C-3.i

APPENDIX C-3. ESTIMATES OF MANUFACTURING COSTS AND ENERGY

CHARACTERISTICS FOR ELECTRIC AND GAS-FIRED STORAGE WATER

HEATERS: DATA FROM MAX MINNIER AND OTHER SOURCES

TABLE OF CONTENTS

C-3.1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3.2

C-3.2 DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3.2

TABLES

Table C-3.1 Manufacturing Cost - Electric Water Heaters (50-gal) . . . . . . . . . . . . . . . . . C-3.6

Table C-3.2 Energy Characteristics - Electric Water Heaters (50-gal) . . . . . . . . . . . . . . . C-3.7

Table C-3.3 Manufacturing Cost - Gas-Fired Water Heaters (40-gal) . . . . . . . . . . . . . . . . C-3.8

Table C-3.4 Energy Characteristics - Gas-Fired Water Heaters (40-gal) . . . . . . . . . . . . . C-3.9

Table C-3.5 Incremental Manufacturing Cost for 3" vs. 4" Flue 

Diameter - Gas-Fired Water Heaters (30-gal and 40-gal) . . . . . . . . . . . . . . C-3.10

Table C-3.6 Incremental Manufacturing Cost for LPG Water Heaters

 (40-gal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3.10
a Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup, retail

price, and fuel price in the Life-Cycle Cost and subsequent analyses.

C-3.2

APPENDIX C-3. ESTIMATES OF MANUFACTURING COSTS AND ENERGY

CHARACTERISTICS FOR ELECTRIC AND GAS-FIRED STORAGE WATER

HEATERS: DATA FROM MAX MINNIER AND OTHER SOURCES

This Appendix documents the manufacturer cost data for residential electric and gas-fireda

water heaters provided to the U.S. Department of Energy by Max E. Minniear, consultant to

Lawrence Berkeley National Laboratory (LBNL).1

 The data are used in the Engineering and the

Life-Cycle Cost analyses to develop the federal efficiency standards for such products.

C-3.1 INTRODUCTION

The primary source of both manufacturer cost and efficiency data for this analysis was the

Gas Appliance Manufacturers Association (GAMA), which collected data from water heater

manufacturers. GAMA did not provide data for three of the design options being considered (2.5-

“ and 3" Jacket Insulation, Plastic Tank, and Side Arm Heater). The missing data were obtained

from Minniear, former Vice President of Engineering at A.O. Smith Water Products Company, who

was contracted by LBNL to provide disaggregated cost and efficiency data for baseline designs and

various design options. Some of the cost data were compared to data obtained from Eugene West,

formerly of Bradford-White Corporation, who was under contract with Pacific Northwest National

Laboratory (PNNL).2

 Both consultants were recommended by GAMA.

Minniear’s data were used primarily for two purposes: 1) to supply the manufacturing data

for the missing design options, 2) to confirm the reasonableness of the computer models’ estimates

used in the analysis and 3) to provide a base for the markup adjustment for gas-fired water heaters

when a 4" flue diameter is applied.

C-3.2 DATA

Minniear provided manufacturer cost and efficiency data for both electric and gas-fired water

heaters. The data were supplied in the format developed by A.D. Little Company to reflect the basic

design options used in the analysis.

Electric Water Heaters: For the typical existing baseline 50-gal electric water heater, 

Minniear provided total manufacturing cost data. He also provided the incremental manufacturing

cost for each design option.
C-3.3

Table C-3.1 contains the manufacturing costs and the associated uncertainty ranges for

electric water heaters and Table C-3.2 contains the energy characteristics values and the associated

uncertainty ranges. 

Gas-Fired Water Heaters: For the typical existing baseline 40-gal gas-fired water heater, 

Minniear provided total manufacturing cost data. He also provided the incremental manufacturing

cost for each design option.

Table C-3.3 contains the manufacturing costs and the associated uncertainty ranges for gasfired water heaters and Table C-3.4 contains the energy characteristic values and the associated

uncertainty ranges. 

Cost Difference Estimate for Gas-Fired Water Heaters with 4” and 3” Flues: For the typical

existing baseline 30-gal and 40-gal gas-fired water heater, Minniear provided incremental

manufacturing cost data to account for the price impact of a change in the flue diameter from 4" to

3". The cost increment is based solely on the impact of a change in the flue diameter.3, 4

In the case of the 30-gal water heater, it was assumed that both water heaters ( 3" and 4" flue

diameters) use HCFC-141b-based insulation, have a 14-in. diameter tank, and a 1-in. nominal jacket

cavity. Similar assumptions were used for the 40-gal water heater with the exception of a 16-in.

diameter tank. Both 30- and 40-gal water heaters use the same gas valve and burner components

even though they have different energy inputs.

