 8 Gas Wall Gravity DHE $793 8 Gas Floor DHE $1118 8 Gas Room DHE $793 8 Operating Cost Inputs Annual Gas Usage* Gas Wall Fan DHE 27.1 MMBtu Variability determined from household sample. 7 Gas Wall Gravity DHE 29.6 MMBtu 7 Gas Floor DHE 30.4 MMBtu 7 8-8Gas Room DHE 22.0 MMBtu 7

Annual Electric Usage* Gas Fan DHE 35 kWh Variability determined from household sample. 7 Gas Wall Gravity 0 kWh 7 Gas Floor DHE 0 kWh 7 Gas Room DHE 0 kWh 7
Energy Prices All Elec = 10.98 ¢/kWh Gas = 12.17 $/MMBtu LPG = 25.97 $/MMBtu Oil = 16.05 $/MMBtu Variability based on region 8

Repair and Maintenance Costs (baseline, average) Gas Wall Fan DHE Repair =$323 Maintenance = $43 Repair-variability based on product failureMaintenance - SinglePoint Value 8 Gas Wall Gravity DHE Repair =$131 Maintenance = $43 8
Gas Floor DHE Repair =$131 Maintenance = $43 8
Gas Room DHE Repair =$131 Maintenance = $43 8
Lifetime All 15 years Uniform distribution = 10 to 20 years 8

Discount Rate Gas Wall Fan DHE 8.7% Custom distribution 8 Gas Wall Gravity DHE 2.5% 8 Gas Floor DHE 8.7% 8 Gas Room DHE 2.5% 8 Energy Price Trend All AEO2008 Reference Case Two sensitivities: High & Low Growth Cases 8 * Annual use provided for baseline product only. Annual consumption decreases with increased product energy efficiency.

8-9

### Table 8.1.3 Gas-Fired Pool Heaters: LCC and PBP Input Summary Input Average or Typical Value Characterization TSD Chapter Reference Total Installed Cost Inputs Baseline Manufacturer Cost 0.78 Et (pilot) = $520 0.78 Et (elect. Ignt.) = $523 Single-Point Value 8

Standard-Level Manufacturer Cost Increase 79% Et (pilot) = $11 79% Et (electr. Ignt.) = $11 81% Et (pilot) = $24 81% Et (electr. Ignt.) = $24 82% Et (pilot) = $39 82% Et (electr. Ignt.) = $55 83% Et (pilot) = $128 83% Et (electr. Ignt.) = $125 84% Et (pilot) = $144 84% Et (electr. Ignt.) = $141 86% Et (pilot) = $171 86% Et (electr. Ignt.) = $168 90% Et (pilot) = $383 90% Et (electr. Ignt.) = $380 95% Et (pilot) = $441 95% Et (electr. Ignt.) = $438 Single-Point Value 8

Manufacturer Markup 1.38 Single-Point Value 6 Distributor Markup Baseline = 1.35; Incremental = 1.11 Single-Point Value 6 Contractor Markup Baseline = 1.10; Incremental = 1.10 Single-Point Value 6 Builder Markup (assumed same as homebuilders) Baseline = 1.31; Incremental = 1.26 Single-Point Value 6

Sales Tax 1.066 Variability based on region 6 Installation Cost (baseline) $1,150 Single-Point Value 8 Operating Cost Inputs Annual Gas Usage* 53.8 MMBtu Variability based on usage 7 Annual Electricity Usage* 2 kWh Variability based on usage 7
Energy Prices Elec = 10.98 ¢/kWh Gas = 12.17 $/MMBtu LPG = 25.97 $/MMBtu Oil = 16.05 $/MMBtu Variability based on region 8

Repair and Maintenance Costs (baseline) Repair = $27 Maintenance = $29 Repair-variability based on product failure Maintenance - Single-Point Value 8
Lifetime 6 years Weibull distribution = 3 to 20 years 8 Discount Rate 4.0% Custom distribution 8 Energy Price Trend AEO2008 Reference Case Two sensitivities: High & Low Growth Cases 8 ** Annual use provided for baseline product only. Annual use decreases with increased product energy efficiency. 8-10

### 8.1.3 New Construction and Replacement Fractions of Heating Product Shipments The LCC and PBP analysis uses separate values for new construction applications and replacement applications for some variables, as the type of application influences these variables. Such variables are markups, installation costs, and discount rates. The derivation of the appropriate values in each case for new construction applications and replacement applications is given in Chapter 6 for markups, and in this chapter for installation costs and discount rates. The analysis requires assignment of the values for new construction applications and replacement applications to specific households in the household sample for each heating product. For water heaters and pool heaters, DOE based the assignment on the estimated fractions of shipments going to new construction and replacement applications in the effective year from the Shipments Analysis (see Chapter 9). For direct heating equipment, the Shipments Analysis does not separately estimate shipments for these two market segments. DOE estimated that for floor furnaces all shipments go to replacements and for the remaining DHE products 90 percent go to replacements. For the vented gas fireplace heaters that DOE added to the gas wall fan DHE and gas room DHE product classes (see discussion in Chapter 9), DOE estimated that half of the shipments go to new construction and half to replacements. Table 8.1.4 shows the fractions used in the analysis for each heating product. To best approximate newly-built homes, DOE assigned the values associated with new construction applications to RECS housing units that were built in the 1996-2001 period. 

### Table 8.1.4	 Fraction of Shipments Going to New Construction and Replacement Applications Heating Product Share of Replacement Applications (%) Share of New Construction Applications (%) Water Heaters Gas-Fired Storage Electric Storage Oil-Fired Storage Gas-Fired Instantaneous 80 80 85 70 20 20 15 30 Pool Heaters 67 33* DHE Gas Wall Fan Gas Wall Gravity Gas Floor Gas Room 82 90 100 58 18 10 0 42 * These values include the pool heaters for new homes (7%) as well as those for “first-time owners” in existing homes (26%).

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### 8.2 TOTAL INSTALLED COST INPUTS DOE defines the total installed cost using the following equation: IC = EQP + INST Where:


### IC = Total installed cost, and 

### EQP = Equipment price (i.e., consumer price for the equipment only), expressed in dollars, and 

### INST = Installation cost or the consumer price to install equipment (i.e., the cost for labor and materials), also in dollars. The equipment price is based on how the consumer purchases the equipment. As discussed in Chapter 6, Markups to Determine Product Price, DOE defined markups and sales taxes for converting manufacturing costs into consumer equipment prices. Table 8.2.1 summarizes the inputs for the determination of total installed cost. 

### Table 8.2.1 Inputs for Total Installed Cost Baseline Manufacturer Cost Standard-Level Manufacturer Cost Distribution Chain Markups Sales Tax (replacement applications) Installation Cost
The 

### baseline manufacturer cost is the cost incurred by the manufacturer to produce equipment meeting existing minimum energy conservation standards. 

### Standard-level manufacturer cost increases are the change in manufacturer cost associated with producing equipment at an energy conservation standard level. 

### Markups and sales tax convert the manufacturer cost to a consumer equipment price. The 

### installation cost is the cost to the consumer of installing the equipment and represents all costs required to install the equipment other than the marked-up consumer equipment price. The installation cost includes labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals the consumer equipment price plus the installation cost. DOE calculated the total installed cost for baseline products based on the following equation:


### ICBASE 

### = EQP BASE 

### + INST BASE


### = COST MFG 

### ×MUOVERALL _ BASE 

### + INST BASE 

### Where:

8-12

### IC BASE 

### = Baseline total installed cost, 

### EQPBASE 

### = Consumer equipment price for baseline models, 

### INST BASE 

### = Baseline installation cost, 

### COST MFG 

### = Manufacturer cost for baseline models, and 

### MU OVERALL_BASE 

### = Baseline overall markup (product of manufacturer markup, other markups, and (for replacement applications) sales tax). DOE calculated the total installed cost for standard-level products based on the following equation:


### ICSTD 

### = 

### EQP STD 

### + 

### INST STD



### = 

# ( EQP BASE 

### +

### Δ EQP STD

# )+

# ( INST BASE 

### +

### Δ INST STD

# )

= 

# ( EQP BASE 

### + 

### INST BASE

# )+

# ( Δ

EQP STD 

### +

### Δ INST STD

# )

= 

### ICBASE 

### +

# ( ΔCOST MFG 

### ×

### MUOVERALL _ INCR 

### +

### Δ INST STD

# )

Where:


### IC STD 

### = Standard-level total installed cost, 

### EQPSTD 

### = Consumer equipment price for standard-level models, 

### INST STD 

### = Standard-level installation cost, 

### EQPBASE 

### = Consumer equipment price for baseline models, 

### ΔEQPSTD 

### = Change in equipment price for standard-level models, 

### INST BASE 

### = Baseline installation cost, 

### ΔINST STD 

### = Change in installation cost for standard-level models, 

### IC BASE 

### = Baseline total installed cost, 

### ΔCOST MFG 

### = Change in manufacturer cost for standard-level models, and 

### MU OVERALL_INCR 

### = Incremental overall markup (product of manufacturer markup, other markups, and (for replacement applications) sales tax). The remainder of this section provides information about each of the above input variables that DOE used to calculate the total installed cost for the three heating products. 

### 8.2.2 Water Heaters 8.2.2.1 Baseline Manufacturer Cost DOE developed the baseline manufacturer costs for water heaters as described in Chapter 5, Engineering Analysis. The baseline manufacturer costs are shown in Table 8.2.2.

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### 12 3 4 5 

### Table 8.2.2 Water Heaters: Baseline Manufacturer Costs Product Class Rated Volume (gal) Energy Factor Manufacturer Cost (2007$)* Gas-Fired storage 

### 30 0.61 $151 40 0.59 $160 50 0.58 $169 75 0.53 $195 Electric storage 30 0.93 $102 40 0.92 $ 12 50 0.90 $1 2 66 0.88 $1 7 75 0.86 $1 2 Oil-Fired storage 32 0.53 $ 10 50 0.50 $538 Gas-Fired Instantaneous 0** 0.62 $225

*Values represent 5- yr average cost. ** 199 kbtu/h rated input. 

### 8.2.2.2 Standard-Level Manufacturer Cost Increases DOE developed manufacturer cost increases associated with increases in product energy efficiency levels as described in Chapter 5, Engineering Analysis. Tables 8.2.3 through 8.2.6 present the standard-level manufacturer cost increases for the four product classes. 

### Table 8.2.3	 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost Increases Energy Efficiency Level Manufacturer Cost Increase (2007$) 30 gal 40 gal 50 gal 75 gal 1 4 7 10 19 2 11 15 19 31 3 114 116 120 127 4 119 123 127 137 5 126 131 136 148 6 256 265 266 287

8-141 2 3 4 5 6 

### Table 8.2.4 Electric Storage Water Heaters: Standard-Level Manufacturer Cost Increases Energy Efficiency Level Manufacturer Cost Increase (2007$) 30 gal 40 gal 50 gal 66 gal 75 gal 5 5 6 7 11 9 10 10 13 16 12 13 14 17 21 18 20 22 26 31 31 34 38 45 51 361 364 368 374 380 

### Table 8.2.5 Oil-Fired Storage Water Heaters: Standard-Level Manufacturer Cost Increases Energy Efficiency Level Manufacturer Cost Increase (2007$) 32 gal 50 gal 1 8 8 2 19 21 3 29 28 4 24 28 5 37 41 6 30 29 7 41 42 

### Table 8.2.6 Gas-Fired Instantaneous Water Heaters: Standard-Level Manufacturer Cost Increases Energy Efficiency Level Manufacturer Cost Increase (2007$) 1 10 2 45 3 118 4 136 5 154 6 163 7 418 

### 8.2.2.3 Overall Markup The overall markup is the value determined by multiplying the manufacturer and other markups and the sales tax together to arrive at a single markup value. Table 8.2.7 shows the overall baseline and incremental markups for gas-fired water heaters. Refer to Chapter 6, Markups to Determine Product Price, for details.
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### Table 8.2.7 Water Heaters: Overall Markups
Product Class Baseline Cost Markup Incremental Cost Markup New Construction Replacement New Construction Replacement Gas-Fired Storage 2.56 2.16 1.90 1.74 Electric Storage 2.43 2.11 1.89 1.73 Oil-Fired Storage 2.56 2.16 1.90 1.74 Gas-Fired Instantaneous 2.49 2.29 2.00 1.88


### 8.2.2.4 Installation Cost The installation cost is the cost to the consumer of installing the water heater and is not considered part of the retail price. The cost of installation covers all labor and material costs associated with the replacement of an existing water heater or the installation of a water heater in a new home, as well as delivery, removal, and permit fees. Some design options may require unique installation costs. DOE’s analysis recognizes these potential situations and incorporates the additional costs in the total installation cost for those designs. 

### Gas-fired storage water heater. DOE developed installation costs for gas-fired storage water heaters using data from RS Means and other sources.2, 3, 4, 5, 6 

### For water heaters in new homes, the installation cost includes adding a gas line branch, installing a vent system, and adding water piping, in addition to the cost of putting in place and setting up the new water heater. In the venting costs, DOE accounted for both commonly-vented water heaters (together with a central furnace) and isolated water heaters (separately vented). For replacement cases, the installation cost includes the labor costs for disconnecting and removing the old water heater, removal/disposal fees, permit fees, as well as the cost of putting in place and setting up the new water heater. See Appendix 8-A, Installation Cost Determination, for details. DOE estimated that all installations would require a drain pan. Some houses may require a replacement drain pan of a larger size when a wider (due to increased insulation thickness) water heater is installed. Manufacturers recommend that the drain pan diameter be two inches 2 

### larger than the diameter of the water heater. Therefore, DOE applied on average an additional drain pan cost of $2 to water heater designs with 2-in. insulation. The efficiency levels that include electronic ignition, power vent, and condensing design have an increased installation cost relative to the baseline. For installation of water heaters with electronic ignition, DOE added an additional installation cost. For all new construction, DOE used the cost of the electrical outlet installation from the installation model developed for 3 

### residential furnaces. This approach yields an average cost of about $49 for adding an additional electrical outlet. For replacement installations, DOE added an additional cost for labor and wiring for installing an electrical outlet for houses that do not have electricity close to the water heater. DOE estimated that all households that do not have a gas furnace or boiler would require 4 

### an electrical outlet and calculated the additional cost of the outlet using RS Means. This yields 8-16

### an average cost of $168 for adding an additional electrical outlet. DOE estimated that grounding 5 

### for an electrical outlet is needed for houses build before 1960. This yields an additional average cost of $32 for grounding. The incremental installation cost for the power vent design includes the cost of the electricity outlet and venting requirements. The venting systems are configured to exit a side wall of a dwelling and are composed of plastic vent pipes. For replacement installations, DOE accounted for the installation of a new vent system and, for the commonly vented water heaters, for disconnecting from the existing common system. The installation cost for the condensing design is the same as for the power vent design with the additional cost of the condensate disposal. This approach reflects the currently available condensing water heater design that utilizes a single pipe power vent design. The condensate disposal includes the cost of the condensate neutralizer filter, which is required by some codes. The average and incremental installation costs for gas-fired storage water heaters are shown in Table 8.2.8. 

