Draft CWASHER6.WPD July 8, 1997 

Clothes 

/ 

U.S. Department of Energy 

Office of Codes and Standards 

1000 Independence Ave., SW · 

Washington, DC 

Date: July a, 1997 
Clothes Washer Rulemaking Framework 

Introduction • . . . • • . . . . . . • • . . • . . . • • . . . . . . . . . . • • • . . . . • • . . . • . . . . . . • . • . • . . • . • • . • . • . • 1 

1.0 Preliminary Market and Technology Assessment •....•......•...•...........•.... 1 

1 .1 Market Assessment .............................. · .............. ; . . . . . . . 1 

1.2 Technology Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

1 .3 Preliminary Baseline Shipments Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

2.0 Screening Analysis . . . . • . . . . . . . . . . . • . . . . . . . . • . . . . . . • . . . . . . . . . . . . . . . . . . . . . . • . . 4 

2.1 Product Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 

2.2 Baseline Units· .............. ~· . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 

2.3 Design Options .......... · ........... ·. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 

3.0 Engineering Analysis •...•.. ·. • . . . • . . . . . . . . • . . . • • . . . . . . . . • • . • . . . . . . . . . . .. . • • . . • • 6 

: 4.0 Manufacturing Costs . . . . . • . . • . • . . . . . . . • . . • . . . . • . . . • . . . • • . . . . • . . . • . . . • • . . . . . . • 7 

4.1 Characterizing Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 

4.2 Variability in Costs between Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 

4.3 Costing Approach/ Engineering Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

4.4 Proprietary Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 

5.0 Life-Cycle Cost and Payback Analysis ......................................... 10 

6.0 Prices . • . . . • • • . . • • • . . . • • . • • . • . • • • • • • • • • • • • • • • • . . • • • . • . . • • • • • . • • . . • • . . . • . . • . 13 

6.1 Retail Prices: Life-Cycle Cost Analysis . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 

6.2 Manufacturer Prices: Industry Cashflow ................................ , . . 13 

7.0 Shipments •••••.•••.•••••••.•••••••.••••••••••••••••.••••••••..••...•.. ' ••.•• 14 

8.0 Preliminary National Benefits Analysis ••...•.••.•••••••.••••••••.•••..•..••.••• 14 

8.1 Inputs to Forecasts ............. , ... . 1 • ••••••• •• • • • • • • • • • • • • • • • • • • • • • • • • • 14 

8.2 Calculation of Energy Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 

8.3 Consumer Net Present Value and Payback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 15 

8.4 Employment Impacts .................................... : . . . . . . . . . . . . . 15 

9.0 Revised Pre-ANOPR Analysis ............................................ .'. : . 16 

10.0 Consumer Impacts •.••.•• · ••••••••.•••••••••••..••..•..••••.•••.•••. : • • ... • • . 16 

10.1 Consumer Sub-group Analysis ......................................... 16 

10.1.1 Variations in Energy, Water and.Sewer Prices .......................... 16 

10.1.2 Variations in Energy Use .......... ·. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 

10.1.3 First Cost Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 

10.2 Consumer Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 

11.0 Industry Cash Flow • . • . .• . . • • • . • • • . • • • . • • . • • . . • • . . • • • . • • • . • • • • . • • • . . • . . . • . • . 17 

12.0 Manufacturer sub-group analysis ........•.•...•..••..••.•..•. u ••••••••••••• 18 

12.1 Manufacturer Sub-groups ............................................... 18 

12.2 Competitive Impacts Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 

12.3 Cumulative Regulatory Burden ......................................... 19 

13.0 Utility Impacts .•••••.•••••.....•..••• ·• • • • • • • • . . • • . • • • • • • • • • . . • • . . • . . • • • . . . . 19 

DRAFT CWASHER6.WPD July 8, 1997 
14.0 Environmental Analysis •.....•....••••••..•.....•••......•..•.••••.•...••••. 19 

Appendices 

A. Base Case Shipments Forecasts: Data Request A-1 

B. Refinement of Design Options • • • . . . . . . . . . • • • • . • • • . . • • • . . . . • • • . . . . . . . • • . • • . . . B-1 

8.1 Design options DOE and Stakeholders generally agree should be 

· considered in further·analysis . : ....... , . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-1 

8.2 Design options DOE and Stakeholders generally agree should be 

eliminated from further analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 

B.3 Design options requiring additional discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2 

8.4 Design options to consider for further analysis ................................. B-3 

C. Data Requests for Manufacturer Costs . . . . • • • • • • • . •. • . • • . . . • • • • • • • • • • • • • • • • . . . . C-1 

_C.1 Design-Option Approach ............................. .- ................... C-1 

C.2 Efficiency-Level Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-5 

C.3 Uncertainty and Variability in Manufacturer Costs ......................... · . . . . . C-9 

D. Financial Inputs for GRIM · .•••.•••••••. ~. • •. • • . • • • • • • • • • • . • • • • • . . • • • • • • • • • . • • . • • D-1 

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DRAFT CWASHER6.WPD July 8, 1997. ii 

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Clothes Wash_er Rulemaking- F_ramework 

Introduction 

This document describes the analytical framework for appliance stand~ds rulemaking. 

The emphasis 'is on describing the major components of the methodology and identifying . 

the rel11tionships among the various sections. A diagram 'of the analytical framework is 

shown in Figure 1. Currently~ the Advisory Conunittee on Applianc~ Energy Efficiency 

Standards is considering cross-cutting issues which may affect the analysis anticipated in · 

upcoming rulemakings. The Department plans to consider any recommendation from the 

Advisory Committee to the greatest extent possible in the ongoing rulemakings. · 

This docilment also describes the application of the analytical framework to· the clothes·· 

washer rule: Following a generic description of each component of a typical rulemaking, 

a comment box has been added to discuss elements ofthe·cJothes washer rule. Clothes 

washers specific comments include summaries of past events, status reports of current 

analysis, discussion of key issues, the Department of Energy's (DOE) perspectives on 

these issues, and requests for additional stakeholder input.· 

As described in this document, manufacturers are asked to provide additional performance 

and costing_information to improve the engineering analysis. T_he new information· Will 

describe iμanufacturer specific costs of achieving predetermined efficiency levels. This 

' format has the benefit of being' entirely compatible .with data requirements for . 

manufacturer impact analysis. Additionally, DOE. seeks costing information on Whirlpool 

proprietary designs. In keeping with the Department's policies~ provisions will be made 

to maintain the confidentiality of all submitted information. 

The Department expects to collect- new data utilizing the efficiency level approach 

adapted to report cost data disaggregated into GRIM cost categories, in · 

cooperation with the Association of Home Appliance Manufacturers (AHAM). The 

Department will supplement this new data-~th the existing data preViously provided by 

the clothes washer industry (based on the design option approach) to perform consumer 

life-cycle cost analysis, select trial standards levels, and calculate preliminary national 

benefits of these levels. If manufacturers want to update any of the data collected 

previo~sly under the design option approach, they should provide thi~ data to AHAM. 

These analyses will complete the analytical steps that precede the Advance Notice of · 

Proposed Rule (ANOPR). The Department believes that additional data gathering before 

the ANOPR will improve the current analysis, identify potential proble~ areas and . 

acc~lerate post-ANOPR manufacturer and economic analyses. · 

Draft CWASHER6.WPD July 8, 1997 1 
Approaches 

Industry Revi""' 

Quantitative Analysis 

Qualitative Analysis-Interviews 

Design-Option Approach 

Cost MOdeling Approach 

· Efficiency-Level Approach 

Markel Suivey Approach 

Expert Forecasts 

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Figure 1: ·Clothes Washers Rule making Framework 

Key-Inputs 

1 • 

Identify Firms/ Products 

Historical Information 

Market/ Firm Segmentation 

Existing T echnoiogy Options 

Ptolotype Designs 

I 

Elliciency/Perfonhance 

. .,, 

·:> 

·i!! 

:~ 

:~ 

" •••••• • .............. 1 •••••• 

I 

EnergyM/ater rates 1 

Maintenance/Service Costs 

Analysis 

Preliminary Market 

& Technology 

Characterization 

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1: 

ell 

Engineering 

Analysis 

Life-cycle Cost 

Analysis 

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Key-Outputs 

• Preliminary Basecase 

• Shipment Forec:aS1 

• Average Payback with Uncertainty 

. 1 • Average Life-cycle with Uncertainty 

1. 

I _______ I · r--iL-. ___ •Base Case ,.... ___ I .... · • Other 

Expert Forecast& 

Models-REM, REEPS etc. 

• Housing demand 

• Historical &hiprnems 

• Product saturalicn 

• Voluntary initiatives 

ANOPR 

lnteiviews 

GRIM Ana 

NOPR 

FINAL RULE 

I · . .. .. . . .. efficiencies I 

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: Retail Prices I . " ...... i .. " . 

• 

Preliminary National 

Benefit Analysis 

t 

• : .. L.., _R_e_vised_Ana_Pre-AN_lyse_s_o_P_R_~-- ...... 

Fuel Type 

Demographics 

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Consumer 

Sub-group Analysis 

. . Manufae1Urer Prices 1 . : '·· ..... -c:···· ............. , ... ·C3 r .. :."~.~ ...... 'C:" .......... : ... -~ .. -~- ~~~~ • 

~· .. _.8a~c~ ........ :----c 1..----------- ~ Standard Level Cases 1 

• Efficiency Distribution 1 for all Cases 

Cost (C). Price (P). 

Quantity (Q), Financial (F) 

,_ 

Manufacturer 

Impacts 

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•Payback 

• Energy savings 

• Net Piesent Values 

• Payback Distribution 

• L' le Distribution 

Industry Cash-flow with Uncertainly 

- • Empm,ment Impacts 

•.COpocly Imp-

• Camp-Imp-

• Cllnula!Mt lhtp- · 

Sub-group Cash-flows 

Emission rates •· ... ..----------r-:::---:----:--:-.,_--~...;..Pe=a~k~-Oe;:;:.;ma;;;;::nd~R~ed:;.::;:;u=cli~·o~ns:;.,. 

Environmental Uti · Revenue Losses 

Uti load factors . Utility Impacts Analysis Emissions 

·' • Revise. Analysis 

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1.0 Prelimin.ary Market and Technology Assessment . . 

