E

C

/R Incorporated Providing Environmental Technical Support Since 1989

501 Eastowne Dr., Suite 250  Chapel Hill, North Carolina 27514

Telephone: (919) 484-0222  Fax: (919) 484-0122

MEMORANDUM

DATE: January 30, 2015

SUBJECT: Estimated Residential Wood Heater Manufacturer Cost Impacts

FROM: Jill Mozier, EC/R Inc.

Beth Friedman, EC/R Inc.

TO: David Cole, EPA/OAQPS 

Gil Wood, EPA/OAQPS

Amanda Aldridge, EPA/OAQPS

The purpose of this memorandum is to document the estimated nationwide cost impacts 

on manufacturers of emission limits under the New Source Performance Standards (NSPS) 

review of residential wood heaters. 

I. Estimated Research and Development (R&D) Costs

A. Model Development Costs – Room Heaters

Prior to proposal of the draft rules, we heard various estimates of the costs to bring a 

wood heater from concept to completion, from $200,000 for a single model to $1,360,000 for a 

4-firebox model line. For example, a Hearth and Home article estimated the total cost to bring a 

model from conception to market as $645,000 to $750,000 for steel stoves and over $1 million 

for cast-iron, enameled wood stoves. The authors indicated that costs would decrease for 

separate models in the same line by up to 25 percent. Based on this information, we estimated

that a 4-model steel line would cost up to approximately $328,000 per model to develop. These 

costs include marketing, design, developing first generation, second generation and prototype 

units; NSPS and safety testing, equipment tooling, etc. The manufacturer supplying these figures 

for the article estimated that the NSPS and safety testing component of these costs would 

constitute $40,000 per model.1Two other manufacturers also provided estimated development 

costs for a 4-box model line, and based on that information we estimated average costs to 

develop a new model line, including testing with both crib and cord wood and reporting and 

recordkeeping, of $356,250 for certified wood stoves and pellet stoves. We also assumed 

$356,250 for single burn rate stoves, which may be somewhat high if they are as clean as the 

manufacturers claim. We likewise assumed a development cost of $356,250 for forced-air 

furnaces and hydronic heaters. 

Comments received on the proposed rule included information and opinions regarding 

these wood heater cost estimates.2 Comments ranged from criticism that the EPA overestimated 

 

1

James E. Houck and Paul Tiegs. There’s a Freight Train Comin’. Hearth and Home. December 2009.

2 Comments on the proposed NSPS are available electronically through http://www.regulations.gov by searching 
2

costs to criticism that the EPA underestimated costs. For example, one commenter stated that the 

proposal cost estimates were overly generous and did not address input from Woodstock 

Soapstone Stoves, winner of the 2013 Wood Stove Decathlon, which estimates that the cost of 

new product development is approximately $200,000, and furthermore that the proposal cost 

estimates did not address the economies manufacturers realize when they develop functionally 

identical models from the originally certified model.3 Other commenters generally stated that the 

breakdown of cost estimates faced by manufacturers is inaccurately low. 

One commenter, in particular, provided detailed estimates of adjustable burn rate wood 

stoves and hydronic heater model development costs. According to this commenter, the proposal 

cost estimates are deficient because they do not reflect specific emission rates or emission 

performances. The detailed wood stove cost estimates are located in Attachment 2 of the Hearth, 

Patio and Barbecue Association (HPBA) comments and were prepared by NERA Economic 

Consulting (May 2014).4 Appendix A of the document, Woodstove Cost Modeling (prepared by

Ferguson, Andors & Company) contains the detailed cost estimates we reviewed and adapted for 

this analysis. According to Appendix A, “...a ‘bottom-up’ approach was used to identify the 

relevant components of compliance costs and to develop a range of cost estimates for each cost 

component based on [their] extensive experience in woodstove development, testing and 

manufacturing. The cost estimates were focused on mid-sized non-catalytic stove models since 

those models currently represent the biggest segment of the market. In developing the cost 

estimates, [they] incorporated detailed comments from a review panel consisting of ten industry 

experts. The range of cost estimates resulting from this process are representative of typical 

manufacturers and typical woodstove models, but actual costs for particular manufacturers 

could lie outside the range. NERA used the mid-points (averages) of the cost ranges for the costeffectiveness analysis.”

5

The Ferguson analysis provides cost estimates for four categories of emission reductions

based on the proposed emission levels, consisting of modifying 7.5 g/hr stoves to comply with a 

new 4.5 g/hr standard, modifying the 4.5 g/hr stoves to comply with new standards of 2.5 g/hr or 

1.3 g/hr stoves, and modifying a 2.5 g/hr stove to a new standard of 1.3 g/hr. The resulting cost 

components consisted of capital costs per model (R&D, engineering labor, tooling, equipment 

integration, preliminary testing, and other costs to design and manufacture the modified wood 

stove model) and other fixed costs per model (certification testing and safety testing, roll-out of 

the modified products including store display models and burn programs, brochures, user 

manuals, training and product discounts). The mid-point capital costs presented by Ferguson 

range from $281,725 to $532,050 depending on the emission reduction range.6

 

Docket ID EPA-HQ-OAR-2009-0734.

3 Comment on the proposed rule to Docket EPA-HQ-OAR-2009-0734 from the Washington State Department of 

Ecology; available at http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-1397 

4 Comment on the proposed rule to Docket EPA-HQ-OAR-2009-0734 from the Hearth, Patio and Barbecue 

Association available at http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-1643

5

Ferguson, Robert (Ferguson, Andors & Company), prepared for the Hearth, Patio & Barbecue Association. 

Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix A: Woodstove Cost Modeling. 

May 2014. p. 1.