### Table 8.2.8 Average Installation Cost for Gas-Fired Storage Water Heaters

Energy Efficiency Level EF Description Installation Options Average Installation Cost (2007$)* Incremental Installation Cost (2007$)
0 0.59 Standing Pilot, 1” ins baseline, drain pan $601

-- 1 0.62 Standing Pilot, 1.5” ins baseline, drain pan $601 $0 2 0.63 Standing Pilot, 2” Ins baseline, large drain pan $603 $2 3 0.64 Electronic ignition, 1” ins, power vent baseline, drain pan, electricity, plastic vent $929 $328 4 0.65 Electronic ignition, 1.5” ins, power vent baseline, drain pan, electricity, plastic vent $929 $328 5 0.66 Electronic ignition, 2” ins, power vent baseline, large drain pan, electricity, plastic vent $931 $330 6
0.77 Condensing, 2” ins, power vent baseline, large drain pan, electricity, plastic vent, condensate filter $940 $339 *Average installation cost represents the weighted average cost for replacement and new construction applications. 

### Electric storage water heater. DOE developed installation cost data for electric storage water heaters using data from RS Means and other sources.2, 4, 5, 6 

### Some houses may require a larger drain pan when a wider (due to increased insulation thickness) water heater is installed. For electric water heaters, DOE used the same approach as for gas-fired water heaters, and applied an average drain pan cost of $2 to all water heaters with 2-in. and 2.25-in. insulation, and a cost of close to $6 to all water heaters with 2.25 to 4-in. insulation. In some houses, the original water heater location may be too small to accommodate a replacement water heater of the same rated volume when the new water heater’s insulation thickness is 2.5, 3 or 4 inches. When such space constraints exist, some households are assumed 8-17

### to use the next smaller standard-size water heater, and increase the water heater setpoint to compensate for the lower storage volume. DOE used RECS 2001 to identify which households would have such space constraints. DOE estimated that such constraints would only exist in cases where the water heater is installed in conditioned space (e.g., not in a garage or an unconditioned basement), and the water heater is in a small house or apartment with a floor area of less than 1,000 ft2



### . For houses with space constraints, DOE adjusted the setpoint of the smaller water heater upward so that the total energy content of the water that could be delivered is the same as could have been delivered by the original water heater at a lower temperature. DOE added the cost of a tempering valve if the new setpoint is >140o

### F. DOE used an average cost of close to $22 for adding tempering and check valves. The details of the space constraint approach as well as the tempering valve costs are described in Appendix 8-A, Installation Cost Determination. Efficiency levels that include 3-in. insulation require an additional cost in some replacement applications to account for certain installation impacts (e.g., to disassemble and reassemble doorjambs). DOE added a $219 cost for removal and replacement of door jambs for half of all water heaters located in the indoor conditioned space. Using RECS 2001, DOE determined that 44 percent of water heaters are located in an indoor conditioned space. The average cost for all design options that include 3-in. insulation is $36. For heat pump water heater installation, DOE applied additional labor and materials costs. The labor cost to install a heat pump water heater takes into account one additional hour of 6 

### labor for the extra time to install this equipment. For one-fourth of the replacement installations, DOE included the cost for adding a condensate pump and longer water line to the drain at an average cost $153. Also for indoor replacement installations, DOE added the cost for making adjustments to accommodate the heat pump water heater in the case of space constraints (including adding ventilation using a fully-louvered closet door). DOE estimated that this cost, which averages $346, occurs in half of indoor replacement installations. DOE also applied an additional drain pan cost of $2 to account for the larger 2-in. insulation for this product. The average total additional cost to install a heat pump water heater is $181 in replacement installations, and $71 in new home installations. The average and incremental installation costs for electric storage water heaters at each considered energy efficiency level are shown in Table 8.2.9.

8-18

### Table 8.2.9 Average Installation Cost for Electric Storage Water Heaters Energy Efficiency Level EF Description Installation Options Average Installation Cost (2007$)* Incremental Installation Cost (2007$) 0 0.90 1.5 in (Baseline) Baseline $409

-- 1 0.91 2 in baseline, large drain pan $410 $2 2 0.92 2.25 in baseline, large drain pan $410 $2 3 0.93 2.5 in baseline, large drain pan, tempering valves $431 $23 4 0.94 3 in baseline, large drain pan, tempering valves, space constraints $468 $59 5 0.95 4 in baseline, large drain pan, tempering valves, space constraints $468 $59 6 2.20 Heat Pump Water Heater Integrated Design baseline, large drain pan, space constraints $568 $160 *Average installation cost represents the weighted average cost for replacement and new construction applications. 

### Oil-fired storage water heater. DOE developed installation cost data for the baseline oil2 

### fired water heater using information from the 2001 water heater rulemaking. An oil-fired water heater installation requires hot and cold water connections, oil supply, electrical power connection, a vent connection and an oil-burner that consists of oil pump, blower, ignition device, and controls. All design options that have 2 and 2.5 in. insulation and that require specialized venting at higher energy efficiency may incur an additional installation cost. Residential oil-fired water heaters are typically sold and installed by local residential heating oil dealers. For the 2001 rulemaking, DOE gathered installation cost information from seven dealers in the northeastern U.S. These data show a very wide range of installation costs, which vary significantly in different areas depending on the size of the markets. The typical installation cost for a new oil-fired water heater ranges from $462 to $981 (2007$), with an average cost of $625. In the 2001 water heater analysis, DOE estimated that there is an additional cost associated with oil-fired water heaters with 2 and 2.5 in. of insulation. For replacement installations, DOE added a cost to account for installing a burner kit, which consists of a longer air tube and a longer nozzle assembly to fit the existing burner to the new wider tank. DOE estimated that 50 percent of the installations will require an oil burner modification kit. DOE applied an average additional installation cost of $23 for designs with 2 and 2.5 in. insulation. For new construction, DOE estimated that there is no additional installation cost.

3 

### Similarly to the analysis performed for residential oil-fired furnaces and boilers (which considered NFPA 31 recommendations), the installation cost for oil-fired water heaters assumes that, depending on the energy efficiency, oil-fired water heaters would be vented using Type L vents or using 316-grade stainless steel vents. All installations using oil-fired water heaters at 0.62 EF or lower that are vented are assumed to use type “L” vents. Following the assumptions 8-19

### in the oil-fired furnaces and boilers rulemaking, this analysis assumes that half of the installations at 0.66 EF and 75 percent of the installations at 0.68 EF will require 316-grade stainless steel vent systems. Based on the furnace and boiler oil-fired equipment analysis, DOE estimated that the 316-grade stainless steel installations cost about 85 percent more than the baseline installations. Table 8.2.10 presents the average installation cost for oil-fired storage water heaters at the different energy efficiency levels. 

### Table 8.2.10 Average Installation Cost for Oil-Fired Storage Water Heaters Energy Efficiency Level EF Description Installation Options Average Installation Cost (2007$)* Incremental Installation Cost (2007$) 0 0.53 Electronic Ignition, 1” ins (fiberglass) Baseline 625

--
1 0.54 Electronic Ignition, 1.5” ins (fiberglass) Baseline 625 0

2 0.56 Electronic Ignition, 2” ins (fiberglass) baseline, burner modification kit 644 19
3 0.58 Electronic Ignition, 2.5” ins (fiberglass) baseline, burner modification kit 644 19

4 0.60 Electronic Ignition, 2” ins (foam) baseline, burner modification kit 644 19

5 0.62 Electronic Ignition, 2.5” ins (foam) baseline, burner modification kit 644 19

6 0.66 Electronic Ignition, 1” ins (fiberglass), enhanced flue baffle baseline, 50% w/ 85% AFUE Venting Adder 889 264

7 0.68 Electronic Ignition, 1” ins (foam), enhanced flue baffle baseline, 75% w/ 85% AFUE Venting Adder 1022 397

*Average installation cost represents the weighted average cost for replacement and new construction applications. 

### Gas-fired instantaneous water heater. DOE developed installation cost data for gas-fired instantaneous water heaters using several sources.2, 3, 5, 6 

### In the analysis, all replacements are assumed to be conversions from gas-fired storage water heaters (this reflects the small number of instantaneous water heaters installed during the 1980s and 1990s and the long lifetime of these products). It can be difficult to use instantaneous water heaters as a replacement technology in some existing homes, since physically accommodating their installation can add considerable 7 

### expense. DOE’s derivation of installation cost does not consider extreme installation configurations. For new construction applications, the installation cost includes adding a gas line branch (since in most cases it is not possible to connect the water heater to the existing house gas line, 8-20

### which is too small), installing a vent system, adding water piping, as well as the cost of putting in place and setting up the new water heater. For replacement cases, the installation cost includes the labor for disconnecting and removing the old water heater, removal/disposal fee, permit fee, as well as the cost of putting in place and setting up the new instantaneous water heater, including the venting system. The analysis for both new construction and replacements assumes Category I vertical venting using non-stainless steel vents. See Appendix 8-A, Installation Cost Determination, for details. The efficiency levels that include electronic ignition, power vent, and condensing design have an increased installation cost relative to the baseline. As it did for gas storage water heaters, for installation of water heaters with electronic ignition DOE added an additional installation cost. For all new construction, DOE used the cost of the electrical outlet installation from the 3 

### installation model developed for residential furnaces. This approach yields an average cost of about $49 for adding an additional electrical outlet. For replacement installations, DOE added an additional cost for labor and wiring for installing an electrical outlet for houses that do not have electricity close to the water heater. DOE estimated that all households that do not have a gas furnace or boiler would require an electrical outlet and calculated the additional cost of the outlet 4 

### using RS Means. This yields an average cost of $168 for adding an additional electrical outlet. 5 

### DOE estimated that grounding for an electrical outlet is needed for houses build before 1960. This yields an additional average cost of $32 for grounding. The incremental installation cost for the power vent design includes the cost of the electricity outlet and the required venting. The cost reflects Category III horizontal venting using stainless steel vents. For replacement installations, DOE estimated that half of the installations will use vertical vents and half will use horizontal vents. For replacement installations, DOE accounted for the installation of a new vent system, and for commonly-vented water heaters, for disconnecting from the existing common system. The installation cost for the condensing design further includes plastic vents and the cost of the condensate disposal. The average and incremental installation costs for gas-fired instantaneous water heaters are shown in Table 8.2.11.

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### Table 8.2.11 Average Installation Cost for Gas-Fired Instantaneous Water Heaters Energy Efficiency Level EF Description Installation Options Average Installation Cost (2007$)* Incremental Installation Cost (2007$) 0 0.62 Standing pilot (Baseline) Natural Draft Venting $986

-- 1 0.69 Standing Pilot, Improved HX Natural Draft Venting $986 $0 2 0.78 Electronic Ignition, Improved HX Forced Draft Venting, Electricity $1,093 $107 3 0.80 Electronic Ignition, Induced Draft (Power Vent) Forced Draft Venting, Electricity $1,093 $107 4 0.82 Electronic Ignition, Improved HX, Induced Draft (Power Vent) Forced Draft Venting, Electricity $1,093 $107 5 0.84 Electronic Ignition, Improved HX, Induced Draft (Power Vent) Forced Draft Venting, Electricity $1,093 $107 6 0.85 Electronic Ignition, Improved HX, Induced Draft (Power Vent) Forced Draft Venting, Electricity $1,093 $107 7 0.92 Condensing Condensing (plastic venting), Electricity $896 -$89 *Average installation cost represents the weighted average cost for replacement and new construction installations. 

### 8.2.2.5 Total Installed Cost The total installed cost is the sum of the consumer product price and the installation cost. Refer back to section 8.2 to see the equations that DOE used to calculate the total installed cost for baseline and standard-level products. Tables 8.2.12, 8.2.13, 8.2.14, and 8.2.15 present the average consumer product price, installation costs, and total installed costs for each product class. Prices and costs are presented at the baseline level and each considered energy efficiency level. 

### Table 8.2.12	 Gas-Fired Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level Energy Factor Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 0.59 366 601 967 1 0.62 381 601 982 2 0.63 396 603 998 3 0.64 577 929 1,506 4 0.65 590 929 1,519 5 0.66 605 931 1,536 6 0.77 842 940 1,782

8-22

### Table 8.2.13 Electric Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level Energy Factor Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 0.90 253 409 662 1 0.91 263 410 674 2 0.92 271 410 682 3 0.93 278 431 709 4 0.94 291 468 759 5 0.95 318 468 786 6 2.20 906 568 1,475 

### Table 8.2.14 Oil-Fired Storage Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level Energy Factor Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 0.53 1,133 625 1,757 1 0.54 1,147 625 1,771 2 0.56 1,167 644 1,811 3 0.58 1,184 644 1,828 4 0.60 1,176 644 1,820 5 0.62 1,199 644 1,843 6 0.66 1,186 889 2,075 7 0.68 1,205 1,022 2,227 

### Table 8.2.15 Gas-Fired Instantaneous Water Heater: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level Energy Factor Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 0.62 544 986 1,529 1 0.69 563 986 1,549 2 0.78 632 1,093 1,724 3 0.80 775 1,093 1,867 4 0.82 810 1,093 1,902 5 0.84 845 1,093 1,938 6 0.85 863 1,093 1,955 7 0.92 1,361 896 2,258

8-23

### 8.2.3 Direct Heating Equipment 8.2.3.1 Baseline Manufacturer Cost Table 8.2.16 shows the baseline manufacturer cost for each of the four direct heating equipment product classes, estimated as described in Chapter 5, Engineering Analysis. 

### Table 8.2.16 Direct Heating Equipment: Baseline Manufacturer Cost
Product Class Baseline AFUE Baseline Cost (2007$) Gas Wall Fan DHE 74% 355 Gas Wall Gravity DHE 64% 198 Gas Floor DHE 57% 338 Gas Room DHE 64% 221 

### 8.2.3.2 Standard-Level Manufacturer Cost Increases DOE developed manufacturer cost increases associated with increases in energy efficiency levels of direct heating equipment as described in Chapter 5, Engineering Analysis. Tables 8.2.17, 8.2.18, 8.2.19, and 8.2.20 summarize the standard-level manufacturer cost increases for each direct heating equipment product class. 

### Table 8.2.17 Gas Wall Fan DHE: Standard-Level Manufacturer Cost Increases
Level AFUE Manufacturer Cost Increase (2007$) 1 75% 27 2 76% 41 3 77% 58 4 80% 113 

### Table 8.2.18 Gas Wall Gravity DHE: Standard-Level Manufacturer Cost Increases
Level AFUE Manufacturer Cost Increase (2007$) 1 66% 26 2 68% 33 3 71% 61 4 72% 86 5 75% 139

8-24

### Table 8.2.19 Gas Floor DHE: Standard-Level Manufacturer Cost Increases
Level AFUE Manufacturer Cost Increase (2007$) 1 58% 15 2 61% 30 3 62% 45 4 65% 72 5 78% 130


### Table 8.2.20 Gas Room DHE: Standard-Level Manufacturer Cost Increases
Level AFUE Manufacturer Cost Increase (2007$) 1 65% 16 2 66% 31 3 67% 46 4 68% 61 5 70% 86 6 78% 140 7 93% 331 

### 8.2.3.3 Overall Markup The overall markup is the value determined by multiplying the manufacturer and other markups and the sales tax together to arrive at a single markup value. In turn, DOE multiplied the overall markup by the baseline or standard-level manufacturer cost to arrive at the price paid by the consumer for the product. DOE divided the overall markup into a baseline markup (i.e., a markup used to convert the baseline manufacturer cost into a consumer price) and an incremental markup (i.e., a markup used to convert an incremental manufacturer cost due to a standard level into an incremental consumer price). Table 8.2.21 shows the overall markups for direct heating equipment. Refer to Chapter 6, Markups to Determine Product Price, for details.