1.1 Market Asse.ssment . . . 

Prior to initiating a detailed impact analysis, the Department will develop information on 

the .present arid past industry structure and market characteristics of the product(s) 

concerned. This activity will consist of both quantitative and qualitative efforts to assess 

the ·industry and prodμcts based on publicly available information .. Issues to be addressed . . 

include the following: manufacturer market share and characteristics; trends in the number 

of firms; the financial situation of manufacturers; existing· non-regulatory efficiency 

improvement initiatives; and trends in product characteristics and retail markets. 

The information collected will serve a·s resource material to be used throughout the 

rulemaking. For instance, historical product shipments and prices will be used to help 

predict :(Uture prices and shipments. Market struct~re data will be particularly useful to 

conducting the comP;etitive impacts analysis . . I 

The Department has initiated a market assessment ofthe clothes.washer industry. Once / 

completed, collected infollllation will be distributed for comnient. 

·Are there elements not mentioned aboye which should be incorporated into this 

document? · · 

1.2 Technology Assessment . 

Information relative to existing technology options and prototype designs will be used as 

input to a screening analysis. In consultation with interested parties, the Department will 

develop a list of desigrl options for consideration. Jrut~ally, the candidate design options · 

will encompass all those.technologies considered to be technologically feasible: 

The Depart~ent considers this activity completed. In October 1996, the Department 

issued the "Draft Report on Design Options for Clothes Washers." This report was 

reviewed with stakeholders at a workshop on November 15, 1996. At that time, 

Whiripool asked the Department to include its new clothes washer design options into 

future DOE analysis. These design options will be considered in future analyses. 

1.3 Preliminary Baseline Shipments Forecast 

The D.eparttnent intends to develop a base case forecast of product shipments in absence 

of new standards. This forecast will require an assessment of the impacts of past and 

existing non-regulatory efforts by manufacturers,. utilities and other interested parties. 

Draft. CWASHER6.WPD July 8, 1997 3 
DOE will seek information on the actual impacts of such initiatives to date, but will also 

consider information presented regarding the possible impacts that any existing initiatives 

might have in the future. Such information could include a demonstration of the steps 

manufacturers, distribution channels, utilities or others will take to realize such voluntary 

efficiency improvements. 

The baseline shipments forecast will be used as input to three subsequent analyses: the 

National Benefits Analysis (Section 8.0); the Consumer Life-Cycle Analysis (Section 5.0); 

and the Consumer Sub-Group Analysis (Section 10.0). To perform the National Benefits 

Analysis, a forecast of shipment weighted product efficiency improvements of new 

products sold is needed to the year 2030. To assess the average impact on the affected 

consumer population and the distribution of these impacts on consumer sub-groups, a 

forecast of product shipments by efficiency level is needed for the year a new standard 

would come into effect. 

The Department will begin to prepare a strawman baseline shipment forecast for cl<?thes 

washers. This forecast will include a distribution of shipments by efficiency level. 

Historical .product shipments and discussions with parties involved in market-based 

initiatives for increasing the sales of high efficiency models will guide the shipments 

forecast. Appendix A contains a s~ple '~Base Case Forecast Pata Request" which 

could be used to solicit shipment fQrecasts. · 

What ex/sting market-based initiatives should DOE consider? ·What other approaches 

could be used to establish the base-case shipmentforecast? What information sources 

show past shipment data by efficiency level? Please comment on the sample data 

request in Appendix A? 

The Department has prepared a strawman baseline shipment forecast for clothes 

washers for stakeholder review at the workshop. 

2~0 Screening Analysis . 

The screening analysis consists of three tasks: selecting product classes;.selecting baseline 

units; and reviewing and selecting design options for further analysis. 

2.1 Product Classes 

Product types are separated into classes based on the type of energy used, and capacity or 

performance-related features that provide utility to the consumer and affect efficiency. 

Different energy-efficiency standards will apply to different product classes. In genera.I, 

· classes are defined using information obtained in discussions with appliance 

manufacturers, trade associations; and other interested parties. 

Draft CWASHER6.WPO July 8, 1997 4 

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In t~e "Draft Report of Design Options for Clothes Washers," the Department· proposed 

reducing the number of clothes washer product classes from five to two. Numerous 

comments were received on the Department's consideration of vertical-and horizontal axis 

washers as design strategies instead of separate product classes. The Department· · 

understands the critical consumer utility issues that have· been raised in a few comment. 

However, based on current evidence, the ·Department believes there is no basis for 

maintaining separate classes for horizontal and vertical c;lothes washers. . ' . 

First, based on· the available information DOE believes vertical-axis clothes washers can 

achieve the same,efficiency as horizontal-axis clothes washers .. Second, recent and nearterin product offerings, ~d working prototype~ of horizontal and vertical axis clothes 

washers demonstrate large energy savings while maintaining important product features 

such as: ease of loading and unloading, mid-cycle addition and removal of clothing, 

length of cycle times and. tub capacity. Because utility features do not appear to affect 

efficiency, ~hey do not warrant a separate class. 

Due to the lack of information and relatively low energy consumption of the compact· · 

Class of clothes washers ( < 1. 6ft3), the Department does not anticipate their consideration 

in this rulemaking. The current minimum efficiency requirement for the compact class 

would remain unchanged. · · ',• 

Because the vertical axis com.pact clothes washer market and the manufacturing 

base for_ these products have changed since the current standards were developed, 

Whirlpool commented that the compact vertical axis product class should be re~ised 

to reflect the changed market conditions from the current definition of 1.6 ft3 to. 

include all vertical axis clothes washers <2.0 ft3. · 

2.2 Baselin~ Units . 

Defining a baseline unit .is the starting point for analyzing design options for improving · 

energy efficiency. For each product class, the baseline unit generally represents a model 

With the maximum allowable energy use specified by the National Energy Conservation 

· Act (NAECA), as amended. Other·than effieiency, features incorporated in the baseline 

unit are represen~ative of the "low-end" unit within the class. 

Draft CWASHER6.WPD ..luly 8, 199~ 5 
In the "Draft Report on the Preliminary Engineering Analysis for Clothes Washers," 

(Draft Engineering Analysis) the baseline unit represents a typical model with an Energy 

Factor (EF) of 1.198 ft3 /kWh. Expressed in terms of the efficiency descriptor of the 

future test procedure, the baseline clothes washer has a Modified Energy Factor (MEF) 

of .885 ft3 /kWh .. The baseline energy use of 1296 kWh/yr is based on the shipmentweighted average of major American tp.anufacturers' models. The current weighted 

average efficiency of new clothes washers is EF=l.23 as described in the AHAM fact 

book. The Department believes this corresponds to an MEF value of 0. 923. 

Are these values sound? If not, why not? 

AHAM indicates that the baseline MEF level is not known. They say it will take 

at least two weeks from receipt of the fi~al test procedure for the manufacturers 

to begin to calculate th~ baseline MEF. This data will need to be gathered and· 

reviewed by AHAM prior to giving the manufacturers the percentage levels from 

which they can calculate the improvements in MEF. 

2.3 Design Options 

Following the development of an initial list of design options during the technology 

assessment, the Department, in consultation with interested partie~, will review each 

design option to determine if it is practicable to manufacture, install and service; would 

adversely impact product utility ot product availability; or would have adverse impacts on 

health and safety. Design options not eliminated in the screening process will be 

considered furthedn the engineering analysis. 

On October 15, 1996, :the Department issued the "Draft Report on Design Options for 

Clothes Washers." This report identified product categories and narrowed the range of 

design options being considered for the development of technically feasible designs. A 

screening workshop was held on Nove~ber 15, 1996, to discuss the report ~d to receive 

peer review comments. · 

In response to the report and the workshop, the Department received numerous. 

comments on considering, eliininating or adding design options: In adpitiop., three peer 

reviewers provided input on the selection of design options for further study. Taking into 

consideration these inputs, the Department has identified desi~ options it believes should 

be considered for further analysis. These design options, and a summary of the comments 

received, are presented in Appendix B, '~Refinement of Design Options." · 

Draft CWASHER6.WPD July 8, 1997 6 

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3.0 Engineering Analysis 

The purpose of the engineering analysis is to estimate the energy savings potential of the 

individu81 or combinati_ons of design options not eliminated in the previous screening . 

analysis. The Department, in consultation with stakeholders, will use the most appropriate 

means available to determine energy consumption, including an overall system approach or 

engineering m·odeling. Ranges and uncertainties in _performance will be established. The 

energy savings mea~ures developed in the engineering analysis will be combined with end- . 

user costs in the life-cycle cost analysis. · · · 

The engineering analysis involves adding individual or combinations of design options to 

the baseline unit described in Section 2.2. A cost-efficiency relationship Will. be developed 

to show ~he manufacturer cost of achieving increased efficiency. The efficiency levels 

corresponding to various design option combination~ will be determined from 

manufacturer data submittals and from DOE engineering calculation~. Cost estimates will. 

be obtained from detailed incremental cost data disaggregated into labor, purchased parts 

and materjal, shipping/packaging and investment. . 

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The use of a component-based engineering analysis, Le. reverse 'engineering, p~ovides 

useful information including the identification of potential technological. paths 

·manufacturers could use to achieve increased product energy efficiency. ·1t also allows the 

use of engineering models to simulate the energy consumption of different design 

configurations under various use profiles and. applications. 

The Department recognizes that the n>:anufacturer cost information derived in a 

component-based analysis does not reflect ~e variability in design strategies and cost 

structures that can exist between manufacturers. Therefore, the Depcu:tment plans to 

derive-additional manufacturing cost estimates, using other approaches developed in 

consultation with interested parties. These additional estimates could, for example, be 

based on alternative assumptions as to the elements of manufacturing cost. These costs . 

will be used both for the engineering analysis and the manufacturer impact analysis. 

Section 4.0 contains a more detail~d discussion of approaches to estimating manufacturing 

costs. 

Draft CWASHER6.WPD July 8, 1997 7 
On October 15, 1996, the Department issued the Draft Engineering Analysis. The 

Department previously had received extensive data from the Association of Home 

Appliance Manufacturers (AHAM) and issued the document to the public for 

informational purposes. At the November 15, 1996, workshop the Department received ' 

comments from the public and had peer reviewers present their findings. 

