CHAPTER 5. ENGINEERING ANALYSIS

TABLE OF CONTENTS

5.1 INTRODUCTION

........................................................................................................... 5-1 5.2 TECHNOLOGIES UNABLE TO BE INCLUDED IN THE FINAL RULE ANALYSIS

...................................................................................................................... 5 -2 5.3 EQUIPMENT CLASSES ANALYZED

.......................................................................... 5-2 5.4 EFFICIENCY LEVELS

................................................................................................... 5-3 5.4.1 Baseline Units

................................................................................................................. . 5-3 5.4.2 Incremental Efficiency Levels

......................................................................................... 5-4 5.5 METHODOLOGY OVERVIEW

.................................................................................... 5-5 5.5.1 AHAM Data Request

....................................................................................................... 5-5 5.5.2 Manufacturer Interviews

.................................................................................................. 5-6 5.5.3 Review of Previous Technical Support Documents

........................................................ 5-6 5.5.4 Equipment Testing

........................................................................................................... 5-6 5.6 ANALYSIS AND RESULTS

.......................................................................................... 5-6 5.6.1 AHAM Data

..................................................................................................................... 5 -6 5.6.2 Review of the Most Recent TSD fo r Residential Clothes Washers

................................. 5-9 5.6.2.1 1996 AHAM Cost and Energy Use Data Submittal Review

......................... 5-9 5.6.2.2 2000 TSD Reverse-Engineering Review

..................................................... 5-14 5.6.2.3 Other Observations Regarding the 2000 Residential Clothes Washer TSD 5-20 5.6.3 Cost-Efficiency Curves

.................................................................................................. 5-23

LIST OF TABLES

Table 5.4.1 Baseline Modified Energy Factor and Water Factor for Commercial Clothes Washers

................................................................................................................... 5-3 Table 5.4.2 Efficiency Levels for Top-Loading Commercial Clothes Washers

........................ 5-5 Table 5.4.3 Efficiency Levels for Front-Loadi ng Commercial Clot hes Washers

..................... 5-5 Table 5.6.1 AHAM Commercial Clothes Washer Shipments and Shipment-Weighted MEF and WF Data Submittal

................................................................................. 5-7 Table 5.6.2 AHAM Baseline MEF Commercial Clot hes Washer Average Energy and Water Use Data Submittal

...................................................................................... 5-7 Table 5.6.3 AHAM Commercial Clothes Washer Incremental Cost Data Submittal

................ 5-8 Table 5.6.4 1996 AHAM Residential Clothes Wash er Cost Data Submittal

.......................... 5-11 Table 5.6.5 1996 AHAM Residential Clothes Wash er Energy and Water Use Data Submittal

............................................................................................................... 5-13 Table 5.6.6 Commercial Clothes Wa sher Cost-Efficiency Curves

........................................... 5-23

5-iLIST OF FIGURES

Figure 5.6.1 AHAM Commercial Clothes Washer Incremental Cost Data Submittal

............. 5-8 Figure 5.6.2 2000 Low-Volume versus High-Vo lume Clothes Washer Cost Disadvantage

...................................................................................................... 5-18 Figure 5.6.3 2000 Cost Disadvantage of Produc ing 100,000 versus 1.5MM Clothes Washers per Year with Gr een Field Facility

...................................................... 5-19

5-iiCHAPTER 5. ENGINEERING ANALYSIS

5.1 INTRODUCTION

After conducting the screening analysis, the U.S. Department of Energy (DOE) performed an engineering analysis based on the remaining design options. The engineering analysis consists of estimating the energy a nd water consumption and costs of commercial clothes washers (CCWs) at vari ous levels of increased effici ency. This section provides an overview of the engineering analysis (section 5.1), considers technologies that are unable to analyzed for this rulemaking (section 5.2), discu sses equipment classes (section 5.3), establishes baseline unit specifications (section 5.4.1), disc usses incremental efficiency levels (section 5.4.2), explains the methodology used during data ga thering (5.5) and discusses the analysis and results (section 5.6) As described in section 1.3 of chapter 1 of this technical support document (TSD), DOE is continuing the rulemaking for energy conservation standards for microwave oven standby power, and analyses related to these products will be pub lished in a separate TSD. In addition, DOE issued a final rule adopting en ergy conservation standards for conventional cooking products ( i.e. , cooktops and ovens) and microwave ove n energy factor (EF), and details of the analyses for these products are cont ained in the corresponding final rule TSD.

The primary inputs to the engine ering analysis are baseline information from the market and technology assessment (chapter 3 of this fi nal rule TSD) and technology options from the screening analysis (chapter 4). Additional inputs include cost a nd energy efficiency data, which DOE received from the Association of Home Appliance Manufacturers (AHAM) and qualified and supplemented through limited laboratory te sting, data gained th rough review of recent residential clothes washer (RCW) engineeri ng analyses, and other primary and secondary research. The primary output of the engineering anal ysis is a set of cost-efficiency curves. In the subsequent markups analysis (chapt er 7), DOE determined customer ( i.e. equipment purchaser) prices by applying distribution ma rkups, sales tax and contractor markups. After applying these markups, they serve as the input to the buildi ng energy-use and end-use load characterization (chapter 6) and the life-cycle cost (LCC) a nd payback period (PBP) an alyses (chapter 8).

DOE typically structures its engineeri ng analysis around one of three methodologies. These are: 1) the design-option approach, whic h calculates the incremental costs of adding specific design options to a baseli ne model; 2) the efficiency-lev el approach, which calculates the relative costs of achieving increases in ener gy efficiency levels, without regard to the particular design options used to achieve such increases; and/or 3) the reverse engineering or cost-assessment approach, which involves a “b ottom-up” manufacturing cost assessment based on a detailed bill of materials (BOM) derived from teardowns of the product or equipment being analyzed. Deciding which methodology to use fo r the engineering analysis depends on the equipment, the design options under study, and an y historical data th at DOE can draw on.

5-15.2 TECHNOLOGIES UNABLE TO BE INCLUDED IN THE FINAL RULE
ANALYSIS
In performing the engineering analysis, DOE did not consider for analysis certain technologies that met the screeni ng criteria but were unable to be evaluated for one or both of the following reasons: 1) data are not available to evaluate consumer usage of equipment incorporating the technology and, therefore, the test procedure conditions and methods may not be applicable; and 2) data are not available to ev aluate the energy efficiency characteristics of the technology. In these cases, DOE is unable to adeq uately assess how these technologies impact annual energy consumption. Furthermore, certain technologies cannot be measured according to the conditions and methods specified in the existing test procedure.

Although several manufacturers have made claims regarding improved wash performance and greater utility of improved drum designs for front-loading clothes washers, DOE is unaware of any publicly available data to corroborate a decrease in cycle time or water consumption or an increase in modified energy factor (MEF) as a result of implementing this design option. Therefore, DOE will not analyze this design option for the final rule.

