CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES
 

TABLE OF CONTENTS 

8.1 INTRODUCTION .............................................................................................. 8-1
 

8.1.1 General Approach for LCC and PBP Analyses ............................................................... 8-1
 

8.1.2 Overview of LCC and PBP Inputs................................................................................... 8-3
 

8.1.3 New Construction and Replacement Fractions of Heating Product Shipments ............ 8-11
 

8.2 TOTAL INSTALLED PRICE INPUTS ............................................................. 8-12
 

8.2.2 Water Heaters................................................................................................................. 8-13
 

8.2.2.1 Baseline Manufacturer Cost......................................................................... 8-13
 

8.2.2.2 Standard-Level Manufacturer Cost Increases.............................................. 8-14
 

8.2.2.3 Overall Markup............................................................................................ 8-16
 

8.2.2.4 Installation Cost ........................................................................................... 8-17
 

8.2.2.5 Total Installed Price ..................................................................................... 8-25
 

8.2.3 Direct Heating Equipment ............................................................................................. 8-26
 

8.2.3.1 Baseline Manufacturer Cost......................................................................... 8-26
 

8.2.3.2 Standard-Level Manufacturer Cost Increases.............................................. 8-27
 

8.2.3.3 Overall Markup............................................................................................ 8-28
 

8.2.3.4 Installation Cost ........................................................................................... 8-28
 

8.2.3.5 Total Installed Price ..................................................................................... 8-30
 

8.2.4 Gas-Fired Pool Heaters.................................................................................................. 8-32
 

8.2.4.1 Baseline Manufacturer Cost......................................................................... 8-32
 

8.2.4.2 Standard-Level Manufacturer Cost Increases.............................................. 8-32
 

8.2.4.3 Overall Markup............................................................................................ 8-33
 

8.2.4.4 Installation Cost ........................................................................................... 8-33
 

8.2.4.5 Total Installed Price ..................................................................................... 8-34
 

8.3 OPERATING COST INPUTS - OVERVIEW .................................................... 8-35
 

8.4 ANNUAL ENERGY CONSUMPTION ............................................................. 8-36
 

8.4.1 Accounting for the Rebound Effect ............................................................................... 8-37
 

8.5 ENERGY PRICES AND ENERGY PRICE TRENDS........................................ 8-38
 

8.5.1 Residential Natural Gas Prices....................................................................................... 8-38
 

8.5.2 Residential Electricity Prices ......................................................................................... 8-39
 

8.5.3 Residential Oil Prices..................................................................................................... 8-40
 

8.5.4 Residential LPG Prices .................................................................................................. 8-41
 

8.5.5 Energy Price Trends....................................................................................................... 8-42
 

8.6 MAINTENANCE AND REPAIR COSTS ......................................................... 8-44
 

8.6.1 Water Heaters................................................................................................................. 8-45
 

8.6.1.1 Gas-Fired Storage Water Heaters ................................................................ 8-45
 

8.6.1.2 Electric Storage Water Heaters.................................................................... 8-45
 

8.6.1.3 Oil-Fired Storage Water Heaters ................................................................. 8-46
 

8.6.1.4 Gas-Fired Instantaneous Water Heaters....................................................... 8-47
 

8.6.2 Direct Heating Equipment ............................................................................................. 8-47
 

8.6.3 Gas-Fired Pool Heaters.................................................................................................. 8-48
 

8.7 PRODUCT LIFETIME ..................................................................................... 8-48
 

8.7.1 Water Heaters................................................................................................................. 8-48
 

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8.7.2 Direct Heating Equipment ............................................................................................. 8-50
 

8.7.3 Gas-Fired Pool Heaters.................................................................................................. 8-51
 

8.8 DISCOUNT RATES ......................................................................................... 8-52
 

8.8.1 Discount Rate for Replacement Products Purchased by Consumers............................. 8-52
 

8.8.2 Discount Rates for Appliances Installed in New Housing............................................. 8-55
 

8.9 EFFECTIVE DATE OF ENERGY CONSERVATION STANDARDS ............... 8-56
 

8.10 PRODUCT ENERGY EFFICIENCY IN THE BASE CASE............................... 8-57
 

8.10.1 Water Heaters................................................................................................................. 8-57
 

8.10.2 Direct Heating Equipment ............................................................................................. 8-58
 

8.10.3 Gas-Fired Pool Heaters.................................................................................................. 8-59
 

8.11 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS ............................. 8-59
 

8.11.1 Water Heaters................................................................................................................. 8-60
 

8.11.1.1 Distributions of Impacts............................................................................... 8-60
 

8.11.1.2 Summary of LCC and PBP Results ............................................................. 8-66
 

8.11.1.3 Range of LCC Savings and PBPs ................................................................ 8-68
 

8.11.1.4 Gas-Fired and Electric Storage Water Heaters: Results for TSL 5 ............. 8-73
 

8.11.2 Direct Heating Equipment ............................................................................................. 8-74
 

8.11.2.1 Distributions of Impacts............................................................................... 8-74
 

8.11.2.2 Summary of LCC and PBP Results ............................................................. 8-80
 

8.11.2.3 Range of LCC Savings and PBPs ................................................................ 8-82
 

8.11.3 Gas-Fired Pool Heaters.................................................................................................. 8-87
 

8.11.3.1 Distributions of Impacts............................................................................... 8-87
 

8.11.3.2 Summary of LCC and PBP Results ............................................................. 8-89
 

8.11.3.3 Range of LCC Savings and PBPs ................................................................ 8-90
 

8.12 REBUTTABLE PAYBACK PERIOD ............................................................... 8-91
 

8.12.1 Inputs.............................................................................................................................. 8-91
 

8.12.2 Results............................................................................................................................ 8-92
 

LIST OF TABLES 

Table 8.1.1 Water Heaters: LCC and PBP Input Summary.............................................. 8-6
 

Table 8.1.2 Direct Heating Equipment: LCC and PBP Input Summary........................... 8-8
 

Table 8.1.3 Gas-Fired Pool Heaters: LCC and PBP Input Summary ............................. 8-10
 

Table 8.1.4 Fraction of Shipments In New Construction and Replacement
 

Applications ................................................................................................. 8-11
 

Table 8.2.1 Inputs for Total Installed Price .................................................................... 8-12
 

Table 8.2.2 Water Heaters: Baseline Manufacturer Costs.............................................. 8-14
 

Table 8.2.3 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost
 

Increases....................................................................................................... 8-15
 

Table 8.2.4 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost
 

Increases for Low-NOx Models................................................................... 8-15
 

Table 8.2.5 Electric Storage Water Heaters: Standard-Level Manufacturer Cost
 

Increases....................................................................................................... 8-15
 

Table 8.2.6 Oil-Fired Storage Water Heaters: Standard-Level Manufacturer Cost
 

Increases....................................................................................................... 8-16
 

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Table 8.2.7 Gas-Fired Instantaneous Water Heaters: Standard-Level Manufacturer 

Cost Increases .............................................................................................. 8-16
 

Table 8.2.8 Water Heaters: Overall Markups ................................................................. 8-17
 

Table 8.2.9 Average and Incremental Installation Cost for Gas-Fired Storage
 

Water Heaters............................................................................................... 8-19
 

Table 8.2.10 Average and Incremental Installation Cost for Electric Storage Water
 

Heaters ......................................................................................................... 8-22
 

Table 8.2.11 Average and Incremental Installation Cost for Oil-Fired Storage Water
 

Heaters ......................................................................................................... 8-23
 

Table 8.2.12 Average and Incremental Installation Cost for Gas-Fired Instantaneous
 

Water Heaters............................................................................................... 8-24
 

Table 8.2.13 Gas-Fired Storage Water Heaters: Average Consumer Product Price,
 

Installation Cost, and Total Installed Price .................................................. 8-25
 

Table 8.2.14 Electric Storage Water Heaters: Average Consumer Product Price,
 

Installation Cost, and Total Installed Price .................................................. 8-25
 

Table 8.2.15 Oil-Fired Storage Water Heaters: Average Consumer Product Price,
 

Installation Cost, and Total Installed Price .................................................. 8-26
 

Table 8.2.16 Gas-Fired Instantaneous Water Heaters: Average Consumer Product
 

Price, Installation Cost, and Total Installed Price........................................ 8-26
 

Table 8.2.17 Direct Heating Equipment: Baseline Manufacturer Costs........................... 8-27
 

Table 8.2.18 Gas Wall Fan DHE: Standard-Level Manufacturer Cost Increases............. 8-27
 

Table 8.2.19 Gas Wall Gravity DHE: Standard-Level Manufacturer Cost Increases ...... 8-27
 

Table 8.2.20 Gas Floor DHE: Standard-Level Manufacturer Cost Increases................... 8-27
 

Table 8.2.21 Gas Room DHE: Standard-Level Manufacturer Cost Increases.................. 8-28
 

Table 8.2.22 Gas Hearth DHE: Standard-Level Manufacturer Cost Increases ................ 8-28
 

Table 8.2.23 Direct Heating Equipment: Overall Markups.............................................. 8-28
 

Table 8.2.24 Average Installation Cost for Gas Wall Fan DHE....................................... 8-29
 

Table 8.2.25 Average Installation Cost for Gas Wall Gravity DHE................................. 8-29
 

Table 8.2.26 Average Installation Cost for Gas Floor DHE............................................. 8-30
 

Table 8.2.27 Average Installation Cost for Gas Room DHE............................................ 8-30
 

Table 8.2.28 Average Installation Cost for Gas Hearth DHE........................................... 8-30
 

Table 8.2.29 Gas Wall Fan DHE: Average Consumer Product Price, Installation
 

Cost, and Total Installed Price ..................................................................... 8-31
 

Table 8.2.30 Gas Wall Gravity DHE: Average Consumer Product Price, Installation
 

Cost, and Total Installed Price ..................................................................... 8-31
 

Table 8.2.31 Gas Floor DHE: Average Consumer Product Price, Installation Cost,
 

and Total Installed Price .............................................................................. 8-31
 

Table 8.2.32 Gas Room DHE: Average Consumer Product Price, Installation Cost,
 

and Total Installed Price .............................................................................. 8-31
 

Table 8.2.33 Gas Hearth DHE: Average Consumer Product Price, Installation Cost,
 

and Total Installed Price .............................................................................. 8-32
 

Table 8.2.34 Gas-Fired Pool Heaters: Baseline Manufacturer Cost................................. 8-32
 

Table 8.2.35 Gas-Fired Pool Heaters: Standard-Level Manufacturer Cost Increases ...... 8-32
 

Table 8.2.36 Gas-Fired Pool Heaters: Overall Markups................................................... 8-33
 

Table 8.2.37 Average and Incremental Installation Cost for Pool Heaters....................... 8-34
 

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Table 8.2.38 Gas-Fired Pool Heaters: Average Consumer Product Price, Installation
 

Cost, and Total Installed Price ..................................................................... 8-34
 

Table 8.3.1 Inputs for Operating Cost............................................................................. 8-35
 

Table 8.5.1 Average Residential Natural Gas Prices in 2007......................................... 8-39
 

Table 8.5.2 Average Residential Electricity Prices in 2007 ........................................... 8-40
 

Table 8.5.3 Average Monthly Residential Oil Prices in 2007 ........................................ 8-41
 

Table 8.5.4 Average Residential LPG Prices in 2007..................................................... 8-42
 

Table 8.7.1 Water Heaters: Product Lifetime Estimates and Sources ............................ 8-49
 

Table 8.7.2 Water Heaters: Average, Minimum, and Maximum Product Lifetimes
 

Used in LCC Analysis ................................................................................. 8-50
 

Table 8.7.3 Direct Heating Equipment: Average, Minimum, and Maximum
 

Product Lifetimes Used in LCC Analysis.................................................... 8-51
 

Table 8.7.4 Gas-Fired Pool Heaters: Product Lifetime Estimates and Sources.............. 8-51
 

Table 8.7.5 Gas-Fired Pool Heaters: Average, Minimum, and Maximum Product
 

Lifetimes Used in LCC Analysis ................................................................. 8-51
 

Table 8.8.1 Average Shares of Considered Household Debt and Equity Classes .......... 8-53
 

Table 8.8.2 Average Nominal Interest Rates for Household Debt Classes (percent)..... 8-53
 

Table 8.8.3 Average Real Effective Interest Rates for Household Debt Classes
 

(percent) ....................................................................................................... 8-54
 

Table 8.8.4 Average Nominal and Real Interest Rates for Household Equity
 

Classes.......................................................................................................... 8-54
 

Table 8.8.5 Shares and Interest or Return Rates Used for Household Debt and
 

Equity Classes.............................................................................................. 8-55
 

Table 8.8.6 Data Used to Calculate Real Effective Mortgage Rates .............................. 8-56
 

Table 8.10.1 Water Heaters: Base Case Energy Efficiency Market Shares in 2015* ...... 8-58
 

Table 8.10.2 Direct Heating Equipment: Energy Efficiency Market Shares in the
 

Base Case ..................................................................................................... 8-59
 

Table 8.10.3 Gas-Fired Pool Heaters: Energy Efficiency Market Share by Ignition
 

Type in the Base Case.................................................................................. 8-59
 

Table 8.11.1 Gas-Fired Storage Water Heaters: LCC and PBP Results........................... 8-67
 

Table 8.11.2 Electric Storage Water Heaters: LCC and PBP Results .............................. 8-67
 

Table 8.11.3 Oil-Fired Water Heaters: LCC and PBP Results ......................................... 8-68
 

Table 8.11.4 Gas-Fired Instantaneous Water Heaters: LCC and PBP Results................. 8-68
 

Table 8.11.5 Gas-Fired Storage Water Heaters: LCC and PBP Results for Small and
 

Large-Volume Water Heaters Under TSL 5................................................ 8-73
 

Table 8.11.6 Electric Storage Water Heaters: LCC and PBP Results for Small and
 

Large-Volume Water Heaters Under TSL 5................................................ 8-74
 

Table 8.11.7 Gas Wall Fan DHE: LCC and PBP Results................................................. 8-81
 

Table 8.11.8 Gas Wall Gravity DHE: LCC and PBP Results........................................... 8-81
 

Table 8.11.9 Gas Floor DHE: LCC and PBP Results....................................................... 8-81
 

Table 8.11.10 Gas Room DHE: LCC and PBP Results...................................................... 8-82
 

Table 8.11.11 Gas Hearth DHE: LCC and PBP Results..................................................... 8-82
 

Table 8.11.12 Gas-Fired Pool Heaters: LCC and PBP Results .......................................... 8-90
 

Table 8.12.1 Water Heaters: Rebuttable Payback Periods................................................ 8-92
 

Table 8.12.2 Direct Heating Equipment: Rebuttable Payback Periods ............................ 8-92
 

Table 8.12.3 Pool Heaters: Rebuttable Payback Periods.................................................. 8-93
 

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LIST OF FIGURES 

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ................. 8-5
 

Figure 8.5.1 Residential Natural Gas Price Trends in AEO2009..................................... 8-43
 

Figure 8.5.2 Residential Electricity Price Trends in AEO2009 ....................................... 8-43
 

Figure 8.5.3 Residential Oil Price Trends in AEO2009................................................... 8-44
 

Figure 8.5.4 Residential LPG Price Trends in AEO2009 ................................................ 8-44
 

Figure 8.11.1 Gas-Fired Storage Water Heaters: Base Case LCC Distribution................. 8-61
 

Figure 8.11.2 Electric Storage Water Heaters: Base Case LCC Distribution .................... 8-61
 

Figure 8.11.3 Oil-Fired Storage Water Heaters: Base Case LCC Distribution.................. 8-62
 

Figure 8.11.4 Gas-Fired Instantaneous Water Heaters: Base Case LCC Distribution....... 8-62
 

Figure 8.11.5 Gas-Fired Storage Water Heaters: Distribution of LCC Impacts for
 

Efficiency Level 2........................................................................................ 8-63
 

Figure 8.11.6 Electric Storage Water Heaters: Distribution of LCC Impacts for
 

Efficiency Level 5........................................................................................ 8-63
 

Figure 8.11.7 Oil-Fired Storage Water Heaters: Distribution of LCC Impacts for
 

Efficiency Level 5........................................................................................ 8-64
 

Figure 8.11.8 Gas-Fired Instantaneous Water Heaters: Distribution of LCC Impacts
 

for Efficiency Level 4 .................................................................................. 8-64
 

Figure 8.11.9 Gas-Fired Storage Water Heaters: Distribution of PBPs for Efficiency
 

Level 2 ......................................................................................................... 8-65
 

Figure 8.11.10 Electric Storage Water Heaters: Distribution of PBPs for Efficiency
 

Level 5 ......................................................................................................... 8-65
 

Figure 8.11.11 Oil-Fired Storage Water Heaters: Distribution of PBPs for Efficiency
 

Level 5 ......................................................................................................... 8-66
 

Figure 8.11.12 Gas-Fired Instantaneous Water Heaters: Distribution of PBPs for
 

Efficiency Level 8........................................................................................ 8-66
 

Figure 8.11.13 Range of LCC Savings for Gas-Fired Storage Water Heaters..................... 8-69
 

Figure 8.11.14 Range of LCC Savings for Electric Storage Water Heaters ........................ 8-69
 

Figure 8.11.15 Range of LCC Savings for Oil-Fired Storage Water Heaters...................... 8-70
 

Figure 8.11.16 Range of LCC Savings for Gas-Fired Instantaneous Water Heaters........... 8-70
 

Figure 8.11.17 Range of Payback Periods for Gas-Fired Storage Water Heaters................ 8-71
 

Figure 8.11.18 Range of Payback Periods for Electric Storage Water Heaters ................... 8-71
 

Figure 8.11.19 Range of Payback Periods for Oil-Fired Storage Water Heaters................. 8-72
 

Figure 8.11.20 Range of Payback Periods for Gas-Fired Instantaneous Water Heaters...... 8-72
 

Figure 8.11.21 Gas Wall Fan DHE: Base Case LCC Distribution....................................... 8-74
 

Figure 8.11.22 Gas Wall Gravity DHE: Base Case LCC Distribution ................................ 8-75
 

Figure 8.11.23 Gas Floor DHE: Base Case LCC Distribution............................................. 8-75
 

Figure 8.11.24 Gas Room DHE: Base Case LCC Distribution............................................ 8-75
 

Figure 8.11.25 Gas Hearth DHE: Base Case LCC Distribution .......................................... 8-76
 

Figure 8.11.26 Gas Wall Fan DHE: Distribution of LCC Impacts for Efficiency Level
 

3.................................................................................................................... 8-76
 

Figure 8.11.27 Gas Wall Gravity DHE: Distribution of LCC Impacts for Efficiency
 

Level 3 ......................................................................................................... 8-77
 

Figure 8.11.28 Gas Floor DHE: Distribution of LCC Impacts for Efficiency Level 1........ 8-77
 

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Figure 8.11.29 Gas Room DHE: Distribution of LCC Impacts for Efficiency Level 4....... 8-78
 

Figure 8.11.30 Gas Hearth DHE: Distribution of LCC Impacts for Efficiency Level 1...... 8-78
 

Figure 8.11.31 Gas Wall Fan DHE: Distribution of PBPs for Efficiency Level 3 .............. 8-79
 

Figure 8.11.32 Gas Wall Gravity DHE: Distribution of PBPs for Efficiency Level 3 ........ 8-79
 

Figure 8.11.33 Gas Floor DHE: Distribution of PBPs for Efficiency Level 1..................... 8-79
 

Figure 8.11.34 Gas Room DHE: Distribution of PBPs for Efficiency Level 4 ................... 8-80
 

Figure 8.11.35 Gas Hearth DHE: Distribution of PBPs for Efficiency Level 1 .................. 8-80
 

Figure 8.11.36 Range of LCC Savings for Gas Wall Fan DHE........................................... 8-83
 

Figure 8.11.37 Range of LCC Savings for Gas Wall Gravity DHE .................................... 8-83
 

Figure 8.11.38 Range of LCC Savings for Gas Floor DHE................................................. 8-84
 

Figure 8.11.39 Range of LCC Savings for Gas Room DHE................................................ 8-84
 

Figure 8.11.40 Range of LCC Savings for Gas Hearth DHE............................................... 8-85
 

Figure 8.11.41 Range of Payback Periods for Gas Wall Fan DHE...................................... 8-85
 

Figure 8.11.42 Range of Payback Periods for Gas Wall Gravity DHE ............................... 8-86
 

Figure 8.11.43 Range of Payback Periods for Gas Floor DHE............................................ 8-86
 

Figure 8.11.44 Range of Payback Periods for Gas Room DHE........................................... 8-87
 

Figure 8.11.45 Range of Payback Periods for Gas Hearth DHE ......................................... 8-87
 

Figure 8.11.46 Gas-Fired Pool Heaters: Base Case LCC Distribution ................................ 8-88
 

Figure 8.11.47 Gas-Fired Pool Heaters: Distribution of LCC Impacts for Efficiency
 

Level 5 ......................................................................................................... 8-88
 

Figure 8.11.48 Gas-Fired Pool Heaters: Distribution of PBPs for Efficiency Level 5 ........ 8-89
 

Figure 8.11.49 Range of LCC Savings for Gas-Fired Pool Heaters .................................... 8-90
 

Figure 8.11.50 Range of Payback Periods in Years for Gas-Fired Pool Heaters................. 8-91
 

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CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES 

8.1 INTRODUCTION 

This chapter describes the Department of Energy (DOE)’s methodology for analyzing the 

economic impacts of possible energy conservation standards on individual consumers. The effect 

of energy conservation standards on individual consumers includes a change in operating 

expense (usually decreased) and a change in purchase price (usually increased). This chapter 

describes three metrics DOE used to determine the effect of energy conservation standards on 

individual consumers: 

•	 Life-cycle cost (LCC) is the total consumer expense over the life of an appliance, 

including purchase expense and operating costs (including energy expenditures). DOE 

discounts future operating costs to the time of purchase, and sums them over the lifetime 

of the product. 

•	 Payback period (PBP) measures the amount of time it takes consumers to recover the 

estimated higher purchase price of more energy efficient products through lower 

operating costs. 

•	 Rebuttable payback period is a special case of the PBP. While the LCC and PBP are 

estimated over a range of inputs reflecting actual conditions, the rebuttable payback 

period is based on laboratory conditions, specifically DOE test procedure inputs. 

