EXECUTIVE SUMMARY

ES.1 Overview o f Preliminary Activities

............ ......................................................................... 1

ES.2 Overview o f the Preliminary Analyses and the Preliminary Technical Support

Do cument

............................................................................................................................. 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

............................................................................. 2 8

ES.3 .8.3 Impact of Standards on Natural Gas Prices and Overall Economic Benefits

.. 3 1

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 f or Oil­Fired Storage and

In stantaneous 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

An alysis

............................................................................................................ 33

ES.4 .5 Condensing Room Heaters

.............................................................................. 3 4

ES.4 .6 Safety Concerns for Near­Condensing Efficiency Levels for Gas­Fired

Po ol Heaters

..................................................................................................... 34

ES.4 .7 Development of Energy Efficiency Equations for Gas­Fired and Electric

St orage 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

................. 3 5

ES.4 .11 Market Penetration of Instantaneous Gas­Fired Water Heaters

...................... 3 5

ES.4 .12 Forecast of Direct Heating Equipment Shipments

........................................... 35

ES.4 .13 Forecast of Efficiencies in the Base Case and Standards Cases

...................... 3 6

ES.4 .14 Switching from an Electric Heat Pump Water Heater to a G as­Fired Water

He ater

............................................................................................................... 36

ES.4 .15 Rebound Effect

................................................................................................ 3 6

ES.4 .16 Impact on Natural Gas Prices Resulting from Energy Conservation

St andards for the Three Heating Products

....................................................... 36

ES­iES.4.17 Super­Low NOx Requirements and Cumulative Regulatory Burden

Im pacts.............................................................................................................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

ES­iiEXECUTIVE SUMMARY

ES .1 OVERVIEW OF P RELIMINARY A CTIVITIES

Se ction 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 o r amended energy conservation

st andards, p romulgate standards that achieve the maximum improvement in energy efficiency

th at 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

pr eliminary analyses that DOE conducted in consideration of amended energy conservation

st andards for residential water heaters, d irect heating equipment, and pool heaters. Th e executive

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

pr eliminary analyses. Additionally, the executive summary delineates issues identified during the

an alyses about which DOE seeks comments from interested parties. Th ese issues are highlighted

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

te chnical support document (TSD).

Fi gure ES.3.1 p resents a s ummary of the analytical components of the standards­setting

pr ocess and illustrates how k ey results are generated. The focal point of the figure is the center

co lumn, labeled “Analyses.” Th e columns labeled “Key Inputs” and “Key Outputs” show h ow

th e analyses fit into the process and how t hey relate to each other. Key inputs are the types of

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

da tabases. D OE collects other inputs from interested parties or persons having special knowledge

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

pr ocess. Th e issues on which DOE seeks comment from interested parties derive from the key

re sults that are generated by the preliminary analyses. A rrows connecting analyses show t he

ty

pes of information that feed from one analysis to another.

ES­1Figure ES.3.1 F low Diagram of Analyses for the Residential Heating Products

Ru lemaking Process

ES­2ES.2 OVERVIEW OF THE PRELIMINARY A NALYSES AND T HE

PR ELIMINARY T ECHNICAL SUPPORT DOCUMENT

Fo r the preliminary stage, DOE p ublishes a p reliminary notice of public meeting in the

Fe deral Register

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

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

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

de veloped in the period preceding a n otice of proposed rulemaking (NOPR).

The preliminary TSD d escribes each analysis in detail, p roviding detailed descriptions of

inp uts, s ources, m ethodologies, a nd results. C hapter 2 o f the preliminary TSD provides an

ov erview o f each analysis, t he comments received in response to the analytical approaches DOE

de scribed in the framework document, and DOE’s responses to those comments. Th e remaining

ch apters of the preliminary TSD, which are described b elow, address the analyses performed in

th is preliminary stage.

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

an d technology options, i ncluding prototype designs ( chapter 3).

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

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

af

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

(c hapter 4).

An engineering analysis develops cost­efficiency relationships that show t he

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

co nsumer through an analysis of engineering markups, w hich convert manufacturer production

co st (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

(c hapter 7).

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

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

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

in stalled cost likely to result directly from the imposition of a g iven standard (chapter 8).

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

na tional impacts of standards on energy consumption, n et present value (NPV), and future

ma nufacturer cash flows (chapter 9).

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

th e NPV o f total consumer LCC and national energy savings (NES) (chapter 10).

ES­3A life­cycle cost analysis for subgroups evaluates the effects of energy conservation

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

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

en ergy conservation standards on manufacturers, such as effects on expenditures for capital

co nversion, marketing costs, s hipments, a nd research and development costs (chapter 12).

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

ge neration 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 R ESULTS OF THE ANALYSES

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

th e TSD.

ES .3.1 Market and Technology Assessment

Wh en initiating an analysis of potential energy efficiency standards for appliances, D OE

de velops information for the products concerned on the present and past industry structure and

ma rket characteristics. R elying on publicly available information, this activity quantitatively and

qu alitatively assesses industries and products.

Wh en evaluating and establishing energy conservation standards, D OE generally divides

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

pe rformance­related features that affect efficiency. Different energy conservation standards may

ap ply to different product classes. ( 42 U.S.C. 6295(q)) Table ES.3.1 d escribes all of the product

cl asses examined in the preliminary analyses.

ES­4Table ES.3.1 P roduct Classes

Re sidential Water Heater Type Ch aracteristics

Ga s­Fired Storage Type Nom inal input of 75,000 Btu/h or less;

ra ted storage volume from 20 to 100

ga llons

Oi l­Fired Storage Type Nom inal input of 105,000 Btu/h or less;

ra ted storage volume of 50 gallons or less

Ele ctric Storage Type Nom inal input of 12 kW (40,956 Btu/h) or

le ss; rated storage volume from 20 to 120

ga llons

In stantaneous Gas­Fired Nom inal input of over 50,000 Btu/h up t o

20 0,000 Btu/h; rated storage volume of 2

g allons or less

Di rect Heating Equipment Type He ating Capacity (Btu/h)

Ga s Wall Fan Type Up to 42,000

Ov er 42,000

Up to 10,000

Ov er 10,000 up t o 12,000

Ov er 12,000 up t o 15,000

Ga s Wall Gravity Type Ov er 15,000 up t o 19,000

Ov er 19,000 up t o 27,000

Ov er 27,000 up t o 46,000

Ov er 46,000

Ga s Floor Up to 37,000

Ov er 37,000

Up to 18,000

Ov er 18,000 up t o 20,000

Ga s Room Ov er 20,000 up t o 27,000

Ov er 27,000 up t o 46,000

Ov er 46,000

Po ol Heater Type Ch aracteristics

Re sidential Pool Heaters Ga s­Fired

Fo r the three considered heating products (residential water heaters, d irect heating

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

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

tr ends in product characteristics and retail markets. Th is information provided data and resource

ma terial throughout the analysis.

DO E reviewed literature and interviewed manufacturers to develop a n overall

un derstanding of the residential heating products industry in the United States. Industry

pub lications, i ncluding trade journals, l iterature from manufacturers, government agencies, and

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

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

ES­5pool heater) and capacity (storage volume or fuel input capacity); (3) product information; and

(4 ) industry trends. C hapter 3 o f the preliminary TSD d escribes the market analysis and resulting

in formation.

DO E typically uses information about existing and past technology options and prototype

de signs to determine which technologies and combinations of technologies manufacturers would

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

de velops a l ist of technologies to be considered. The identified technologies initially include all

th ose that DOE b elieves are technologically feasible.