The draft report raised important issues, most of whi~h the Department is addre'ssing in 

this document. 

1'. OLD DATA: At Jeast two manufacturers have requested DOE to accept new data 

in replacement of the data originally supplied. New cost and performance 

information is now available owing to recent experience in manufacturing efficient 

designs. . 

2. UNCERTAINTY: Participants at the November 1996 workshop commented that 

uncertainty about the cost of manufacturing each design option combination was 

not described. 

3. · V ARIABfLITY: Current data did not allow for cost variations between firms 

needed for the manufacturer inipact analysis. 

4. APPROACH: Several comments suggested that DOE request manufacturer 

specific cost-efficiency curves to improve the engineering analysis. 

5. PROTOTYPES: Another i111portant issue in~olved the announcement by 

Whirlpool of various prototypes including vertical-axis technology that meets 

horizontal-axis clothes washers efficiency level. The Department has committed to . I 

consider these prototypes in future analyses. 

4.0 Manufacturing Costs 

In addition to being used in conjunction with the Engineering Analysis, manufacturing. . 

costs are needed for the manufacturer impact .analysis and are used as one means of 

determining ret~ prices. The manufacturing costs used for the industry cash flow analysis 

are the "average" costs of achieving a specified efficiency level - within a range of 

uncertainty. For the manufacturer sub-group. analysis, only those costs· representative of 

the subject sub-group are used. 

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Th~ Dep~ment believes that the existing ~ata set, as currently reported, cannot be used 

for manufacturer impact analyses because it was submitted as average manufacturing cost" 

and does not reflect variability among manufacturers. The Department intends to collect 

new cost information from manufacturers. The data collection period is scheduled to 

occur during the months of July. and August, 1997. DOE prefers that individu'al 

· manufacturer data sets be submitted to a third party contractor for statistical treatment 

and subsequent analysis. · 

Is the data collection time frame acceptable? Can individual manufacturers submit . . -. data? 

AHAM is working out the details to allow Whirlpool Corporation to report its data 

to AHAM·to be compiled, de-identified and averaged to produce one data 

submission for th~ .manufacturen. The AHAM members propose to gather data 

from the memben within the organization and to compile it based on the DOE data 

collection form. The data collection process will begin 5 business days after receipt 

by each ·or the manufacturen of the baseline MEF data point. Once that has 

occurred and the above points ·worked out, the manufacturen will need· a minimum 

of 8_ weeks to gather the data. and return this to AHAM. Following that~ AHAM will 

need approximately 4 weeks to compile the data and prepare it for release to DOE • 

. This should total approximately 16 weeks from receipt of the test procedures. · 

4.l Characterizing Uncertainty . 

Consistent with the process rule, DOE will place a: range around the average 

manufacturing cost of achieving various efficiency levels. This range of cost will be ~sed 

both in the industry cashflow analysis and in one approach to generating retail prices for 

the consumer life-cycle cost analysis. . ' 

Draft CWASHER6.WPD July 8, 1997 . 9 
In the manufacturing cost information previously supplied by manufacturers, a confidence 

level ·was provided to characterize the probability of achieving the cost reported. Building 

on this framework, ·DOE is proposing a modification to future data collection instruments 

so that the cost estimates reported will be bound by a range. For example, manufacturers 

would be asked to provide their best point estimate and a range.describing the lowest and 

highest values they consider likely. Appendix C describes in greater detail two sample data 

requests, the statistical treatment" which would result of the information provided, and 

possible reporting methods. The Department plans to meet with interested parties to 

discuss the appropriate use of data and the range of uncertainty. 

Are there alternative approaches to characterizing uncertainty in average manufacturing 

costs? 

The Department has prepared a spreadsheet model using ·a commercially available 

uncertainty software package to demonstrate hpw manufacturing costs will.be 

combined and reported. ' · 

4.2 Variability in Costs between Manufacturers . 

The Department is committed to assessing the differential impacts of standards on 

different manufacturers. The detailed sub-group analysis will entail calculating cashflows 

separately for each class of manufacturer defined .. If appropriate, GRIM analysis will be 

perfomied for each firm . 

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Draft CWASHER6.WPO July 8, 1997 10 

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The clothes washer manufacturing costs previously submitted to DOE demonstrated large 

variability. This variability ·was expressed _using the standard deviation in data submittals. 

DOE will not be using standard deviation figures to conduct its subgroup analysis since 

these may mask serious cost impacts, particularly to smaller firms. 

The Department prefers receiving disaggregated cost da:ta from all manufacturers. The 

company specific cost informatio_n will be used to perform GRIM analysis for each 

mariufacturer or manufacturer subgroup. The Department is open to suggestions 

regarding the mechanics of generating sub-group specific GRIM analysis_which will still 

allow for manufacturer confidentiality and appropriflte stakeholder review. 

Whirlpool has proposed a basic methodology of output aggregation in combination 

with individual company submission. 

• Each industry member would develop their own inputs to the GRIM models 

over a range of MEF levels. proposed by the DOE. . 

• The GRIM models \YOUld be run by industry members to generate a range of 

individual company outputs. 

• , The outputs of the individual companies could then be aggregated t~ 

determine industry impact. _ · 

• .· Individual companies would not be r:equired to submit"detailed input 

assumptions, but only changes in revenues, shipments, profit after tax, and 

cashflow; capital investment and design and marketing spending could als·o 

be provided~ . 

• A third party could do the aggregation an~ then conduct a reality check by 

. comparing the aggregate output to currently available industry data. 

Please comment on this proposed methodoiofn!. · 

. 4.3 Costing Approach/ Engineering Analysis . 

Three methodologies can be used to generate manufacturing costs. These methods 

include: the DESIGN-O:PTION APPROACH, reporting the'.incremental costs of adding 

design options to a baseline model; the EFFICIENCY-LEVEL APPROACH, reporting . 

relative costs of achieving energy efficiency improvements; and the COSTASSESSMENT APPROACH which requires a "bottoms-up" manufacturing cost 

assessment based on a detailed bill of materials. This assessment would be.performed by a 

third-party contractor. The Department will select public input on which of those 

approaches should be used during a rulemaking . 

. Draft CWASHER6.WPD July 8, 1997_ 11 

·_/ 
.I 

The Draft Engineering Analysis used industry cost data based on the DESIGN-OPTION 

APPROACH. The Department believes. that this data is not sufficient to perform a 

manufacturing impact an8.lysis due to variations between the design paths manufacturers 

will use. · ' I 

The Department would like to supplement the existing data with new data generated by 

the EFFICIENCY-LEVEL approach, adapted to report cost data disaggregated into 

GRIM cost categories. A more detail explanation of this approach appears in Appendix C. . . 

Should a new manufacturer data submittal be conducted using the EFFICIENCY -

LEVEL approach? · 

DOE expects manufacturer:s to submit new data based on the efficiency-level 

approach which will be used with the exi~ting analysis to supp•ement the ·new data 

submittal. 

4.4 Proprietary Design 

· The Department will consider in its analysis all design options that are commercially 

available or present in a working prototype, including proprietary designs. Proprietary 

designs will be fully considered in the Department's engineering and economic analyses. 

Whirlpool has provided the Department with patents and demonstrated working 

prototypes of new proprietary designs. , DOE intends to consider these designs in future 

analyses. This entails developing cost and performance information to be used in the 

engineering analysis and later, in the manufacturer impact analysis. 

DOE request that each manufacturer estimate its cost.of producing the design features 

desC'.ribed in the prototypes. This inf<?rmation will provide input to the competitive 

impacts assessment and other economic anajyses. . 

What are the.pros and cons of this approach? Are·there alternative approaches? 

The Department will perform an independent cost efficiency assessment. Before 

publishing a rule based on this technology, the Department will require additional 

information. 

5.0 Life-Cycle Cost and Payback Analysis 

Draft CWASHER6.WPD July 8, 1997 12 
-------- ----

) 

The effect of standards on individual. consumers includes a change in operating expense 

(usually decreased) and a change in purchase price (usually increased).· The net effect is 

. analyzed by calculating the life-cycle cost using the engineering performance data for 

energy consumption and equipment reta_\l pnces which can be derived in a number. of ways 

-(see Sectio.n 6.0). Inputs to the LCC calculation include the installed c_onsumer cost 

(purchase price plus installation cost), operating expenses (energy, water, sewer, and 

maintenance costs), lifetime of the appliance and a·discount rate. 

·1n the ANOPR stage, the consumer life-cycle analysis will be conducted using typical 

values for appliance price and life, 'fuel costs, energy usage and discount rates. Design - · 

options which have payback periods that e?Cceed the average life of the product or which 

cause life-cycle cost increases will not be considered further. The· detailed impact ·. 

calculation,-conducted after the ANOPR, will have a comprehensive assessment of 

impacts on subgroups of consumers as described in Section 10.0. 

In the ANO PR stage,' uncertainty analysis will be conducted on several of the typical - . 

values described. During the post-ANOPR consumer analysis (Section 10.0), the 

Department will evaluate additional parameters includmg: variations in regional energy, 

water, and sewer prices, variations in energy use and variations ·41 installation costs. 

Based on the results of the life-cycle cost ancilysis, DOE will select candidate standard 

levels for analysis. The range of candidat~- standard levels will typically include: (a) the -

most energy efficient combination of design options or most energy efficient level; (b) the 

combination of design options or efficiency-level with the lowest life-cycle cost; and ( c) a 

combinatiqn of design· options or efficiency _level with a payback period of not more than 

three years. Additionally, candidate standard levels that incorporate noteworthy 

technologies or fill in large gaps between efficiency levels of other candidate standards 

levels may be selected. 

,. 

Draft CWA.SHER6.WPD July 8, 1997 13 

/ · 
For clothes washers it will be necessary to determine input values for several variables. 

The following discusses each of the other variables in turn. 

Retail Prices: The determination of prices for clothes washers is described in Section 6.0. 

·Annual Energy Use: The Dr~ Engineering Analysis used a calculation based on the 

Department's future test procedure for clothes washers (JI T.P). Average usage is 

assumed to be 392 wash cycles per year. Average energy use per cycle is based on 

manufacturer data submittals. 

