CHAPTER 10: NATIONAL IMPACT ANALYSIS 

TABLE OF CONTENTS 

10.1 INTRODUCTION ......................................................................................................... 10-1


10.2 FORECASTED ENERGY EFFICIENCIES ................................................................. 10-1


10.2.1 Water Heaters................................................................................................................. 10-2


10.2.2 Pool Heaters................................................................................................................... 10-4


10.2.3 Direct Heating Equipment ............................................................................................. 10-5


10.3 NATIONAL ENERGY SAVINGS ............................................................................... 10-6


10.3.1 Definition of National Energy Savings.......................................................................... 10-6


10.3.2 Inputs to National Energy Savings ................................................................................ 10-7


10.3.2.1 Annual Energy Consumption per Unit ........................................................ 10-7


10.3.2.2 Shipments and Equipment Stock ............................................................... 10-11


10.3.2.3 National Annual Energy Consumption...................................................... 10-11


10.3.2.4 Site-to-Source Energy Conversion Factors................................................ 10-12


10.4	 NET PRESENT VALUE............................................................................................. 10-13


10.4.1 Definition of Net Present Value................................................................................... 10-13


10.4.2 Inputs to Calculation of Net Present Value.................................................................. 10-14


10.4.2.1 Total Installed Cost per Unit...................................................................... 10-15


10.4.2.2 Annual Operating Cost Savings per Unit................................................... 10-17


10.4.2.3 Total Increases in Annual Installed Cost ................................................... 10-17


10.4.2.4 Total Savings in Annual Operating Cost ................................................... 10-17


10.4.2.5 Discount Factors ........................................................................................ 10-18


10.4.2.6 Present Value of Costs............................................................................... 10-18


10.4.2.7 Present Value of Savings ........................................................................... 10-18


10.5	 CALCULATION RESULTS....................................................................................... 10-19


10.5.2 National Energy Savings Results................................................................................. 10-20


10.5.2.1 Water Heaters............................................................................................. 10-20


10.5.2.2 Pool Heaters............................................................................................... 10-22


10.5.2.3 Direct Heating Equipment ......................................................................... 10-22


10.5.3 Annual Costs and Savings ........................................................................................... 10-24


10.5.4 Net Present Value Results............................................................................................ 10-25


10.5.4.1 Water Heaters............................................................................................. 10-25


10.5.4.2 Pool Heaters............................................................................................... 10-27


10.5.4.3 Direct Heating Equipment ......................................................................... 10-28


10.6	 IMPACT OF STANDARDS ON NATURAL GAS PRICES AND


ASSOCIATED CONSUMER BENEFITS.................................................................. 10-28


10.6.2 Impact of Changes in Natural Gas Price on Users....................................................... 10-32


10.6.3 Components of the Benefit .......................................................................................... 10-32


LIST OF TABLES 

Table 10.2.1 Gas-Fired Storage Water Heaters: Energy Efficiency Distributions in 2015.... 10-3


Table 10.2.2 Electric Storage Water Heaters: Energy Efficiency Distributions in 2015....... 10-3


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Table 10.2.3 Oil-Fired Storage Water Heaters: Energy Efficiency Distributions in 2015 ..... 10-3


Table 10.2.4 Gas-Fired Instantaneous Water Heaters: Energy Efficiency Distributions


in 2015 ............................................................................................................... 10-4


Table 10.2.5 Pool Heaters: Energy Efficiency Distributions in 2013..................................... 10-4


Table 10.2.6 Gas Wall Fan Direct Heating Equipment: Energy Efficiency Distributions


in 2013 ............................................................................................................... 10-5


Table 10.2.7 Gas Wall Gravity Direct Heating Equipment: Energy Efficiency


Distributions in 2013.......................................................................................... 10-5


Table 10.2.8 Gas Room Direct Heating Equipment: Energy Efficiency Distributions in


2013.................................................................................................................... 10-6


Table 10.2.9 Gas Floor Direct Heating Equipment: Energy Efficiency Distributions in


2013.................................................................................................................... 10-6


Table 10.3.1 Water Heaters: Shipments-Weighted Average per-Unit Annual Energy


Consumption in 2015......................................................................................... 10-8


Table 10.3.2 Pool Heaters: Shipments-Weighted Average per-Unit Annual Energy


Consumption.................................................................................................... 10-10


Table 10.3.3 Direct Heating Equipment: Shipments-Weighted Average per-Unit Annual


Energy Consumption ....................................................................................... 10-11


Table 10.4.1 Water Heaters: Shipments-Weighted Average per-Unit Total Installed


Cost in 2015 ..................................................................................................... 10-15


