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: Wood Stove 10-year Amortization Period, Sensitivity Analysis of R&D Costs

FROM: Jill Mozier, EC/R Inc.

TO: Gil Wood, EPA/OAQPS

David Cole, EPA/OAQPS

Amanda Aldridge, EPA/OAQPS

The purpose of this memorandum is to document a sensitivity analysis based on varying 

the amortization period for wood stove R&D costs. For both proposal and for final rule support, 

we amortized R&D costs over a 6-year period in order to spread R&D costs over a 6-year model 

development timeframe. For the final rule this 6-year period extends from the Step 1 compliance 

date (2015) to the Step 2 compliance date (2020, inclusive). Before proposal, two manufacturers 

noted 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-for-manufacture.

1 However, the Hearth, Patio and 

Barbecue Association’s (HPBA’s) economic consultant, NERA, used a 10-year period for 

amortizing costs in their wood stove analysis (May 2014) submitted as Attachment 2 of HPBA’s

comment on the proposed rule.

2 We therefore amortized our estimated final rule costs for wood 

stove R&D over 10-years, as a sensitivity analysis. 

For comparison, the 6-year versus 10-year annual amortized costs are shown in the final 

two rows of Table 1, both at a 7% interest rate. The components of the tabulated cost estimates 

are discussed in the Manufacturer Cost Impacts memo.3Tables 2a and 2b show the average 

annual cost per wood stove manufacturer and the nationwide annual costs using the 10-year 

amortization period. For comparison, Tables 3a and 3b show the same using the 6-year 

amortization period. 

Finally, Tables 4 and 5 show the cost effectiveness (CE) of reducing PM2.5 from wood 

stoves based on the 10-year and 6-year amortization periods, respectively. Over the 20-year 

emitting lifespan, the estimated CE is $587 per ton based on the 10-year amortization period 

versus $519 per ton based on the 6-year amortization period. The CE calculations based on using 

the 10-year amortization period, entitled Revised Final Wood Heater NSPS PM25 CE 7% 1-23-

15 Woodstove 10yr Amortization.xls, are provided with e-mail transmittal of this memo.

 

1 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.

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

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

3 Memorandum to USEPA from EC/R, Inc. Estimated Wood Heater Manufacturer Cost Impacts. January 2015.
2

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 (6-year) $42,610 $22,794 $32,702 Annualized over 6 

years at 7% 

Annualized capital cost per model (10-year) $28,917 $15,469 $22,193

Annualized over 10 

years at 7%
3

Table 2a. Average Annual Cost per Manufacturer under the Final NSPS using a 10-year Amortization Period (2015-2024)

Table 2b. Nationwide Annual Costs under the Final NSPS using a 10-year Amortization Period (2015-2024)

Footnotes:

1 Nationwide Annual Cost assumes R&D investment is amortized over 10 years (2015 through 2024). The analysis extends to year 2029 

(based on a model brought to market in 2020 with a lifespan of 10 years), but because woodstoves already incur certification and 

reporting & recordkeeping costs under the existing 1988 NSPS, no additional costs are modeled after the 10-year amortization period.

2

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.

(Step 1

compliance) 

2015 2016 2017 2018 2019

(Step 2 

compliance) 

2020 2021 2022 2023 2024

2025 

through 

2029

Wood Stoves (R&D)334 125 $60,378 $60,378 $60,378 $60,378 $60,378 $60,378 $60,378 $60,378 $60,378 $60,378 $0

Average Annual Cost per Manufacturer based on 10-year amortization period of R&D costs (2015-2024) to meet Step 2 limit and 10-year model life for stoves

shipped in 2020 (through 2029)1,2

# Manufacturers # Models

AAA: Room Heaters 

(Wood Stoves only 

Sensitivity Analysis)

NSPS Subpart Appliance Type

(Step 1

compliance) 

2015 2016 2017 2018 2019

(Step 2 

compliance) 

2020 2021 2022 2023 2024

2025 through 

2029

Wood Stoves (R&D)334 125 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $0

$2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $2,052,861 $0

# Manufacturers # Models

Nationwide Annual Costs1,2

AAA: Room Heaters 

(Wood Stoves only 

Sensitivity Analysis)

NSPS Subpart Appliance Type
4

Table 3a. Average Annual Cost per Manufacturer under the Final NSPS using a 6-year Amortization Period (2015-2020)

Table 3b. Nationwide Annual Costs under the Final NSPS using a 6-year Amortization Period (2015-2020)

Footnotes:

1 Nationwide Annual Cost assumes R&D investment is amortized over 6 years (2015 through 2020).

2

Since certification is required every 5 years, it is assumed that certification costs will be spread out so that 1/5 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.