Results for the LCC and PBP analyses are presented in section 8.11, and the rebuttable 

PBP is discussed in section 8.12. Key variables and calculations are presented for each metric. 

DOE performed the calculations discussed here using a series of Microsoft Excel spreadsheets 

which are accessible on the Internet at 

(http://www.eere.energy.gov/buildings/appliance_standards/). Details and instructions for using 

the spreadsheets are discussed in appendix 8-H, User Instructions for the LCC Analysis 

Spreadsheet. 

8.1.1 General Approach for LCC and PBP Analyses 

Life-cycle cost is the total consumer expense over the life of an appliance, including 

purchase expense and operating costs (including energy expenditures). DOE discounts future 

operating costs to the time of purchase, and sums them over the lifetime of the product. DOE 

defines LCC by the following equation: 

N	 OC t LCC = IC +∑ t (1+ r)
 Where:
 

t =1 

LCC = Life-cycle cost in dollars,
 

IC = Total installed cost in dollars,
 

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∑ = Sum over the lifetime, from year 1 to year N,
 

N = Lifetime of appliance in years,
 

OC = Operating cost in dollars,
 

r = Discount rate, and
 

t = Year for which operating cost is being determined.
 

The PBP is the amount of time it takes the consumer to recover the estimated higher 

purchase expense of more energy efficient products as a result of lower operating costs. 

Numerically, the PBP is the ratio of the increase in purchase expense (i.e., from a less energy 

efficient design to a more energy efficient design) to the decrease in annual operating 

expenditures. This type of calculation is known as a “simple” payback period, because it does 

not take into account changes in operating expense over time or the time value of money; (i.e., 

the calculation is done at an effective discount rate of zero percent). 

The equation for PBP is: 

ΔIP PBP = ΔOC 

Where: 

ΔIP = Difference in the total installed price between the more energy efficient design 

and the baseline design, and 

ΔOC = difference in annual operating expenses. 

Payback periods are expressed in years. Payback periods greater than the life of the 

product indicate that the increased total installed cost is not recovered with the reduced operating 

expenses. 

Recognizing that several inputs used to determine consumer LCC and PBP are either 

variable or uncertain, DOE conducted the LCC and PBP analyses by modeling both the 

uncertainty and variability in the inputs using Monte Carlo simulation and probability 

distributions. A detailed explanation of the use of probability distributions is included in this 

chapter. DOE developed LCC and PBP spreadsheet models incorporating both Monte Carlo 

simulation and probability distributions by using Microsoft Excel spreadsheets combined with 

Crystal Ball (a commercially available add-in program). 

In addition to characterizing several inputs of the analyses with probability distributions, 

DOE developed a sample of individual households that use each of the appliances. By 

developing household samples, DOE was able to perform the LCC and PBP calculations for each 

household to account for the variability in energy consumption and/or energy price associated 

with each household. As described in chapter 7, Energy Use Characterization, DOE used the 

DOE Energy Information Administration (EIA)’s 2005 Residential Energy Consumption Survey 

(RECS) to develop household samples for each of the three heating products.1 

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By using RECS, DOE was able to assign a specific annual energy use and energy price to 

each household in the sample. Due to the large sample of households considered in the LCC and 

PBP analyses, the range of annual energy use within each product class considered is quite large. 

Thus, the variability of annual energy use and energy prices across all households contributes to 

the range of LCCs and PBPs calculated for any particular energy conservation standard level. 

DOE displays the LCC and PBP results as distributions of impacts compared to the base 

case. Results are presented at the end of this chapter and are based on 10,000 samples per Monte 

Carlo simulation run. 

8.1.2 Overview of LCC and PBP Inputs 

DOE categorizes inputs to the LCC and PBP analyses as follows: (1) inputs for 

establishing the purchase expense, otherwise known as the total installed price, and (2) inputs for 

calculating the operating cost. 

The primary inputs for establishing the total installed price are: 

•	 Baseline manufacturer cost: The costs incurred by the manufacturer to produce products 

meeting existing minimum energy conservation standards. 

•	 Standard-level manufacturer cost increases: The change in manufacturer cost associated 

with producing products to meet a particular energy conservation standard level. 

•	 Markups and sales tax: The markups and sales tax associated with converting the
 

manufacturer cost to a consumer product cost.
 

•	 Installation cost: The cost to the consumer of installing the product. The installation cost 

represents all costs required to install the product other than the marked-up consumer 

product price. The installation cost includes labor, overhead, and any miscellaneous 

materials and parts. Thus, the total installed price equals the consumer product price plus 

the installation cost. 

The primary inputs for calculating the operating cost are: 

•	 Energy consumption: The energy consumption is the site energy use associated with 

operating the product. 

•	 Energy efficiency: The product energy efficiency dictates the product energy
 

consumption associated with standard-level products (i.e., products with energy
 

efficiencies greater than baseline products).
 

•	 Energy prices: Energy prices are the prices paid by consumers for energy (i.e., electricity, 

gas, or oil). DOE determined current energy prices based on data from the Energy 

Information Administration (EIA). 

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•	 Energy price trends: DOE used the EIA Annual Energy Outlook 2009 (AEO2009) to 

forecast energy prices into the future. 

•	 Repair and maintenance costs: Repair costs are associated with repairing or replacing 

components that have failed. Maintenance costs are associated with maintaining the 

operation of the product. 

•	 Lifetime: The age at which the product is retired from service. 

•	 Discount rate: The rate at which DOE discounted future expenditures to establish their 

present value. 

The data inputs to PBP are the total installed price of the product to the consumer for 

each energy efficiency level and the annual (first year) operating expenditures for each energy 

conservation standard level. The inputs to the total installed price are the product cost and the 

installation cost. The inputs to the operating costs are the annual energy cost, the annual repair 

cost, and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except 

that energy price trends and discount rates are not required. Since the PBP is a “simple” payback, 

the required energy price is only for the year in which a new energy conservation standard is to 

take effect. The energy price DOE used in the PBP calculation was the price projected for that 

year. Discount rates are also not required for the simple PBP calculation. 

Figure 8.1.1 graphically depicts the relationships between the installed cost and operating 

cost inputs for the calculation of the LCC and PBP. In the figure below, the yellow boxes 

indicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the 

final outputs (the LCC and PBP). 

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Baseline 

Manufacturer 

Cost 

Std-Level 

Manufacturer 

Cost 

Manufacturer 

Markup 

Retailer or 

Distributor 

Markup 

Sales Tax 

Installation 

Cost 

Energy 

Consumption 

Equipment 

Price 

Lifetime 

Operating 

Expense 

Annual Energy 

Expense 

Lifetime Repair and 

Maintenance 

Cost 

Discount Rate 

Energy Price 

Trends 

Annual 

Operating 

Expense 

Payback 

Period 

Life-Cycle 

Cost 

Energy Prices 

Total Installed 

Cost 

Figure 8.1.1	 Flow Diagram of Inputs for the Determination of 

LCC and PBP 

Table 8.1.1, Table 8.1.2, and Table 8.1.3 summarize the input values that DOE used to 

calculate the LCC and PBP for the three types of heating products. Each table summarizes the 

total installed price inputs and the operating cost inputs including the lifetime, discount rate, and 

energy price trends. DOE characterized all of the total cost inputs with single-point values, but 

characterized several of the operating cost inputs with probability distributions that capture the 

input’s uncertainty and/or variability. For those inputs characterized with probability 

distributions, the values provided in the following tables are the average or typical values. Also 

listed in the following tables is the chapter of the technical support document (TSD) where more 

detailed information on the inputs can be found. 

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Table 8.1.1 Water Heaters: LCC and PBP Input Summary
 

Input Product Class 

Average or Typical 

Value Characterization 

TSD 

Chapter 

Reference 

Total Installed Price Inputs 

Baseline 

Manufacturer 

Cost (2008$) 

Gas-fired storage-type 40 gal = $180 

Single-Point Value 

5 

40 gal low-NOx = $247 

Electric storage-type 50 gal = $133 5 

Oil-fired storage-type 32 gal = $577 5 

Gas-fired instantaneous 199 kBtu/h = $282 5 

Standard-Level 

Manufacturer 

Cost Increase 

(2008$) 

Gas-fired storage-type 

(40 gal) 

0.62 EF= $7.44 

0.63 EF = $14.22 

0.64 EF = $127.42 

0.65 EF = $135.10 

0.67 EF = $142.13 

0.80 EF = $273.89 

Single-Point Value 5 

Electric storage-type 

(50 gal) 

0.91 EF = $6.85 

0.92 EF = $10.85 

0.93 EF = $15.07 

0.94 EF = $22.63 

0.95 EF = $40.45 

2.00 EF = $408.80 

2.20 EF = $455.91 

Single-Point Value 5 

Oil-fired storage-type 

(32 gal) 

0.54 EF = $6.19 

0.56 EF = $12.08 

0.58 EF = $22.24 

0.60 EF = $18.95 

0.62 EF = $30.54 

0.66 EF = $102.97 

0.68 EF = $107.49 

Single-Point Value 5 

Gas-fired instantaneous 

(199 kBtu/h) 

0.69 EF = $14.25 

0.78 EF = $44.21 

0.80 EF = $154.22 

0.82 EF = $191.63 

0.84 EF = $480.13 

0.85 EF = $525.35 

0.92 EF = $602.16 

0.95 EF = $702.88 

Single-Point Value 5 

Manufacturer 

Markup 

Gas-fired storage-type 1.31 

Single-Point Value 

6 

Electric storage-type 1.28 6 

Oil-fired storage-type 1.30 6 

Gas-fired instantaneous 1.45 6 

Retailer Markup All Baseline=1.45 

Incremental=1.15 Single-Point Value 6 

Distributor 

Markup 

Gas-fired, Oil-fired 

storage, Gas-fired 

instantaneous 

Baseline = 1.35 

Incremental = 1.11 Single-Point Value 6 

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Electric Storage Baseline = 1.28 

Incremental = 1.10 Single-Point Value 6 

Contractor 

Markup All 1.10 Single-Point Value 6 

Builder Markup All Baseline = 1.31 

Incremental = 1.26 Single-Point Value 6 

Sales Tax 

Gas-fired storage-type 1.081 

Variability based on 

region 

6 

Electric storage-type 1.075 6 

Oil-fired storage-type 1.065 6 

Gas-fired instantaneous 1.081 6 

Installation Cost 

(baseline) 

Gas-fired storage-type $576 

Variability determined 

from household sample. 

8 

Electric storage-type $222 8 

Oil-fired storage-type $648 8 

Gas-fired instantaneous $967 8 

Operating Cost Inputs 

Annual Energy 

Use (baseline)* 

Gas-fired storage-type Gas = 16.6 MMBtu 

Variability determined 

from household sample. 

7 

Electric storage-type Elec = 2,618 kWh 7 

Oil-fired storage-type Oil = 21.6 MMBtu 

Elec = 62 kWh 7 

Gas-fired instantaneous Gas = 16.8 MMBtu 7 

Forecasted 

Energy Prices in 

2015 (2008$) 

All 

Elec = 10.71 ¢/kWh 

Gas = 10.87 $/MMBtu 

Oil = 22.30 $/MMBtu 

LPG= 31.61 $/MMBtu 

Variability based on 

region. 8 

Repair and 

Maintenance 

Costs (baseline) 

Gas-fired storage-type Repair = $22 

Maintenance = $10 

Repair-variability based 

on product failure. 

Maintenance - SinglePoint Value 

8 

Electric storage-type Repair = $24 

Maintenance = $3 8 

Oil-fired storage-type Repair = $0 

Maintenance = $157 8 

Gas-fired instantaneous Repair = $45 

Maintenance = $62 8 

Lifetime 

Gas-fired storage-type 13 years Weibull distribution = 

6 to 20 years 8 

Electric storage-type 13 years Weibull distribution = 

6 to 20 years 8 

Oil-fired storage-type 13 years Weibull distribution = 

6 to 20 years 8 

Gas-fired instantaneous 20 years Weibull distribution = 

8 to 30 years 8 

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Discount Rate All 

Replacement purchases = 

4.8% 

New home purchases = 

3.0% 

Custom distribution 8 

Energy Price 

Trend All AEO2009 Reference Case 

Two sensitivities: 

High & Low Growth 

Cases 

8 

* Annual use provided for baseline product only. Annual use decreases with increased product energy efficiency. 

Table 8.1.2 Direct Heating Equipment: LCC and PBP Input Summary 

Input Product Class 

Average or Typical 

Value Characterization 

TSD 

Chapter 

Reference 

Total Installed Price Inputs 

Baseline 

Manufacturer 

Cost (2008$) 

Gas Wall Fan DHE 74% AFUE = $351 Single-Point Value 5 

Gas Wall Gravity DHE 64% AFUE = $207 Single-Point Value 5 

Gas Floor DHE 57% AFUE = $357 Single-Point Value 5 

Gas Room DHE 64% AFUE = $226 Single-Point Value 5 

Gas Hearth DHE 64% AFUE = $359 Single-Point Value 5 

Standard-Level 

Manufacturer 

Cost Increase 

Gas Wall Fan DHE 

75% AFUE = $25 

76% AFUE = $36 

77% AFUE = $55 

80% AFUE = $114 

Single-Point Value 5 

Gas Wall Gravity DHE 

66% AFUE = $26 

68% AFUE = $43 

71% AFUE = $78 

72% AFUE = $147 

Single-Point Value 5 

Gas Floor DHE 58% AFUE = $24 Single-Point Value 5 

Gas Room DHE 

65% AFUE = $15 

66% AFUE = $31 

67% AFUE = $37 

68% AFUE = $46 

83% AFUE = $180 

Single-Point Value 5 

Gas Hearth DHE 

67% AFUE = -$2 

72% AFUE = $172 

93% AFUE = $527 

Single-Point Value 5 

Manufacturer 

Markup All 1.35 Single-Point Value 6 

Distributor 

Markup All Baseline=1.35 

Incremental=1.11 Single-Point Value 6 

Contractor 

Markup All Baseline=1.32 

Incremental=1.32 Single-Point Value 6 

Builder Markup All Baseline=1.31 

Incremental=1.26 Single-Point Value 6 

Sales Tax All 1.068 Single-Point Value 6 

Installation Cost Gas Wall Fan DHE $824 Single-Point Value 8 

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(baseline) Gas Wall Gravity DHE $824 

Gas Floor DHE $1,161 

Gas Room DHE $634 

Gas Hearth DHE $698 

Operating Cost Inputs 

Annual Gas 

Usage* 

Gas Wall Fan DHE 29.6 MMBtu 

Variability determined 

from household sample. 7 

Gas Wall Gravity DHE 29.7 MMBtu 

Gas Floor DHE 30.8 MMBtu 

Gas Room DHE (LPG) 27.5 MMBtu 

Gas Hearth DHE 15.3 MMBtu 

Annual Electric 

Usage* 

Gas Fan DHE 39 kWh 

Variability determined 

from household sample. 7 

Gas Wall Gravity 0 kWh 

Gas Floor DHE 0 kWh 

Gas Room DHE 0 kWh 

Gas Hearth DHE 0 kWh 

Forecasted 

Energy Prices in 

2013 (2008$) 

All 

Elec = 8.98 ¢/kWh 

Gas = 10.85 $/MMBtu 

LPG= 22.89 $/MMBtu 

Variability based on 

region 8 

Repair and 

Maintenance 

Costs (baseline, 

average) 

Gas Wall Fan DHE Repair =$101 

Maintenance = $45 

Repair-variability based 

on product failure 

Maintenance - SinglePoint Value 

8 

Gas Wall Gravity DHE Repair =$40 

Maintenance = $45 

Gas Floor DHE Repair =$41 

Maintenance = $45 

Gas Room DHE Repair =$36 

Maintenance = $45 

Gas Hearth DHE Repair =$38 

Maintenance = $45 

Lifetime All 15 years Weibull distribution = 

10 to 20 years 8 

Discount Rate All 

Replacement purchases = 

5.8% 

New home purchases = 

3.0% 

Custom distribution 8 

Energy Price 

Trend All AEO2009 Reference Case 

Two sensitivities: 

High & Low Growth 

Cases 

8 

* Annual use provided for baseline product only. Annual consumption decreases with increased product energy efficiency. 

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Table 8.1.3 Gas-Fired Pool Heaters: LCC and PBP Input Summary
 

Input Average or Typical Value Characterization 

TSD 

Chapter 

Reference 

Total Installed Price Inputs 

Baseline Manufacturer 

Cost 

78% Et (pilot) = $529 

78% Et (elect. Ignt.) = $548 Single-Point Value 5 

Standard-Level 

Manufacturer Cost Increase 

79% Et (pilot) = $11 

79% Et (electr. Ignt.) = $10 

81% Et (pilot) = $24 

81% Et (electr. Ignt.) = $24 

82% Et (pilot) = $55 

82% Et (electr. Ignt.) = $55 

83% Et (pilot) = $145 

83% Et (electr. Ignt.) = $126 

84% Et (pilot) = $206 

84% Et (electr. Ignt.) = $187 

86% Et (pilot) = $451 

86% Et (electr. Ignt.) = $432 

90% Et (pilot) = $938 

90% Et (electr. Ignt.) = $919 

95% Et (pilot) = $1,074 

95% Et (electr. Ignt.) = $1,055 

Single-Point Value 5 

Manufacturer Markup Baseline = 1.30 

Incremental = 1.30 Single-Point Value 6 

Distributor Markup Baseline = 1.35 

Incremental = 1.11 Single-Point Value 6 

Contractor Markup Baseline = 1.10 

Incremental = 1.10 Single-Point Value 6 

Builder Markup Baseline = 1.31 

Incremental = 1.26 Single-Point Value 6 

Sales Tax 1.055 Variability based on region 6 

Installation Cost (baseline) $1,289 Variability based on household sample. 8 

Operating Cost Inputs 

Annual Gas Usage Baseline = 38.24 MMBtu Variability based on usage 7 

Annual Electricity Usage Baseline = 2 kWh Variability based on usage 7 

Forecasted Energy Prices 

in 2013 (2008$) 

Elec = 10.78 ¢/kWh 

Gas = 11.74 $/MMBtu 

Oil = 19.53 $/MMBtu 

LPG= 27.77 $/MMBtu 

Variability based on region 8 

Repair and Maintenance 

Costs (baseline) 

Repair = $22 

Maintenance = $48 

Repair-variability based on product failure 

Maintenance - Single-Point Value 8 

Lifetime 8 years Weibull distribution = 3 to 20 years 8 

Discount Rate Replacement purchases = 4.8% 

New home purchases = 3.0% Custom distribution 8 

Energy Price Trend AEO2009 Reference Case Sensitivities: High & Low Growth Cases 8 

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8.1.3 New Construction and Replacement Fractions of Heating Product Shipments 

The LCC and PBP analyses use separate values for new construction applications and 

replacement applications for some variables, as the type of application influences these variables. 

Such variables include markups, installation costs, and discount rates. The derivation of the 

appropriate values in each case for new construction applications and replacement applications is 

given in chapter 6 for markups, and in this chapter for installation costs and discount rates. 

The analysis requires assignment of the values for new construction applications and 

replacement applications to specific households in the household sample for each heating 

product. For water heaters and pool heaters, DOE based the assignment on the estimated 

fractions of shipments going to new construction and replacement applications in the effective 

year from the shipments analysis (see chapter 9). For pool heaters, DOE assigned “first-time 

owners” to the new construction cohort for installation costs because the installation is similar to 

new construction. It assigned them to the replacement cohort for discount rates since a first-time 

owner purchase is similar to that of a replacement purchase. 

For direct heating equipment, the shipments analysis does not separately estimate 

shipments for these two market segments. DOE estimated that all gas floor DHE shipments are 

replacements and that 90 percent of all other direct heating equipment shipments are 

replacements. For gas hearth DHE, DOE estimated that half of the shipments are for new 

construction applications and that half are for replacement applications. 

Table 8.1.4 shows the fractions used in the analysis for each heating product. 

Table 8.1.4 Fraction of Shipments In New Construction and Replacement Applications 

Heating Product Share of Replacement 

Applications (%) 

Share of New 

Construction 

Applications (%) 

Water Heaters 

Gas-Fired Storage 

Electric Storage 

Oil-Fired Storage 

Gas-Fired Instantaneous 

80 

80 

85 

70 

20 

20 

15 

30 

DHE 

Gas Wall Fan 

Gas Wall Gravity 

Gas Floor 

Gas Room 

_Gas Hearth 

90 

90 

100 

90 

50 

10 

10 

0 

10 

50 

Pool Heaters 67* 33* 

* The assignment of “first-time owners” varies; see explanation in text. 

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8.2 TOTAL INSTALLED PRICE INPUTS
 

DOE defines the total installed price using the following equation: 

IP = CPC + INST 

Where: 

IP = Total installed cost, and 

CPP = Consumer product price (i.e., consumer price for the product only), and 

INST = Cost to the consumer to install products. 

The product price is based on how the consumer purchases the product. As discussed in 

chapter 6, Markups to Determine Product Price, DOE defined markups and sales taxes for 

converting manufacturing costs into the consumer product price. 

Table 8.2.1 summarizes the inputs for the determination of total installed price. 

Table 8.2.1 Inputs for Total Installed Price 

Baseline Manufacturer Cost 

Standard-Level Manufacturer Cost 

Distribution Chain Markups 

Sales Tax (replacement applications) 

Installation Cost 

The baseline manufacturer cost is the cost incurred by the manufacturer to produce 

products meeting existing minimum energy conservation standards. Standard-level manufacturer 

cost increases are the change in manufacturer cost associated with producing products at an 

energy conservation standard level. Markups and sales tax convert the manufacturer cost to a 

consumer product price. The installation cost is the cost to the consumer of installing the product 

and represents all costs required to install the product other than the marked-up consumer 

product price. The installation cost includes labor, overhead, and any miscellaneous materials 

and parts. 

DOE calculated the total installed price for baseline products based on the following 

equation: 

IP = CPP + INST BASE BASE BASE 

= COST × MU + INST MFG OVERALL _ BASE BASE 

Where: 

IPBASE = Baseline total installed price,
 

CPPBASE = Consumer product price for baseline models,
 

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INSTBASE = Baseline installation cost, 

COSTMFG = Manufacturer cost for baseline models, and 

MUOVERALL_BASE = Baseline overall markup (product of manufacturer markup, other 

markups, and (for replacement applications) sales tax). 