DO E developed its list of technologically feasible technologies for each of the three

pr oducts from trade publications, t echnical papers, and manufacturer literature and through

co nsultation with manufacturers of components and systems. B ecause existing products contain

ma ny technologies for improving product efficiency, product literature and direct examination

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

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

us ing the relevant DOE test procedure.

ES .3.2 Screening Analysis

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

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

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

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

te chnology assessment identified as feasible. In consultation with interested parties, D OE

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

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

he alth and safety. In the subsequent engineering analysis, D OE further examines the technology

opt ions that it did not remove from consideration in t he screening analysis.

ES .3.3 Engineering Analysis

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

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

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

ma nufacturers, a nd the Nation. Chapter 5 d escribes t he product classes DOE analyzed, the

re presentative baseline units, t he efficiency levels DOE considered, the methodology DOE used

to develop t he manufacturing production cost model, the cost­efficiency results, a nd the

me thodology DOE used to extend the analysis to classes of products that comprise low s hipment

vo lumes.

ES .3.3.1 Product Classes Analyzed

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

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

ho wever, the engineering analysis did not directly analyze all product classes. D OE used the

ES­6shipments data obtained from the market and technology assessment (chapter 3) to prioritize the

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

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

ma rkets. B ased on analysis of four product classes within water heaters, f our product classes

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

co st­efficiency curves. C hapter 5 i ncludes additional details on the representative product classes

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

DO E also reviewed the energy efficiency equations t hat define existing Federal energy

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

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

co nservation standards are representative of today’s markets. D OE investigated potential

re visions to existing energy efficiency equations to r eflect current market conditions. C hapter 5

o f the preliminary TSD i ncludes information on the approach DOE used to develop a lternative

en ergy efficiency equations for gas­fired and electric storage water heaters.

ES .3.3.2 Manufacturing Cost Assessment

DO E estimated the manufacturing costs associated with an increase in energy efficiency

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

mo del units, a nalyzing the materials and manufacturing processes, analyzing the design

ap proaches manufacturers use, and developing a s preadsheet model to describe costs. D OE b uilt

a d etailed model for assessing manufacturing cost that estimates manufacturer production cost.

DO E also aggregated manufacturers’ costs to maintain c onfidentiality of the data. DOE obtained

inp ut from interested parties on the manufacturer production cost estimates and manufacturing

co st model inputs. C hapter 5 o f the preliminary TSD includes information on the inputs used to

de termine the manufacturing cost, including material, labor, and overhead prices. C hapter 5 a lso

in cludes information on the various components and features incorporated into designs for

re sidential heating products.

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

he ating products. Th e cost­efficiency curves are described by the efficiency levels DOE

an alyzed, 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.

ES­7Table ES.3.2 E fficiency Level, Manufacturer Production Cost, and Manufacturer

Se lling Price for Gas­Fired Storage Water Heaters, 40­Gallon Volume

Ef ficiency Level (EF) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline

(EF

= 0.59) St anding Pilot and 1′′

In sulation $1 60 $2 21

Eff iciency Level 1

( EF

= 0.62) St anding Pilot and

1.5 ′′ Insulation $1 67 $2 30

Eff iciency Level 2

( EF

= 0.63) St anding Pilot and 2′′

In sulation $1 75 $2 42

Eff iciency Level 3

( EF

= 0.64) Ele ctronic Ignition,

Po wer Vent, and 1′′

In sulation $2 76 $3 81

Eff iciency Level 4

( EF

= 0.65) Ele ctronic Ignition,

Po wer Vent and 1.5′′

In sulation $2 83 $3 91

Eff iciency Level 5

( EF

= 0.66) Ele ctronic Ignition,

Po wer Vent, and 2′′

In sulation $2 91 $4 02

Eff iciency Level 6–Max

Tec h (EF

= 0 .77) Co ndensing, Power

Ve nt, and 2′′

In sulation $4 25 $5 87

ES­8Table ES.3.3 E fficiency Level, Manufacturer Production Cost, and Manufacturer

Se lling Price for Oil­Fired Storage Water Heaters, 32­Gallon Volume

wi th Burner Assembly

Ef ficiency Level (EF) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (EF

= 0.53) Ele ctronic Ignition and 1′′ Fiberglass

In sulation $5 10 $704

Eff iciency Level 1

( EF

= 0.54) Ele ctronic Ignition and 1.5′′

Fi berglass Insulation $5 18 $715

Eff iciency Level 2

( EF

= 0.56) Ele ctronic Ignition and 2′′ Fiberglass

In sulation $5 29 $730

Eff iciency Level 3

( EF

= 0.58) Ele ctronic Ignition and 2.5′′

Fi berglass Insulation $5 39 $744

Eff iciency Level 4

( EF

= 0.60) Ele ctronic Ignition and 2′′ Foam

In sulation $5 34 $737

Eff iciency Level 5

( EF

= 0.62) Ele ctronic Ignition, 2.5′′ Foam

In sulation $5 47 $755

Eff iciency Level 6

( EF

= 0.66) Ele ctronic Ignition, 1′′ Fiberglass

In sulation, and Enhanced Flue

Ba ffles $5 40 $745

Eff iciency Level 7

– Max

Tec h (EF

= 0 .68) Ele ctronic Ignition, 1′′ Foam

In sulation, and Enhanced Flue

Ba ffles $5 51 $760

Ta ble ES.3.4 E fficiency Level, Manufacturer Production Cost, and Manufacturer

Se lling Price for Electric Storage Water Heaters, 5 0­gallon Volume

Ef ficiency Level (EF) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (EF

= 0.90) 1.5 ′′ Foam Insulation $122 $168

Eff iciency Level 1

( EF

= 0.91) 2′′ Foam Insulation $1 28 $177

Eff iciency Level 2

( EF

= 0.92) 2.2 5′′ Foam Insulation $132 $182

Eff iciency Level 3

( EF

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

Eff iciency Level 4

( EF

= 0.94) 3′′ Foam Insulation $1 44 $199

Eff iciency Level 5

( EF

= 0.95) 4′′ Foam Insulation $1 60 $221

Eff iciency Level 6–Max Tech

(EF

= 2.2) He at Pump Water Heater $490 $676

ES­9Table ES.3.5 E fficiency Level, Manufacturer Production Cost, and Manufacturer

Se lling Price for Instantaneous Gas­Fired Water Heaters, 0 ­Gallon

St orage Volume, 199 Btu/h Input Capacity

Ef ficiency Level (EF) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (EF

= 0.62) Standing Pilot $2 25 $326

Eff iciency Level 1

( EF

= 0.69) St anding Pilot and Improved Heat

Exc hanger Area $2 35 $341

Eff iciency Level 2

( EF

= 0.78) Ele ctronic Ignition and Improved

He at Exchanger $2 70 $392

Eff iciency Level 3

( EF

= 0.80) Ele ctronic Ignition and Power Vent $343 $497

Eff iciency Level 4

( EF

= 0.82) Ele ctronic Ignition, Power Vent, and

Im proved Heat Exchanger Area $3 61 $523

Eff iciency Level 5

( EF

= 0.84) Ele ctronic Ignition, Power Vent, and

Im proved Heat Exchanger Area $3 79 $550

Eff iciency Level 6

( EF

= 0.85) Ele ctronic Ignition, Power Vent,

Di rect Vent, and Improved Heat

Exc hanger Area $3 88 $563

Eff iciency Level 7–Max

Tec h (EF

= 0 .92) Co ndensing $6 43 $932

Ta ble ES.3.6 E fficiency Level, Manufacturer Production Cost, and Manufacturer

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

Ca pacity

Ef ficiency Level (AFUE) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (AFUE