Annual Water Use: The Draft Engineering Analysis used a calculation based on the future 

DOE test procedure. Average usage is assumed to be 392 wash cycles per year. The 

average water use per cycle is based on manufacturer data submittals. 

Energy Prices: The life-cycle cost analysis will use high and low projections of national 

average electricity and gas prices to residential customers for the year 2003. The present 

Energy Information Administration (EIA) Annual Energy Outlook will be used as the 

default source of projectfons for this uncertainty ~nalysis. The Appliance Standards 

Advisory Committee (Advisory Committee) is currently investigating alternative methods 

·of forecasting future energy prices for recommendation to the Department. 

Water and Sewer Rates: The Draft Engineering Analysis used 2.84 $/kgal based on 

comments provided by ·Seattle Water1

. The Seattle Water national analysis of water and 

. sewer rates was conducted using current rates. The Department seeks data arui comments 

from stakeholders regarding appropriate values for water and sewer rates in 2003. ' 

-Lifetime: For the purposes ofthe life-cycle analysis, ·a life-time of 14 years will be used. , 

Discount Rate: Discount rates of 2%, 6% and 15% net. of inflation shall be considered. 

Water Heater Fuel Type: For clothes washers much of the operating expense comes from 

externally heated water. The watet heating energy required and its cost, depend upon the 

fuel type and efficiency of the water heater. Therefore, two fuel scenario.s, gas and . 

electric, for water heating.will.be considered in the life-cycle analysis. 

Dryer Fuel Type:. Since the future test procedure considers the energy needed to fully dry 

clothes in a dryer after a final washer spin .cycle, dryer fuel type is important in 

determining clothes washer operating costs. Various scenarios for electric and gas.dryers 

will be considered in the LCC analysis. 

Maintenance. Service. and Installation Costs: The Department will ~onsider expected 

·changes to maintenance, service and installation costs for clothes washers, if applicable . 

. Currently, the Department does not know of any measurable changes to any of these costs 

associated with different design options. . 

Detergent Costs: The Dep~ment is aware that several parties believe t~at low water use 

clothes washers may reduce detergent requirements. Detergent manufacturers believe that 

detergent requirements are based primarily on clothing soil levels and not water use. 

From comments received, detergent manufacturers expect to offer new formulations for 

low water use clothes washers in the near future. The Department does not plan to 

consider detergent savings in its analysis but, if relevant, will reconsider its position should 

more information becqrrie available. ' 

Comment number 29 on Docket EE·RM-94-403. 

Draft CWASHER6.WPD July 8, 1997 14 

. ' 
The Department is prepari~g a spre~d sheet inodel for_ calculating LCC · · 

considering uncertafoty and ranges in input variables. This niodel shall be 

presented at the workshop. 

6.0 Prices 

How manufacturing costs and assoCiated m~gins, associated with standards, are passedthrough from manufacturers to consumers has an impact on botp consumers and · 

manufacturers. Consumer and manufacturer economics are linked and invers~ly related. 

For this reason, retail prices used for the life-cycle cost analysis need to be reconciled with '. 

manufacturer prices. 

6.1 Retail Prices: Life-Cycle Cost Analysis 

At the pre-ANOPR stage, a co~sumer life-cycle cost curve, based on average retail prices, 

is used to perform an initial selection of potential standards levels. Retail prices are 

neede~ for a base case, absent new standards, and for all efficiency levels to be considered. 

Several approaches have been described to obtain these retail prices. Potential approaches 

include: 1) conducting a survey of existing prices' on the market; 2} surveying 

manufacturers and other market experts to predict consumer willingness to pay higher 

prices; 3) applying various mark-ups over variable manufacturing costs. · 

··.The Department believes that there is value in using various assumptions about cost passthrough· that will be reflected in price forecast approaches. The output ·of this analysis will 

be a. table describing ~etail prices for each possible efficiency level which assumes that each . 

level. represents a new minimum efficiency standard. Consistent with the proc~ss rule, and 

building on the ,estimates generated by the various approaches, new retail prices would be. 

described within a range of uncertainty. 

The Department intends to use atl the approaches described above to generate estimates 

of future prices and conduct uncertainty analysis of the.range generated. The market 

assessment document described in Section 1.1 will include any market pricing information 

currently available. The manufacturing cost data forms in Appendix C include a request . 

for the estimated increase in retail price resulting from the standard. Mark-up approaches 

to price determination will· be conducted by the Departm~nt and. submitted for review,. 

Is the proposed pr()(:ess for generating retail prices sound? Would interested parties. be 

willing to provide estimates of the future prices? · 

A presentation on estimatin2 future prices will be mde at the workshop. 

. . 

6.2 Manufacturer Prices: Industry Cashflow 

Draft CWASHER6.WPD July 8, 1 ~97 15 
I' 

·------

DOE will use an average distributor mark-up to relate the retail prices generated for the 

life-cycle cost anaiysis and manufacturer prices required to conduct the industry cashflow 

analysis. Distributor mark-ups are reported in the market assessment document from 

Section 1.1. The same relative nμ1ge of uncertainty generated for retail prices will be used ' 

for manufacturer prices since the mark-up is assumed constant. 

Are there alternate approaches? Would manufacturers be willing to provide estimates of. 

future manufacturer prices? 

A presentation on estimating future orices will be mde at the workshop. 

7 .0 Sh~pments 

- As described in Section 1.3, the Department intends to develop a base case forecast of 

product shipments in the absence of new standards. This initial forecast will incorporate 

the impacts of past and eX:isting non~regulatory efforts by manufacturers, utilities and 

others. · 

For all candidate standards levels, shipment forecasts are required in order to calculate the 

·national benefits of standards ( en~rgy savings, water savings, and consumer life..-cycle . 

costs) and to calculate the future cashflows of manufacturers. DOE propo·ses to use three 

approaches to conduct these forecasts including: I) an approach to derive shipments based 

on the key market drivers for the particular product; 2) larger models to consider 

additional variables (i.e. retirement functions, price elasticities, etc.), and, 3) applying the 

expert judgment of rulemaking participants, and observing histotical trends, .new forecasts 

will be generated. 

·Because models cannot adequately simulate short-term effects, DOE will place 

considerable weight on_ expert forecasts for short term shipments estimates. Shipment 

forecasts previously-developed will be combined through scenario analysis and a range of 

uncertainty will be carried forward into both national benefits and cashflow analysis. 

Are there alternate aiproaches to forecasting shipments? ·How will manufacturers 

provide shipment forecasts for various efficiency levels? · . ' . 

8.0 Preliminary National Bene_fits Analysis 

In Section 6.0, the life-cycle cost and energy savings for i~dividual consumers is 

Draft cwAsHER6.WPD July ·a. 1997 

'• 

' 16 

.. 

~ 

,; 
~ - .. ' 

estimated. In this section, a preliminary assessment of the aggregate impacts at the 

national level is conducted. Mea~ures of impact ·to be reported include the average · 

consumer payback, the net present vaiue of total consumer life-cycle costs, national 

energy and water savings and national employment . I 

8.1 Inputs tc:» Forecasts 

Analyzing impacts of Federal energy-efficiency standards requires a comparison_ of 

projected U.S. residential energy consumption with and without standards. The caseswithout standards a~e referred to as pase case projections. The forecasts contain 

projections of unit energy consumption of new appliances, annual appliance shipments and 

the price of purchased appliances. The derivations of the base case forecast are described 

in Section 1. 3 and standards case forecasts are discussed in Section 7. 0. Approach~s to 

determiriing retail prices _are described in-Section 6.0. 

The base-case shipments forecast developed under Section 1.3 will incorporate the likely 

effects of market forces and of any non-regulatory initiatives. 

8.2 Calculation of Energy Savings 

The Department intends to calculate national energy consumption for each year beginning 

with the expected effective date of the standards. Aggregate energy consumption Will be 

calculated for the base case and. each candidate standards level. This calculation may be 

done by one or more alternative approaches, including: I) the use of_a simple spreadsheet; 

· 2) .the use of detailed end-use energy models· such as the Lawrence Berkeley National 

Laboratory's Residential' Energy Model (REM) oi the Energy Information 

Administration's_National Energy Modeling System (NEMS); and 3) by multiplying 

shipment forecasts by unit energy savings. 

For the clothes-washer rulemaking, the Department plaris to use the REM and simpl~ 

spreadsheet m9dels. 

Do you agree with the use of these tools? 

The Department will present an exai.Ople-of energy savings forecasting results using 

a simple spreadsheet to show bow the growth in efficiency can be accounted for 

over time. ' 

\ 

8.3 Consumer Net Present Value and Payback 

The national- net present value of the candidate standards levels is calculated as the 

difference in LCC, base case minus standards case. The calculation is performed as in 

Section 5. 0, except that a· shipment weighted LCC is calculated using the shipment and 

energy efficiency distribution forecast~ from Section 7.0. 

D'raft CWASHER6.WPD July 8, 1997 17 
8.4 Employment Impacts 

Two impacts on employment are possible from standards, direct impacts and indirect 

impacts. Direct employment impacts would result if standards lead to a change in the 

number of employees at manufacturing plants and related supply and service firms. These 

direct impacts are estimated in the manufacturer sub-group analysis described in Section 

12.0. Indirect impacts may result from both expenditures shifting amorig goods · 

(substitution effect), and income changing, which will lead to a change in overall 

expenditure levels (income effect). The Department is.currently seeking input on 

. ·appropriate methods to estimate indirect employment effects of standards.· 

Are you aware of any methods or models which can be used to assess indirect 

employment impacts? 

9.0 Revised Pre-ANOPR Analysis 

Based on consideration of the comments received for the ANOPR. any necessa.rY changes 

to the pre-ANOPR analysis or the candidate standards levels will be made. If major 

changes are required at this· stage, inter~sted parties will be given an. opportunity to review 

· the reVised analysis'. · 

10.0 Consumer Impacts. 

10.1 Consumer Sub-group A_nalysis . 

The Department .will evaluate ·variations in regional energy prices, variations in energy use 

and variations in installation costs that might affect the net present value of a standard to 

consumer sub-populations. To the extent possible, DOE will obtain estimates of the 

· variability in each input variable and consider this variability in its c.alculation of consumer 

impacts. The variability in each input variable and likely sources of information will be 

.discussed with stakeholders. . 