DOE calculated the total installed price for standard-level products based on the 

following equation: 

IP = CPP + INST STD STD STD 

= (CPP + ΔCPP ) + (INST + ΔINST ) BASE STD BASE STD 

= (CPP + INST ) + (ΔCPP + ΔINST ) BASE BASE STD STD 

= IP + (ΔCOST × MU + ΔINST ) BASE MFG OVERALL _ INCR STD 

Where: 

ICSTD = Standard-level total installed price, 

CPPSTD = Consumer product price for standard-level models, 

INSTSTD = Standard-level installation cost, 

CPPBASE = Consumer product price for baseline models, 

ΔCPPSTD = Change in product price for standard-level models, 

INSTBASE = Baseline installation cost, 

ΔINSTSTD = Change in installation cost for standard-level models, 

IPBASE = Baseline total installed price, 

ΔCOSTMFG = Change in manufacturer cost for standard-level models, and 

MUOVERALL_INCR = Incremental overall markup (product of manufacturer markup, 

other markups, and (for replacement applications) sales tax). 

The remainder of this section provides information about each of the above input 

variables that DOE used to calculate the total installed price for the three heating products. 

8.2.2 Water Heaters 

8.2.2.1 Baseline Manufacturer Cost 

DOE developed the baseline manufacturer costs for water heaters as described in chapter 

5, Engineering Analysis. The baseline manufacturer costs are shown in Table 8.2.2. 

DOE assumed that the South Coast Air Quality District and the Bay Area Air Quality 

District would be the only locations where ultra low NOx gas-fired water heaters would be 

required by 2015. DOE estimated that this would represent 50 percent of shipments to California 

or 8.7 percent of shipments nationally. 

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Table 8.2.2 Water Heaters: Baseline Manufacturer Costs
 

Product Class Rated Volume 

(gal) 

Energy Factor Manufacturer Cost 

(2008$) 

Gas-Fired Storage 

30 0.61 $236 

40 0.59 $255 

50 0.58 $289 

66 0.54 $343 

75 0.53 $370 

Gas-Fired Storage, 

low NOx 

30 0.61 $322 

40 0.59 $343 

50 0.58 $378 

66 0.54 $432 

75 0.53 $462 

Electric Storage 

30 0.93 $154 

40 0.92 $185 

50 0.90 $194 

66 0.88 $228 

80 0.86 $261 

119 0.81 $322 

Oil-Fired Storage 32 0.53 $767 

50 0.50 $846 

Gas-Fired 

Instantaneous 0* 0.62 $282 

* 199 kBtu/h rated input. 

8.2.2.2 Standard-Level Manufacturer Cost Increases 

DOE developed manufacturer cost increases associated with increases in product energy 

efficiency levels as described in chapter 5, Engineering Analysis. Table 8.2.3 through Table 

8.2.7 present the standard-level manufacturer cost increases for the four product classes. 

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Table 8.2.3 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost 

Increases 

Energy 

Efficiency 

Level Manufacturer Cost Increase (2008$) 

30 gal 40 gal 50 gal 66 gal 75 gal 

1 $9.4 $10.5 $12.0 $14.6 $14.7 

2 $18.7 $27.2 $38.1 $30.2 $28.6 

3 $165.8 $166.9 $167.1 $169.7 $171.0 

4 $175.5 $177.8 $179.5 $184.6 $186.1 

5 $185.1 $194.7 $205.9 $200.7 $200.4 

6 $350.1 $367.4 $379.7 $390.1 $397.3 

Table 8.2.4 Gas-Fired Storage Water Heaters: Standard-Level Manufacturer Cost 

Increases for Low-NOx Models 

Energy 

Efficiency 

Level Manufacturer Cost Increase (2008$) 

30 gal 40 gal 50 gal 66 gal 75 gal 

1 $20.65 $28.15 $39.02 $31.67 $30.04 

2 $164.82 $165.73 $165.93 $168.51 $169.68 

3 $175.50 $176.59 $178.29 $183.46 $184.36 

4 $185.13 $193.62 $204.76 $199.52 $199.11 

5 $350.17 $367.28 $380.28 $393.04 $401.00 

6 $350.17 $367.28 $380.28 $393.04 $401.00 

Table 8.2.5 Electric Storage Water Heaters: Standard-Level Manufacturer Cost 

Increases 

Energy 

Efficiency Level Manufacturer Cost Increase (2008$) 

30 gal 40 gal 50 gal 66 gal 75 gal 

1 $8.2 $0.0 $9.6 $12.1 $12.6 

2 $8.2 $16.3 $14.8 $12.1 $20.7 

3 $8.2 $16.3 $21.1 $24.3 $28.0 

4 $26.1 $32.2 $31.8 $40.6 $42.5 

5 $26.1 $69.5 $57.0 $68.2 $72.6 

6 $532.0 $522.6 $548.8 $529.7 $534.0 

7 $590.2 $582.2 $611.0 $590.7 $599.5 

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Table 8.2.6 Oil-Fired Storage Water Heaters: Standard-Level Manufacturer Cost 

Increases 

Energy 

Efficiency Level Manufacturer Cost Increase (2008$) 

32 gal 50 gal 

1 $9.16 $11.15 

2 $17.43 $21.12 

3 $37.47 $34.11 

4 $26.36 $31.30 

5 $48.26 $46.52 

6 $133.87 $133.26 

7 $139.74 $139.73 

Table 8.2.7 Gas-Fired Instantaneous Water Heaters: Standard-Level Manufacturer 

Cost Increases 

Manufacturer 

Energy Cost Increase 

Efficiency Level (2008$) 

1 $14.3 

2 $44.2 

3 $154.2 

4 $191.6 

5 $480.1 

6 $525.4 

7 $602.2 

8 $702.9 

8.2.2.3 Overall Markup 

The overall markup is the value determined by multiplying the manufacturer and other 

markups and the sales tax together to arrive at a single markup value. Table 8.2.8 shows the 

overall baseline and incremental markups for gas-fired water heaters. Refer to chapter 6, 

Markups to Determine Product Price, for details. 

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Table 8.2.8 Water Heaters: Overall Markups
 

Product Class Baseline Cost Markup Incremental Cost Markup 

New Construction Replacement New Construction Replacement 

Gas-Fired Storage 2.43 2.06 1.92 1.66 

Electric Storage 2.25 1.96 1.86 1.61 

Oil-Fired Storage 2.41 2.03 1.91 1.63 

Gas-Fired Instantaneous 2.69 2.31 2.13 1.89 

8.2.2.4 Installation Cost 

The installation cost is the cost to the consumer of installing the water heater. The cost of 

installation covers all labor and material costs associated with the replacement of an existing 

water heater or the installation of a water heater in a new home, as well as delivery, removal, and 

permit fees. Some design options may require unique installation costs. DOE’s analysis 

recognizes these potential situations and incorporates the additional costs in the total installation 

price for those designs. DOE’s analysis of installation costs makes use of the determination of 

water heater location for each sample household, as described in chapter 7. 

DOE used regional labor costs to more accurately estimate installation costs by region. 

DOE then applied the appropriate regional labor cost to each RECS sample household. 

Gas-Fired Storage Water Heaters. DOE developed installation costs for gas-fired 

4 2, 3 storage water heaters using data from RS Means, DOE technical support documents, and a 

consultant report prepared for this analysis.2 See appendix 8-A, Installation Cost Determination, 

for details of the costs. 

For water heaters in new homes, the basic installation cost includes adding a gas line 

branch and water piping, in addition to putting the new water heater in place and additional setup. For natural draft venting in new construction, DOE accounted for both commonly-vented 

water heaters (together with a central furnace) and isolated water heaters (separately vented). For 

replacement cases, the installation cost includes disconnecting and removing the old water 

heater, removal/disposal fees, permit fees, as well as the cost of putting the new water heater in 

place and additional set-up. 

For installations that include either a 66-gallon or 75-gallon water heater tank, and for 

installations in an attic, DOE added the cost of one additional labor hour. 

Some houses may require a replacement drain pan of a larger size when a wider (due to 

increased insulation thickness) water heater is installed. DOE applied an additional drain pan 

cost as a function of the water heater rated volume for all water heaters with 2-inch insulation. 

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In some houses, the original water heater location may be too small to accommodate a 

replacement water heater of the same rated volume when the new water heater’s insulation 

thickness is 1.5 or 2 inches. Based on the consultant report, an estimated 15–25 percent of all 

replacement installations would require significant modifications in order to install a larger sized 

gas-fired storage water heater with 2-inch insulation. DOE estimated that such constraints would 

apply to half of the above fraction for replacement water heater installations with 1.5-inch 

insulation. 

In situations where significant modifications would be required, there are a number of 

possibilities that might be applicable to the individual installation. These include: 

1) Installing a water heater with different dimensions (e.g., installing a taller unit). 

2) Installing a water heater with a smaller rated volume and adding a tempering valve to 

compensate for lower hot water delivery. 

3) Modifying the existing water heater installation location (primarily removing/replacing 

door jambs). 

4) Relocating water heater. 

5) Switching to an electric or gas-fired instantaneous water heater or electric storage water 

heater. 

After considering that some houses could choose a different dimension water heater 

(option 1), DOE assumed that, for non-manufactured homes, major modifications would be 

necessary for 20 percent of replacement installations with 2-inch insulation and for 10 percent of 

replacement installations with 1.5-inch insulation. Because manufactured homes encounter space 

constraints more often, DOE assumed that major modifications would be necessary for 40 

percent of replacement installations with 2-inch insulation and for 20 percent of replacement 

installations with 1.5-inch insulation. For those households facing major modifications, DOE 

estimated that half of the cases would choose option 2 (smaller water heater with tempering 

valve) and half would select option 3 (door jamb removal/replacement). For single-family and 

multi-family homes, DOE estimated that option 3 would be selected only in cases where the 

water heater is installed in an indoor closet or attic (e.g., not in a garage or basement). 

For households choosing option 2, DOE adjusted the setpoint of the smaller water heater 

upward so that the total energy content of the water that can be delivered is equivalent to the 

content delivered by the original water heater at a lower temperature. DOE added the cost of 

tempering and check valves if the new setpoint is greater than 140 °F. For households choosing 

option 3, DOE estimated that door jamb removal/replacement would require 3.7 labor hours. 

The efficiency levels that include electronic ignition, power vent, and condensing design 

have an increased installation cost relative to the baseline. For installation of water heaters with 

electronic ignition in new homes, DOE used the cost of the electrical outlet installation from the 

installation model developed for residential furnaces.3 This approach assumes that power is 

readily available and that hookup into the existing wiring box is already covered by the regular 

installation cost. For replacement installations, DOE added an additional cost for installing an 

electrical outlet for houses that do not have electricity close to the water heater. DOE estimated 

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that all households that do not have a gas furnace or boiler would require an electrical outlet and 

calculated the additional cost of the outlet using RS Means. DOE estimated that grounding for an 

electrical outlet is needed for houses built before 1960. 

The incremental installation cost for the power vent design includes the cost of an 

electricity outlet and venting. The venting systems are configured to exit a side wall of a 

dwelling and are composed of plastic vent pipes. For replacement installations, DOE accounted 

for the installation of a new vent system and, for the commonly vented water heaters, for 

disconnecting the old unit from the existing common system. 

The installation cost for the condensing design is the same as for the power vent design 

with the additional cost of the condensate disposal. This approach reflects the currently available 

condensing water heater design that utilizes a single pipe power vent design. The condensate 

disposal includes the cost of the condensate neutralizer filter, which is required by some codes. 

The condensate disposal includes the cost of the condensate neutralizer filter, which is required 

by some codes. DOE applied a condensate filter cost of $86 to 25 percent of the installations. 

The average and average incremental installation costs for gas-fired storage water heaters 

at each considered energy efficiency level are shown in Table 8.2.9. 

Table 8.2.9	 Average and Incremental Installation Cost for Gas-Fired Storage Water 

Heaters 

Energy 

Efficiency 

Level 

EF Description Installation Options Average 

Installation 

Cost 

(2008$)* 

Incremental 

Installation 

Cost 

(2008$) 

0 0.59 Standing Pilot, 1” ins baseline, drain pan $576 -

1 0.62 Standing Pilot, 1.5” ins baseline, drain pan $595 $19 

2 0.63 Standing Pilot, 2” Ins 

baseline, large drain pan, 

tempering valves, space 

constraints 

$621 $46 

3 0.64 

Electronic ignition, 1” 

ins, power vent 

baseline, drain pan, 

electricity, plastic vent 

$779 $203 

Electronic ignition, 1.5” 

baseline, drain pan, 

electricity, plastic vent, 

tempering valves, space 

$793 $217 

4 0.65 ins, power vent constraints 

Electronic ignition, 2” 

baseline, large drain pan, 

electricity, plastic vent, 

tempering valves, space 

$808 $233 

5 0.67 ins, power vent constraints 

6 0.80 

Condensing, 2” ins, 

power vent 

baseline, large drain pan, 

electricity, plastic vent, 

condensate filter, 

tempering valves, space 

constraints 

$828 $252 

*Average installation cost represents the weighted average cost for replacement and new construction applications. 

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Electric Storage Water Heaters. DOE developed installation costs for electric storage 

4	 2, 5, 6 water heaters using data from RS Means and other sources. See appendix 8-A, Installation 

Cost Determination, for details of the costs. 

For new construction water heaters, the basic installation cost includes adding water 

piping in addition to putting in place and setting up the new water heater. The basic installation 

cost for replacement cases includes the costs for putting in place and setting up the new water 

heater disconnecting, removing the old water heater, and removal/disposal fees and permit fees. 

DOE added an additional cost for installation of 66-, 75-, and 119-gallon electric water heaters, 

which takes into account one additional hour of labor for the extra time to install this larger 

equipment. Similarly, for installations in an attic, DOE added one additional labor hour. 

Some houses may require a larger drain pan when a wider (due to increased insulation 

thickness) water heater is installed. For electric storage water heaters, DOE used the same 

approach as for gas-fired storage water heaters, and applied an incremental drain pan cost for all 

water heaters with 2-inch and greater insulation. 

A certain fraction of households could incur additional installation costs when installing a 

water heater with a larger size due to increased insulation. Based on the consultant report, DOE 

estimated that 30–50 percent of all replacement installations would require significant 

modifications in order to install an electric storage water heater with 3 inch insulation. DOE 

estimated that such constraints would apply to half of the above fraction (i.e., 15–25 percent) for 

electric storage water heater installations with 2 inch insulation. 

In situations where significant modifications would be required, there are a number of 

possibilities that might be applicable to the individual installation. These include: 

1.	 Installing a water heater with different dimensions (e.g., installing a taller unit) 

2.	 Installing a water heater with a smaller rated volume and adding a tempering valve to 

compensate for lower hot water delivery 

3.	 Modifying the existing water heater installation location (including
 

removing/replacing door jambs)
 

4.	 Relocating water heater 

5.	 Switching to an electric or gas instantaneous water heater or gas storage water heater 

After considering that some houses could choose a different dimension water heater 

(option 1), DOE assumed that major modifications would be necessary for 40 percent of 

replacement installations with 3 inch or greater insulation and for 20 percent of replacement 

installations with 2 inch or greater insulation. For these cases, the most common solutions would 

be installing a water heater with a smaller rated volume and adding a tempering valve (option 2) 

or removing/replacing door jambs (option 3). The other installation possibilities have a much 

lower probability of occurring. DOE estimated that half of the cases where major modifications 

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would be necessary would choose option 2 (tempering valves)a and half would select option 3 

(door jamb removal/replacement). DOE estimated that option 3 would be selected only in cases 

where the water heater is installed in an indoor closet or attic (e.g., not in a garage or basement). 

For option 2, DOE increased the water heater setpoint to compensate for the lower 

storage volume. DOE adjusted the setpoint of the smaller water heater upward so that the total 

energy content of the water that can be delivered is equivalent to the content delivered by the 

original water heater at a lower temperature. DOE added the cost of a tempering valve if the new 

setpoint is greater than 140 °F. For households choosing option 3, DOE estimated that door jamb 

removal/replacement would require 3.7 labor hours. 

For heat pump water heater installation, DOE applied several additional costs, including 

one additional hour of labor for the extra time required to install this product. Since many 

electric storage water heaters are installed near a drain, DOE estimates that only one quarter of 

all heat pump water heater installations would require addition of a condensate pump and longer 

water line to the drain (at an average cost of $154). DOE also applied an additional drain pan 

cost to account for the larger insulation for this product. 

DOE assumed that the space constraints encountered when installing heat pump water 

heaters would be similar to those encountered when installing electric storage water heaters with 

3 inch insulation. Therefore, as explained above, DOE assumed that 40 percent of replacement 

installations would be affected, and that half of the cases would choose a smaller water heater 

with tempering valves and half would choose door jambs removal/replacement. In addition, heat 

pump water heaters are required to be in well-ventilated spaces, so the households that encounter 

door jamb modifications also encounter the additional cost of adding a louvered door. DOE 

estimated that the cost for removing the door jambs and installing a louvered door averages 

$362. The 20 percent of households encountering this cost are half of all indoor or attic 

replacement installations. 

Heat pump water heaters can increase heating loads when installed in a conditioned space 

during the heating season. DOE estimated that about 35 percent of households in the subsample 

for electric water heaters would experience significant indoor cooling due to operation of the 

heat pump water heater in the heating months. For some of these households, DOE added costs 

to install a venting system to exhaust and supply air. (For new construction, the unit is assumed 

to be installed in a space where this is not an issue.) DOE estimated that those households for 

which the heat pump cooling load is greater than 10 percent of the household heating load would 

have a venting system installed. Using calculations specific to each household in the subsample 

for electric water heaters, DOE estimated that 40 percent of households with cooling effect 

would incur this cost, which averages $460.b 

a Tempering valve was applied to water heaters with 2.5 in. or greater insulation to match what was used in the 2001 

water heater rulemaking. 

b For the remainder of homes experiencing a cooling effect, the extra cost for space heating is accounted for in the 

energy use calculations, as described in chapter 7. 

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The average and average incremental installation costs for electric storage water heaters 

at each considered energy efficiency level are shown in Table 8.2.10. 

Table 8.2.10	 Average and Incremental Installation Cost for Electric Storage Water 

Heaters 

Energy 

Efficiency 

Level 

EF Description Installation Options Average 

Installation 

Cost (2008$)* 

Incremental 

Installation 

Cost (2008$) 

0 0.90 1.5 in (Baseline) Baseline $222 -

1 0.91 2 in 

baseline, large drain pan, 

tempering valves, space 

constraints 

$241 $19 

2 0.92 2.25 in 

baseline, large drain pan, 

tempering valves, space 

constraints 

$251 $29 

3 0.93 2.5 in 

baseline, large drain pan, 

tempering valves, 

tempering valves, space 

constraints 

$259 $36 

4 0.94 3 in 

baseline, large drain pan, 

tempering valves, space 

constraints 

$282 $60 

5 0.95 3 to 4 in 

baseline, large drain pan, 

tempering valves, space 

constraints 

$282 $60 

6 2.00 

Heat Pump Water Heater 

Integrated Design 

baseline, large drain pan, 

space constraints 

$446 $223 

7 2.20 

Heat Pump Water Heater 

Integrated Design 

baseline, large drain pan, 

space constraints 

$450 $227 

*Average installation cost represents the weighted average cost for replacement and new construction applications. 

Oil-Fired Storage Water Heaters. DOE developed installation cost data for the baseline 

4 oil-fired storage water heater using information from the 2001 water heater rulemaking. An oilfired storage water heater installation requires hot and cold water connections, oil supply, 

electrical power connection, a vent connection and an oil-burner that consists of oil pump, 

blower, ignition device, and controls. 

Residential oil-fired storage water heaters are typically sold and installed by local 

residential heating oil dealers. For the 2001 rulemaking, DOE gathered installation cost 

information from seven dealers in the northeastern United States. These data show a very wide 

range of installation costs, which vary significantly in different areas depending on the size of the 

markets. The typical installation cost for a new oil-fired storage water heater ranges from $462 to 

$981 (2007$), with an average cost of $625. 

DOE assumed that a new burner is already installed and therefore there is no additional 

installation cost for 2 and 2.5 inch oil-fired storage water heaters. DOE also assumed that there is 

no additional venting cost associated with efficiency levels 6 and 7. 

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Table 8.2.11 presents the average and average incremental installation cost for oil-fired 

storage water heaters at the considered energy efficiency levels. 

Table 8.2.11	 Average and Incremental Installation Cost for Oil-Fired Storage Water 

Heaters 

Energy 

Efficiency 

Level 

EF Description Installation 

Options 

Average 

Installation 

Cost (2008$)* 

Incremental 

Installation 

Cost (2008$) 

0 0.53 

Electronic Ignition, 1” ins 

(fiberglass) 

Baseline $648 -­

1 0.54 

Electronic Ignition, 1.5” ins 

(fiberglass) 

Baseline $648 0 

2 0.56 

Electronic Ignition, 2” ins 

(fiberglass) 

Baseline $648 0 

3 0.58 

Electronic Ignition, 2.5” ins 

(fiberglass) 

Baseline $648 0 

4 0.60 Electronic Ignition, 2” ins (foam) Baseline $648 0 

5 0.62 Electronic Ignition, 2.5” ins (foam) Baseline $648 0 

6 0.66 

Electronic Ignition, 1” ins 

(fiberglass), enhanced flue baffle 

Baseline $648 0 

7 0.68 

Electronic Ignition, 1” ins (foam), 

enhanced flue baffle 

Baseline $648 0 

*Average installation cost represents the weighted average cost for replacement and new construction applications. 

Gas-Fired Instantaneous Water Heaters. DOE developed installation cost data for gas3, 4, 5, 6, 7	 3, 4, fired instantaneous water heaters using RS Means, DOE technical support documents,

5, 6, 7	 2 and a consultant report prepared for this analysis. All replacements are assumed to be 

conversions from gas-fired storage water heaters; this reflects the small number of instantaneous 

water heaters installed during the 1980s and 1990s and the long lifetime of these products. It can 

be difficult to use instantaneous water heaters as a replacement technology in some existing 

8 homes, since physically accommodating their installation can add considerable expense. DOE’s 

derivation of installation cost does not consider extreme installation configurations, as DOE 

believes that households with physical limitations will not choose to convert from a gas-fired 

storage water heater. 