= 7 4) Standing Pilot $3 35 $490

Eff iciency Level 1

( AFUE

= 7 5) In termittent Ignition and 2­speed

Bl ower $3 82 $527

Eff iciency Level 2

( AFUE

= 7 6) In termittent Ignition and

Im proved Heat Exchanger $3 96 $546

Eff iciency Level 3

( AFUE

= 7 7) In termittent Ignition, 2­speed

Bl ower, and Improved Heat

Exc hanger $4 13 $570

Eff iciency Level 4–Max

Tec h (AFUE

= 8 0) In duced Draft and Electronic

Ig nition $4 68 $646

ES­10Table ES.3.7 E fficiency Level, Manufacturer Production Cost, and Manufacturer

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

to 46,000 Btu/h Input Capacity

Ef ficiency Level (AFUE) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (AFUE

= 6 4) St anding Pilot $1 98 $273

Eff iciency Level 1

( AFUE

= 6 6) St anding Pilot and Improved

He at Exchanger $2 24 $309

Eff iciency Level 2

( AFUE

= 6 8) St anding Pilot and Improved

He at Exchanger $2 31 $319

Eff iciency Level 3

( AFUE

= 7 1) St anding Pilot and Improved

He at Exchanger $2 59 $357

Eff iciency Level 4

( AFUE

= 7 2) Ele ctronic Ignition $2 84 $392

Eff iciency Level 5–Max Tech

(A FUE

= 7 5) In duced Draft $3 37 $465

Ta ble ES.3.8 E fficiency Level, Manufacturer Production Cost, and Manufacturer

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

Ca pacity

Ef ficiency Level (AFUE) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (AFUE

= 5 7) St anding Pilot $3 38 $466

Eff iciency Level 1

( AFUE

= 5 8) St anding Pilot and Improved

He at Exchanger $3 53 $487

Eff iciency Level 2

( AFUE

= 6 1) St anding Pilot and Improved

He at Exchanger $3 68 $508

Eff iciency Level 3

( AFUE

= 6 2) St anding Pilot and Improved

He at Exchanger $3 83 $529

Eff iciency Level 4

( AFUE

= 6 5) Im proved Heat Exchanger and

Ele ctronic Ignition $4 10 $566

Eff iciency Level 5–Max Tech

(A FUE

= 7 8) In duced Draft $4 68 $646

ES­11Table ES.3.9 E fficiency Level, Manufacturer Production Cost, and Manufacturer

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

46 ,000 Btu/h Input Capacity

Ef ficiency Level (AFUE) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline (AFUE

= 6 4) St anding Pilot $2 21 $305

Eff iciency Level 1

( AFUE

= 6 5) St anding Pilot and Improved

He at Exchanger $2 37 $327

Eff iciency Level 2

( AFUE

= 6 6) St anding Pilot and Improved

He at Exchanger $2 52 $348

Eff iciency Level 3

( AFUE

= 6 7) St anding Pilot and Improved

He at Exchanger $2 67 $368

Eff iciency Level 4

( AFUE

= 6 8) St anding Pilot and Improved

He at Exchanger $2 82 $389

Eff iciency Level 5

( AFUE

= 7 0) Ele ctronic Ignition $3 07 $424

Eff iciency Level 6

( AFUE

= 7 8) In duced Draft $3 61 $498

Eff iciency Level 7–Max Tech

(A FUE

= 9 3) Co ndensing $5 52 $762

Ta ble ES.3.10 Efficiency Level, Manufacturer Production Cost, and Manufacturer

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

an d Standing Pilot

Ef ficiency Level (Thermal

Eff iciency) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline

(Th ermal Efficiency

= 7 8) $5 20 $718

Eff iciency Level 1

( Thermal Efficiency

= 7 9) Im proved Heat Exchanger Design $531 $733

Eff iciency Level 2

( Thermal Efficiency

= 8 1) Im proved Heat Exchanger Design $544 $751

Eff iciency Level 3

( Thermal Efficiency

= 8 2) Im proved Heat Exchanger

De sign, More Effective Insulation

(C ombustion Chamber) $5 59 $771

ES­12Table ES.3.11 Efficiency Level, Manufacturer Production Cost, and Manufacturer

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

an d Electronic Ignition

Ef ficiency Level (Thermal

Eff iciency) Te chnology MPC

(2007$) MS P

(2 007$)

Ba seline

(Th ermal Efficiency

= 7 8) $5 23 $722

Eff iciency Level 1

( Thermal Efficiency

= 7 9) Im proved Heat Exchanger

De sign $5 34 $737

Eff iciency Level 2

( Thermal Efficiency

= 8 1) Im proved Heat Exchanger

De sign $5 47 $755

Eff iciency Level 3

( Thermal Efficiency

= 8 2) Im proved Heat Exchanger

De sign and More Effective

In sulation (Combustion

Ch amber) $5 78 $798

Eff iciency Level 4

( Thermal Efficiency

= 8 3) Po wer Venting $6 48 $894

Eff iciency Level 5

( Thermal Efficiency

= 8 4) Po wer Venting and Improved

He at Exchanger Design $6 64 $916

Eff iciency Level 6

( Thermal Efficiency

= 8 6) Se aled Combustion and

Im proved Heat Exchanger

De sign $6 91 $954

Eff iciency Level 7

( Thermal Efficiency

= 9 0) Se aled Combustion and

Co ndensing $9 03 $1,246

Eff iciency Level 8–Max Tech

(Th ermal Efficiency

= 9 5) Se aled Combustion,

Co ndensing, and Improved

He at Exchanger Design $9 61 $1,326

ES .3.4 Markups to Determine Product Price

To c onvert the estimates of MSP derived from the engineering analysis to customer

pr ices, D OE estimated markups taken by distributors, retailers, contractors, and builders, a long

wi th sales taxes. In developing markups, D OE determined the distribution channels for product

sa les, t he markup a ssociated with each party in the distribution channels, a nd the markups for

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

DO E calculated both overall baseline and overall incremental markups based on the product

ma rkups at each step in the distribution channel.

Af ter establishing appropriate distribution channels for each of the product classes, D OE

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

ar e marked up a s they pass from the manufacturer to the customer. Chapter 2 o f the TSD

su mmarizes the analytical methodology; chapter 6 p rovides additional details.

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

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

ES­13and incremental markups for replacement and new construction applications for the three heating

pr oducts.

Ta ble ES.3.12 Markups for Water Heaters: Replacement Applications

Ga s­Fired and

Oi l­Fired Storage In stantaneous

Ga s­Fired El ectric Storage

Ba seline Incremental Baseline Incremental Baseline Incremental

Ma nufacturer 1.3 8 1.4 5 1.3 8

Re tailer 1.45 1.1 5 1.4 5 1.1 5 1.4 5 1.1 5

Di stributor 1.35 1.1 1 1.3 5 1.1 1 1.2 8 1.1 0

Co ntractor 1.10 1.1 0 1.1 0 1.1 0 1.1 0 1.1 0

Sa les Tax 1.0 68 1.0 68 1.0 68

Ov erall*

Re placement

Ch annel A

R eplacement

Ch annel B 2 .14

2.1 9 1.6 9

1.8 0 2.2 5

2.3 0 1.7 8

1.8 9 2.1 4

2.0 8 1.6 9

1.7 8

We ighted

Av erage

Re placement 2.1 6 1.7 4 2.2 9 1.8 8 2.1 1 1.7 3

*The overall m arkup is t he average of the total markups for distribution channels A a nd B, weighted by the

es timated p ercentage of each channel represented by total replacement installations. Replacement channel A

c omprises a m anufacturer and retailer. Replacement channel B i ncludes a m anufacturer, distributor, and

co ntractor. F or channel A, it is estimated that 60 percent of units are storage water heaters, and 10 percent

ins tantaneous w ater heaters.