8-25

### Table 8.2.21 Direct Heating Equipment: Overall Markups Product Class Replacement Applications New Home Applications Baseline Incremental Baseline Incremental Gas Wall Fan 2.64 2.17 3.22 2.55 Gas Wall Gravity 2.64 2.17 3.22 2.55 Gas Floor 2.64 2.17 3.22 2.55 Gas Room 2.64 2.17 3.22 2.55


### 8.2.3.4 Installation Cost DOE derived baseline installation costs for direct heating equipment using the approach 8 

### from the 1993 TSD. For gas wall gravity DHE, gas floor DHE and gas room DHE, DOE added an additional installation cost for the design options that require electricity. This was done for the replacement market only, since in new construction the wiring is considered part of the general electrical work. This yields an average cost of $168 for adding an additional electrical outlet. 5 

### DOE estimated that grounding for an electrical outlet is needed for houses build before 1960. This yields an average cost of $32 for grounding. Tables 8.2.22, 8.2.23, 8.2.24, and 8.2.25 summarize the average installation costs for each product class. Average installation cost represents the weighted average cost for replacement and new construction applications. 

### Table 8.2.22 Average Installation Cost for Gas Wall Fan DHE Energy Efficiency Level AFUE Description Installation Options Average Installation Cost (2007$) Incremental Installation Cost (2007$) 0 74% Standing Pilot Baseline $793

-- 1 75% Electronic ignition, two-speed blower Baseline $793 $0.00
2 76% Electronic ignition, improved HX Baseline $793 $0.00
3 77% Electronic ignition, two-speed blower, improved HX Baseline $793 $0.00
4 80% Electronic ignition, induced draft Baseline $793 $0.00

8-26

### Table 8.2.23 Average Installation Cost for Gas Wall Gravity DHE Energy Efficiency Level AFUE Description Installation Options Average Installation Cost (2007$) Incremental Installation Cost (2007$) 0 64% Standing pilot Baseline $793

-- 1 66% Standing pilot, improved HX Baseline $793 $0.00 2 68% Standing pilot, improved HX Baseline $793 $0.00 3 71% Standing pilot, improved HX Baseline $793 $0.00 4 72% Electronic ignition Baseline, Electrical Outlet $983 $190
5 75% Induced draft Baseline, Electrical Outlet $983 $190 

### Table 8.2.24 Average Installation Cost for Gas Floor DHE Energy Efficiency Level AFUE Description Installation Options Average Installation Cost (2007$) Incremental Installation Cost (2007$) 0 57% Standing pilot Baseline $1,118

-- 1 58% Standing pilot, improved HX Baseline $1,118 $0.00 2 61% Standing pilot, improved HX Baseline $1,118 $0.00 3 62% Standing pilot, improved HX Baseline $1,118 $0.00 4 65% Electronic ignition, improved HX Baseline, Electrical Outlet $1,309 $190
5 78% Induced draft Baseline, Electrical Outlet $1,309 $190 

### Table 8.2.25 Average Installation Cost for Gas Room DHE Energy Efficiency Level AFUE Description Installation Options Average Installation Cost (2007$) Incremental Installation Cost (2007$) 0 64% Standing Pilot Baseline $793

-- 1 65% Standing pilot, improved HX Baseline $793 $0.00 2 66% Standing pilot, improved HX Baseline $793 $0.00 3 67% Standing pilot, improved HX Baseline $793 $0.00 4 68% Standing pilot, improved HX Baseline $793 $0.00 5 70% Electronic ignition Baseline, Electrical Outlet $971 $178
6 78% Induced draft Baseline, Electrical Outlet $971 $178
7 93% Condensing Baseline, Electrical Outlet $971 $178



### 8.2.3.5 Total Installed Cost The total installed cost is the sum of the consumer product price and the installation cost. Refer back to section 8.2 to see the equations DOE used to calculate the total installed cost for baseline and standard-level products. 8-27

### Tables 8.2.26, 8.2.27, 8.2.28, and 8.2.29 present the consumer product prices, installation costs, and total installed costs for the four direct heating equipment product classes. 

### Table 8.2.26	 Gas Wall Fan DHE: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level AFUE Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 74% 976 793 1,769 1 75% 1,037 793 1,830 2 76% 1,068 793 1,861 3 77% 1,106 793 1,899 4 80% 1,230 793 2,023 

### Table 8.2.27 Gas Wall Gravity DHE: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level AFUE Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 64% 581 793 1,374 1 66% 642 793 1,435 2 68% 659 739 1,452 3 71% 725 793 1,518 4 72% 784 983 1,767 5 75% 909 983 1,893 

### Table 8.2.28 Gas Floor DHE: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level AFUE Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 57% 895 1,118 2,013 1 58% 927 1,118 2,046 2 61% 960 1,118 2,078 3 62% 992 1,118 2,111 4 65% 1,051 1,309 2,360 5 78% 1,177 1,309 2,486

8-28

### Table 8.2.29 Gas Room DHE: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level AFUE Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 64% 637 793 1,430 1 65% 674 793 1,467 2 66% 709 793 1,502 3 67% 744 793 1,537 4 68% 779 793 1,572 5 70% 837 971 1,808 6 78% 963 971 1,933 7 93% 1,407 971 2,378 

### 8.2.4 Gas-Fired Pool Heaters 8.2.4.1 Baseline Manufacturer Cost DOE developed the baseline manufacturer costs for gas-fired pool heaters shown in Table 8.2.30 as described in Chapter 5, Engineering Analysis. 

### Table 8.2.30 Gas-Fired Pool Heaters: Baseline Manufacturer Cost Energy Efficiency Level Manufacturer Cost (2007$) 78% - Standing Pilot 520 78% - Electronic Ignition 523



### 8.2.4.2 Standard-Level Manufacturer Cost Increases DOE developed manufacturing cost increases associated with increases in product energy efficiency levels for gas-fired pool heaters (Table 8.2.31) as described in Chapter 5, Engineering Analysis.

8-29

### Table 8.2.31 Gas-Fired Pool Heaters: Standard-Level Manufacturer Cost Increases Energy Efficiency Thermal Manufacturer Cost Increase (2007$) Level Efficiency Standing Pilot Electronic Ignition 1 79% 11 11 2 81% 24 24 3 82% 39 55 4 83% 128 125 5 84% 144 141 6 86% 171 168 7 90% 383 380 8 95% 441 438 

### 8.2.4.3 Overall Markup The overall markup is the value determined by multiplying the manufacturer and other markups and the sales tax together to arrive at a single markup value. Table 8.2.32 shows the overall baseline and incremental markups for gas-fired pool heaters. Refer to Chapter 6, Markups to Determine Product Price, for details. 

### Table 8.2.32 Gas-Fired Pool Heaters: Overall Markups Replacement Applications New Home Applications Baseline Incremental Baseline Incremental 

### Overall 2.18 1.80 2.44 1.93


### 8.2.4.4 Installation Cost
4 

### DOE derived installation cost data for the baseline pool heater using RSMeans and 9 

### information in a consultant report. There are two design options considered for this analysis that increase the installation cost relative to the baseline: electronic ignition and condensing design. The baseline unit represents a pool heater with a pilot light. For new construction applications, the installation cost includes adding a gas line from the gas meter to the pool heater (in most cases it is not possible to connect the pool heater to the existing house gas line as it is too small). It also includes adding PVC lines from the pool pump to the inlet and outlet water headers of the pool heater (thermal isolation - non - PVC pipe is usually part of this line toprevent pool pump overheating). The installation cost also includes setting, connection and startup fees. For the replacement applications, the installation cost includes disconnecting and removing the old pool heater, putting in place the new unit and reconnecting the gas and PVC lines.

8-30

### For units with electronic ignition, DOE included an additional installation cost to account for adding an electrical line (115V) and a separate junction box. These are needed since the pool heater requires lower amperage than the pool pump. The incremental installation cost for the condensing design includes the cost of the condensate drain piping that goes from the pool heater to a P-trap devicea 

### located at the sewer 9 

### line entrance. Table 8.2.33 shows the average installation cost for pool heaters at each energy efficiency level. Average installation cost represents the weighted average cost for replacement and new constructions. 

### Table 8.2.33 Average Installation Cost for Pool Heaters Energy Efficiency Level EF Description Installation Options Average Installation Cost (2007$) Incremental Installation Cost (2007$) 0 78% Baseline -pilot or elect. Ignition Baseline $1,150

-- 1 79% Improved HX Baseline $1,150 $0.00 2 81% Improved HX Baseline $1,150 $0.00 3 82% Improved HX Baseline $1,150 $0.00 4 83% Power Venting Baseline, Electrical Outlet $1,150 $0.00
5 84% Power Venting, improved HX Baseline, Electrical Outlet $1,173 $23.1
6 86% Sealed Combustion, improved HX Baseline, Electrical Outlet $1,173 $23.1

7 90% Sealed combustion, condensing Baseline, Electrical Outlet, Condensing Adder $1,173 $23.1

8 95% Sealed combustion, condensing, improved HX Baseline, Electrical Outlet, Condensing Adder $1,273 $123



### 8.2.4.5 Total Installed Cost The total installed cost is the sum of the consumer product price and the installation cost. Refer back to section 8.2 to see the equations that DOE used to calculate the total installed cost for baseline and standard-level products. Table 8.2.34 presents the consumer product price, installation costs, and total installed costs for pool heaters at each considered energy efficiency level.

a A “P-trap” is required by many city codes. It helps to isolate the condensate from back-flowing into the pool water and prevents the sewer gas from back-flowing. 8-31

### Table 8.2.34 Gas-Fired Pool Heaters: Consumer Product Price, Installation Cost, and Total Installed Cost Energy Efficiency Level Thermal Efficiency Product Price (2007$) Installation Cost (2007$) Total Installed Cost (2007$) Baseline 78% 1,185 1,150 2,335 1 79% 1,205 1,150 2,356 2 81% 1,229 1,150 2,380 3 82% 1,278 1,150 2,428 4 83% 1,417 1,150 2,567 5 84% 1,446 1,173 2,620 6 86% 1,496 1,173 2,670 7 90% 1,887 1,173 3,060 8 95% 1,993 1,273 3,267



### 8.3 OPERATING COST INPUTS -- OVERVIEW DOE defines the operating cost by the following equation:
OC = 

### EC + 

### RC + 

### MC 

### Where:
EC 

### = Energy expenditure associated with operating the product, RC 

### = Repair cost associated with component failure, and MC 

### = Service cost for maintaining product operation. Table 8.3.1 shows the inputs for determining the operating costs. The inputs listed are also necessary for determining lifetime operating expenses, which include the energy price trends, product lifetime, discount rate, and effective date of the energy conservation standard. 

### Table 8.3.1 Inputs for Operating Cost Annual Energy Consumption Energy Prices and Price Trends Repair and Maintenance Costs Product Lifetime Discount Rate Effective Date of Energy conservation standard
The annual energy consumption 

### is the site energy use associated with operating the product. The annual energy consumption varies with the product energy efficiency. That is, the energy consumption associated with standard-level products is less than the consumption associated with baseline products. Energy prices 

### are the prices paid by consumers for electricity, 8-32__ 

### gas, or oil. Multiplying the annual energy consumption by the appropriate energy prices yields the annual energy cost. DOE used energy price trends 

### to forecast energy prices into the future and, along with the product lifetime and discount rate, to establish the lifetime energy costs. Repair costs 

### are associated with repairing or replacing components that have failed. Maintenance costs 

### are associated with maintaining the operation of the product. Theproduct lifetime 

### is the age at which the product is retired from service. The discount rate 

### is the rate at which DOE discounted future expenditures to establish their present value. DOE calculated the operating cost for baseline products based on the following equation:
OCBASE 

### = 

### ECBASE 

### + 

### RCBASE 

### + 

### MCBASE



### = AECBASE 

### × PRICEENERGY 

### + RCBASE 

### + MCBASE 

### Where:
OC BASE 

### = Baseline operating cost, EC BASE 

### = Energy expenditure associated with operating the baseline product, RC BASE 

### = Repair cost associated with component failure for the baseline product, MC BASE 

### = Cost for maintaining baseline product operation, AEC BASE 

### = Annual energy consumption for baseline product, PRICE ENERGY 

### = Energy price.
DOE calculated the operating cost for standard-level products based on the following equation:


### OCSTD 

### = 

### ECSTD 

### + 

### RCSTD 

### + 

### MCSTD



### = AECSTD 

### × PRICEENERGY 

### + RCSTD 

### + MCSTD



### =

# ( AECBASE 

### Δ AECSTD

# )× PRICEENERGY 

### +

## (RCBASE 

### + Δ RCSTD

## )+

## (MCBASE 

### + Δ MCSTD

## ) Where:
OC STD 

### = Standard-level operating cost, EC STD 

### = Energy expenditure associated with operating standard-level products, RC STD 

### = Repair cost associated with component failure for standard-level products, MC STD 

### = Service cost for maintaining standard-level product operation, AEC STD 

### = Annual energy consumption for standard-level products, PRICE ENERGY 

### = Energy price, 

### Δ

AEC STD 

### = Change in annual energy consumption caused by standard-level products, 

### ΔRC STD 

### = Change in repair cost caused by standard-level products, and 

### ΔMC STD 

### = Change in maintenance cost caused by standard-level products.

8-33

### As the above equations show, DOE multiplied the annual energy consumption by the energy price to derive the energy component of operating costs. For pool heaters and DHE, it used annual average energy prices. For water heaters, DOE estimated energy consumption on a monthly basis, so it developed monthly average energy prices. The following sections provide information about each of the above input variables that DOE used to calculate the operating costs for heating products. 

### 8.4 ANNUAL ENERGY CONSUMPTION Chapter 7, Energy Use Determination, details how DOE determined the annual energy consumption for baseline and standard-level products. As described in Chapter 7 and the beginning of this chapter in section 8.1.1, DOE developed a sample of individual households that use each of the considered products. By developing household samples, DOE was able to account for the variability in both energy use and energy price associated with each household. DOE used RECS 2001 to develop the household samples and, in turn, to establish the variability in annual energy consumption. Refer back to Chapter 7 to review the parameters that define the variability of annual energy consumption for the heating products as well as the annual energy consumption results. 

### 8.4.1 Accounting for the Rebound Effect A rebound effect (also called a take-back effect or offsetting behavior) refers to increased energy consumption that results from actions that increase energy efficiency and reduce consumer costs. The logic behind the rebound effect is that more energy efficient products lower the marginal cost of the end-use service relative to lower energy efficient products. Because the marginal cost of the service is reduced, a service demand response occurs. For example, a home insulation program that reduces heat losses by 50 percent does not usually result in a full 50 percent reduction in energy consumption, because residents of insulated homes find that they can afford to keep their homes warmer. As a result, they reinvest a portion of potential energy savings on comfort. To determine the impact of the rebound effect on energy efficiency improvement for the heating products considered in this rulemaking, DOE searched the literature on the rebound effect, and also considered how the National Energy Modeling System (NEMS), which is used for developing EIA'sAnnual Energy Outlook 

### ( AEO

### ), incorporates a rebound effect. For water heaters, DOE found that NEMS does not incorporate a rebound factor. It reviewed a summary of studies regarding the rebound effect that concluded “technical improvements for residential hot water heating will be between 60 and 90 percent effective in 10 

### reducing energy consumption for this service" (implying a rebound effect of 10-40 percent). Another study examining the rebound effect cites a best-guess value for “other services” (which 11 

### include water heating) of <20 percent, but with a low degree of confidence. Based on the available information, DOE used a rebound effect of 10 percent for all water heaters.