For new construction applications, the installation cost includes adding a gas line branch 

(since in most cases it is not possible to connect the water heater to the existing house gas line, 

which is too small), installing a vent system, adding water piping, and putting in place and 

setting up the new water heater. For replacement cases, the installation cost includes the labor for 

disconnecting and removing the old water heater, removal/disposal fee, permit fee, and putting in 

place and setting up the new instantaneous water heater, including the venting system. The 

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analysis for both new construction and replacements assumes Category I vertical venting using 

non-stainless steel vents. See appendix 8-A, Installation Cost Determination, for details. 

For installations of gas-fired instantaneous water heaters with electronic ignition, DOE 

included an additional cost to account for labor and wiring for installing an electrical outlet for 

houses that do not have electricity close to the water heater. DOE used the same approach it 

applied to gas-fired storage water heaters. 

The incremental installation cost for the power vent design includes the cost of the 

electricity outlet and the required venting. The cost reflects Category III horizontal venting using 

stainless steel vents. For replacement installations, DOE estimated that half of the installations 

will use vertical vents and half will use horizontal vents. For replacement installations, DOE 

accounted for the installation of a new vent system, and for commonly-vented water heaters, for 

disconnecting from the existing common system. 

The installation cost for the condensing design also includes plastic vents and the cost of 

the condensate disposal. 

The average and average incremental installation costs for gas-fired instantaneous water 

heaters at the considered efficiency levels are shown in Table 8.2.12. 

Table 8.2.12	 Average and Incremental Installation Cost for Gas-Fired Instantaneous 

Water Heaters 

Energy 

Efficiency 

Level 

EF Description Installation 

Options 

Average 

Installation 

Cost (2008$)* 

Incremental 

Installation 

Cost (2008$) 

0 0.62 Standing pilot (Baseline) 

Natural Draft 

Venting 

$967 -­

1 0.69 Standing Pilot, Improved HX 

Natural Draft 

Venting 

$967 $0 

2 0.78 Electronic Ignition, Improved HX 

Forced Draft 

Venting, Electricity 

$1,179 $212 

3 0.80 

Electronic Ignition, Induced Draft 

(Power Vent) 

Forced Draft 

Venting, Electricity 

$1,179 $212 

4 0.82 

Electronic Ignition, Improved 

HX, Induced Draft (Power Vent) 

Forced Draft 

Venting, Electricity 

$1,179 $212 

5 0.84 

Electronic Ignition, Improved 

HX, Induced Draft (Power Vent) 

Forced Draft 

Venting, Electricity 

$1,179 $212 

6 0.85 

Electronic Ignition, Improved 

HX, Induced Draft (Power Vent) 

Forced Draft 

Venting, Electricity 

$1,179 $212 

7 0.92 Condensing 

Condensing 

(plastic venting), 

Electricity 

$877 -$90 

8 0.95 Condensing 

Condensing 

(plastic venting), 

Electricity 

$877 -$90 

*Average installation cost represents the weighted average cost for replacement and new construction installations. 

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8.2.2.5 Total Installed Price
 

The total installed price is the sum of the consumer product price and the installation cost. 

Refer back to section 8.2 to see the equations that DOE used to calculate the total installed price 

for baseline and standard-level products. Table 8.2.13 through Table 8.2.16 present the average 

consumer product price, installation costs, and total installed price for each product class at the 

baseline level and each considered energy efficiency level. 

Table 8.2.13	 Gas-Fired Storage Water Heaters: Average Consumer Product Price, 

Installation Cost, and Total Installed Price 

Energy 

Efficiency Level 

Energy 

Factor 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed Price 

(2008$) 

Baseline 0.59 $451 $576 $1,027 

1 0.62 $468 $595 $1,063 

2 0.63 $506 $621 $1,127 

3 0.64 $670 $779 $1,449 

4 0.65 $686 $793 $1,479 

5 0.67 $730 $808 $1,538 

6 0.80 $935 $828 $1,763 

Table 8.2.14 Electric Storage Water Heaters: Average Consumer Product Price, 

Installation Cost, and Total Installed Price 

Energy 

Efficiency Level 

Energy 

Factor 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed Price 

(2008$) 

Baseline 0.90 $296 $222 $519 

1 0.91 $305 $241 $546 

2 0.92 $315 $251 $566 

3 0.93 $319 $259 $578 

4 0.94 $338 $282 $620 

5 0.95 $369 $282 $651 

6 2.00 $989 $446 $1,435 

7 2.20 $1,068 $450 $1,517 

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Table 8.2.15 Oil-Fired Storage Water Heaters: Average Consumer Product Price, 

Installation Cost, and Total Installed Price 

Energy 

Efficiency Level 

Energy 

Factor 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed Price 

(2008$) 

Baseline 0.53 $1,271 $648 $1,918 

1 0.54 $1,284 $648 $1,931 

2 0.56 $1,295 $648 $1,942 

3 0.58 $1,318 $648 $1,965 

4 0.60 $1,307 $648 $1,954 

5 0.62 $1,332 $648 $1,980 

6 0.66 $1,443 $648 $2,090 

7 0.68 $1,451 $648 $2,098 

Table 8.2.16 Gas-Fired Instantaneous Water Heaters: Average Consumer Product Price, 

Installation Cost, and Total Installed Price 

Energy 

Efficiency Level 

Energy 

Factor 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed Price 

(2008$) 

Baseline 0.62 $684 $967 $1,651 

1 0.69 $712 $967 $1,679 

2 0.78 $770 $1,179 $1,950 

3 0.80 $986 $1,179 $2,166 

4 0.82 $1,060 $1,179 $2,239 

5 0.84 $1,625 $1,179 $2,805 

6 0.85 $1,714 $1,179 $2,893 

7 0.92 $1,864 $877 $2,742 

8 0.95 $2,062 $877 $2,939 

8.2.3 Direct Heating Equipment 

8.2.3.1 Baseline Manufacturer Cost 

Table 8.2.17 shows the baseline manufacturer cost for each of the direct heating 

equipment product classes, estimated as described in chapter 5, Engineering Analysis. 

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Table 8.2.17 Direct Heating Equipment: Baseline Manufacturer Costs
 

Product Class 

Baseline 

AFUE 

Manufacturer 

Cost 

(2008$) 

Gas Wall Fan DHE 74% 351 

Gas Wall Gravity DHE 64% 207 

Gas Floor DHE 57% 357 

Gas Room DHE 64% 226 

Gas Hearth DHE 64% 356 

8.2.3.2 Standard-Level Manufacturer Cost Increases 

DOE developed manufacturer cost increases associated with increases in energy 

efficiency levels of direct heating equipment as described in chapter 5, Engineering Analysis. 

Table 8.2.18 through Table 8.2.22 summarize the standard-level manufacturer cost increases for 

each direct heating equipment product class. 

Table 8.2.18 Gas Wall Fan DHE: Standard-Level Manufacturer Cost Increases 

Energy 

Efficiency Level AFUE 

Manufacturer Cost 

Increase (2008$) 

1 75% $25 

2 76% $36 

3 77% $55 

4 80% $114 

Table 8.2.19 Gas Wall Gravity DHE: Standard-Level Manufacturer Cost Increases
 

Energy 

Efficiency Level AFUE 

Manufacturer Cost 

Increase (2008$) 

1 66% $26 

2 68% $43 

3 71% $78 

4 72% $147 

Table 8.2.20 Gas Floor DHE: Standard-Level Manufacturer Cost Increases
 

Energy 

Efficiency Level AFUE 

Manufacturer Cost 

Increase (2008$) 

1 58% $24 

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Table 8.2.21 Gas Room DHE: Standard-Level Manufacturer Cost Increases
 

Energy 

Efficiency Level AFUE 

Manufacturer Cost 

Increase (2008$) 

1 65% $15 

2 66% $31 

3 67% $37 

4 68% $46 

5 83% $180 

Table 8.2.22 Gas Hearth DHE: Standard-Level Manufacturer Cost Increases
 

Energy 

Efficiency Level AFUE 

Manufacturer Cost 

Increase (2008$) 

1 67% -$2 

2 72% $172 

3 93% $527 

8.2.3.3 Overall Markup 

The overall markup is the value determined by multiplying the manufacturer and other 

markups and the sales tax together to arrive at a single markup value. In turn, DOE multiplied 

the overall markup by the baseline or standard-level manufacturer cost to arrive at the price paid 

by the consumer for the product. DOE estimated a baseline markup (i.e., a markup used to 

convert the baseline manufacturer cost into a consumer price) and an incremental markup (i.e., a 

markup used to convert an incremental manufacturer cost due to a standard level into an 

incremental consumer price). Table 8.2.23 shows the overall markups for direct heating 

equipment. Refer to chapter 6, Markups to Determine Product Price, for details. 

Table 8.2.23 Direct Heating Equipment: Overall Markups 

Product Class Replacement Applications New Home Applications 

Baseline Incremental Baseline Incremental 

Gas Wall Fan 2.60 2.14 3.15 2.49 

Gas Wall Gravity 2.60 2.14 3.15 2.49 

Gas Floor 2.60 2.14 3.15 2.49 

Gas Room 2.59 2.13 3.15 2.49 

Gas Hearth 2.58 2.12 3.15 2.49 

8.2.3.4 Installation Cost 

DOE derived baseline installation costs for direct heating equipment using the approach 

from the 1993 TSD.9 For gas wall gravity DHE, gas room DHE, and gas hearth DHE, DOE 

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included an additional installation cost for the design options that require electricity. DOE 

included this cost for the replacement market only, since in new construction the wiring is 

considered part of the general electrical work. DOE determined the cost of an additional 

electrical outlet to be $180 for gas wall gravity DHE, $151 for gas room DHE, and $164 for gas 

hearth DHE. DOE estimated that grounding for an electrical outlet is needed for houses build 

before 1960 at a cost of $36 for gas wall gravity DHE, $31 for gas room DHE, and $33 for gas 

10 hearth DHE.

In addition, DOE included an additional installation cost of $67 for the design options 

requiring stainless steel venting (e.g. 83 percent gas room DHE efficiency level). For gas hearth 

DHE condensing efficiency levels, DOE did not include any cost adder. DOE considered that on 

average the additional installation cost in replacement applications is offset by the decreased 

installation costs for new owners and new construction. 

Table 8.2.24 through Table 8.2.28 summarize the average installation costs for each 

product class. Average installation cost represents the weighted average cost for replacement and 

new construction applications. 

Table 8.2.24 Average Installation Cost for Gas Wall Fan DHE 

Energy 

Efficiency 

Level 

AFUE Description Installation 

Options 

Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 74% Standing Pilot Baseline $824 -

1 75% Electronic ignition, twospeed blower Baseline $824 $0 

2 76% Electronic ignition, 

improved HX Baseline $824 $0 

3 77% Electronic ignition, twospeed blower, improved HX Baseline $824 $0 

4 80% Electronic ignition, induced 

draft Baseline $824 $0 

Table 8.2.25 Average Installation Cost for Gas Wall Gravity DHE
 

Energy 

Efficiency 

Level 

AFUE Description Installation 

Options 

Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 64% Standing pilot Baseline $824 -

1 66% Standing pilot, improved HX Baseline $824 $0 

2 68% Standing pilot, improved HX Baseline $824 $0 

3 71% Standing pilot, improved HX Baseline $824 $0 

4 72% Electronic ignition Baseline, 

Electricity $963 $140 

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Table 8.2.26 Average Installation Cost for Gas Floor DHE
 

Energy 

Efficiency 

Level 

AFUE Description Installation 

Options 

Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 57% Standing pilot Baseline $1,161 -­

1 58% Standing pilot, improved HX Baseline $1,161 $0.00 

Table 8.2.27 Average Installation Cost for Gas Room DHE
 

Energy 

Efficiency 

Level 

AFUE Description Installation 

Options 

Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 64% Standing Pilot Baseline $634 

1 65% Standing pilot, improved HX Baseline $634 $0 

2 66% Standing pilot, improved HX Baseline $634 $0 

3 67% Standing pilot, improved HX Baseline $634 $0 

4 68% Standing pilot, improved HX Baseline $634 $0 

5 83% 

Electronic Ignition, Dual 

Shaft Blower, Electronic 

Controls 

Baseline, 

Electricity, 

Stainless Steel 

Vent 

$822 $188 

Table 8.2.28 Average Installation Cost for Gas Hearth DHE
 

Energy 

Efficiency 

Level 

AFUE Description Installation Options Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 64% Standing Pilot Baseline $634 

1 67% Electronic Ignition Baseline, Electricity $700 $66 

2 72% 

Electronic Ignition, 

Fan Assisted 

(Blower) 

Baseline, Electricity $700 $66 

3 93% Condensing Baseline, Electricity, 

Condensing $700 $66 

8.2.3.5 Total Installed Price 

The total installed price is the sum of the consumer product price and the installation cost. 

Refer back to section 8.2 to see the equations DOE used to calculate the total installed price for 

baseline and standard-level products. Table 8.2.29 through Table 8.2.33 present the consumer 

product prices, installation costs, and total installed price for the five direct heating equipment 

product classes. 

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Table 8.2.29 Gas Wall Fan DHE: Average Consumer Product Price, Installation Cost, and 

Total Installed Price 

Energy 

Efficiency Level AFUE 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed 

Price (2008$) 

Baseline 74% $931 $824 $1,755 

1 75% $984 $824 $1,808 

2 76% $1,008 $824 $1,832 

3 77% $1,051 $824 $1,875 

4 80% $1,177 $824 $2,001 

Table 8.2.30 Gas Wall Gravity DHE: Average Consumer Product Price, Installation Cost, 

and Total Installed Price 

Energy 

Efficiency Level AFUE 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed 

Price (2008$) 

Baseline 64% $549 $824 $1,372 

1 66% $606 $824 $1,430 

2 68% $643 $824 $1,466 

3 71% $719 $824 $1,542 

4 72% $868 $963 $1,831 

Table 8.2.31 Gas Floor DHE: Average Consumer Product Price, Installation Cost, and 

Total Installed Price 

Energy 

Efficiency Level AFUE 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed 

Price (2008$) 

Baseline 57% $946 $1,161 $2,108 

1 58% $998 $1,161 $2,159 

Table 8.2.32 Gas Room DHE: Average Consumer Product Price, Installation Cost, and 

Total Installed Price 

Energy 

Efficiency Level AFUE 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed 

Price (2008$) 

Baseline 64% $597 $634 $1,231 

1 65% $629 $634 $1,263 

2 66% $663 $634 $1,297 

3 67% $676 $634 $1,311 

4 68% $697 $634 $1,331 

5 83% $987 $822 $1,809 

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Table 8.2.33 Gas Hearth DHE: Average Consumer Product Price, Installation Cost, and 

Total Installed Price 

Energy 

Efficiency Level AFUE 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed 

Price (2008$) 

Baseline 64% $1,028 $634 $1,662 

1 67% $1,023 $700 $1,723 

2 72% $1,424 $700 $2,124 

3 93% $2,243 $700 $2,943 

8.2.4 Gas-Fired Pool Heaters 

8.2.4.1 Baseline Manufacturer Cost 

DOE developed the baseline manufacturer costs for gas-fired pool heaters shown in Table 

8.2.34 as described in chapter 5, Engineering Analysis. 

Table 8.2.34 Gas-Fired Pool Heaters: Baseline Manufacturer Cost 

Energy Efficiency Level Manufacturer Cost (2008$) 

78% - Standing Pilot $529 

78% - Electronic Ignition $548 

8.2.4.2 Standard-Level Manufacturer Cost Increases 

DOE developed manufacturing cost increases associated with increases in product energy 

efficiency levels for gas-fired pool heaters (Table 8.2.35) as described in chapter 5, Engineering 

Analysis. 

Table 8.2.35 Gas-Fired Pool Heaters: Standard-Level Manufacturer Cost Increases 

Energy Efficiency Manufacturer Cost Increase (2008$) 

Level Thermal Efficiency Standing Pilot Electronic Ignition 

1 79% $11 $10 

2 81% $24 $24 

3 82% $55 $55 

4 83% $145 $126 

5 84% $206 $187 

6 86% $451 $432 

7 90% $938 $919 

8 95% $1,074 $1,055 

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8.2.4.3 Overall Markup 

The overall markup is the value determined by multiplying the manufacturer and other 

markups and the sales tax together to arrive at a single markup value. Table 8.2.36 shows the 

overall baseline and incremental markups for gas-fired pool heaters. Refer to chapter 6, Markups 

to Determine Product Price, for details. 

Table 8.2.36 Gas-Fired Pool Heaters: Overall Markups 

Replacement Applications New Home Applications 

Baseline Incremental Baseline Incremental 

Overall 2.07 1.70 2.30 1.82 

8.2.4.4 Installation Cost 

DOE derived installation cost data for the baseline pool heater using RS Means7 and 

information in a consultant report.11 The baseline unit represents a pool heater with a pilot light. 

For new construction applications, the installation cost includes adding a gas line from the gas 

meter to the pool heater (in most cases it is not possible to connect the pool heater to the existing 

house gas line as it is too small). It also includes adding PVC lines from the pool pump to the 

inlet and outlet water headers of the pool heater (thermal isolation - non - PVC pipe is usually 

part of this line to prevent pool pump overheating). The installation cost also includes setting, 

connection and start-up fees. For the replacement applications, the installation cost includes 

disconnecting and removing the old pool heater, putting in place the new unit and reconnecting 

the gas and PVC lines. 

For units with electronic ignition, DOE included an additional installation cost to account 

for adding an electrical line (115V) and a separate junction box. These are needed since the pool 

heater requires lower amperage than the pool pump. 

The incremental installation cost for the condensing design includes the cost of the 

condensate drain piping that goes from the pool heater to a P-trap devicec located at the sewer 

11 line entrance.

Table 8.2.37 shows the average and incremental installation cost for pool heaters at each 

energy efficiency level. Average installation cost represents the weighted average cost for 

replacement and new constructions. 

c A “P-trap” is required by many city codes. It helps to isolate the condensate from back-flowing into the pool water 

and prevents the sewer gas from back-flowing. 

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Table 8.2.37 Average and Incremental Installation Cost for Pool Heaters
 

Energy 

Efficiency 

Level 

EF Description Installation Options Average 

Installation 

Cost (2008$) 

Incremental 

Installation 

Cost (2008$) 

0 78% Baseline -pilot or elect. Ignition Baseline $1,289 

1 79% Improved HX Baseline $1,289 $0 

2 81% Improved HX Baseline $1,289 $0 

3 82% Improved HX Baseline $1,289 $0 

4 83% Power Venting Baseline, Electrical 

Outlet 

$1,314 $24 

5 84% Power Venting, improved HX Baseline, Electrical 

Outlet 

$1,314 $24 

6 86% Sealed Combustion, improved 

HX 

Baseline, Electrical 

Outlet, Condensing 

Adder 

$1,414 $124 

7 90% Sealed combustion, condensing 

Baseline, Electrical 

Outlet, Condensing 

Adder 

$1,414 $124 

8 95% Sealed combustion, 

condensing, improved HX 

Baseline, Electrical 

Outlet, Condensing 

Adder 

$1,414 $124 

8.2.4.5 Total Installed Price 

The total installed price is the sum of the consumer product price and the installation cost. 

Refer back to section 8.2 to see the equations that DOE used to calculate the total installed price 

for baseline and standard-level products. Table 8.2.38 presents the average consumer product 

price, installation costs, and total installed price for pool heaters at each considered energy 

efficiency level. 

Table 8.2.38	 Gas-Fired Pool Heaters: Average Consumer Product Price, Installation Cost, 

and Total Installed Price 

Energy Efficiency 

Level 

Thermal 

Efficiency 

Product Price 

(2008$) 

Installation Cost 

(2008$) 

Total Installed Price 

(2008$) 

Baseline 78% $1,168 $1,289 $2,457 

1 79% $1,186 $1,289 $2,475 

2 81% $1,210 $1,289 $2,499 

3 82% $1,264 $1,289 $2,553 

4 83% $1,396 $1,314 $2,710 

5 84% $1,503 $1,314 $2,816 

6 86% $1,930 $1,414 $3,343 

7 90% $2,779 $1,414 $4,193 

8 95% $3,016 $1,414 $4,430 

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8.3 OPERATING COST INPUTS - OVERVIEW
 

DOE defines the operating cost by the following equation: 

OC = EC + RC + MC 

Where: 

EC = Energy expenditure associated with operating the product,
 

RC = Repair cost associated with component failure, and
 

MC= Service cost for maintaining product operation.
 

Table 8.3.1 shows the inputs for determining the annual operating costs and their 

discounted value over the product lifetime. 

Table 8.3.1 Inputs for Operating Cost 

Annual Energy Consumption 

Energy Prices and Price Trends 

Repair and Maintenance Costs 

Product Lifetime 

Discount Rate 

Effective Date of Standard 

The annual energy consumption is the site energy use associated with operating the 

product. The annual energy consumption varies with the product energy efficiency. Energy 

prices are the prices paid by consumers for electricity, gas, or oil. Multiplying the annual energy 

consumption by the appropriate energy prices yields the annual energy cost. DOE used energy 

price trends to forecast energy prices into the future and, along with the product lifetime and 

discount rate, to establish the lifetime energy costs. Repair costs are associated with repairing or 

replacing components that have failed. Maintenance costs are associated with maintaining the 

operation of the product. The product lifetime is the age at which the product is retired from 

service. The discount rate is the rate at which DOE discounted future expenditures to establish 

their present value. 

DOE calculated the operating cost for baseline products based on the following equation: 

OC = EC + RC + MC BASE BASE BASE BASE 

= AEC × PRICE + RC + MC BASE ENERGY BASE BASE 

Where:
 

OCBASE = Baseline operating cost,
 

ECBASE = Energy expenditure associated with operating the baseline product,
 

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RCBASE = Repair cost associated with component failure for the baseline 

product,
 

MCBASE = Cost for maintaining baseline product operation,
 

AECBASE = Annual energy consumption for baseline product,
 

PRICEENERGY = Energy price.
 

DOE calculated the operating cost for standard-level products based on the following 

equation: 

OC = EC + MC STD STD + RC STD STD 

= AEC × PRICE + RC + MC STD ENERGY STD STD 

= (AEC ΔAEC STD )× PRICE BASE ENERGY 

+ (RC + ΔRC ) + (MC + ΔMC ) BASE STD BASE STD 

Where: 

OCSTD = Standard-level operating cost, 

ECSTD = Energy expenditure associated with operating standard-level 

products, 

RCSTD = Repair cost associated with component failure for standard-level 

products, 

MCSTD = Service cost for maintaining standard-level product operation, 

AECSTD = Annual energy consumption for standard-level products, 

PRICEENERGY = Energy price, 

ΔAECSTD = Change in annual energy consumption caused by standard-level 

products, 

ΔRCSTD = Change in repair cost caused by standard-level products, and 

ΔMCSTD = Change in maintenance cost caused by standard-level products. 

