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/R Incorporated Providing Environmental Technical Support Since 1989

MEMORANDUM

DATE: January 30, 2015

SUBJECT: Unit Cost Estimates of Residential Wood Heating Appliances

FROM: 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 present an estimate of the unit costs of residential wood heating 

appliances under final New Source Performance Standards (NSPS). We present estimates of baseline unit costs 

for each of the appliance types regulated in the final rule and estimated additional manufacturing costs to 

comply with the final emission limits. We use this information to estimate the incremental impacts on unit cost 

based on the NSPS two-step PM emission limit implementation strategy. Note that the majority of cost and 

shipment data used in this analysis was provided by industry sources. 

I. Baseline Unit Cost Estimates 

Baseline unit costs for each appliance were estimated using three sources of information. These costs 

represent the costs based on the manufacturer’s price (not the retail price). For pellet stoves, we used the 

average 2008 base year manufacturer’s cost ($1,279), based on Frost & Sullivan (F&S) market research

1

, and 

converted the 2008 cost to 2013 dollars ($1,384)

2

. For units not included in the F&S report, such as single burn 

rate stoves and forced-air furnaces, we used manufacturer’s base cost information, also updated to 2013 

dollars.

3, 4

Single burn rate stoves unit cost was $250 in 2008 and $271 in 2013. Forced-air furnaces unit cost 

was $900 in 2008 and $974 in 2013.

In the case of adjustable burn rate wood stoves and hydronic heaters, commenters on the proposed NSPS 

provided the results of a retail price survey for each of these appliance types. For adjustable burn rate wood 

heaters, the average (mean) retail price for the full range of medium-size steel models was $1,858 (2012) while 

the average (mean) retail price for the full range of medium-size cast iron models was $2285 (2012).5 At 

proposal, the unit cost estimates were based on production of steel stoves alone. However, based on information 

provided in public comments that assumed cast iron stoves comprise about half of the market6, we estimated an 

average cost of the two model types to better represent average unit costs ($2,072). Finally, we adjusted the 

retail price estimate to remove the industry estimate of a 67 percent retail markup for these appliances 

($1,241).7 We also updated the price estimate to reflect 2013 dollars ($1,259).

 

1 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating Products Market. 

Prepared by Frost & Sullivan. April 26, 2010. p.35.

2

See http://www.bls.gov/data/inflation_calculator.htm

3 Confidential Business Information.

4 Confidential Business Information.

5

Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix B, Woodstove Retail Price Survey. Prepared by 

Robert Ferguson and Charles Page for the Hearth, Patio & Barbecue Association. May 2014. p. 14.

6

Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix B, Woodstove Retail Price Survey. Prepared by 

Robert Ferguson and Charles Page for the Hearth, Patio & Barbecue Association. May 2014. p. 4.

7 Cost-Effectiveness Analysis of Alternative Woodstove New Source Performance Standards. Prepared by NERA Consulting for the 

Hearth, Patio and Barbecue Association. May 2014. p. 4.
2

For hydronic heaters, the retail survey showed that the average (mean) retail price of unqualified heaters 

was $6,154 (2013) and of EPA Voluntary Program Phase 2 qualified models was $10,193 (2013).8 We adjusted 

the retail price estimates to remove the industry estimate of a 25 percent retail markup for these appliances in 

order to estimate manufacturers’ prices.

9

The resulting prices are $4,923 for unqualified heaters and $8,154 for 

qualified heaters.

II. Additional Manufacturing Costs

We believe that manufacturers may face additional costs to manufacture complying units in some cases. 

We estimated the following additional manufacturing costs per unit based on appliance type:

 Certified wood stoves and pellet stoves represent a well-developed technology and we could not 

identify price differences between models with lower emission levels compared to models with 

higher emission levels. Some stoves with lower emission sell for less than some stoves with higher 

emissions and vice versa. Therefore, we have assumed no additional manufacturing costs.

 One manufacturer estimated that it will cost an average of $100 more to manufacture a lower 

emitting single burn rate product (exclusive of recovering R&D cost), which we updated to 2013 ($), 

approximately $110.10

 We have limited information that indicates the cost to produce a forced-air furnace that complies 

with a Step 1 emission standard (see discussion below in section V) is approximately 75 percent 

more, or $1,700 (exclusive of recovering R&D cost).11

 As can been seen in the hydronic heater market survey results, the prices of qualified model 

hydronic heaters ranges from $6,995 to $15,395, with the average retail price of $10,193. As 

discussed in the previous section, we adjusted this value to exclude the 25 percent retail markup, 

resulting in a manufacturers’ cost estimate of $8,154.12 We assumed an approximate increase of 

$3,200 to manufacture a qualified unit compared to an unqualified unit.

III. Number of Models and Shipment Data

The estimated number of shipments (i.e., units sold per year) was derived as explained in the emissions 

memo.13 We needed to reconcile the data on shipments of individual units with the certification costs associated 

with model lines. Therefore, we estimated the average number of models produced by manufacturers of each 

product type. For certified wood stoves and fireplace inserts, we used information provided by HPBA that 125 

models are being produced on EPA’s list of certified stoves.14 Because pellet stoves are produced at levels 

comparable to wood stoves, we estimated that there are up to 125 models being currently produced. 