ES ­14Table ES.3.13 Markups for Water Heaters: New Construction

Ga s­Fired and OilF ired Storage In stantaneous GasF ired El ectric Storage

Ba seline Incremental Baseline Incremental Baseline Incremental

Ma nufacturer 1.3 8 1.4 5 1.3 8

Di stributor 1.35 1.1 1 1.3 5 1.1 1 1.2 8 1.1 0

Co ntractor 1.10 1.1 0 1.1 0 1.1 0 1.1 0 1.1 0

Bu ilder 1.31 1.2 6 1.3 1 1.2 6 1.3 1 1.2 6

Ov erall*

New

Ch annel A

Ne w

Ch annel B

W eighted

Av erage

New 2.4 4

2.6 8

2.5 6 1.6 8

2.1 2

1.9 0 2.1 5

2.8 2

2.4 9 1.7 7

2.2 3

2.0 0 1.9 4

2.5 5

2.4 3 1.6 7

2.1 0

1.8 9

*The overall m arkup is t he average of the total markups for distribution channels A a nd B, weighted by the

es timated p ercentages of each channel represented by total new home installations. Channel A i ncludes a

m anufacturer, d istributor, and builder. Channel B als o contains a c ontractor. It is e stimated that channels A a nd

B e ach c ontain 5 0 percent of all s ales.

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

Ap plications

Di rect Heating Equipment Po ol Heaters

Ba seline Incremental Baseline Incremental

Ma nufacturer 1.3 8 1.3 8

Di stributor 1.3 5 1.1 1 1.3 5 1.1 1

Co ntractor 1.3 2 1.3 2 1.1 0 1.1 0

Sa les Tax 1.0 75 1.0 66

Ov erall 2.6 4 2.1 7 2.1 8 1.8 0

Ta ble ES.3.15 Markups for Direct Heating Equipment and Pool Heaters, N ew Home

Ap plications

Di rect Heating Equipment Po ol Heaters

Ba seline Incremental Baseline Incremental

Ma nufacturer 1.3 8 1.3 8

Di stributor 1.3 5 1.1 1 1.3 5 1.1 1

Co ntractor 1.3 2 1.3 2 ­* ­*

Bu ilder 1.3 1 1.2 6 1.3 1** 1.2 6**

Ov erall 3.2 2 2.5 5 2.4 4 1.9 3

*In the new homes, the pool builder purchases th e product directly from a d istributor or

wh olesaler w ithout contractor involvement.

* *It i s a ssumed that pool builders have the same markup as home builders.

ES ­15ES.3.5 Energy Use Characterization

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

fr om higher efficiency standards, p rovides the basis f or developing the energy savings used in

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

ty

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

ef

ficiency levels for a r epresentative sample of actual housing units. In so doing, DOE relied on

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

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

th ree heating products.

Fo r residential storage­type water heaters, D OE relied on an energy use analysis tool

(w ater heater analysis model, or WHAM) and a h ot water draw m odel. For this analysis, D OE

mo dified earlier versions of these tools, w hich had been used to conduct the previous standards

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

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

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

co nsumption in the United States.

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

as sociated test procedures to establish the typical annual energy consumption of a p roduct.

Ch apter 2 o f the TSD s ummarizes the analytical methodology for characterizing energy

us e; chapter 7 p rovides more details on the methods, data, and assumptions.

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

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

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

na tural gas and the increasing use of electricity (e.g., a dditional electrical power consumption

fr om power vents) at some energy efficiency levels.

Ta ble ES.3.16 Annual Energy Consumption: Gas­Fired Storage Water Heaters

Ef ficiency

Le vel En ergy

Fa ctor Av erage Natural Gas and

El ectricity Consumption Av erage Energy

Sa vings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

ES­161 1

2 2

3 3

4 4

5 5

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

Ef ficiency

Le vel En ergy

Fa ctor Av erage Energy

Co nsumption

(k Wh/yr) Av erage Energy

Sa vings

(k Wh/yr)

(B aseline) 0.90 2,7 03

—

0 .9 2,657 46

0.9 2,612 91

0.9 2,568 13 5

0.9 2,525 17 7

0.9 2,483 22 0

2.2 0 1,3 42 1,3 61

Ta ble ES.3.18 Annual Energy Consumption: Oil­Fired Storage Water Heaters

Ef ficiency

Le vel En ergy

Fa ctor Av erage Energy

Co nsumption Av erage Energy

Sa vings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

Ef ficiency

Le vel En ergy

Fa ctor Av erage Energy

Co nsumption Av erage

En ergy Savings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

sa vings for each considered energy efficiency level f or each representative product class of direct

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

ch anges in the use of electricity.

ES­17Table ES.3.20 Annual Energy Consumption: Gas Wall Fan DHE

Ef ficiency

Le vel AFU E Av erage Natural Gas and

El ectricity Consumption Av erage Energy

Sa vings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

Ef ficiency

Le vel AFU E Av erage Natural Gas and

El ectricity Consumption Av erage Energy

Sa vings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

Ef ficiency

Le vel AFU E Av erage Natural Gas and

El ectricity Consumption Av erage Energy

Sa vings

(M MBtu/yr) (M MBtu/yr) (kWh/yr)

(B aseline) 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

ES­18Table ES.3.23 Annual Energy Consumption: Gas Room DHE

Ef ficiency

Le vel AFU E Av erage Natural Gas and

El ectricity Consumption Av erage Energy

Sa vings

(M MBtu/yr) (kWh/yr) (MMBtu/yr)

(B aseline) 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

sa vings for pool heaters for each considered energy efficiency level.

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

Ef ficiency

Le vel Th ermal

Ef ficiency

( % ) Av erage Energy

Co nsumption

( MM Btu/year ) Av erage Energy

Sa vings

( MM Btu/year )

(B aseline) 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

St ipulating new e nergy conservation standards for products results in changes in

co nsumer operating expenses—usually a d ecrease—and changes in consumer price—usually an

in crease. DOE analyzed the net effect of new s tandards on consumers by evaluating the net LCC

us ing the cost­efficiency relationship derived in the engineering analysis, a s well as the energy

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

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

ex penses and maintenance costs), the lifetime of the appliance, and a d iscount rate.

Be cause the installed cost of a p roduct typically increases while operating cost typically

de creases in response to new s tandards, t here is a t ime in the life of products having higher­thanb aseline efficiency when the net operating­cost benefit (in dollars) since the time of purchase is

ES­19equal to the incremental first cost of purchasing the higher­efficiency product. The length of time

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

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

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

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

li fetimes. D OE used EIA’s energy price data to determine prices for electricity, natural gas, o il,

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

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

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

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

pr oducts.

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

pr oducts in the absence of new e nergy conservation standards. To evaluate the potential impact

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

be affected by a s tandard at a p articular energy efficiency standard level. DOE assigned each

ho usehold in the RECS sample a u nique product energy efficiency taken from the estimated

di stribution of product energy efficiencies in the effective year of new s tandards. Th e distribution

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

DO E assigned a p roduct in the base case with a h igher energy efficiency level than the standard

ef

ficiency level under consideration. In these situations, t he household would not be affected by

th e energy conservation standard (labeled “No I mpact” in the tables below). DOE determined the

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

th at would not be affected by the energy conservation standard.

Ch apter 2 o f the TSD s ummarizes the analytical methodology for LCC and PBP

an alyses; chapter 8 p rovides additional details.