8-34

### For pool heaters, DOE found no mention of a rebound effect in the literature. However, since economic theory suggests that there should be some take-back associated with a reduction in the marginal cost of service, DOE included a rebound effect of 10 percent for pool heaters in its analysis. For direct heating equipment, DOE considered a summary of studies regarding the 10 

### rebound effect in relation to space heating products. Based on five studies chosen for their robust methodology, the summary concluded that, for a 100 percent increase in fuel efficiency, values of "take-back" or rebound for space heating are between 10 and 30 percent of the energy consumption savings. It noted that NEMS incorporates a rebound effect for space heating that results in a 0.15-percent increase in energy consumption for a one-percent increase in energy efficiency. In keeping with the approach in NEMS, DOE chose to apply a rebound effect of 15 percent (for a 100 percent increase in energy efficiency) in its analysis of direct heating equipment energy conservation standards. The take-back in energy consumption associated with the rebound effect provides consumers with increased value (e.g., a warmer indoor environment). The net impact onconsumers is thus the sum of the change in the cost of owning the heating products (i.e., lifecycle cost) and the increased value for the warmer indoor environment. DOE believes that, if it were able to monetize the increased value to consumers added by the rebound effect, this value would be similar in value to the foregone energy savings. For this analysis, DOE estimated that this value is equivalent to the monetary value of the energy savings that would have occurred without the rebound effect. Therefore, the economic impacts on consumers with or without the rebound effect, as measured in the LCC analysis, are the same. 

### 8.5 ENERGY PRICES AND ENERGY PRICE TRENDS Using data from EIA, DOE calculated average annual energy prices for each of 13 geographic areas: the nine U.S. Census divisions, and four large States (New York, California, Texas, and Florida) treated separately. For Census divisions containing one of these large States, DOE calculated the regional average values leaving out data for the large State—for example, the Pacific region average does not include California, and the West South Central region does not include Texas. To be able to examine seasonal prices, DOE developed monthly energy price factors for each fuel. For a detailed discussion of the development of monthly energy price factors, see Appendix 8-E, Monthly Energy Price Factor Calculations. As noted earlier, DOE used RECS to develop a sample of individual households that use each of the appliances. By developing household samples, DOE was able to perform the LCC and PBP calculations for each household to account for the regional variability in energy prices. 

### 8.5.1 Residential Natural Gas Prices
12 

### DOE collected 2006 natural gas prices from EIA’s Natural Gas Navigator, which includes monthly natural gas prices for residential, commercial, and industrial consumers by 8-35

### State. DOE weighted the average residential natural gas prices for each State by the US Census 13 

### Bureau’s 2006 population estimates, and transformed the values from units of $/tcf to $/MMBtu. Finally, DOE aggregated and averaged the prices by 13 geographic areas: the nine US Census Divisions and four large states (Table 8.5.1). 

### Table 8.5.1 Average Annual Residential Natural Gas Prices

Geographic Area Average (2007$/MMBtu) 

### CD 1 - New England 17.63 CD 2 - Middle Atlantic (excludes NY) 16.78 CD 3 - East North Central 12.94 CD 4 - West North Central 13.64 CD 5 - South Atlantic (excludes FL) 18.37 CD 6 - East South Central 16.51 CD 7 - West South Central (excludes TX) 15.48 CD 8 - Mountain 14.09 CD 9 - Pacific (excludes CA) 16.15 CD 10 - New York 15.92 CD 11 - California 11.49 CD 12 - Texas 14.20 CD 13 - Florida 21.83 CD 14 - United States 14.14 

### 8.5.2 Residential Electricity Prices
14 

### DOE collected 2006 electricity prices using EIA Form 861 data. These data are published annually and include annual electricity sales, revenues from electricity sales, and number of consumers, for the residential, commercial, and industrial sectors. DOE calculated regional electricity prices by weighing each utility’s average price by the percentage of the region served, for all utilities. Finally, DOE aggregated and averaged the prices by 13 geographic areas (Table 8.5.2).

8-36

### Table 8.5.2 Average Annual Residential Electricity Prices Geographic Area Average (2007$/kWh) 

### CD 1 - New England 0.165 CD 2 - Middle Atlantic (excludes NY) 0.118 CD 3 - East North Central 0.095 CD 4 - West North Central 0.085 CD 5 - South Atlantic (excludes FL) 0.092 CD 6 - East South Central 0.084 CD 7 - West South Central (excludes TX) 0.092 CD 8 - Mountain 0.093 CD 9 - Pacific (excludes CA) 0.092 CD 10 - New York 0.180 CD 11 - California 0.148 CD 12 - Texas 0.132 CD 13 - Florida 0.117 CD 14 - United States 0.112 

### 8.5.3 Residential Oil Prices
15 

### DOE collected 2006 oil prices from EIA’s Petroleum Navigator, which includes monthly oil prices for residential, commercial, industrial, and transportation consumers by Petroleum Administration for Defense Districts (PADD). The first four PADD follow the US Census Divisions. However, Arizona is not included in the PADD for the Pacific Region and New Mexico is excluded altogether. In addition, data was not provided for the East South Central region, West South Central region, Florida, Texas, and California so national averages were used for these regions. DOE weighted the average residential oil prices for each PADD by 13 

### the US Census Bureau’s 2006 population estimates. DOE then transformed the data in units of cents/gallon to $/MMBtu. Finally, the prices were aggregated and averaged by nine geographic areas (Table 8.5.3). The EIA data do not include taxes, so DOE determined the average tax rate 16 

### for the four Census Regions (Northeast, South, Midwest, and West) and applied it to the annual average data.

8-37

### Table 8.5.3 Annual Average Residential Oil Prices Geographic Area Average (2007$/MMBtu) 

### CD 1 - New England 18.56 CD 2 - Middle Atlantic (excludes NY) 18.62 CD 3 - East North Central 18.57 CD 4 - West North Central 18.39 CD 5 - South Atlantic (includes FL) 17.73 CD 6 - East South Central* 18.66 CD 7 - West South Central * 18.66 CD 8 - Mountain 18.54 CD 9 - Pacific (includes CA) 19.34 CD 10 - New York 19.38 CD 11 - California* 18.66 CD 12 - Texas* 18.66 CD 13 - Florida* 18.66 CD 14 - United States 18.66 *National average 

### 8.5.4 Residential LPG Prices DOE collected 2005 average LPG prices from EIA’s 2005 State Energy Consumption, 17 

### Price, and Expenditures Estimates (SEDS). SEDS includes annual LPG prices for residential, commercial, industrial, and transportation consumers by State. DOE weighted the average 13 

### residential LPG prices for each State by the US Census Bureau’s 2006 population estimates. Finally, DOE aggregated and averaged the prices by 13 geographic areas (Table 8.5.4). The EIA data were collected without taxes, so DOE determined the average tax rate for the four Census 16 

### Regions (Northeast, South, Midwest, and West) and applied it to the annual average data. To present the LPG price data for the same year as the other fuels (2006), DOE scaled the 2005 prices using data inAEO2008 

### (see section 8.5.5).

8-38

### Table 8.5.4 Average Annual Residential LPG Prices Geographic Area Average (2007$/MMBtu) 

### CD 1 - New England 33.90 CD 2 - Middle Atlantic (excludes NY) 32.46 CD 3 - East North Central 25.33 CD 4 - West North Central 22.40 CD 5 - South Atlantic (excludes FL) 30.53 CD 6 - East South Central 28.85 CD 7 - West South Central (excludes TX) 28.93 CD 8 - Mountain 28.29 CD 9 - Pacific (excludes CA) 31.73 CD 10 - New York 31.33 CD 11 - California 32.79 CD 12 - Texas 30.56 CD 13 - Florida 35.29 CD 14 - United States 28.06 

### 8.5.5 Energy Price Trends
18 

### DOE used price forecasts from EIA’s Annual Energy Outlook 2008 ( AEO2008) 

### to estimate the trends in natural gas, oil, and electricity prices. To arrive at prices in future years, it multiplied the average prices described in the preceding section by the forecast of annual average price changes inAEO2008

### . To estimate the trend after 2030, DOE used the average rate of change during 2020–2030 for electricity and the average rate of change during 2015–2030 for natural gas, LPG and oil. DOE calculated LCC and PBP using three separate projections fromAEO2008

### : Reference, Low Economic Growth, and High Economic Growth. The early release ofAEO2008 

### only forecasts the reference case, so DOE calculated the high and low growth price trends based 19 

### on the three scenarios presented inAEO2007

### . These three cases reflect the uncertainty of economic growth in the forecast period. The high and low growth cases show the projected effects of alternative growth assumptions on energy markets. Figures 8.5.1, 8.5.2, 8.5.3 and 8.5.4 show the residential electricity, natural gas, oil and LPG price trends, respectively. For the LCC results presented in this chapter, DOE used only the energy price forecasts from the AEO Reference case.

8-3911.00 11.50 12.00 12.50 13.00 13.50 14.00 14.50

200 5 200 7 200 9 201 1 201 3 201 5 20 17 20 19 20 21 20 23 20 25 2 027 20 29
Year2007$/MMBtu High Grow th Reference Low Grow th



### Figure 8.5.1 Residential Natural Gas Price Trends in AEO2008

9.50 10.00 10.50 11.00 11.50 12.00

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029
Yearcents(2007$)/kWh

High Growth Reference Low Growth



### Figure 8.5.2 Residential Electricity Price Trends in AEO2008

8-4013.00 15.00 17.00 19.00 21.00 23.00

2005 2 007 200 9 2011 2013 20 15 2017 2019 2021 2 023 202 5 2027 2 029
Year2007$/MMBtu High Grow th Reference Low Grow th



### Figure 8.5.3 Residential Oil Price Trends in AEO2008

19.00 21.00 23.00 25.00 27.00 29.00

2005 2007 2009 2011 2013 2015 201 7 2019 2021 2023 2025 2027 2029

Year2007$/MMBtu

High Grow th Reference Low Grow th



### Figure 8.5.4 Residential LPG Price Trends in AEO2008 8.6 MAINTENANCE AND REPAIR COSTS The maintenance cost is the price of regular scheduled product maintenance ($/year). The repair cost is the cost to repair the product when it fails ($/year). These costs cover all labor and material costs associated with the maintenance or repair. The determination of the repair cost involves determining the cost and the service life of the components that are likely to fail. The component lifetime is presented as a distribution.

8-41

### 8.6.1 Water Heaters 8.6.1.1 Gas-Fired Storage Water Heaters DOE did not include any maintenance cost for gas-fired water heaters. Although manufacturers recommend that water heaters be drained and flushed annually to minimize deposition of sediment, maintain operating efficiency, and prolong product life, the available 20 

### evidence indicates that this practice is seldom done. The repair cost reflects the cost for a service call when the product fails. In some cases, if a gas-fired water heater fails, residential consumers tend to replace the unit rather than having it repaired. However, there are four design options considered for the gas-fired water heater analysis that may encounter repair cost during the lifetime of the water heater: pilot ignition, electronic ignition, power vent, and condensing design. The energy efficiency levels that include power vent or condensing design encounter both power vent as well as electronic ignition repair costs. DOE estimated that the repair cost for the pilot ignition, a design option associated with the baseline water heater, is $145, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 21 

### DOE estimated that the repair cost for the electronic ignition (hot surface type) is $187, and that such replacement occurs at most once, on average in the fifteenth year of the product lifetime.8, 21 

### The repair cost of the power vent represents the cost of replacing the fan. DOE estimated that the average fan repair cost is $206, and that the power 21 

### vent fan fails on average in the fifteenth year of operation. 

### 8.6.1.2 Electric Storage Water Heaters DOE determined that there is virtually no maintenance or repair of electric resistance water heaters. For a heat pump water heater, maintenance includes annual cleaning of the air filter and a preventative maintenance cost to check the evaporator and refrigeration system. The literature recommends that no professional help is needed for this maintenance.22, 23 

### DOE believes there are instances in which such help is needed; thus, for certain heat pump water heater installations it added a preventative maintenance cost to check the evaporator and refrigeration system. For locations where the heat pump water heater might be more exposed to the outdoor environment, such as garages and crawlspaces, DOE applied a 5-year preventative maintenance cost based on Australian heat pump water heater outdoor installations24, 25 

### DOE estimated that 27% of these exposed installations would require this maintenance, based on a 26 

### survey conducted for central air conditioners. For heat pump water heaters that are located indoors or in basements, the maintenance requirements are considered to be the same as other similar indoor appliances such as refrigerators and room heaters, which don’t have any additional maintenance costs 8, 27 

### For this maintenance cost, labor hours and costs are based on RS Means4, 28 

### and are equal to $81. The repair cost of the heat pump water heater represents the cost of replacing the compressor and the evaporator fan. The estimated average compressor repair cost is $273 and the
8-42

### estimated average fan repair cost is $124. Based on available information,27, 29 

### DOE estimated that the compressor and the fan fail on average in the 19th year of operation.b 

### Appendix 8-B provides the details of DOE’s accounting of heat pump water heater repair costs. 

### 8.6.1.3 Oil-Fired Storage Water Heaters Oil-fired water heaters and burners are cleaned and maintained regularly. Maintenance is most frequently performed under annual maintenance contracts, which typically includes repairof failed components. These contracts are very common in the northeast, where most of the oilfired heating products are located. DOE estimated the average cost of separate maintenance/repair contracts only for water heaters as $153 per year. This mean value comes from a collection of annual maintenance contract prices, which were gathered from web sites that represent oil-fired product suppliers in the eastern U.S. This cost varies widely, depending on the presence of other oil-fired products in the residence (see Appendix 8-B). Costs may go down if multiple oil-fired appliances in a household are on the same contract. The maintenance contracts apply to all energy efficiency levels. 