.. 

· 10.1.1 Variations in Energy, Water and Sewer Prices . . 

Energy, water and sewer prices vary regionally across the country. DOE proposes to 

perform sensitivity anaiyses considering the fraction of consumers facing a particular 

service price. The range· in values of change of life~cycle costs· f.or the distribution of 

households also will be calculated. The analysis will be structured to answer questions 

such as: How many households are better-off with standards and by how much? How 

many households are not better off and by how much? 

Draft CWASHER6.WPD July 8, 1997 18 
,,, .. 

• • 

"' 

Are you aware of data sources that the Department shouid consider for this analysis? . . 

10.1.2 Variations in Energy' Use . 

Variations in energy use for a particulaf-appliance can depend on factors such as: climate, 

type of household, people in household, etc. Annual eriergy use can be estimated· by a 

calculation based on an accepted test procedure or it can be measured directly inthe'field. 

The Department will perform sensitivity analyses to. consider how differences in energy 

use will affect sub-groups of cons~mers. · 

Currently the Department has data for average consumer usage. 

Are you aware of any data which reflect variations in consumer usage habits, e.g. 

change in the number of cycles,. on the use of hot water, or use of the dryer? 

10.1.3 Fint Cost Increases 

The Department will be sensitive to first cost increases to avoid negative impacts to 

identifiable population groups such as low-income households. Additionally, the 

Department will assess the likely impa~s of first cost increases on product sales· and fuel· 

switching: · · 

The Department is sensitive to the potentially high first cost increases for high efficiency 

clothes washers. · · 

. . 

'What are the potential impacts of a large first cost increase on consumers (affordability, 

ftnr.mcing, etc.). Can you suggest methods and data the Department could use in . 

· conducting its analysis? . · · 

:i0.2 Consumer Participation 

The Department will seek to inform and involve consumers and consumer representatives 

· in the process of developing standards. This will include notification of consumer 

representatives during the rulemaking process and where appropriate, seeking direct 

consumer input~ 

Draft CWASHER6.WPD July 8, 1997 19 

·' 

,I 
Currently, the Department is conducting various market demonstration projects for 

market-pull high efficiency clothes washer programs. Results of these projects are 

expected to be available prior to the publication of the NOPR. In addition, the Advisory 

Committee is addressing this issue and may offer recommendations which the Department 

will consider. 

11.0 Industry Cash Flow 

Th~ Department intends to perform ari industry cashflow analysis. This analysis will use 

average manufacturing costs (with uncertainty)under Section 4.0, shipments forecasts as 

·derived under Section 7.0 and pnce forecasts from Section 6.4. Financial information, 

· also required as an input to GRIM, Will be developed based on publicly available data and 

confidentially submitted manufacturer information. 

For discussion purposes, the Department has prepared a.list of default financial values to· 

be used in the GRIM in~ustry analysis. These were calculated by studying publicly · 

available financial statements of clothes washer manufacturers and considering values 

used in the report titled "Financial Impact of DOE Top Loading Hotizontal Axis 

Standards on U.S. Washing Machine Manufacturers: Report to Association· of Home 

Appliance Manufacturers Horizontal Axis Task Force." Refer to Appendix D: Financial 

_Values for GRIM Analysis. · · · 

Are the values proposed reasonable? What range of values. is appropriate? If data is 

available prif?T to the publication of the AJ{OPR, the D~partment may pr9vide advance 

cash flow analyses to interested.parties. 

12.0 Manufacturer sub-group analysis 

12.1 Manufacturer Sub-gr.oops 

The Department intend.s to conduct detailed interviews with as many clothes washer· 

manUracturers as is possible to gain insight into the potential impacts of standards. During 

t.hese interviews, DOE will solicit information _necessary to evaluate cashflows· and to 

assess competitive, employment and capacity impacts. Firm-specific cumulative burden 

will al$o be considered. 

Draft CWASHER6.WPO July 8, 1997 20 
j 

.!! 

•.fr 

Which m<mujacturers should be actively solicited? Is there t;zny value in grouping 

clothes washer manufacturers into sub-groups or should individual GRIM analysis be 

coruluctedfor each? More generally, what would a well executed sub-group analysis 

entail? · 

For example, the Department's coptractor could develop GRIM analysis scenarios jointly . 

with individual manufacturers and report changes in financial performance without . 

disclosing manufacturer identities. Alternatively, manufacturers could submit complete 

GRIM siriiulations including input data. The Department's contractor would then . . 

aggregate them, as appropriate, and report changes in financial parameters. 

12.2 Competitive Impacts Assessment 

Legislation directs the Department to consider any lessening of competition that is likely 

to result from standards. It further directs the Attorney General to gauge the·impacts, if 

any, of any lessening' of competition. DOE will make a determined effort to gather and 

report firm-specific financial information and impact.s. The competitive analysis will focus 

on assessing the impacts to smaller, yet significant, manufacturers. · · 

The Department is consulting with the Department of Justice on the clothes washer rule ... 

' 

12.3 Cumulative Regulatory Burden 

The Department will recognize and seek to mitigate th.e overlapping effects on 

manufacturers of new or revised DOE standards and other regulatory actions affecting the · same products. . ' . . . 

The Department is currently preparing enhancements to the GRIM model to add 

cumulative regulatory burden calcufation capabilities. . 

Are you aware of any regulations that would cause a cumulative burden with this 

rulemaking? 

13.0 Utility Impacts 

The analysis of utility impacts will include estimated marginal impacts on electric and gas 

Draft CWASHER6.WPD July 8, 1997 21 
utility costs and revenues. For electric utilities, the Department will calculate three 

primary measures of utility impact: l) avoided energy and avoided reliability costs, 2) 

generation peak load and capacity reductions, 3) revenue losses. This analysis will be 

performed by the Appliance Standards Environmental and Utility Model (ASEUM). The 

Department seeks views <?n appropriate measures of impact and analytical methods te 

evaluate gas utility impacts: -

Consi<#!ring the use of gas water heaters and clothes dryers by consumers, how 

important is a gas utility impact ~ses"sment? Do you have any recommendations 

regarding how a gas utility impact analysis should be conducted? 

14.Q Environmental Analysis 

The standards' analysis tracks three types of energy-related emissions: sulfur oxides 

(SOx), nitrous oxides (NOx) and carbon dioxide (CO:z). The ASEUM model introduced 

in Sectiori 13.0, is used to perform the computations. The emissions of these pollutants 

are reported separately ~ut no monetary values are assigned. .Outside the scope of the 

current analysis which will not be considered are other types of environmental impacts, 

such as emissions of particulates, carbon mono,Pde, air toxins, and volatile organic 

compounds, generation of solid wastes, and water discharges associated with energy use. 

In regards to reduced water·use and waste water generation achieved through high 

efficiency· clothes washers, the Department plans to provide individual consumer and 

national reduction of water and waste water results. · · 

Are .there any other factors the Department should consider?. If so, how? 

Draft CWASHER6,WPD July 8, 1997 
... 

Appendix A 

Base case Shipment Forecast: Data Request 

The Department is developing a base case forecast of produCt shipments in the absence of 

new standards. This forecast will incorporate an asses_sment of the impacts of past and 

exist~g non-regulatory efforts by manufacturers, utilities, and other interested parties. 

To perform a the National Analysis, a forec~st of shipment weighted· efficiency 

·.improvements of new products sold is needed to the year 2030. Please use Figure A. I to 

enter your forecast of changes in the shipment weighted efficiency of new products sold. 

The.current shipment weighted efficiency of clothes washers has an MEF value of0.923.-

~ 

~40-+-~~~+-~~--+~~~-+-~~~-+-~~~t--~~-+~~~~ 

.. 

E 

~ oa. 

]30-t-~~~+--,-~--+~~~-+-~-,-~-+-~~~t--~_,..-+~~~~ 

.... 

C> 

c 

.!! 

Ja 

-a 

ffi20-r-~~~+-~~--+~~~-+-~~~--~~~t--~~-+~-,-~~ 

.! 

--= l!' 

.. 

3: 

c10-r-~_,.._,..+-~~--+~_,.._,..-+-~_,..~-+-~~_,..+--~~-+~~~~ 

tll 

e 

.& 

--= C/J 

o--~-,--,-+--,-~--+~~~-+-~~~-+-_,.._,.._,..t--~~-+~~~~ 

1995 2000 2005 . . 2010 - 2015 2020 2025 2030 

Year 

Figure A.1: Shipment Weighted Efficiency of New Products Sold 

Please indicate what factors/considerations influenced your forecast. 

Draft CWASHER6.WPD July 8, 1997 A-t 
Appendix A (continued) 

·Base case. Shipment Forecast: Data Request 

To assess the average economic impact of standards on the affected consumer population · 

and to calculate the distribution of this impact to different consumer sub~groups, a 

forecast of product shipments by efficiency level is needed for the year the new standard 

would come into effect. 

Please use Figure A.2 to profile the expected sales distribution of new products by 

efficiency level for the year 2003. · 

100 

90 Ill 

.!!· 80 ftl 

Cll 

-u 70 ::I 

'1:1 

..... 

0 60 

Q.. 

3 50 GJ 

z 

- 40 .o 

CD 

a 30 ftl 

-

c 

GJ 20 u 

... 

GJ. 

a.. 10 

0 

0 10 .20 30 40 50 60 

% Decrease in.Energy Consumption Per Unit Compared to Baseline 

Figure A.2: Shipment Weighted Efficiency Distribution of New Product Sales 

in the Year 2003 

Please indicate what factors/considerations ~uenced your forecast. 

Draft CWASHER6.WPD July 8, 1997 A-2 
Appendix B 

Refinement of Design Options . 

The Draft Report on Design Options for Clothes Washers was distributed prior to a DOE 

sponsored clothes washer workshop· held on November 15, 1996. In the report, po~ential 

design options were separated into two categories: .1) tentatively eliminate from further 

analysis and 2) tentatively consider for further anatysis. In response to the report and 

workshop, the Department received numerous comments on considering, eliminating, or 

adding design options: In addition, thre~. peer reviewers J?rovided input on design options. 