Table 10.4.2 Pool Heaters: Shipments-Weighted Average Per-Unit Total Installed Costs.. 10-16


Table 10.4.3 Direct Heating Equipment: Shipments-Weighted Average per-Unit Total


Installed Costs.................................................................................................. 10-16


Table 10.5.1 Inputs to National Energy Savings and Net Present Value.............................. 10-19


Table 10.5.2 Gas-Fired Storage Water Heaters: Cumulative National Energy Savings....... 10-20


Table 10.5.3 Electric Storage Water Heaters: Cumulative National Energy Savings .......... 10-21


Table 10.5.4 Oil-Fired Storage Water Heaters: Cumulative National Energy Savings........ 10-21


Table 10.5.5 Gas-Fired Instantaneous Water Heaters: Cumulative National Energy


Savings............................................................................................................. 10-22


Table 10.5.6 Pool Heaters: Cumulative National Energy Savings ....................................... 10-22


Table 10.5.7 Gas Wall Fan Direct Heating Equipment: Cumulative National Energy


Savings............................................................................................................. 10-23


Table 10.5.8 Gas Wall Gravity Direct Heating Equipment: Cumulative National Energy


Savings............................................................................................................. 10-23


Table 10.5.9 Gas Room Direct Heating Equipment: Cumulative National Energy


Savings............................................................................................................. 10-23


Table 10.5.10 Gas Floor Direct Heating Equipment: Cumulative National Energy


Savings............................................................................................................. 10-24


Table 10.5.11 Gas-Fired Storage Water Heaters: Cumulative Net Present Value ................. 10-26


Table 10.5.12 Electric Storage Water Heaters: Cumulative Net Present Value ..................... 10-26


Table 10.5.13 Oil-Fired Water Heaters: Cumulative Net Present Value................................ 10-27


Table 10.5.14 Gas-Fired Instantaneous Water Heaters: Cumulative Net Present Value........ 10-27


Table 10.5.15 Pool Heaters: Cumulative Net Present Value Results ..................................... 10-28


Table 10.5.16 Direct Heating Equipment: Cumulative Net Present Value ............................ 10-28


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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table 10.6.1 

Table 10.6.2 

Energy Efficiency Levels in Scenarios Used to Analyze Impacts on 

Natural Gas Price ............................................................................................. 10-29 

Natural Gas Inverse Price Elasticity from Seven Energy Models ................... 10-30 

LIST OF FIGURES 

Figure 10.3.1 

Figure 10.3.2 

Figure 10.3.3 

Figure 10.5.2 

Figure 10.6.2 

Figure 10.6.3 

Gas-Fired Storage Water Heaters: Forecasted Trends in Average Energy 

Use ..................................................................................................................... 10-9 

Electric Storage Water Heaters: Forecasted Trends in Average Energy Use.... 10-9 

Site-to-Source Conversion Factors for Electricity........................................... 10-13 

Non-Discounted Increases in Annual Installed Cost and Savings in 

Operating Cost for Gas-Fired Storage Water Heaters: Efficiency Level 2 ..... 10-25 

Change in U.S. Natural Gas Consumption Associated with Scenarios for 

Water Heater Standards ................................................................................... 10-31 

Effects of Water Heater Standard Scenarios on Average Natural Gas 

Prices at U.S. Wellheads.................................................................................. 10-31 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
CHAPTER 10. NATIONAL IMPACT ANALYSIS 

10.1 INTRODUCTION 

This chapter describes the U.S. Department of Energy’s (DOE’s) estimation of certain 

national impacts that may result from potential energy conservation standards for heating 

products. Results described here include: (1) national energy savings (NES) from considered 

standard levels, (2) the monetary value of those energy savings, (3) increased total installed costs 

of the considered appliances that are attributable to energy conservation standards, and (4) the 

net present value (NPV) of the difference between the value of energy savings and the total 

installed costs. 

DOE determined the NES and NPV for all the standard levels considered for the three 

heating products under consideration (residential water heaters, direct heating equipment, and 

pool heaters). All calculations for each of the considered products were performed using a 

Microsoft Excel spreadsheet model, which is accessible on the Internet 

(www.eere.energy.gov/buildings/appliance_standards/). Each product’s spreadsheet model, 

referred to as a national impact analysis (NIA) model, incorporates the calculations for 

determining the NES and NPV as well as inputs from the associated shipments model. Details 

and instructions for using the NIA models are provided in Appendix 9-A, user instructions for 

shipments and national energy savings spreadsheet model. Chapter 9, shipments analysis, 

describes the shipments models that DOE used to forecast future purchases of the considered 

products. 

