EXECUTIVE SUMMARY

ES.1 Overview of Preliminary Activities.....................................................................................1

ES.2 Overview of the Preliminary Analyses and the Preliminary Technical Support

Document.............................................................................................................................3

ES.3 Key Results of the Analyses................................................................................................4

ES.3.1 Market and Technology Assessment .................................................................4

ES.3.2 Screening Analysis.............................................................................................6

ES.3.3 Engineering Analysis.........................................................................................6

ES.3.3.1 Product Classes Analyzed..................................................................................6

ES.3.3.2 Manufacturing Cost Assessment........................................................................7

ES.3.4 Markups to Determine Product Price...............................................................13

ES.3.5 Energy Use Characterization ...........................................................................16

ES.3.6 Life­Cycle Cost and Payback Period Analyses ...............................................19

ES.3.7 Shipments Analysis..........................................................................................24

ES.3.8 National Impact Analysis.................................................................................27

ES.3.8.1 National Energy Savings Analysis...................................................................27

ES.3.8.2 Net Present Value Analysis .............................................................................28

ES.3.8.3 Impact of Standards on Natural Gas Prices and Overall Economic Benefits..31

ES.3.9 Preliminary Manufacturer Impact Analysis.....................................................32

ES.4 Issues on Which DOE Seeks Public Comment..................................................................32

ES.4.1 Organization of Water Heater Product Classes for Oil­Fired Storage and

Instantaneous Gas­Fired Water Heaters...........................................................33

ES.4.2 Product Class for Vented Fireplace Heaters....................................................33

ES.4.3 Organization of Direct Heating Equipment Product Classes...........................33

ES.4.4 Conclusion from Heat Pump Water Heater Preliminary Screening

Analysis............................................................................................................33

ES.4.5 Condensing Room Heaters ..............................................................................34

ES.4.6 Safety Concerns for Near­Condensing Efficiency Levels for Gas­Fired

Pool Heaters.....................................................................................................34

ES.4.7 Development of Energy Efficiency Equations for Gas­Fired and Electric

Storage Water Heaters .....................................................................................34

ES.4.8 Hot Water Use for Instantaneous Water Heaters.............................................34

ES.4.9 Energy Use by Instantaneous Gas­Fired Water Heaters..................................34

ES.4.10 Inputs to Life­Cycle Cost Analysis for Heat Pump Water Heaters.................35

ES.4.11 Market Penetration of Instantaneous Gas­Fired Water Heaters ......................35

ES.4.12 Forecast of Direct Heating Equipment Shipments...........................................35

ES.4.13 Forecast of Efficiencies in the Base Case and Standards Cases......................36

ES.4.14 Switching from an Electric Heat Pump Water Heater to a Gas­Fired Water

Heater...............................................................................................................36

ES.4.15 Rebound Effect ................................................................................................36

ES.4.16 Impact on Natural Gas Prices Resulting from Energy Conservation

Standards for the Three Heating Products.......................................................36

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
ES.4.17 Super­Low NOx Requirements and Cumulative Regulatory Burden

Impacts.............................................................................................................37

ES.4.18 Impacts on Domestic Manufacturers...............................................................37

ES.4.19 Product Class Prioritization .............................................................................37

ES.4.20 Criteria for the Selection of Trial Standard Levels..........................................38

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
EXECUTIVE SUMMARY

ES.1 OVERVIEW OF PRELIMINARY ACTIVITIES

Section 6295(o)(2)(A) of Chapter 42 of the United States Code (U.S.C.) requires that the

U.S. Department of Energy (DOE), when prescribing new or amended energy conservation

standards, promulgate standards that achieve the maximum improvement in energy efficiency

that the Department determines is both technologically feasible and economically justified. (42

U.S.C. 6295(o)(2)(A)) This executive summary summarizes the activities associated with the

preliminary analyses that DOE conducted in consideration of amended energy conservation

standards for residential water heaters, direct heating equipment, and pool heaters. The executive

summary describes the preliminary activities and summarizes key results from DOE’s

preliminary analyses. Additionally, the executive summary delineates issues identified during the

analyses about which DOE seeks comments from interested parties. These issues are highlighted

in the public meeting presentation and are further discussed in chapter 2 of the preliminary

technical support document (TSD).

Figure ES.3.1 presents a summary of the analytical components of the standards­setting

process and illustrates how key results are generated. The focal point of the figure is the center

column, labeled “Analyses.” The columns labeled “Key Inputs” and “Key Outputs” show how

the analyses fit into the process and how they relate to each other. Key inputs are the types of

data and other information that the analyses require. Some key inputs are obtained from public

databases. DOE collects other inputs from interested parties or persons having special knowledge

and expertise. Key outputs are analytical results that feed directly into the standards­setting

process. The issues on which DOE seeks comment from interested parties derive from the key

results that are generated by the preliminary analyses. Arrows connecting analyses show the

types of information that feed from one analysis to another.

ES­1

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Figure ES.3.1 Flow Diagram of Analyses for the Residential Heating Products

Rulemaking Process

ES­2

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
ES.2 OVERVIEW OF THE PRELIMINARY ANALYSES AND THE

PRELIMINARY TECHNICAL SUPPORT DOCUMENT

For the preliminary stage, DOE publishes a preliminary notice of public meeting in the

Federal Register, which announces the availability of the preliminary TSD, the date and place of

the public meeting, and presentation materials interested parties may review before the public

meeting. In addition, the preliminary notice of public meeting highlights the major analyses DOE

developed in the period preceding a notice of proposed rulemaking (NOPR).

The preliminary TSD describes each analysis in detail, providing detailed descriptions of

inputs, sources, methodologies, and results. Chapter 2 of the preliminary TSD provides an

overview of each analysis, the comments received in response to the analytical approaches DOE

described in the framework document, and DOE’s responses to those comments. The remaining

chapters of the preliminary TSD, which are described below, address the analyses performed in

this preliminary stage.

A market and technology assessment (MTA) characterizes the relevant product markets

and technology options, including prototype designs (chapter 3).

A screening analysis reviews each technology option to determine whether it is

technologically feasible; is practicable to manufacture, install, and service; would adversely

affect product utility or product availability; or would have adverse impacts on health and safety

(chapter 4).

An engineering analysis develops cost­efficiency relationships that show the

manufacturer’s cost of achieving increased efficiency. DOE determines the increased cost to the

consumer through an analysis of engineering markups, which convert manufacturer production

cost (MPC) to manufacturer selling price (MSP) (chapter 5).

A markups analysis converts the estimated MSPs derived from the engineering analysis

to customer prices (chapter 6).

An energy use analysis determines the annual energy use of the considered products

(chapter 7).

Life­cycle cost (LCC) and payback period (PBP) analyses calculate, at the consumer

level, the discounted savings in operating costs (less maintenance and repair costs) throughout

the estimated average life of the covered products, compared to any increase in the product’s

installed cost likely to result directly from the imposition of a given standard (chapter 8).

A shipments analysis forecasts product shipments, which then are used to calculate the

national impacts of standards on energy consumption, net present value (NPV), and future

manufacturer cash flows (chapter 9).

A national impact analysis (NIA) assesses the aggregate impacts at the national level of

the NPV of total consumer LCC and national energy savings (NES) (chapter 10).

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
A life­cycle cost analysis for subgroups evaluates the effects of energy conservation

standards on various national subgroups of the population (chapter 11).

A preliminary manufacturer impact analysis (MIA) assesses the potential impacts of

energy conservation standards on manufacturers, such as effects on expenditures for capital

conversion, marketing costs, shipments, and research and development costs (chapter 12).

A utility impact analysis examines impacts of energy conservation standards on the

generation capacity of electric utilities (chapter 13).

An employment impact analysis examines the effects of energy conservation standards

on national employment (chapter 14).

ES.3 KEY RESULTS OF THE ANALYSES

The following sections describe in detail the key analyses DOE performed in support of

the TSD.

ES.3.1 Market and Technology Assessment

When initiating an analysis of potential energy efficiency standards for appliances, DOE

develops information for the products concerned on the present and past industry structure and

market characteristics. Relying on publicly available information, this activity quantitatively and

qualitatively assesses industries and products.

When evaluating and establishing energy conservation standards, DOE generally divides

covered products into product classes by the type of energy consumed, capacity, or other

performance­related features that affect efficiency. Different energy conservation standards may

apply to different product classes. (42 U.S.C. 6295(q)) Table ES.3.1 describes all of the product

classes examined in the preliminary analyses.