The reduction in the flue diameter has the following effect on water heater design: the width

of the baffle is decreased, the diameter of the material used to fabricate the flue is decreased, the

draft hood must be redesigned for the smaller flue, and the height of the tank is decreased to maintain

the same volume. The design changes reduce the amount of steel used in the shell, the amount of

steel used in the flue, the amount of steel used in the jacket, the amount of foam used in the

sidewall, the amount of material used in the dip tube, the amount of material used in the anode rod,

the length of the baffle and the amount of steel used in the baffle, and the material used in the carton

(the tank itself and the shipping carton are about 1-3/4” shorter than a unit with a 4” flue). The

change in flue diameter has no impact on components such as foam dams, burners, gas valves, drain

valves, etc. There is no perceivable difference in direct or indirect labor. Table C-3.5 contains the

incremental variable material cost estimates for 30-gal and 40-gal gas-fired water heater due to a

change in the flue diameter from 4" to 3". As can be seen in the table, the totals are $2.26 for 30-gal

and $2.11 for 40-gal water heater.

In order to determine the markup of the 3" water heater (by adjusting the costs of the 4" case),

all of the cost components of the base 4" water heater must be included in the adjustment. This

includes the manufacturer's cost allocations and product failure costs.5

Most manufacturers use cost allocations to distribute the fixed costs across the product line.

Cost allocation is part of the water heater fixed costs. The total variable manufacturing costs

determine the magnitude of the allocation cost. Water heaters with lower variable costs absorb
C-3.4

proportionately less fixed cost. In this case, the 3" flue water heater would absorb about $1.05 less

fixed costs than the 4" flue case. Therefore, the impact of correcting the fixed cost absorption would

further reduce the manufacturing cost of a 3" flue water heater by $1.05.

Product failure cost (also part of the fixed cost) must also be adjusted for a 3" flue water

heater. Product failure cost is based on three elements:

• product reliability,

• manufacturer liability, and

• replacement cost in case of failure. 

Product reliability is a weighting factor. If a product is more likely to fail within the warranty

period, more monies would be allocated to manufacturer warranty reserves. 

Manufacturer liability is a simple allocation much like fixed cost and is based on the cost of

the product. If the product costs more, the liability increases. The products being considered (4" vs.

3"flue diameter water heaters) would not have a significant difference in liability so that part of the

product failure cost would remain unchanged.

The replacement cost is based on the manufacturer's cost of the water heater. As the variable

manufacturer cost increases so does the amount allocated to cover the future warranty cost. 

Based on the lower cost of the 3" flue water heater, less would be allocated for product

failure. Correcting for this reduced product failure cost further reduces the manufacturing cost of a

3" flue water heater by $0.24.

The total cost adjustment for the 3" flue diameter water heater as compared to a similar 4"

water heater is $3.40 for the 40-gal and $3.64 for the 30-gal water heater.

Cost Difference Estimate between LPG and Gas-Fired Water Heaters: For the typical

existing baseline 40-gal gas-fired water heater, our consultant provided incremental manufacturing

cost data to account for the price impact of a change from natural gas to LPG.6

It was assumed that both water heater types ( natural gas and LPG fuel) use HCFC-141bbased insulation, have a 16-in. diameter tank, and a 1-in. nominal jacket cavity.

The fuel change from natural gas to LPG has the following effect on water heater design:

the gas thermostat/valve is fuel-specific, the LPG water heater uses a smaller main orifice (the reason

is that the rate of gas flow in ft3

/hr is less for LPG because of the higher energy input in Btu/ft3), and

the LPG water heater uses a smaller pilot orifice. The design changes increase the cost of all three

components: the main gas thermostat/valve, the main orifice and the pilot. Table C-3.6 contains the

incremental variable material cost estimates for 40-gal gas-fired water heaters due to an LPG fuel

change. As can be seen in the table, the total material cost is $9.20.
C-3.5

The total incremental manufacturing cost includes also a fixed cost component as well as

product failure and liability allocations. The liability cost allocation is based on the basic cost of the

product regardless of fuel type. This includes natural gas, LPG, and electric. The normal liability

allocation should be adjusted for the difference in material and labor cost. In this case, there is no

difference in labor cost. The LPG water heaters have a significant difference in liability and in this

case the incremental liability cost is be $0.40.