(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

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)

# ManufacAppliance Type turers # Models

(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

# Manufacturers # Models

Nationwide Annual Costs1

Appliance Type
5

Table 4. Cost Effectiveness of Wood Stoves Based on 10-year Amortization Period

Baseline PM2.5 

Emissions2 

(tons)

NSPS PM2.5 

Emissions2 

(tons)

Emission 

Reduction 

(tons)

CE based on 

nationwide 

average

annual cost 

(per ton)

Baseline PM2.5 

Emissions 

(tons)

NSPS PM2.5 

Emissions 

(tons)

Emission 

Reduction 

(tons)6

2015 4$2,052,861 $1,368,574 381 381 0 N/A 381 381 0

2016 $2,052,861 $1,368,574 389 389 0 N/A 770 770 0

2017 $2,052,861 $1,368,574 397 397 0 N/A 1,167 1,167 0

2018 $2,052,861 $1,368,574 445 445 0 N/A 1,612 1,612 0

2019 $2,052,861 $1,368,574 454 454 0 N/A 2,066 2,066 0

2020 4$2,052,861 $1,368,574 463 259 204 $6,710 2,529 2,325 204

2021 $2,052,861 $1,368,574 472 264 208 $6,578 3,001 2,589 412

2022 $2,052,861 $1,368,574 482 269 212 $6,449 3,483 2,859 624

2023 $2,052,861 $1,368,574 491 275 216 $6,323 3,974 3,134 841

2024 $2,052,861 $1,368,574 501 280 221 $6,199 4,475 3,414 1,061

2025 $0 $1,368,574 511 286 225 $6,077 4,987 3,700 1,287

2026 $0 $1,368,574 521 292 230 $5,958 5,508 3,992 1,516

2027 $0 $1,368,574 532 298 234 $5,841 6,040 4,289 1,751

2028 $0 $1,368,574 542 303 239 $5,727 6,582 4,593 1,990

2029 $0 $1,368,574 553 310 244 $5,614 7,136 4,902 2,233

2030 7,136 4,902 2,233

2031 7,136 4,902 2,233

2032 7,136 4,902 2,233

2033 7,136 4,902 2,233

2034 7,136 4,902 2,233

2035 6,754 4,521 2,233

2036 6,365 4,132 2,233

2037 5,969 3,735 2,233

2038 5,524 3,290 2,233

2039 5,070 2,836 2,233

2040 4,607 2,577 2,029

2041 4,134 2,313 1,821

2042 3,653 2,043 1,609

2043 3,161 1,769 1,393

2044 2,660 1,488 1,172

2045 2,149 1,202 947

2046 1,628 911 717

2047 1,096 613 483

2048 553 310 244

$20,528,611 34,983 $587

6 In order to not overstate emission reductions caused by the NSPS, emissions are reduced to discount wood stoves already meeting the Step 2 limit (i.e., 26% of wood 

stoves already meet the Step 2 limit).

Cost Effectiveness (CE) based on annual and cumulative PM2.5 emissions from Wood Stoves

Year 

3

Nationwide 

Annual Cost1 

Nationwide 

Average 

Annual Cost 

Annual Snapshots Emission Reduction, cumulative per year CE based on total

cost & cumulative 

emission reduction 

over 20-year 

emitting lifespan 

(per ton)

1

 Estimated nationwide annual costs are in 2013 $ and are based on a 10-year amortization period of R&D costs at a 7% interest rate (during 2015-2020 ). Years 2030 through 

2048 are past the 10-year model design lifespan used in this analysis.

2

 Except for an adjustment in year 2018 based on an industry projection (NERA), estimated annual emissions are based on a forecasted revenue growth rate (as a surrogate

for shipments) of 2.0% from 2015 through 2029, in keeping with the average annual growth in real GDP predicted by the US Bureau of Economic Analysis (May 2014 Update

of Global Outlook projections; see http://www.conference-board.org/data/globaloutlook.cfm). 

3

 These heaters have in-home emitting lifespans of at least 20 years; thus wood stoves shipped in 2029 will be emitting through 2048.

4

 Estimated emissions assume Step 1 standard becomes effective in 2015 and Step 2 standard in 2020. For woodstoves, estimates assume that most models already meet 

the Step 1 limit and that manufacturers will certify and sell existing models meeting Step 1 standard during 2015 through 2019. Therefore no emission reductions are

estimated until Step 2 in 2020.

5

 The nationwide cumulative cost represents the cost to manufacturers resulting from the R&D re-design to meet the NSPS assuming a 10-year model life. 