ES­4

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.1 Product Classes

Residential Water Heater Type Characteristics

Gas­Fired Storage Type

Nominal input of 75,000 Btu/h or less;

rated storage volume from 20 to 100

gallons

Oil­Fired Storage Type Nominal input of 105,000 Btu/h or less;

rated storage volume of 50 gallons or less

Electric Storage Type

Nominal input of 12 kW (40,956 Btu/h) or

less; rated storage volume from 20 to 120

gallons

Instantaneous Gas­Fired

Nominal input of over 50,000 Btu/h up to

200,000 Btu/h; rated storage volume of 2

gallons or less

Direct Heating Equipment Type Heating Capacity (Btu/h)

Gas Wall Fan Type Up to 42,000

Over 42,000

Up to 10,000

Over 10,000 up to 12,000

Over 12,000 up to 15,000

Gas Wall Gravity Type Over 15,000 up to 19,000

Over 19,000 up to 27,000

Over 27,000 up to 46,000

Over 46,000

Gas Floor Up to 37,000

Over 37,000

Up to 18,000

Over 18,000 up to 20,000

Gas Room Over 20,000 up to 27,000

Over 27,000 up to 46,000

Over 46,000

Pool Heater Type Characteristics

Residential Pool Heaters Gas­Fired

For the three considered heating products (residential water heaters, direct heating

equipment, and pool heaters), DOE addressed (1) manufacturer market share and characteristics,

(2) existing regulatory and non­regulatory initiatives for improving product efficiency, and (3)

trends in product characteristics and retail markets. This information provided data and resource

material throughout the analysis.

DOE reviewed literature and interviewed manufacturers to develop an overall

understanding of the residential heating products industry in the United States. Industry

publications, including trade journals, literature from manufacturers, government agencies, and

trade organizations provided the bulk of the information, including (1) manufacturers and their

market share; (2) shipments by product type (whether water heater, direct heating equipment, or

ES­5

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
pool heater) and capacity (storage volume or fuel input capacity); (3) product information; and

(4) industry trends. Chapter 3 of the preliminary TSD describes the market analysis and resulting

information.

DOE typically uses information about existing and past technology options and prototype

designs to determine which technologies and combinations of technologies manufacturers would

be likely to use to attain higher performance levels. In consultation with interested parties, DOE

develops a list of technologies to be considered. The identified technologies initially include all

those that DOE believes are technologically feasible.

DOE developed its list of technologically feasible technologies for each of the three

products from trade publications, technical papers, and manufacturer literature and through

consultation with manufacturers of components and systems. Because existing products contain

many technologies for improving product efficiency, product literature and direct examination

provided additional information. Before performing the screening analysis, DOE removed from

the list those technologies for which the energy consumption could not be adequately measured

using the relevant DOE test procedure.

ES.3.2 Screening Analysis

The screening analysis examines whether identified technologies (1) are technologically

feasible, (2) are practicable to manufacture, install, and service, (3) have an adverse impact on

product utility or availability, and/or (4) have adverse impacts on health and safety. DOE

develops an initial list of options for enhancing efficiency from the technologies that the

technology assessment identified as feasible. In consultation with interested parties, DOE

reviews the list to assess whether the technologies: are practicable to manufacture, install, and

service; would adversely affect product utility or availability; or would have adverse impacts on

health and safety. In the subsequent engineering analysis, DOE further examines the technology

options that it did not remove from consideration in the screening analysis.

ES.3.3 Engineering Analysis

The engineering analysis (chapter 5) establishes the relationship between the cost of

manufacturing each residential heating product and its efficiency. This relationship serves as the

basis for calculating costs and benefits of technologies in terms of individual consumers,

manufacturers, and the Nation. Chapter 5 describes the product classes DOE analyzed, the

representative baseline units, the efficiency levels DOE considered, the methodology DOE used

to develop the manufacturing production cost model, the cost­efficiency results, and the

methodology DOE used to extend the analysis to classes of products that comprise low shipment

volumes.

ES.3.3.1 Product Classes Analyzed

The engineering analysis analyzed all product classes of the considered heating products.

Given the large number of product classes within each of the three product types covered,

however, the engineering analysis did not directly analyze all product classes. DOE used the

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
shipments data obtained from the market and technology assessment (chapter 3) to prioritize the

product classes considered in the engineering analysis. In the market and technology assessment,

DOE determined that the product classes to be analyzed are representative of their associated

markets. Based on analysis of four product classes within water heaters, four product classes

within direct heating equipment, and one product class within pool heaters, DOE generated nine

cost­efficiency curves. Chapter 5 includes additional details on the representative product classes

and the cost­efficiency curves developed as part of the heating products engineering analysis.

DOE also reviewed the energy efficiency equations that define existing Federal energy

conservation standards for gas­fired and electric storage water heaters. DOE compared the

energy efficiency equations to the current market to determine whether the Federal energy

conservation standards are representative of today’s markets. DOE investigated potential

revisions to existing energy efficiency equations to reflect current market conditions. Chapter 5

of the preliminary TSD includes information on the approach DOE used to develop alternative

energy efficiency equations for gas­fired and electric storage water heaters.

ES.3.3.2 Manufacturing Cost Assessment

DOE estimated the manufacturing costs associated with an increase in energy efficiency

for each of the residential heating product types. The assessment method involved disassembling

model units, analyzing the materials and manufacturing processes, analyzing the design

approaches manufacturers use, and developing a spreadsheet model to describe costs. DOE built

a detailed model for assessing manufacturing cost that estimates manufacturer production cost.

DOE also aggregated manufacturers’ costs to maintain confidentiality of the data. DOE obtained

input from interested parties on the manufacturer production cost estimates and manufacturing

cost model inputs. Chapter 5 of the preliminary TSD includes information on the inputs used to

determine the manufacturing cost, including material, labor, and overhead prices. Chapter 5 also

includes information on the various components and features incorporated into designs for

residential heating products.

DOE’s engineering analysis produced cost efficiency curves for the nine representative

heating products. The cost­efficiency curves are described by the efficiency levels DOE

analyzed, the manufacturer product cost (MPC), and the manufacturer selling price (MSP). Table

ES.3.2 through Table ES.3.11 present the results of the engineering analysis.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.2 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas­Fired Storage Water Heaters, 40­Gallon Volume

Efficiency Level (EF) Technology MPC

(2007$)

MSP

(2007$)

Baseline

(EF = 0.59)

Standing Pilot and 1′′

Insulation $160 $221

Efficiency Level 1

(EF = 0.62)

Standing Pilot and

1.5′′ Insulation $167 $230

Efficiency Level 2

(EF = 0.63)

Standing Pilot and 2′′

Insulation $175 $242

Efficiency Level 3

(EF = 0.64)

Electronic Ignition,

Power Vent, and 1′′

Insulation

$276 $381

Efficiency Level 4

(EF = 0.65)

Electronic Ignition,

Power Vent and 1.5′′

Insulation

$283 $391

Efficiency Level 5

(EF = 0.66)

Electronic Ignition,

Power Vent, and 2′′

Insulation

$291 $402

Efficiency Level 6–Max

Tech (EF = 0.77)

Condensing, Power

Vent, and 2′′

Insulation

$425 $587

ES­8

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.3 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Oil­Fired Storage Water Heaters, 32­Gallon Volume

with Burner Assembly

Efficiency Level (EF) Technology MPC

(2007$)

MSP

(2007$)

Baseline (EF = 0.53) Electronic Ignition and 1′′ Fiberglass

Insulation $510 $704

Efficiency Level 1

(EF = 0.54)

Electronic Ignition and 1.5′′

Fiberglass Insulation $518 $715

Efficiency Level 2

(EF = 0.56)

Electronic Ignition and 2′′ Fiberglass

Insulation $529 $730

Efficiency Level 3

(EF = 0.58)

Electronic Ignition and 2.5′′

Fiberglass Insulation $539 $744

Efficiency Level 4

(EF = 0.60)

Electronic Ignition and 2′′ Foam

Insulation $534 $737

Efficiency Level 5

(EF = 0.62)

Electronic Ignition, 2.5′′ Foam

Insulation $547 $755

Efficiency Level 6

(EF = 0.66)

Electronic Ignition, 1′′ Fiberglass

Insulation, and Enhanced Flue

Baffles

$540 $745

Efficiency Level 7 – Max

Tech (EF = 0.68)

Electronic Ignition, 1′′ Foam

Insulation, and Enhanced Flue

Baffles

$551 $760

Table ES.3.4 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Electric Storage Water Heaters, 50­gallon Volume

Efficiency Level (EF) Technology MPC

(2007$)

MSP

(2007$)

Baseline (EF = 0.90) 1.5′′ Foam Insulation $122 $168

Efficiency Level 1

(EF = 0.91) 2′′ Foam Insulation $128 $177

Efficiency Level 2

(EF = 0.92) 2.25′′ Foam Insulation $132 $182

Efficiency Level 3

(EF = 0.93) 2.5′′ Foam Insulation $136 $188

Efficiency Level 4

(EF = 0.94) 3′′ Foam Insulation $144 $199

Efficiency Level 5

(EF = 0.95) 4′′ Foam Insulation $160 $221

Efficiency Level 6–Max Tech

(EF = 2.2) Heat Pump Water Heater $490 $676

ES­9

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.5 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Instantaneous Gas­Fired Water Heaters, 0­Gallon

Storage Volume, 199 Btu/h Input Capacity

Efficiency Level (EF) Technology MPC

(2007$)

MSP

(2007$)