Tab le ES.3.25 through Table ES.3.28 show t he results of LCC and PBP analyses for

wa ter heaters.

ES­20Table ES.3.25 LCC a nd PBP Results: Gas­Fired Storage Water Heaters

Efficiency Life­Cycle Cost Life­Cycle Cost Savings PB P ( y ears )

Av erage A verage Average Households that

Ex perience

Median Average Le vel E F I n stalled

P r ice

( 2 007$) Operating

C o st

( 2 007$) LCC

( 2 007$) A verage

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 0 .59 967 1,978 2,945

­ ­ ­ ­ ­ ­

1 0 .62 9 82 1,849 2,830 95 0 1 8 82 1.1 1 .1

2 0.63 9 98 1,808 2,807 116 0 1 1 89 1.9 2 .0

3 0.64 1 ,506 1,829 3,335 ­368 73 9 1 8 41.4 5 4.0

4 0.65 1 ,519 1,790 3,309 ­343 73 7 2 0 34.1 4 3.0

5 0.66 1 ,536 1,753 3,288 ­324 73 6 2 2 28.8 3 2.8

6 0.77 1 ,782 1,489 3,271 ­307 75 2 2 2 17.5 1 8.1

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

Efficiency Life­Cycle Cost Life­Cycle Cost Savings PB P ( y ears )

Av erage A verage Average Households that

Ex perience

Median Average Le vel E F I n stalled

P r ice

( 2 007$) Operating

C o st

( 2 007$) LCC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 0 .90 662 2,836 3,498

­ ­ ­ ­ ­ ­

1 0 .91 6 74 2,787 3,461 20 0 4 6 54 2.5 2 .6

2 0.92 6 82 2,740 3,422 50 0 2 3 77 2.1 2 .1

3 0.93 7 09 2,694 3,403 65 9 1 8 73 2.3 3 .9

4 0.94 7 59 2,648 3,407 61 18 7 7 5 2.8 6 .9

5 0.95 7 86 2,604 3,390 78 18 6 7 6 3.8 6 .7

6 2.20 1 ,475 1,759 3,233 229 45 5 5 0 8.3 2 2.2

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

Efficiency Life­Cycle Cost Life­Cycle Cost Savings PB P ( y ears )

Av erage A verage Average Households that

Ex perience

Median Average Le vel E F I n stalled

P r ice

( 2 007$) Operating

C o st

( 2 007$) LCC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 0 .53 1,757 3,238 4,996

­ ­ ­ ­ ­ ­

1 0 .54 1 ,771 3,187 4,958 10 0 7 3 27 2.0 2 .0

2 0.56 1 ,811 3,089 4,900 30 0 6 6 34 2.7 2 .7

3 0.58 1 ,828 2,998 4,826 55 0 6 6 34 2.1 2 .2

4 0.60 1 ,820 2,914 4,734 89 0 6 3 37 1.4 1 .3

5 0.62 1 ,843 2,834 4,678 121 0 4 5 55 1.7 1 .7

6 0.66 2 ,075 2,722 4,797 23 36 18 47 5.1 1 0.4

7 0.68 2 ,227 2,671 4,898 ­68 53 9 3 8 8.6 1 3.1

ES­21Table ES.3.28 LCC a nd PBP Results: Instantaneous Gas­Fired Water Heaters

Efficiency Life­Cycle Cost Life­Cycle Cost Savings PB P ( y ears )

Av erage A verage Average Households that

Ex perience

Median Average Le vel E F I n stalled

P r ice

( 2 007$) Operating

C o st

( 2 007$) LCC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 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 9 9 0 4 0.7 56.7

4 0.82 1 ,902 3,353 5,255 2 6 86 8 1 1.3 14.9

5 0.84 1 ,938 3,301 5,239 14 30 29 41 11.3 1 4.5

6 0.85 1 ,955 3,276 5,231 20 37 14 49 12.0 1 4.8

7 0.92 2 ,258 3,117 5,375 ­119 79 3 1 8 25.2 3 5.8

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

eq uipment.

Ta ble ES.3.29 LCC a nd PBP Results: Gas Wall Fan DHE

Efficiency AFUE Life­Cycle Cost Li fe­Cycle Cost Savings PB P ( y ears )

Average Average Average Households that

Ex perience

Median Average Le vel ( %

) Installed

Price

(2 007$) Operating

Co st ( 2007$) L CC

( 2 007$) Ave rage

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 7 4 1,769 4,525 6,294

­ ­ ­ ­ ­ ­

1 7 5 1 ,830 4,311 6,141 74 3 4 5 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 1 3.3

4 80 2 ,023 4,078 6,101 103 48 50 2 1 0.3 24.4

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

Efficiency AFUE Life­Cycle Cost Li fe­Cycle Cost Savings PB P ( y ears )

Average Average Average Households that

Ex perience

Median Average Le vel ( %

) Installe d

Price

(2 007$) Operating

Co st ( 2007$) L CC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 6 4 1,374 4,927 6,301

­ ­ ­ ­ ­ ­

1 6 6 1 ,435 4,796 6,231 32 20 54 26 9.5 1 5.1

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 6 8 6.7 1 1.8

4 72 1 ,767 4,352 6,120 107 54 0 4 6 12.1 1 8.4

5 75 1 ,893 4,221 6,113 114 60 0 4 0 13.9 2 2.6

ES­22Table ES.3.31 LCC a nd PBP Results: Gas Floor DHE

Efficiency AFUE Life­Cycle Cost Li fe­Cycle Cost Savings PB P ( y ears )

Average Average Average Households that

Ex perience

Median Average Le vel ( %

) Installed

Price

(2 007$) Operating

Co st ( 2007$) L CC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 5 7 2,013 4,652 6,664

­ ­ ­ ­ ­ ­

1 5 8 2 ,046 4,581 6,627 8 1 0 78 12 8.2 1 1.4

2 61 2 ,078 4,385 6,463 172 17 0 8 3 3.6 6 .2

3 62 2 ,111 4,323 6,434 201 25 0 7 5 5.0 9 .0

4 65 2 ,360 3,991 6,351 284 31 0 6 9 8.3 1 3.2

5 78 2 ,486 3,414 5,901 735 27 0 7 3 6.7 1 2.1

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

Efficiency AFUE Life­Cycle Cost Li fe­Cycle Cost Savings PB P ( y ears )

Average Average Average Households that

Ex perience

Median Average Le vel ( %

) Installed

Price

(2 007$) Operating

Co st ( 2007$) L CC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 6 4 1,430 4,373 5,803

­ ­ ­ ­ ­ ­

1 6 5 1 ,467 4,315 5,782 8 2 1 60 19 11.4 1 6.2

2 66 1 ,502 4,259 5,761 22 34 35 31 11.1 1 8.7

3 67 1 ,537 4,205 5,741 37 43 20 38 11.7 2 0.6

4 68 1 ,572 4,152 5,723 54 49 9 4 2 12.1 2 1.6

5 70 1 ,807 3,912 5,719 58 53 4 4 4 11.7 2 7.9

6 78 1 ,933 3,577 5,510 264 45 2 5 3 10.1 2 5.2

7 93 2 ,377 3,066 5,443 330 55 0 4 5 12.6 2 5.8

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

ES­23Table ES.3.33 LCC a nd PBP Results: Gas­Fired Pool Heaters

Efficiency TE Life­Cycle Cost Li fe­Cycle Cost Savings PB P ( y ears )