Even though DOE considers consumer usage of CCWs to be well-defined, the current tests procedures do not measure standby pow er. Also, DOE is unaware of any data demonstrating energy savings associated with low-standby power supplies for CCWs. Thus, in the context of the present rulemaking, DOE e liminated the low-standby-power design option from the final rule analysis.

5.3 EQUIPMENT CLASSES ANALYZED

DOE separated CCWs into equipment classes. In general, the criteria for separation into different classes are: 1) type of energy used (natural gas or elect ricity); and 2) capacity or other performance-related features such as those that pr ovide utility to the consumer, or others deemed appropriate by the Secretary th at would justify the establis hment of a separate energy conservation standard. (42 U.S.C. 6295 (q) and 6316(a)) For CCWs, DOE analyzed the following equipment classes based on the method of access:

 Top-loading; and

 Front-loading.

5-25.4 EFFICIENCY LEVELS

5.4.1 Baseline Units

DOE selected baseline units as reference points for each equipment class, against which DOE measured changes resulting from energy cons ervation standards. The baseline unit in each equipment class represents the basic characterist ics of equipment in that class. Typically, a baseline unit is a unit that just meets current required energy conservatio n standards and provides basic consumer utility. DOE used the baseline un its in the engineering analysis and the life

cycle-cost and payback-period analysis. To dete rmine energy savings and changes in price, DOE compared each higher energy efficiency or lo wer energy efficiency design option with the baseline unit.

The identification of baseline units required esta blishing the baseline efficiency level. For CCWs, energy conservation standard levels are defined by two factors normalized by wash basket volume—MEF and water factor (WF). The MEF is the quotient of the cubic foot capacity of the clothes container divide d by the total clothes washer en ergy consumption per cycle. The MEF takes into consideration not only the energy consumption of the washer but also the amount of energy required to dry clothes based on the remaining moisture content (RMC) of the clothes. The WF is the quotient of the total weighted pe r-cycle water consumption divided by the cubic foot capacity of the clothes washer. These two va riables are only directly related to each other via the average hot water usage by a clothes wash er as measured by the test procedure. Other measured variables affect only one variable or the other. For example, cold water consumption only affects the WF, while RMC only affects the MEF.

The Energy Policy and Conservation Ac t (EPCA) of 1975 (42 U.S.C. 6291–6309) establishes the following ener gy and water conservation standa rds for all CCWs: a minimum MEF of 1.26 cubic feet (ft 3 ) per kilowatt-hour (kWh) and a ma ximum WF of 9.5 gallons per ft 3

. (42 U.S.C. 6313(e); see also 70 FR 60416 (Oct. 18, 2005), adding 10 CFR 431.156) Based on comments and the determination at that time to consider a single equipment class for CCWs, DOE selected baseline levels for the a dvance notice of proposed rulemaking (ANOPR), published on November 15, 2007 (72 FR 64432; November 2007 ANOPR), that were based on current Federal energy conservation standards. Becau se, as discussed in detail in chapter 3, the determination of two equipment classes for CCWs was subsequently made, DOE revised the baseline levels presented in the November 2007 ANOPR to characterize top-loading and frontloading CCWs separately. DOE has selected the baseline MEFs and WFs for the two equipment classes as listed in Table 5.4.1.

Table 5.4.1 Baseline Modified Energy Factor and Water Factor for Commercial Clothes Washers

Equipment Class MEF, ft

3 /kWh WF, gallons/ft 3 Top Loading 1.26 9.5 Front Loading 1.72 8.0

5-35.4.2 Incremental Efficiency Levels

DOE analyzed several efficiency levels for both equipment classes and obtained incremental cost data at each of these levels. Table 5.4.2 a nd Table 5.4.3 provide efficiency levels and the reference source of each level. The highest effi ciency levels were initially identified based on a review of available equipmen t literature for models commercially available. DOE conducted additional testing and analysis in response to comments received on the notice of proposed rulemaking (NOPR) published on October 17, 2008 (73 FR 62034; October 2008 NOPR) to verify the maximum available efficiency level fo r top-loading CCWs.

EPCA mandates that DOE determine bot h a minimum MEF and a maximum WF for CCWs. The two variables are related to a limite d extent, but it was not clear initially to DOE which factor is more important in setting th e energy conservation standards. DOE determined, based on comments from interested parties, th at a high MEF and low WF are not necessarily correlated, and, thus, a max-tech le vel based on the highest MEF a nd lowest WF is not realistic. That is, a CCW with the highest possible ME F may not achieve the lowest possible WF. Similarly, a CCW with the lowest WF may not achieve the highest MEF. Therefore, DOE selected CCWs currently available on the market that exhibit a balance of high MEF and low WF to represent the max-tech levels.

For top-loading CCWs, DOE analyzed two e fficiency levels beyond the baseline, as listed in Table 5.4.2

. These levels were based on the Cons ortium for Energy Efficiency (CEE) Commercial Clothes Washer Init iative, and maximum levels that are currently commercially available (max-tech). For the October 2008 NOPR, DOE proposed an additional, third efficiency level because market surveys of currently availa ble models suggested a max-tech level of (1.76 MEF/8.3 WF) for top-loading CCWs. However, DOE received comments on the October 2008 NOPR that raised questions on the validity of this max-tech level. Because EPCA requires DOE to consider the max-tech level in the analysis of efficiency levels fo r CCW energy conservation standards (42 U.S.C. 6295(o)(2 )(A) and 6316(a)), DOE decided, in light of the uncertainty surrounding the performance of the CCW model upon which the top-loading max-tech level was based, to test several units of that model at an independent laboratory. Results from a 3-unit sample indicated that the MEF and WF of th ese units are below and above, respectively, the max-tech levels—1.63 MEF/8.4 WF. Therefore, fo r the supplemental notice of proposed rulemaking (SNOPR) published November 9, 2009 (74 FR 57738; N ovember 2009 SNOPR), DOE revised the max-tech level downward one level to 1.60 MEF/8.5 WF. DOE received comments in response to the November 2009 SNOP R that questioned whether wash performance could be maintained for top-loading CCWs at the proposed max-tech level. In the absence of an industry-accepted, standardized test for CCW wash perfor mance, however, DOE relies on manufacturers to market and se ll only those products that th ey feel perform adequately. Therefore, for the final rule, DOE maintained the top-loading efficiency levels proposed in the November 2009 SNOPR.

5-4Table 5.4.2 Efficiency Levels for Top- Loading Commercial Clothes Washers

Level Efficiency Level Source Efficiency Level MEF, ft 3 /kWh WF, gallons/ft 3
baseline DOE Standard (effective 2007) 1.26 9.5 1 CEE Tier 1 (January 1, 2004) 1.42 9.5 2 CEE Tier 2 (January 1, 2004) (Max-Tech) 1.60 8.5

For front-loading CCWs, DOE analyzed four efficiency levels beyond the baseline for CCWs, as listed in Table 5.4.3. These leve ls were based on ENERGY STAR, the CEE Commercial Clothes Washer Init iative, and maximum levels that are currently commercially available. Two gap-fill levels were added based on interested party input between the CEE Tier 3A and the maximum available level. For front -loading CCWs, DOE has determined a max-tech level of 2.35 MEF/4.4 WF, based on a currently av ailable CCW. This mode l was selected after an extensive market survey, and DOE’s research suggests that its combination of high MEF and low WF represents the best-in-class balance between MEF and WF.