### 8.6.1.4 Gas-Fired Instantaneous Water Heaters Gas-fired instantaneous water heaters may incur maintenance costs for addressing the fouling of the heat exchanger from hard water, periodic sensor inspections and filter changes. All manufacturers recommend that these water heaters be de-limed annually to minimize deposition of sediment, maintain operating efficiency and prolong product life. DOE’s analysis used an average maintenance cost of $85 per year for all energy efficiency levels of instantaneous water heaters.7, 30 

### The repair cost for gas instantaneous water heaters is similar to the cost for gas-fired storage water heaters. Design options that may encounter repair cost during the lifetime of the water heater include pilot ignition, electronic ignition, and power vent. DOE estimated that the average repair cost for the pilot ignition, a design option associated with the baseline design, is $145, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 31 

### It estimated that the average repair cost for the electronic ignition is $187, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 31 

### The repair cost of the power vent represents the cost of replacing the fan. The estimated average 31 

### fan repair cost is $206, with fan failure occurring on average in the fifteenth year of operation. The energy efficiency levels that include power vent or condensing design encounter power vent as well as electronic ignition repair cost.

b DOE uses an average lifetime of 14 years for heat pump water heaters (see section 8.7.1). DOE used a lifetime distribution for the compressor and evaporator fan ranging averaging 19 years. In total, around 17 percent of heat pump water heaters encounter this repair, which represents an upper bound. 8-43

### 8.6.2 Gas-Fired Pool Heaters Most pool owners do not perform any pool heater maintenance except when the heater does not come on. In such situations, the maintenance work includes checking controls, cleaning burners, cleaning heat exchanger, starting the heater and measuring water temperature rise, and DOE used an average cost of $351. For power vent and condensing design options, maintenance also includes measuring combustion differential pressure, yielding an average maintenance cost of $491. DOE estimated that the maintenance occurs in the fifth year of the pool heater lifetime 32 

### (if the pool heater lifetime in a given home is six years or longer). Design options considered that may encounter repair cost during the lifetime of the pool heater include pilot ignition, electronic ignition, and power vent. DOE estimated that the average repair cost for the pilot ignition is $145, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 31 

### It estimated that the repair cost for the electronic ignition equals $187, and that such replacement occurs at most once, on average in the fifteenth year of the product lifetime.8, 31 

### DOE estimated that the repair cost of the power vent includes replacing the fan at an average cost of $206, with estimated product failure on average 31 

### in the fifteenth year of operation. The energy efficiency levels that include power vent or condensing design encounter both power vent as well as electronic ignition repair cost. 

### 8.6.3 Direct Heating Equipment For direct heating equipment, DOE used the maintenance cost data from the recent 3 

### furnace/boiler rulemaking. The costs were derived from a field survey sponsored by several gas utilities that repair and service furnace and boiler equipment. The survey estimated the average cost per service call as the average total service charge (parts, labor, and other charges), which DOE estimated to be $214. DOE used a maintenance frequency of once every five years for all direct heating equipment products. DOE determined the repair cost using an approach that reflects the cost and the service life of the components that are likely to fail. Designs considered for the direct heating equipment analysis that may encounter repair cost during the lifetime of the product include pilot ignition, electronic ignition, circulating blower, and induced draft. DOE estimated that the repair cost for the pilot ignition is $145, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 31 

### It estimated that the repair cost for the electronic ignition equals $187, and that such replacement occurs at most once, on average in the tenth year of the product lifetime.8, 31 

### The repair cost of the air circulation blower represents the cost of replacing the fan. DOE estimated the average fan repair cost to be $206, with power vent fan failure on average in 31 

### the 12th year of operation. DOE estimated the average repair cost of the induced draft fan to be 31 

### $206, with fan failure on average in the fifteenth year of operation. The average repair cost of the condensing design includes electronic ignition, circulation blower and induced draft components.

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### 8.7 PRODUCT LIFETIME The lifetime is the period of time that a water heater, direct heating equipment, or a pool heater will provide service. 

### 8.7.1 Water Heaters Table 8.7.1 presents the sources found by DOE to provide estimates of the lifetime of water heaters. The available information suggests that LPG storage water heaters have a lifetime equivalent to that of gas-fired storage water heaters. Table 8.7.2 shows the average, minimum and maximum lifetime values used in the LCC analysis. For gas-fired and electric storage water heaters, DOE chose averages based on the values in the middle of the range for the identified sources: 12 years for gas and 14 years for electric. For a minimum lifetime, DOE used seven years for gas-fired storage water heaters, which is the value given byAppliance 

### magazine, and six years for electric storage water heaters.c 

### For oil-fired storage water heaters, DOE used the average, minimum and maximum lifetime values from the 2001 water heater rulemaking. For gas-fired instantaneous water heaters, DOE used 20 years as the average lifetime based on the estimates in Table 8.7.1. For each product class, DOE characterized the product lifetime using a Weibull probability distribution that ranged from the minimum to maximum lifetime estimates shown in the table. The analysis assumes that the lifetime distributions are the same for all energy efficiency levels within each product class.

Some advanced water heater designs may apply design options that effectively increase or decrease the lifetime of the equipment. For example, gas water heater designs that utilize electricity may incorporate electrical anodes that may prolong the lifetime of the water heater heat exchanger. 8-45 c

### Table 8.7.1 Water Heaters: Product Lifetime Estimates and Sources Typical Lifetime or Range (years) Source Gas-Fired Storage 13 U.S. Department of Energy33 11 to 13 National Association of Home Builders34 13 American Council for an Energy Efficient Economy 35 Average =11; Low = 7; High = 15 Appliance magazine29 5 to 13 Residential Water Heaters Final Rule 200136 13 DEER37 Electric Storage 13 U.S. Department of Energy33 14 National Association of Home Builders34 13 American Council for an Energy Efficient Economy35 Mean = 13; Low = 4; High = 20 Appliance magazine29 6 to 21 Residential Water Heaters Final Rule 200136 15 DEER37 Oil-Fired Storage 8 American Council for an Energy Efficient Economy35 5 to 13 Residential Water Heaters Final Rule 200136 Gas-Fired Instantaneous 20 DEER37 20 Low Energy Systems38 20 National Association of Home Builders39 15 to 20 Builders Websource40 20 American Council for an Energy Efficient Economy35

8-46

### Table 8.7.2 Water Heaters: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis
Product Class Minimum years 

### Average years 

### Maximum years 

### Gas-Fired/LPG Storage 7 12 20 Electric Storage 6 14 20 Oil-Fired Storage 5 9 13 Gas-Fired Instantaneous 8 20 30


### 8.7.2 Direct Heating Equipment Limited information is available on the lifetime of direct heating equipment. Therefore, 8 

### DOE used the average, minimum and maximum lifetime values from the 1993 TSD, p.1-45, as shown in Table 8.7.3. DOE characterized the product lifetime using a Weibull probability 41 

### distribution that ranged from the minimum to maximum lifetime. 

### Table 8.7.3	 Direct Heating Equipment: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis Product Class Category Minimum years Average years Maximum years 

### Gas Wall Fan DHE 10 15 20 Gas Wall Gravity DHE 10 15 20 Gas Floor DHE 10 15 20 Gas Room DHE 10 15 20


### 8.7.3 Gas-Fired Pool Heaters Table 8.7.4 presents the sources found by DOE to provide estimates of the lifetime of gas-fired pool heaters. The available information suggests that LPG-fired pool heaters have a lifetime equivalent to that of gas-fired pool heaters. 

### Table 8.7.4	 Gas-Fired Pool Heaters: Product Lifetime Estimates and Sources

Typical Lifetime (years) Source

5 U.S. Department of Energy: Energy Efficiency and Renewable Energy42 

### 5 Illinois Propane Gas Association43 

### 6 Pool Quest44 

### 10* The Spa Specialist Inc.45 * Refers to spa heaters.

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### Based on the information collected, DOE used six years for average lifetime of gas-fired pool heaters, and estimated minimum and maximum lifetime values of three and 20 years (Table 8.7.5). DOE characterized the product lifetime using a Weibull probability distribution that ranged from the minimum to maximum lifetime estimates. 

### Table 8.7.5	 Gas-Fired Pool Heaters: Average, Minimum, and Maximum Product Lifetimes Used in LCC Analysis Minimum Average Maximum

(years) (years) (years) 

### 3 6 20


### 8.8 DISCOUNT RATES DOE derived the discount rates for the LCC and PBP analysis from estimates of the finance cost of purchasing the considered products. Following financial theory, the finance cost of raising funds to purchase appliances can be interpreted as: (1) the financial cost of any debt incurred to purchase products, or (2) the opportunity cost of any equity used to purchase products. For the residential products, the purchase of products for new homes entails different finance costs for consumers than the purchase of replacement products.d 

### Thus, DOE used different discount rates for new construction and replacement installations. 

### 8.8.1 Discount Rate for New Home Products New-home products are purchased as part of the home, which is almost always financed with a mortgage loan. DOE estimated discount rates for new-housing products using the effective real (after-inflation) mortgage rate for homebuyers. This rate corresponds to the interest rate after deduction of mortgage interest for income tax purposes and after adjusting for inflation (using the Fisher formula).e 

### For example, a six-percent nominal mortgage rate has an effective nominal rate of 4.5 percent for a household at the 25-percent marginal tax rate. When adjusted for inflation of two percent, the effective real rate becomes 2.45 percent. The data source DOE used for mortgage interest rates is the Federal Reserve Board’s 46 

### Survey of Consumer Finances (SCF) 

### in 1989, 1992, 1995, 1998, 2001, and 2004. Using the appropriate SCF 

### data for each year, DOE adjusted the mortgage interest rate for each relevant household in the SCF 

### for mortgage tax deduction and inflation (see Table 8.8.1). In cases where the effective interest rate is equal to or below the inflation rate (resulting in a negative real interest rate), DOE set the real effective interest rate to zero. The average nominal mortgage rate carried by homeowners in these six years was 8.1 percent. Since the mortgage rates carried by households in these years were established over a

d For pool heaters, it is not typical for a pool to be included in the price of a new home. Rather, the pool is typically installed by the home owner after the purchase. Therefore, DOE considers the appropriate finance cost to be that for replacement applications rather than that for new construction applications.

e Fisher formula is given by: Real Interest Rate = [(1 + Nominal Interest Rate) / (1 + Inflation Rate)] – 1. 8-48

### range of time, DOE believes they are representative of rates that may be in effect at the effective date of new energy conservation standards. After adjusting for inflation and interest tax deduction, effective real interest rates on mortgages across the six surveys averaged 3.2 percent. 

### Table 8.8.1 Data Used to Calculate Real Effective Mortgage Rates

Year Average Nominal Interest Rate (%) Inflation Rate47 (%) Marginal Tax Rate Applicable to Mortgage Interest48 (%)* Average Real Effective Interest Rate (%) 1989 9.7 4.82 23.7 2.5 1992 9.1 3.01 22.9 3.9 1995 8.2 2.83 23.8 3.4 1998 7.9 1.56 23.7 4.4 2001 7.6 2.85 22.6 3.0 2004 6.2 2.66 19.6 2.3 Average 8.1 3.2 * The values given are the inverse of the marginal tax rate on mortgage interest. 

### To account for variation among new home situations, DOE sampled a rate for each household from a probability distribution of rates that DOE developed based on the SCF 

### data (see Appendix 8-D). 

### 8.8.2 Discount Rate for Replacement Products Households use a variety of methods to finance replacement products. In principle, one could estimate the interest rates on the actual financing vehicles used to purchase replacement products. The shares of different financing vehicles in total replacement product purchases are unknown, however. DOE’s approach involves identifying all possible debt or asset classes that might be used to purchase replacement products, including household assets that might be affected indirectly.f 

### DOE did not include debt from primary mortgages and equity of assets considered non-liquid (such as retirement accounts), since these would likely not be affected by replacement product purchases. DOE estimated the average shares of the various debt and equity types in the average U.S. household equity and debt portfolios using SCF 

### data for 1989, 1992, 1995, 1998, 2001, and 2004. Table 8.8.2 shows the average shares of each considered type. DOE used the mean share of each type across the six years as a basis for estimating the effective finance cost for replacement products.

f An indirect effect would arise if a household sold some assets in order to pay off a loan or credit card debt that

might have been used to finance the actual appliance purchase. 8-49

### Table 8.8.2 Average Shares of Considered Household Debt and Equity Types Type 1989 SCF (%) 1992 SCF (%) 1995 SCF (%) 1998 SCF (%) 2001 SCF (%) 2004 SCF (%) Mean (%) Home equity loans 4.3 4.5 2.7 2.8 2.8 4.4 3.6 Credit cards 1.6 2.1 2.6 2.2 1.7 2.0 2.0 Other installment loans 2.8 1.7 1.4 1.7 1.1 1.3 1.7 Other residential loans 4.4 6.9 5.2 4.3 3.1 5.8 4.9 Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.5 Checking accounts 5.8 4.7 4.9 3.9 3.6 4.2 4.5 Savings & money market 19.2 18.8 14.0 12.8 14.2 15.1 15.7 Certificate of deposit (CD) 14.5 11.7 9.4 7.0 5.4 5.9 9.0 Savings bonds 2.2 1.7 2.2 1.1 1.2 0.9 1.5 Bonds 13.8 12.3 10.5 7.0 7.9 8.4 10.0 Stocks 22.4 24.0 25.9 36.9 37.5 28.0 29.1 Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 17.5 Total 100 100 100 100 100 100 100 

### DOE estimated interest or return rates associated with each type of equity and debt. The data source for the interest rates for loans, credit cards, and lines of credit is the SCF 

### in 1989, 1992, 1995, 1998, 2001, and 2004. Table 8.8.3 shows the average nominal rates in each year, and the inflation rates used to calculate real rates. For home equity loans, DOE calculated effective interest rates in a similar manner as for mortgage rates, since interest on such loans is tax deductible. Table 8.8.4 shows the average effective real rates in each year and the mean rate across the years. Since the interest rates for each debt carried by households in these years were established over a range of time, DOE believes they are representative of rates that may be in effect in the 2013-2015 period. 

### Table 8.8.3 Average Nominal Interest Rates for Household Debt Type 1989 SCF (%) 1992 SCF (%) 1995 SCF (%) 1998 SCF (%) 2001 SCF (%) 2004 SCF (%) Mean (%) Home equity loans 11.5 9.6 9.6 9.8 8.7 5.7 9.2 Credit cards*

- - 14.2 14.5 14.2 11.7 13.6 Other installment loans 9.0 7.8 9.3 7.8 8.7 7.4 8.3 Other residential loans 8.8 7.6 7.7 7.7 7.5 6.0 7.5 Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 12.5 Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 * No interest rate data were available for credit cards in 1989 or 1992.

8-50

### Table 8.8.4 Average Real Effective Interest Rates for Household Debt Types Type 1989 SCF (%) 1992 SCF (%) 1995 SCF (%) 1998 SCF (%) 2001 SCF (%) 2004 SCF (%) Mean (%) Home equity loans 3.8 4.3 4.4 5.8 3.8 1.9 4.0 Credit cards*

- - 11.0 12.7 11.1 9.1 11.0 Other installment loans 4.9 5.8 7.0 6.6 6.1 5.4 6.0 Other residential loans 4.0 4.7 4.8 6.0 4.6 3.3 4.6 Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 8.7 * No interest rate data were available for credit cards in 1989 or 1992. 

### To account for variation among households, DOE sampled a rate for each household from a distribution of rates for each of the above debt classes. DOE developed a probability distribution of interest rates for each debt class based on the SCF 

### data (see Appendix 8-D). Similar rate data are not available from the SCF 

### for the asset types, so DOE derived data for these classes from national-level historical data. The interest rates associated with certificates 49 50 51 

### of deposit (CDs), savings bonds, and bonds (AAA corporate bonds) are from Federal Reserve Board time-series data covering 1977–2007. Rates on savings and money market 52 

### accounts are from Cost of Savings Index data covering 1984–2007. The rates for stocks are the 53 

### annual returns on the Standard and Poor’s (S&P) 500 in the 1977–2007 period. The mutualfund rates are a weighted average of the stock rates (two-thirds weight) and the bond rates (onethird weight) in each year of the 1977–2007 period. DOE adjusted the nominal rates to real rates using the annual inflation rate in each year. DOE estimated real rates on checking accounts to be zero. Average nominal and real interest rates for the classes of assets are shown in Table 8.8.5. Since the interest and return rates for each asset type cover a range of time, DOE believes they are representative of rates that may be in effect in the 2013-2015 period. 