Av erage A verage Average Households that

Ex perience

Median Average Le vel (%) Installed

Pr ice

( 2 007$) Operating

C o st

( 2 007$) LCC

( 2 007$) Average

Savings Net Cost

( %) N o

I m pact

( % ) N e t

B e nefit

( % )

B a seline 7 8 2,335 4,965 7,300

­ ­ ­ ­ ­ ­

1 7 9 2 ,356 4,905 7,261 0 0 99 1 2 .8 3.8

2 81 2 ,380 4,790 7,169 13 2 8 6 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 1 6.0

5 84 2 ,620 4,518 7,137 36 53 19 28 7.5 1 1.3

6 86 2 ,670 4,464 7,133 40 62 7 3 1 5.5 7 .7

7 90 3 ,060 4,273 7,333 ­157 84 1 1 5 10.3 1 4.0

8 95 3 ,267 4,057 7,324 ­148 82 1 1 7 9.0 1 2.5

ES.3.7 Shipments Analysis

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

us e, NP V, and future manufacturer cash flows for each product under consideration. DOE’s

sh ipments models consider new construction and replacements. R ather than simply extrapolating

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

se gment. For new h ousing units, a nnual product shipments are equal to the number of new

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

th e product under consideration. To e stimate shipments due to replacements, t he models use

sa les in previous years and assumptions about the product lifetime, which determine how l ong an

ap pliance is likely to remain in use.

Ch apter 9 o f the TSD provides additional detail on the shipments analysis.

Fi gure ES.3.1 t hrough Figure ES.3.3 i llustrate the results of the shipments analysis for

ea ch of the heating products under consideration.

ES­240.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00

2015 2018 2021 2024 2027 2030 2033 2036 2039 2042MillionsofUnits Gas­Fired

Storage

Electric

Storage

Oil­Fired

Storage

Gas­Fired

Instantaneous

Figure ES.3.1 F orecasted Shipments for Water Heaters, 2 015–2043 (Million Units)

0.000 0.050 0.100 0.150 0.200 0.250 0.300

2013 2017 2021 2025 2029 2033 2037 2041MillionsofUnits Gas Wall Fan

Gas Wall

Gravity

Gas Floor

Gas Room

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

Un its)

ES­250.000 0.100 0.200 0.300 0.400 0.500 0.600 0.700 0.800 0.9002013201520172019202120232025202720292031203320352037203920412043MillionsofUnits

Pool Heaters

Figure ES.3.3 F orecasted Shipments for Pool Heaters, 2 013–2043 (Million Units)

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

of a c overed product compared to a c ompeting product in the market, some consumers (or home

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

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

st orage water heaters, a nd instantaneous gas­fired water heaters—compete with one another to

so me degree. DOE considered the nature of the competition among the products in the

re placement and new c onstruction market segments separately in order to assess the potential

im pact of energy conservation standards on shipments.

The cost of replacing a g as­fired storage water heater with an electric storage water heater

is substantial because of installation complexity. In new c onstruction, b uilders generally will

in stall a g as­fired water heater if gas is available. In both new a nd replacement installations, a

l arge increase in the price of a g as­fired water heater compared to an electric water heater likely

wo uld be necessary to induce consumers to replace a g as water heater with an electric unit, or to

in duce builders to install an electric water heater instead of a g as unit. Results of DOE’s current

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

he aters are not cost­effective by a l arge margin. It is unlikely that consumers would switch from

a g as­fired to an electric storage water heater.

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

sa vings. Because this product has a h igher installed cost than typical gas­fired storage water

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

wa ter heater to a g as­fired water heater. DOE considered several potential combinations of

en ergy efficiency levels for electric and gas­fired storage water heaters. D OE estimated that if an

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

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

un its per year in cases where a g as water heater standard requires natural draft, and by 162,000

un its per year in cases where a g as water heater standard requires a p ower vent.

ES­26ES.3.8 National Impact Analysis

The NIA assesses the NPV o f total consumer LCC and NES

. DOE p repared an NES

s preadsheet model to forecast energy savings and national consumer economic costs and savings

re sulting from new s tandards. Th e model uses typical values for inputs. C hapter 2 o f the TSD

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

ES .3.8.1 National Energy Savings Analysis

DO E calculated annual NES a s the difference between national energy consumption in

th e base case (without new e fficiency standards) and in each higher efficiency standard case.

DO E estimated energy consumption and savings based o n site energy and converted the

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

th e 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

re duce consumer costs. Th e logic behind the rebound effect is that because more energy efficient

pr oducts lower the marginal cost of the end­use service compared to less efficient products, s ome

co nsumers give up p art of the potential energy savings to receive more service. Based on

av ailable information, DOE used a r ebound effect of 10 percent for water heaters, 1 5 percent for

di rect heating equipment, and 10 percent for pool heaters.

The NES r esults 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).

Ta ble ES.3.34 Cumulative National Energy Savings Results: Water Heaters

Ef ficiency Ga s­Fired

St orage El ectric Storage Oi l­Fired

St orage In stantaneous GasF ired

Le vel EF NE S

(q uads) EF NE S

(q uads) EF NE S

(q uads) EF NE S

(q uads)

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

ES­27Table ES.3.35 Cumulative National Energy Savings Results: Direct Heating Equipment

Ef ficiency Gas Wall Fan Gas Wall Gravity Gas Room Ga s Floor

Le vel AFU E

(% ) NE S

(q uads) AFU E

(% ) NE S

(q uads) AFU E

(% ) NE S

(q uads) AFU E

(% ) NE S

(q uads)

1 7 5 0.018 66 0.008 65 0.010 58 0.000

2 7 6 0.024 68 0.020 66 0.026 61 0.000

3 7 7 0.030 71 0.044 67 0.045 62 0.000

4 8 0 0.052 72 0.068 68 0.066 65 0.001

5 7 5 0.087 70 0.166 78 0.002

6 7 8 0.302

7 9 3 0.523

Ta ble ES.3.36 Cumulative National Energy Savings Results: Pool Heaters

Ef ficiency Level Th ermal Efficiency ( % ) NES ( quads )

1 7 9 0.0 01

2 8 1 0.0 20

3 8 2 0.0 43

4 8 3 0.1 71

5 8 4 0.2 22

6 8 6 0.3 36

7 9 0 0.5 60

8 9 5 0.8 14

ES .3.8.2 Net Present Value Analysis

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

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

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

ca lculated savings over the life of the product using discount rates of 7 p ercent and 3 p ercent to

di scount future costs and savings to the present. DOE calculated NPV a s the difference between

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

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

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

ES­28Table ES.3.37 Cumulative Net Present Value: Gas­Fired Storage Water Heaters

Ef ficiency Level EF NPV

3% Discount Rate

(b illion 2007$) 7% Discount Rate

(b illion 2007$)

1 0 .62 7.6 2 2.9 1

2 0 .63 9.5 0 3.5 6

3 0 .64 ­2 2.35 ­1 1.66

4 0 .65 ­2 0.14 ­1 0.87

5 0 .66 ­1 8.34 ­1 0.25

6 0 .77 ­1 3.12 ­9 .66

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

Ef ficiency Level EF NPV

3% Discount Rate

(b illion 2007$) 7% Discount Rate

(b illion 2007$)

1 0 .91 1.9 4 0.7 2

2 0 .92 4.8 4 1.8 2

3 0 .93 6.5 8 2.3 3

4 0 .94 6.7 8 2.0 6

5 0 .95 8.6 3 2.6 0

6 2 .2 28.08 5.8 9

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

Ef ficiency Level EF NPV

3% Discount Rate

(b illion 2007$) 7% Discount Rate

(b illion 2007$)