Baseline (EF = 0.62) Standing Pilot $225 $326

Efficiency Level 1

(EF = 0.69)

Standing Pilot and Improved Heat

Exchanger Area $235 $341

Efficiency Level 2

(EF = 0.78)

Electronic Ignition and Improved

Heat Exchanger $270 $392

Efficiency Level 3

(EF = 0.80) Electronic Ignition and Power Vent $343 $497

Efficiency Level 4

(EF = 0.82)

Electronic Ignition, Power Vent, and

Improved Heat Exchanger Area $361 $523

Efficiency Level 5

(EF = 0.84)

Electronic Ignition, Power Vent, and

Improved Heat Exchanger Area $379 $550

Efficiency Level 6

(EF = 0.85)

Electronic Ignition, Power Vent,

Direct Vent, and Improved Heat

Exchanger Area

$388 $563

Efficiency Level 7–Max

Tech (EF = 0.92) Condensing $643 $932

Table ES.3.6 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas Wall Fan­type DHE, More Than 42,000 Btu/h Input

Capacity

Efficiency Level (AFUE) Technology MPC

(2007$)

MSP

(2007$)

Baseline (AFUE = 74) Standing Pilot $335 $490

Efficiency Level 1

(AFUE = 75)

Intermittent Ignition and 2­speed

Blower

$382 $527

Efficiency Level 2

(AFUE = 76)

Intermittent Ignition and

Improved Heat Exchanger $396 $546

Efficiency Level 3

(AFUE = 77)

Intermittent Ignition, 2­speed

Blower, and Improved Heat

Exchanger

$413 $570

Efficiency Level 4–Max

Tech (AFUE = 80)

Induced Draft and Electronic

Ignition $468 $646

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.7 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas Wall Gravity­type DHE, More Than 27,000 and up

to 46,000 Btu/h Input Capacity

Efficiency Level (AFUE) Technology MPC

(2007$)

MSP

(2007$)

Baseline (AFUE = 64) Standing Pilot $198 $273

Efficiency Level 1

(AFUE = 66)

Standing Pilot and Improved

Heat Exchanger $224 $309

Efficiency Level 2

(AFUE = 68)

Standing Pilot and Improved

Heat Exchanger $231 $319

Efficiency Level 3

(AFUE = 71)

Standing Pilot and Improved

Heat Exchanger $259 $357

Efficiency Level 4

(AFUE = 72) Electronic Ignition $284 $392

Efficiency Level 5–Max Tech

(AFUE = 75) Induced Draft $337 $465

Table ES.3.8 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas Floor­type DHE, More Than 37,000 Btu/h Input

Capacity

Efficiency Level (AFUE) Technology MPC

(2007$)

MSP

(2007$)

Baseline (AFUE = 57) Standing Pilot $338 $466

Efficiency Level 1

(AFUE = 58)

Standing Pilot and Improved

Heat Exchanger $353 $487

Efficiency Level 2

(AFUE = 61)

Standing Pilot and Improved

Heat Exchanger $368 $508

Efficiency Level 3

(AFUE = 62)

Standing Pilot and Improved

Heat Exchanger $383 $529

Efficiency Level 4

(AFUE = 65)

Improved Heat Exchanger and

Electronic Ignition $410 $566

Efficiency Level 5–Max Tech

(AFUE = 78) Induced Draft $468 $646

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.9 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas Room­type DHE, More Than 27,000 and up to

46,000 Btu/h Input Capacity

Efficiency Level (AFUE) Technology MPC

(2007$)

MSP

(2007$)

Baseline (AFUE = 64) Standing Pilot $221 $305

Efficiency Level 1

(AFUE = 65)

Standing Pilot and Improved

Heat Exchanger $237 $327

Efficiency Level 2

(AFUE = 66)

Standing Pilot and Improved

Heat Exchanger $252 $348

Efficiency Level 3

(AFUE = 67)

Standing Pilot and Improved

Heat Exchanger $267 $368

Efficiency Level 4

(AFUE = 68)

Standing Pilot and Improved

Heat Exchanger $282 $389

Efficiency Level 5

(AFUE = 70) Electronic Ignition $307 $424

Efficiency Level 6

(AFUE = 78) Induced Draft $361 $498

Efficiency Level 7–Max Tech

(AFUE = 93) Condensing $552 $762

Table ES.3.10 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas­Fired Pool Heater, 250,000 Btu/h Input Capacity

and Standing Pilot

Efficiency Level (Thermal

Efficiency)

Technology MPC

(2007$)

MSP

(2007$)

Baseline

(Thermal Efficiency = 78) $520 $718

Efficiency Level 1

(Thermal Efficiency = 79) Improved Heat Exchanger Design $531 $733

Efficiency Level 2

(Thermal Efficiency = 81) Improved Heat Exchanger Design $544 $751

Efficiency Level 3

(Thermal Efficiency = 82)

Improved Heat Exchanger

Design, More Effective Insulation

(Combustion Chamber)

$559 $771

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.11 Efficiency Level, Manufacturer Production Cost, and Manufacturer

Selling Price for Gas­Fired Pool Heater, 250,000 Btu/h Input Capacity

and Electronic Ignition

Efficiency Level (Thermal

Efficiency)

Technology MPC

(2007$)

MSP

(2007$)

Baseline

(Thermal Efficiency = 78) $523 $722

Efficiency Level 1

(Thermal Efficiency = 79)

Improved Heat Exchanger

Design $534 $737

Efficiency Level 2

(Thermal Efficiency = 81)

Improved Heat Exchanger

Design $547 $755

Efficiency Level 3

(Thermal Efficiency = 82)

Improved Heat Exchanger

Design and More Effective

Insulation (Combustion

Chamber)

$578 $798

Efficiency Level 4

(Thermal Efficiency = 83) Power Venting $648 $894

Efficiency Level 5

(Thermal Efficiency = 84)

Power Venting and Improved

Heat Exchanger Design $664 $916

Efficiency Level 6

(Thermal Efficiency = 86)

Sealed Combustion and

Improved Heat Exchanger

Design

$691 $954

Efficiency Level 7

(Thermal Efficiency = 90)

Sealed Combustion and

Condensing $903 $1,246

Efficiency Level 8–Max Tech

(Thermal Efficiency = 95)

Sealed Combustion,

Condensing, and Improved

Heat Exchanger Design

$961 $1,326

ES.3.4 Markups to Determine Product Price

To convert the estimates of MSP derived from the engineering analysis to customer

prices, DOE estimated markups taken by distributors, retailers, contractors, and builders, along

with sales taxes. In developing markups, DOE determined the distribution channels for product

sales, the markup associated with each party in the distribution channels, and the markups for

baseline products (baseline markups) and for more­efficient products (incremental markups).

DOE calculated both overall baseline and overall incremental markups based on the product

markups at each step in the distribution channel.

After establishing appropriate distribution channels for each of the product classes, DOE

relied on economic data from the U.S. Census Bureau and other sources to define how products

are marked up as they pass from the manufacturer to the customer. Chapter 2 of the TSD

summarizes the analytical methodology; chapter 6 provides additional details.

Table ES.3.12 through Table ES.3.15 summarize the markups at each stage in the

distribution channel (including sales tax where appropriate), along with and the overall baseline

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
and incremental markups for replacement and new construction applications for the three heating

products.

Table ES.3.12 Markups for Water Heaters: Replacement Applications

Gas­Fired and

Oil­Fired Storage

Instantaneous

Gas­Fired

Electric Storage

Baseline Incremental Baseline Incremental Baseline Incremental

Manufacturer 1.38 1.45 1.38

Retailer 1.45 1.15 1.45 1.15 1.45 1.15

Distributor 1.35 1.11 1.35 1.11 1.28 1.10

Contractor 1.10 1.10 1.10 1.10 1.10 1.10

Sales Tax 1.068 1.068 1.068

Overall*

Replacement

Channel A

Replacement

Channel B

2.14

2.19

1.69

1.80

2.25

2.30

1.78

1.89

2.14

2.08

1.69

1.78

Weighted

Average

Replacement

2.16 1.74 2.29 1.88 2.11 1.73

*The overall markup is the average of the total markups for distribution channels A and B, weighted by the

estimated percentage of each channel represented by total replacement installations. Replacement channel A

comprises a manufacturer and retailer. Replacement channel B includes a manufacturer, distributor, and

contractor. For channel A, it is estimated that 60 percent of units are storage water heaters, and 10 percent

instantaneous water heaters.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.13 Markups for Water Heaters: New Construction

Gas­Fired and OilFired StorageInstantaneous GasFiredElectric Storage

Baseline Incremental Baseline Incremental Baseline Incremental

Manufacturer 1.38 1.45 1.38

Distributor 1.35 1.11 1.35 1.11 1.28 1.10

Contractor 1.10 1.10 1.10 1.10 1.10 1.10

Builder 1.31 1.26 1.31 1.26 1.31 1.26

Overall*

New

Channel A

New

Channel B

Weighted

Average

New

2.44

2.68

2.56

1.68

2.12

1.90

2.15

2.82

2.49

1.77

2.23

2.00

1.94

2.55

2.43

1.67

2.10

1.89

*The overall markup is the average of the total markups for distribution channels A and B, weighted by the

estimated percentages of each channel represented by total new home installations. Channel A includes a

manufacturer, distributor, and builder. Channel B also contains a contractor. It is estimated that channels A and

B each contain 50 percent of all sales.