6

Ferguson, Robert (Ferguson, Andors & Company), prepared for the Hearth, Patio & Barbecue Association. 

Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix A: Woodstove Cost Modeling. 

May 2014. pp. 4 – 5.
3

Unlike the proposed rule, the final rule only contains a Step 1 limit of 4.5 g/hr and a Step 

2 limit of 2.0 g/hr, with no alternative, three step limits. We maintain that the Step 1 cost for 7.5 

to 4.5 g/hr is a reasonable representation of model development costs for all models subject to 

subpart AAA, with some exceptions, described below. The Ferguson analysis shows that several 

of the cost components are identical across scenarios. The analysis claims, however, that other 

cost components vary according to the specified emission reduction scenario. We found these 

differences to be unsupported. For purposes of this analysis, we used the 7.5 to 4.5 g/hr scenario 

as a baseline case and modified it to reflect the deletion of cost categories that we deemed

inappropriately attributed to the NSPS.

We did accept the assumptions and logic related to evaluating the tooling cost differences 

between steel stoves and cast iron stoves, as both are commonly manufactured. Like Ferguson, 

we used an average of their tooling costs to reflect product differences, even though using an 

average may overestimate the number of cast iron stoves in the market place. While we 

recognize the range in capital cost estimates provided both prior to and after proposal of the draft

standards leave room for additional cost scenarios, especially the much lower cost scenario for 

Woodstock Soapstone Stoves, we concluded that the Ferguson costs represent the best 

documented cost ranges and cost categories available at this time. Table 1, below, is a summary

of the estimated wood stove capital costs used in our analyses.

For the final cost analysis, we used the mean wood stove costs estimated in Table 1. We 

have assumed that these model development costs represent feasible costs for adjustable burn 

rate stoves and pellet stoves. For single burn rate stoves, we estimate, as we did at proposal, that 

additional R&D may be required to bring these stoves to qualifying levels. Therefore we 

estimated that the R&D/Engineering portion of the total costs would require double the 

investment in the first 2 years, with “normal” model development proceeding thereafter.
4

Table 1. Estimated Wood Stove Capital Costs

Capital Costs Appliance Costs Notes

High Low Mean 2013 dollars; All costs 

based on HPBA 

estimates under 7.5 to 

4.5 g/hr scenario, with 

modifications

 R&D/Engineering Costs

Market research, aesthetic design, initial 

prototype design/construction/testing, formulate 

design changes, modify/test prototype $45,500 $19,000 $32,250

Adjust design/test until emission target is met $47,500 $30,000 $38,750

Construct final prototypes, safety test check, eng. 

drawings/specs, patent application $27,000 $17,000 $22,000

Confirm final prototype performance $0 $0 $0

 R&D/Engineering Total costs $120,000 $66,000 $93,000

 Tooling

Steel Stove $31,200 $9,700 $20,450

Cast Iron Stove $62,000 $31,000 $46,500

 Average tooling cost $46,600 $20,350 $33,475

HPBA costs for 

equipment and 

integration not 

included because 

these are considered 

duplicative of R&D 

costs, above

Other Capital Cost components $14,000 $6,000 $10,000

Total Capital Cost per model $180,600 $92,350 $136,475

Fixed Costs per model HBPA costs for 

personnel at lab and 

travel expenses not 

accepted as 

independent third 

party testing costs

 Certification

EPA testing, Confirmation safety testing or full 

safety testing, shipping of prototype $19,000 $14,500 $16,750

Owner's manual, labeling $3,500 $1,800 $2,650

 Roll-out $0 $0 $0

Roll-out considered 

normal business 

operation and not due 

to NSPS

Total Fixed Capital Cost per model $22,500 $16,300 $19,400

Total Costs per Model $203,100 $108,650 $155,875

Annualized capital cost per model $42,610 $22,794 $32,702 Annualized over 6 

years at 7% 

Annualized cost for development of 4 models $170,438 $91,177 $130,808
5

B. Model Development Costs – Central Heaters

At proposal, we estimated that hydronic heaters and forced-air furnaces would face the 

same model development costs as room heaters. Some commenters objected to this 

characterization, particularly based on the detailed hydronic heater cost estimates located in 

Attachment 3 of the HPBA comments as prepared by NERA Economic Consulting (May 2014).7

Appendix A of that document, Hydronic Heater Cost Modeling (prepared by Ferguson, Andors 

& Company) contains the detailed cost estimates we reviewed and adapted for this analysis. 

These costs were prepared with the same methodology and overall assumptions as were 

used in development of the wood heater costs. The Ferguson analysis provides cost estimates for 

four categories of hydronic heater emission reductions, based on the proposed emission levels 

consisting of modifying uncontrolled heaters to comply with a new 0.32 lb/mm Btu standard, 

modifying the 0.32 lb/mm Btu heaters to comply with new standards of 0.15 or 0.06 lb/mm Btu,

and modifying a 0.15 lb/mm Btu heater to a new standard of 0.06 lb/mm Btu. The resulting cost

components consisted of capital costs per model (R&D, engineering labor, tooling, equipment 

integration, preliminary testing, and other costs to design and manufacture the modified wood 

stove model) and other fixed costs per model (certification testing and safety testing, roll-out of 

the modified products including store display models and burn programs, brochures, user 

manuals, training and product discounts). The mid-point capital costs presented by Ferguson 

range from $1,743,750 to $2,162,300 depending on the emission reduction range.8 While these 

estimates are considerably higher than estimates we gleaned from speaking with manufacturers 

in 2010, we used them in our analysis absent better data and in order to not underestimate costs.