10.2 FORECASTED ENERGY EFFICIENCIES 

A key component of DOE’s estimates of NES and NPV for each of the three heating 

products is the energy efficiencies forecasted for the base case (without new energy conservation 

standards) and each of the standards cases (with new energy conservation standards). The 

forecasted energy efficiency represents the annual shipments-weighted energy efficiency of the 

product under consideration during the forecast period (that is, from the assumed effective date 

of a new standard to 30 years after that date). 

For calculating the NES, per-unit average annual energy consumption is a direct function 

of product energy efficiency. Chapter 7, energy use determination, describes how each product’s 

per-unit energy consumption changes as a function of energy efficiency. For the NPV, the perunit total installed cost is a direct function of energy efficiency; the per-unit annual operating 

cost, because it is a function of per-unit annual energy consumption, is indirectly dependent on 

product energy efficiency. Chapter 8, life-cycle cost and payback period analyses, describes how 

per-unit total installed costs change as a function of energy efficiency for each of the considered 

products. The above NES and NPV inputs, as well as all other inputs to the calculation of NES 

and NPV, are discussed further in sections 10.3 and 10.4. 

To forecast base-case energy efficiencies for each product class, DOE used as a starting 

point the shipments-weighted energy efficiency for 2015. To represent the distribution of product 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
energy efficiencies in 2015, DOE used the same market shares as in the base case for the lifecycle cost (LCC) analysis (chapter 8). 

To project trends until the end of the forecast period (2043), DOE examined the projected 

trend between the present and 2015. For gas-fired storage water heaters and electric storage 

water heaters, DOE estimated the distribution of product energy efficiencies (EFs) in 2015 by 

accounting for the estimated market impact of the newly established ENERGY STAR efficiency 

levels for water heaters. The result that the market share of 0.80-EF gas-fired storage water 

heaters increases from zero at present to 2.5 percent in 2015; the market share of 2.20-EF electric 

storage water heaters increases from zero at present to 5 percent in 2015. The projected trend to 

2015 represents an average annual increase in energy efficiency of 0.27 percent for gas-fired 

storage water heaters and 0.55 percent for electric storage water heaters. DOE applied the above 

values to estimate the increase in average energy efficiency (and the decrease in corresponding 

unit energy consumption) in each year through 2043. Because DOE set water heater utilization to 

remain constant throughout the forecast, trends in average energy consumption are indicative of 

trends in average energy efficiency. 

Because DOE found no quantifiable indications of change in energy efficiencies over 

time for the oil-fired and instantaneous gas water heater product classes, direct heating 

equipment (DHE), and pool heaters, DOE estimated that energy efficiencies remain frozen at the 

2015 or 2013 level until the end of the forecast period in 2043. 

For its forecast of standards-case energy efficiencies, DOE used a “roll-up” scenario to 

establish the shipments-weighted average energy efficiency for the year that energy conservation 

standards are assumed to become effective (2013 and 2015). In this approach, product energy 

efficiencies in the base case that do not meet the standards level under consideration would “roll 

up” to meet the new standards level. Product energy efficiencies in the base case that exceeded 

the standards level under consideration would not be affected. 

The following sections detail the forecasted energy efficiencies that DOE developed for 

each of the three types of heating products. 

10.2.1 Water Heaters 

The market shares of energy efficiencies in the base case for water heaters are developed 

in chapter 8. Tables 10.2.1 through 10.2.4 show the distributions of product energy efficiencies 

that DOE used in its NIA for water heaters, as well as the shipments-weighted energy factor 

(SWEF) for each considered efficiency level. 

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Table 10.2.1 Gas-Fired Storage Water Heaters: Energy Efficiency Distributions in 2015


Energy Energy Market Share 

Efficiency Efficiency Base Efficiency Level 

Level Case 1 2 3 4 5 6 

Baseline 0.59 82% 

1 0.62 7% 89% 

2 0.63 2% 2% 91% 

3 0.64 1% 1% 1% 93% 

4 0.65 2% 2% 2% 2% 94% 

5 0.66 3% 3% 3% 3% 3% 98% 

6 0.77 2% 2% 2% 2% 2% 2% 100% 

SWEF 0.60 0.63 0.63 0.64 0.65 0.66 0.77 

Table 10.2.2 Electric Storage Water Heaters: Energy Efficiency Distributions in 2015


Energy Energy Market Share 

Efficiency Efficiency Base Efficiency Level 

Level Case 1 2 3 4 5 6 

Baseline 0.9 54% 

1 0.91 22% 77% 

2 0.92 6% 6% 82% 

3 0.93 11% 11% 11% 93% 

4 0.94 1% 1% 1% 1% 94% 

5 0.95 1% 1% 1% 1% 1% 95% 

6 2.2 5% 5% 5% 5% 5% 5% 100% 

SWEF 0.97 0.98 0.98 0.99 1.00 1.01 2.20 

Table 10.2.3 Oil-Fired Storage Water Heaters: Energy Efficiency Distributions in 2015