Table 5.4.3 Efficiency Levels for Fron t-Loading Commercial Clothes Washers

Level Efficiency Level Source Efficiency Level MEF, ft 3 /kWh WF, gallons/ft 3
baseline ENERGY STAR (effective 2007) 1.72 8.0 1 CEE Tier 3A (January 1, 2004) 1.80 7.5 2 Gap Fill 1 2.00 5.5 3 Gap Fill 2 2.20 5.1 4 Max-Tech 2.35 4.4

5.5 METHODOLOGY OVERVIEW

DOE used data submitted by AHAM as the primary source of cost information for the engineering analysis. AHAM provi ded DOE with aggregated incremental manufacturing cost data from its member companies. DOE conducte d an independent review of the AHAM data using several methods and data sources. To ga in a better understanding of the data submitted by member companies and to be able to relate th e costs of improving effici ency to discrete (or system) technologies, DOE conducted interviews with manufacturers of CCWs and revised estimates accordingly. In addition, DOE reviewed the previous TSD for RCWs to evaluate technology options, and performed limited equi pment teardowns and performance testing.

5.5.1 AHAM Data Request

In support of this rulemaking effort, DOE requested incremental cost data from AHAM for CCWs. The data represent the average increm ental production cost to improve a baseline unit to a specified efficiency level. This methodology constitutes an e fficiency-level approach to the engineering analysis because DOE examined aggr egated incremental increases in manufacturer selling price at specified leve ls of energy efficiency. In addition, DOE requested shipments,

5-5shipment-weighted average efficiency, and market share efficiency data. Tables of aggregated data provided to DOE by AHAM are contained in appendix 5A.

5.5.2 Manufacturer Interviews

AHAM provided to DOE shipment-weighted ma nufacturer costs. These costs included the shipment-weighted average cost as well as the lowest and highest single-manufacturer cost to achieve efficiency levels above the baseline level. Presenting th e data in this manner enables interested parties to appreciate the variability in baseline units, desi gn strategies, and cost structures that exist among manufacturers. To be tter understand and explain the causes of these cost variances, DOE supplemented these cost data with information obtained through follow-up manufacturer interviews. These confidential inte rviews provided a deeper understanding of the various combinations of technologies used to in crease equipment efficiency, and their associated manufacturing costs.

During the interviews, DOE also gathered information about the capital expenditures required to increase the efficiency of the ba seline units to various efficiency levels ( i.e. , capital conversion costs by efficiency or energy-use level). The intervie ws provided information about the size and the nature of the capital investments. DOE also re quested information about the depreciation method used to expense the conversion capital.

5.5.3 Review of Previous Technical Support Documents

DOE reviewed the 2000 RCW TSD, since residential and CCWs share the same design options, are frequently built on the same chassis, and are therefore subj ect to similar economic impacts.

5.5.4 Equipment Testing

DOE conducted performance testing of three units of the max-tech model identified for the October 2008 NOPR. These tests, consisting of measuring the MEF and WF according to the DOE test procedure, were carried ou t at an independent test laboratory.

5.6 ANALYSIS AND RESULTS

5.6.1 AHAM Data

To support the DOE rulemaking, AHAM collect ed incremental CCW manufacturing cost data from its member companies in Octobe r 2006. Table 5.6.1 compiles unit shipment and energy efficiency data for CCWs from 2002–2005.

5-6Table 5.6.1 AHAM Commercial Clothes Was her Shipments and Shipment-Weighted MEF and WF Data Submittal

Year Total Shipments MEF ( ft

3 /kWh) WF (gallons / ft 3 ) 2002 175,187 1.30 11.77 2003 190,720 1.33 11.42 2004 178,382 1.33 11.33 2005 177,394 1.41 10.91

Table 5.6.2 reproduces AHAM's 2006 data s ubmittal for the average water and power consumption agitator top-loadi ng CCWs that meet the baseline 1.26 MEF energy efficiency level. Since January 2007, however, CCWs manufact ured at this baseline 1.26 MEF must meet a lower WF (9.5) than the one liste d in the AHAM data submittal.

Table 5.6.2 AHAM Baseline MEF Commercia l Clothes Washer Average Energy and Water Use Data Submittal

Attributes of Average 1.26 MEF Washer Power Consumption per Wash Cycle (kWh)

MEF ( ft

3 /kWh) WF (gallons / ft

3 ) Washer Capacity (ft

3 ) Water Use (gallons/cycle) Standby Power Consumption (W) Hot Water Machine Power Dryer Power 1.26 11.1 3.1 34.3 * 0.87 0.18 1.38

DOE initially requested incremental cost data for efficiency levels presented in the framework document for the single equipment cla ss including both top-load ing and front-loading CCWs. Data submitted by AHAM for the N ovember 2007 ANOPR, shown in Table 5.6.3, represents aggregated input from the producers of CCWs sold in the United States. The shipment-weighted incremental cost at each level is the cost to upgrade the baseline efficiency machine (1.26 MEF/9.5 WF) to that efficiency le vel for the single equipment class. The CCW industry currently has only three manufacturers with more than 1-pe rcent market share, and there are a limited number of CCWs that operate at different efficiency points, restri cting the amount of data that AHAM could submit. a Four efficiency levels c ontain no cost data since AHAMrequires a minimum of three data points per efficiency level before submitting shipmentweighted results. Therefore, AHAM submitted tw o manufacturing cost estimates: 1) $74.63 at efficiency level 1; and 2) $316.35 at effi ciency level 5, as noted in Table 5.6.3.

a AHAM is limited to publishing data to efficiency levels where at leas t three AHAM members can submit cost efficiency data, which AHAM then weights according to unit shipments by manufacturer.

5-7Table 5.6.3 AHAM Commercial Clothes Was her Incremental Cost Data Submittal Efficiency Level 1 2 3 4 5 6 Exploratory MEF Levels – Commercial Clothes Washers 1.42 1.6 1.72 1.8 2 2.2 Exploratory WF Levels – Commercial Clothes Washers 9.5 8.5 8.0 7.5 5.5 5.1 Incremental Costs ($ Per Unit) – Shipment-Weighted $ 74.73 * * * $ 316.35 * * Insufficient data reported

Figure 5.6.1 plots the efficiency levels for the single CCW equipment class established in the November 2007 ANOPR for which AHAM submitte d incremental manufacturing cost data, i.e. the baseline efficiency level, effici ency level 1, and efficiency level 5.Incremental Mfg. Cost ($/unit) 350

300

250

200

150

100

50

0 EL 5: 5.5WF

EL 1: 9.5WF

Baseline EL: 9.5WF

1.2 1.4 1.6
MEF 1.8 2 2.2 EL = Efficiency Level

Figure 5.6.1 AHAM Comm Submittal ercial Clo t hes W asher I ncremental Cost Data

Manufacturers stated that the baseline e fficiency level (1.26 MEF/9.5 WF) and the efficiency level 1 (1.42 MEF/9.5 WF) are atta inable with agitato r top-loading CCWs. Manufacturers also stated that efficiency level 5 (2.00 MEF/5.5 WF) would require the use of front-loading CCWs. Ther efore, DOE believes the data in Ta ble 5.6.3 is subject to a platform change from agitator top-loading to front-loa ding CCWs between efficiency level 1 and efficiency level 5. Given the persistent manufact uring cost difference between these platforms,

5-8an incremental cost “curve” with more intermediate data points would thus likely exhibit a steep step change wherever that platform change occurs.