As the above equations show, DOE multiplied the annual energy consumption by the 

energy price to derive the energy component of operating costs. For direct heating equipment 

and pool heaters, DOE used annual average energy prices. For water heaters, DOE estimated 

energy consumption on a monthly basis, and therefore also generated monthly average energy 

prices. 

The following sections provide information about each of the above input variables that 

DOE used to calculate the operating costs for heating products. 

8.4 ANNUAL ENERGY CONSUMPTION 

As described in chapter 7, Energy Use Characterization, and the beginning of this chapter 

in section 8.1.1, DOE developed a sample of individual households that use each of the 

considered products. By developing household samples, DOE was able to account for the 

variability in both energy use and energy price associated with each household. Refer back to 

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chapter 7 to review the parameters that define the variability of annual energy consumption for 

the heating products as well as the annual energy consumption results. 

8.4.1 Accounting for the Rebound Effect 

A rebound effect (also called a take-back effect or offsetting behavior) refers to increased 

energy consumption resulting from actions that increase energy efficiency and reduce consumer 

prices. The logic behind the rebound effect is that more energy efficient products lower the 

marginal cost of the end-use service relative to lower energy efficient products. Because the 

marginal cost of the service is reduced, a service demand response occurs. For example, a home 

insulation program that reduces heat losses by 50 percent does not usually result in a full 50 

percent reduction in energy consumption, because residents of insulated homes find that they can 

afford to keep their homes warmer. As a result, they reinvest a portion of potential energy 

savings on comfort. 

To determine the impact of the rebound effect on energy efficiency improvement for the 

heating products considered in this rulemaking, DOE searched the literature on the rebound 

effect, and also considered how the National Energy Modeling System (NEMS), which is used 

for developing EIA's Annual Energy Outlook (AEO), incorporates a rebound effect. 

For water heaters, DOE found that NEMS does not incorporate a rebound factor. DOE 

reviewed a summary of studies regarding the rebound effect that concluded “technical 

improvements for residential hot water heating will be between 60 and 90 percent effective in 

reducing energy consumption for this service" (implying a rebound effect of 10 to 40 percent).12 

Another study examining the rebound effect cites a best-guess value for “other services” (which 

include water heating) of less than 20 percent, but with a low degree of confidence.13 Balancing 

the available information, DOE chose to use a rebound effect of 10 percent for all water heaters. 

For direct heating equipment, DOE considered a summary of studies regarding the 

rebound effect in relation to space heating products.12 Based on five studies chosen for their 

robust methodology, the summary concluded that, for a 100 percent increase in fuel efficiency, 

values of "take-back" or rebound for space heating are between 10 and 30 percent of the energy 

consumption savings. It noted that NEMS incorporates a rebound effect for space heating that 

results in a 0.15 percent increase in energy consumption for a one-percent increase in energy 

efficiency. In keeping with the approach in NEMS, DOE chose to apply a rebound effect of 15 

percent in its analysis of direct heating equipment. 

For pool heaters, DOE found no mention of a rebound effect in the literature. However, 

since economic theory suggests that there should be some take-back associated with a reduction 

in the marginal cost of service, DOE included a rebound effect of 10 percent for pool heaters in 

its analysis. 

The take-back in energy consumption associated with the rebound effect provides 

consumers with increased value (e.g., a warmer indoor environment). The net impact on 

consumers is thus the sum of the change in the cost of owning the heating products (i.e., lifecycle cost) and the increased value for the warmer indoor environment. DOE believes that the 

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increased value to consumers added by the rebound effect is similar in value to the foregone 

energy savings. Therefore, DOE estimated that this value is equivalent to the monetary value of 

the energy savings that would have occurred without the rebound effect. Thus, the economic 

impacts on consumers with or without the rebound effect, as measured in the LCC analysis, are 

the same. 

8.5 ENERGY PRICES AND ENERGY PRICE TRENDS 

Using data from EIA, DOE calculated average annual energy prices for each of 13 

geographic areas: the nine U.S. Census Divisions and four large States (California, Florida, New 

York, and Texas) treated separately. For Census Divisions containing one of these large States, 

DOE calculated the regional average values leaving out data for the large State—for example, 

the Pacific division average does not include California, and the West South Central division 

does not include Texas. 

To be able to determine monthly prices for use in the water heater analysis, DOE 

developed monthly energy price factors for each fuel. For a detailed discussion of the 

development of monthly energy price factors, see appendix 8-E, Monthly Energy Price Factor 

Calculations. 

As noted earlier, DOE used RECS to develop a sample of individual households that use 

each of the three products. By developing household samples, DOE was able to perform the LCC 

and PBP calculations for each household to account for the regional variability in energy prices. 

8.5.1 Residential Natural Gas Prices 

DOE collected 2007 natural gas prices from EIA’s Natural Gas Navigator, which 

includes natural gas prices for residential, commercial, and industrial consumers by State.14 The 

EIA’s Natural Gas Navigator provides both annual and monthly natural gas prices. DOE 

weighted the residential natural gas prices for each State by the number of natural gas consumers 

in each State14 and transformed the values from units of $/tcf to $/MMBtu. Finally, DOE 

aggregated the prices by 13 geographic areas: the nine US Census Divisions and four large 

states. 

Table 8.5.1 displays the 2007 annual natural gas prices, as well as an average of the 

monthly prices for each region. EIA develops the annual average natural gas prices by weighting 

the monthly prices by monthly natural gas consumption. The annual prices tend to be lower than 

the monthly average prices because the majority of natural gas consumption occurs in the winter 

months when natural gas prices are lower. DOE used the monthly average prices for the water 

heater analysis because water heater energy use varies little throughout the year, and the monthly 

average price weights winter prices the same as summer prices, therefore making it a more 

accurate reflection of natural gas prices paid by consumers. DOE used the annual weighted 

prices for direct heating equipment and pool heaters because these products’ energy use varies 

throughout the year. 

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Table 8.5.1 Average Residential Natural Gas Prices in 2007
 

Geographic Area 

Annual Average 

(2008$/MMBtu) 

Monthly Average 

(2008$/MMBtu) 

CD 1 - New England 17.0 17.7 

CD 2 - Middle Atlantic (excludes NY) 14.7 16.1 

CD 3 - East North Central 11.8 13.2 

CD 4 - West North Central 12.2 14.3 

CD 5 - South Atlantic (excludes FL) 16.3 18.9 

CD 6 - East South Central 14.4 16.1 

CD 7 - West South Central (excludes TX) 13.2 15.2 

CD 8 - Mountain 12.0 13.1 

CD 9 - Pacific (excludes CA) 14.3 15.0 

CD 10 - New York 15.7 16.9 

CD 11 - California 11.7 11.9 

CD 12 – Texas 12.1 14.1 

CD 13 – Florida 20.8 21.6 

CD 14 – United States 13.3 14.6 

8.5.2 Residential Electricity Prices 

DOE derived 2007 annual electricity prices from EIA Form 861 data and 2007 monthly 

electricity prices from EIA Form 826. The EIA Form 861 data are published annually and 

include annual electricity sales, revenues from electricity sales, and number of consumers, for the 

residential, commercial, and industrial sectors at the utility level.15 DOE calculated annual 

regional electricity prices by weighting each utility’s average price by the number of electricity 

consumers in each utility’s service area. The EIA Form 826 data include monthly electricity 

sales, revenue from electricity sales, and electricity prices for each State.16 DOE calculated 

monthly regional electricity prices by weighting the simple average of monthly electricity prices 

by the number of residential electricity consumers in each State.17 Finally, DOE aggregated the 

prices by the nine U.S. Census Divisions and four large states. 

Table 8.5.2 displays the 2007 annual and monthly electricity prices. As it did for natural 

gas, DOE used the monthly average electricity prices for the water heater analysis, but used 

annual weighted prices for direct heating equipment and pool heaters. 

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Table 8.5.2 Average Residential Electricity Prices in 2007
 

Geographic Area 

Annual Average 

(2008$/kWh) 

Monthly Average 

(2008$/kWh) 

CD 1 - New England 0.173 0.172 

CD 2 - Middle Atlantic (excludes NY) 0.128 0.126 

CD 3 - East North Central 0.103 0.102 

CD 4 - West North Central 0.088 0.087 

CD 5 - South Atlantic (excludes FL) 0.099 0.098 

CD 6 - East South Central 0.087 0.087 

CD 7 - West South Central (excludes TX) 0.093 0.093 

CD 8 - Mountain 0.097 0.096 

CD 9 - Pacific (excludes CA) 0.099 0.097 

CD 10 - New York 0.186 0.177 

CD 11 - California 0.150 0.149 

CD 12 - Texas 0.128 0.128 

CD 13 - Florida 0.117 0.116 

CD 14 - United States 0.117 0.116 

8.5.3 Residential Oil Prices 

DOE collected 2007 oil prices from EIA’s Petroleum Navigator,18 which includes 

monthly oil prices for residential, commercial, industrial, and transportation consumers by 

Petroleum Administration for Defense Districts (PADD). The first four PADD follow the U.S. 

Census Divisions. However, Arizona is not included in the PADD for the Pacific Region and 

New Mexico is excluded altogether. In addition, data was not provided for the East South 

Central region, West South Central region, Florida, Texas, and California, so national averages 

were used for these regions. DOE weighted the average residential oil prices for each PADD by 

19 the amount of oil consumed in each PADD. DOE then transformed the data in units of 

cents/gallon to $/MMBtu. Finally, the prices were aggregated and averaged by nine geographic 

areas (Table 8.5.3). The EIA oil price data do not include taxes, so DOE determined the average 

tax rate for the four Census Regions (Northeast, South, Midwest, and West)20 and applied it to 

the annual average data. 

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Table 8.5.3 Average Monthly Residential Oil Prices in 2007
 

Geographic Area 

Monthly Average 

(2008$/MMBtu) 

CD 1 - New England 20.13 

CD 2 - Middle Atlantic (excludes NY) 19.95 

CD 3 - East North Central 19.92 

CD 4 - West North Central 20.53 

CD 5 - South Atlantic (includes FL) 19.76 

CD 6 - East South Central* 20.21 

CD 7 - West South Central * 20.21 

CD 8 - Mountain 20.45 

CD 9 - Pacific (includes CA) 20.88 

CD 10 - New York 20.90 

CD 11 – California** 20.88 

CD 12 - Texas* 20.21 

CD 13 - Florida*** 19.76 

CD 14 - United States 20.21 

*National average 

**Pacific Division average 

***South Atlantic Division average 

8.5.4 Residential LPG Prices 

DOE collected 2006 average LPG prices from EIA’s 2006 State Energy Consumption, 

Price, and Expenditures Estimates (SEDS).21 SEDS includes annual LPG prices for residential, 

commercial, industrial, and transportation consumers by State. DOE weighted the average 

residential LPG prices for each State by the amount of LPG consumed by each State. Finally, 

DOE aggregated and averaged the prices by 13 geographic areas (Table 8.5.4). To present the 

LPG price data for the same year as the other fuels (2007), DOE scaled the 2006 prices using 

data in AEO2009 (see section 8.5.5). 

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Table 8.5.4 Average Residential LPG Prices in 2007
 

Geographic Area 

Annual Average 

(2008$/MMBtu) 

CD 1 - New England 29.84 

CD 2 - Middle Atlantic (excludes NY) 29.74 

CD 3 - East North Central 23.11 

CD 4 - West North Central 20.22 

CD 5 - South Atlantic (excludes FL) 27.84 

CD 6 - East South Central 27.06 

CD 7 - West South Central (excludes TX) 24.87 

CD 8 – Mountain 24.67 

CD 9 - Pacific (excludes CA) 28.85 

CD 10 - New York 29.28 

CD 11 – California 30.77 

CD 12 – Texas 27.82 

CD 13 – Florida 32.82 

CD 14 - United States 25.90 

8.5.5 Energy Price Trends 

22 DOE used price forecasts from EIA’s Annual Energy Outlook 2009 (AEO2009) to 

estimate the trends in natural gas, electricity, oil and LPG prices. To project future prices, DOE 

multiplied the average prices described in the preceding section by the forecast of annual average 

price changes in AEO2009. To estimate the trend after 2030, DOE used the average rate of 

change during 2020–2030 for electricity and the average rate of change during 2015–2030 for 

natural gas, LPG and oil. 

DOE calculated LCC and PBP using three separate projections from AEO2009: 

Reference, Low Economic Growth, and High Economic Growth. The updated version of 

AEO2009, which reflects the provisions of the American Recovery and Reinvestment Act that 

were enacted in February 2009, only forecasts the reference case, so DOE calculated the high 

and low growth price trends based on the scenarios presented in an earlier release of AEO2009.

23 

These three cases reflect the uncertainty of economic growth in the forecast period. The high and 

low growth cases show the projected effects of alternative growth assumptions on energy prices. 

Figure 8.5.1 through Figure 8.5.4 show the residential electricity, natural gas, oil and LPG price 

trends, respectively. For the LCC results presented in this chapter, DOE used only the energy 

price forecasts from the AEO2009 Reference case. 

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10.0 

11.0 

12.0 

13.0 

14.0 

15.0 

16.0 

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 

Year 

2008$/MMBtu 

High Growth 

Reference 

Low Growth 

Figure 8.5.1 Residential Natural Gas Price Trends in AEO2009
 

9.5 

10.0 

10.5 

11.0 

11.5 

12.0 

12.5 

13.0 

2006 

2008 

2010 

2012 

2014 

2016 

2018 

2020 

2022 

2024 

2026 

2028 

2030 

Year 

cents(2008$)/kWh 

High Growth 

Reference 

Low Growth 

Figure 8.5.2 Residential Electricity Price Trends in AEO2009
 

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12.0 

14.0 

16.0 

18.0 

20.0 

22.0 

24.0 

26.0 

28.0 

30.0 

32.0 

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 

Year 

2008$/MMBtu

High Growth 

Reference 

Low Growth 

Figure 8.5.3 Residential Oil Price Trends in AEO2009
 

20.0 

22.0 

24.0 

26.0 

28.0 

30.0 

32.0 

34.0 

36.0 

38.0 

40.0 

2006 

2008 

2010 

2012 

2014 

2016 

2018 

2020 

2022 

2024 

2026 

2028 

2030 

Year 

2008$/MMBtu

High Growth 

Reference 

Low Growth 

Figure 8.5.4 Residential LPG Price Trends in AEO2009 

8.6 MAINTENANCE AND REPAIR COSTS 

The maintenance cost is the cost of regular scheduled product maintenance. The repair 

cost is the cost to repair the product when it fails. These costs cover all labor and material costs 

associated with the maintenance or repair. The determination of the repair cost involves 

determining the cost and the service life of the components that are likely to fail. The component 

lifetime is presented as a distribution. This section provides a summary of DOE’s estimation of 

maintenance and repair costs for water heaters, direct heating equipment, and pool heaters; 

appendix 8-B provides the details and results. 

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8.6.1 Water Heaters 

8.6.1.1 Gas-Fired Storage Water Heaters 

Manufacturers recommend that storage water heaters be drained and flushed annually to 

minimize deposition of sediment, maintain operating efficiency, and prolong product life. The 

available evidence indicates that this practice is done in 10 percent of households, and mostly in 

locations with hard water.24 DOE assumed that, of this 10 percent, only 25 percent of consumers 

hire a contractor to perform the maintenance work. For this maintenance cost, the labor hours 

24 5, 7 were determined from a consultant’s report, and the labor cost is based on RS Means. The 

total cost of $109 per year is applicable to 2.5 percent of installations. 

In addition, all new gas-fired storage water heaters are equipped with Flammable Vapor 

Ignition Resistant (FVIR), which manufacturers recommend be maintained annually. The 

available evidence indicates that 25 percent of households are likely to hire a contractor to 

perform this work.25 For this maintenance cost, the labor hours are determined from a 

24 5, 7 consultant’s repor, and the labor cost is based on RS Means. The total cost of $146 per year 

is applicable to 25 percent of installations. 

The repair cost reflects the cost for a service call when the product fails. In some cases, if 

a gas-fired water heater fails, residential consumers tend to replace the unit rather than having it 

repaired. However, there are four design options considered for the gas-fired water heater 

analysis that may encounter repair cost during the lifetime of the water heater: pilot ignition, 

electronic ignition, power vent, and condensing design. The efficiency levels that include power 

vent or condensing design encounter both power vent as well as electronic ignition repair costs. 

DOE estimated that the repair cost for the pilot ignition, a design option associated with 

the baseline water heater, is $246, and that such replacement occurs at most once, on average in 

9, 26 the tenth year of the product lifetime. DOE estimated that the repair cost for the electronic 

ignition (hot surface type) is $296, and that such replacement occurs at most once, on average in 

9, 26 the fifteenth year of the product lifetime. The repair cost of the power vent represents the cost 

of replacing the fan. DOE estimated that the average fan repair cost is $400, and that the power 

vent fan fails on average in the fifteenth year of operation.26 

8.6.1.2 Electric Storage Water Heaters 

Manufacturers recommend that electric storage water heaters be drained and flushed 

annually to minimize deposition of sediment, maintain operating efficiency, and prolong product 

life. The available evidence indicates that this practice is done in 10 percent of households, 

mostly in locations with hard water.24 DOE assumed that of this 10 percent fraction only 25 

percent hire a contractor to due the maintenance work. For this maintenance cost, labor hours 

and costs are based on RS Means5, 7 and are equal to $105 per year for 2.5 percent of the 

installations. 

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For a heat pump water heater, maintenance includes annual cleaning of the air filter and a 

preventative maintenance cost to check the evaporator and refrigeration system. The literature 

27, 28 recommends that professional help is not needed for this maintenance. However, DOE 

accounted for instances in which such help may be needed by adding a preventative maintenance 

cost for certain heat pump water heater installations to check the evaporator and refrigeration 

system. For locations where the heat pump water heater might be more exposed to the outdoor 

environment, such as garages and crawlspaces, DOE applied a 5-year preventative maintenance 

29, 30 cost based on Australian heat pump water heater outdoor installations. DOE estimated that 

27 percent of these exposed installations would require this maintenance, based on a survey 

conducted for central air conditioners.31 For this maintenance cost, labor hours and costs are 

based on RS Means5, 7 and are equal to about $81. For heat pump water heaters that are located 

indoors or in basements, the maintenance requirements are considered to be the same as other 

similar indoor appliances such as refrigerators and room heaters, which don’t have any additional 

9, 32 maintenance costs.

The repair cost for electric water heaters includes the cost of replacing the heating 

element. Based on available information, DOE estimated that the heating element fails on 

24 average in the fifth year of operationd for 20 percent of the households. The estimated average 

heating element repair cost is $105. 

The repair cost for the heat pump water heater represents the cost of replacing the 

32, 33 compressor and the evaporator fan where necessary. Based on available information, DOE 

used a lifetime distribution for the compressor and evaporator fan with an average of 19 years. 

Although the average lifetime used for heat pump water heaters is 13 years, the lifetime 

distribution for the compressor and evaporator fan overlaps with the lifetime distribution for heat 

pump water heaters. Thus, some units are expected to receive this repair cost. The estimated 

average compressor repair cost is $290 and the estimated average fan repair cost is $126. 

8.6.1.3 Oil-Fired Storage Water Heaters 

Oil-fired storage water heaters and burners are cleaned and maintained regularly. 

Maintenance is most frequently performed under annual maintenance contracts, which typically 

includes repair of failed components. These contracts are very common in the northeast, where 

most of the oil-fired heating products are located. 

DOE estimated the average cost of separate maintenance/repair contracts only for water 

heaters as $153 per year. This mean value comes from a collection of annual maintenance 

contract prices, which were gathered from web sites that represent oil-fired product suppliers in 

the eastern U.S. This cost varies, depending on the presence of other oil-fired products in the 

residence (see appendix 8-B). Costs may go down if multiple oil-fired appliances in a household 

are on the same contract. The maintenance contracts apply to all efficiency levels. 

d DOE used a triangular distribution with a mean of 5 years and a maximum of 9 and minimum of 1 year. 

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In addition to the items included in the maintenance contract, DOE determined that the 

manufacturers recommended draining and flushing, which is not included in the maintenance 

agreements. Therefore, this cost was added similarly as it was to electric and gas-fired storage 

water heaters. 

8.6.1.4 Gas-Fired Instantaneous Water Heaters 

Gas-fired instantaneous water heaters may incur maintenance costs for addressing the 

fouling of the heat exchanger from hard water, periodic sensor inspections and filter changes. All 

manufacturers recommend that these water heaters be de-limed annually to minimize deposition 

of sediment, maintain operating efficiency and prolong product life. DOE’s analysis used an 

average maintenance cost of $109 per year for all energy efficiency levels of instantaneous water 

8, 34 heaters. DOE assumed that the de-liming maintenance would apply to 75 percent of 

households (those without soft water or water softener) and that of these households, 75 percent 

would call a contractor to complete the work. Therefore, 56 percent of all households would 

encounter this maintenance cost. 

The repair cost for gas-fired instantaneous water heaters is similar to the cost for gas-fired 

storage water heaters. Design options that may encounter repair cost during the lifetime of the 

water heater include pilot ignition, electronic ignition, and inducer fan. DOE estimated that the 

average repair cost for the pilot ignition, a design option associated with the baseline design, is 

$167, and that such replacement occurs at most once, on average in the tenth year of the product 

9, 35 lifetime. It estimated that the average repair cost for the electronic ignition is $210, and that 

9, 35 such replacement occurs at most once, on average in the tenth year of the product lifetime.

The repair cost for the inducer fan represents the cost of replacing the fan. The estimated average 

fan repair cost is $303, with fan failure occurring on average in the fifteenth year of operation.35 

The efficiency levels that include inducer fan or condensing design encounter inducer fan 

as well as electronic ignition repair cost. 

8.6.2 Direct Heating Equipment 

For direct heating equipment, DOE used the maintenance cost data from the 2007 

furnace/boiler rulemaking.3 The costs were derived from a field survey sponsored by several gas 

utilities that repair and service furnace and boiler equipment. The survey estimated the average 

cost per service call as the average total service charge (parts, labor, and other charges), which 

DOE estimated to be $223. DOE used a maintenance frequency of once every five years for all 

direct heating equipment products. 