In Sections B. l, B.2, and B.3 which follow, design options have been categorized ~y the 

nature of the comments received. In Section B.4 a summary_ of the design options to be 

considered in the further analysis is presented. ' · 

8.1 Design options DOE and Stakeholders generally agree shou.ld be considered 

. in further analysis 

-1. Improved· fill control . 

2. ·Tighter tub tolerance (for vertical axis designs only) 

. 3. Thennostatically controlled mixing valves (TCMV} 

4. Improved water extraction for RMC's of 50% 

5. Horizontal axis design2 

6. Horizontal axis design with recirculation2 

7. Automatic fill control 

8. Increased motor efficiency 

9. Direct drive motor 

_\ 

8.2 · Design options DOE and Stakeholders generally agree should be eliminated 

from further analysis 

1. Improved .water extraction for RMC's of 30% 

2. Suds saving · · 

3. Reduced thennal mass 

. 4. Electrolytic disassociatio.n of water 

5. Ultrasonic washing 

6. Bubble action 

7. Ozonated laundering 

8. Added insulation3 

2 While some commenters believe those design options are valid, they indicated they should be 

consider~ entirely separate product classes.·· 

3 'Die insulation design option was added to this category on the basis that it saves little or no 

energy. 

Draft CWASHER6.WPD July 8, 1997 B-1 
B.3 Design options requiring additional discussion 

1. .Jmproved Water &traction 

The Department received conflicting comments from various stakeholders. One 

group believed that the Department's preliminary decision to screen out 35% 

RMC was unfounded. They stated that c4rrently available clothes washers are on 

the market that achieve approximately 36% RMC, and if DOE does not consider 

35% RMC then it should at least consider 36% R,MC. The opposing group of 

commenters believe that the 40% RMC level should be eliminated due to potential 

wrinkling of clothing and loss of consumer utility. In addition, commenters 

rec_ommended that the Department consider 45% RMC to reduce the increment in 

improvement from ·:4-0% to 50% RMC. 

The Department has concerns about potentially impacting consumer utility or 

overestimating potential energy savings.from improved RMC. Currently, the 

Department is implementing test procedure revisions which will discount the 

potential savings ofRMC improvements due to consumer's potential behavior 

given a choice of improved moisture extraction options. However, this reduction is 

.. not based on explicit data regarding consumer usage habits of improved RMC, 

rather it is based on stakeholders best assessment _of.future trends. Considering 

· this, and the potential impact of excessive wrinkling of clothes, the Department 

believes that the lowest RMC level considered should be 40% RMC. 

The Department. realizes that the 40% RMC level may increase wrinkling of 

clothing, but the Department's test procedure provides for consumer choice of 

RMC levels, thus eliminating consumer utility concerns. In addition, the 

Department believes the consideration of the 45% level ·should.be analyzed to 

reduce the ·gap between the 40% and 50% RMC levels. · 

2. Whirlpool Prototype 

At the November 15, 1995, workshop, Whirlpool announced it had four 

proprietary protot)rpes. These prototypes iricluded top-loading hprizontal-axis and 

vertical-axis clothes washers that achieve effi~iencies comparable to the horizontalaxis desigri .option considered in the Department's preliminary engineering analysis. 

The Department believes that Whirlpool's horizontal-axis prototypes are 

·interesting and provide aqditional information regarding potential design strategies 

by various manufacturers .. :However, the department does not believe they need to 

be analyzed separately since other manufacturers have introduced innovative 

horizontal-axis clothes washers into the market place. 

Several_ manufacturers commented that the. Whirlpool high efficiency vertical axis 

Draft CWASHER6.WPD July 8, 1997 B-2 
designs should be added as design options: Whirlpool agreed and provided patents 

on their high efficiency vertl.cal axis d~signs. Whirlpool commented that its . 

,patented designs meet all criteria for further consideration as design options. 

Whirlpool further commented that its high efficiency vertical axis designs maintain . 

consumer utility in regards to capacity, ease of loading, and performance. The 

achievable energy savings are reported by Whirlpool to be equivalent to current 

horizontal axis deigns. The Department believes that it should analyze the 

, Whirlpool vertical-axis prototype, due to their ability to attain horizontal axis 

efficiencies in a conventional vertical configuration: · 

I 

3. Advanced Controls'/ Sensors 

Comments received stated that this. option could or will affect product utility if the 

defirlition includes soil sensing. Preliminary.engineering analysis showed energy 

savings of only 0.4%. Based on the preliminary engineering analysis, this design 

option is cl~arly not cost effective. Based on these factors the Department. believes 

· that further analysis is not warranted'.· 

B.4 Design options to consider for further analysis 

Taking into consideration comments on the Draft Report on Design Options for Clothes 

Washers and the DOE November, 1996, Workshop on clothes washers; the Department -. · 

plans to consider the design options below for further analysis. · 

1. Iffiproved fill control 

2. Tighter tub tolerance (for vertical axis only) 

. 3. Thermost~ticatly controlled ·mixing valves 

4. Improved water extraction (RMC = 50%) 

5. Improved water extraction (RMC = 45%) 

6. Improved water extraction (RMC= 40%) 

7. Horizontal axis· design (tumble washer) 

8. Horizontal axis design with recirculation 

9. Automatic fill control 

. 10. Increased motor ~fficiency 

11. Direct drive motor 

12. whirlpool high e~ciency vertical axis ,design (or similar concepts) 

The Department recognizes t~at c~mbinatioris of the above design options may also be 

considered. Combinations have beeri analyzed in a preliminary engineering analysis. The _ 

design option improved moisture control (RMC) can be combined with all of the other 

listed design options except for tighter tub tolerance. Similarly, auto-fill and . . 

thermostatically controlled mi~g valves (TCMV) can be eombiiled with other design 

Draft CWASHER6.WPD July 8, 1997 B-3· 
options. The energy savings of the RMC design option can be calculated directly, 

however, responses from manufacturers on combined design options could account for 

synergies between options and could effect the cost of a combined design option. In other 

cases, the energy.savings of a combination may not warrant further analysis when another 

design option is available that has greater savings for simiiar costs. 

Draft CWASHER6.WPD July 8, 1997 B-4 
Appendix C 

• ft-a- ft--·----a ~ .. ...,. __ , ____ .... __ •• ___ •---- • 

uau1 nt="tut=:n "· •-ues1gn·upuon Approacn 

0 

.. 

! 

Appliance Type: · Clothes Washer 

Appliance Class (anddpattd): Standard (1.6 cu. n. or greater capadtJ) 

Variable Cosu Total 

~ Costs oer Unit (a) Variable 

> en Material Labor Overhead· Costs (e) 

:t 

m (b) (c) (d) ($per Unit) 

lJ 

"" DOE Anticipated Design Options - [i] (2] (3) (4). 

~ .,, I Baseline 

0 2 Imnroved fill control -

3: 3 Tiaht~r tub tolerance Cvert. axis onlvl . 

II> 

'< 4 Thermostaticallv controlled mlxin2 valves CTCMVI 

I\) 

<D 

S lm~roved water exuactioli lRMC = SO%) 

- 6 lmnroved water extraction CRMC = 4S%) 

<D 

<D i lmoroved water extraction CRMC = 40... l ....., 8 Horizontal axis desil?D (tumble washer) 

9 Horizontal axis desil?D with recirculation . - 10 Automatic Fill Control 

l l Increase motor effici,.,,,.,, 

12 Direct drive motor 

13 Whirlnnnl hillh efficiencv vertical uis desitm 

Comblnadons 

14 ~ RMC +Auto-fill+ TCMV 

U 45% RMC +Auto-fill + TCMV --· 

16 ~ RMC +Auto-fill+ TCMV 

17 SO% RMC + lmnrnved Fill Conttol 

18 4591> RMC + lmnrnved Fill Control 

'19 ~ RMC + lmoroved Fill Control 

20 H-axis +SO% RMC 

21 H-axis + 45% RMC 

22 H-illlis + 40% RMC 

23 H-oxis + ~0% RMC + TCMV 

24 H-axis + 45% RMC+ TCMV 

. 2S H-axis + ~ RMC+ TCMV 

26 H-axis w/recirc. +.SO.. RMC 

27 H-uis w/recirc. + 4591> RMC , 

28 H-axis w/recirc. + 40% RMC 

Cost Uncertainty Range 

Variable Cosu 

. (+/·percentage) (0 

Maximum Minimum 

(SJ (6) 

. 

•' 

' 

Yeariy Production Volume (a)=-. _ 

Conversion Costs (Fixed) Total Cost Uncertainty Range 

Total cinimons of dollm> Fixed Fixed Costs 

Capital Product (i) Costs (j) ( +/- Del'Ctntage) (k) 

Costs(g),(h) Design Costs (millions) Maximum Minimum 

(7) (8) (9) (10) [II) 

, 

' 

' 

/ 

·• 

-· 

.. "'} ~ 
.... 

<O 

<O 

"" 

Data Request C.1-Deslgn-Optlon Approach (continued.:) 

Energy Use Data (k) 

Hot Machine Total Energy Dryer 

- Water(I) Energy (m) wlodryer Energy(n) 

lWhlcyc lWhlcyc lWhlcyc lWhlcyc 

DOE Anticipated Design Options (12) (13) (14) (IS) 

I Baseline 

2 fmnroved fill control ,, 3 Tighter tub tolerance tvert. axis onlvl · 

4 Thennostaticallv controlled mlxintl valves ITCMVl 

S fmnmved water extraction tRMC = SO%l 

6 fmoroved water extraction <RMC = 4S%) .. 

1 lmoroved·water extraction <RMC = 40%) 

8 Horizontal axis desilm Crumble washer} 

9 Horizontal axis desian with recirculation ' 

10 Automatic Fill Control 

11 Increase motor efficiencv 

12 Direct drive motor 

13 Whirlnnnl blah efficiencv verti~ axis desian 

Combinations 

14 SO% RMC +Auto-fill+ TCMV 

IS 4S% RMC +Auto-mt+ TCMV 

16 40% RMC + Auto-fill + TCMV 

17 SO% RMC + lmnmved Fill Control 

18 4S% RMC + rmoroved Fill Control 

19 40% RMC + lmoroved Fill C.ontrol 

.. 