5.6.2 Review of the Most Recent TSD for Residential Clothes Washers

In 2001, DOE concluded a rulemaking for RCWs. The intent of this section is to review some of the conclusions drawn in the 2000 TSD that supported that rule making, to update the data presented in it, and to assess in which ways the RCW TSD can be used in the context of this CCW rulemaking. In particular, th is review focuses on the manuf acturing costs published in the 2000 TSD. First, the 1996 AHAM RCW cost da ta submittal provided for the 2000 TSD is examined, followed by the 2000 reverse-engineeri ng analysis and an update on the low-volume manufacturer (LVM) case.

5.6.2.1 1996 AHAM Cost and Energy Use Data Submittal Review

In 1996, manufacturers submitted manufacturing cost and energy use estimates by efficiency level for RCWs to AHAM. This data was then aggregated by market share and efficiency level to prevent the disclosure of conf idential information, and the results were used in the analysis reported in the 2000 TSD. While this process yielded viable results in the RCW rulemaking, the results are not directly applic able to the current CCW rulemaking due to differences in the following key parameters: 1) intended use and cycle lif e, 2) production scale, 3) technical advancements, 4) market share, 5) platform mixing, and 6) incompatibility of the MEF and WF pairings in the data submittal.

Intended Use and Cycle Life

Clothes washer manufacturers have traditiona lly designed their commercial units to share many parts with their residential platforms. Shar ed components typically consist of parts that do not affect unit life, such as cabinet stampings, that may or may not be selectively upgraded. For example, entry-level RCW cabinets typically f eature a powder-coated plastic finish whereas commercial models may feature a more durable en ameled finish. Purchased components such as motors, timers, and switches may also be customized to reflect the different and more rigorous usage patterns expected in commercial applica tions. For example, one manufacturer stated that their CCWs are expected to last 12,000 wash cycles whereas reside ntial models are expected to last 6,000 or fewer wash cycles.

Production Scale

In 1996, a twenty-fold scale difference existe d between residential and CCW market unit shipments. Since then, RCW shipments have grown while CCW sales have stagnated or declined. As a result, the current scale difference is more than forty-fold.

The scale difference helps explain why CC Ws have traditionally been a product extension of existing RCW platforms for most manufacturers. By shari ng many components with residential models, research and development, tooling and equipment, and other costs can be

5-9spread over the largest number of clothes washers. Consequently, any additional investment required for CCWs alone is depreciated over a much smaller production volume.

As efficiency standards are ra ised, manufacturers may be required to make investments in the form of capital expenditures, research and development, and implementation to meet such standards. Investments such as new tooling and research, in particular, are “step” functions, requiring a minimum investment regardless of production volume. A standard that affects CCWs first may thus require a substant ial investment that can only be depreciated over a much smaller production volume.

As a result of the much lower production volumes, the per-unit conversion costs to accommodate higher efficiencies ar e greater per efficiency increm ent for CCWs than they are for residential models. Therefore, DOE believes Table 4.2 published in the 2000 TSD (duplicated below as Table 5.6.4) is not va lid for CCWs, because the fixed costs are assumed to be depreciated over a much larger product vol ume and because the higher-volume production processes manufacturers envisioned minimize variable cost increases. Most manufacturers of RCWs in 1996 had production levels in exce ss of 300,000 units per year, with the leading manufacturer producing about 3.5 million top-loading washers per year. In contrast, the two leading CCW manufacturers in 2007 had total CCW production levels of about 100,000 units per
year.
Currently, as in 1996, there is an LVM that operates in both the residential and commercial markets. While its volumes in the residential market are very small on a percentage basis, this manufacturer is very prominen t in the CCW market. Unlike its diversified competitors, this company exclusively manufactures laundry equipment. A review of the U.S. Securities and Exchange Commission (SEC) 10-K documents revealed that, as of 2005, this company derived 22 percent of its total revenue from the sale of front- and top-loading clothes washers and 87 percent of that income was from the commercial market. As a result, this company will be affected disproportionately by the CCW rulemaking compared to its competitors, for whom CCWs represent about 2 per cent of total clothes washer sales. For more information on the LVM, see chapter 13 and appendix 13A of this TSD.

5-10Table 5.6.4 1996 AHAM Residential Clot hes Washer Cost Data Submittal

Product Characteristics Incremental Variable Costs ( $ per Unit ) Total Fixed Costs ($ per unit ) Incre

mental Mfg. Cost ($ per unit ) No. of Res

pon dents Percent Improve

ment MEF WF Ma

terials Labor Over

head Total Baseline 0.817 13.779 5 0.860 13.732 $0.01 $0.01 $0.00 $0.02 $0.07 $0.09 5 10 0.908 13.710 $0.25 $0.04 $0.01 $0.30 $0.61 $0.91 5 15 0.961 13.670 $3.18 $0.10 $0.04 $3.32 $1.01 $4.33 5 20 1.021 13.342 $10.71 -$0.02 $1.80 $8.89 $6.21 $15.10 5 25 1.089 9.220 $36.14 $8.61 $0.09 $44.84 $19.29 $64.13 5 30 *
35 1.257 7.601 $86.73 $10.94 $7.78 $105.45 $22.72 $128.17 5 40 1.362 7.610 $87.15 $10.94 $7.78 $105.87 $22.72 $128.59 5 45 1.485 8.570 $125.58 $15.52 $14.51 $155.61 $24.67 $180.28 4 50 1.634 8.570 $132.40 $15.68 $14.51 $162.59 $24.67 $187.26 4 * No data were submitted at this efficiency level

Technical Advancements

While the general function of clothes wash ers has not changed si nce the 2000 TSD, many different technologies have been implemented. As with dishwashers and other residential appliances, clothes washers are built on platform s whose baseline performance can be improved with design options. Some platforms are inherently more energy and water efficient than others, allowing a manufacturer to use fe wer design options to reach a part icular efficiency level, but there are efficiency limits inherent to every pl atform regardless of how many design options are employed. These limits affect the MEF as well as the WF.