The total cost adjustment for the 40-gal LPG water heater as compared to a similar natural

gas water heater is $14.82.
C-3.6

Table C-3.1 Manufacturing Cost - Electric Water Heaters (50-gal) 

Design Options Variable Costs1 Cost Uncertainty

Range

Fixed Costs 2,3 Cost Uncertainty

Range

Variable Costs Fixed Costs

Material Labor Overhead Total (+/- percentage) Capital Product Design Total (+/- percentage)

$/unit $/unit $/unit $/unit Max. Min. Million $ Million $ Million $ Max. Min.

1 Baseline 58.43 5.77 18.11 82.31 1% 1% 0.00 0.00 0.00 – –2 Heat Traps4 2.00 0.05 0.15 2.20 1% 1% 0.01 0.01 0.02 1% 1%

3 Increased Insulation (R-24 Foam)5 8.50 0.15 0.45 9.10 5% 2% 0.02 0.04 0.06 3% 2%4 Increased Insulation (R-32 Vacuum)6 20.00 0.50 1.50 22.00 15% 5% 0.16 0.16 0.32 20% 20%

5 Plastic Tank 7 5.25 0.80 3.20 9.25 5% 5% 0.60 0.12 0.72 10% 5%

1 The total variable cost includes material, labor, and overhead cost. The overhead is only the factory overhead2 Conversion cost - million $/40,000 units3 There is no fixed cost associated with the existing baseline model4 Heat Traps design option cost is assumed to be one and same for all types of heat traps5 R-24 is equivalent to 3 inches of polyurethane foam6 R-32 is equivalent to a vacuum insulation7 Cost for plastic tank design option reflects the “steel shell/plastic interior” tank method used in the analysis
C-3.7

Table C-3.2 Energy Characteristics - Electric Water Heaters (50-gal) 

DOE Design Options Energy Data Uncertainty Range

On-Cycle Off-Cycle EF

EF RE UA Elec Elec (+/- percentage)

W W Max. Min.

1 Baseline 0.900 0.98 5.50 4400 0 0.902 0.875

2 Heat Traps 0.905 0.98 5.25 4400 0 0.907 0.890

3 Increased Insulation (R-24 Foam) 0.935 0.98 4.00 4400 0 0.937 0.9004 Increased Insulation (R-32 Vacuum) 0.955 0.98 3.30 4400 0 0.960 0.9005 Plastic Tank 0.910 0.98 5.00 4400 0 0.920 0.900
C-3.8

Table C-3.3 Manufacturing Cost - Gas-Fired Water Heaters (40-gal)

DOE Design Options Variable Costs 1 Cost Uncertainty Range Fixed Costs 2,3 Cost Uncertainty Range

Material

$/unit $/unit

Total

Variable Costs Fixed Costs

$/unit $/unit Max. 

Labor Overhead (+/- percentage) Capital Product Design Total (+/- percentage)

%

Min. 

%

Million 

$

Million 

$

Million 

$

Maximum

%

Minimu

%

m

2 Heat Traps 1 Baseline 64.53 6.50 16.72 87.75 1 1 0.00 0.00 0.00 – –

4 2.00 0.05 0.15 2.20 2 2 0.01 0.01 0.02 2% 2%

3 Increased Insulation (R-16 Foam)5 6.00 0.05 0.15 6.20 5 5 0.02 0.02 0.04 4% 2%4 Increased Insulation (R-24 Foam)5 14.50 0.15 0.45 15.10 10 5 0.04 0.06 0.10 5% 2%

5 Plastic Tank 7 29.75 2.90 9.25 41.90 10 5 0.80 0.40 1.20 10% 5%

6 Improved Flue Baffle 1.25 0.15 0.45 1.85 5 5 0.07 0.15 0.22 5% 2%

7 Multiple Flues 13.25 0.65 2.25 16.15 5 5 0.75 0.15 0.90 5% 2%

8 Improved Combustion Chamber 0.00 0.00

9 Submerged Combustion Chamber 17.25 1.75 5.75 24.75 5 5 0.20 1.00 1.20 8% 4%

10 Flue Damper (electro-mechanical) 6.25 0.70 2.25 9.20 10 5 0.03 0.15 0.18 10% 3%

11 Side Arm Heater 24.50 2.10 7.20 33.80 20 10 0.20 0.50 0.70 20% 10%12 Two Phase Thermosiphon 12.25 1.15 3.20 16.60 20 10 0.04 0.12 0.16 10% 10%13 IID 14.50 1.25 4.50 20.25 10 5 0.07 0.10 0.17 5% 5%