Table ES.3.14 Markups for Direct Heating Equipment and Pool Heaters: Replacement

Applications

Direct Heating Equipment Pool Heaters

Baseline Incremental Baseline Incremental

Manufacturer 1.38 1.38

Distributor 1.35 1.11 1.35 1.11

Contractor 1.32 1.32 1.10 1.10

Sales Tax 1.075 1.066

Overall 2.64 2.17 2.18 1.80

Table ES.3.15 Markups for Direct Heating Equipment and Pool Heaters, New Home

Applications

Direct Heating Equipment Pool Heaters

Baseline Incremental Baseline Incremental

Manufacturer 1.38 1.38

Distributor 1.35 1.11 1.35 1.11

Contractor 1.32 1.32 ­* ­*

Builder 1.31 1.26 1.31** 1.26**

Overall 3.22 2.55 2.44 1.93

*In the new homes, the pool builder purchases the product directly from a distributor or

wholesaler without contractor involvement.

**It is assumed that pool builders have the same markup as home builders.

ES­15

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
ES.3.5 Energy Use Characterization

The energy use characterization, which assesses the energy savings potentially resulting

from higher efficiency standards, provides the basis for developing the energy savings used in

the LCC and subsequent analyses. Because the analysis is intended to capture and represent

typical energy consumption in the field, DOE estimated energy consumption at different energy

efficiency levels for a representative sample of actual housing units. In so doing, DOE relied on

existing test procedures, as well as the Energy Information Administration (EIA)’s Residential

Energy Consumption Survey (RECS) and other sources to establish ranges of energy use for the

three heating products.

For residential storage­type water heaters, DOE relied on an energy use analysis tool

(water heater analysis model, or WHAM) and a hot water draw model. For this analysis, DOE

modified earlier versions of these tools, which had been used to conduct the previous standards

rulemaking that concluded in 2001. These analysis tools are well developed and are familiar to

the interested parties who participated in the previous rulemaking process. Along with data from

the RECS, these analytical tools enabled DOE to establish ranges in water heater energy

consumption in the United States.

For direct heating equipment and pool heaters, DOE utilized the assumptions in the

associated test procedures to establish the typical annual energy consumption of a product.

Chapter 2 of the TSD summarizes the analytical methodology for characterizing energy

use; chapter 7 provides more details on the methods, data, and assumptions.

Table ES.3.16 through Table ES.3.19 present the average annual energy use and average

energy savings for water heaters at each considered energy efficiency level compared to the

baseline. The energy savings, given in units of million Btu per year (MMBtu/yr), encompass

natural gas and the increasing use of electricity (e.g., additional electrical power consumption

from power vents) at some energy efficiency levels.

Table ES.3.16 Annual Energy Consumption: Gas­Fired Storage Water Heaters

Efficiency

Level

Energy

Factor

Average Natural Gas and

Electricity Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 0.59 16.7 0 —

1 0.62 15.6 0 1.1

2 0.63 15.3 0 1.4

3 0.64 14.8 69 1.8

4 0.65 14.5 68 2.2

5 0.66 14.2 67 2.5

6 0.77 12.1 61 4.6

ES­16

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
1 1

2 2

3 3

4 4

5 5

6

Table ES.3.17 Annual Energy Consumption: Electric Storage Water Heaters

Efficiency

Level

Energy

Factor

Average Energy

Consumption

(kWh/yr)

Average Energy

Savings

(kWh/yr)

(Baseline) 0.90 2,703 —

0.9 2,657 46

0.9 2,612 91

0.9 2,568 135

0.9 2,525 177

0.9 2,483 220

2.20 1,342 1,361

Table ES.3.18 Annual Energy Consumption: Oil­Fired Storage Water Heaters

Efficiency

Level

Energy

Factor

Average Energy

Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 0.53 19.4 56 —

1 0.54 18.9 55 0.5

2 0.56 18.0 53 1.4

3 0.58 17.2 50 2.2

4 0.60 16.4 48 2.9

5 0.62 15.7 46 3.7

6 0.66 14.7 43 4.7

7 0.68 14.2 41 5.2

Table ES.3.19 Annual Energy Consumption: Instantaneous Gas­Fired Water Heaters

Efficiency

Level

Energy

Factor

Average Energy

Consumption

Average

Energy Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 0.62 17.0 0 —

1 0.69 16.0 0 1.0

2 0.78 12.5 26 4.5

3 0.80 12.2 29 4.8

4 0.82 11.9 29 5.1

5 0.84 11.6 29 5.4

6 0.85 11.5 29 5.6

7 0.92 10.6 29 6.4

Table ES.3.20 through Table ES.3.23 present the average annual energy use and energy

savings for each considered energy efficiency level for each representative product class of direct

heating equipment. The energy savings, given in MMBtu/yr, include natural gas and reflect

changes in the use of electricity.

ES­17

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.20 Annual Energy Consumption: Gas Wall Fan DHE

Efficiency

Level AFUE

Average Natural Gas and

Electricity Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 74 27.1 35 —

1 75 25.6 42 1.5

2 76 25.2 42 1.9

3 77 24.9 42 2.2

4 80 23.9 61 3.2

Table ES.3.21 Annual Energy Consumption: Gas Wall Gravity DHE

Efficiency

Level AFUE

Average Natural Gas and

Electricity Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 64 29.6 0 —

1 66 28.7 0 0.8

2 68 27.9 0 1.6

3 71 26.8 0 2.7

4 72 25.6 18 4.0

5 75 24.4 58 5.2

Table ES.3.22 Annual Energy Consumption: Gas Floor DHE

Efficiency

Level AFUE

Average Natural Gas and

Electricity Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 57 30.4 0 —

1 58 29.9 0 0.5

2 61 28.5 0 1.9

3 62 28.1 0 2.3

4 65 25.5 12 4.9

5 78 21.0 54 9.3

ES­18

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.23 Annual Energy Consumption: Gas Room DHE

Efficiency

Level AFUE

Average Natural Gas and

Electricity Consumption

Average Energy

Savings

(MMBtu/yr) (kWh/yr) (MMBtu/yr)

(Baseline) 64 22.0 0 —

1 65 21.7 0 0.3

2 66 21.4 0 0.6

3 67 21.1 0 0.9

4 68 20.8 0 1.2

5 70 19.4 12 2.6

6 78 17.2 75 4.9

7 93 14.4 65 7.6

Table ES.3.24 shows the average annual energy consumption and the average energy

savings for pool heaters for each considered energy efficiency level.

Table ES.3.24 Gas Pool Heaters: Annual Energy Consumption by Efficiency Level

Efficiency

Level

Thermal

Efficiency

(%)

Average Energy

Consumption

(MMBtu/year)

Average Energy

Savings

(MMBtu/year)

(Baseline) 78 53.6 —

1 79 52.9 0.7

2 81 51.6 1.9

3 82 51.0 2.5

4 83 49.2 4.4

5 84 48.6 5.0

6 86 47.5 6.1

7 90 45.4 8.2

8 95 43.0 10.6

ES.3.6 Life­Cycle Cost and Payback Period Analyses

Stipulating new energy conservation standards for products results in changes in

consumer operating expenses—usually a decrease—and changes in consumer price—usually an

increase. DOE analyzed the net effect of new standards on consumers by evaluating the net LCC

using the cost­efficiency relationship derived in the engineering analysis, as well as the energy

costs derived from the energy use characterization. Inputs to the LCC calculation included the

installed cost to the consumer (purchase price plus installation cost), operating costs (energy

expenses and maintenance costs), the lifetime of the appliance, and a discount rate.

Because the installed cost of a product typically increases while operating cost typically

decreases in response to new standards, there is a time in the life of products having higher­thanbaseline efficiency when the net operating­cost benefit (in dollars) since the time of purchase is

ES­19

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
equal to the incremental first cost of purchasing the higher­efficiency product. The length of time

required for products to reach this cost­equivalence point is known as the payback period (PBP).

DOE conducted the LCC and PBP analyses using typical values that reflect energy

consumption in the field. DOE identified several input values for estimating the LCC, including:

retail prices; energy prices; discount rate; maintenance, repair, and installation costs; and product

lifetimes. DOE used EIA’s energy price data to determine prices for electricity, natural gas, oil,

and liquefied petroleum gas in 2006. DOE used projections of these energy prices from EIA’s

Annual Energy Outlook 2008 to estimate future energy prices and incorporated expected changes

to maintenance, repair, and installation costs for the considered heating products. DOE

developed discount rates from estimates of the interest, or finance cost, to purchase residential

products.