Clothes washers currently often use electroni c controllers instead of electromechanical controllers, which were more prevalent at the time of the 2000 TSD. Electronic controllers usually carry a cost premium over electromechan ical timers, driving up manufacturing cost. However, such controllers are appealing to cu stomers and are required for some design options. Besides enabling certain design options, electron ic controllers allow owners to more easily monitor washer utilization, functiona l status, and other parameters. There are potential reliability benefits as well. For example, one reason that variable-water-height sele ctors are atypical in commercial top-loading clothes washers is that ow ners prefer not to give users the ability to select water levels. If they did, users could atte mpt to wash a full load on a “low water” setting, potentially damaging the washer and/or the clot hes being washed. Electronic controllers may be able to detect such overload conditions and stop the wash cycle before the clothes washer is harmed. Alternatively, controllers can be programmed to “reset” to default settings after each wash cycle. This forces the end-user select the appropriate cycle for each use, potentially reducing the incidence of accidental overloads.

Some manufacturers have also phased out mech anical transmission a nd clutch systems, replacing them with variable-s peed electronic drive systems. Benefits include a reduction in mechanical complexity, increased cabinet sp ace to accommodate potential expansion of the

5-11basket/tub, and greater wash program flexibility. The substitution of electronics for mechanical systems can increase overall unit co st, particularly if fixed in-house assets that had been used to manufacture mechanical transmission and clutch systems become stranded assets.

Many design options available in RCWs ha ve yet to find application in CCWs. The reliability and longevity requirements of CCWs combined with the production scale issues are such that manufacturers avoid adding design options unless necessar y. As the part count increases, so does the probability that the cl othes washer will break down, and purchased parts sourced just for CCWs are likely to carry a cost premium. Thus, DOE expects manufacturers will continue to introduce new features first in the residential markets before transitioning them to the commercial field.

Since the 2000 RCW TSD was written, there have been numerous technological advances incorporated into clothes washers, and the manufacturing costs submitted to AHAM were based on RCW models that are no longer in production. Thus, even if DOE could ascertain the manufacturing cost differential between comm ercial and residential clothes washers in 1996, that differential would no longer be valid for current models.

Most importantly, manufacturers have been able to improve the MEF and WF of agitator clothes washers at a much lower cost than they projected in 1996. Instead of using front-loading or non-agitator top-loading clothes washers as projected to meet a 1.26 MEF, current baseline 1.26 MEF CCWs consist of agitato r models with reduced water consumption, lower wash temperatures, and improved control systems. Thus, manufacturers were able to reach the current efficiency requirements at much lower cost than projected in 1996. One ma nufacturer noted that the costs of improved control systems are substantially higher than those of the electromechanical controls they replaced and th at the wash performance and hence end-user utility of top-loading clothes washers are aff ected by lower WF and higher MEF requirements.

Market Share

The market shares that AHAM used to aggr egate manufacturer-submitted data were valid for the RCW market in 1996. However, since then there has been signif icant consolidation by domestic producers, and multiple foreign brands ha ve started selling their clothes washers in the United States. More importantly, the market sh ares of producers in the RCW market are not equivalent to the market shares of manufacturers in the CCW industry.

Four to five RCW manufacturers submitted ma nufacturing cost data estimates for each efficiency level for the 1996 AHAM data request. However, there are currently essentially only three U.S. CCW manufacturers: Alliance Laundry Systems LLC (A lliance), General Electric GE Consumer & Industrial (GE), and Whirlpool (v ia its acquisition of Maytag Corporation (Maytag)). The low number of manufacturers limits current AHAM data submittals to DOE since AHAM requires a minimum of th ree data points per efficiency level before it publishes any results.

Since AHAM adjusts incremental manufacturing cost data submittals by efficiency level on a market-share basis, the manufacturing cost s submitted by the largest manufacturers have the

5-12greatest weight. As noted above, the distribut ions of market share by manufacturer for commercial and residential clothes washers are quite different. Since DOE does not have access to the disaggregated data, ther e is no opportunity to compensate for market share differences between markets, even if the costs of manuf acturing residential and CCWs were the same.

Platform Mixing

DOE’s efforts to update the 1996 AHAM data submittal are hindered by the submittal’s aggregation of top- and front-l oading clothes washers. Base d on the AHAM-supplied energy and water use data, reproduced in Table 5.6.5, DOE a ssumes that the cost and energy use tables contained only agitator top-loading data for efficiency improvement levels of up to, and including, 20 percent. This assumption is driven by the consistent water usage up to that point and the low incremental costs to reach that effici ency level. Similarly, DOE assumes that the two highest efficiency levels, 45 a nd 50 percent improvement, exclusiv ely incorporated front-loading clothes washers. The 25 to 40 percent improvement categories appear to have aggregated highefficiency top-loading as well as front-loading clothes washers.

Table 5.6.5 1996 AHAM Residential Clothe s Washer Energy and Water Use Data Submittal Product Characteristics Energy Use ( kWh/cycle ) Water Use

Percent Improve

ment MEF Total Energy w/Dryer ( kWh /cycle ) Clothes Container ( ft

3 ) Hot Water Machine Energy Dryer Energy ( gal / cycle ) ( gal / ft

3 ) Baseline 0.817 3.227 2.847 1.587 0.209 1.430 39.181 13.779 5 0.860 3.165 2.817 1.543 0.209 1.413 38.613 13.732 10 0.908 3.017 2.822 1.408 0.209 1.400 38.613 13.710 15 0.961 2.833 2.832 1.216 0.209 1.407 38.621 13.670 20 1.021 2.739 2.893 1.113 0.218 1.408 38.446 13.342 25 1.089 2.292 2.866 0.715 0.304 1.273 26.600 9.220 30 *
35 1.257 1.866 2.749 0.462 0.133 1.270 21.030 7.601 40 1.362 1.859 2.749 0.462 0.133 1.263 21.030 7.610 45 1.485 1.651 2.736 0.429 0.114 1.107 23.405 8.570 50 1.634 1.574 2.736 0.413 0.114 1.047 23.405 8.570 * No data were submitted at this efficiency level.

Since DOE does not have access to the disaggregated data and the clothes washer platforms that underlie the AHAM data submittals , there is no method by which DOE can assess how relevant the data submittal is to the current rulemaking. It is not clear to DOE which models were submitted at each efficiency level, whether these models use the same platforms as current CCWs, nor what efficiency impr ovements manufacturers have been able to achieve with these models since 1996.

Incompatibility of the MEF and WF Pairings

Table 5.6.5 shows the lowest shipment-wei ghted WF at 1.26 MEF. No top-loading clothes washers could reach 1.634 MEF in 1996, sugge sting that the clothes washers at the two

5-13highest efficiency levels consis ted of front-loading clothes wa shers, whereas baseline units consisted of agitator top-loading clothes washers. The WF is lowe st at 1.26 MEF, indicating that the shipment-weighted WF for that efficiency level included clothes washers that had a lower WF than residential front-loading clothes washers di d at that time.