Energy Energy Market Share 

Efficiency Efficiency Base Efficiency Level 

Level Case 1 2 3 4 5 6 7 

Baseline 0.53 27% 

1 0.54 7% 34% 

2 0.56 0% 0% 34% 

3 0.58 3% 3% 3% 37% 

4 0.6 18% 18% 18% 18% 55% 

5 0.62 27% 27% 27% 27% 27% 82% 

6 0.66 9% 9% 9% 9% 9% 9 % 91% 

7 0.68 9% 9% 9% 9% 9% 9% 9% 100% 

SWEF 0.59 0.60 0.60 0.61 0.62 0.63 0.66 0.68 

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1

2

3

4

5

6

7

Table 10.2.4 Gas-Fired Instantaneous Water Heaters: Energy Efficiency Distributions in 

2015 

Energy Energy Market Share 

Efficiency Efficiency Base Efficiency Level 

Level Case 1 2 3 4 5 6 7 

Baseline 0.62 0% 

0.69 0% 0% 

0.78 1% 1% 1% 

0.8 13% 13% 13% 14% 

0.82 57% 57% 57% 57% 71% 

0.84 15% 15% 15% 15% 15% 86% 

0.85 11% 11% 11% 11% 11% 11% 97% 

0.92 3% 3% 3% 3% 3% 3% 3% 100% 

SWEF 0.83 0.83 0.83 0.83 0.83 0.84 0.85 0.92 

For oil-fired storage water heaters and for gas-fired instantaneous water heaters, DOE 

maintained the shipments-weighted energy efficiencies projected for 2015 throughout the 

forecast period. 

10.2.2 Pool Heaters 

The market shares of energy efficiencies in the base case for pool heaters are developed 

in chapter 8. Table 10.2.5 shows the distributions for the base- and standards-case product 

energy efficiency for 2013, which DOE used in its NIA for pool heaters. Also included in the 

table is the shipments-weighted energy efficiency associated with the base case and each 

considered standard level. 

Table 10.2.5 Pool Heaters: Energy Efficiency Distributions in 2013 

Energy Thermal Market Share 

Efficiency Efficiency Base Efficiency Level 

Level (%) Case 1 2 3 4 5 6 7 8 

Baseline 78 1% 

1 79 13% 14% 

2 81 21% 21% 35% 

3 82 33% 33% 33% 68% 

4 83 14% 14% 14% 14% 81% 

5 84 12% 12% 12% 12% 12% 93% 

6 86 6% 6% 6% 6% 6% 6% 99% 

7 90 0% 0% 0% 0% 0% 0% 0% 99% 

8 95 1% 1% 1% 1% 1% 1% 1% 1% 100% 

SWEF 82.1 82.1 82.4 82.7 83.4 84.2 86.1 90.1 95.0 

DOE maintained the shipments-weighted energy efficiencies for 2013 throughout the 

forecast period (2013–2043). 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
10.2.3 Direct Heating Equipment 

The market shares of energy efficiencies in the base case for direct heating equipment are 

developed in chapter 8. Tables 10.2.6 through 10.2.9 show the distributions for base- and 

standards-case product energy efficiency that DOE used in its NIA for direct heating equipment. 

Also included in the tables are the shipments-weighted energy efficiencies associated with the 

base case and each considered standard level. 

Table 10.2.6	 Gas Wall Fan Direct Heating Equipment: Energy Efficiency Distributions in 

2013 

Energy AFUE* Market Share 

Efficiency (%) Base Efficiency Level 

Level Case 1 2 3 4 

Baseline 74 48% 

1 75 12% 60% 

2 76 19% 19% 79% 

3 77 19% 19% 19% 98% 

4 80 2% 2% 2% 2% 100% 

Shipments-Weighted 

AFUE 

75.2 75.7 76.3 77.1 80.0 

* Annual fuel utilization efficiency 

Table 10.2.7	 Gas Wall Gravity Direct Heating Equipment: Energy Efficiency 

Distributions in 2013 

Energy Market Share 

Efficiency AFUE (%) Base Efficiency Level 

Level Case 1 2 3 4 5 

Baseline 64 46% 

1 66 21% 67% 

2 68 33% 33% 100% 

3 71 0% 0% 0% 100% 

4 72 0% 0% 0% 0% 100% 

5 75 0% 0% 0% 0% 0% 100% 

Shipments-Weighted 

AFUE 

65.7 66.7 68.0 71.0 72.0 75.0 

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

2

3

4

5

6

7

Table 10.2.8 Gas Room Direct Heating Equipment: Energy Efficiency Distributions in 