 Adjustable burn rate stoves – 125 models

 Pellet stove – 125 models

 

8

Proposed Hydronic Heater NSPS Incremental Cost Effectiveness Analyses, Appendix B, Hydronic Heater Retail Price Survey. 

Prepared by Robert Ferguson for the Hearth, Patio & Barbecue Association. May 2014. p. 5.

9 Cost-Effectiveness Analysis of Alternative Hydronic Heater New Source Performance Standards. Prepared by NERA Consulting for 

the Hearth, Patio and Barbecue Association. May 2014. p. 10.

10 NSPS Review and Comments. Confidential Business Information. September 2010.

11 Confidential Business Information.

12 Cost-Effectiveness Analysis of Alternative Hydronic Heater New Source Performance Standards. Prepared by NERA Consulting for 

the Hearth, Patio and Barbecue Association. May 2014. p. 10.

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

14 Letter to Lucinda Power, EPA, from John Crouch, HPBA. September 12, 2010. pp. 10 – 11.
3

The single burn rate estimate of 20 different models is based on an internet search of the two major 

manufacturers (United States Stove and Vogelzang, which is now owned by United States Stove). The actual 

estimate could be higher if there are a large number of importers of foreign produced units. However, a search 

of the Northern Tool and Equipment, Tractor Supply Company, Lowes, Home Depot and Walmart websites did 

not identify any other major producers of single burn rate stoves that are sold in the U.S. Also, public comments 

did not identify any other major producers.

 Single burn rates stoves – 20 models

The HPBA provided a list of manufacturers by product type.15 Using this as a starting point, we 

conducted additional internet searches to quantify the numbers of models offered by manufacturer. We further 

refined the estimate of hydronic heater models based on EPA’s experience with the EPA voluntary partnership 

program. We understand that a number of manufacturers list products on their website that are no longer 

manufactured, only sold in limited quantities, and/or are sold under license to another manufacturer. 

Furthermore, one manufacturer dominates industry sales, so on a sales-weighted basis there are fewer numbers 

of models produced than a strict interpretation of web sites would indicate. Based on this process, we estimated 

the following number of models by appliance type:

 Forced-air furnaces – 50 models

 Hydronic heating systems (outdoor and indoor) – 120 models

IV. Incremental Unit Costs of Residential Wood Heaters

Our analysis of incremental unit costs is based on the following Adjusted Unit Cost Formulas. Cost 

Formula 1 is used to estimate incremental unit costs from 2015 through 2020 and states:

((Cost of Amortized R&D * Number of models) / (Number of shipments))

+ Baseline Unit Cost + Additional Manufacturing Cost = Adjusted Unit Cost (1)

The adjusted unit cost (Formula 1) equals the incremental cost of developing a new unit, spread over the 

number of units expected to be sold in 2015, for the duration of the 6-year model development period (2015 to 

2020). The cost of amortized R&D corresponds to an average annual R&D cost amortized over 6 years at a 7-

percent interest rate, as explained in more detail in the manufacturer cost impacts memo.16 

We used this cost formula to estimate the incremental unit costs starting in 2015 and ending in 2020. 

This is consistent with the assumptions described in section V regarding NSPS implementation timing. 

Although 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 – for the purposes of our cost 

estimate, we have amortized model development costs over the 6 year period beginning in 2015 and ending in 

2020 (inclusive). In the case of single burn rate stoves and forced-air furnaces, we assume that the first two 

years of R&D represent intensified research and engineering as explained in the manufacturer’s cost memo.16

Where there are additional manufacturing costs as discussed above, we added these to the unit cost number. 

The total incremental cost was added to the base model cost to derive the post-NSPS (adjusted) unit cost.

 

15 HBPA Solid Fuel Product List. Attachment to E-mail from John Crouch, HPBA, to Gil Wood, EPA. September 24, 2010.

16 Memorandum to USEPA from EC/R, Inc. Estimated Wood Heater Manufacturer Cost Impacts. January 2015.
4

By 2021, we assume that R&D has been completely amortized. Note that from 2015 to 2020, we have 

incorporated certification costs as part of the overall R&D expenditures, expressed above in Cost Formula 1.

However, starting in 2021, we assume incremental costs associated with ongoing certification testing such that 

1/5th of models certify every 5 year period. This assumption is reflected in our Adjusted Unit Cost Formula 2:

((Cost of Certification Testing)/5 * Number of models) / (Number of shipments)) 

+ Baseline Unit Cost + Additional Manufacturing Cost = Adjusted Unit Cost (2)

For adjustable burn rate, single burn rate and pellet stoves, we estimate the cost of certification testing a heater 

design in an EPA accredited lab to be approximately $10,000.17 And we estimate a certification testing cost of 

$20,000 per model for hydronic heaters and forced-air furnaces.18 

Table 1 is a summary of the unit cost inputs with the exception of the shipment data. See the emissions 

memo for detailed shipment data.19

Table 1. Summary of Unit Cost Inputs

R&D 

Annualized 

Cost ($)* 

**

# 

Models

Certification 

Testing ($)*

Baseline 

Unit Cost 

($)*

Additional 

manufacturing

cost ($)*

Adjustable Burn Rate 

Wood Stoves 32,702 125 10,000 1,259

Single Burn Rate Stoves 39,206 20 10,000 271 110

Pellet Stoves 32,702 125 10,000 1,384

Forced-Air Furnaces 306,232 50 20,000 974 1700

Hydronic Heating 

Systems 250,706 120 20,000 4,923 3200

*Cost estimates are in 2013$.

