Cost Effectiveness of Particulate 

Standards under the Proposed NSPS 

for Residential Wood Heaters

Overview of Manufacturer Cost & Emission Reduction Estimates

Presented to the Northeast States for Coordinated Air Use 

Management (NESCAUM) 

March 28, 2014

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Steps used to estimate Cost Effectiveness

1) R&D Cost per Appliance Model: We estimated Annualized R&D cost based on 

industry cost estimates and a 6-year research & development period to derive 

an average annual cost to develop and bring to market each firebox model

2) Nationwide Manufacturer Cost: We used the estimated annual R&D cost per 

model plus ongoing certification and reporting & recordkeeping costs to 

estimate the total nationwide Manufacturer Cost for each appliance type

3) Appliance Emissions: We used EPA’s Residential Wood Combustion (RWC) Tool 

and adjusted emission factors to derive PM2.5 Appliance Emissions – that is, 

estimated tons of particulate emissions from each appliance type per year –

under both baseline and proposed standard scenarios

4) Annual Emissions: We used the estimated annual appliance emissions plus 

shipment data (from industry-based market research by Frost & Sullivan) to 

derive total PM2.5 Annual Emissions from all newly-sold appliances under 

baseline and proposed NSPS scenarios, starting in 2008 onward 

5) Cost Effectiveness: We used the nationwide manufacturer cost estimates (from 

#2 above) combined with the annual baseline and NSPS emission estimates 

(from #4 above) to derive the dollars ($) per ton of particulate reduced each 

year, as well as the cumulative dollars($) per ton of particulate reduced over 

appliance lifespans

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Annualized R&D

Based on a range of industry-provided information, we estimated the average cost to 

develop a 4-firebox model line to be $1,425,000 or $356,250 per model:

o $850,000 for salaries ($160,000/year for 2 full time employees for 5.3 years)

o $50,000 for laboratory equipment (less expensive for R&D than using testing lab)

o $25,000 for prototypes (~8 prototypes at $700 for each of 4 fireboxes)

o $45,000 for test fuel (150 tests for each of 4 fireboxes at $50 for crib + cordwood)

o $150,000 for testing services (includes emissions, efficiency, & safety testing )

o $160,000 for outside consultants (300 hrs/year at $40,000 for 4 years)

o $120,000 for re-tooling (new molds & jigs for $30,000 for each of 4 fireboxes)

o $25,000 for marketing (new photos, websites, owner’s manuals)

We annualized costs using a 6-year amortization period for indirect (non-labor) costs 

because several manufacturers estimated that 14 to 18 months are required to 

develop a new firebox, but 5 to 6 years of intensive engineering and R&D efforts 

are needed for a model line of 4 fireboxes ready-for-manufacture.

Average cost per model = $63,850 annualized over 6 years (at 7% interest rate)

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Manufacturer Cost

We calculated nationwide annual R&D costs for each appliance type as:

(Annualized R&D cost)*(total # models)*(fraction of models requiring R&D) 

Note: “fraction of models requiring R&D” are those models that don’t already meet Step 2

To this we added ongoing certification costs plus reporting & recordkeeping costs (for all 

appliances except wood stoves which already have to certify and report)

Based on the following assumptions:

o 125 wood stove models;

o 125 pellet stove models;

o 20 single burn rate stove models;

o 50 forced air furnace models;

o 120 hydronic heater models;

o $10,000 to certify each wood stove, pellet stove, and single burn rate stove model

o $20,000 to certify each forced air furnace and hydronic heater model

o Reporting & recordkeeping (R&R) costs estimated in the ICR Supporting Statements per

NSPS Subpart

Note the large number of models which does not take likely model consolidation into 

account. Fewer models would significantly decrease a manufacturer’s total R&D costs.

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Residential Wood Combustion (RWC) Tool

We estimated PM2.5 emissions from each appliance type using EPA’s RWC Tool, a 

Microsoft Access® based database considered the most comprehensive, 

transparent, and flexible database tool available to estimate nationwide wood 

heater emissions.

The RWC tool allows state, local, and tribal agencies to update parameters at the 

county level and provide locally-specific emission estimates. The tool includes 

queries to recalculate emissions.