DOE is aware of an agitator top-loading CC W platform from a major manufacturer that had achieved a 7.3 WF by employing a spray rinse. However, this unit was withdrawn from the market a number of years ago, allegedly due to end-user complaints regarding rinse performance. The CEC database of current CCWs lists no top-lo ading clothes washers with a similar WF. The closest model is an agitator top-loading washer platform with an 8.3 WF. The top-loading clothes washer platform currently listed in the CEC RCW database that meets the 7.6 WF does not exist in a commercial version and cons ists of a non-agitator design.

Thus, the results at 1.26 MEF in Table 5.6.5 s uggest multiple platforms, likely consisting of agitator top-loading with spray rinse, non-agitator t op-loading, and front-loading RCWs. Neither spray-rinse agitator nor non-agitator clothes washers are currently in production for commercial purposes. The incompatibility betwee n the WF of machine properties submitted to AHAM for the 1996 data submittal and machines curren tly on the market is yet another indication of how the projections of manufacturers diverged from the agitator top-loading clothes washers they developed to meet the 1.26 MEF/9.5 WF requirements.

Conclusion

There are sufficient changes in market condi tions due to intended use and cycle life, production scale, technical advancements, and market share to precl ude the use of the 1996 AHAM data submittal as a basis for the curr ent CCW analysis. Furthermore, the 1996 AHAM data submittal cannot be factored into the analysis due to pl atform mixing and the resulting inability to disaggregate the data into top- and front-loading machines.

5.6.2.2 2000 TSD Reverse-Engineering Review

Further manufacturing cost data by effici ency level was developed for the 2000 RCW rulemaking by DOE. Since DOE has access to this data, DOE has decided to review and publish data that remains relevant to the current CCW rulemaking.

Reviewed Models

For the 2000 RCW TSD, DOE reverse- engineered eight RCWs in 1999 from manufacturers with substantial market share. DOE subsequently developed cost models to estimate the manufacturing costs of thes e washers at varying production levels.

The market share covered by the RCW platfo rms reverse-engineered in 1999 was about 80 percent. Three of the washers shared a chassis with CCWs in 1999. DOE could make estimates regarding the costs to update these plat forms for commercial use, but the market share

5-14covered by these platforms is currently less th an 20 percent of the commercial market, limiting the usefulness of the results.

All three of the major manufacturers currently serving the CCW industry have introduced new models or significantly revised exis ting models since th e 2000 RCW TSD. Some manufacturers have updated the drive system s and other major system components to differentiate their equipment or improve ener gy efficiency. As a resu lt, there have been significant changes in the baseli ne cost of clothes washers th at the 2000 TSD could not have analyzed, even if it ha d reviewed CCW models.

Market Share and Scale

The U.S. CCW market is very small compar ed to the RCW market. Whereas shipments of RCWs have been increasing, with more th an 9.2 million units in 2005, CCW sales have stagnated or declined to about 200,000 units pe r year. The RCW market is dominated by the merged Whirlpool-Maytag entity, which has an approximate combined market share of 70 percent. The RCW sales of this entity exceed 6 million units per year, approximately 30 times the entire CCW market.

This scale difference is important in this anal ysis because agitator top-loading residential and CCWs typically share many parts to minimi ze tooling and equipment investments. Thus, a manufacturer that benefits from high manufacturing volumes on th e residential side has a much larger potential base of units over which to depr eciate investments. Commercial assembly lines can be repurposed towards RCW production if the commercial top-loading washer platform is no longer cost effective to produce.

While the largest competitor in the U.S. cl othes washer manufacturing business may not realize much cost benefit due to manufacturing s cale in moving to 6 million units per year versus the 1.5 million units per year modeled during the 2001 RCW rulemaking, there are other advantages to scale. For example, research a nd development and other overhead functions can be leaner as a percentage of sales revenue, yet still have far more available resources than comparable departments at lower-volume competitors.

High-volume competitors have a long history of improving the performance of agitator top-loading clothes washers via add-on design options such as sp ray rinse, nutating plates, and other means. For a lower-volume manufacturer, it is inherently more difficult to assemble and defend an intellectual-property portfolio. Similarl y, an LVM may have to wait for innovations to trickle down from common supplie rs since high-volume manufact urers typically get first (and sometimes exclusive) access to new technologies.

Manufacturers whose production comprises a high percentage of CCWs are thus impacted disproportionately by any regulatory burden regarding CCWs. One low-volume U.S. clothes washer manufacturer was contractuall y barred from manufacturing RCWs from 1999 until 2004. While its subsequent SEC 10-K reports s how significant growth in the residential market segment, commercial sales are still substa ntially higher. As a resu lt, this LVM is not only

5-15concentrated in the CCW market, but its lack of diversification makes it particularly sensitive to any impacts on its CCW business as well.

The Low-Volume Manufacturer Case

The LVM has been successfully competing with much larger competitors in the commercial laundry market for several years. Based on the LVM's public SEC 10-K filings, DOE has estimated that the LVM derives about a third of its total revenues from the sales of clothes washers and dryers, which are usually bundled. Clothes washer sales by themselves account for more than 20 percent of total re venue. Laundry equipmen t for institutional use largely makes up the balance. For a detail ed breakdown of LVM revenues by product line, equipment line, and market segment, see chapte r 13 and appendix 13A of this TSD, which detail DOE's methodology and results for the LVM analysis.

As of 2006, agitator top-loading clothes wash ers sold by the LVM into the commercial market segment represented about 65 percent of total clothes washer unit shipments and about 60 percent of total CCW revenues. Thus, any market disruption that elimin ates the use of such clothes washers from the commercial market w ould affect the LVM disp roportionably due to the relative importance of the business and its effect on manufacturing scale. Such a transition also poses a business risk since a platform change will reduce the value of accumulated spare-parts inventories, technician training, etc. to route operators. Thus, any switching cost to other brands could be substantially reduced.

The LVM released a front-loadi ng clothes washer for sale in 1999 and does not presently manufacture any non-agitator top- loading clothes washers. As of 2005, its sales of front-loading clothes washers represented approximately 20 percent of total wash er unit shipments and approximately 35 percent of total washer revenues. Given the scal e of the manufacturer at the time, the front-loading design was likely optimi zed for very low production volume. Should the entire CCW industry be forced to migrate to fr ont-loading clothes washers, the LVM would thus have to make substantial investments to make its design more cost competitive. As of 2008, the proportion of front-loading to top-loading washers grew to 30 versus 70 percent, respectively. While the LVM is already at work to reduce front- loading unit costs, a market transition to frontloading washers accelerated by federal standards would most likely result in the LVM moving its front-loading manufacturing offshore.

However, unlike its larger rivals, the LVM doe s not benefit from very large scale in its residential operations to help amortize the investments in research, development, plant expenditures, and implementation expenses. The si ze of the CCW market by itself is simply too small to justify large lump-sum investments. The agitator top-loading units that the LVMmanufactures have benefited from years of investments and refinements, whereas the frontloading model received its first update in 2003.