The base efficiency case reflects the projected evolution of the markets for the heating

products in the absence of new energy conservation standards. To evaluate the potential impact

of energy conservation standards, DOE estimated the percentage of heating products that would

be affected by a standard at a particular energy efficiency standard level. DOE assigned each

household in the RECS sample a unique product energy efficiency taken from the estimated

distribution of product energy efficiencies in the effective year of new standards. The distribution

represents the products that households would purchase in the base case. For some households,

DOE assigned a product in the base case with a higher energy efficiency level than the standard

efficiency level under consideration. In these situations, the household would not be affected by

the energy conservation standard (labeled “No Impact” in the tables below). DOE determined the

median and average values of the PBPs shown below by excluding the percentage of households

that would not be affected by the energy conservation standard.

Chapter 2 of the TSD summarizes the analytical methodology for LCC and PBP

analyses; chapter 8 provides additional details.

Table ES.3.25 through Table ES.3.28 show the results of LCC and PBP analyses for

water heaters.

ES­20

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.25 LCC and PBP Results: Gas­Fired Storage Water Heaters

Efficiency

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level Median Average EF Installed

Price

(2007$)

Operating

Cost

(2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 0.59 967 1,978 2,945 ­ ­ ­ ­ ­ ­

1 0.62 982 1,849 2,830 95 0 18 82 1.1 1.1

2 0.63 998 1,808 2,807 116 0 11 89 1.9 2.0

3 0.64 1,506 1,829 3,335 ­368 73 9 18 41.4 54.0

4 0.65 1,519 1,790 3,309 ­343 73 7 20 34.1 43.0

5 0.66 1,536 1,753 3,288 ­324 73 6 22 28.8 32.8

6 0.77 1,782 1,489 3,271 ­307 75 2 22 17.5 18.1

Table ES.3.26 LCC and PBP Results: Electric Storage Water Heaters

Efficiency

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level Median Average EF Installed

Price

(2007$)

Operating

Cost

(2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 0.90 662 2,836 3,498 ­ ­ ­ ­ ­ ­

1 0.91 674 2,787 3,461 20 0 46 54 2.5 2.6

2 0.92 682 2,740 3,422 50 0 23 77 2.1 2.1

3 0.93 709 2,694 3,403 65 9 18 73 2.3 3.9

4 0.94 759 2,648 3,407 61 18 7 75 2.8 6.9

5 0.95 786 2,604 3,390 78 18 6 76 3.8 6.7

6 2.20 1,475 1,759 3,233 229 45 5 50 8.3 22.2

Table ES.3.27 LCC and PBP Results: Oil­Fired Storage Water Heaters

Efficiency

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level Median Average EF Installed

Price

(2007$)

Operating

Cost

(2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 0.53 1,757 3,238 4,996 ­ ­ ­ ­ ­ ­

1 0.54 1,771 3,187 4,958 10 0 73 27 2.0 2.0

2 0.56 1,811 3,089 4,900 30 0 66 34 2.7 2.7

3 0.58 1,828 2,998 4,826 55 0 66 34 2.1 2.2

4 0.60 1,820 2,914 4,734 89 0 63 37 1.4 1.3

5 0.62 1,843 2,834 4,678 121 0 45 55 1.7 1.7

6 0.66 2,075 2,722 4,797 23 36 18 47 5.1 10.4

7 0.68 2,227 2,671 4,898 ­68 53 9 38 8.6 13.1

ES­21

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.28 LCC and PBP Results: Instantaneous Gas­Fired Water Heaters

Efficiency

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level Median Average EF Installed

Price

(2007$)

Operating

Cost

(2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 0.62 1,529 4,264 5,793 ­ ­ ­ ­ ­ ­

1 0.69 1,549 4,075 5,623 0 0 100 0 ­ ­

2 0.78 1,724 3,461 5,185 0 0 100 0 ­ ­

3 0.80 1,867 3,407 5,274 ­1 1 99 0 40.7 56.7

4 0.82 1,902 3,353 5,255 2 6 86 8 11.3 14.9

5 0.84 1,938 3,301 5,239 14 30 29 41 11.3 14.5

6 0.85 1,955 3,276 5,231 20 37 14 49 12.0 14.8

7 0.92 2,258 3,117 5,375 ­119 79 3 18 25.2 35.8

Table ES.3.29 through Table ES.3.32 show the LCC and PBP results for direct heating

equipment.

Table ES.3.29 LCC and PBP Results: Gas Wall Fan DHE

Efficiency AFUE

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level (%) Median Average Installed

Price

(2007$)

Operating

Cost (2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 74 1,769 4,525 6,294 ­ ­ ­ ­ ­ ­

1 75 1,830 4,311 6,141 74 3 45 52 3.5 3.8

2 76 1,861 4,259 6,121 86 10 50 40 4.5 7.1

3 77 1,899 4,209 6,108 95 23 55 21 6.1 13.3

4 80 2,023 4,078 6,101 103 48 50 2 10.3 24.4

Table ES.3.30 LCC and PBP Results: Gas Wall Gravity DHE

Efficiency AFUE

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level (%) Median Average Installed

Price

(2007$)

Operating

Cost (2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 64 1,374 4,927 6,301 ­ ­ ­ ­ ­ ­

1 66 1,435 4,796 6,231 32 20 54 26 9.5 15.1

2 68 1,452 4,673 6,125 102 16 33 51 4.5 8.7

3 71 1,518 4,501 6,019 208 32 0 68 6.7 11.8

4 72 1,767 4,352 6,120 107 54 0 46 12.1 18.4

5 75 1,893 4,221 6,113 114 60 0 40 13.9 22.6

ES­22

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.31 LCC and PBP Results: Gas Floor DHE

Efficiency AFUE

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level (%) Median Average Installed

Price

(2007$)

Operating

Cost (2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 57 2,013 4,652 6,664 ­ ­ ­ ­ ­ ­

1 58 2,046 4,581 6,627 8 10 78 12 8.2 11.4

2 61 2,078 4,385 6,463 172 17 0 83 3.6 6.2

3 62 2,111 4,323 6,434 201 25 0 75 5.0 9.0

4 65 2,360 3,991 6,351 284 31 0 69 8.3 13.2

5 78 2,486 3,414 5,901 735 27 0 73 6.7 12.1

Table ES.3.32 Gas Room DHE: LCC and PBP Results

Efficiency AFUE

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level (%) Median Average Installed

Price

(2007$)

Operating

Cost (2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 64 1,430 4,373 5,803 ­ ­ ­ ­ ­ ­

1 65 1,467 4,315 5,782 8 21 60 19 11.4 16.2

2 66 1,502 4,259 5,761 22 34 35 31 11.1 18.7

3 67 1,537 4,205 5,741 37 43 20 38 11.7 20.6

4 68 1,572 4,152 5,723 54 49 9 42 12.1 21.6

5 70 1,807 3,912 5,719 58 53 4 44 11.7 27.9

6 78 1,933 3,577 5,510 264 45 2 53 10.1 25.2

7 93 2,377 3,066 5,443 330 55 0 45 12.6 25.8

Table ES.3.33 shows the LCC and PBP results for pool heaters.

ES­23

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.33 LCC and PBP Results: Gas­Fired Pool Heaters

Efficiency TE

Life­Cycle Cost Life­Cycle Cost Savings PBP (years)

Average Average Average

Households that

Experience

Level (%) Median Average Installed

Price

(2007$)

Operating

Cost

(2007$)

LCC

(2007$)

Average

Savings Net Cost

(%)

No

Impact

(%)

Net

Benefit

(%)

Baseline 78 2,335 4,965 7,300 ­ ­ ­ ­ ­ ­

1 79 2,356 4,905 7,261 0 0 99 1 2.8 3.8

2 81 2,380 4,790 7,169 13 2 86 12 1.7 2.3

3 82 2,428 4,734 7,163 14 19 65 15 5.4 7.8

4 83 2,567 4,570 7,138 39 43 32 24 9.2 16.0

5 84 2,620 4,518 7,137 36 53 19 28 7.5 11.3

6 86 2,670 4,464 7,133 40 62 7 31 5.5 7.7

7 90 3,060 4,273 7,333 ­157 84 1 15 10.3 14.0

8 95 3,267 4,057 7,324 ­148 82 1 17 9.0 12.5

ES.3.7 Shipments Analysis

Shipment forecasts are needed to calculate the national impacts of standards on energy

use, NPV, and future manufacturer cash flows for each product under consideration. DOE’s

shipments models consider new construction and replacements. Rather than simply extrapolating

a current shipments trend, the analysis uses driver input variables to forecast sales in each market

segment. For new housing units, annual product shipments are equal to the number of new

housing units built multiplied by the purchase rate, which is determined by the market share of

the product under consideration. To estimate shipments due to replacements, the models use

sales in previous years and assumptions about the product lifetime, which determine how long an

appliance is likely to remain in use.

Chapter 9 of the TSD provides additional detail on the shipments analysis.

Figure ES.3.1 through Figure ES.3.3 illustrate the results of the shipments analysis for

each of the heating products under consideration.