2013 

Energy AFUE Market Share 

Efficiency (%) Base Efficiency Level 

Level Case 1 2 3 4 5 6 7 

Baseline 64 40% 

65 25% 65% 

66 15% 15% 80% 

67 11% 11% 11% 91% 

68 5% 5% 5% 5% 96% 

70 2% 2% 2% 2% 2% 98% 

78 2% 2% 2% 2% 2% 2% 100% 

93 0% 0% 0% 0% 0% 0% 0% 100% 

ShipmentsWeighted AFUE 

65.5 65.9 66.5 67.3 68.2 70.1 78.0 93.0 

Table 10.2.9 Gas Floor Direct Heating Equipment: Energy Efficiency Distributions in 

2013 

Energy AFUE Market Share 

Efficiency (%) Base Efficiency Level 

Level Case 1 2 3 4 5 

Baseline 57 22% 

1 58 78% 100% 

2 61 0% 0% 100% 

3 62 0% 0% 0% 100% 

4 65 0% 0% 0% 0% 100% 

5 78 0% 0% 0% 0% 0% 100% 

Shipments-Weighted 

AFUE 

57.8 58.0 61.0 62.0 65.0 78.0 

As noted previously, DOE assumed that energy efficiencies for all product classes of 

direct heating equipment remain frozen at 2013 levels. 

10.3 NATIONAL ENERGY SAVINGS 

The following sections discuss the definition of NES and the inputs to calculations of 

NES. 

10.3.1 Definition of National Energy Savings 

DOE calculates NES for each year as the difference between energy consumption of the 

product stock using the average unit energy consumption (UEC) of the stock in the base case 

(without new standards) or in a case given new standards. 

NES (y)class = AffStock (y)class × (UEC ( y)base ,class −UEC ( y)std ,class )

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

AffStock(y)class = the stock of equipment sold after the year of the standard that is still in 

operation in year y (affected stock), 

UEC(y)base class = the unit energy consumption in the base case in year y, and 

UEC(y)std. class = the unit energy consumption in the standard case in year y. 

The affected stock in year y is given by: 

( )

y 

class = ∑ ( )class × Surv (y − i) AffStock y S i class 

i=stdyr 

The quantity of stock in year y is dependent on the number of shipments S(y)class in past 

years, multiplied by the survival function Surv(v), which is the fraction of shipments that survive 

until age v (vintage). Only those shipments made after the year standards are enacted (stdyr) are 

considered in calculating NES, because shipments before that date are unaffected by the 

standard, and thus will produce no savings. The variables UECbase,class and UECstd,class are the 

average unit energy consumption of products sold in either the base or standards case. In the case 

of gas and electric storage water heaters, the average unit energy consumption changes over 

time. For all other product classes, unit energy consumption remains constant. 

Cumulative energy savings are the sum of annual NES during a defined period, which for 

water heaters is 2015–2043 and for the other products considered is 2013–2043: 

2043 

NES ( ) cum = ∑NES y 

y=stdyr 

The stock of products is dependent on annual shipments and the lifetime of the products. 

10.3.2 Inputs to National Energy Savings 

The inputs for determining NES are: 

• annual energy consumption per unit (UEC) 

• shipments 

• equipment stock (STOCKV) 

• national annual energy consumption (AEC) 

• site- to-source conversion factor (src_conv) 

10.3.2.1 Annual Energy Consumption per Unit 

DOE developed per-unit annual energy consumption as a function of product energy 

efficiency for each of the considered products (chapter 7, energy use determination, and chapter 

8, life-cycle cost and payback period analyses). Because per-unit annual energy consumption is 

directly dependent on energy efficiency, DOE used the shipments-weighted energy efficiencies 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
for the base and standards cases (presented in section 10.2), along with the annual energy use 

data presented in chapter 8, to estimate the shipments-weighted average annual per-unit energy 

consumption under the base and standards cases. 

Water Heaters. Using the relationship between water heater EF and annual energy 

consumption described in chapter 8, DOE calculated the per-unit annual energy consumption 

based on the average energy efficiencies that correspond to the base case and each considered 

standard case for each water heater product class (Table 10.3.1). 