Unlike the proposed rule, the final rule contains a Step 1 PM emission limit of 0.32

lb/mm Btu and a Step 2 PM emission limit of 0.10 lb/mm Btu, with no alternative three step PM 

emission limits. We estimate that the Step 1 PM emission limit cost for uncontrolled to 0.32 

lb/mm Btu is a reasonable representation of model development costs for all models subject to 

subpart QQQQ, with some exceptions, described below. The Ferguson analysis shows that 

several of the cost components are identical across scenarios. The analysis claims, however, that 

other cost components vary according to the specified emission reduction scenario. We found 

these differences to be unsupported. For purposes of this analysis, we used the uncontrolled to 

0.32 lb/mm Btu as a baseline case and modified it to reflect the deletion of cost categories that 

we deemed inappropriately attributed to the NSPS.

For the final cost analysis, we used the mean hydronic heater costs estimated in Table 2, 

below. We have assumed that these model development costs represent feasible costs for 

hydronic heaters. For forced-air furnaces, we estimate, as we did at proposal, that additional 

R&D may be required to bring these heaters to compliance levels. Therefore we estimated that 

the R&D/Engineering portion of the total costs would require double the investment in the first 2 

years, with “normal” model development proceeding thereafter.

 

7 Comment on the proposed rule to Docket EPA-HQ-OAR-2009-0734 from the Hearth, Patio and Barbecue 

Association available at http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2009-0734-1643

8

Ferguson, Robert (Ferguson, Andors & Company), prepared for the Hearth, Patio & Barbecue Association. 

Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix A: Hydronic Heater Cost 

Modeling. May 2014. p. 4.
6

Table 2. Estimated Hydronic Heater Capital Costs

Capital Costs Appliance Costs Notes

High Low Mean 2013 dollars; All costs 

based on HPBA 

estimates under 

uncontrolled to 0.32 

lb/mm BTU scenario, 

with modifications

 R&D Engineering Costs

Market research, aesthetic design, initial 

prototype design/construction/testing, 

formulate design changes, modify/test 

prototype

$180,000 $115,000 $147,500

Formulate design changes $4,500 $2,500 $3,500

Modify prototype $16,000 $9,000 $12,500

Test/Retest $615,000 $410,000 $512,500 App. A (NERA) 

concludes erroneously 

$887,000 for high cost 

and $581,000 for low 

cost

Construct final prototype, confirm testing, 

safety testing $133,500 $88,500 $111,000

Document final changes $8,000 $6,000 $7,000

 R&D/Engineering Total costs $957,000 $631,000 $794,000

 Manufacturing/Engineering

Programming and Tooling - Steel parts $22,000 $13,000 $17,500

Tooling - Refractory $45,000 $28,000 $36,500

Electronic Control System $10,000 $5,000 $7,500

Final Production samples/Confirm product. Fitup $25,000 $15,000 $20,000

Create QA/QC specs $4,000 $2,000 $3,000

 Manufacturing/Engineering total costs $106,000 $63,000 $84,500

 Other Capital Cost components HPBA costs for 

equipment and 

integration not 

included because 

these are considered 

duplicative of R&D 

costs, above

Purchased parts sourcing $41,000 $23,500 $32,250

Test first production heaters $200,000 $150,000 $175,000

Equipment and facilities $75,000 $25,000 $50,000

 Other Capital Cost components total costs $316,000 $198,500 $257,250

Total Capital Cost per model $1,379,000 $892,500 $1,135,750

Fixed Costs per model HBPA costs for 

personnel at lab and 

travel expenses not 

accepted as 

independent third 

party testing costs

 Certification

EPA testing, Confirmation safety testing or full 

safety testing, shipping of prototype $72,500 $36,000 $54,250

Owner's manual, labeling $6,500 $3,500 $5,000

 Certification Total Costs $79,000 $39,500 $59,250

 Roll-out $0 $0 $0

Roll-out considered 

normal business 

operation and not due 

to NSPS

Total Fixed Capital Cost per model $79,000 $39,500 $59,250

Total Costs per Model $1,458,000 $932,000 $1,195,000

Annualized capital cost per model $305,882 $195,530 $250,706 Annualized over 6 

years at 7%

Annualized cost for development of 4 models $1,223,529 $782,119 $1,002,824
7

II. Estimated Manufacturer Cost Impacts

A. Final NSPS and Appliances Meeting Stepped Limits

For proposal, we developed two primary options to evaluate the cost impacts of 

implementing new or revised NSPS standards for the residential wood heating appliance industry

– namely, a two-step PM emission limit proposed approach and an alternative three-step PM 

emission limit approach. Under the final NSPS, all types of appliances would be required to meet 

a specified Step 1 PM emission limit and then a stricter Step 2 PM emission limit in 2020. 

Forced-air furnaces will be required to comply with a work practice/operational standard in 

2015, a Step 1 PM emission limit for small furnaces (<65,000 BTU/hr heat output) by 2016 and 

a Step 1 PM emission limit for the remaining large furnaces (65,000 BTU/hr heat output or 

larger) by 2017. All appliances, including forced-air furnaces of every size, will be required to 

meet the Step 2 PM emission limits five years after the effective date (2020). It should be noted 

however that the final Step 2 limits are less stringent than proposed, as discussed below.

Subpart AAA (“room heaters”): 

1. Adjustable burn rate, pellet and single burn rate stoves: Stepped Limits: Step 1 PM 

emission limit of 4.5 g/hr upon effective date in 2015; and Step 2 PM emission limit 

of 2.0 g/hr five years after effective date, i.e., in 2020. 