ES­24

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
0.00 

1.00 

2.00 

3.00 

4.00 

5.00 

6.00 

7.00 

2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 

Millions of Units

Gas­Fired 

Storage 

Electric 

Storage 

Oil­Fired 

Storage 

Gas­Fired 

Instantaneous 

Figure ES.3.1 Forecasted Shipments for Water Heaters, 2015–2043 (Million Units)

0.000 

0.050 

0.100 

0.150 

0.200 

0.250 

0.300 

2013 2017 2021 2025 2029 2033 2037 2041 

Millions of Units

Gas Wall Fan 

Gas Wall 

Gravity 

Gas Floor 

Gas Room 

Figure ES.3.2 Forecasted Shipments for Direct Heating Equipment, 2013–2043 (Million

Units)

ES­25

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
0.000 

0.100 

0.200 

0.300 

0.400 

0.500 

0.600 

0.700 

0.800 

0.900 

2013201520172019202120232025202720292031203320352037203920412043 

Millions

of Units

Pool Heaters 

Figure ES.3.3 Forecasted Shipments for Pool Heaters, 2013–2043 (Million Units)

To the extent that revised energy conservation standards result in an increase in the price

of a covered product compared to a competing product in the market, some consumers (or home

builders in the case of shipments for new construction) may purchase the competing product

instead. Three of the four water heater product classes—gas­fired storage water heaters, electric

storage water heaters, and instantaneous gas­fired water heaters—compete with one another to

some degree. DOE considered the nature of the competition among the products in the

replacement and new construction market segments separately in order to assess the potential

impact of energy conservation standards on shipments.

The cost of replacing a gas­fired storage water heater with an electric storage water heater

is substantial because of installation complexity. In new construction, builders generally will

install a gas­fired water heater if gas is available. In both new and replacement installations, a

large increase in the price of a gas­fired water heater compared to an electric water heater likely

would be necessary to induce consumers to replace a gas water heater with an electric unit, or to

induce builders to install an electric water heater instead of a gas unit. Results of DOE’s current

LCC suggested that efficiency levels that significantly increase the installed cost of gas water

heaters are not cost­effective by a large margin. It is unlikely that consumers would switch from

a gas­fired to an electric storage water heater.

The analysis indicated that electric heat pump water heaters yield large average LCC

savings. Because this product has a higher installed cost than typical gas­fired storage water

heaters do, DOE conducted an analysis of the potential for switching from an electric heat pump

water heater to a gas­fired water heater. DOE considered several potential combinations of

energy efficiency levels for electric and gas­fired storage water heaters. DOE estimated that if an

energy­efficiency standard for electric water heaters were to require heat pump technology,

annual electric water heater shipments would be less than in the no­switching case by 404,000

units per year in cases where a gas water heater standard requires natural draft, and by 162,000

units per year in cases where a gas water heater standard requires a power vent.

ES­26

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
ES.3.8 National Impact Analysis

The NIA assesses the NPV of total consumer LCC and NES. DOE prepared an NES

spreadsheet model to forecast energy savings and national consumer economic costs and savings

resulting from new standards. The model uses typical values for inputs. Chapter 2 of the TSD

summarizes the methodology for the NIA; chapter 10 provides additional detail on the analysis.

ES.3.8.1 National Energy Savings Analysis

DOE calculated annual NES as the difference between national energy consumption in

the base case (without new efficiency standards) and in each higher efficiency standard case.

DOE estimated energy consumption and savings based on site energy and converted the

electricity consumption and savings to source energy. Cumulative energy savings are the sum of

the annual NES, which DOE determined over specified periods.

In its analysis of energy consumption, DOE considered the rebound effect, which refers

to increased energy consumption in response to actions that increase energy efficiency and

reduce consumer costs. The logic behind the rebound effect is that because more energy efficient

products lower the marginal cost of the end­use service compared to less efficient products, some

consumers give up part of the potential energy savings to receive more service. Based on

available information, DOE used a rebound effect of 10 percent for water heaters, 15 percent for

direct heating equipment, and 10 percent for pool heaters.

The NES results shown in Table ES.3.34 through Table ES.3.36 are cumulative to 2043

or 2045 (for water heaters) and are shown as primary energy savings in quads (quadrillion Btus).

Table ES.3.34 Cumulative National Energy Savings Results: Water Heaters

Efficiency

Gas­Fired

Storage

Electric Storage Oil­Fired

Storage

Instantaneous GasFired

Level EF NES

(quads) EF NES(quads) EF NES(quads) EF NES(quads)

1 0.62 0.98 0.91 0.24 0.54 0.001 0.69 0.00

2 0.63 1.31 0.92 0.58 0.56 0.004 0.78 0.00

3 0.64 1.24 0.93 0.93 0.58 0.006 0.80 0.00

4 0.65 1.56 0.94 1.32 0.60 0.008 0.82 0.02

5 0.66 1.88 0.95 1.71 0.62 0.011 0.84 0.14

6 0.77 4.26 2.2 8.70 0.66 0.018 0.85 0.21

7 0.68 0.022 0.92 0.69

ES­27

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.35 Cumulative National Energy Savings Results: Direct Heating Equipment

Efficiency Gas Wall Fan Gas Wall Gravity Gas Room Gas Floor

Level AFUE

(%)

NES

(quads)

AFUE

(%)

NES

(quads)

AFUE

(%)

NES

(quads)

AFUE

(%)

NES

(quads)

1 75 0.018 66 0.008 65 0.010 58 0.000

2 76 0.024 68 0.020 66 0.026 61 0.000

3 77 0.030 71 0.044 67 0.045 62 0.000

4 80 0.052 72 0.068 68 0.066 65 0.001

5 75 0.087 70 0.166 78 0.002

6 78 0.302

7 93 0.523

Table ES.3.36 Cumulative National Energy Savings Results: Pool Heaters

Efficiency Level Thermal Efficiency (%) NES (quads)

1 79 0.001

2 81 0.020

3 82 0.043

4 83 0.171

5 84 0.222

6 86 0.336

7 90 0.560

8 95 0.814

ES.3.8.2 Net Present Value Analysis

DOE calculated net monetary savings each year as the difference between total savings in

operating costs (including electricity, repair, and maintenance) and increases in total installed

costs (including product price and installation) in the base case and standards case. DOE

calculated savings over the life of the product using discount rates of 7 percent and 3 percent to

discount future costs and savings to the present. DOE calculated NPV as the difference between

the present value of operating cost savings and the present value of increased total installed costs.

The NPV results for each of the three heating products are shown in Table ES.3.37 through

Table ES.3.42 as the discounted value of the net savings in dollar terms.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table ES.3.37 Cumulative Net Present Value: Gas­Fired Storage Water Heaters

Efficiency Level EF

NPV

3% Discount Rate

(billion 2007$)

7% Discount Rate

(billion 2007$)

1 0.62 7.62 2.91

2 0.63 9.50 3.56

3 0.64 ­22.35 ­11.66

4 0.65 ­20.14 ­10.87

5 0.66 ­18.34 ­10.25

6 0.77 ­13.12 ­9.66

Table ES.3.38 Cumulative Net Present Value: Electric Storage Water Heaters

Efficiency Level EF

NPV

3% Discount Rate

(billion 2007$)

7% Discount Rate

(billion 2007$)

1 0.91 1.94 0.72

2 0.92 4.84 1.82

3 0.93 6.58 2.33

4 0.94 6.78 2.06

5 0.95 8.63 2.60

6 2.2 28.08 5.89

Table ES.3.39 Cumulative Net Present Value Results: Oil­Fired Storage Water Heaters

Efficiency Level EF

NPV

3% Discount Rate

(billion 2007$)

7% Discount Rate

(billion 2007$)

1 0.54 0.009 0.003

2 0.56 0.026 0.009

3 0.58 0.046 0.017

4 0.6 0.073 0.028

5 0.62 0.099 0.0038

6 0.66 0.041 0.006

7 0.68 ­0.018 ­0.024

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Table ES.3.40 Cumulative Net Present Value: Instantaneous Gas­Fired Water Heaters

Efficiency Level EF

NPV

3% Discount Rate

(billion 2007$)

7% Discount Rate

(billion 2007$)

1 0.69 0.00 0.00

2 0.78 0.00 0.00

3 0.8 ­0.04 ­0.02

4 0.82 0.06 0.00

5 0.84 0.54 0.09

6 0.85 0.81 0.13

7 0.92 ­1.81 ­1.78

Table ES.3.41 Cumulative Net Present Value: Direct Heating Equipment

Gas Wall Fan Gas Wall Gravity Gas Room Gas Floor

7% 3% 7% 3% 7% 3% 7% 3%

Efficiency Discount Discount Discount Discount Discount Discount Discount Discount

Level Rate Rate Rate Rate Rate Rate Rate Rate

(billion (billion (billion (billion (billion (billion (billion (billion

2007$) 2007$) 2007$) 2007$) 2007$) 2007$) 2007$) 2007$)

1 0.056 0.162 0.022 0.058 0.012 0.048 0.000 0.000

2 0.066 0.198 0.069 0.170 0.033 0.127 0.002 0.004

3 0.075 0.235 0.141 0.354 0.056 0.218 0.002 0.004

4 0.054 0.210 0.078 0.291 0.078 0.313 0.003 0.008

5 0.053 0.258 ­0.017 0.346 0.006 0.014

6 0.002 0.422

7 0.001 0.963

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Table ES.3.42 Cumulative Net Present Value: Gas­Fired Pool Heaters

Efficiency Level Thermal Efficiency

(%)

NPV

3% Discount

Rate

7% Discount

Rate

(billion 2007$) (billion 2007$)

1 79 0.007 0.003

2 81 0.190 0.079

3 82 0.287 0.110

4 83 0.922 0.326

5 84 1.087 0.372

6 86 1.252 0.410

7 90 0.030 ­0.333

8 95 0.924 ­0.070

ES.3.8.3 Impact of Standards on Natural Gas Prices and Overall Economic Benefits

The NIA examines the potential impacts alternative standard levels may have on

consumers who purchase the considered products. To evaluate potentially important indirect

effects of energy conservation standards on energy users in general, DOE analyzed the potential

impact of new water heater standards on natural gas prices and the associated benefits for all

natural gas consumers in all sectors of the economy.