Table 10.3.1	 Water Heaters: Shipments-Weighted Average per-Unit Annual Energy 

Consumption in 2015 

Product Base Efficiency Level 

Class Case 1 2 3 4 5 6 7 

EF 0.59 0.62 0.63 0.64 0.65 0.66 0.77 

GSWH* 

Annual 

Energy 

Use 

(MMBtu/ 

yr †

) 16.4 15.6 15.3 15.2 14.9 14.7 12.7 

EF 0.90 0.91 0.92 0.93 0.94 0.95 2.20 

ESWH‡ 

Annual 

Energy 

Use 

(kWh/yr§

) 2,612 2,589 2,558 2,526 2,490 2,455 1,478 

EF 0.53 0.54 0.56 0.58 0.60 0.62 0.66 0.68 

OSWH# 

Annual 

Energy 

Use 

(MMBtu/ 

yr) 17.3 17.2 16.9 16.7 16.4 16.0 15.3 14.9 

EF 0.62 0.69 0.78 0.80 0.82 0.84 0.85 0.92 

GIWH′′

Annual 

Energy 

Use 

(MMBtu/ 

yr) 12.4 12.4 12.4 12.4 12.4 12.2 12.1 11.3 

* Gas-fired storage water heater. 

† Thousand thousand (million) British thermal units per year. 

‡ Electric storage water heater.


§ Kilowatt-hours per year.


# Oil-fired storage water heater.


′′ Gas-fired instantaneous water heater.


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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
When calculating energy consumption at each considered efficiency level for each water 

heater, DOE applied a rebound effect of 10 percent. As discussed in chapter 8, when the rebound 

effect is incorporated, calculated energy use is higher than if no rebound effect were considered. 

17.0 

UEC (MMBtu) 

16.0 

15.0 

14.0 

13.0 

12.0 

2015 2020 2025 2030 2035 2040 2045 

Base Case CSL 1 CSL 2 CSL 3


CSL 4 CSL 5
 CSL 6 

Figure 10.3.1	 Gas-Fired Storage Water Heaters: Forecasted 

Trends in Average Energy Use 

2800


2600


2400


2200


UEC (kWh) 2000 

1800 

1600 

1400 

1200 

1000 

2015 2020 2025 2030 2035 2040 2045 

Base Case CSL 1 CSL 2 CSL 3 

CSL 4 CSL 5 CSL 6 

Figure 10.3.2	 Electric Storage Water Heaters: Forecasted Trends 

in Average Energy Use 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
As noted in section 10.2, DOE projected trends in average energy efficiency of water 

heaters in the base case and standards cases. Because it is a function of energy efficiency, the 

per-unit annual energy consumption (shown in Table 10.3.1) mirrors the trends in energy 

efficiency. 

Pool Heaters. DOE used the relationship between pool heater energy efficiency and 

annual energy consumption described in chapter 8 to calculate per-unit annual gas consumption 

for pool heaters. The calculations were based on the shipments-weighted energy efficiencies that 

correspond to the base case and each considered efficiency level (Table 10.3.2). 

Table 10.3.2	 Pool Heaters: Shipments-Weighted Average per-Unit Annual Energy 

Consumption 

Base 

Case 

Efficiency Level 

1 2 3 4 5 6 7 8 

Thermal 

Efficiency (%) 78 79 81 82 83 84 86 90 95 

Annual 

Energy Use 

(MMBtu/yr) 50.9 50.9 50.7 50.5 49.4 49.0 48.1 46.2 44.1 

When calculating energy consumption at each considered efficiency level for each pool 

heater, DOE applied a rebound effect of 10 percent. As discussed in chapter 8, when the rebound 

effect is incorporated, calculated energy use is higher than if no rebound effect were considered. 

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base 

and standards cases remain frozen at 2013 levels. Because per-unit annual energy consumption is 

a function of energy efficiency, DOE held the values shown in Table 10.3.2 constant throughout 

the forecast period. 

Direct Heating Equipment. Using the relationship between the EF of each direct heating 

equipment product and the annual energy consumption described in chapter 8, DOE calculated 

the per-unit annual energy consumption of direct heating equipment products. The calculation 

was based on the shipments-weighted energy efficiencies that correspond to the base case and 

each standards case for the four product classes of direct heating equipment (Table 10.3.3). 

10-10 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table 10.3.3 Direct Heating Equipment: Shipments-Weighted Average per-Unit Annual 

Energy Consumption 

Product 

Class 

Base 

Case 

Efficiency Level 

1 2 3 4 5 6 7 

Gas 

Wall 

Fan 

DHE 

AFUE (%) 74 75 76 77 80 

Gas 

(MMBtu/yr) 26.4 25.8 25.6 25.4 24.6 

Gas 

Wall 

Gravity 

DHE 

AFUE (%) 64 66 68 71 72 75 

Gas 

(MMBtu/yr) 29.0 28.6 28.2 27.2 26.3 25.4 

Gas 

Room 

DHE 

AFUE (%) 64 65 66 67 68 70 78 93 

Gas 

(MMBtu/yr) 21.6 21.5 21.3 21.1 20.9 19.8 18.1 15.8 

Gas 

Floor 

DHE 

AFUE (%) 57 58 61 62 65 78 

Gas 

(MMBtu/yr) 30.0 29.9 28.8 28.4 26.2 22.6 

When calculating energy consumption at each considered efficiency level for each direct 

heating equipment product, DOE applied a rebound effect of 15 percent. As discussed in chapter 

8, when the rebound effect is incorporated, calculated energy use is higher than if no rebound 

effect were considered. 