20 A-axis + SO% RMC -

21 H-axis + 4S% RMC 

22 H-axis + 40% RMC 

23 H-axis + SO% RMC + TCMV 

24 H-axis + 45% RMC+ TCMV 

25 H-axis + 40% RMC+ TCMV 

26 H-axis wlrecirc. +SO% RMC 

27 H-axis wlrecirc. + 4S% RMC - 28 H-axis wlrecirc. + 40% RMC · 

Uncenainty Range Water Use (1>) 

Total Energy Oothes MEF. Total Energy Water Water 

with dryer . Container (+I- ocrcentage) (o). Use Use 

kWh/eye cu.ft. cu.ftAWhkyclt Maximum Minimum gal/cu.ft. gal.lcycle 

(16) (17] (18] (19] ·1201 (21) (22] 
Data Request C. i-Design-Option Approach (continued .. ) I 

Energy Data Comments Estimated 

Source (q) Notes ' Increase in 

Retail Price 

' DOE Anticipated Design Options . (23) (24) (25) 

I Baseline 

2 lmoroved fill control 

3 Tiirhter tub tolerance lvert. axis onM 

4 Thermostaticallv controlled mixina valves ITCMVl r 

S lmmnved water extraelion lRMC = S~l · 

6 lmoroved water extraelion tRMC = 4S'lL) 

7 lmoroved water extraetion fRMC = 4o'lLl .. 8 Horizontal axis desi211 Ctumble washer) 

9 Horizontal axis desi'"' with recirculation . 

10 Automatic Fill Control '• .. 

11 Increase motor efficiencv ' 

12 Direct drive motor , 

13 Whirlnool hieh efficiencv venical axis desian 

Combinations 

14 SO% RMC + Auto-fill+ TCMV 

IS 4S% RMC +Auto-fill+ TCMV \ 

16 40% RMC +Auto-fill+ TCMV 

. 17 SO% RMC + lm...,.ved Fill Control 

18 4S% RMC + lmnrnved Fill Control 

19 40% RMC + lmnrnved Fill Control . 

20 H-axis + SO'lL RMC 

21 H-axis + 4S'lL RMC 

22 H-axis + 40% RMC 

23 H-axis +SO% RMC + TCMV 

24 H-axis + 4S% RMC+ TCMV 

2S H-axis + 40% RMC+ TCMV . .. 

I - .26 H-axis w/recirc. +SO% RMC · 

27 H-11xis w/recirc. + 45% RMC 

28 H-axis w/recirc. + 40% RMC 
Data Request. C1: Design-Option Approach Footnotes 

This data request is consistent with the historical DOE approach to gathering .cost and 

efficiency data. . · 

-_(a) 

(b) 

© 

(d) 

(e) 

(f) 

(g) 

_ (h)-

(i) 

G) 

(k) 

(1) -, 

(m) 

(n) 

(o) 

(p) 

(q) 

Assumes a constant production volume at the level anticipated for the year the new 

standard comes into effect (2003). For production of all models in product class. 

Material cost~ include material and parts. 

Burdened labor rate includes dir_ect labor and fringe-benefits costs. 

Overhead includes factory overhead excluding depreciation. ·Includes both fixed 

and variable components. 

'Total of columns numbered [I] through [3]. 

Shows the range of expected variable costs expressed as maximum value (% over 

column [4]) and a minimum value(% below column [4]).· 

For purposes of this analysis assume a 5 year regulatory life (i.e., amortize this cost 

over 5 years). The Department-will perform sensitivity analysis on this variable as 

appropriate on the suggestion of stakeholders. · 

Includes investment for such items as production machinery and plant upgrade 

and/or expansion and tooling. 

Product design conversion costs are the expensable costs for new product design. 

These may include product redesign costs and expensable factory conversion 

expenses. Also inciudes costs incurred for new product literature and catalogs, 

product obsolescence~ and various related marketing expenses. 

, Total of columns numbered [7] & [8].' -

Shows the range of expected variable c~sts expressed a~ maximum value (% over 

column [9]) and a minimum value (% below columri [9]). · 

Includes only externally applied hot water. -

Includes internal hot water. -

This is a test procedure calculated value that is a function of remaining moisture 

content (RMC). -

This value represents the range of total energy usage (as a percentage). Enter 

maximum value(% over column [16]) and minimum value(% over column [16]). 

Based on DOE test procedure, Appendix JI. 

,source for Energy Use data: test d~ta (T), calculations (C), or estimation (E) .. I 

. ' 

Draft CWASHER6.WPD July 8, 1997 C-4 
c 

iiJ 

ft.-&-"--·---& I' ft P.U!-1.:...--... - a _ ... __ 1 •------- - -•- ' uaLa nc"lut=::1L "·~-c111c1ency•Leve1 Approacn 

= ·Appliance Type: . Clothes Washer 

~ · · Appliance Class (anticipated): 

>· 

Standard (L6 cu. ft.or greater capacity) 

CJ) 

ffi Yearly Production Volume (a)=----

~ 

,, 

~ 

0 

.~ en 

Percent 

Improvement . (b) 

(I] 

Baseline 

s · .. 10 

ts 

20 

25 

30 

3S 

40 

4S 

so 

SS 

60 

6S 

Product Characterisics 

MEF Total Energy Clothes 

wl dryer Container (c) 

cu.ft./lcWh/cyclt kWhlcyclt cu.ft. 

(2) (3) (4) 

0.885 

0.932 

0.983 

1.041 ' 

1.106 

1.180 

1.264 ~ 

1.362 

l.47S 

1.609 

1.770 

l.967 

2.213 

2.S29 

Enen?v Use (c) Water Use (c) 

·Hot Machine Dryer Water Water 

Water(d) Energy (e) Energy· Use Use:. 

kWhlcyclt kWh/cyclt . kWh/cyclt gal.I eye gal./cuft. 

[SJ (6) (7). [8j (9) 

Energy Data 

. Source 

(f) 

(10) 
Oat.a Request C.2-Efficiericy-Level Approach (continued .. ) 

Variable Costs Total Cost Uncenainty Range Product Conversion Costs Total Cost Uncenainty Range 

Percent Cost Per Unit (a) Variable ( +/- percentage) (k) Total (millions of$) Fixed '· ( +/- percentage) (p) 

Improvement Materials Labor Overhead Costs (j) Variable Costs Capital Product (n) Costs (o) Fixed Costs 

(g) (h) (i) ($per Unit) Maximum Minimum Costs (l)(m) Design Costs (millions) Maximum Minimum 

(11) (12) (13) (14) {15] [16] (17] (18) [19) (20] (21)' 

Baseline .. 

5 

10 '' 

.15 

20 

25 

30 

35 

40 

45 ' 

50 

55 

60 - 65 
"""··~ .. ~', 

Data RequestC.2-Efficiency-Level Approach (continued .. ) 

f 

- Design Options Estimate 

Percent Used to Achieve Comments . increase in '• 

Improvement Efficiency Level Retail Price 

- (q) 

(22) . (23) {24)' 

Baseline -

5 

10' 

15 

' 20 

25 

30 ' 

35 .-

40 '. 

45 -· 

50 ' . 

55 '.;, 

60 

65 -

·,' 
Data Request C2: Efficiency-Level Approach Footnotes 

This approach consists of letting the manufacturers supply cost and corresponding 

efficiency data using any desi~ options or design option combinations they choose. . ' I 

(a) 

·(b) 

© 

(d) 

(e) 

(f) 

(g) 

(h) 

.·(i) 

(j) 

(k) 

(1) 

Assumes a constant production volume at the level anticipated for the year the new . 

standard comes into effect (2003). For production of all models in product class. 

Based on.MEF (includes washer and dryer energy).,. Percent increase column 

could be replaced by a MEF column. 

Percent saving& = 1 - (baseline MEF I new MEF) 

Based on DOE test procedure, Appendix J1. 

Includes only externally.applied hot water. 

Includes internal hot water. · 

Source for Energy Use data: test data (T), calculations (C), or estimatfon (E). 

· ·.Material costs include material and parts. 

Burdened labor rate includes dμ-ect labor and fringe-benefits costs: 

Overhead includes factory overhead excluding depreciation. Includes both fixed 

. and variable components. 

Total of columns numbered [11] through [13]. 

Show the range of expected variable costs expressed as maximum value (% over 

column [14)) and a minimum value(% below column [14)). ' 

For purposes of this analysis assume a 5 year regulatory life (i.e., amortize this cost 

over 5 years). The Department Will perform sensitivity analysis on this variable as 

appropriate on the suggestion of stakeholders. 

(m) 

. (n) 

Includes investment for such items as production machinery and plant upgrade 

and/or expansion and tooling. 

Product design· conversion costs are the expensable costs for _new product design . 

These may _include product redesign costs and expensable. factory·conversion 

expenses. Also includes costs uicilrred "for new product literature and catalogs, 

product obsolescence, and various related marketing expenses. 

(o) 

(p) 

, (q) 

Total of colllmns numbered [17] & [18]. 

. Show the range of expected variable costs expressed as maximu~ value (% over 

. column [19)) and a minimum value(% below column [19]). 

List design options used to achieve tJ:ris efficiency: 

1. Baseline 

2. Improved fill control· 

3. Tighter tub tolerance (vert. axis only) 

4. Thermostatically controlled mixing valves (TCMV) 

5. Improved water extraction (RMC = 50%) 

6. Jn:iproved water extraction (RMC = 45%) 

7. Improved water extraction (RMC = 40%) 

8. Horizontal axis design (tumble washer) 

9. Horizontal axis design with recirculation 

10. Automatic Fill Control 

Draft CWASHER6.WPD July 8, 1997 C-8 

(. 
1 l. Increase motor efficiency 

12. Direct drive motor 

13. Whirlpool high efficiency vertical axis design . 

14. Other designs 

C.3 Uncertainty and ,Variability on Manufacturer Costs 

The analysis will explicitly consider uncer,tainty (e.g., incomplete information about future 

costs) and variability (e.g., differences among manufacturers). This sectfon describes a 

proposed approach for collecting a:nd using. the data. The approach can be used for.any 

. data collected (each component of cost, or for the total incremental cost). Part of the · 

discussion with stakeholders should.include decisions about the level of detail at which 

uncertainty should be addressed. · The examples presented here were developed using one 

of several software products that are commercially available. 

·Haw detailed should the data be on uncertainty? 