Cumulative Emission 

Reduction over 20-year 

emitting lifespan 

Nationwide cumulative 

cost5 
6

Table 5. Cost Effectiveness of Wood Stoves Based on 6-year Amortization Period

Baseline PM2.5 

Emissions2 

(tons)

NSPS PM2.5 

Emissions2 

(tons)

Emission 

Reduction 

(tons)6

CE based on 

nationwide 

average

annual cost 

(per ton)

Baseline PM2.5 

Emissions 

(tons)

NSPS PM2.5 

Emissions 

(tons)

Emission 

Reduction 

(tons)6

2015 4$3,024,928 $1,209,971 381 381 0 N/A 381 381 0

2016 $3,024,928 $1,209,971 389 389 0 N/A 770 770 0

2017 $3,024,928 $1,209,971 397 397 0 N/A 1,167 1,167 0

2018 $3,024,928 $1,209,971 445 445 0 N/A 1,612 1,612 0

2019 $3,024,928 $1,209,971 454 454 0 N/A 2,066 2,066 0

2020 4$3,024,928 $1,209,971 463 259 204 $5,932 2,529 2,325 204

2021 $0 $1,209,971 472 264 208 $5,816 3,001 2,589 412

2022 $0 $1,209,971 482 269 212 $5,702 3,483 2,859 624

2023 $0 $1,209,971 491 275 216 $5,590 3,974 3,134 841

2024 $0 $1,209,971 501 280 221 $5,480 4,475 3,414 1,061

2025 $0 $1,209,971 511 286 225 $5,373 4,987 3,700 1,287

2026 $0 $1,209,971 521 292 230 $5,267 5,508 3,992 1,516

2027 $0 $1,209,971 532 298 234 $5,164 6,040 4,289 1,751

2028 $0 $1,209,971 542 303 239 $5,063 6,582 4,593 1,990

2029 $0 $1,209,971 553 310 244 $4,964 7,136 4,902 2,233

2030 7,136 4,902 2,233

2031 7,136 4,902 2,233

2032 7,136 4,902 2,233

2033 7,136 4,902 2,233

2034 7,136 4,902 2,233

2035 6,754 4,521 2,233

2036 6,365 4,132 2,233

2037 5,969 3,735 2,233

2038 5,524 3,290 2,233

2039 5,070 2,836 2,233

2040 4,607 2,577 2,029

2041 4,134 2,313 1,821

2042 3,653 2,043 1,609

2043 3,161 1,769 1,393

2044 2,660 1,488 1,172

2045 2,149 1,202 947

2046 1,628 911 717

2047 1,096 613 483

2048 553 310 244

$18,149,566 34,983 $519

3

 These heaters have in-home emitting lifespans of at least 20 years; thus wood stoves shipped in 2029 will be emitting through 2048.

4

 Estimated emissions assume Step 1 standard becomes effective in 2015 and Step 2 standard in 2020. For woodstoves, estimates assume that most models already meet 

the Step 1 limit and that manufacturers will certify and sell existing models meeting Step 1 standard during 2015 through 2019. Therefore no emission reductions are

estimated until Step 2 in 2020.

5

 The nationwide cumulative cost represents the cost to manufacturers resulting from the R&D re-design to meet the NSPS assuming a 10-year model life. 

Cumulative Emission 

Reduction over 20-year 

emitting lifespan 

Nationwide cumulative 

cost5 

6 In order to not overstate emission reductions caused by the NSPS, emissions are reduced to discount wood stoves already meeting the Step 2 limit (i.e., 26% of wood 

stoves already meet the Step 2 limit).

 Cost Effectiveness (CE) based on annual and cumulative PM2.5 emissions from Wood Stoves

Year 

3

Nationwide 

Annual Cost1 

Nationwide 

Average 

Annual Cost 

Annual Snapshots Emission Reduction, cumulative per year CE based on total

cost & cumulative 

emission reduction 

over 20-year 

emitting lifespan 

(per ton)

1

 Estimated nationwide annual costs are in 2013 $ and are based on a 6-year amortization period of R&D costs at a 7% interest rate (during 2015-2020 ). Years2030 through 

2048 are past the 10-year model design lifespan used in this analysis.

2

 Except for an adjustment in year 2018 based on an industry projection (NERA), estimated annual emissions are based on a forecasted revenue growth rate (as a surrogate

for shipments) of 2.0% from 2015 through 2029, in keeping with the average annual growth in real GDP predicted by the US Bureau of Economic Analysis (May 2014 Update

of Global Outlook projections; see http://www.conference-board.org/data/globaloutlook.cfm).