For its analysis, DOE considered two scenarios for new water heater standards. One

scenario examined the effects of selected efficiency standards levels on gas­fired storage water

heaters (at 0.63 EF), instantaneous gas­fired water heaters (at 0.85 EF), and electric storage water

heaters (at 0.95 EF). These are the energy efficiency levels found to have the greatest average

LCC savings and greatest NPV of consumer benefit. The selected standard for electric storage

water heaters was 0.95 EF. The second scenario (the max­tech scenario), examined the effects on

water heaters of standards that reflect the max­tech energy efficiency levels. This scenario

indicates the upper bound for impacts on natural gas prices.

DOE’s analysis showed an annual change in average U.S. natural gas wellhead price,

relative to the base case of no new standards, for each scenario. The price reduction averaged 0.7

cents per MMBtu (in 2006$) in the selected efficiency levels scenario and 2.3 cents per MMBtu

(in 2006$) in the max­tech scenario. In percentage terms, the average price reduction equals 0.1

percent in the selected efficiency levels scenario and 0.4 percent in the max­tech scenario.

Although there is only a small estimated annual reduction in natural gas prices resulting

from new water heater standards, the associated economy­wide savings in natural gas

expenditures over the forecast period are substantial. DOE’s calculation of the NPV of the

savings in natural gas expenditures for 2015–2043 (with a 7 percent discount rate) yields a value

of $1.0 billion for the savings in the selected efficiency level scenario and $3.6 billion in the

max­tech scenario.

Chapter 2 of the TSD summarizes the analytical methodology for analyzing impacts on

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
natural gas prices; chapter 10 provides additional detail on the analysis.

ES.3.9 Preliminary Manufacturer Impact Analysis

The preliminary MIA focuses on manufacturers of residential heating products. Potential

impacts include financial effects, both quantitative and qualitative, that might result from new

energy conservation standards and consequently lead to changes in manufacturing practices for

water heaters, direct heating equipment, and/or pool heaters. DOE identified potential impacts

through interviews with manufacturers and other interested parties. Chapter 12 of the preliminary

TSD includes details on the key issues DOE identified during the preliminary MIA.

DOE identified key issues regarding the following for water heaters:

• ENERGY STAR criteria;

• increased installation costs for water heaters;

• increased shipping costs for water heaters;

• safety concerns for instantaneous water heaters operating near 0.85 EF;

• fuel switching (from heat pump to gas­fired water heaters); and

• equipment switching (from gas­fired storage to instantaneous gas­fired water

heaters).

DOE identified key issues regarding the following for direct heating equipment:

• increased installation costs for direct heating equipment; and

• derating (and utility impacts).

DOE identified key issues regarding the following for pool heaters:

• increased installation costs for pool heaters; and

• product price increases resulting in a declining market.

During the current stage, DOE conducted the preliminary MIA by first identifying

products, methods, and practices used in the residential heating products industry. Next, DOE

determined how energy efficiency improvements would affect cost, production, and various

other manufacturing metrics. Finally, DOE interviewed manufacturers for feedback. DOE

developed and distributed a questionnaire for use during the interviews. At the beginning of the

interview process, DOE interviewed manufacturers and adjusted the analysis as appropriate,

based on the feedback received. In the interviews, DOE also examined any additional effects on

competition, manufacturing capacity, direct employment, and the cumulative burden of other

regulations affecting manufacturers, as well as several issues raised by individual manufacturers.

ES.4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT

DOE is interested in receiving comments on all aspects of this preliminary analysis. DOE

especially invites comments or data to improve DOE’s analysis, including data or information

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that will respond to the following questions or concerns that were raised in response to the

Framework Document and in preparation of the preliminary TSD.

ES.4.1 Organization of Water Heater Product Classes for Oil­Fired Storage and

Instantaneous Gas­Fired Water Heaters

DOE seeks comment on the organization of product classes and the energy efficiency

relationship between rated storage volume and energy factor for oil­fired storage water heaters

and instantaneous gas­fired water heaters. See chapter 2, section 2.2.2, of the preliminary TSD.

ES.4.2 Product Class for Vented Fireplace Heaters

DOE has not established a separate product class for fireplace heaters because the

products provide the same utility and function as gas wall furnaces or gas room heaters. DOE

also notes that the current AHRI directory lists fireplace heaters as either room heaters or wall

furnaces. DOE requests comments concerning the need for a separate product class for fireplace

heaters. See chapter 2, section 2.2.9, of the preliminary TSD.

ES.4.3 Organization of Direct Heating Equipment Product Classes

DOE seeks comment on the organization of product classes and the relationship between

the AFUE and input capacity of gas wall, fan­type direct heating equipment; gas wall gravitytype direct heating equipment; gas floor­type direct heating equipment; and gas­fired room

heaters. See chapter 2, section 2.2.2.11, of the preliminary TSD.

ES.4.4 Conclusion from Heat Pump Water Heater Preliminary Screening Analysis

DOE seeks comments on the viability of heat pump water heaters as a technology for

electric storage water heaters and whether these water heaters would be practicable to

manufacture, service, and install on a scale necessary to serve the relevant market by the

effective date of any amended standard, which is 5 years after publication of the final rule.

In addition, DOE seeks comment on several specific issues regarding integral heat pump

water heaters, including: (1) whether manufacturers would be able to finance the investment

costs necessary to convert their existing product lines to heat pump water heaters by the effective

date of an amended standard; (2) what percentage of manufacturers’ product lines would be

converted to heat pump water heaters by the effective date of an amended standard (e.g., if

standards did not reach the levels provided by heat pump water heaters); (3) how the market for

heat pump water heaters has changed since the January 2001 final rule, and the number of

installations that would incur a significant increase in cost due to extensive modifications that

will have to be made to a residence to accommodate a heat pump water heater; and (4) heat

pump water heater programs that have been conducted since the January 2001 final rule. See

chapter 2, section 2.3.6, of the preliminary TSD.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
ES.4.5 Condensing Room Heaters

DOE seeks additional comment on Lennox’s concerns about condensate drains on

freestanding room heaters. See chapter 2, section 2.3.7, of the preliminary TSD.

ES.4.6 Safety Concerns for Near­Condensing Efficiency Levels for Gas­Fired Pool

Heaters

DOE received comments from manufacturers regarding safety concerns at 85 and 86

percent thermal efficiency for gas­fired pool heaters. DOE seeks comments on how

manufacturers would mitigate the formation of corrosive condensation at 86­percent thermal

efficiency for gas­fired pool heaters. DOE also seeks comments on the changes manufacturers

would make to the product design and the effects on MPC that would result if the amended

energy conservation standards were at 86 percent thermal efficiency. See chapter 2, section

2.4.3.1, of the preliminary TSD.

ES.4.7 Development of Energy Efficiency Equations for Gas­Fired and Electric Storage

Water Heaters

DOE seeks comments on approaches to develop the energy efficiency equations for all

storage volumes and all efficiency levels of gas­fired and electric storage water heaters.

Specifically, DOE seeks comment on an alternative approach based on model series that

incorporate current market data from AHRI’s Consumers’ Directory to generate revised equation

slopes that minimize the number of models that would become obsolete. DOE also seeks

comment on validating the energy efficiency equations DOE is considering, in particular, the

approach to test and tear down products. See chapter 2, section 2.4.4, of the preliminary TSD.

ES.4.8 Hot Water Use for Instantaneous Water Heaters

DOE developed the hot water draw model for storage­type water heaters. Because

instantaneous water heaters have no storage volume, DOE did not explicitly model their hot

water use. Instantaneous water heaters have the potential to deliver “unlimited” hot water during

times of high household demand. DOE found no adequate data showing higher hot water use for

instantaneous water heaters, however, so it estimated that a household with an instantaneous

water heater uses the same volume of hot water as it would with a storage­type water heater.