1 0 .54 0.0 09 0.0 03

2 0 .56 0.0 26 0.0 09

3 0 .58 0.0 46 0.0 17

4 0 .6 0.073 0.0 28

5 0 .62 0.0 99 0.0 038

6 0 .66 0.0 41 0.0 06

7 0 .68 ­0 .018 ­0 .024

ES­29Table ES.3.40 Cumulative Net Present Value: Instantaneous Gas­Fired Water Heaters

Ef ficiency Level EF NPV

3% Discount Rate

(b illion 2007$) 7% Discount Rate

(b illion 2007$)

1 0 .69 0.0 0 0.0 0

2 0 .78 0.0 0 0.0 0

3 0 .8 ­0.04 ­0 .02

4 0 .82 0.0 6 0.0 0

5 0 .84 0.5 4 0.0 9

6 0 .85 0.8 1 0.1 3

7 0 .92 ­1 .81 ­1 .78

Ta ble ES.3.41 Cumulative Net Present Value: Direct Heating Equipment

Ga s Wall Fan Gas Wall Gravity Gas Room Ga s Floor

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

Ef ficiency Di scount Discount Discount Discount Discount Discount Discount Discount

Le vel Ra te Rate Rate Rate Rate Rate Rate Rate

(b illion (billion (billion (billion (billion (billion (billion (billion

20 07$) 2007$) 2 007$) 2007$) 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

ES­30Table ES.3.42 Cumulative Net Present Value: Gas­Fired Pool Heaters

Ef ficiency Level Th ermal Efficiency

(% ) NPV

3% Discount

Ra te 7% Discount

Ra te

(b illion 2007$) (billion 2007$)

1 7 9 0.0 07 0.0 03

2 8 1 0.1 90 0.0 79

3 8 2 0.2 87 0.1 10

4 8 3 0.9 22 0.3 26

5 8 4 1.0 87 0.3 72

6 8 6 1.2 52 0.4 10

7 9 0 0.0 30 ­0 .333

8 9 5 0.9 24 ­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

co nsumers who purchase the considered products. To evaluate potentially important indirect

ef

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

im pact of new w ater heater standards on natural gas prices and the associated benefits for all

na tural gas consumers in all sectors of the economy.

Fo r its analysis, D OE considered two scenarios for new w ater heater standards. O ne

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

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

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

LC C savings and greatest NPV o f consumer benefit. The selected standard for electric storage

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

wa ter heaters of standards that reflect the max­tech energy efficiency levels. Th is scenario

in dicates the upper bound for impacts on natural gas prices.

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

re lative to the base case of no new s tandards, f or each scenario. The price reduction averaged 0.7

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

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

p ercent in the selected efficiency levels scenario and 0.4 p ercent in the max­tech scenario.

Al though there is only a s mall estimated annual reduction in natural gas prices resulting

fr om new w ater heater standards, t he associated economy­wide savings in natural gas

ex penditures over the forecast period are substantial. DOE’s calculation of the NPV o f the

sa vings in natural gas expenditures for 2015–2043 (with a 7 percent discount rate) yields a v alue

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

ma x­tech scenario.

Ch apter 2 o f the TSD s ummarizes the analytical methodology for analyzing impacts on

ES­31natural 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. P otential

im pacts include financial effects, b oth quantitative and qualitative, that might result from new

en ergy conservation standards and consequently lead to changes in manufacturing practices for

wa ter heaters, d irect heating equipment, and/or pool heaters. D OE identified potential impacts

th rough interviews with manufacturers and other interested parties. C hapter 12 of the preliminary

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

DO E identified key issues regarding the following for water heaters:

• ENER GY S TAR criteria;

• i ncreased installation costs for water heaters;

• i ncreased shipping costs for water heaters;

• s afety concerns for instantaneous water heaters operating near 0.85 EF;

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

• e quipment switching (from gas­fired storage to instantaneous gas­fired water

he aters).

DO E identified key issues regarding the following for direct heating equipment:

• i ncreased installation costs for direct heating equipment; and

• d erating (and utility impacts).

DO E identified key issues regarding the following for pool heaters:

• i ncreased installation costs for pool heaters; and

• p roduct price increases resulting in a d eclining market.

Du ring the current stage, DOE conducted the preliminary MIA by first identifying

pr oducts, m ethods, a nd practices used in the residential heating products industry. N ext, DOE

de termined how e nergy efficiency improvements would affect cost, p roduction, and various

ot her manufacturing metrics. F inally, DOE interviewed manufacturers for feedback. DOE

de veloped and distributed a q uestionnaire for use during the interviews. A t the beginning of the

in terview process, D OE interviewed manufacturers and adjusted the analysis as appropriate,

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

co mpetition, manufacturing capacity, direct employment, and the cumulative burden of other

re gulations affecting manufacturers, a s well as several issues raised by individual manufacturers.

ES .4 ISSUES ON WHICH DOE SEEKS PUBLIC COMMENT

DO E is interested in receiving comments on all aspects of this preliminary analysis. D OE

es pecially invites comments or data to improve DOE’s analysis, i ncluding data or information

ES­32that will respond to the following questions or concerns that were raised in response to the

Fr amework Document and in preparation of the preliminary TSD.

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

In stantaneous Gas­Fired Water Heaters

DO E seeks comment on the organization of product classes and the energy efficiency

re lationship between rated storage volume and energy factor for oil­fired storage water heaters

an d instantaneous gas­fired water heaters. S ee chapter 2, section 2.2.2, of the preliminary TSD.

ES .4.2 Product Class for Vented Fireplace Heaters

DO E has not established a s eparate product class for fireplace heaters because the

pr oducts provide the same utility and function as gas wall furnaces or gas room heaters. D OE

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

fu rnaces. D OE requests comments concerning the need for a s eparate product class for fireplace

he aters. S ee chapter 2, section 2.2.9, of the preliminary TSD.

ES .4.3 Organization of Direct Heating Equipment Product Classes

DO E seeks comment on the organization of product classes and the relationship between

th e AFUE and input capacity of gas wall, fan­type direct heating equipment; gas wall gravityt ype direct heating equipment; gas floor­type direct heating equipment; and gas­fired room

he aters. S ee chapter 2, section 2.2.2.11, of the preliminary TSD.

ES .4.4 Conclusion from Heat Pump Water Heater Preliminary S creening Analysis

DO E seeks comments on the viability of heat pump water heaters as a t echnology for

el ectric storage water heaters and whether these water heaters would be practicable to

ma nufacture, service, and install on a s cale necessary to serve the relevant market by the

ef

fective date of any amended standard, which is 5 y ears after publication of the final rule.

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

wa ter heaters, i ncluding: (1) whether manufacturers would be able to finance the investment

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

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

co nverted to heat pump water heaters by the effective date of an amended standard ( e.g

. , i f

st andards did not reach the levels provided by heat p ump water heaters); (3) how t he market for

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

in stallations that would incur a s ignificant increase in cost due to extensive modifications that

wi ll have to be made to a r esidence to accommodate a h eat pump water heater; and (4) heat

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

ch apter 2, section 2.3.6, of the preliminary TSD.

ES­33ES.4.5 Condensing Room Heaters

DO E seeks additional comment on Lennox’s concerns about condensate drains on

fr eestanding room heaters. S ee chapter 2, section 2.3.7, of the preliminary TSD.