All of the data have some unc~rtainty associated._ One approach would be to request . 

explicit estimates of uncertainty associated with each number provided. ·However, where 

possible, the burden of maklng those estimates can be reduced, by instead estimating oilly 

the uncertainty associated with more aggregate numbers. For example, rather than 

esti.inating the uncertainty for-each of tile cost items in the desigfi option survey, only the 

uncertainty ii). .total variable cost and total fixed cost for each design option is needed to 

carry an analysis of the cost uncertainty through the manufacturer impact analysis and 

engineering analysis. In the design option approach, uncertainty could be characterized 

,for the efficiency or for the components: hot water energy; machine energy, dryer energy, 

· and clothes container (cu. ft.). Variability in consumer usage among households, such as 

loads per year, will be characterized separately (for the detailed consumer analysis), to ' 

deal with actual energy consumption as distinct from the test prpcedure. 

Haw should uncertainty be characterized? 

In order to account for the differences among manufacturers, each manufacturer will be 

asked ~o submit their own estimate of costs, including their estimate of the uncertainty" in 

their costs. Manufacturers will be asked to estimate the uncertainty in their costs by 

providing a minimutll, most likely, and maxim~m value for the cost. These values will be 

interpreted as a triangular distribution, unless the manufacturer indicates th~t a different 

distribution should be used. · 

' Constructing industry costs from individual manufacturer costs. 

Since the costs to individual manufacturers will be treated as confidential, a range of costs 

to the 'industry will be constructed, based upon the information from the individual 

manufacturers. The range of costs to the lndustry will be expressed as confidence 

Draft CWASHER6.WPD July 8, 1997 c.;g 
/ 

intervals, that is a range of values with a specified probability. 

Fo~r steps are proposed for combining information from individual manufacturers to 

. construct the range of costs for the industry. First, the data from each manufacturer 

provide a range of costs. Second, these estimates may be weighted. (See discussion · 

below a~out how to determine what weights to use, if any.) Third, sampl,es are drawn at 

random over the fu~ range of cost estimates, and a distribution of costs for the industry is 

constructed. Fourth, in order to protect confidentiality, the results are summarized as 

"trend results," revealing only the median ("nliddle") and the low and high values 

· correspo11ding to specific. confidence intervals. 

Weighting the individual inanuf acturer costs to obtain the industry costs. 

For the current mix of products, the industry result can be built up from the individual 

manufacturer's costs by simply averaging the estimates (assuming equal weights), or 

alternatively, by weighting each manufacturer's costs by their market share. Ifno weights 

are specified, the range from each manufacturer is sampled as often as the range from any 

other manufacturer. If weights are applied, then a range with a higher we!ght is sampled 

more frequently than a range with a lower weight. In the example, we present both the 

. unweighted estimate of inaustry easts, and an estimate using market shares as weights. 

Without advance knowledge of future market shares, we propose to use current market 

shares to weight each manufacturer's. costs, in order to build up to the range of industry 

costs. For the future mix of products, the market shares may change, (e.g., with the 

possibility that those manufacturers with the highest costs may lose market share). A 

sensitivity analysis can be conducted on.the weights, based upon possible shifts in market 

·~· ' 

· Example: Suppose three manufacturers provide estimates of an incremental cJ~t (either 

for a design option or for an efficiency level). Table I shows each manufacturer's.estimate 

of the minimum, likeliest, and maxitm,1m cost. Figure I shows the triangular distributions 

. drawn from minimum, likeliest, and niaxiffium costs for three manufacturers,· ·. . 

corresponding to Table 1. The areas under each distribution ·are the same, corresponding 

to I 00% probability that the costs for each manufacturer fall within the range between the · 

minimum and maximum value specified by that manufacturer. (The areas can be adjusted 

to any other confidence level.) , , 

Ta b le 1. H h . I. typot etaca mcremen tal cos t es f 1ma t es f rom th ree man uf a ct urers. 

Manufacturer ·Minimum Likeliest Maximum 

B $10 $15 $20 

A $5 ! $20 $25 I ·• 

c .$10 $20 $30 

Manufacturer B estimates the cost to be between·$10 and $20, likeliest $15. 

Draft CWASHER6.WPD' July 8, 1997 C-10 
~ . 

Manufacturer A estimates the cost to be between $5 and ·.$25, likeliest $20. Manufacturer 

C estimates the cost between $10 and $30, likeliest $20. The simple _average of the 

estimates of"likeliest" c9st is $18.J= ($15+20+20)/3. But this estimate fails to .account 

for the uncertainty. 

Figure 1 and Table 1 show that manufacturer A has ~ wider range from the minimum to 

the likely value ($15=$20-$5) than fyom the likely value to the maximum ($5=$25 .. $20). 

Considering the _uncertainties as tnan~lar ~istributions, and taking account of the ran~e 

and shape of the uncertainties, recalculating the mean value for IJ!anufacturer A from a · 

random sample gives a resul(of $16. 7. The mean value is not the same as the "likeliest" 

value m any case where th~ range of estimates is not symmetric. The "likeliest" value 

(e.g., $20) is the value with the highest probability, while the mean.value (e.g., $16.7) is 

the more complete result of random sampling over the range of uncertainty. 

Calculations of.industry costs Will-use multiple values within the range provided by . 

manufacturers. Random :Sampling techniques (Monte Carlo or Latin Hypercube4

) will be. 

used tq select trial values within the ranges. provided. A sufficient number of trials will be 

analyzed to represent the given range well. Figure 2 shows the unweighted 'average, 

calculated using 500 trials (Latin Hypercube), with a mean.industry value of$17.2. 

The weighted values are ~btained by assuming market shares of 3 0% for manufacturer A, · 

60% for manufacturer B, and 10% for manufacturer. C. Since Manufacturer B, with the 

5 

. -- - 10 

FIGURE 1. UNCERTAINTY IN MANUFACTU~ COSTS 

15 20 25 

$ 

30 

,...._Company B 

• • Company A . 

- .. - Conipany c 

.· 4 Monte Carlci invo}ves random sampling. Latin Hypercube.is inten~ed to provide higher assurance 

than Monte Carlo that the full range· is sampled. Latin Hypercube divides the range into segments having equal 

probability arid assumes a value for e~ch segment. . 

Draft CWASHER6.WPD July 8, 1997 ·c-11 

\ ' 
largest market share, has estimated lower' costs than the other manufacttirers, the weighted 

costs are.lower than the unweighted costs. Figure 3 shows the weighted costs, with a 

mean value of$16.0. · · 

·Even. more information is provided by a confidence interval. The confidence interval is the 

probability that the cost will occur within some range from low to high v~ue around the 

mean value. Table 2·shows the range of values for the 10%, 25%, 50%, and 90% 

confidence intervals for the unweighted and weighted scenarios. · 

T bl 2' C fid . t a e . on 1 ence m erva s an d f range o costs f or th em . d ustry 

Confidence Interval Range of Costs Range of Costs 

(around mean) (unweighted) · (weighted) 

Mean $17.2 $16.0 

10% $17.0-17.5 $15. 7-16.2 

25% . $16.5-$18.0 $15.5-16.6 

50% $15.8-18.8 $14.7-17.l 

. 90%. $13.7-20.6 $12.9-19.0 

/ 

/ 

Draft CWASHER6.WPD July 8, 1997 C-12 
' 

. G: ' 

Forecast: UNWEIGHTED AVERAGE 

Summary: 

Display Range Is from l 0.0 to 30.0 

Entire Range ls.from 11.9 to 22.9 

After 500 Trials, the Std. Error of the Mean ls O~ l 

Statistics: 

Trials 

Mean 

Median· 

Mode 

Standard Deviation 

Variance 

Skewness. 

Kurtosis 

· Coeff. of Variability 

. Range Minimum 

Range Maximum · 

Range Width · 

Mean Std. Error . 

I 

I 

\ 500 Trials 

.Ool& 

Forecast: UNWEIGHTED AVERAGE 

Frequency Chart 

~-5CX). 

17.2 

17.3. 

2.1 

4.4 

-0.04 

2.51 

0.12 

11.9 

22.9 

11.0 

0.09.· 

OOutliera · 

23 

.035 • • • • • • • • • • • • • • • • • • • 17.25 

;' 

11.S ' -= 

" 

5.75 ~ 

~ 

~ 

=· .023 

., 

~ 

0 

... .012 CL. 

.ODO 

10.0 15.0 . 20.0 25.0 ' .. 30.0 

c::.13 . I 

Cell: E9 

/ 
Forecast: WEIGHTED A VERA GE 

Su~mary: . 

Display Range is from 10.0 to 30.0 

Entire Range Is from l 0.8 to 20.2 

Fiqure 3 

After 500 Trials. the Std. Error of the Mean is 0.1 

Statistics: 

Trials 

Mean 

·Median 

Mode· 

Standard Deviation 

. Variance 

Skewness 

Kurtosis· 

Coeff. of Variability · 

Range Minimum 

Range Maximum 

Range Width 

· Mean Std. Error 

i Forecast: WEIGHTED AVERAGE 

' i 500 Trials Frequency Chart ., 

.054 

.041 

~ :s 

., .027 . 

.a:::i 

i ·C 

.. .014 I a. I 

! .000 

10.0 15.0 20.0 25.0 

. ·c-14 

~ 

500 

16.0 

16.0 

1.9 

3.4 

-0.07 

2.57 

0.12 

10.8 

20.2 

9.4 

0.08 

OOutliera 

20.25 

~ 13.5 .g 

" 8.75 ~ . 

. 30.0 

'· 

Ce.II: Hl 1 

. ' 

.. · 
~~ 

~4-·"; ~' \" . 

Appendix D 

Financial Inputs for GRIM 

Assumption Default Suggested Uncertainty 

I Range 

Max. Min. 

TaxRate 40% 

Interest Rate 12% 

Working Capital .18% 

% Sales '. 

S,G&A % Sales 16% 

Depreciation· 3.25% -

Capital -4.00% \ 

Variable Overhead (%) 60% 

Useful Life (years) 5 .. 

R&D 2% .. 

In making a cash flow analysis, the GRIM model requires several· major assumptions, each 

of which can·be modified. :Please provide your suggestions for these values .. 

Draft CWASHER6.WPD July 8, 1997 . D-1