### Table 8.8.5 Average Nominal and Real Interest Rates for Household Equity Types Type Average Nominal Rate (%) Average Real Rate (%) Checking accounts

- 0.0 Savings and money market 5.4 2.3 CDs 6.8 2.4 Savings bonds 7.8 3.4 Bonds 8.6 4.1 Stocks 13.2 8.6 Mutual funds 11.4 6.8 

### To account for variation among households, DOE sampled a rate for each household from a distribution of rates for each of the above asset types. DOE developed a normal probability distribution of interest rates for each asset type by using the mean value and standard deviation from the distribution (see Appendix 8-D).

8-51

### Table 8.8.6 summarizes the mean real effective rates of each type of equity or debt. DOE determined the average share of each debt and asset type using SCF 

### data for 1989, 1992, 1995, 1998, 2001, and 2004. Each year of SCF data provides the debt and asset shares for U.S. households. DOE averaged the debt and asset shares over the six years of survey data to arrive at the shares shown in Table 8.8.6 below. The average rate across all types of household debt and equity, weighted by the shares of each class, is 5.5 percent. 

### Table 8.8.6	 Shares and Interest or Return Rates Used for Household Debt and Equity Types Type Average Share of Household Debt plus Equity (%)* Mean Effective Real Rate (%)** Home equity loans 3.6 4.0 Credit cards 2.0 11.0 Other installment loans 1.7 6.0 Other residential loans 4.9 4.6 Other line of credit 0.5 8.7 Checking accounts 4.5 0.0 Savings and money market accounts 15.7 2.3 CDs 9.0 2.4 Savings bonds 1.5 3.4 Bonds 10.0 4.1 Stocks 29.1 8.6 Mutual funds 17.5 6.8 Total/Weighted-average discount rate 100 5.5 * Not including primary mortgage or retirement accounts. ** Adjusted for inflation and, for home equity loans, loan interest tax deduction. 

### 8.9 EFFECTIVE DATE OF ENERGY CONSERVATION STANDARDS The effective date is the future date when a new energy conservation standard becomes operative. A final rule for the products being considered for this energy conservation standards rulemaking is scheduled for completion in 2010. Therefore, the effective date of any new energy conservation standards for these products will be three years after the final rule is published for gas-fired pool heaters and direct heating equipment (2013), and five years after the final rule is published for water heaters (2015). DOE calculated the LCC for all consumers as if they each would purchase a new product in the year the energy conservation standard takes effect. 

### 8.10 PRODUCT ENERGY EFFICIENCY IN THE BASE CASE For each product class, DOE analyzed a number of energy efficiency levels greater than the baseline energy efficiency level. However, some consumers already purchase products with energy efficiencies greater than the baseline levels. Thus, to accurately estimate the percentage of consumers that would be affected by a standard at a particular efficiency level, DOE took into account the distribution of product energy efficiencies that consumers are expected to purchase 8-52

### under the base case (i.e., the case without new energy conservation standards). In other words, rather than analyzing the impacts of a particular standard level assuming that all consumers are currently purchasing products at the baseline level, DOE conducted the analysis by taking into account the full breadth of product energy efficiencies that consumers are expected to purchase under the base case. As noted in section 8.1.1, DOE’s approach for conducting the LCC analysis for heating products relied on developing samples of households that use each of the products, and using a Monte Carlo simulation technique to perform the LCC calculations on the households in the sample. DOE assigned each household in the sample a unique product energy efficiency taken from the estimated distribution of product energy efficiencies in the effective year. The energy efficiency distributions used for each heating product are presented below. 

### 8.10.1 Water Heaters To estimate the market shares of different water heater energy efficiency levels in the 54 

### base case, DOE began with fractions based on data for recent years provided by AHRI. Since these data did not cover all of the energy efficiency levels under consideration, DOE supplemented them with data on the number of water heater models at different energy efficiency levels, as given in the March 2007 GAMA directory for gas-fired storage water 55 

### heaters, electric storage water heaters, and oil-fired storage water heaters, as well as March 56 57 

### 2008 GAMA directory and June 2007 FTC Directory for gas-fired instantaneous water heaters. DOE then took account for the estimated market impact of the new ENERGY STAR 58 

### efficiency levels for water heaters. The requirements that become effective in 2010 set the following minimum Energy Factors for ENERGY STAR designation: 0.80 EF for gas-fired storage water heaters and 2.20 EF for electric storage water heaters. These levels correspond to the MaxTech efficiency levels considered in this rulemaking. DOE estimated that the market penetrations of these products would be half of the goals set by the ENERGY STAR program. The resulting market penetration in 2015 is 2.5 percent for gas-fired storage water heaters and 5 percent for electric storage water heaters. Table 8.10.1 presents the market shares of the energy efficiency levels in the base case for the four water heater product classes that DOE considered. These market shares represent the products that households would purchase in the year 2015 in the absence of new energy conservation standards.

8-53

### Table 8.10.1 Water Heaters: Base Case Energy Efficiency Market Shares Energy Efficiency Gas-Fired Storage Electric Storage Oil-Fired Storage Gas-Fired Instantaneous Level EF Market Share (%)* EF Market Share (%)* EF Market Share (%)* EF Market Share (%)* Baseline 0.59 82.5 0.90 36.2 0.53 30 0.62 0 1 0.62 5.6 0.91 25.6 0.54 0 0.69 0 2 0.63 2.7 0.92 8.7 0.56 0 0.78 0.6 3 0.64 1.4 0.93 19.5 0.58 0 0.80 13.1 4 0.65 1.5 0.94 2.5 0.60 20 0.82 57.0 5 0.66 3.8 0.95 2.5 0.62 30 0.84 14.6 6 0.77 2.5 2.20 5.0 0.66 10 0.85 11.7 7 0.68 10 0.92 2.9 100% 100% 100% 100% * The shares are for 40-gal GSWH, 50-gal ESWH, and 32-gal OSWH. 

### 8.10.2 Direct Heating Equipment Very little is known regarding the distribution of direct heating equipment energy efficiencies that consumers in the United States currently purchase. To estimate the market shares of different energy efficiency levels in the base case, DOE used data on the number of direct heating equipment models at different energy efficiency levels, as given in the March 2007 55 

### GAMA directory. The market shares in Table 8.10.2 represent the products that households would purchase in the year 2013 in the absence of new energy conservation standards.

8-54

### Table 8.10.2 Direct Heating Equipment: Energy Efficiency Market Shares in the Base Case Energy Efficiency Level Gas Wall Fan Gas Wall Gravity Gas Floor Gas Room AFUE

(%) Market Share

(%) AFUE (%) Market Share

(%) AFUE (%) Market Share

(%) AFUE (%) Market Share

(%) Baseline 74 48 64 46 57 22 64 40 1 75 12 66 21 58 78 65 25 2 76 19 68 33 61 0 66 15 3 77 19 71 0 62 0 67 11 4 80 2 72 0 65 0 68 5 5 75 0 78 0 70 2 6 78 2 7 93 0 100% 100% 100% 100% 

### 8.10.3 Gas-Fired Pool Heaters Data on the distribution of gas-fired pool heater shipments by energy efficiency level are not available. To estimate the market shares of different energy efficiency levels in the base case, DOE used data on the number of gas-fired pool heater models at different energy efficiency 59 

### levels given in the May 2007 FTC directory. The market shares in Table 8.10.3 represent the products at each efficiency level that households would purchase in the year 2013 in the absence of new energy conservation standards by ignition type. 

### Table 8.10.3	 Gas-Fired Pool Heaters: Energy Efficiency Market Share by Ignition Type in the Base Case Energy Efficiency Level Thermal Efficiency (%) Market Share Pilot Light (%) Electronic Ignition (%) Total (%) Baseline 78 0 0 1 1 79 5 8 13 2 81 5 16 21 3 82 13 20 33 4 83 7 7 14 5 84 0 12 12 6 86 0 6 6 7 90 0 0 0 8 95 0 1 1 Total 29 71 100

8-55

### 8.11 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS This section presents the LCC and PBP results for the three types of heating products. As discussed in section 8.1.1, DOE’s approach for conducting the LCC analysis relied on developing samples of households that use each of the products. DOE also characterized the uncertainty of many of the inputs to the analysis with probability distributions. DOE used a Monte Carlo simulation technique to perform the LCC calculations on the households in the sample. For each set of sample households using the products in each product class, DOE calculated the average LCC and LCC savings and the median and average PBP for each of the potential standard levels. DOE calculated LCC savings and PBPs at each efficiency level relative to the base case products that it assigned to the households. For some households, DOE assigned base case products that are more energy efficient than some of the standard levels. If a household was assigned a product energy efficiency that is greater than or equal to the energy efficiency of the standard level under consideration, the LCC calculation would reveal that this household is not impacted by an increase in product energy efficiency that is equal to the standard level. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. In the subsections below, DOE presents figures showing the distribution of LCCs in the base case for each product class. Also presented below for a specific standard level are figures showing the distribution of LCC impacts and the distribution of PBPs. The figures are presented as frequency charts that show the distribution of LCCs, LCC impacts, and PBPs with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples. LCC and PBP calculations were performed 10,000 times on the sample of households established for each residential product. Each LCC and PBP calculation was performed on a single household that was selected from the sample. The selection of a household was based on its weight (i.e., how representative a particular household is of other households in the distribution). Each LCC and PBP calculation also sampled from the probability distributions that DOE developed to characterize many of the inputs to the analysis. For each standard level, DOE calculated the share of households with a net LCC benefit, with a net LCC cost, and with no impact. DOE considered a household to receive no impact at a given standard level if DOE assigned it base case products that are the same as or are more energy efficient than the standard level. To illustrate the range of LCC and PBP impacts among the sample households, the sections below present figures that provide such information for each product class.

8-56

### 8.11.1 Water Heaters 8.11.1.1 Base Case LCC Distributions Figures 8.11.1, 8.11.2, 8.11.3 and 8.11.4 show the frequency charts for the base case LCC for the water heater product classes that DOE analyzed. The figures show the mean LCC of the base case distribution as well as the full range of LCCs.

Frequency Chart

$ Mean=$2,984 .000 .007 .013 .020 .026

0 65 130 195 260

$1,243 $2,578 $3,913 $5,248 $6,583 10,000Trials 9,752 Displayed Forecast:LCC- level 0



### Figure 8.11.1 Gas-Fired Storage Water Heaters: Base Case LCC Distribution

Frequency Chart

$ Mean= $3,520 .000 .006 .012 .018 .024

0 60.5 121 181.5 242

$803 $2,752 $4,702 $6,652 $8,602 10,000Trials 9,750 Displayed Forecast:LCC- level 0



### Figure 8.11.2 Electric Storage Water Heaters: Base Case LCC Distribution

8-57Frequency Chart

$ Mean= $4,996 .000 .006 .012 .018 .023

0 58.5 117 175.5 234

$2,763 $4,047 $5,332 $6,616 $7,901 10,000 Trials 9,816 Displayed Forecast: LCC- level 0



### Figure 8.11.3 Oil-Fired Storage Water Heaters: Base Case LCC Distribution

Frequency Chart

$ Mean=$5,787 .000 .006 .012 .018 .024

0 60 120 180 240

$2,375 $4,666 $6,956 $9,246 $11,536 10,000 Trials 9,746 Displayed Forecast: LCC- level 0



### Figure 8.11.4	 Gas-Fired Instantaneous Water Heaters: Base Case LCC Distribution 8.11.1.2 Standard-Level Distributions of LCC Impacts Figures 8.11.5 is an example of a frequency chart showing the distribution of LCC differences for the case of Efficiency Level 2 for gas-fired storage water heaters. The large ‘spike’ in the left part of the figure represents the percentage of households that are not impacted by an increase in the standard level, i.e., households that purchase gas-fired storage water heaters with energy efficiencies greater than or equal to the standard level. DOE can generate a frequency chart like the one shown in Figure 8.11.5 for every standard level. Figures 8.11.6 through 8.11.9 are examples of frequency charts showing the distribution of payback periods for the other water heater product classes.

8-58Frequency Chart

$ Mean= $115 .000 .030 .059 .089 .118

0 295.5 591 886.5 1182

$0 $89 $178 $267 $355 10,000 Trials 9,788 Displayed Forecast: LCCSaving - level 2



### Figure 8.11.5 Gas-Fired Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 2

Frequency Chart

$ Mean= $28 .000 .021 .042 .063 .084

0 210.7 421.5 632.2 843

($339) ($154) $30 $215 $400 10,000 Trials 9,960 Displayed Forecast: LCCSaving - level 4



### Figure 8.11.6 Electric Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 4

8-59Frequency Chart

$ Mean= $121 .000 .113 .225 .338 .451

0 4509

$0 $136 $271 $407 $543 10,000 Trials 9,880 Displayed Forecast: LCCSaving - level 5



### Figure 8.11.7 Oil-Fired Storage Water Heaters: Distribution of LCC Impacts for Efficiency Level 5

Frequency Chart

$ Mean= $14 .000 .078 .157 .235 .314

0 784.7 3139

($102) ($44) $13 $71 $128 10,000 Trials 9,711 Displayed Forecast: LCCSaving - level 5



### Figure 8.11.8	 Gas-Fired Instantaneous Water Heaters: Distribution of LCC Impacts for Efficiency Level 5 8.11.1.3 Standard-Level PBP Distributions Figure 8.11.9 is an example of a frequency chart showing the distribution of payback periods for Efficiency Level 2 for gas-fired storage water heaters. DOE can generate a frequency chart like the one shown in Figure 8.11.9 for every Efficiency Level within each product class. Figures 8.11.10 through 8.11.12 are examples of frequency charts showing the distribution of payback periods for the other water heater product classes. The large ‘spike’ at the left in Figures 8.11.11 and 8.11.12 indicates the percentage of households with oil-fired storage water heaters and gas-fired instantaneous water heaters that are not impacted by an increase in the standard level, i.e., households that already use oil-fired storage water heaters and gas-fired instantaneous water heaters with energy efficiencies equal to or greater than Efficiency Level 5.
8-60Forecast:Payback- level 2 10,000 Trials Frequency Chart 8,717 Displayed .060 604

.045 453

.030 302

.015 151

.000 0 -1.8 -0.1 1.7 3.5 5.3 

### Figure 8.11.9	 Gas-Fired Storage Water Heaters: Distribution of PBPs for Efficiency Level 2

Frequency Chart

.000 .033 .066 .099 .133

0 331.2 662.5 993.7 1325

-2.0 8.2 18.4 28.7 38.9 10,000 Trials 9,774 Displayed Forecast: Payback- level 4



### Figure 8.11.10 Electric Storage Water Heaters: Distribution of PBPs for Efficiency Level 4

8-61Frequency Chart

.000 .113 .225 .338 .451

0 4509

-2.0 -0.6 0.7 2.1 3.4 10,000 Trials 9,999 Displayed Forecast: Payback- level 5



### Figure 8.11.11 Oil-Fired Storage Water Heaters: Distribution of PBPs for Efficiency Level 5

Frequency Chart

.000 .073 .146 .219 .293

0 731.5 2926

-2.0 8.2 18.4 28.6 38.8 10,000 Trials 9,815 Displayed Forecast: Payback- level 5



### Figure 8.11.12	 Gas-Fired Instantaneous Water Heaters: Distribution of PBPs for Efficiency Level 5 8.11.1.4 LCC and PBP Results Tables 8.11.1, 8.11.2, 8.11.3 and 8.11.4 show the LCC and PBP results for water heaters. As mentioned earlier, for some households, DOE assigned products in the base case that are more energy efficient than some of the energy efficiency levels under consideration. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specificenergy efficiency level and the LCC of the baseline product. For example, in the case of gasfired storage water heaters, Efficiency Level 2 (0.63 energy factor) shows an average LCC savings of $116. Note that for this level, six percent of the housing units are estimated to purchase a water heater at this level or higher in the base case, and thus have zero savings (no impact) due to the standard. If one compares the LCC of the baseline design to Efficiency Level 2, then the average LCC savings are $138. But since the base case includes households that 8-62

### purchase a unit with higher efficiency than the baseline, the average savings over all of the households is less than $138. Similarly with regard to the PBPs shown below, DOE determined the median and average values by excluding the percentage of households not impacted by the energy conservation standard. For gas-fired storage water heaters, Efficiency Level 2 (0.63 energy factor) has the highest average LCC savings and a median PBP of 1.9 years.g 

### For electric storage water heaters, Efficiency Level 6 (2.20 energy factor) has the highest average LCC savings and a median PBP of 8.3 years. For oil-fired storage water heaters, Efficiency Level 5 (0.62 energy factor) has the highest average LCC savings and a median PBP of 1.7 years. For gas-fired instantaneous water heaters, Efficiency Level 6 (0.85 energy factor) has the highest average LCC savings and a median PBP of 12 years. 