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

He aters

DO E received comments from manufacturers regarding safety concerns at 85 and 86

pe rcent thermal efficiency for gas­fired pool heaters. D OE seeks comments on how

ma nufacturers would mitigate the formation of corrosive condensation at 86­percent thermal

ef

ficiency for gas­fired pool heaters. D OE also seeks comments on the changes manufacturers

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

en ergy 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

Wa ter Heaters

DO E seeks comments on approaches to develop t he energy efficiency equations for all

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

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

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

sl opes that minimize the number of models that would b ecome obsolete. DOE also seeks

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

ap proach to test and tear down products. S ee chapter 2, section 2.4.4, of the preliminary TSD.

ES .4.8 Hot Water Use for Instantaneous Water Heaters

DO E developed the hot water draw m odel for storage­type water heaters. Because

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

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

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

in stantaneous water heaters, h owever, so it estimated that a h ousehold with an instantaneous

wa ter heater uses the same volume of hot water as it w ould with a s torage­type water heater.

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

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

ES .4.9 Energy Use by Instantaneous Gas­Fired Water Heaters

Fo r instantaneous water heaters, D OE calculated the energy use with the approach used

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

p erformance factor to account for evidence that the rated energy efficiency of instantaneous gasf ired water heaters overstates actual performance. Preliminary results from a s tudy of

in stantaneous water heater installations conducted for the California Energy Commission

ES­34indicate a p erformance drop­off at small draw v olumes 1

. To account for this phenomenon, the

st udy recommends reducing the listed EF f or instantaneous gas­fired water heaters by 8.8

p ercent. DOE chose to incorporate this recommendation, and did so b y applying a f actor that

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

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

wa ter heaters. S ee chapter 2, section 2.6.1, of the preliminary TSD.

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

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

he at pump water heaters. In p articular, DOE is interested in receiving any data on the magnitude

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

ES .4.11 Market Penetration of Instantaneous Gas­Fired Water Heaters

The re is considerable uncertainty about the extent o f the future market penetration of

in stantaneous water heaters. F or this reason, DOE modeled three scenarios for their market

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

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

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

Au stralian water heater markets, D OE b elieves that t he market evolution in Australia provides an

ap proximate model for scenarios for the United States. D OE’s scenario of high future market

pe netration of instantaneous gas­fired water heaters in the United States assumes that the

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

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

in stantaneous water heaters are comparable, current U .S. p rices of gas storage water heaters are

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

th an in Australia. The medium and low s cenarios assume that the shape of the market penetration

cu rve in the United States is the same as that for the high scenario, b ut is lower by 50 and 75

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

pe netration of instantaneous gas­fired water heaters. S ee chapter 9, section 9.3.1, of the

pr eliminary TSD.

ES .4.12 Forecast of Direct Heating Equipment Shipments

The unavailability of separate forecasting shipment d ata related to replacements and new

ho me installations makes it difficult to forecast the direct heating equipment market. To a ddress

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

he ating 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 E nergy Group, California E nergy

Co mmission r eport, 2 006.

2 For gas floor direct heating equipment, D OE projected that the shipments w ill follow the downward trend seen in

the 2 000–2007 AHRI’s historical shipments data. Consequently, the data s how that this product, w hich is used only

fo r r eplacement installations, has very low and declining shipments.

ES ­359.4.1, of the preliminary TSD.

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

Be cause key inputs to the calculation of the NES a nd NPV d epend on the estimated

ef

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

ef

ficiencies are of great importance to the analysis. D OE forecasted base and standards case

ef

ficiencies, b elieving they will remain frozen throughout the analysis period (2013–2043). DOE

us ed a r oll­up scenario to establish the shipments­weighted efficiency for the year that standards

ar e to become effective (2013 or 2015). Under a r oll­up scenario, p roduct efficiencies in the base

ca se that did not meet the standards level under consideration would roll up t o meet the new

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

es timating the impact that standards will have on product efficiencies. S ee chapter 10, section

10 .2, of the preliminary TSD.

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

He ater

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

LC C savings, b ut this product has a h igher installed cost than typical gas­fired storage water

he aters, and it is new t o consumers and builders. D OE therefore analyzed the potential for

co nsumers to switch from an electric heat pump water heater to a g as­fired water heater. DOE

co nsidered several potential combinations of standards for electric and gas­fired storage water

he aters: (1) electric heat pump water heater and a g as­fired storage water heater using natural

dr aft; (2) electric heat pump water heater and a g as­fired storage water heater using power

ve nting; and (3) electric heat pump water heater and a g as­fired storage water heater that has

co ndensing technology. DOE evaluated the potential f or switching in the replacement and new

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

el ectric heat pump water heaters to gas­fired water heaters. S ee chapter 2, section 2.8.1, of the

pr eliminary TSD.

ES .4.15 Rebound Effect

To e valuate the rebound effect on energy efficiency improvements for the considered

he ating products, D OE searched the literature on the rebound effect and studied how t he national

en ergy modeling system incorporates a r ebound effect. Based on the available information, DOE

ap plied a r ebound effect of 10 percent for water heaters, 1 5 percent for direct heating equipment,

an d 10 percent for pool heaters. D OE requests comments on its estimates of the rebound effect

fo r the three heating products. S ee chapter 2, section 2.7.2, of the preliminary TSD.

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

fo r the Three Heating Products

DO E requests comments on the appropriateness of considering the potential impact on

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

pr oducts. D OE also requests comment on its estimated magnitude of such impacts and the extent

ES­36to which these impacts should be considered transfers from producers to consumers, r ather than

ne t economic benefits. M ore broadly, DOE seeks comment on what weight it should give to

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

st andards for the three heating products. S ee Chapter 2, section 2.8.5 o f the preliminary TSD.

ES .4.17 Super­Low NOx Requirements and Cumulative Regulatory Burden Impacts

DO E recognizes and seeks to mitigate the overlapping effects on manufacturers of new o r

re vised DOE standards and other regulatory actions a ffecting the same equipment. Based on its

ow n research and discussions with manufacturers, D OE identified one particular regulation

re levant to residential water heaters, d irect heating equipment, and pool heaters, i nvolving low

ni trogen oxide (NOx) requirements ( e.g.

, South Coast Air Quality Management District

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

wi th complying with the super­low NOx requirements ( e .g.

, the SCAQMD districts). See

Ch apter 2, section 2.9.4, of the preliminary TSD.

ES .4.18 Impacts on Domestic Manufacturers

As part of the preliminary manufacturing impact analysis, D OE asked manufacturers

ab out the potential impacts of amended conservation standards on their business, e mployment

le vels, m arket share, and competitive positions within the marketplace. Some manufacturers

st ated potential loss of market share to international manufacturers as a c oncern. As outlined

ab ove, p otential equipment switching is a m ajor concern for gas­fired storage water heating

ma nufacturers, a s is the potential for DOE to change the current purchasing patterns of

co nsumers with amended energy conservation standards. A s part of the NOPR phase and in

re sponse to the publication of the notice of meeting and the availability of the preliminary

an alyses, D OE seeks comments from interested parties about their potential loss of market share,

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

sh ipments 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

Be cause of the large number of product classes for the three heating products, i n the

cu rrent phase DOE has focused on conducting a t horough examination of the product classes

wi th the greatest energy savings potential. To d etermine which product classes have the greatest

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

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

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

DO E specifically seeks feedback on its approach to product­class prioritization and the approach

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

cl asses.

ES­37ES.4.20 Criteria for the Selection of Trial Standard Levels

Fo r a g iven product consisting of several product classes, D OE will develop e ach trial

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

ex hibit similar characteristics. F or example, in the case of direct heating equipment, one of the

TSL s will likely consist of the efficiency levels from each class with a m inimum LCC. DOE will

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

ef

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

ch aracteristics from levels already selected as a T SL. DOE seeks feedback on the criteria it

sh ould use for selecting TSLs.

ES­38