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base 

and standards cases remain frozen at 2013 levels. Because per-unit annual energy consumption is 

a function of energy efficiency, DOE held the values shown in Table 10.3.3 constant throughout 

the forecast period. 

10.3.2.2 Shipments and Equipment Stock 

The methodology for conducting and generating shipments forecasts for each considered 

product is described in detail in chapter 9. The product stock in a given year is the number of 

products shipped from earlier years that survive in the given year. The NIA models keep track of 

the number of units shipped each year. DOE assumes that the products have an increasing 

probability of retiring as they age. The survival function represents the probability of survival as 

a function of years since purchase. The sections in chapter 9 that concern with specific products 

present further details on the survival functions that DOE used in its analyses. 

10.3.2.3 National Annual Energy Consumption 

The national annual energy consumption (AEC), which is calculated for the base case 

only, is the product of the annual energy consumption per unit and the number of units of each 

vintage. 

10-11 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
AEC (y)class = UEC base ,class × Stock (y)class 

Where: 

UECbase class = the unit energy consumption in the base case, and 

Stock(y)class = the stock of equipment in year y. 

10.3.2.4 Site-to-Source Energy Conversion Factors 

In determining annual NES, DOE initially considered the annual energy consumption at a 

residence (for electricity, the energy in kWh consumed by the household). DOE then calculated 

primary (source) energy savings from site energy consumption by applying a conversion factor 

to account for losses associated with the generation, transmission, and distribution of electricity 

and natural gas. The site-to-source conversion factor is a multiplicative factor used for 

converting site energy consumption into primary or source energy consumption, expressed in 

quadrillion Btu (quads). 

DOE used annual site-to-source conversion factors based on the version of the national 

energy modeling system (NEMS) that corresponds to the DOE Energy Information 

1 Administration’s (EIA’s) Annual Energy Outlook 2008 (AEO 2008). The factors are marginal 

values, which represent the response of the system to an incremental decrease in consumption. 

Natural gas losses include pipeline leakage, pumping energy, and transportation fuel. The AEO 

2008 forecasts losses of about 7 percent for natural gas, with only slight variation from year to 

year. For electricity, the conversion factors change over time in response to projected changes in 

generation sources (i.e., the types of power plant projected to provide electricity). NEMS outputs 

stop in 2030; DOE assumed that conversion factors remain constant at 2030 values throughout 

the rest of the forecast. Figure 10.3.3 shows the site-to-source conversion factors for electricity 

between 2005 and 2030. The conversion factor for natural gas increases slightly from 1.083 Btu 

in 2005 to 1.097 Btu in 2030. 

10-12 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
0 

2000 

4000 

6000 

8000 

10000 

12000 

14000 

2005 2010 2015 2020 2025 2030 

Btu/kWh 

Figure 10.3.3 Site-to-Source Conversion Factors for Electricity 

10.4 NET PRESENT VALUE 

The following sections provide the definition of NPV and inputs to the calculation of 

NPV. 

10.4.1 Definition of Net Present Value 

The NPV is the value in the present of a combination of costs and savings. The NPV is 

described by the equation: 

NPV = ∑(S( y) − C( y))× DF ( y) 

y 

Where: 

S(y) = value of operating cost savings (including energy, repair, and maintenance 

costs) in year y, 

C(y) = value of increased total installed costs (including products and 

installation), and 

DF(y) = discount factor in each year. 

10-13 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
DOE calculated the total annual savings in operating costs by multiplying the number or 

stock of a given product (by vintage) by its per-unit savings on operating costs (also by vintage). 

DOE calculated the total annual increases in installed costs by multiplying the number or stock 

of the given product (by vintage) by its per-unit total increase in installed costs (also by vintage). 

The calculation of the annual savings in operating costs and total annual increases in installed 

cost is represented by the following equations. 

OCS ( y) = ∑UOCS ( y) × AffStock ( y) 

TIC ( y) = ∑UTIC ( y)xS ( y) 

Where: 

OCS = total annual savings in operating costs each year summed over vintages of 

the product stock considered, AffStock(y), 

TIC = total annual increase in installed cost each year summed over vintages of 

the product stock considered, AffStock(y), 

S(y) = stock of product (millions of units) of vintage V that survive in the year for 

which DOE calculated annual energy consumption, 

UOCS(y) = annual savings in operating cost per unit in year y, 

UTIC(y) = annual increase in total installed cost per unit in year y, and 

y = year in forecast. 