### Table 8.11.1 Gas-Fired Storage Water Heaters: LCC and PBP Results

Efficiency Level ID Energy Factor Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 0.59 967 1,978 2,945

- - - - - - 1 0.62 982 1,849 2,830 95 0% 18% 82% 1.1 1.1 2 0.63 998 1,808 2,807 116 0% 11% 89% 1.9 2.0 3 0.64 1,506 1,829 3,335 -368 73% 9% 18% 41.4 54.0 4 0.65 1,519 1,790 3,309 -343 73% 7% 20% 34.1 43.0 5 0.66 1,536 1,753 3,288 -324 73% 6% 22% 28.8 32.8 6 0.77 1,782 1,489 3,271 -307 75% 2% 22% 17.5 18.1

g Large differences in the average and median values for PBP are due to outliers in the distribution of results. A limited number of excessively long PBPs produce an average PBP that is very long. Therefore, in these cases, the median PBP is a more representative value to gauge the length of the PBP. 8-63d 

### Table 8.11.2 Electric Storage Water Heaters: LCC and PBP Results Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Payback Perio (years) Households with Efficiency Level ID Energy Factor Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Net Cost No Impact Net Benefit Median Average Baseline 0.90 662 2,836 3,498 - - - - - - 1 0.91 674 2,787 3,461 20 0% 46% 54% 2.5 2.6 2 0.92 682 2,740 3,422 50 0% 23% 77% 2.1 2.1 3 0.93 709 2,694 3,403 65 9% 18% 73% 2.3 3.9 4 0.94 759 2,648 3,407 61 18% 7% 75% 2.8 6.9 5 0.95 786 2,604 3,390 78 18% 6% 76% 3.8 6.7 6 2.20 1,475 1,759 3,233 229 45% 5% 50% 8.3 22.2 

### Table 8.11.3 Oil-Fired Water Heaters: LCC and PBP Results

Efficiency Level ID Energy Factor Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 0.53 1,757 3,238 4,996

- - - - - - 1 0.54 1,771 3,187 4,659 10 0% 73% 27% 2.0 2.0 2 0.56 1,811 3,089 4,900 30 0% 66% 34% 2.7 2.7 3 0.58 1,828 2,998 4,826 55 0% 66% 34% 2.1 2.2 4 0.60 1,820 2,914 4,734 89 0% 63% 37% 1.4 1.3 5 0.62 1,843 2,834 4,678 121 0% 45% 55% 1.7 1.7 6 0.66 2,075 2,722 4,797 23 36% 18% 47% 5.1 10.4 7 0.68 2,227 2,671 4,898 -68 53% 9% 38% 8.6 13.1 

### Table 8.11.4 Gas-Fired Instantaneous Water Heaters: LCC and PBP Results

Efficiency Level ID Energy Factor Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 0.62 1,529 4,264 5,793

- - - - - - 1 0.69 1,549 4,075 5,623 0 0% 100% 0% -2.0 -2.0 2 0.78 1,724 3,461 5,185 0 0% 100% 0% -2.0 -2.0 3 0.80 1,867 3,407 5,274 -1 1% 99% 0% 40.7 56.7 4 0.82 1,902 3,353 5,255 2 6% 86% 8% 11.3 14.9 5 0.84 1,938 3,301 5,239 14 30% 29% 41% 11.3 14.5 6 0.85 1,955 3,276 5,231 20 37% 14% 49% 12.0 14.8 7 0.92 2,258 3,117 5,375 -119 79% 3% 18% 25.2 35.8
8-64

### Figures 8.11.13 through 8.11.16 show the range of LCC savings for the standard levels for the water heater product classes. For each standard level, the top and the bottom of the box indicate the 75th 

### and 25th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have LCC savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5th 

### and 95th 

### percentiles. The small box shows the average LCC savings for each standard level. Figures 8.11.17 through 8.11.20 show the range of PBPs for the four water heater product classes.
LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-800 -600 -400 -200 0 200 400

Standing Pilot, 1.5” ins Standing Pilot, 2” Ins Electronic ignition, 1” ins,

pow er vent Electronic ignition, 1.5” ins, pow er vent Electronic ignition, 2” ins,

pow er vent Condensing, 2” ins, pow er vent median Average



### Figure 8.11.13 Range of LCC Savings for Gas-Fired Storage Water Heaters

8-65LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-1000

-500 0 500 1000 1500 2000

2" ins 2.25"ins 2.5" ins 3" ins 4" ins Heat Pump Water Heater median Average



### Figure 8.11.14 Range of LCC Savings for Electric Storage Water Heaters

LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-500 -400 -300 -200 -100 0 100 200 300 400 500 600

Electronic Ignition, 1.5” Ins (fiberglass) Electronic Ignition, 2” Ins (fiberglass) Electronic Ignition, 2.5” Ins (fiberglass) Electronic Ignition, 2” Ins (foam) Electronic Ignition, 2.5” Ins (foam) Electronic Ignition, 1” Ins (f iberglass),

enhanced flue baffle Electronic Ignition, 1” Ins (foam), enhanced flue baffle median Average



### Figure 8.11.15 Range of LCC Savings for Oil-Fired Storage Water Heaters

8-66LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-400 -300 -200 -100 0 100 200 300

Standing Pilot, Improved HX Electronic Ignition, Improved HX Electronic Ignition, Induced Draft (Pow er Vent) Electronic Ignition, Improved HX, Induced Draf t (Pow er Vent) Electronic Ignition, Improved HX, Induced Draft (Pow er Vent) Electronic Ignition, Improved HX, Induced Draft (Pow er Vent) Condensing median Average



### Figure 8.11.16 Range of LCC Savings for Gas-Fired Instantaneous Water Heaters

Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 20 40 60 80 100 120 140

Standing Pilot, 1.5” ins Standing Pilot, 2” Ins Electronic ignition, 1” ins,

pow er vent Electronic ignition, 1.5” ins, pow er vent Electronic ignition, 2” ins,

pow er vent Condensing, 2” ins, pow er vent median Average



### Figure 8.11.17	 Range of Payback Periods for Gas-Fired Storage Water Heaters 8-67Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 20 40 60 80

2" ins 2.25"ins 2.5" ins 3" ins 4" ins Heat Pump Water Heater median Average



### Figure 8.11.18 Range of Payback Periods for Electric Storage Water Heaters

Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 10 20 30 40 50

Electronic Ignition, 1.5” Ins (f iberglass) Electronic Ignition, 2” Ins (f iberglass) Electronic Ignition, 2.5” Ins (fiberglass) Electronic Ignition, 2” Ins (f oam) Electronic Ignition, 2.5” Ins (f oam) Electronic Ignition, 1” Ins (fiberglass),

enhanced flue baff le Electronic Ignition, 1” Ins (foam), enhanced flue baff le median Average



### Figure 8.11.19 Range of Payback Periods for Oil-Fired Storage Water Heaters

8-68Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 30 60 90 120 150

Standing Pilot, Improved HX Electronic Ignition, Improved HX Electronic Ignition, Induced Draft (Pow er Vent) Electronic Ignition, Improved HX, Induced Draft (Pow er Vent) Electronic Ignition, Improved HX, Induced Draft (Pow er Vent) Electronic Ignition, Improved HX, Induced Draf t (Pow er Vent) Condensing median Average



### Figure 8.11.20	 Range of Payback Periods for Gas-Fired Instantaneous Water Heaters 8.11.2 Gas-Fired Pool Heaters Figure 8.11.21 shows the frequency chart for the base case LCC for gas-fired pool heaters. The figure shows the mean LCC of the base case distribution as well as the full range of LCCs. Forecast: Life Cycle Cost - level00 10,000 Trials Frequency Chart 9,667 Displayed

Mean= $7,300 .000 .012 .024 .036 .048

0 119.5 239 358.5 478

$1,884 $8,390 $ $14,895 $21,401 $27,907 

### Figure 8.11.21 Gas-Fired Pool Heaters: Base Case LCC Distribution

8-69

### 8.11.2.2 Standard-Level Distributions of LCC Impacts Figure 8.11.22 is an example of a frequency chart showing the distribution of LCC differences for the case of standard level 4 for gas-fired pool heaters. The large ‘spike’ in Figure 8.11.22 represents the percentage of households that are not impacted by an increase in the standard level, i.e., households that already use pool heaters with energy efficiencies greater than or equal to the standard level. DOE can generate a frequency chart like the one shown in Figure 8.11.22 for every standard level.Forecast: LCCSavings - level04 10,000 Trials Frequency Chart 9,706 Displayed

Mean= $39 .000 .083 .165 .248 .330

0 825 3300

($190) $43 $277 $511 $745 $ 

### Figure 8.11.22	 Gas-Fired Pool Heaters: Distribution of LCC Impacts for Efficiency Level 4 8.11.2.3 Standard-Level PBP Distributions Figure 8.11.23 is an example of a frequency chart showing the distribution of payback periods of Efficiency Level 4 for gas-fired pool heaters. The large ‘spike’ at the left indicates the percentage of households with pool heaters that are not impacted by an increase in the standard level, i.e., households that purchase pool heaters with energy efficiencies equal to or greater than then standard level. DOE can generate a frequency chart like the one shown in Figure 8.11.23 for every standard level.

8-70Forecast: Payback- level04 10,000 Trials Frequency Chart 9,721 Displayed .322

-2.0 12.9 27.7 42.6 57.5 3224

.242

.161

.081 806

.000 0
$ 

### Figure 8.11.23	 Gas-Fired Pool Heaters: Distribution of PBPs for Efficiency Level 4 8.11.2.4 LCC and PBP Results Table 8.11.5 shows the LCC and PBP results for gas-fired pool heaters. As mentioned earlier, for some households, DOE assigned base case products that are more energy efficient than some of the standard levels. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. Efficiency level 4 (83 percent thermal efficiency) shows an average LCC savings of $39. Note that for this level, 32 percent of the housing units are estimated to have already purchased a pool heater in the base case at this level and thus have zero savings (no impact) due to the energy conservation standard. If one compares the LCC of the baseline unit at 78 percent efficiency to the Level 4 case at 83 percent efficiency, then the average LCC savings are $162. But since the base case includes a significant number of households that are not impacted by the energy conservation standard, the average savings over all of the households is $39. Similarly with regard to the PBPs shown below, DOE determined the median and average values by excluding the percentage of households not impacted by the energy conservation standard. For pool heaters, the average LCC savings are roughly similar for Efficiency Levels 4 through 6, but the median PBP is lowest in Efficiency Level 6.

8-71

### Table 8.11.5 Gas-Fired Pool Heaters: LCC and PBP Results

Efficiency Level ID Thermal Efficiency Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 78% 2,335 4,965 7,300

- - - - - - 1 79% 2,356 4,905 7,261 0 0% 99% 1% 2.8 3.8 2 81% 2,380 4,790 7,169 13 2% 86% 12% 1.7 2.3 3 82% 2,428 4,734 7,163 14 19% 65% 15% 5.4 7.8 4 83% 2,567 4,570 7,138 39 43% 32% 24% 9.2 16.0 5 84% 2,620 4,518 7,137 36 53% 19% 28% 7.5 11.3 6 86% 2,670 4,464 7,133 40 62% 7% 31% 5.5 7.7 7 90% 3,060 4,273 7,333 -157 84% 1% 15% 10.3 14.0 8 95% 3,267 4,057 7,324 -148 82% 1% 17% 9.0 12.5 

### Figure 8.11.24 shows the range of LCC savings for all of the standard levels considered for gas-fired pool heaters. For each standard level, the top and the bottom of the box indicate the 75th

### and 25th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have LCC savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5th 

### and 95th 

### percentiles. The small box shows the average LCC savings for each standard level. Figure 8.11.25 shows the range of PBPs.

LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-800 -400 0 400 800 1200

Improved H X Impro ved H X Impro ved H X Po wer Venting P o wer Venting, impro ved HX Sealed C o mbustio n, improved HX Sealed co mbust io n, condensing Sealed co mbust io n, co ndensing, impro ved H X median Average



### Figure 8.11.24 Range of LCC Savings for Gas-Fired Pool Heaters

8-72Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 10 20 30 40 50

Improved HXImproved HXImproved HX Power Venting Pow er Venting, improved HX Sealed Combustion, improved HX Sealed combustion, condensing Sealed combustion, condensing, improved HX median Average



### Figure 8.11.25	 Range of Payback Periods in Years for Gas-Fired Pool Heaters 8.11.3 Direct Heating Equipment 8.11.3.1 Base Case LCC Distributions Figures 8.11.26 through 8.11.29 show the frequency charts for the base case LCC for the four direct heating equipment product classes. The figures show the full range of LCCs of the base case distribution. Forecast:Life Cycle Cost - level0 10,000 Trials Frequency Chart 9,600 Displayed .041

Mean=$6,294 408

.031 306

.020 204

.010 102

.000 0 $2,074 $6,030 $9,986 $13,941 $17,897 $ 

### Figure 8.11.26 Gas Wall Fan DHE: Base Case LCC Distribution
8-73Forecast:Life Cycle Cost - level0 10,000 Trials Frequency Chart 9,594 Displayed

Mean= $6,301 .000 .010 .020 .030 .040

0 100.2 200.5 300.7 401

$1,745 $6,123 $ $10,501 $14,879 $19,257 

### Figure 8.11.27 Gas Wall Gravity DHE: Base Case LCC Distribution

Forecast:Life Cycle Cost - level0 10,000 Trials Frequency Chart 9,679 Displayed .045

Mean=$6,664 449

.034 336.7

.022 224.5

.011 112.2

.000 0 $2,234 $6,638 $11,043 $15,448 $19,852 $ 

### Figure 8.11.28 Gas Floor DHE: Base Case LCC Distribution

8-74Forecast:Life Cycle Cost - level0 10,000 Trials Frequency Chart 9,679 Displayed .043

Mean=$5,803 429

.032 321.7

.021 214.5

.011 107.2

.000 0 $1,640 $5,555 $9,470 $13,385 $17,300 $ 

### Figure 8.11.29 Gas Room DHE: Base Case LCC Distribution 8.11.3.2 Standard-Level Distributions of LCC Impacts Figures 8.11.30 is an example of a frequency charts showing the distribution of LCC differences for the case of standard level 3 for gas wall fan DHE. DOE can generate a frequency chart like the one shown in Figure 8.11.30 for every standard level within each product class. Similarly, Figures 8.11.31 through 8.11.33 are examples of frequency charts showing the distribution of LCC differences for different standard levels.