DOE requests comments on the above assumption, as well as data that would support use of an

alternative assumption. See chapter 2, section 2.6.1, of the preliminary TSD.

ES.4.9 Energy Use by Instantaneous Gas­Fired Water Heaters

For instantaneous water heaters, DOE calculated the energy use with the approach used

for storage water heaters, modified to account for the absence of a storage tank. DOE applied a

performance factor to account for evidence that the rated energy efficiency of instantaneous gasfired water heaters overstates actual performance. Preliminary results from a study of

instantaneous water heater installations conducted for the California Energy Commission

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
indicate a performance drop­off at small draw volumes1

. To account for this phenomenon, the

study recommends reducing the listed EF for instantaneous gas­fired water heaters by 8.8

percent. DOE chose to incorporate this recommendation, and did so by applying a factor that

increases the calculated energy for instantaneous gas­fired water heaters at each EF by 8.8

percent. DOE requests comments on this evaluation of energy use by instantaneous gas­fired

water heaters. See chapter 2, section 2.6.1, of the preliminary TSD.

ES.4.10 Inputs to Life­Cycle Cost Analysis for Heat Pump Water Heaters

DOE seeks comments on its estimates of installation, repair, and maintenance costs for

heat pump water heaters. In particular, DOE is interested in receiving any data on the magnitude

of these costs to consumers. See chapter 2, section 2.7.1, of the preliminary TSD.

ES.4.11 Market Penetration of Instantaneous Gas­Fired Water Heaters

There is considerable uncertainty about the extent of the future market penetration of

instantaneous water heaters. For this reason, DOE modeled three scenarios for their market

penetration. The scenarios are based on experience with instantaneous water heaters in Australia,

where the percentage of these products in total gas­fired water heater shipments has grown

considerably in the past decade. Despite some differences between the United States and

Australian water heater markets, DOE believes that the market evolution in Australia provides an

approximate model for scenarios for the United States. DOE’s scenario of high future market

penetration of instantaneous gas­fired water heaters in the United States assumes that the

evolution in the U.S. market is 25 percent lower per year than that seen and projected for

Australia. DOE chose this approach because, while Australian prices of gas storage and gas

instantaneous water heaters are comparable, current U.S. prices of gas storage water heaters are

lower, which suggests that instantaneous water heaters would likely be less popular in the U.S.

than in Australia. The medium and low scenarios assume that the shape of the market penetration

curve in the United States is the same as that for the high scenario, but is lower by 50 and 75

percent, respectively. DOE seeks comments on its approach for estimating the market

penetration of instantaneous gas­fired water heaters. See chapter 9, section 9.3.1, of the

preliminary TSD.

ES.4.12 Forecast of Direct Heating Equipment Shipments

The unavailability of separate forecasting shipment data related to replacements and new

home installations makes it difficult to forecast the direct heating equipment market. To address

this shortcoming, DOE held shipments of each product class category, except gas floor direct

heating equipment,2 constant at the 2006 level for the forecast period. DOE requests comments

on this approach, as well as information to support alternative approaches. See chapter 9, section

1 Field and Laboratory Testing of Tankless Gas Water Heater Performance, Davis Energy Group, California Energy

Commission report, 2006.

2 For gas floor direct heating equipment, DOE projected that the shipments will follow the downward trend seen in

the 2000–2007 AHRI’s historical shipments data. Consequently, the data show that this product, which is used only

for replacement installations, has very low and declining shipments.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
9.4.1, of the preliminary TSD.

ES.4.13 Forecast of Efficiencies in the Base Case and Standards Cases

Because key inputs to the calculation of the NES and NPV depend on the estimated

efficiencies under the base case (without standards) and the standards case, forecasted

efficiencies are of great importance to the analysis. DOE forecasted base and standards case

efficiencies, believing they will remain frozen throughout the analysis period (2013–2043). DOE

used a roll­up scenario to establish the shipments­weighted efficiency for the year that standards

are to become effective (2013 or 2015). Under a roll­up scenario, product efficiencies in the base

case that did not meet the standards level under consideration would roll up to meet the new

standards level. DOE requests feedback on its methods for both forecasting efficiencies and

estimating the impact that standards will have on product efficiencies. See chapter 10, section

10.2, of the preliminary TSD.

ES.4.14 Switching from an Electric Heat Pump Water Heater to a Gas­Fired Water

Heater

The level of efficiency offered by electric heat pump water heaters provides large average

LCC savings, but this product has a higher installed cost than typical gas­fired storage water

heaters, and it is new to consumers and builders. DOE therefore analyzed the potential for

consumers to switch from an electric heat pump water heater to a gas­fired water heater. DOE

considered several potential combinations of standards for electric and gas­fired storage water

heaters: (1) electric heat pump water heater and a gas­fired storage water heater using natural

draft; (2) electric heat pump water heater and a gas­fired storage water heater using power

venting; and (3) electric heat pump water heater and a gas­fired storage water heater that has

condensing technology. DOE evaluated the potential for switching in the replacement and new

construction markets separately. DOE requests comments on its analysis of switching from

electric heat pump water heaters to gas­fired water heaters. See chapter 2, section 2.8.1, of the

preliminary TSD.

ES.4.15 Rebound Effect

To evaluate the rebound effect on energy efficiency improvements for the considered

heating products, DOE searched the literature on the rebound effect and studied how the national

energy modeling system incorporates a rebound effect. Based on the available information, DOE

applied a rebound effect of 10 percent for water heaters, 15 percent for direct heating equipment,

and 10 percent for pool heaters. DOE requests comments on its estimates of the rebound effect

for the three heating products. See chapter 2, section 2.7.2, of the preliminary TSD.

ES.4.16 Impact on Natural Gas Prices Resulting from Energy Conservation Standards

for the Three Heating Products

DOE requests comments on the appropriateness of considering the potential impact on

natural gas prices resulting from amended energy conservation standards for the three heating

products. DOE also requests comment on its estimated magnitude of such impacts and the extent

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
to which these impacts should be considered transfers from producers to consumers, rather than

net economic benefits. More broadly, DOE seeks comment on what weight it should give to

these price impacts in its consideration of the overall benefits and burdens of higher efficiency

standards for the three heating products. See Chapter 2, section 2.8.5 of the preliminary TSD.

ES.4.17 Super­Low NOx Requirements and Cumulative Regulatory Burden Impacts

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of new or

revised DOE standards and other regulatory actions affecting the same equipment. Based on its

own research and discussions with manufacturers, DOE identified one particular regulation

relevant to residential water heaters, direct heating equipment, and pool heaters, involving low

nitrogen oxide (NOx) requirements (e.g., South Coast Air Quality Management District

(SCAQMD). DOE seeks comments on the cost of compliance and any other issues associated

with complying with the super­low NOx requirements (e.g., the SCAQMD districts). See

Chapter 2, section 2.9.4, of the preliminary TSD.

ES.4.18 Impacts on Domestic Manufacturers

As part of the preliminary manufacturing impact analysis, DOE asked manufacturers

about the potential impacts of amended conservation standards on their business, employment

levels, market share, and competitive positions within the marketplace. Some manufacturers

stated potential loss of market share to international manufacturers as a concern. As outlined

above, potential equipment switching is a major concern for gas­fired storage water heating

manufacturers, as is the potential for DOE to change the current purchasing patterns of

consumers with amended energy conservation standards. As part of the NOPR phase and in

response to the publication of the notice of meeting and the availability of the preliminary

analyses, DOE seeks comments from interested parties about their potential loss of market share,

changes in the efficiency distribution within each industry, and the total reduction in product

shipments at each amended energy conservation standard level DOE is considering. See Chapter

2, section 2.9.5, of the preliminary TSD.

ES.4.19 Product Class Prioritization

Because of the large number of product classes for the three heating products, in the

current phase DOE has focused on conducting a thorough examination of the product classes

with the greatest energy savings potential. To determine which product classes have the greatest

energy savings potential, DOE relied on industry­supplied shipment data and addressed product

classes with the highest shipment values first. DOE then extended the results of its analyses to

the remaining product classes to all of the product classes covered by the preliminary analyses.

DOE specifically seeks feedback on its approach to product­class prioritization and the approach

to extend the technical analysis from high­shipment product classes to low­shipment product

classes.

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ES.4.20 Criteria for the Selection of Trial Standard Levels

For a given product consisting of several product classes, DOE will develop each trial

standard level (TSL) so that it is comprised of energy efficiency levels from each class that

exhibit similar characteristics. For example, in the case of direct heating equipment, one of the

TSLs will likely consist of the efficiency levels from each class with a minimum LCC. DOE will

also attempt to limit the number of TSLs considered for the NOPR by eliminating energy

efficiency levels that do not exhibit significantly different economic and/or engineering

characteristics from levels already selected as a TSL. DOE seeks feedback on the criteria it

should use for selecting TSLs.

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2