DOE determined the repair cost using an approach that reflects the cost and the service 

life of the components that are likely to fail. Designs considered for the direct heating equipment 

analysis that may incur repair costs during the lifetime of the product include pilot ignition, 

electronic ignition, circulating blower, and induced draft fan. DOE estimated that the repair cost 

for the pilot ignition is $170 for gas wall fan DHE and gas wall gravity DHE, $142 for gas room 

DHE and $154 for gas hearth DHE, and that such replacement occurs at most once, on average 

9, 35 in the tenth year of the product lifetime. It estimated that the repair cost for the electronic 

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ignition equals $213 for gas wall fan DHE and gas wall gravity DHE, $178 for gas room DHE 

and $194 for gas hearth DHE, and that such replacement occurs at most once, on average in the 

9, 35 tenth year of the product lifetime. The repair cost of the air circulation blower represents the 

cost of replacing the fan. DOE estimated the average fan repair cost to be $312 for gas wall fan 

DHE and gas wall gravity DHE, $262 for gas room DHE and $284 for gas hearth DHE, with 

power vent fan failure on average in the 12th year of operation.35 DOE estimated the average 

repair cost of the induced draft fan to be $290, with fan failure on average in the fifteenth year of 

operation.35 

The average repair cost of the condensing design includes electronic ignition, circulation 

blower and induced draft components. 

8.6.3 Gas-Fired Pool Heaters 

Pool owners typically do not regularly maintain pool heaters. However, when a pool 

heater stops working, maintenance work includes checking controls, cleaning burners, cleaning 

the heat exchanger, starting the heater and measuring water temperature rise. This amounts to an 

average cost of $316. For power vent and condensing design options, maintenance also includes 

measuring combustion differential pressure, which yields an average maintenance cost of $457. 

DOE estimated that, on average, both of these maintenance costs occur in the fifth year of the 

pool heater lifetime.36 

Design options considered that may encounter repair cost during the lifetime of the pool 

heater include pilot ignition, electronic ignition, and power vent. DOE estimated that the average 

repair cost for the pilot ignition is $145, and that replacement occurs at most once, on average in 

9, 35 the tenth year of the product lifetime. It estimated that the repair cost for the electronic 

ignition is $213, and that replacement occurs at most once, on average in the fifteenth year of the 

9, 35 product lifetime. DOE estimated that the repair cost of the power vent includes replacing the 

fan at an average cost of $368, with estimated product failure on average in the fifteenth year of 

operation.35 The efficiency levels that include power vent or condensing design encounter both 

power vent as well as electronic ignition repair cost. 

8.7 PRODUCT LIFETIME 

The product lifetime is the age at which the product is retired from service. This section 

details how DOE developed lifetime distributions for each of the three heating products. 

8.7.1 Water Heaters 

Table 8.7.1 presents the sources found by DOE to provide estimates of the lifetime of 

water heaters. The available information suggests that LPG storage water heaters have a lifetime 

equivalent to that of gas-fired storage water heaters. 

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Table 8.7.1 Water Heaters: Product Lifetime Estimates and Sources
 

Typical Lifetime or Range (years) Source 

Gas-Fired Storage 

13 U.S. Department of Energy37 

11 to 13 National Association of Home Builders38 

13 American Council for an Energy Efficient Economy 39 

Average =11; Low = 7; High = 15 Appliance magazine33 

5 to 13 Residential Water Heaters Final Rule 200140 

13 DEER41 

Electric Storage 

13 U.S. Department of Energy37 

14 National Association of Home Builders38 

13 American Council for an Energy Efficient Economy39 

Average = 13; Low = 4; High = 20 Appliance magazine33 

6 to 21 Residential Water Heaters Final Rule 200140 

15 DEER41 

Oil-Fired Storage 

8 American Council for an Energy Efficient Economy39 

5 to 13 Residential Water Heaters Final Rule 200140 

Gas-Fired Instantaneous 

20 DEER41 

20 Low Energy Systems42 

20+ National Association of Home Builders43 

15 to 20 Builders Websource44 

In its pre-NOPR analysis for gas-fired and electric storage water heaters, DOE chose 

averages based on the values in the middle of the range for the identified sources: 12 years for 

gas and 14 years for electric. In the NOPR analysis, DOE found that applying the above values 

to historic shipments (as discussed in chapter 9) resulted in estimates of the stock of gas-fired 

and electric storage water heaters that did not match the data on the stock reported in the 2007 

American Housing Survey (AHS), which covers all housing units in the United States.45 The 

estimated stock is too low for gas-fired storage water heaters and too high for electric storage 

water heaters. The implication is that the lifetimes used (average of 12 years for gas and 14 years 

for electric) are incorrect. Using an average lifetime of 13 years for both gas-fired and electric 

storage water heaters results in stock estimates for 2007 that are close to the stock numbers from 

the AHS. Therefore, DOE used an average lifetime of 13 years for both gas-fired and electric 

storage water heaters in its NOPR analysis, along with a minimum value of 6 years and a 

maximum value of 20 years. 

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For oil-fired storage water heaters, DOE utilized the approach from the 2001 water heater 

rulemaking4 and assumed that these water heaters have the same distribution of lifetimes as gasfired storage water heaters. 

For gas-fired instantaneous water heaters, local variables such as water quality, humidity 

and maintenance schedules all influence the predicted lifetime. DOE used 20 years as the 

average lifetime based on the estimates in Table 8.7.1, with a range from 8 to 30 years. 

Table 8.7.2 shows the average, minimum and maximum lifetime values used in the LCC 

analysis. For each product class, DOE characterized the product lifetime using a Weibull 

probability distribution that ranged from the minimum to maximum lifetime estimates shown in 

the table. 

DOE evaluated whether electric heat pump water heaters have a different lifetime from 

the baseline products. An accelerated durability test of heat pump water heaters conducted by 

Oak Ridge National Laboratory suggests that these units have similar lifetime as standard 

electric resistance storage water heaters.46 Therefore, DOE used the same lifetime distribution 

for all efficiency levels considered for this product class, as well as for the other product classes.e 

Table 8.7.2	 Water Heaters: Average, Minimum, and Maximum Product Lifetimes Used 

in LCC Analysis 

Product Class 

Minimum 

years 

Average 

years 

Maximum 

years 

Gas-Fired/LPG Storage 6 13 20 

Electric Storage 6 13 20 

Oil-Fired Storage 6 13 20 

Gas-Fired Instantaneous 8 20 30 

8.7.2 Direct Heating Equipment 

Limited information is available on the lifetime of direct heating equipment. Therefore, 

DOE used the average, minimum and maximum lifetime values from the 1993 TSD, p.1-45,9 

as 

shown in Table 8.7.3. DOE characterized the product lifetime using a Weibull probability 

distribution that ranged from the minimum to maximum lifetime.47 

e Some advanced water heater designs may apply design options that effectively increase or decrease the lifetime of 

the product. For example, gas-fired water heater designs that utilize electricity may incorporate electrical anodes that 

may prolong the lifetime of the water heater heat exchanger. However, DOE had insufficient information to 

incorporate a different lifetime for water heaters at different efficiency levels. 

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Table 8.7.3 Direct Heating Equipment: Average, Minimum, and Maximum Product 

Lifetimes Used in LCC Analysis 

Product Class Category Minimum 

years 

Average 

years 

Maximum 

years 

Gas Wall Fan DHE 10 15 20 

Gas Wall Gravity DHE 10 15 20 

Gas Floor DHE 10 15 20 

Gas Room DHE 10 15 20 

Gas Hearth DHE 10 15 20 

8.7.3 Gas-Fired Pool Heaters 

Table 8.7.4 presents the sources found by DOE to provide estimates of the lifetime of 

gas-fired pool heaters. The available information suggests that LPG-fired pool heaters have a 

lifetime equivalent to that of gas-fired pool heaters. 

Table 8.7.4	 Gas-Fired Pool Heaters: Product Lifetime Estimates and Sources 

Typical Lifetime 

(years) 

Source 

5 U.S. Department of Energy: Energy Efficiency and Renewable 

Energy48 

5 Illinois Propane Gas Association49 

6 Pool Quest50 

10* The Spa Specialist Inc.51 

* Refers to spa heaters. 

Based on the information collected, results from the shipments model and a consultant 

report, 52 DOE used eight years for average lifetime of gas-fired pool heaters, and estimated 

minimum and maximum lifetime values of three and 20 years (Table 8.7.5). The consultant 

report indicated that many factors impact pool heater lifetimes, resulting in a large range of 

lifetime values depending on location. Factors including wind, humidity, pressure, frequency of 

use and temperature all affect the lifetime of a pool heater. DOE characterized the product 

lifetime using a Weibull probability distribution that ranged from the minimum to maximum 

lifetime estimates. 

Table 8.7.5	 Gas-Fired Pool Heaters: Average, Minimum, and Maximum Product 

Lifetimes Used in LCC Analysis 

Minimum Average Maximum 

(years) (years) (years) 

3 8 20 

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8.8 DISCOUNT RATES
 

The discount rate is the rate at which DOE discounted future expenditures to establish 

their present value. DOE derived the discount rates for the LCC and PBP analyses from 

estimates of the finance cost of purchasing the considered products. Following financial theory, 

the finance cost of raising funds to purchase appliances can be interpreted as: (1) the financial 

cost of any debt incurred to purchase products, or (2) the opportunity cost of any equity used to 

purchase products. The financing of purchasing products installed in new homes is different 

than the financing of appliances bought directly by consumers (e.g., for replacement). Thus, 

DOE used different discount rates for these applications. 

8.8.1 Discount Rate for Replacement Products Purchased by Consumers 

Households use a variety of methods to finance purchase of major appliances. In 

principle, it is possible to estimate the interest rates on the actual financing vehicles used to 

purchase appliances. However, the shares of different financing vehicles in total appliance 

purchases are unknown. 

DOE’s approach involves identifying all possible debt or asset classes that might be used 

to purchase the considered appliances, including household assets that might be affected 

indirectly.f DOE did not include debt from primary mortgages and equity of assets considered 

non-liquid (such as retirement accounts), since these would likely not be affected by appliance 

purchases. DOE estimated the average shares of the various debt and equity classes in the 

average U.S. household equity and debt portfolios using data from the Federal Reserve Board’s 

Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007.53 Table 

8.8.1 shows the average shares of each considered class. DOE used the mean share of each class 

across the seven surveys as a basis for estimating the weight of the classes in the direct or 

indirect financing of the considered appliances. 

f An indirect effect would arise if a household sold some assets in order to pay off a loan or credit card debt that 

might have been used to finance the actual appliance purchase. 

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Table 8.8.1 Average Shares of Considered Household Debt and Equity Classes
 

1989 

SCF 

1992 

SCF 

1995 

SCF 

1998 

SCF 

2001 

SCF 

2004 

SCF 

2007 

SCF 

Mean 

(%) 

Home equity loans 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7 

Credit cards 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1 

Other installment loans 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6 

Other residential loans 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3 

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5 

Checking accounts 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4 

Savings & money market 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3 

Certificate of deposit (CD) 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6 

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4 

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5 

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0 

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6 

Total 100 100 100 100 100 100 100 100 

DOE estimated interest or return rates associated with each type of equity and debt. The 

data source for the interest rates for loans, credit cards, and lines of credit is the Federal Reserve 

Board’s SCF in 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Table 8.8.2 shows the average 

nominal rates in each year, and the inflation rates used to calculate real rates. For home equity 

loans, DOE calculated effective interest rates in a similar manner as for mortgage rates, since 

interest on such loans is tax deductible. Table 8.8.3 shows the average effective real rates in each 

year and the mean rate across the years. Since the interest rates for each debt carried by 

households in these years were established over a range of time, DOE believes they are 

representative of rates that may apply when amended standards take effect. 

Table 8.8.2 Average Nominal Interest Rates for Household Debt Classes (percent) 

1989 

SCF 

1992 

SCF 

1995 

SCF 

1998 

SCF 

2001 

SCF 

2004 

SCF 

2007 

SCF 

Mean 

(%) 

Home equity loans 11.5 9.6 9.6 9.8 8.7 5.7 7.9% 9.0% 

Credit cards* - - 14.2 14.5 14.2 11.7 12.6% 13.4% 

Other installment loans 9.0 7.8 9.3 7.8 8.7 7.4 10.4% 8.6% 

Other residential loans 8.8 7.6 7.7 7.7 7.5 6.0 6.3% 7.4% 

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 12.7% 12.6% 

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85 

* No interest rate data available for credit cards in 1989 or 1992. 

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Table 8.8.3 Average Real Effective Interest Rates for Household Debt Classes (percent)
 

1989 

SCF 

1992 

SCF 

1995 

SCF 

1998 

SCF 

2001 

SCF 

2004 

SCF 

2007 

SCF) 

Mean 

(%) 

Home equity loans 3.8 4.3 4.4 5.8 3.8 1.9 3.3 3.9 

Credit cards* - - 11.0 12.7 11.1 9.1 9.7 10.7 

Other installment loans 4.9 5.8 7.0 6.6 6.1 5.4 5.8 6.0 

Other residential loans 4.0 4.7 4.8 6.0 4.6 3.3 3.4 4.4 

Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 9.7 8.8 

* No interest rate data available for credit cards in 1989 or 1992. 

DOE developed a probability distribution of interest rates for each debt class based on the 

SCF data. To account for variation among households, DOE sampled a rate for each household 

from the distributions for the appropriate debt class. Appendix 8-D presents the probability 

distributions for each class that DOE used in the LCC and PBP analyses. 

Similar rate data are not available from the SCF for the asset classes, so DOE derived 

data for these classes from national-level historical data. The interest rates associated with 

54 55 56 certificates of deposit (CDs), savings bonds, and bonds (AAA corporate bonds) are from 

Federal Reserve Board time-series data covering 1977–2008. DOE assumed rates on checking 

accounts to be zero. Rates on savings and money market accounts are from Cost of Savings 

Index data covering 1984–2008.57 The rates for stocks are the annual returns on the Standard and 

Poor’s (S&P) 500 in 1977–2008.58 The mutual fund rates are a weighted average of the stock 

rates (two-thirds weight) and the bond rates (one-third weight) in each year of the 1977–2008 

period. DOE adjusted the nominal rates to real rates using the annual inflation rate in each year. 

The average nominal and real interest rates for the classes of assets are shown in Table 8.8.4. 

Since the interest rates for each debt carried by households in these years were established over a 

range of time, DOE believes they are representative of rates that may apply when amended 

standards take effect. 

Table 8.8.4 Average Nominal and Real Interest Rates for Household Equity Classes 

Average Nominal Rate (%) Average Real Rate (%) 

Checking accounts - 0.0 

Savings and money market 5.4 2.2 

CDs 6.6 2.3 

Savings bonds 7.7 3.3 

Bonds 8.5 4.1 

Stocks 11.6 7.1 

Mutual funds 10.3 5.8 

Table 8.8.5 summarizes the mean real effective rates of each type of equity or debt. DOE 

determined the average share of each debt and asset using SCF data for 1989, 1992, 1995, 1998, 

2001, 2004, and 2007. Each year of SCF data provides the debt and asset shares for U.S. 

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households. DOE averaged the debt and asset shares over the six years of survey data to arrive 

at the shares shown in Table 8.8.5 below. The average rate across all types of household debt and 

equity, weighted by the shares of each class, is 4.8 percent. 

Table 8.8.5	 Shares and Interest or Return Rates Used for Household Debt and Equity 

Classes 

Average Share of 

Household Debt plus 

Equity (%)* 

Mean Effective Real Rate 

(%)** 

Home equity loans 3.7 3.9 

Credit cards 2.1 10.7 

Other installment loans 1.6 6.0 

Other residential loans 5.3 4.4 

Other line of credit 0.5 8.8 

Checking accounts 4.4 0.0 

Savings and money market accounts 15.3 2.2 

CDs 8.6 2.3 

Savings bonds 1.4 3.3 

Bonds 9.5 4.1 

Stocks 29.0 7.1 

Mutual funds 18.6 5.8 

Total/Weighted-average discount rate 100 4.8 

* Not including primary mortgage or retirement accounts.
 

** Adjusted for inflation and, for home equity loans, loan interest tax deduction.
 

DOE developed a normal probability distribution of interest rates for each asset type by 

using the mean value and standard deviation from the distribution. To account for variation 

among households, DOE sampled a rate for each household from the distributions for the 

appropriate asset class. Appendix 8-D presents the probability distributions for each class that 

DOE used in the LCC and PBP analyses. 

8.8.2 Discount Rates for Appliances Installed in New Housing 

Appliances installed in new homes (“new-housing appliances”) are purchased as part of 

the home, which is almost always financed with a mortgage loan. DOE estimated discount rates 

for new-housing appliances using the effective real (after-inflation) mortgage rate for 

homebuyers. This rate corresponds to the interest rate after deduction of mortgage interest for 

income tax purposes and after adjusting for inflation (using the Fisher formula).g For example, a 

six-percent nominal mortgage rate has an effective nominal rate of 4.5 percent for a household at 

the 25-percent marginal tax rate. When adjusted for inflation of two percent, the effective real 

rate becomes 2.45 percent. 

g Fisher formula is given by: Real Interest Rate = ((1 + Nominal Interest Rate) / (1 + Inflation Rate)) – 1. 

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The data source DOE used for mortgage interest rates is the SCF in 1989, 1992, 1995, 

1998, 2001, 2004, and 2007.53 Using the appropriate SCF data for each year, DOE adjusted the 

mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and 

inflation (see Table 8.8.6). In cases where the effective interest rate is equal to or below the 

inflation rate (resulting in a negative real interest rate), DOE set the real effective interest rate to 

zero. 

The average nominal mortgage rate carried by homeowners in these six years was 7.9 

percent. Since the mortgage rates carried by households in these years were established over a 

range of time, DOE believes they are representative of rates that may apply when amended 

standards take effect. After adjusting for inflation and interest tax deduction, effective real 

interest rates on mortgages across the six surveys averaged 3.0 percent. 

Table 8.8.6 Data Used to Calculate Real Effective Mortgage Rates 

Year 

Average 

Nominal Interest 

Rate (%) 

Inflation Rate59 

(%) 

Marginal Tax Rate 

Applicable to Mortgage 

Interest60 (%) 

Average Real 

Effective Interest 

Rate (%) 

1989 9.7 4.82 24.3 2.4 

1992 9.1 3.01 23.4 3.8 

1995 8.2 2.83 24.1 3.3 

1998 7.9 1.56 23.9 4.4 

2001 7.6 2.85 22.9 2.9 

2004 6.2 2.66 20.6 2.2 

2007 6.3 2.85 21.6 2.1 

Average 7.9 3.0 

To account for variation among households, DOE sampled a rate for each household in 

the RECS samples from a distribution of mortgage rates. DOE developed the distribution based 

on the SCF data. Appendix 8-D presents the probability distribution that DOE used in the LCC 

and PBP analyses. 

8.9 EFFECTIVE DATE OF ENERGY CONSERVATION STANDARDS 

The effective date is the future date when a new energy conservation standard becomes 

operative. A final rule for the products being considered for this energy conservation standards 

rulemaking is scheduled for completion in 2010. Therefore, the effective date of any new energy 

conservation standards for these products will be three years after the final rule is published for 

gas-fired pool heaters and direct heating equipment (2013), and five years after the final rule is 

published for water heaters (2015). DOE calculated the LCC for all consumers as if they each 

would purchase a new product in the year the energy conservation standard takes effect. 

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8.10 PRODUCT ENERGY EFFICIENCY IN THE BASE CASE 

For each product class, DOE analyzed a number of energy efficiency levels above the 

baseline energy efficiency level. However, some consumers already purchase products with 

energy efficiencies greater than the baseline levels. Thus, to accurately estimate the percentage 

of consumers that would be affected by a standard at a particular efficiency level, DOE took into 

account the distribution of product energy efficiencies that consumers are expected to purchase 

under the base case (i.e., the case without new energy conservation standards). In other words, 

rather than analyzing the impacts of a particular standard level assuming that all consumers will 

purchase products at the baseline level, DOE conducted the analysis by taking into account the 

breadth of product energy efficiencies that consumers are expected to purchase under the base 

case. 

As noted in section 8.1.1, DOE’s approach for conducting the LCC analysis for heating 

products relied on developing samples of households that use each of the products, and using a 

Monte Carlo simulation technique to perform the LCC calculations on the households in the 

sample. DOE assigned each household in the sample a unique product energy efficiency taken 

from the estimated base-case distribution of product energy efficiencies in the effective year. The 

energy efficiency distributions used for each heating product are presented below. 

8.10.1 Water Heaters 

To estimate the market shares of different water heater energy efficiency levels in the 

base case, DOE began with fractions based on data for recent years provided by AHRI.61 Since 

these data did not cover all of the energy efficiency levels under consideration, DOE 

supplemented them with data on the number of water heater models at different energy 

efficiency levels, as given in the March 2008 AHRI directory for gas-fired storage water heaters, 

electric storage water heaters, and oil-fired storage water heaters62 and the June 2008 FTC 

Directory and March 2008 CEC directory 63 for gas-fired instantaneous water heaters. 

DOE then took account of the estimated market impact of the new ENERGY STAR 

criteria for water heaters.64 Effective in 2010, the minimum efficiency for the ENERGY STAR 

designation will be 0.67 EF for non-condensing gas-fired storage water heaters, 0.80 EF for 

condensing gas-fired storage water heaters, and 2.0 EF for heat pump water heaters. For both 

condensing gas-fired storage water heaters and heat pump water heaters, DOE considered the 

market penetration goals set by the ENERGY STAR program. DOE estimated that heat pump 

water heaters would reach half of the program goal by 2015, or 5 percent market share. DOE 

estimated that condensing gas-fired storage water heaters would achieve only about one-fifth of 

the goal (1 percent), as there are currently no residential models available in the market. 

For gas-fired instantaneous water heaters, DOE estimated that the base-case market 

shares in 2015 would be equivalent to current shares. In the case of this product, the majority of 

the market (approximately 85 percent of shipments) is already at the ENERGY STAR level, so 

there is limited room for the shares of ENERGY STAR products to increase in the near future. 

For oil-fired storage water heaters, DOE also estimated that the market shares in 2015 would be 

equivalent to current shares, as there has been little change in the past decade. 