8-75Forecast: LCCSavings - level 3 10,000 Trials Frequency Chart 9,676 Displayed

Mean= $95 .000 .059 .118 .176 .235

0 587.7 2351

($151) $28 $206 $385 $564 $ 

### Figure 8.11.30	 Gas Wall Fan DHE: Distribution of LCC Impacts for Efficiency Level 3 Forecast: LCCSavings - level 3 10,000 Trials Frequency Chart 9,683 Displayed

Mean= $208 .000 .014 .028 .042 .056

0 141 282 423 564

($144) $203 $ $549 $896 $1,243 

### Figure 8.11.31 Gas Wall Gravity DHE: Distribution of LCC Impacts for Efficiency Level 3

8-76Forecast: LCCSavings - level 3 10,000 Trials Frequency Chart 9,667 Displayed

Mean= $201 .000 .013 .025 .038 .050

0 125.5 251 376.5 502

($90) $196 $ $482 $768 $1,054 

### Figure 8.11.32 Gas Floor DHE: Distribution of LCC Impacts for Efficiency Level 3 Forecast: LCCSavings - level 4 10,000 Trials Frequency Chart 9,681 Displayed .113

Mean=$54 1133

.085 849.7

.057 566.5

.028 283.2

.000 0 ($149) $28 $205 $383 $560 $ 

### Figure 8.11.33	 Gas Room DHE: Distribution of LCC Impacts for Efficiency Level 4 8.11.3.3 Standard-Level PBP Distributions Figures 8.11.34 through 8.11.37 are examples of a frequency chart for direct heating equipment products showing the distribution of payback periods for different standard levels. DOE can generate frequency charts like these for every standard level within each product class. The large ‘spike’ at the left in Figures 8.11.34 and 8.11.37 indicates the percentage of households with gas wall fan DHE and gas room DHE that are not impacted by an increase in the standard level, i.e., households that already use gas wall fan DHE and gas room DHE with energy efficiencies equal to or greater than standard level 3 or 4.

8-77Forecast:Payback- level 3 10,000 Trials Frequency Chart 9,655 Displayed .214

-2.0 13.6 29.2 44.8 60.3 2142

.161

.107

.054 535.5

.000 0
$ 

### Figure 8.11.34	 Gas Wall Fan DHE: Distribution of PBPs for Efficiency Level 3 Forecast:Payback- level 3 10,000 Trials Frequency Chart 9,646 Displayed .069

-1.0 11.8 24.6 37.5 50.3 687

.052 515.2

.034 343.5

.017 171.7

.000 0
$ 

### Figure 8.11.35	 Gas Wall Gravity DHE: Distribution of PBPs for Efficiency Level 3

8-78Forecast:Payback- level 3 10,000 Trials Frequency Chart 9,791 Displayed .084 844

.063 633

.042 422

.021 211

.000 0 0.4 10.4 20.4 30.4 40.4 $ 

### Figure 8.11.36	 Gas Floor DHE: Distribution of PBPs for Efficiency Level 3 Forecast:Payback- level 4 10,000 Trials Frequency Chart 9,768 Displayed .091 908

.068 681

.045 454

.023 227

.000 0 -2.0 19.5 41.0 62.5 84.0 $ 

### Figure 8.11.37	 Gas Room DHE: Distribution of PBPs for Efficiency Level 4 8.11.3.4 LCC and PBP Results Tables 8.11.6 through 8.11.9 show the LCC and PBP results for DHE. As mentioned earlier, for some households, DOE assigned base case products that are more energy efficient than some of the standard levels. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline products. For example, in the case of gas wall fan DHE, energy efficiency level 4 shows an average LCC savings of $130. Note that for this level, 50 percent of the housing units are estimated to have already purchased gas wall fan DHE of at least 80 percent AFUE in the base case and thus have zero savings (no impact) due to the energy conservation standard. If one compares the LCC of the baseline at 74 percent AFUE to level 4 at 80 percent AFUE, then the average LCC savings are $193. But since the base case includes a significant number of households that are not 8-79

### impacted by the energy conservation standard, the average savings over all of the households is $130. Similarly with regard to the PBPs shown below, DOE determined the median and average values by excluding the percentage of households not impacted by the energy conservation standard. For gas wall fan DHE, Efficiency Level 4 (80 percent AFUE) has the highest average LCC savings and a median PBP of 10.3 years. For gas wall gravity DHE, Efficiency Level 3 (71 percent AFUE) has the highest average LCC savings and a median PBP of 6.7 years. For gas floor DHE, Efficiency Level 5 (78 percent AFUE) has the highest average LCC savings and a median PBP of 6.7 years. For gas room DHE, Efficiency Level 7 (93 percent AFUE) has the highest average LCC savings and a median PBP of 12.6 years. 

### Table 8.11.6 Gas Wall Fan DHE: LCC and PBP Results

Efficiency Level ID AFUE Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 74% 1,769 4,525 6,294

- - - - - - 1 75% 1,830 4,311 6,141 74 3% 44% 52% 3.5 3.8 2 76% 1,861 4,259 6,121 86 10% 50% 40% 4.5 7.1 3 77% 1,899 4,209 6,108 95 23% 55% 21% 6.1 13.3 4 80% 2,023 4,078 6,101 130 48% 50% 2% 10.3 24.4 

### Table 8.11.7 Gas Wall Gravity DHE: LCC and PBP Results

Efficiency Level ID AFUE Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 64% 1,374 4,972 6,301

- - - - - - 1 66% 1,435 4,796 6,231 32 20% 54% 26% 9.5 15.1 2 68% 1,452 4,673 6,125 102 16% 33% 51% 4.5 8.7 3 71% 1,518 4,501 6,019 208 32% 0% 68% 6.7 11.8 4 72% 1,767 4,352 6,120 107 54% 0% 46% 12.1 18.4 5 75% 1,893 4,221 6,113 114 60% 0% 40% 13.9 22.7

8-801 2 3 4 5 

### Table 8.11.8 Gas Floor DHE: LCC and PBP Results

Efficiency Level ID AFUE Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 57% 2,013 4,652 6,664

- - - - - - 58% 2,046 4,581 6,627 8 10% 78% 12% 8.2 11.4 61% 2,078 4,385 6,463 172 17% 0% 83% 3.6 6.2 62% 2,111 4,323 6,434 201 25% 0% 75% 5.0 9.0 65% 2,360 3,991 6,351 284 31% 0% 69% 8.3 13.2 78% 2,486 3,414 5,901 735 27% 0% 73% 6.7 12.1 

### Table 8.11.9 Gas Room DHE: LCC and PBP Results

Efficiency Level ID AFUE Life-Cycle Cost (2007$) Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operating Cost Average LCC Average Savings (2007$) Households with
Median Average Net Cost No Impact Net Benefit Baseline 64% 1,430 4,373 5,803

- - - - - - 1 65% 1,467 4,315 5,782 8 21% 60% 19% 11.4 16.2 2 66% 1,502 4,259 5,761 22 34% 35% 31% 11.1 18.7 3 67% 1,537 4,205 5,741 37 43% 20% 38% 11.7 20.6 4 68% 1,572 4,152 5,723 54 49% 9% 42% 12.1 21.6 5 70% 1,807 3,912 5,719 58 53% 4% 44% 11.7 27.9 6 78% 1,933 3,577 5,510 264 45% 2% 53% 10.1 25.2 7 93% 2,377 3,066 5,443 330 55% 0% 45% 12.6 25.8 

### Figures 8.11.38 through 8.11.41 show the range of LCC savings for the standard levels for the direct heating equipment product class category. For each standard level, the top and the bottom of the box indicate the 75th 

### and 25th 

### percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have LCC savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5th

### and 95th 

### percentiles. The small box shows the average LCC savings for each standard level. Figures 8.11.42 through 8.11.45 show the range of PBPs for the direct heating equipment product class category.

8-81LCC Savings Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

-200 -100 0 100 200 300 400 500 600 700 800

75% - Electronic ignition, tw o-speed blow er 76% - Electronic ignition, improv ed HX 77% - Electronic ignition, tw o-speed blow er, improved HX 80% - Electronic ignition, induc ed draft median Average



### Figure 8.11.38 Range of LCC Savings for Gas Wall Fan DHE

LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-400 -200 0 200 400 600 800 1000 1200 1400

58% - Standing pilot, improved HX 61% - Standing pilot, improved HX 62% - Standing pilot, improved HX 65% - Electronic ignition, improved HX 78% - Induced draft median Average



### Figure 8.11.39 Range of LCC Savings for Gas Wall Gravity DHE

8-82LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-500 0 500 1000 1500 2000 2500 3000 3500

58% - Standing pilot, improved HX 61% - Standing pilot, improved HX 62% - Standing pilot, improved HX 65% - Electronic ignition, improved HX 78% - Induced draft median Average



### Figure 8.11.40 Range of LCC Savings for Gas Floor DHE

LCC Savings Ranges by Efficiency Level Median; B ox 25%-75%; Whisker: 5%-95%

-1000

-500 0 500 1000 1500 2000 2500 3000

65% ­ Standing

pilot, improved HX 66% ­ Standing

pilot, improved HX 67% ­ Standing

pilot, improved HX 68% ­ Standing

pilot, improved HX 70% ­ Electronic

ignition 78% ­ Induced

draft 93% ­ Condensing median Average



### Figure 8.11.41 Range of LCC Savings for Gas Room DHE

8-83Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 20 40 60 80 100 120

58% - Standing pilot, improved HX 61% - Standing pilot, improved HX 62% - Standing pilot, improved HX 65% - Electronic ignition, improved HX median Average



### Figure 8.11.42 Range of Payback Periods for Gas Fan Wall DHE

Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 10 20 30 40 50 60

58% - Standing pilot, improved HX 61% - Standing pilot, improved HX 62% - Standing pilot, improved HX 65% - Electronic ignition, improved HX 78% - Induced draft median Average



### Figure 8.11.43 Range of Payback Periods for Gas Wall Gravity DHE

8-84Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 10 20 30 40

58% - Standing pilot, improved HX 61% - Standing pilot, improved HX 62% - Standing pilot, improved HX 65% - Electronic ignition, improved HX 78% - Induced draft median Average



### Figure 8.11.44 Range of Payback Periods for Gas Floor DHE

Payback Period Ranges by Efficiency Level Median; Box 25%-75%; Whisker: 5%-95%

0 30 60 90 120 150 180

65% ­ Standing

pilot, improved HX 66% ­ Standing

pilot, improved HX 67% ­ Standing

pilot, improved HX 68% ­ Standing

pilot, improved HX 70% ­ Electronic

ignition 78% ­ Induced

draft 93% ­ Condensing median Average



### Figure 8.11.45 Range of Payback Periods for Gas Room DHE

8-85

### 8.12 REBUTTABLE PAYBACK PERIOD DOE presents rebuttable PBPs to provide the legally established rebuttable presumption that an energy conservation standard is economically justified if the additional product costs attributed to the energy conservation standard are less than three times the value of the first-year energy cost savings. (42 U.S.C. §6295 (o)(2)(B)(iii)) 

### 8.12.1 Approach The basic equation for rebuttable PBP is the same as that shown in section 8.1.2, Payback Period Inputs. Unlike the analyses described in sections 8.2 and 8.3, however, the rebuttable PBP is not based on the use of household samples and probability distributions. Rather than distributions, the rebuttable PBP is based on discrete single-point values. For example, while DOE uses regional energy prices in the distributional payback period analysis, it uses only the national average energy price to determine the rebuttable PBP. Other than the use of single-point values, the most notable difference between the distribution PBP and the rebuttable PBP is the latter’s reliance on the DOE test procedure to determine a product’s annual energy consumption. Thus, for some of the products (e.g., water heaters) the rebuttable PBPs differ from the average distribution PBP calculated in the LCC and PBP analysis. 

### 8.12.2 Inputs Inputs for the rebuttable PBP differ from the distribution PBP in that the calculation uses discrete values, rather than distributions, for inputs. Note that for the calculation of distribution PBP, because inputs for the determination of total installed cost were based on single-point values, only the variability and/or uncertainty in the inputs for determining operating cost contributed to variability in the distribution PBPs. The following summarizes the single-point values that DOE used in the determination of the rebuttable PBP.

• Manufacturing costs, markups, sales taxes, and installation costs are all based on the single-point values used in the distributional LCC and PBP analysis.

• As described in section 8.4, annual energy consumption is based on the DOE test procedure.

• Energy prices are based on national average values for the year that new energy conservation standards are estimated to take effect.

• An average discount rate or lifetime is not required in the rebuttable PBP calculation.

• The effective date of the energy conservation standard is assumed to be 2013 for pool heaters and direct heating equipment, and 2015 for water heaters.

8-86

### 8.12.3 Results DOE calculated rebuttable PBPs for each standard level relative to the distribution of product energy efficiencies estimated for the base case. In other words, DOE did not determine the rebuttable PBP relative to the baseline energy efficiency level, but relative to the distribution of product energy efficiencies DOE determined for the base case (i.e., the case without new energy conservation standards). Table 8.12.1 presents the rebuttable PBPs for the four product classes of water heaters that DOE analyzed. Table 8.12.2 presents the rebuttable PBPs for pool heaters. Table 8.12.3 presents the rebuttable payback periods for gas gravity DHE and gas floor DHE. For gas wall fan DHE and gas room DHE, there were no payback periods under three years. 

### Table 8.12.1 Water Heaters: Rebuttable Payback Periods Product Class Energy Factor (EF) PBP (years) Gas-Fired Storage Water Heaters 0.62 0.8 0.63 1.5 Electric Storage Water Heaters 0.91 2.4 0.92 1.8 0.93 2.9 2.20 2.7 Oil-Fired Storage Water Heaters 0.54 1.8 0.56 2.3 0.58 1.9 0.60 1.2 0.62 1.4 Gas-Fired Instantaneous Water Heaters 0.69 0.7 

### Table 8.12.2 Gas-Fired Pool Heaters: Rebuttable Payback Periods Thermal Efficiency PBP (years) 79% (Electronic Ignition) 2.8 81% (Electronic Ignition) 2.7 

### Table 8.12.3 Direct Heating Equipment: Rebuttable Payback Periods Product Class AFUE PBP (years) Gas Gravity DHE 68% 3.0 58% 2.9 Gas Floor DHE 61% 1.5 62% 1.9 78% 2.8

8-87

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