Besides benefiting from ongoing development and investments, agitator top-loading clothes washers at the LVM also benefit from well-depreciated equipment and tooling and a long-term knowledge base. In the past, the LVM ha d residential sales well in excess of its CCW

5-16sales before a non-compete contract cut off the LVM from the residential market from 1999 until 2004. Thus, while the LVM has gained the experi ence of producing hundreds of thousands of top-loading clothes washers per ye ar, it has yet to gain the same experience with its front-loading clothes washer line.

The loss of the commercial market for agitator top-loading clothes washers is likely to make residential models of those clothes washer s too expensive to manufacture due to the much smaller scale. Whether the LVM could remain in the front-loading cl othes washer business despite the loss of the agitator top-loading clothes washer business is also uncertain. To date, the LVM has been able to grow its business despit e adverse market conditions and much larger competitors.

Implications of Scale for the Low-Volume Manufacturer

As discussed previously, mo st of the clothes washers under review in the 2001 RCW rulemaking did not share a chassis with a commerci al model. Thus, the results of the engineering analysis in the 2000 TSD do not apply to presen t day CCWs except for a very narrow set of observations.

A universal factor in manufact uring is scale, which descri bes how many units over which a fixed investment can be amortized. As part of the 2000 reverse-engineering analysis for RCWs, DOE tried to understand the implications of low-volume manufacturing. Figure 5.6.2, originally published as Figure 5.10 in the 2000 RCW TSD, av erages the cost differences among multiple baseline top-loading vertical-axis RCWs at production levels of 1.5 million and 0.3 million units per year. It also averages front -loading horizontal-axis results for the residential front-loading horizontal-axis clothes washers that DOE reverse-engineered.

5-17Figure 5.6.2 2000 Low-Volume versus High-Volume Clothes Washer Cost Disadvantage

While the units under review in the 2000 RCW TSD are not applicable to the current CCW analysis, the impact of ma nufacturing scale is still rele vant to the CCW market. As manufacturing volumes shrink, la bor costs rise due to growin g inefficiencies within the fabrication and assembly lines. Th e effect of manufact uring scale on depreciation is even more pronounced, as there are minimum tooling and equipment investments required to start operations, regardless of what the actual manufac turing volume turns out to be. Careful design will minimize the amount of additional tooling required to bring new equipment to market.

Results from the 2000 TSD analysis for the effects of manufacturing scale are presented as follows, recognizing that similar results will likely apply to CCWs. Figure 5.6.3 examines the case of very low-production volumes (100,000 units per year) versus producing at high volumes (1,500,000 units per year). Driven mainly by incr eases in depreciation costs, the very lowvolume manufacturing cost increment over high -volume manufacturing increases to about $80 for both top-loading vertical-a xis and front-loading horizon tal-axis clothes washers.

5-18$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00USD Other Depreciation Labor Materials

V-Axis H-Axis

Figure 5.6.3 2000 Cost Disadvantage of Producing 100,000 versus 1.5MM Clothes Washers per Year with Green Field Facility

The agitator top-loading clothe s washer market is largely commoditized, resulting in fierce price competition. As of 2006, a $156 price difference for the end user ($80 manufacturing cost multiplied by a 1.93 total markup (see chapte r 7 of this TSD)) was not likely to be sustainable. However, the LVM is aided in th is equipment segment by the extant tooling and equipment, years of research and developm ent, etc. which represent a sunk cost.

In contrast, the front-loading clothes washer manufacturing line would have to increase its output by multiples to meet the unit demand that the top-loading line currently sustains. Since the two platforms do not share many components, the top-loading line would be likely to be written off, while substantial investments would be required to expand the output of the frontloading line. Such investments may not be jus tified by the potential market for them, and the larger rivals have a great adva ntage in terms of leveraging th eir RCW shipments to minimize depreciation on a per-unit basis.

Thus, while the LVM may be able to compet e with its bigger rivals on the agitator toploading platform due to depreciated plant and equipment, prior high-volume experience, and a long learning curve, it would be competing at a great disadvantage with it s larger rivals should front-loading CCWs become the only platform that can meet future energy efficiency standards.

Manufacturers operating at very low volumes are likely to face margin pressure for both top- and front-loading clothes washers. To c ounter pressure from hi gh-volume manufacturers, low-volume producers have to compete on the ba sis of service, reliability, bundling, and

5-19equipment differentiation. Its long le gacy in the agitator top-loading market also aids the LVM in competing successfully with larger rivals.

Conclusion

In conclusion, the LVM faces larger rivals in all of the clot hes washer markets it competes in, yet the LVM has been able to grow its revenue despite bein g heavily concentrated in the stagnant CCW market. As a result, the elimination of the agitator top-loading clothes washer platform from the CCW market would impact this manuf acturer disproportionately and could therefore represent a mate rial risk to the company.

5.6.2.3 Other Observations Regarding the 2000 Residential Clothes Washer TSD

Historic Background

When DOE began the 2001 RCW rulemaking, th e U.S. RCW market consisted almost exclusively of top-loading vert ical-axis platforms. Table 3.9 in the 2000 TSD noted that toploading vertical-axis clothes washers comp rised a 99.9 percent market share as of 1995. Available front-loading horizontal- axis clothes washers were lim ited to imported goods and two domestic platforms. While the majority of overall clothes washer shipments in the United States still consist of top-loading clothe s washers, the shipment levels and market share of front-loading clothes washers have grown significantly.

Unlike in 1995, all remaining U.S. manufactur ers now sell front-loading clothes washers that are either produced in thei r own factories or outsourced. The majority of residential frontloading clothes washers sold in the United States today are manufactured abroad. While a greater proportion of CCWs are made dome stically, significant market scale differences remain. Thus, as markets for top-loading clothes washers decline, domestic clothes washer production will likely decline also.

In the 1996 AHAM data submittal, the maximum potential improvement was capped at an MEF of 1.634, whereas front-loading clothes washers from multiple vendors currently reach MEFs in excess of 2.00. Manufacturers have also in creased the basket capac ity of top- and frontloading clothes washers, reaching up to 4.7 ft 3 in some residential models. The WFs are also significantly lower on severa l current front-loading clothes wash ers found in either residential or CCW markets than they were for models in the 2000 TSD.

As a result of the RCW rulemaking, the standa rds for RCWs were increased in two steps, reaching an MEF of 1.26 as of January 1, 2007. Wh en that standard was issued, no front-loading clothes washer MEFs were below 1.26. Thus, only top-loading clothes washers were affected by the rulemaking. In the interim, manufacturers wo rked to find the most cost-effective way to modify their top-loading platforms to meet the current minimum MEF.

At the time of the 2000 TSD, a correlation was noted and assumed between MEF and WF (see Table 5.6.5). However, no WF was imposed in the final rulemaking. As a result,

5-20manufacturers could largely focu s on reducing the energy content of the wash and rinse water rather than having to jointly focus on the MEF and the WF. None of the agitator top-loading clothes washers that currently meet the 1.26 MEF minimum efficiency standard also reach the WF predicted for that efficiency level by the 2000 TSD. Typically, such current top-loading clothes washers use two more gallons of water per ft 3 of capacity than the WF associated with the 1.26 MEF standard in the 2000 TSD.