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Table 8.10.1 presents the market shares of the energy efficiency levels in the base case 

for the representative rated volume for the four water heater product classes that DOE 

considered. These market shares represent the products that households would purchase in the 

year 2015 in the absence of new energy conservation standards. 

Table 8.10.1 Water Heaters: Base Case Energy Efficiency Market Shares in 2015* 

Energy 

Efficiency 

Level 

Gas-Fired Storage Electric Storage Oil-Fired Storage Gas-Fired 

Instantaneous 

EF Market Share 

(%) EF Market Share 

(%) EF Market Share 

(%) EF Market Share 

(%) 

Baseline 0.59 87.2 0.90 36.3 0.53 22.2 0.62 0.3 

1 0.62 3.0 0.91 23.2 0.54 0.0 0.69 1.8 

2 0.63 0.9 0.92 6.7 0.56 0.0 0.78 1.0 

3 0.64 1.2 0.93 18.6 0.58 0.0 0.80 12.2 

4 0.65 1.4 0.94 4.6 0.60 11.1 0.82 62.9 

5 0.67 5.3 0.95 5.7 0.62 16.7 0.84 2.8 

6 0.80 1.0 2.00 4.0 0.66 40.0 0.85 3.8 

7 2.20 1.0 0.68 10.0 0.92 9.5 

8 0.95 5.7 

100 100 100 100 

* The values refer to the representative sizes for each product class: 40 gal for gas-fired storage, 50 gal for electric 

storage, 32 gal for oil-fired storage. 

8.10.2 Direct Heating Equipment 

Very little is known regarding the distribution of direct heating equipment energy 

efficiencies that consumers in the United States currently purchase. To estimate the market 

shares of different energy efficiency levels in the base case, DOE used data on the fraction of 

direct heating equipment models at different energy efficiency levels, as given in the March 2008 

AHRI directory.65 The market shares in Table 8.10.2 represent the products that households 

would purchase in the year 2013 in the absence of new energy conservation standards. 

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Table 8.10.2 Direct Heating Equipment: Energy Efficiency Market Shares in the Base 

Case 

Energy 

Efficiency 

Level 

Gas Wall Fan Gas Wall Gravity Gas Floor Gas Room Gas Hearth 

AFUE 

(%) 

Market 

Share 

(%) 

AFUE 

(%) 

Market 

Share 

(%) 

AFUE 

(%) 

Market 

Share 

(%) 

AFUE 

(%) 

Market 

Share 

(%) 

AFUE 

(%) 

Market 

Share 

(%) 

Baseline 74 40.9 64 30.0 57 42.9 64 25.0 64 49.1 

1 75 4.5 66 30.0 58 57.1 65 25.0 67 37.6 

2 76 40.9 68 40.0 66 25.0 72 13.1 

3 77 9.1 71 0.0 67 0.0 93 0.2 

4 80 4.5 72 0.0 68 0.0 

5 83 25.0 

100% 100% 100% 100% 100% 

8.10.3 Gas-Fired Pool Heaters 

Data on the distribution of gas-fired pool heater shipments by energy efficiency level are 

not available. To estimate the market shares of different energy efficiency levels in the base case, 

DOE used data on the fraction of gas-fired pool heater models at different energy efficiency 

levels given in the May 2008 FTC directory.66 The market shares in Table 8.10.3 represent the 

products at each efficiency level that households would purchase in the year 2013 in the absence 

of new energy conservation standards by ignition type. 

Table 8.10.3	 Gas-Fired Pool Heaters: Energy Efficiency Market Share by Ignition Type in 

the Base Case 

Energy Efficiency 

Level 

Thermal 

Efficiency (%) 

Market Share 

Pilot Light (%) Electronic 

Ignition (%) Total (%) 

Baseline 78 0.0 0.0 0.0 

1 79 14.2 22.1 36.3 

2 81 3.5 14.2 17.7 

3 82 8.8 13.3 22.1 

4 83 0.0 2.7 2.7 

5 84 0.0 15.9 15.9 

6 86 0.0 4.4 4.4 

7 90 0.0 0.0 0.0 

8 95 0.0 0.9 0.9 

Total 26.5 73.5 100.0% 

8.11 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS 

This section presents the LCC and PBP results for the three types of heating products. As 

discussed in section 8.1.1, DOE’s approach for conducting the LCC analysis relied on 

developing samples of households that use each of the products. DOE also characterized the 

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uncertainty of many of the inputs to the analysis with probability distributions. DOE used a 

Monte Carlo simulation technique to perform the LCC calculations on the households in the 

sample. For each set of sample households using the products in each product class, DOE 

calculated the average LCC and LCC savings and the median and average PBP for each of the 

potential standard levels. 

DOE calculated LCC savings and PBPs at each efficiency level relative to the base case 

products that it assigned to the households. For some households, DOE assigned base case 

products that are more energy efficient than some of the standard levels. If a household was 

assigned a product energy efficiency that is greater than or equal to the energy efficiency of the 

standard level under consideration, the LCC calculation reveals that this household is not 

impacted by an increase in product energy efficiency that is equal to the standard level. For that 

reason, the average LCC impacts are not equal to the difference between the LCC of a specific 

standard level and the LCC of the baseline products. 

In the subsections below, DOE presents figures showing the distribution of LCCs in the 

base case for each product class. Also presented for a specific standard level are figures showing 

the distribution of LCC impacts and the distribution of PBPs. The figures are presented as 

frequency charts that show the distribution of LCCs, LCC impacts, and PBPs with their 

corresponding probability of occurrence. DOE generated the figures for the distributions from a 

Monte Carlo simulation run based on 10,000 samples. 

LCC and PBP calculations were performed 10,000 times on the sample of households 

established for each residential product. Each LCC and PBP calculation was performed on a 

single household that was selected from the sample. The selection of a household was based on 

its weight (i.e., how representative a particular household is of other households in the 

distribution). Each LCC and PBP calculation also sampled from the probability distributions that 

DOE developed to characterize many of the inputs to the analysis. 

For each standard level, DOE calculated the share of households with a net LCC benefit, 

with a net LCC cost, and with no impact. DOE considered a household to receive no impact at a 

given standard level if DOE assigned it base case products that are the same as or are more 

energy efficient than the standard level. To illustrate the range of LCC and PBP impacts among 

the sample households, the sections below present figures that provide such information for each 

product class. 

8.11.1 Water Heaters 

8.11.1.1 Distributions of Impacts 

Figure 8.11.1 through Figure 8.11.4 show the frequency charts for the base case LCC for 

the water heater product classes that DOE analyzed. 

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Forecast:LCC- level 0 

10,000Trials Frequency Chart 9,755 Displayed 

.028 277 

.021 207.7 

.014 138.5 

.007 69.25 

.000 0 

$1,284 $3,157 $5,030 $6,903 $8,776 

$ 

Figure 8.11.1 Gas-Fired Storage Water Heaters: Base Case LCC 

Distribution 

Forecast:LCC- level 0 

10,000Trials Frequency Chart 9,777 Displayed 

.025 247 

.019 185.2 

.012 123.5 

.006 61.75 

.000 0 

$597 $2,613 $4,629 $6,645 $8,661 

$ 

Figure 8.11.2 Electric Storage Water Heaters: Base Case LCC 

Distribution 

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Forecast: LCC - level 0 

10,000 Trials	 Frequency Cha rt 9,789 Displayed 

.024 243 

.018 182.2 

.012 121.5 

.006 60.75 

.000 0 

$4,188 

Figure 8.11.3 

$ 

$7,663 $11,139 $14,614 $18,090 

Oil-Fired Storage Water Heaters: Base Case LCC 

Distribution 

10,000Trials Frequency Chart 

Forecast:LCC- level 0 

9,751 Displayed 

.026 261 

.020 195.7 

.013 130.5 

.007 65.25 

.000 0 

$2,374 $5,172 $7,970 $10,767 $13,565 

$ 

Figure 8.11.4	 Gas-Fired Instantaneous Water Heaters: Base Case 

LCC Distribution 

Figure 8.11.5 is an example of a frequency chart showing the distribution of LCC 

differences for the case of Efficiency Level 2 for gas-fired storage water heaters. The large spike 

in the figure represents the percentage of households that are not impacted by an increase in the 

standard level, i.e., households that purchase gas-fired storage water heaters with energy 

efficiencies greater than or equal to the standard level. DOE can generate a frequency chart like 

the one shown in Figure 8.11.5 for every standard level. Figure 8.11.6 through Figure 8.11.8 are 

examples of frequency charts showing the distribution of payback periods for the other water 

heater product classes. 

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Forecast: LCCSaving - level 2 

10,000Trials Frequency Chart 9,552 Displayed 

.182 1822 

.137 

.091 911 

.046 455.5 

.000 0 

($469) 

Figure 8.11.5 

$ 

($197) $74 $346 $618 

Gas-Fired Storage Water Heaters: Distribution of 

LCC Impacts for Efficiency Level 2 

10,000Trials Frequency Chart 

Forecast: LCCSaving - level 5 

9,736 Displayed 

.124 1243 

.093 932.2 

.062 621.5 

.031 310.7 

.000 0 

($273) ($115) $43 $201 $359 

$ 

Figure 8.11.6 Electric Storage Water Heaters: Distribution of 

LCC Impacts for Efficiency Level 5 

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Forecast: LCCSaving - level 5 

10,000Trials	 Frequency Chart 9,840 Displayed 

.000 

.112 

.224 

.336 

.448 

0 

4484 

$0 $422 $843 $1,265 $1,687 

$ 

Figure 8.11.7 Oil-Fired Storage Water Heaters: Distribution of 

LCC Impacts for Efficiency Level 5 

Forecast: LCCSaving - level 4 

10,000Trials Frequency Chart 9,806 Displayed 

.000 

.212 

.425 

.637 

.849 

0 

8492 

($163) ($82) $0 $82 $163 

$ 

Figure 8.11.8	 Gas-Fired Instantaneous Water Heaters: 

Distribution of LCC Impacts for Efficiency Level 4 

Figure 8.11.9 is an example of a frequency chart showing the distribution of payback 

periods for Efficiency Level 2 for gas-fired storage water heaters. DOE can generate a frequency 

chart like the one shown in Figure 8.11.9 for every Efficiency Level within each product class. 

Figure 8.11.10 though Figure 8.11.12 are examples of frequency charts showing the distribution 

of payback periods for the other water heater product classes. The large spike at the left in Figure 

8.11.12 indicates the percentage of households with gas-fired instantaneous water heaters that are 

not impacted by an increase in the standard level, i.e., households that already use gas-fired 

instantaneous water heaters with energy efficiencies equal to Efficiency Level 8. 

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Forecast: LCCSaving - level 2 

10,000Trials Frequency Chart 9,552 Displayed 

.182 1822 

.137 

.091 911 

.046 455.5 

.000 0 

($469) 

Figure 8.11.9 

$ 

($197) $74 $346 $618 

Gas-Fired Storage Water Heaters: Distribution of 

PBPs for Efficiency Level 2 

10,000Trials Frequency Chart 

Forecast: Payback - level 5 

9,696 Displayed 

.101 1007 

.076 755.2 

.050 503.5 

.025 251.7 

.000 0 

-2.0 5.7 13.5 21.2 29.0 

Figure 8.11.10 Electric Storage Water Heaters: Distribution of 

PBPs for Efficiency Level 5 

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Forecast: Payback - level 5 

10,000Trials	 Frequency Chart 9,989 Displayed 

.000 

.112 

.224 

.336 

.448 

0 

4484 

-2.0 -1.0 0.1 1.1 2.1 

Figure 8.11.11 Oil-Fired Storage Water Heaters: Distribution of 

PBPs for Efficiency Level 5 

Forecast: Payback - level 4 

10,000Trials Frequency Chart 9,767 Displayed 

.000 

.212 

.423 

.635 

.847 

0 

8468 

-2.0 9.6 21.3 32.9 44.6 

Figure 8.11.12	 Gas-Fired Instantaneous Water Heaters: 

Distribution of PBPs for Efficiency Level 8 

8.11.1.2 Summary of LCC and PBP Results 

Table 8.11.1 through Table 8.11.4 summarize the LCC and PBP results for water heaters. 

As mentioned earlier, for some households, DOE assigned products in the base case that are 

more energy efficient than some of the energy efficiency levels under consideration. For that 

reason, the average LCC impacts are not equal to the difference between the LCC of a specific 

energy efficiency level and the LCC of the baseline product. Similarly with regard to the PBPs 

shown below, DOE determined the median and average values by excluding the percentage of 

households not impacted by a standard at a given efficiency level. The values for average 

lifetime operating cost in the tables are discounted sums of the annual operating costs over the 

product lifetime. 

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For gas-fired storage water heaters, Efficiency Level 1 (0.62 energy factor) has the 

highest average LCC savings and a median PBP of 1.4 years.h For electric storage water heaters, 

Efficiency Level 7 (2.20 energy factor) has the highest average LCC savings and a median PBP 

of 8.2 years. However, 45 percent of the households experience a net cost (i.e., negative savings). 

For oil-fired storage water heaters, Efficiency Level 7 (0.68 energy factor) has the highest 

average LCC savings and a median PBP of 1.4 years. For gas-fired instantaneous water heaters, 

Efficiency Level 2 (0.78 energy factor) has the highest average LCC savings and a median PBP 

of 6.7 years. Few households are impacted by a standard at this level, however, since most 

households have a unit with equal or higher efficiency in the base case. 

Table 8.11.1 Gas-Fired Storage Water Heaters: LCC and PBP Results 

Efficiency 

Level ID 

Energy 

Factor 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 0.59 $1,027 $2,429 $3,456 

1 0.62 $1,063 $2,306 $3,369 $69 9% 22% 69% 1.4 4.6 

2 0.63 $1,127 $2,242 $3,369 $68 15% 17% 68% 2.7 11.6 

3 0.64 $1,449 $2,247 $3,696 -$224 69% 11% 20% 35.7 49.5 

4 0.65 $1,479 $2,188 $3,666 -$196 68% 8% 24% 28.4 38.7 

5 0.67 $1,538 $2,080 $3,618 -$150 67% 6% 27% 20.9 24.6 

6 0.80 $1,763 $1,759 $3,522 -$55 62% 1% 36% 14.1 14.2 

Table 8.11.2 Electric Storage Water Heaters: LCC and PBP Results
 

Efficiency 

Level ID 

Energy 

Factor 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 0.90 $519 $2,881 $3,400 

1 0.91 $546 $2,843 $3,389 $6 6% 63% 31% 2.8 8.5 

2 0.92 $566 $2,805 $3,372 $16 10% 32% 59% 2.8 7.8 

3 0.93 $578 $2,783 $3,361 $23 11% 29% 60% 3.0 8.0 

4 0.94 $620 $2,731 $3,351 $32 20% 14% 66% 4.5 8.6 

5 0.95 $651 $2,691 $3,342 $39 25% 10% 65% 5.8 8.8 

6 2.00 $1,435 $1,710 $3,145 $224 45% 5% 50% 8.3 25.9 

7 2.20 $1,517 $1,578 $3,095 $273 45% 1% 54% 8.2 21.5 

h Large differences in the average and median values for PBP are due to outliers in the distribution of results. A 

limited number of excessively long PBPs produce an average PBP that is very long. Therefore, in these cases, the 

median PBP is a more representative value to gauge the length of the PBP. 

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Table 8.11.3 Oil-Fired Water Heaters: LCC and PBP Results
 

Efficiency 

Level ID 

Energy 

Factor 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 0.53 $1,918 $7,298 $9,216 

1 0.54 $1,931 $7,159 $9,090 $18 0% 85% 15% 1.0 1.0 

2 0.56 $1,942 $6,896 $8,838 $99 0% 69% 31% 0.6 0.6 

3 0.58 $1,965 $6,651 $8,616 $171 0% 69% 31% 0.7 0.8 

4 0.60 $1,954 $6,423 $8,377 $288 0% 52% 48% 0.4 0.3 

5 0.62 $1,980 $6,210 $8,190 $395 0% 45% 55% 0.5 0.7 

6 0.66 $2,090 $5,903 $7,994 $532 0% 33% 66% 1.7 2.4 

7 0.68 $2,098 $5,764 $7,863 $655 0% 7% 93% 1.4 1.7 

Table 8.11.4 Gas-Fired Instantaneous Water Heaters: LCC and PBP Results
 

Efficiency 

Level ID 

Energy 

Factor 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 0.62 $1,651 $4,321 $5,972 

1 0.69 $1,679 $3,925 $5,604 $1 0% 100% 0% 1.3 1.3 

2 0.78 $1,950 $3,283 $5,233 $7 0% 98% 2% 6.7 7.0 

3 0.80 $2,166 $3,227 $5,393 $2 2% 97% 1% 13.5 36.8 

4 0.82 $2,239 $3,170 $5,409 $0 11% 85% 4% 23.5 30.4 

5 0.84 $2,805 $3,116 $5,921 -$401 78% 22% 0% 181.6 216.0 

6 0.85 $2,893 $3,090 $5,983 -$451 81% 19% 0% 128.8 180.8 

7 0.92 $2,742 $2,923 $5,665 -$181 70% 15% 15% 34.1 50.2 

8 0.95 $2,939 $2,859 $5,798 -$307 83% 6% 12% 39.5 58.7 

8.11.1.3 Range of LCC Savings and PBPs 

Figure 8.11.13 through Figure 8.11.16 show the range of LCC savings for the standard 

levels for the water heater product classes. For each standard level, the top and the bottom of the 

box indicate the 75th and 25th percentiles, respectively. The bar at the middle of the box indicates 

the median; 50 percent of the households have LCC savings above this value. The ‘whiskers’ at 

the bottom and the top of the box indicate the 5th and 95th percentiles. The small box shows the 

average LCC savings for each standard level. Figure 8.11.17 through Figure 8.11.20 show the 

range of PBPs for the four water heater product classes. 

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LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-900 

-700 

-500 

-300 

-100 

100 

300 

500 

700 

900 

1100 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 

LCC Savings (2008$)

median 

average 

Figure 8.11.13 Range of LCC Savings for Gas-Fired Storage Water 

Heaters 

LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2500 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 

LCC Savings (2008$) 

median 

average 

. 

Figure 8.11.14 Range of LCC Savings for Electric Storage Water 

Heaters 

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LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

200 

400 

600 

800 

1000 

1200 

1400 

1600 

1800 

2000 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 

LCC Savings (2008$) 

median 

average 

Figure 8.11.15 Range of LCC Savings for Oil-Fired Storage Water 

Heaters 

LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; Whisker: 5%-95% 

-800 

-600 

-400 

-200 

0 

200 

400 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 EL 8 

LCC Savings (2008$) 

median 

average 

Figure 8.11.16	 Range of LCC Savings for Gas-Fired Instantaneous 

Water Heaters 

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Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

20 

40 

60 

80 

100 

120 

140 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 

Payback Period (years) 

median 

average 

Figure 8.11.17 Range of Payback Periods for Gas-Fired Storage 

Water Heaters 

Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

10 

20 

30 

40 

50 

60 

70 

80 

90 

100 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 

Payback Period (years) 

median 

average 

Figure 8.11.18 Range of Payback Periods for Electric Storage 

Water Heaters 

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Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

1 

2 

3 

4 

5 

6 

7 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 

Payback Period (years) 

median 

average 

Figure 8.11.19 Range of Payback Periods for Oil-Fired Storage 

Water Heaters 

Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

100 

200 

300 

400 

500 

600 

700 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 EL 8 

Payback Period (years) 

median 

average 

Figure 8.11.20 Range of Payback Periods for Gas-Fired 

Instantaneous Water Heaters 

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8.11.1.4 Gas-Fired and Electric Storage Water Heaters: Results for TSL 5 

As explained in chapter 10, DOE wanted to consider a pairing of efficiency levels that 

would promote the penetration of advanced technologies into the electric and gas-fired storage 

water heater markets and potentially save additional energy. Consequently, DOE is pairing an 

efficiency level that requires heat pump technology for large-volume electric storage water 

heaters with an efficiency level achievable using electric resistance technology for small-volume 

electric storage water heaters. In addition, DOE is pairing an efficiency level that requires 

condensing technology for large-volume gas storage water heaters with an efficiency level that 

can be achieved in atmospherically-vented gas-fired storage water heaters with increased 

insulation thickness for small storage volumes. 

TSL 5 includes efficiency levels that require heat pump technology for electric storage 

water heaters with rated storage volumes at and above 56 gallons, and efficiency levels that 

require condensing technology for gas-fired storage water heaters with rated storage volumes at 

and above 56 gallons. Based on its market assessment, DOE estimated approximately 4 percent 

of gas-fired storage water heater shipments and 11 percent of models would be subject to the 

large-volume water heater requirements using the TSL 5 division. Similarly, DOE estimated 

approximately 9 percent of electric storage water heater shipments and 27 percent of models 

would be subject to the large-volume water heater requirements using the TSL 5 division. 

To derive the LCC and PBP results for TSL 5, DOE divided each of the household 

samples for gas and electric water heaters into two groups, one consisting of households with 

small-volume water heaters, and the other consisting of households with large-volume water 

heaters. Using the appropriate inputs for the efficiency level pairs for each product class, DOE 

calculated results for each of the small- and large-volume subgroups, as described in appendix 8­

I. DOE then weighted the subgroup results using the shipments market shares of small- and 

large-volume water heaters described above. Table 8.11.5 and Table 8.11.6 show the results for 

each subgroup at the efficiency levels specified in TSL 5, along with the weighted-average total 

results. 

Table 8.11.5	 Gas-Fired Storage Water Heaters: LCC and PBP Results for Small and 

Large-Volume Water Heaters Under TSL 5 

Volume 

Subgroup 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

and 

Energy 

Factor 

Market 

Share 

(%) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Small at 

0.63 96.1 $1,116 $2,200 $3,316 $71 15% 17% 69% 2.7 12.2 

Large at 

0.80 3.9 $1,979 $2,348 $4,327 $268 40% 1% 59% 8.8 9.1 

Wtd-avg 

Total* 100 $1,149 $2,206 $3,355 $78 16% 16% 68% 3.0 12.1 

* Weighted by shares of shipments for small and large volume units. 