Notes on appliances already meeting these limits: The Step 1 PM emission limit is 

the 1995 Washington State standard for non-catalytic stoves; and the Step 2 PM 

emission limit is already met by the top performing catalytic, non-catalytic and pellet 

stove models, according to industry data. This industry data was initially prepared by

HPBA and includes the results of an effort to delete models that are no longer 

manufactured and remove duplicate certifications.9 Communication from HPBA 

confirmed that there were 110 non-catalytic wood stoves and 15 catalytic wood 

stoves being manufactured in 2010 by 34 manufacturers or importers of EPA certified 

wood heaters.10 We expect that manufacturers will focus on existing models that meet 

the Washington State limits in order to comply with the Step 1 standard.

Furthermore, certification data indicate that 26% of non-catalytic and catalytic stoves 

combined and 70% of pellet stoves already meet the Step 2 limit.

11 Based on this 

emission data for adjustable burn rate wood stoves and pellet stoves, for our cost 

analysis we estimated that while major R&D efforts are not needed to meet Step 1, 

R&D efforts would be required for some of these appliance models (e.g., 

approximately 74% of wood stove models and 30% of pellet stove models) to meet 

the Step 2 limit in 2020.

 

9 Letter to Gil Wood, EPA, from Robert Ferguson, Ferguson, Andors, & Company. April 30, 2010. EC/R made 

minor changes to the data set used in this analysis; see Memo from Jeff Harris, EC/R to Project File, May 3, 2010. 

Changes to “Final HPBA Heater Database” from 2/25/10 HPBA version.

10Letter to Lucinda Power, EPA, from John Crouch, HPBA. September 12, 2010.

11 Memorandum to USEPA from EC/R, Inc. Derivation of wood heater model percentages meeting Step 2 standards. 

November 2014.
8

Although previously unregulated and a less developed technology than adjustable 

burn rate stoves, single burn rate stove designs have been undergoing R&D in 

anticipation of the proposed NSPS and cleaner designs are nearly market-ready.

12

However, given the relative lack of previous regulation of these appliance types in the 

United States, we estimate that manufacturers will have to redesign all single burn 

rate stove models to meet the final Step 2 emissions limit, and reflected that major redesign effort in our cost estimates.

Our specific cost and implementation assumptions are discussed below in Section B 

and Section C.

Subpart QQQQ (“central heaters”):

1. Hydronic heaters (both outdoor and indoor): Stepped Limits: Step 1 PM emission 

limit of 0.32 lb/mm BTU heat output (weighted average with an 18 g/hr cap for each 

individual test run), upon the effective date of the final rule in 2015; and Step 2 PM 

emission limit of 0.10 lb/mm BTU heat output (at each burn rate) five years after the 

effective date of the final rule in 2020.

Notes on appliances already meeting these limits: The Step 1 limit is identical to 

the EPA “Phase 2” voluntary program limit and is already met by all 50 of the 50 

hydronic heater models built by U.S. manufacturers currently participating in the 

voluntary program.13 The Step 2 limit is already met by 9 of the 50 (18%) hydronic 

heater models built by U.S. manufacturers currently participating in the voluntary

program, as well as over 100 European manufacturers per test method EN 303-05.14 It

should be noted that cleaner models continue to become Phase 2 qualified until the 

effective date of the final rule, and additional manufacturers not participating in the 

voluntary program may also have models meeting Step 1 and Step 2. (19 test reports 

have just recently been submitted to EPA for review.)

Based on the EPA’s experience with the hydronic heater market through the 

voluntary program, we understand that it is dominated by a few manufacturers in 

terms of the bulk of sales, and these manufacturers have qualifying units at one or 

both of the stepped emission limits, as noted above. Therefore, on a sales-weighted 

basis, only a percentage of the hydronic heater models currently sold in the United 

States would be required to undertake R&D to meet Step 1, with higher percentages 

needing R&D to meet the Step 2 limit. For our cost analysis, based on the data cited 

above from the voluntary program, we estimate that 18% of existing hydronic heater 

models sold in the United States can meet the Step 2 limit without intensive R&D 

efforts, so that 82% of models would begin R&D in 2015 to meet the Step 2 standard. 

 

12 2/8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of single burn rate stoves.

13 See list of cleaner hydronic heaters participating in EPA’s Phase 2 voluntary Hydronic Heater Program at 

http://www.epa.gov/burnwise/owhhlist.html.

14 European Wood-Heating Technology Survey: An Overview of Combustion Principles and the Energy and 

Emissions Performance Characteristics of Commercially Available Systems in Austria, Germany, Denmark, 

Norway, and Sweden; Final Report; Prepared for the New York State Energy Research and Development Authority; 

NYSERDA Report 10–01; April 2010.
9

Our specific cost and implementation assumptions are discussed below in Section B 

and Section C.

2. Forced-Air Furnaces: Stepped Limits: Work practice/operational standards will be 

required of all forced-air furnaces upon the rule’s 2015 effective date. A Step 1 PM 

emission limit of 0.93 lb/mm BTU heat output will be required by 2016 for small 

forced-air furnaces (<65,000 BTU/hr models, representing approximately 25% of 

current sales) and this same PM emission limit of 0.93 lb/mm BTU will be required 

by 2017 for large forced-air furnaces (≥65,000 BTU/hr models, representing 

approximately 75% of current sales). A Step 2 PM emission limit of 0.15 lb/mm BTU 

heat output will be required for all forced-air furnace models five years after 

promulgation in 2020

Notes on appliances already meeting these limits: The stepped compliance 

timelines are based on the infeasibility of testing and certifying approximately 50 

untested forced-air furnaces in the 60 days between publication of the final rule and 

the effective date and industry comments on the proposed rule, explaining the design 

challenges for small and large forced-air furnaces, respectively.