Impact of Equipment Test Procedures

EPACT 2005 amended EPCA to require DOE to rate CCWs with the same test procedure established for RCWs. (42 U.S.C. 6314(a)(8)) DOE adopted test procedures for CCWs in a final rule published on October 18, 2005. 70 FR 60407, 60416. The testing procedure for RCWs is codified in 10 CFR part 430, subpart B, appendix J1.

When calculating MEF, the DOE test procedur e factors in end-user-selectable variables including the wash and rinse water temperatures, and fill level. Thus, adaptive water levels (either user-set or automatic) a nd temperature choices are accounted for in the calculation. Some design options, such as reducing th e amount of rinse water, have an efficiency benefit regardless of the user-set program. These and other design options have allowed th e three highest-volume CCW manufacturers to reach the 1.26 MEF standard level at relatively low cost by making evolutionary changes to thei r top-loading platforms.

For example, the calculated MEF is a func tion of the cycle water temperatures. By requiring a cold rinse and offering more warm or cold wash programs while reducing the number of hot wash cycle options, the MEF of a washer can be raised without affecting the WF. The incremental cost of offering more wash temperat ures or lowering the temperatures overall is relatively minor. Similarly, the added cost and co mplexity of offering a water level selector switch is relatively minor but it allows manufacturers to take advantage of the credits that the DOE test procedure gives to washer s that have this design option.

At the time of the AHAM data submittal for the 2000 TSD, clothes washer manufacturers had little experience with the upda ted clothes washer test proce dure, which was not published in the Federal Register until August 27, 2000. The only top-load ing clothes washers on the market at the time that could reach an MEF of 1.26 were proprietary in design. Furthermore, the clothes washer manufacturing cost estimates for the 1.26 MEF levels were an amalgam of the high-cost proprietary top-loading design and several front-loading washers.

In conclusion, the cost of upgrading top-lo ading washers to reach an MEF of 1.26 was lower than manufacturers estimated according to the AHAM-supplied data. No expensive design options had to be employed to push the top-loadi ng platform to that MEF level. Therefore, DOE believes that the current manufacturing cost of an agitator top-loading clothes washer that meets the 1.26 MEF/9.5 WF efficiency level is within 10 pe rcent of the cost of a baseline washer in Table 5.6.5 once these costs ar e adjusted for inflation.

5-21Persistence of Baseline Top-loading versu s Front-loading Clothes Washer Cost Differential

Since the publication of the 2000 TSD, the clothes washer market has been transformed by the entrance of more foreign competitors, significant market consolidation, and the appearance of RCWs that have hi gher load capacities than the basket-capacity limits defined by EPACT 2005. For example, front -loading RCWs from BSH Home Appliances Corporation (Bosch-Siemens), GE, LG Electronics, Inc. (LG), and Whirlpool have a stat ed basket capacity in excess of the 3.5 ft 3 capacity product class definition limit set by EPACT 2005 for RCWs.

Despite the entrance of multiple front-loadi ng clothes washers into the commercial and residential markets, a significant retail price diffe rence between agitator top- and front-loading clothes washer platforms persists. This suggest s that manufacturers ha ve yet to overcome the inherently higher costs associat ed with manufacturing front-loadi ng clothes washer platforms.

These cost differences are due in part to the suspensions, seals, drive systems, and stainless-steel wash baskets that front-loading clothes washers em ploy and which can be simpler, unnecessary, and/or less expensive in baseline top-loading models . The higher strength, stiffness, and vibration-resistance require ments for front-loading clothes washers add further cost and complexity. Electronic drive systems are found in all front-loading clothes washers, whereas simpler and less expensive induction motors ar e typically found on baselin e top-loading clothes washers.

High-volume manufacturers of t op-loading clothes washers al so benefit from a plant and equipment stock that have been largely depreciat ed, yet remain functional. The growth in frontloading clothes washer sales continues to demand factory expansi on and the resultant investments.

As noted above, the reverse-engineering anal ysis of the 2000 RCW TSD is largely not a valid basis upon which to compare costs in the co mmercial market. However, it is interesting to note how manufacturers were able to meet the current 1.26 MEF RCW standa rd with little to no additional manufacturing cost. Thus, the cost of a baseline top-loading washer has not changed much in the interim, other than to reflect changes in raw mate rials costs. Front-loading clothes washer costs are similarly affected, so that th e manufacturing cost differential between the two RCW platforms has remained largely the same.

The retail pricing survey for this current TSD underscores this persiste nt differential, as noted in Figure 3.11.1 in chapter 3 of this TSD. This figure demonstrates that the average retail price difference between commercial top-loadi ng and front-loading wash ers varies between $531 for washers with coin boxes and $625 for washers without coin boxes. As noted in chapter 7 of this TSD, the total markup from manufacturer to end user is 1.93 for CCWs. Therefore there is a manufacturing cost difference of $275 to $327 between top-loading and front-loading CCW platforms.
This difference is about $100 higher than th e average difference cal culated in the 2000 RCW TSD between a baseline to p-loading and two front-loading clothes washers that were

5-22subjected to reverse-engineering analysis. Howeve r, the residential designs were produced at much a higher manufacturing scale, suggesting higher cost optimization, better purchasing power, and lower raw material costs. Higher-volume manufacturi ng allows a manufacturer to consider more platform and design options that c ould not be economically justified at a very low manufacturing scale.

Thus, the $316 cost difference in the AHAM-s ubmitted data for top-loading and frontloading CCWs is plausible. A cost difference higher than that found in the residential market is reasonable since CCWs are designed to be more r ugged, are required to be more reliable, and are produced at a much lower scale. As a conseque nce, manufacturers cannot readily cost-optimize front-loading designs to the extent that they have been able to refine their extant top-loading units. In addition, even an optimized front-loadi ng CCW will remain inherently more expensive to produce than a high-volume residential mode l built on the same platform due to the volume over which customized items like cont rollers have to be depreciated.

5.6.3 Cost-Efficiency Curves
Based on its analysis, for this final, the De partment has retained all cost estimates presented in the October 2008 NOPR and Novemb er 2009 SNOPR, though they were revised with a Producer Price Index (PPI) multiplier to update them to 2008$. These are shown in Table 5.6.6.

Table 5.6.6 Commercial Clothes Was her Cost-Efficiency Curves

Efficiency

Level Modified Energy Factor (ft 3 /kWh) / Water Factor (gallons/ft 3 ) Incremental Cost

Top-Loading Front-Loading TopLoading FrontLoading Baseline 1.26/9.5 1.72/8.0 $0.00 $0.00
1 1.42/9.5 1.8/7.5 $77.60 $0.00
2 1.60/8.5 2.0/5.5 $134.99 $14.21
3 N/A 2.2/5.1 N/A $39.34
4 N/A 2.35/4.4 N/A $66.16

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