1 The total variable cost includes material, labor, and overhead cost. The overhead is only the factory overhead2 Fixed costs - million $/50,000 units3 There is no fixed cost associated with the existing baseline model4 Heat Traps design option cost is assumed to be one and same for all types of heat traps5

 Cost for plastic tank design option assumes that the design has a side arm combustion system with the plastic tank as a storag 7 R-24 is equivalent to 3 inches of polyurethane foam 6 R-16 is equivalent to 2 inches of polyurethane foam

e medium.
C-3.9

Table C-3.4 Energy Characteristics - Gas-Fired Water Heaters (40-gal) 

DOE Design Options Energy Data Uncertainty Range

EF RE UA On-Cycle Off-Cycle EF

Gas Elec Gas Elec (+/- percentage)

Btu/hr W Btu/hr W Max.

$

Min.

$

 1 Baseline 0.560 0.75 12.0 40,400 0 400 0 0.565 0.545

9 Submerged Combustion Chamber 0.583 0.77 11.0 40,400 0 400 0 0.590 0.5758 Improved Combustion Chamber7 Multiple Flues 0.568 0.80 14.0 40,400 0 400 0 0.575 0.5556 Improved Flue Baffle 0.595 0.79 11.0 40,400 0 400 0 0.600 0.5805 Plastic Tank 0.644 0.80 7.5 40,400 0 400 0 0.670 0.6304 Increased Insulation (R24 Foam) 0.581 0.75 10.0 40,400 0 400 0 0.585 0.5653 Increased Insulation (R16 Foam) 0.576 0.75 10.5 40,400 0 400 0 0.580 0.5602 Heat Traps 0.565 0.75 11.5 40,400 0 400 0 0.575 0.560

13 IID 0.565 0.75 11.5 40,000 15 0 5 0.565 0.56012 Two Phase Thermosiphon 0.560 0.75 12.0 40,400 0 400 0 0.565 0.54511 Side Arm Heater 0.637 0.80 8.0 40,400 0 400 0 0.645 0.62010 Flue Damper (electro-mechanical) 0.604 0.75 8.0 40,400 30 400 0 0.606 0.585
C-3.10

Table C-3.5 Incremental Manufacturing Cost for 3" vs. 4" Flue 

Diameter - Gas-Fired Water Heaters (30-gal and 40-gal) 

Components 1 30-gal 40-gal

$ $

tank shell 0.44 0.37

flue 1.15 1.12

jacket 0.13 0.10

baffle 0.13 0.13

foam 0.08 0.07

dip tube 0.05 0.05

anode rod 0.12 0.12

carton 0.11 0.10

draft hood 0.05 0.05

Total 2.26 2.11 1 The incremental costs are based on a cost of steel of$0.25/lb and $1.00/lb for polyurethane foam.

Table C-3.6 Incremental Manufacturing Cost for LPG Water Heaters

 (40-gal) 

Cost Components 40-gal

$

Material cost 9.20

Fixed cost 4.56

Product failure 0.66

Liability 0.40

Total 14.82
C-3.11

REFERENCES

1. Minniear, M., Residential Water Heaters: Initial Estimates of Manufacturing Costs and

Energy Consumption, November 12, 1997, Minniear Corporation. Panama City, FL.

Report No. Task 1 of LBNL Subcontract No. 6466797. 

2. West, E., Oil-Fired Water Heaters, Improvement to the Energy Use Attribute, 1998. PNNL

Subcontract No. 323519. Received by PNNL on August 14, 1998.

3. Minniear, M., Cost Estimate: 30-gal 4" ->3" Flue, personal communication. E-mail to Jim

Lutz, Jim McMahon, and Alex Lekov, LBNL. August 2, 2000.

4. Minniear, M., Cost Estimates for 4" v 3" Flues (40-gal), personal communication. E-mail

to Jim Lutz, LBNL. July 2, 2000.

5. Minniear, M., Retail Prices and Markups of 4" vs. 3" Flue, personal communication. Email to Jim Lutz, LBNL. July 16, 2000.

6. Minniear, M., Cost Estimates Incremental Difference Between Natural Gas and LPG for 40-

gal Water Heaters, personal communication. E-mail to Jim Lutz, LBNL. August 8, 2000.