15 The Step 1 and Step 

2 PM emission limits are based on test data from development of Canadian standard 

B415.1-1016 and conversations with industry regarding cleaner forced-air furnace 

models currently being tested in R&D17. Forced-air furnace designs able to meet the 

Step 2 limit will be based on technology transferred from hydronic heater designs

and/or wood stove designs. Given the relative lack of previous regulation of these 

appliance types in the United States, we assume in our cost analysis that 

manufacturers will have to redesign all forced-air furnace models to meet the Step 2 

PM emissions limit, and reflect that major re-design effort in our cost estimates. Our 

specific cost and implementation assumptions are discussed below in Section B and 

Section C.

B. Estimated Manufacturer Costs – General Approach

We estimated the average annual cost to manufacturers of each appliance type and then 

extended those costs to nationwide total annual costs. The basic components to each

manufacturer’s estimated annual cost are:

1. Annualized R&D costs;

2. Ongoing annual Certification cost; and

3. Ongoing annual Reporting and Recordkeeping cost.

The underlying assumptions used to estimate these components are discussed below.

 

15 See the Response to Comment (RTC) document in the docket for this rulemaking.

16 CSA B415.1-10, Performance Testing of Solid-Fuel-Burning Heating Appliances. Appendix D. March 2010.

17 2/8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of forced-air furnaces.
10

Amortization Period used for annualizing R&D costs:

Manufacturers have indicated that it takes several years to develop new models. One 

manufacturer said that development time is 12 to 14 months for non-catalytic heaters and 10 to 

12 months for catalytic heaters.

18 Another manufacturer estimated costs over an 8- to 12-month 

schedule for a relatively uncomplicated product, but added that costs will increase for products 

that have more sophisticated controls.19 Two other manufacturers suggested a 14- to 18-month 

timeframe is required to develop a new firebox, but added that it will take from 5 to 6 years of 

intensive engineering and R&D efforts to have a model line consisting of 4 boxes ready-formanufacture, agreeing that knowledge of the process obtained during each firebox development 

will shorten (somewhat) the time necessary, but not enough to consider within a guiding 

framework.20 Given this information and in an effort to not underestimate the time needed for 

R&D, we amortized R&D costs (shown in Tables 1 and 2 above) over 6 years. 

We assume that many manufacturers have already begun R&D efforts – in anticipation of 

this rule whose initial development was publicly announced by EPA in November 2009.

However, for the purposes of our cost estimate, we amortized model development costs over the 

6 year period beginning in 2015 and ending in 2020 (inclusive). We prepared estimates using 

both a 7% interest rate and a 3% interest rate during the amortization period.21

Annualized R&D costs:

The annualized R&D costs (shown in Tables 1 and 2) are by far the largest cost 

component and we have applied these costs to most models in each appliance category –

especially for previously unregulated appliances and for appliances without a voluntary program

– in order to avoid underestimating cost impacts. For these appliances (i.e., single burn rate 

stoves and forced-air furnaces), we estimated that 100% of the existing models will undergo 

R&D beginning in 2015 to meet the final limits. In cases where we assumed less than 100% of 

the models would require R&D (e.g., adjustable burn rate stoves, pellet stoves and hydronic 

heaters), this was based on the percentage of models estimated to already meet the 2020 Step 2 

limit, as explained above. 

However, it is important to note that manufacturers will likely consolidate their model 

lines, focusing on models able to achieve the limit, rather than incur R&D costs for every

currently non-compliant model line. Therefore fewer models than we used in our cost estimates 

will likely undergo R&D, which will decrease cost impacts, potentially significantly. But since 

we do not have data to suggest the degree of consolidation which may occur, we assumed all 

non-compliant models would remain in existence and incur R&D costs, in order to avoid 

underestimating costs.

 

18James E. Houck and Paul Tiegs. There’s a Freight Train Comin’. Hearth and Home. December 2009.

19 Comments from United States Stove Company, Small Entity Representative. July 13, 2010.

20 NSPS Review/Revision, and Impact on Our Companies: A Manufacturer’s Position Statement. Prepared by Stove 

Builder International and United States Stove Company. June 2010

21 See January 2015 cost effectiveness (CE) spreadsheets including for PM2.5 the Revised Final Wood Heater NSPS 

PM CE 7% and the Revised Final Wood Heater NSPS PM CE 3% for the CE analysis supporting the NSPS. All of 

these spreadsheets are found in the public docket for this rulemaking.
11

Furthermore, for appliances like single burn rate stoves and forced-air furnaces, which 

were previously unregulated (and also were not pushed technologically by a voluntary program, 

as hydronic heaters were), we have doubled the R&D/Engineering cost portion of the total costs 

in the first 2 years (2015 and 2016), as noted above in Sections I.A. and I.B. This doubling of the 

R&D/Engineering costs represents an intensification of the R&D efforts to meet the Step 1 limits

and begin development of models to meet the Step 2 limits – R&D efforts which industry has 

indicated are already ongoing.22

Ongoing certification and reporting & recordkeeping costs:

All manufacturers, except for wood stoves that are subject to the current 1988 NSPS (and 

therefore already incur certification costs), will face ongoing certification costs above baseline 

conditions. In the 2015 to 2020 timeframe, we have incorporated these costs as part of the overall 

R&D expenditures. For the purposes of our analysis, which estimates initial R&D costs from 

2015 to 2020 and ongoing costs for bringing a model to market after 2020, the ongoing 

certification and reporting and recordkeeping costs faced by manufacturers are estimated over 

the 10-year model lifespan.