Emissions = n × b × d × EF, where 

n = number of appliance (Census AHS data refined with study & industry data); 

b = burn rate of appliance (includes adjustment for warmer states);

d = wood density (converts cords of wood burned to tons of wood burned); and 

EF = emission factor in lbs pollutant/tons of wood burned (based on AP-42 factors 

and test data)

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Appliance Emissions

For each appliance type, we used the RWC queried tallies for the total number of appliances, the total 

tons of wood burned, and the baseline emission factor. 

We adjusted the baseline RWC inventory and emission factors by deleting non-certified stoves (which 

cannot be sold), by calculating the weighted average of the AP-42 emission factors for freestanding 

and insert cat and non-cat wood stoves, and by reducing the baseline emission factor where 

warranted to not overstate reductions (to reflect, for example, that new shipments of woodstoves 

will meet the current Washington state limits even without the NSPS). We assumed that single burn 

rate stoves have the same emission factor as freestanding non-certified woodstoves. 

For each appliance type, we calculated annual emissions per individual appliance as:

Tons PM2.5 per appliance/year = 

(Total tons wood burned)*(Adjusted RWC Emission Factor) / (Number of appliances)

We adjusted the baseline emission factors to represent the proposed NSPS stepped standards, as 

described in the “Emissions Memo” (link on Slide 12), and used the same above equation 

to estimate emissions per appliance under the proposed standards. 

Note: To the degree that wood consumption and wood heater use increase (as the most recent EIA 

data* show), the baseline emissions per heater will be greater and the potential emissions 

reductions will be greater for the proposal. (*See final slide for link to data)

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Shipment Baseline: Frost & Sullivan Market Research

• We hired Frost & Sullivan (F&S) to assess the residential wood heating products market in North 

America including size of the 2006 through 2008 market by revenues and shipments, growth trends, 

and market projections through 2015. F&S’ current (2008) and forecasted market assessments are 

based on primary research – interviews with industry – supplemented with secondary sources.

• Based on their market research, F&S prepared a revenue forecast for the residential wood heating 

market with 2008 as the base year and annual revenue growth/contraction predictions for years 2009 

through 2015, including a predicted compound annual growth rate (CAGR) for these years. 

• F&S provided current market size by revenue and by unit shipments for wood stoves, pellet stoves, 

biomass stoves, hydronic heaters, masonry heaters and fireplaces, as well as manufacturer’s average 

price and price range, installation cost, and fuel consumption for each of these appliance categories 

(2008 data). Forced air furnaces were not part of F&S’ assessment.

• Other Key Findings from F&S market research include:

o Exceptional growth in the residential wood heating market in 2008, with a 16.4% revenue growth over 2007

o A predicted downward turn in 2009 and 2010 due to the economic crisis and drop in oil prices

o Positive growth predicted after 2010 due to volatile prices of natural gas and heating oil

o Demand for wood heaters strongly tied to price of oil and natural gas, making forecasting by industry difficult

o Too-strict emission regulations will require large R&D investments which will drive unit prices up and potentially cause 

some manufacturers to go out-of-business

o There is a need for a testing procedure which reflects real world homeowner use

o Lack of a comprehensive national standard is problematic for industry

o Most of industry advocates change-outs and consumer education regarding moisture content & appliance operation

o While demand is expected to increase across North America, the greatest demand is expected to continue to be in the 

Northeast US and eastern Canada

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Annual Emissions

Annual Shipments: We used F&S data for 2008 shipments by appliance category with F&S 

forecasts for 2009 and 2010, incorporating the weak economy. For years 2011 through 

2038 we used a revenue growth rate of 2% in keeping with the annual average growth 

in real GDP predicted by the US Bureau of Economic Analysis. (F&S had predicted a 

CAGR of 4.1% from 2009 through 2015.)

Baseline Emissions: We calculated baseline emissions by multiplying Annual Shipments by 

the baseline Appliance Emissions for each appliance type (Slide 6).

NSPS Emissions: We calculated emissions under the proposed NSPS standards (with Step 1 

predicted in 2014 and Step 2 in 2019 at the time of this analysis) by multiplying Annual 

Shipments by the NSPS Appliance Emissions for each appliance type (Slide 6).

For each year: Emission Reduction = Baseline Emissions – NSPS Emissions 

Emission reductions in this analysis depend on our annual shipment projections and on 

the adjusted-from-baseline emission factors. If shipments are higher than modeled 

here, then actual emission reductions will be higher (and costs per stove lower). 