** Total R&D cost estimates correspond to an average annual R&D cost amortized over 6 

years at a 7% interest rate. 

Table 2 is a summary of the adjusted unit costs of Wood Heaters meeting the final NSPS.

 

17 Letter to Lucinda Power, EPA, from Brian Klipfel, Fire Works Masonry. September 10, 2010.

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

19 Memorandum to USEPA from EC/R, Inc. Estimated Emissions from Wood Heaters. January 2015.
5

Table 2. Unit Costs of Wood Heaters meeting Final NSPS (2013$)

2008* ... 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 ... 2029

Adjustable Burn 

Rate Wood 

Stoves $1,259 $1,259 $1,259 $1,307 $1,307 $1,307 $1,307 $1,307 $1,307 $1,261 $1,261 $1,261 $1,261 $1,261 $1,261

Single Burn Rate 

Stoves $271 $271 $271 $410 $410 $410 $410 $410 $410 $382 $382 $382 $382 $382 $382

Pellet Stoves $1,384 $1,384 $1,384 $1,430 $1,430 $1,430 $1,430 $1,430 $1,430 $1,387 $1,387 $1,387 $1,387 $1,387 $1,387

Forced-Air 

Furnaces $974 $974 $974 $3,225 $3,225 $3,225 $3,225 $3,225 $3,225 $2,680 $2,680 $2,680 $2,680 $2,680 $2,680

Hydronic Heating 

Systems $4,923 $4,923 $4,923 $10,287 $10,287 $10,287 $10,287 $10,287 $10,287 $8,154 $8,154 $8,154 $8,154 $8,154 $8,154

Step 1 (2015)

Step 2 (2020)

*Note: The average 2008 base year cost per appliance was converted to 2013$ for this analysis. 
6

V. NSPS Requirements

For the final rule, we evaluated the cost impacts of implementing new or revised NSPS 

standards for the residential wood heating appliance industry. The cost analyses reflect the final 

rule’s phase-in schedules where most appliances would be required to meet a specified Step 1 

emission limit upon promulgation in 2015 and then a stricter Step 2 emission limit 5 years later 

in 2020, as detailed below. It is important to note that the unit costs presented above in Table 2 

for years 2015 through 2020 are for a unit required to make changes to comply with the NSPS. 

In reality, some units will not require changes and not incur the related R&D costs because some 

model lines already meet the final emission limits. The following summary describes the specific 

emission limits under the rule for affected appliance types under each subpart.

Subpart AAA (“room heaters”): 

 Adjustable burn rate, single burn rate, and pellet stoves: Step 1 limit of 4.5 g/hr upon 

the effective date in 2015; and Step 2 limit of 2.0 g/hr 5 years after the effective date, 

i.e., in 2020. 

Subpart QQQQ (“central heaters”):

 Hydronic heaters (both outdoor and indoor): Step 1 limit of 0.32 lb/mm BTU heat 

output upon the effective date in 2015; and Step 2 limit of 0.10 lb/mm BTU heat 

output 5 years after the effective date, i.e., in 2020. 

 Forced-Air Furnaces: Work practice/operational standards will be required of all 

forced-air furnaces upon the rule’s 2015 effective date. The Step 1 PM emission limit 

of 0.93 lb/mm BTU heat output will be required by 2016 (1 year after the 2015 

effective date) for small forced-air furnaces and by 2017 (2 years after the 2015 

effective date) for large forced-air furnaces. The Step 2 PM emission limit of 0.15

lb/mm BTU heat output for all forced-air furnaces will be required 5 years after the 

effective date, i.e., in 2020. Note: For the purposes of this unit cost analysis we have 

estimated incremental cost increases to the manufacturer beginning in 2015, similar to 

other appliances, because costs are amortized beginning in 2015 in our analysis. 

However, retail cost increases may not occur until 2016 and 2017, depending on the 

forced-air furnace model.

VI. Other Cost Information

The HPBA market surveys referenced above contain additional information on other 

factors that affect the retail price of stoves such as discounting off the manufacturer’s suggested 

retail price (MSRP), freight costs, installation costs, taxes and regional pricing. Commenters also 

provide an analysis of hearth retailer gross margin survey results.20 Other than information 

described above regarding retail price markups, this information was not used in the analysis of 

adjusted unit costs described herein.

 

20 Proposed Wood Heater NSPS Incremental Cost Effectiveness Analyses, Appendix C, HPBA Hearth Retailer 

Gross Margin Survey Results. Prepared by Charles Page for the Hearth, Patio & Barbecue Association. May 2014.