23,24

Regarding ongoing certification costs (after initial certification which is estimated in the 

R&D costs itemized above in Tables 1 and 2), we estimated a continuing cost of $10,000 per 

model for pellet stoves and single burn rate stoves and a continuing cost of $20,000 per model 

for hydronic heaters and forced-air furnaces.25 We distributed these ongoing costs over the 5 year 

certification life, assuming annual certification costs for one-fifth of the models. For example, 

compliant (but as yet uncertified) pellet stoves will incur certification costs starting in 2015. As 

explained in Section II.A, approximately 70 percent of existing pellet stove models are expected 

to comply with the Step 2 standard without requiring intensive R&D. However, in order to be 

sold, these pellet models would now be required to demonstrate compliance with the emissions 

limit, incurring an upfront cost of $10,000 per model to become certified. We have estimated that 

one fifth of the pellet stove models will certify in any given year. 

We based reporting and recordkeeping (R&R) costs on the annual average costs derived 

from development of the Information Collection Request (ICR) supporting statements.

26,27 These 

are annual estimates of the ongoing R&R burden to manufacturers associated with final rule 

compliance. We estimated that R&R costs are incurred beginning in 2015 in our analysis. 

 

22 2/8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of forced-air furnaces and single 

burn rate stoves.

23 Memorandum to USEPA from EC/R, Inc. Estimated Emissions from Wood Heaters. January 2015

24 Memorandum to USEPA from EC/R, Inc. Residential Wood Heater Cost Effectiveness Analysis. January 2015

25 Conversation with Dennis Brazier, Central Boiler. August 9, 2010.

26 See http://www.reginfo.gov for the ICR Supporting Statements for the New Residential Wood Heaters New

Source Performance Standards (OMB Control Number 2060-0161), Hydronic Heaters and Forced-Air Furnaces 

New Source Performance Standards (OMB Control Number 2060-0693)(40 CFR Part 60, Subparts AAA and 

QQQQ).

27 See also Memorandum to Docket ID Number EPA-HQ-OAR-2009-0734 from EC/R, Inc. 40 CFR Part 60, 

Subparts AAA and QQQQ Estimated Three-Year and Annual Respondent Burden Cost of Reporting and 

Recordkeeping Requirements (Years 2018 to 2020). January 2015.
12

As noted above, the certification and reporting and recordkeeping costs were estimated to 

be incurred by manufacturers for the full 10-year model design lifespan, for models designed to 

meet each final limit. We therefore estimated costs from 2015 through 2029 – that is, 10 years 

(inclusive) after the 2020 compliance year marking the beginning of the lifespan for a model 

designed to meet the Step 2 limit. 

C. Estimated Manufacturer Costs – Specific Assumptions & Resulting Costs

Tables 3 and 4 show the estimated annual cost per manufacturer under the final NSPS for 

all appliances, as well as the nationwide annual costs. Tables 3a and 3b are based on a 7% 

interest rate during the 6-year amortization period; while Tables 4a and 4b are based on a 3% 

interest rate. Cost estimates are based on 2013 dollars ($). Note that costs vary by appliance type 

based on the estimated number of models. Our estimates of the number of models for each 

appliance type are described in the unit cost memo.28 For numbers of manufacturers, we started 

with HPBA data and modified those numbers as needed, based on internet searches of 

manufacturers of the major appliance types.29 The final estimates for numbers of models and 

number of manufacturers are shown in Tables 3 and 4.

The footnotes associated with Tables 3 and 4 (included in our cost spreadsheets30 but not 

included with the tables below due to space limitations) explain the details we assumed for the 

cost analysis and are listed below.

1. Nationwide Annual Cost assumes R&D investment is amortized over 6 years (2015 

through 2020). Ongoing certification and reporting & recordkeeping costs are 

incurred through 2029 (based on a model brought to market in 2020 with a lifespan of 

10 years).

2. Since certification is required every 5 years, it is assumed that certification costs will 

be spread out so that one-fifth of the models certify each year.

3. This analysis considers additional costs resulting from the NSPS. For wood stoves, 

the analysis assumes that 26% meet Step 2 already so that 74% of the models will 

undergo re-design to meet the Step 2 level. The costs modeled for years 2021 through 

2029 exclude the ongoing certification and reporting & recordkeeping costs incurred 

by wood stove manufacturers who already had to certify and report under the existing 

1988 NSPS.

4. For pellet stoves, the analysis assumes that 70% meet Step 2 already so that 30% of 

models undergo R&D re-design to meet Step 2. The R&D budget includes 

certification costs. The analysis also assumes that the 70% of the pellet stove models 

 

28 Memorandum to USEPA from EC/R, Inc. Unit Cost Estimates of Residential Wood Heating Appliances. January 

2015.

29 HPBA Solid Fuel Product List. Attachment to E-mail from John Crouch, HBPS, to Gil Wood, EPA. September 

24, 2010.

30 See January 2015 cost effectiveness (CE) spreadsheets including for PM2.5 the Revised Final Wood Heater NSPS 

PM CE 7% and the Revised Final Wood Heater NSPS PM CE 3% for the CE analysis supporting the NSPS. All of 

these spreadsheets are found in the public docket for this rulemaking.
13

which already meet Step 2 will certify in an ongoing basis starting in 2015. The 

analysis reflects the certification costs beginning in 2015 for the 70% of models 

meeting Step 2, and beginning in 2020 for the remaining 30% of models which 

underwent R&D re-design. The analysis also reflects ongoing reporting & 

recordkeeping costs for 100% of the models beginning in 2015.

5. Based on conversations with industry, single burn rate stoves and forced-air furnaces 

have been undergoing R&D prior to 2014 to develop cleaner models.