Note that potential NSPS-caused effects on shipments/sales (e.g., reduced sales, 

market shifts among appliances) are not modeled. The modeling of such potential 

economic effects were outside the scope of this analysis.

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Model Design & Appliance Emitting Lifespan

We assumed a 20-year model design lifespan. Some models developed for the 1988 

NSPS are still being sold (after 25 years) and many “new” models still have the 

same internal working parts with merely exterior cosmetic changes.

We also assumed a 20-year appliance emitting lifespan. Most wood heaters in 

consumer homes emit for at least 20 years and often much longer.

In keeping with the 20-year model design life, our cost effectiveness analysis tracks 

new shipments and costs for 20 years after Step 2 becomes effective. We then 

track emissions (from stoves in consumer homes) for another 20 years, in keeping 

with the 20-year appliance emitting lifespan. 

Thus, we assume that a stove shipped in the 20th year of model design life (20 years 

after Step 2) will be emitting in home for another 20 years , making the final year 

of our cost effectiveness analysis 40 years after Step 2. 

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Cost Effectiveness (CE) Spreadsheets

We used the nationwide manufacturer cost estimates (Slides 3 through 4) combined 

with the annual baseline and NSPS emission estimates (Slides 5 through 8) to 

derive the dollars per ton of particulate reduced each year, as well as the 

cumulative dollars per ton of particulate reduced over the appliance lifespans.

We estimate costs and shipments for 20 years past Step 2, which would be 2038 

(assuming Step 2 had become effective in 2019). And we estimate emissions for 20 

years past 2038, which would be 2057 (inclusive).

The CE analysis incorporates “trailing emissions” as part of our 20 year emitting 

lifespan assumption. For example, our analysis assumes that a stove shipped in 

2015 will emit in homes for 20 years – or until 2034 (inclusive), but does not model 

emissions past these 20 years. We therefore drop emissions from this stove in our 

analysis in year 2035. Likewise, we drop emissions for a stove shipped in 2016 in 

year 2036, and so on.

The total cost ($) in the final CE estimate (at bottom right of each CE spreadsheet) is 

based on the summed annual costs over the 20 year model lifespans – beginning 

one year prior to Step 1 through 20 years after Step 2. The total emission 

reduction (tons PM2.5) is based on the 20 year emitting lifespan of each shipped 

model, through 40 years after Step 2, and accounts for trailing emissions. 

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Notes on Alternative Approach

• Under the alternative 3-step approach, due to the larger time lag between 

steps 1 and 3, we assumed two rounds of R&D for all appliances (except 

masonry heaters).

• For the second round of R&D we assumed manufacturers would not need to 

purchase new lab equipment, therefore the annualized R&D is slightly lower.

• In order to not underestimate the level of R&D which may result from a 3-step 

limit phased in over 8 years, we made the assumption that after meeting the 

interim stepped limit (3 years after the initial limit), all manufacturers would 

begin a second round of R&D for 80% of their models – i.e., we assumed that 

only 20% of models achieve the most stringent limit in the first round of R&D

• This assumption caused an “overlapping” two-year period of NSPS-related 

R&D amortized costs

• As under our proposed approach, we assumed no model consolidation (even 

though model consolidation will likely occur). Therefore our estimated costs 

are conservative, tending to err on the high side.

• The formulas we applied based on the above assumptions are visible in the 

Cost Effectiveness Alternative Approach spreadsheets in the docket.

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Links to all Cited Documents

All information presented is available in the Supporting Documents of the Residential Wood Heater NSPS Docket at 

http://www.regulations.gov/#!docketBrowser;rpp=100;so=ASC;sb=docId;po=0;dct=SR;D=EPA-HQ-OAR-2009-0734

Cost Effectiveness PM 2.5 Proposed Approach Spreadsheets: 

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0019

Cost Effectiveness PM2.5 Alternative Approach Spreadsheets:

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0016 

Emissions Memo: http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0005

Manufacturer’s Cost Impact Memo: http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0003

Unit Cost Memo: http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0004

Cost Effectiveness Memo: http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0002

Residential Wood Combustion Tool Overview (presentation slides): 

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0179

Residential Wood Combustion Tool (Access database too large for download; available at EPA Docket Center or by request): 

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0366

Frost & Sullivan 2010 Residential Wood Heating Market Study: 

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-0026

Energy Information Administration (EIA) Data: http://www.eia.gov/todayinenergy/detail.cfm?id=15431

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