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Table 8.11.6 Electric Storage Water Heaters: LCC and PBP Results for Small and LargeVolume Water Heaters Under TSL 5 

Volume 

Subgroup 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

and 

Energy 

Factor 

Market 

Share 

(%) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Small at 

0.95 90.7 $631 $2,632 $3,263 $31 25% 10% 65% 5.9 9.1 

Large at 

2.00 9.3 $1,574 $2,158 $3,731 $733 22% 5% 73% 5.6 9.2 

Wtd-avg 

Total* 100 $718 $2,588 $3,306 $96 25% 10% 65% 5.9 9.1 

* Weighted by shares of shipments for small and large volume units. 

8.11.2 Direct Heating Equipment 

8.11.2.1 Distributions of Impacts 

Figure 8.11.21 through Figure 8.11.25 show the full range of LCCs for the base case for 

the five direct heating equipment product classes. 

Forecast: Life Cycle Cost - level 0 

10,000 Trials Frequency Cha rt 9,691 Displayed 

.046 464 

.035 348 

.023 232 

.012 116 

.000 0 

$2,003 $7,177 $12,350 $17,523 $22,696 

$ 

Figure 8.11.21 Gas Wall Fan DHE: Base Case LCC Distribution
 

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Forecast: Life Cycle Cost - level 0 

10,000 Trials Frequency Cha rt 9,690 Displayed 

.000 

.012 

.024 

.036 

.048 

0 

120.5 

241 

361.5 

482 

$1,664 

Figure 8.11.22 

$ 

$6,760 $11,856 $16,952 $22,048 

Gas Wall Gravity DHE: Base Case LCC 

Distribution 

10,000 Trials Frequency Cha rt 

Forecast: Life Cycle Cost - level 0 

9,684 Displa yed 

.051 512 

.038 384 

.026 256 

.013 128 

.000 0 

$2,492 $7,814 $13,136 $18,458 $23,780 

$ 

Figure 8.11.23 Gas Floor DHE: Base Case LCC Distribution 

Forecast: Life Cycle Cost - level 0 

10,000 Trials Frequency Cha rt 9,673 Displa yed 

.046 455 

.034 341.2 

.023 227.5 

.011 113.7 

.000 0 

$1,582 $7,596 $13,609 $19,622 $25,636 

$ 

Figure 8.11.24 Gas Room DHE: Base Case LCC Distribution
 

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Forecast: Life Cycle Cost - level 0 

10,000 Trials Frequency Cha rt 9,914 Displayed 

.101 1008 

.076 756 

.050 504 

.025 252 

.000 0 

$1,739 $7,857 $13,975 $20,094 $26,212 

$ 

Figure 8.11.25 Gas Hearth DHE: Base Case LCC Distribution 

Figure 8.11.26 is an example of a frequency chart showing the distribution of LCC 

impacts for the case of standard level 3 for gas wall fan DHE. DOE can generate a frequency 

chart like the one shown in Figure 8.11.26 for every standard level within each product class. 

Similarly, Figure 8.11.27 through Figure 8.11.30 are examples of frequency charts showing the 

distribution of LCC impacts for the other direct heating equipment product classes. 

Forecast: LCC Savings - level 3 

10,000 Trials Frequency Chart 9,653 Displayed 

.000 

.040 

.080 

.121 

.161 

0 

402.2 

804.5 

1609 

($141) $65 $271 $477 $683 

$ 

Figure 8.11.26 Gas Wall Fan DHE: Distribution of LCC Impacts 

for Efficiency Level 3 

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Forecast: LCC Savings - level 3 

10,000 Trials Frequency Cha rt 9,720 Displayed 

.067 670 

.050 502.5 

.034 335 

.017 167.5 

.000 0 

($166) $193 $552 $911 $1,270 

$ 

Figure 8.11.27 Gas Wall Gravity DHE: Distribution of LCC 

Impacts for Efficiency Level 3 

Forecast: LCC Savings - level 1 

10,000 Trials Frequency Cha rt 9,711 Displayed 

.000 

.144 

.289 

.433 

.577 

0 

5770 

($52) $13 $78 $143 $208 

$ 

Figure 8.11.28 Gas Floor DHE: Distribution of LCC Impacts for 

Efficiency Level 1 

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Forecast: LCC Savings - level 4 

10,000 Trials	 Frequency Chart 9,617 Displayed 

.000 

.070 

.141 

.211 

.282 

0 

704 

2816 

($97) 

Figure 8.11.29 

$ 

$132 $362 $591 $820 

Gas Room DHE: Distribution of LCC Impacts for 

Efficiency Level 4 

10,000 Trials Frequency Cha rt 

Forecast: LCC Savings - level 1 

9,582 Displa yed 

.000 

.135 

.269 

.404 

.539 

0 

5386 

($238) ($11) $217 $445 $672 

$ 

Figure 8.11.30	 Gas Hearth DHE: Distribution of LCC Impacts for 

Efficiency Level 1 

Figure 8.11.31 through Figure 8.11.35 are examples of a frequency chart for direct 

heating equipment products showing the distribution of payback periods for different standard 

levels. DOE can generate frequency charts like these for every standard level within each 

product class. The large spike at the left in Figure 8.11.33 and Figure 8.11.34 indicates the 

percentage of households with gas floor DHE and gas room DHE that are not impacted by an 

increase in the standard level, i.e., households that already use gas floor DHE and gas room DHE 

with energy efficiencies equal to or greater than the standard level. 

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Forecast: Payback - level 3 

10,000 Trials Frequency Chart 9,766 Displayed 

.136 1363 

.102 

.068 681.5 

.034 340.7 

.000 0 

-2.0 15.6 33.2 50.8 68.4 

$ 

Figure 8.11.31 Gas Wall Fan DHE: Distribution of PBPs for 

Efficiency Level 3 

Forecast: Payback - level 3 

10,000 Trials Frequency Cha rt 9,762 Displayed 

.068 677 

.051 507.7 

.034 338.5 

.017 169.2 

.000 0 

-1.0 14.6 30.2 45.8 61.3 

$ 

Figure 8.11.32 Gas Wall Gravity DHE: Distribution of PBPs for 

Efficiency Level 3 

Forecast: Payback - level 1 

10,000 Trials Frequency Cha rt 9,146 Displayed 

.000 

.143 

.286 

.429 

.571 

0 

5714 

-2.0 

Figure 8.11.33 

$ 

11.1 24.2 37.3 50.4 

Gas Floor DHE: Distribution of PBPs for Efficiency 

Level 1 

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Forecast: Payback - level 4 

10,000 Trials	 Frequency Chart 9,748 Displayed 

.000 

.063 

.125 

.188 

.250 

0 

625 

2500 

-2.0 8.9 19.7 30.6 41.4 

$ 

Figure 8.11.34 Gas Room DHE: Distribution of PBPs for Efficiency 

Level 4 

Forecast: Payback - level 1 

10,000 Trials Frequency Cha rt 9,874 Displayed 

.000 

.127 

.255 

.382 

.509 

0 

5090 

-2.0 11.5 25.0 38.5 52.0 

$ 

Figure 8.11.35	 Gas Hearth DHE: Distribution of PBPs for 

Efficiency Level 1 

8.11.2.2 Summary of LCC and PBP Results 

Table 8.11.7 through Table 8.11.11 show the LCC and PBP results for direct heating 

equipment. As mentioned earlier, for some households, DOE assigned base case products that 

are more energy efficient than some of the standard levels. For that reason, the average LCC 

impacts are not equal to the difference between the LCC of a specific standard level and the LCC 

of the baseline products. Similarly with regard to the PBPs shown below, DOE determined the 

median and average values by excluding the percentage of households not impacted by a 

standard at a given efficiency level. The values for average lifetime operating cost in the tables 

are discounted sums of the annual operating costs over the product lifetime. 

For gas wall fan DHE, Efficiency Level 4 (80 percent AFUE) has the highest average 

LCC savings and a median PBP of 9.8 years. For gas wall gravity DHE, Efficiency Level 3 (71 

percent AFUE) has the highest average LCC savings and a median PBP of 8.4 years. For gas 

floor DHE, Efficiency Level 1 (78 percent AFUE) has the highest average LCC savings and a 

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median PBP of 12.7 years. For gas room DHE, Efficiency Level 5 (83 percent AFUE) has the 

highest average LCC savings and a median PBP of 7.4 years. 

Table 8.11.7 Gas Wall Fan DHE: LCC and PBP Results 

Efficiency 

Level ID AFUE 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

Net 

Benefit 

No 

Impact 

Baseline 74% $1,756 $5,296 $7,052 

1 75% $1,809 $5,070 $6,879 $73 3% 59% 38% 3.1 3.1 

2 76% $1,833 $5,009 $6,842 $90 5% 55% 41% 3.9 6.7 

3 77% $1,876 $4,949 $6,825 $104 30% 14% 56% 6.0 15.0 

4 80% $2,002 $4,791 $6,793 $135 44% 5% 52% 9.8 22.6 

Table 8.11.8 Gas Wall Gravity DHE: LCC and PBP Results
 

Efficiency 

Level ID AFUE 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 64% $1,373 $5,263 $6,636 

1 66% $1,431 $5,123 $6,553 $25 12% 70% 18% 8.1 14.8 

2 68% $1,467 $4,990 $6,458 $83 19% 40% 41% 6.5 10.9 

3 71% $1,543 $4,806 $6,349 $192 39% 0% 61% 8.3 14.1 

4 72% $1,831 $4,642 $6,473 $68 59% 0% 41% 13.0 26.5 

Table 8.11.9 Gas Floor DHE: LCC and PBP Results
 

Efficiency 

Level ID AFUE 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 57% $2,109 $5,324 $7,433 

1 58% $2,160 $5,244 $7,404 $13 25% 57% 18% 14.7 20.4 

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Table 8.11.10 Gas Room DHE: LCC and PBP Results
 

Efficiency 

Level ID AFUE 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 64% $1,232 $6,584 $7,815 

1 65% $1,264 $6,493 $7,756 $15 9% 75% 16% 7.4 11.0 

2 66% $1,298 $6,404 $7,702 $42 19% 50% 31% 8.1 13.4 

3 67% $1,311 $6,318 $7,630 $96 19% 25% 56% 4.9 9.4 

4 68% $1,332 $6,235 $7,567 $143 20% 25% 55% 5.3 10.2 

5 83% $1,809 $5,083 $6,892 $646 26% 25% 49% 7.0 15.2 

Table 8.11.11 Gas Hearth DHE: LCC and PBP Results
 

Efficiency 

Level ID AFUE 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 64% $1,663 $3,732 $5,395 

1 67% $1,722 $3,473 $5,195 $96 9% 51% 40% 0.0 7.9 

2 72% $2,123 $3,265 $5,388 -$70 69% 13% 17% 25.9 77.6 

3 93% $2,943 $2,629 $5,571 -$253 81% 0% 19% 37.5 78.2 

8.11.2.3 Range of LCC Savings and PBPs 

Figure 8.11.36 through 8.11.40 show the range of LCC savings for the standard levels for 

the direct heating equipment product class category. For each standard level, the top and the 

bottom of the box indicate the 75th and 25th percentiles, respectively. The bar at the middle of the 

box indicates the median; 50 percent of the households have LCC savings above this value. The 

whiskers at the bottom and the top of the box indicate the 5th and 95th percentiles. The small box 

shows the average LCC savings for each standard level. Figure 8.11.41 through Figure 8.11.45 

show the range of PBPs for the direct heating equipment product class category. 

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LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-600 

-400 

-200 

0 

200 

400 

600 

800 

1000 

1200 

EL 1 EL 2 EL 3 EL 4 

LCC Savings (2008$) 

median 

average 

Figure 8.11.36 Range of LCC Savings for Gas Wall Fan DHE
 

LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-200 

-100 

0 

100 

200 

300 

400 

500 

600 

700 

800 

900 

EL 1 EL 2 EL 3 EL 4 

LCC Savings (2008$) 

median 

average 

Figure 8.11.37 Range of LCC Savings for Gas Wall Gravity DHE
 

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LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-60 

-35 

-10 

15 

40 

65 

90 

115 

140 

EL 1 

LCC Savings (2008$) 

median 

average 

Figure 8.11.38 Range of LCC Savings for Gas Floor DHE
 

LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2500 

3000 

3500 

4000 

EL 1 EL 2 EL 3 EL 4 EL 5 

LCC Savings (2008$) 

median 

average 

Figure 8.11.39 Range of LCC Savings for Gas Room DHE
 

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LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2500 

EL 1 EL 2 EL 3 

LCC Savings (2008$) 

median 

average 

Figure 8.11.40 Range of LCC Savings for Gas Hearth DHE
 

Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-10 

10 

30 

50 

70 

90 

EL 1 EL 2 EL 3 EL 4 

Payback Period (years) 

median 

average 

Figure 8.11.41 Range of Payback Periods for Gas Wall Fan DHE
 

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Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

10 

20 

30 

40 

50 

60 

70 

80 

90 

100 

110 

120 

130 

EL 1 EL 2 EL 3 EL 4 

Payback Period (years)

median 

average 

Figure 8.11.42 Range of Payback Periods for Gas Wall Gravity 

DHE 

Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

10 

20 

30 

40 

50 

60 

EL 1 

Payback Period (years) 

median 

average 

Figure 8.11.43 Range of Payback Periods for Gas Floor DHE
 

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Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

10 

20 

30 

40 

50 

60 

70 

EL 1 EL 2 EL 3 EL 4 EL 5 

Payback Period (years) 

median 

average 

Figure 8.11.44 Range of Payback Periods for Gas Room DHE
 

Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

0 

50 

100 

150 

200 

250 

300 

350 

400 

EL 1 EL 2 EL 3 

Payback Period (years) 

median 

average 

Figure 8.11.45 Range of Payback Periods for Gas Hearth DHE 

8.11.3 Gas-Fired Pool Heaters 

8.11.3.1 Distributions of Impacts 

Figure 8.11.46 shows the full range of LCCs for the base case for gas-fired pool heaters. 

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Forecast: Life Cycle Cost - level00 

10,000Trials	 Frequency Chart 9,837 Displayed 

.038 382 

.029 286.5 

.019 191 

.010 95.5 

.000 0 

$1,470 $6,528 $11,585 $16,643 $21,701 

$ 

Figure 8.11.46	 Gas-Fired Pool Heaters: Base Case LCC
 

Distribution
 

Figure 8.11.47 is an example of a frequency chart showing the distribution of LCC 

differences for the case of standard level 5 for gas-fired pool heaters. The large ‘spike’ in Figure 

8.11.47 represents the percentage of households that are not impacted by an increase in the 

standard level, i.e., households that already use pool heaters with energy efficiencies greater than 

or equal to the standard level. DOE can generate a frequency chart like the one shown in Figure 

8.11.47 for every standard level. 

Forecast: LCCSavings - level05 

10,000Trials Frequency Chart 9,751 Displayed 

.000 

.056 

.112 

.168 

.224 

0 

560.5 

2242 

($439) ($85) $268 $622 $975 

$ 

Figure 8.11.47	 Gas-Fired Pool Heaters: Distribution of LCC 

Impacts for Efficiency Level 5 

Figure 8.11.48 is an example of a frequency chart showing the distribution of payback 

periods of Efficiency Level 5 for gas-fired pool heaters. The large spike at the left indicates the 

percentage of households with pool heaters that are not impacted by an increase in the standard 

level, i.e., households that purchase pool heaters with energy efficiencies equal to or greater than 

then standard level. DOE can generate a frequency chart like the one shown in Figure 8.11.48 for 

every standard level. 

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Forecast: Payback - level05 

10,000Trials	 Frequency Chart 9,696 Displayed 

.000 

.054 

.108 

.162 

.216 

0 

539.5 

2158 

-2.0 14.9 31.9 48.8 65.8 

$ 

Figure 8.11.48	 Gas-Fired Pool Heaters: Distribution of PBPs for 

Efficiency Level 5 

8.11.3.2 Summary of LCC and PBP Results 

Table 8.11.12 shows the LCC and PBP results for gas-fired pool heaters. As mentioned 

earlier, for some households, DOE assigned base case products that are more energy efficient 

than some of the standard levels. For that reason, the average LCC impacts are not equal to the 

difference between the LCC of a specific standard level and the LCC of the baseline products. 

Similarly with regard to the PBPs shown below, DOE determined the median and average values 

by excluding the percentage of households not impacted by a standard at a given efficiency level. 

The values for average lifetime operating cost in the tables are discounted sums of the annual 

operating costs over the product lifetime. 

For pool heaters, the average LCC savings are highest for Efficiency Level 4, and the 

median PBP is 10.6 years. However, 52 percent of the households experience an LCC cost (i.e., 

negative savings) at this level. 

At Efficiency Level 5, 59 percent of the households experience an LCC cost (i.e., 

negative savings). However, DOE determined that 14 percent of the consumers will experience a 

net cost smaller than 2 percent of their total LCC. Consequently, a majority of all users (56%) 

would experience some savings (20 percent), no impact (22 percent) or only a small increase in 

net life-cycle costs (14 percent). 

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Table 8.11.12 Gas-Fired Pool Heaters: LCC and PBP Results
 

Efficiency 

Level ID 

Thermal 

Efficiency 

Life-Cycle Cost (2008$) Life-Cycle Cost Savings Payback Period 

(years) 

Average 

Installed 

Price 

Average 

Lifetime 

Operating 

Cost 

Average 

LCC 

Average 

Savings 

(2008$) 

Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Baseline 78% $2,457 $4,018 $6,475 

1 79% $2,475 $3,972 $6,447 $0 0% 100% 0% -2.0 -2.0 

2 81% $2,499 $3,884 $6,383 $24 6% 64% 30% 2.5 3.5 

3 82% $2,553 $3,842 $6,395 $18 31% 46% 22% 7.4 10.1 

4 83% $2,710 $3,685 $6,395 $39 52% 24% 24% 10.6 18.7 

5 84% $2,816 $3,645 $6,461 -$13 59% 22% 20% 13.0 19.5 

6 86% $3,343 $3,690 $7,034 -$555 90% 6% 5% 28.6 42.4 

7 90% $4,193 $3,544 $7,737 -$1,252 97% 1% 3% 35.7 49.0 

8 95% $4,430 $3,379 $7,809 -$1,323 96% 1% 3% 28.1 37.2 

8.11.3.3 Range of LCC Savings and PBPs 

Figure 8.11.49 shows the range of LCC savings for all of the standard levels considered 

for gas-fired pool heaters. For each standard level, the top and the bottom of the box indicate the 

75th and 25th percentiles, respectively. The bar at the middle of the box indicates the median; 50 

percent of the households have LCC savings above this value. The ‘whiskers’ at the bottom and 

the top of the box indicate the 5th and 95th percentiles. The small box shows the average LCC 

savings for each standard level. Figure 8.11.50 shows the range of PBPs. 

LCC Savings Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-2400 

-2000 

-1600 

-1200 

-800 

-400 

0 

400 

800 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 EL 8 

LCC Savings (2008$)

median 

average 

Figure 8.11.49 Range of LCC Savings for Gas-Fired Pool Heaters
 

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Payback Period Ranges by Efficiency Level 

Median; Box 25%-75%; W hisker: 5%-95% 

-10 

10 

30 

50 

70 

90 

110 

130 

EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 EL 8 

Payback Period (years) 

median 

average 

Figure 8.11.50	 Range of Payback Periods in Years for Gas-Fired 

Pool Heaters 

8.12 REBUTTABLE PAYBACK PERIOD 

DOE presents rebuttable PBPs to establish the rebuttable presumption that an energy 

conservation standard is economically justified if the additional product costs attributed to the 

energy conservation standard are less than three times the value of the first-year energy cost 

savings. (42 U.S.C. §6295 (o)(2)(B)(iii)) 

The basic equation for rebuttable PBP is the same as that shown in section 8.1.2, Payback 

Period Inputs. Unlike the analyses described in sections 8.2 and 8.3, the rebuttable PBP is not 

based on the use of household samples and probability distributions. Rather than distributions, 

the rebuttable PBP is based on discrete single-point values. For example, while DOE uses 

regional energy prices in the distributional payback period analysis, it uses only the national 

average energy price to determine the rebuttable PBP. 

Other than the use of single-point values, the most notable difference between the 

distribution PBP and the rebuttable PBP is the latter’s reliance on the DOE test procedure to 

determine a product’s annual energy consumption. Thus, for some of the products (e.g., water 

heaters) the rebuttable PBPs differ from the average distribution PBP calculated in the LCC and 

PBP analyses. 

8.12.1 Inputs 

The following summarizes the single-point values that DOE used in the determination of 

the rebuttable PBP. 

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•	 Manufacturing costs, markups, sales taxes, installation costs, and repair and maintenance 

costs are all based on the single-point values used in the distributional LCC and PBP 

analyses. 

•	 Annual energy consumption is based on the DOE test procedure. 

•	 Energy prices are based on national average values for the year that new energy
 

conservation standards are estimated to take effect.
 

•	 An average discount rate or lifetime is not required in the rebuttable PBP calculation. 

•	 The effective date of the energy conservation standard is assumed to be 2013 for pool 

heaters and direct heating equipment, and 2015 for water heaters. 

8.12.2 Results 

DOE calculated rebuttable PBPs for each standard level relative to the distribution of 

product energy efficiencies estimated for the base case. In other words, DOE did not determine 

the rebuttable PBP relative to the baseline energy efficiency level, but relative to the distribution 

of product energy efficiencies DOE determined for the base case (i.e., the case without new 

energy conservation standards). 

Table 8.12.1 through Table 8.12.3 below only show those efficiency levels for which the 

calculated PBP is less than three years. For gas-fired and electric storage water heaters, gas wall 

gravity DHE, gas floor DHE and gas room DHE, there were no payback periods under three 

years. 

Table 8.12.1 Water Heaters: Rebuttable Payback Periods 

Product Class Energy Factor (EF) PBP (years) 

Gas-Fired Storage 0.62 2.98 

0.54 1.0 

0.56 0.7 

0.58 0.9 

Oil-Fired Storage 0.60 0.5 

0.62 0.7 

0.66 1.4 

0.68 1.3 

Gas-Fired Instantaneous 0.69 0.9 

Table 8.12.2 Direct Heating Equipment: Rebuttable Payback Periods
 

Product Class AFUE PBP (years) 

Gas Wall Fan DHE 76% 2.9 

Gas Hearth DHE 67% 2.0 

8-92
 

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Table 8.12.3 Pool Heaters: Rebuttable Payback Periods
 

Thermal Efficiency Pilot Ignition (Baseline) 

PBP (years) 

Electronic Ignition (Baseline) 

PBP (years) 

79% 1.9 1.7 

81% 1.4 1.4 

82% 2.4 2.4 

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