31 Because these 

devices were previously unregulated and may need to transfer technology from 

adjustable burn rate stoves and hydronic heaters (respectively) this analysis assumes 

that these efforts will intensify in 2015 and 2016. Therefore estimated R&D costs are 

doubled in 2015 and 2016 to reflect model development to meet the more stringent 

2020 Step 2 PM emission limit. 

6. For single burn rate stoves and forced-air furnaces, the analysis assumes that only a 

small percentage meet Step 2 so that approximately 100% of the models undergo 

R&D re-design to meet Step 2. The R&D budget includes certification costs. Ongoing 

certification costs for the re-designed models are reflected in this analysis beginning 

in 2021. Ongoing reporting & recordkeeping for all models are estimated beginning 

in 2015.

7. Reporting and recordkeeping costs (R&R) are based on the annual average costs 

derived from the ICR and are estimates of the ongoing R&R burden to manufacturers 

associated with the NSPS. The annual average nationwide R&R burden estimated to 

manufacturers for Subpart AAA is approximately $179,000 for years 2015 through 

2017 and $352,000 for years 2018 through 2020. For Subpart QQQQ, the R&R 

burden to manufacturers is estimated to be $141,000 for years 2015 through 2017 and 

$197,000 for years 2018 through 2020. Although the 2018 through 2020 costs are 

carried forward to 2029 for this analysis, actual R&R costs from 2021 through 2029 

may vary slightly. These R&R costs do not include the R&R burden to laboratories 

and certifying entities, which have been calculated separately [and provided in the 

ICRs and spreadsheets in the docket].

8. For hydronic heaters, the analysis assumes that 18% of models meet Step 2 already so 

that 82% must undergo R&D to meet Step 2 in 2020. The R&D budget includes 

certification costs. Ongoing certification costs for the re-designed models are 

reflected in this analysis beginning in 2021. Ongoing reporting & recordkeeping for 

all models are estimated beginning in 2015.

Cost Tables 3 and 4 are included after the sample calculation provided below in Section D.

D. Sample Calculation for Deriving Nationwide Annual Cost to Manufacturers

The following provides a sample calculation showing how we derived nationwide annual 

costs to hydronic heater manufacturers in the year 2019, based on costs being amortized over 6 

 

31 2/8/13 telephone discussion between Gil Wood, USEPA, and a manufacturer of forced-air furnaces and single 

burn rate stoves.
14

years at a 7% interest rate. It may be helpful to refer to Tables 3a and 3b while reviewing the 

sample calculation steps.

1. We derived the annualized capital cost per model, for R&D related costs including 

certification, based on industry-supplied cost components as described in Section I. The 

estimated annualized capital cost to bring a hydronic heater model through R&D, based 

on an amortization period of 6 years and an interest rate of 7%, is $250,706 as shown in 

Table 2 of Section I. 

2. To derive the average annual cost to each hydronic heater manufacturer, we multiplied 

the annualized capital cost of $250,706 by the estimated number of hydronic heater 

models in the nation, 120, divided by the estimated number of hydronic heater

manufacturers, 30. 

3. To refine the average annual cost further, we estimated the percentage of hydronic heater

models that already meet the Step 2 limit – and therefore would not need to incur R&D 

costs, but only certification and R&R costs. As described in Section II, we estimated that 

18% of current hydronic heater models can meet Step 2 without additional R&D. 

Therefore 82% of models will incur R&D, certification and reporting & recordkeeping 

costs; while 18% of hydronic heater models will incur only certification and reporting & 

recordkeeping costs.

4. We estimated ongoing hydronic heater certification testing (outside the R&D process) to 

cost $20,000 per certification. Since a certification is good for 5 years, in order to 

determine an annual certification cost, we assumed that manufacturers will choose to 

spread out certification costs by certifying one-fifth of their models each year. (Note 

again that the certification cost for models undergoing R&D is included in the $250,706 

R&D cost.)

5. We estimated ongoing R&R costs based on Information Collection Request (ICR) 

assumptions, which were calculated for the first 3 years and then for the 3 years 

following, respectful of changing reporting & recordkeeping costs to meet a 2-Step 

standard. The annual average reporting & recordkeeping burden estimated for hydronic 

heater manufacturers is $3,300 per manufacturer for years 2015 through 2017 and $4,635

per manufacturer for years 2018 through 2020. 

6. Based on the above costs and assumptions, the annual cost to a hydronic heater

manufacturer in year 2019 is:

(120/30) * [0.82*$250,706 + 0.18*($20,000/5)] + $4,635 = $829,830 per manufacturer

7. To derive the total nationwide annual cost to all hydronic heater manufacturers in the 

U.S. market, we multiplied the above average annual cost to each manufacturer by the 

total number of manufacturers (30). Therefore, the total estimated nationwide annual cost

to all hydronic heater manufacturers in year 2019 is:

$829,830 per manufacturer * 30 manufacturers = approximately $24,895,000
15

It should be noted that the estimated cost to each hydronic heater manufacturer drops 

significantly after the investment required during the R&D period. In years 2021 through 2029, 

we estimate that ongoing certification and R&R will cost approximately $21,000 per 

manufacturer, or $619,000 nationwide, annually.
16

Table 3a. Average Annual Cost per Manufacturer under the Final NSPS *

Table 3b. Nationwide Annual Costs under the Final NSPS*

*Model development costs amortized over 6 years at a 7% interest rate

(Step 1

compliance) 

2015 2016 2017 2018 2019

(Step 2 

compliance) 

2020

2021 

through 

20292 

Wood Stoves (R&D)334 125 $88,968 $88,968 $88,968 $88,968 $88,968 $88,968 $0

Pellet Stoves (R&D, R&R, cert)4,729 125 $51,179 $51,179 $51,179 $53,941 $53,941 $53,941 $14,240

Single Burn Rate Stoves (R&D, R&R, cert.)5, 6, 7 3 20 $352,506 $352,506 $352,506 $226,704 $226,704 $226,704 $22,025

Forced Air Furnaces (R&D, R&R, cert.)5, 6, 7 7 50 $2,986,523 $2,986,523 $1,796,681 $1,799,034 $1,799,034 $1,799,034 $36,849

Hydronic Heaters (R&D, R&R, cert.)7,830 120 $828,513 $828,513 $828,513 $829,831 $829,831 $829,831 $20,635

Average Annual Cost per Manufacturer based on 6-year R&D round (2015-2020) to meet Step 1 and 

Step 2 limits with ongoing certification and R&R costs (through 2029)

# Manufacturers # Models

QQQQ: Central Heaters

AAA: Room Heaters

NSPS Subpart Appliance Type

(Step 1 

compliance) 

2015 2016 2017 2018 2019

(Step 2

compliance) 

2020

2021 through 

20292 

Wood Stoves (R&D)334 125 $3,024,928 $3,024,928 $3,024,928 $3,024,928 $3,024,928 $3,024,928 $0

Pellet Stoves (R&D, R&R, cert)4,729 125 $1,484,192 $1,484,192 $1,484,192 $1,564,285 $1,564,285 $1,564,285 $412,963

Single Burn Rate Stoves (R&D, R&R, cert.)5, 6, 7 3 20 $1,057,518 $1,057,518 $1,057,518 $680,112 $680,112 $680,112 $66,074

$5,566,638 $5,566,638 $5,566,638 $5,269,325 $5,269,325 $5,269,325 $479,037

Forced Air Furnaces (R&D, R&R, cert.)

5, 6, 7 7 50 $20,905,663 $20,905,663 $12,576,770 $12,593,240 $12,593,240 $12,593,240 $257,941

Hydronic Heaters (R&D, R&R, cert.)7,830 120 $24,855,398 $24,855,398 $24,855,398 $24,894,927 $24,894,927 $24,894,927 $619,059

$45,761,061 $45,761,061 $37,432,168 $37,488,168 $37,488,168 $37,488,168 $877,000

Annual Cost of the Rule $51,327,699 $51,327,699 $42,998,805 $42,757,493 $42,757,493 $42,757,493 $1,356,037

# Manufacturers # Models

Nationwide Annual Costs1

QQQQ: Central Heaters

AAA: Room Heaters

NSPS Subpart Appliance Type
17

Table 4a. Average Annual Cost per Manufacturer under the Final NSPS *

Table 4b. Nationwide Annual Costs under the Final NSPS*

*Model development costs amortized over 6 years at a 3% interest rate

(Step 1

compliance) 

2015 2016 2017 2018 2019

(Step 2 

compliance) 

2020

2021 

through 

20292 

Wood Stoves (R&D)334 125 $78,283 $78,283 $78,283 $78,283 $78,283 $78,283 $0

Pellet Stoves (R&D, R&R, cert)4,729 125 $46,100 $46,100 $46,100 $48,862 $48,862 $48,862 $14,240

Single Burn Rate Stoves (R&D, R&R, cert.)5, 6, 7 3 20 $310,698 $310,698 $310,698 $200,519 $200,519 $200,519 $22,025

Forced Air Furnaces (R&D, R&R, cert.)5, 6, 7 7 50 $2,628,527 $2,628,527 $1,581,596 $1,583,949 $1,583,949 $1,583,949 $36,849

Hydronic Heaters (R&D, R&R, cert.)7,830 120 $729,746 $729,746 $729,746 $731,064 $731,064 $731,064 $20,635

Average Annual Cost per Manufacturer based on 6-year R&D round (2015-2020) to meet Step 1 and 

Step 2 limits with ongoing certification costs (through 2029)

# Manufacturers # Models

QQQQ: Central Heaters

AAA: Room Heaters

NSPS Subpart Appliance Type

(Step 1 

compliance) 

2015 2016 2017 2018 2019

(Step 2

compliance) 

2020

2021 through 

20292 

Wood Stoves (R&D)334 125 $2,661,608 $2,661,608 $2,661,608 $2,661,608 $2,661,608 $2,661,608 $0

Pellet Stoves (R&D, R&R, cert)4,729 125 $1,336,900 $1,336,900 $1,336,900 $1,416,993 $1,416,993 $1,416,993 $412,963

Single Burn Rate Stoves (R&D, R&R, cert.)5, 6, 7 3 20 $932,093 $932,093 $932,093 $601,557 $601,557 $601,557 $66,074

$4,930,601 $4,930,601 $4,930,601 $4,680,157 $4,680,157 $4,680,157 $479,037

Forced Air Furnaces (R&D, R&R, cert.)

5, 6, 7 7 50 $18,399,692 $18,399,692 $11,071,171 $11,087,642 $11,087,642 $11,087,642 $257,941

Hydronic Heaters (R&D, R&R, cert.)7,830 120 $21,892,380 $21,892,380 $21,892,380 $21,931,910 $21,931,910 $21,931,910 $619,059

$40,292,072 $40,292,072 $32,963,552 $33,019,552 $33,019,552 $33,019,552 $877,000

Annual Cost of the Rule $45,222,674 $45,222,674 $37,894,153 $37,699,709 $37,699,709 $37,699,709 $1,356,037

# Manufacturers # Models

Nationwide Annual Costs1

QQQQ: Central Heaters

AAA: Room Heaters

NSPS Subpart Appliance Type