DOE calculated a discount factor from the discount rate and the number of years between 

the present (i.e., the year to which the sum is being discounted) and the year in which the costs 

and savings occur. The NPV is the sum over time of the discounted net savings. 

10.4.2 Inputs to Calculation of Net Present Value 

The inputs to calculations of NPV are: 

• total installed cost per unit, 

• annual savings in operating cost per unit, 

• total annual increases in installed cost, 

• total annual operating costs, 

• discount factor, 

• present value of costs, and 

• present value of savings. 

The increase in total annual installed cost is equal to the annual change in the per-unit 

total installed cost (difference between base case and standards cases) multiplied by the 

shipments forecasted for the standards case. As when calculating the NES, DOE did not use base 

case shipments to calculate total annual installed costs for all of the products. 

10-14 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
The total annual savings in operating costs are equal to the change in annual operating 

costs (difference between base case and standards case) per unit multiplied by the shipments 

forecasted in the standards case. The annual operating cost includes energy, repair, and 

maintenance costs, as described in chapter 8, life-cycle cost and payback period analyses. 

10.4.2.1 Total Installed Cost per Unit 

The per-unit total installed cost of each considered product is described in chapter 8 as a 

function of product energy efficiency. Because the per-unit total annual installed cost is directly 

dependent on energy efficiency, DOE used the shipments-weighted energy efficiencies of the 

base and standards cases described in section 10.2, in combination with the total installed costs 

developed in chapter 8, to estimate the shipments-weighted average annual per-unit total 

installed cost under the base and standards cases. 

Water Heaters. DOE based average water heater prices on average manufacturer costs 

plus average overall markup values. Using the relationship, presented in chapter 8, between 

water heater EF and total installed cost, DOE derived the per-unit total installed cost based on 

the shipments-weighted energy efficiencies that correspond to the base case and each standards 

case for the four water heater product classes being considered (Table 10.4.1). For gas and 

electric storage water heaters, EF increases over time in the base case, so per-unit total installed 

cost increases as well. 

Table 10.4.1	 Water Heaters: Shipments-Weighted Average per-Unit Total Installed Cost 

in 2015 

Product 

Class 

Base 

Case 

(2015) 

Efficiency Level 

1 2 3 4 5 6 7 

EF 0.59 0.62 0.63 0.64 0.65 0.66 0.77 

Gas 

Storage 

Total Installed 

Cost (2007$) 1,023 1,035 1,050 1,514 1,526 1,541 1,782 

EF 0.90 0.91 0.92 0.93 0.94 0.95 2.20 

Electric 

Storage 

Total Installed 

Cost (2007$) 713 720 726 748 794 819 1,475 

EF 0.53 0.54 0.56 0.58 0.60 0.62 0.66 0.68 

Oil 

Storage 

Total Installed 

Cost (2007$) 1,865 1,869 1,882 1,888 1,885 1,898 2,088 2,227 

EF 0.62 0.69 0.78 0.80 0.82 0.84 0.85 0.92 

GIWH 

Total Installed 

Cost (2007$) 1,918 1,918 1,918 1,919 1,924 1,949 1,964 2,258 

As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base 

and standards cases remain frozen at the levels existing in the effective year of the standard. 

Because per-unit total installed costs are a function of energy efficiency, DOE maintained the 

values shown in Table 10.4.1 constant throughout the forecast period. 

10-15 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Pool Heaters. The total installed cost of pool heaters includes the cost of both the product 

and the installation. DOE based average product prices on average manufacturer costs multiplied 

by average overall markup values. Using the relationship, presented in chapter 8, between pool 

heater efficiency and total installed cost, DOE calculated the per-unit total installed cost based on 

the shipments-weighted energy efficiencies that correspond to the base case and each standards 

case (Table 10.4.2). 

Table 10.4.2	 Pool Heaters: Shipments-Weighted Average Per-Unit Total Installed Costs 

Base 

Case 

Efficiency Level 

1 2 3 4 5 6 7 8 

Thermal Efficiency (%) 78 79 81 82 83 84 86 90 95 

Total Installed Cost (2007$) 2,473 2,473 2,476 2,493 2,587 2,630 2,676 3,062 3,267 

As described in section 10.2, DOE assumed that forecasted energy efficiencies in the 

base and standards cases remain frozen at 2013 levels. Because per-unit total installed costs are a 

function of energy efficiency, DOE held the values shown in Table 10.4.2 constant throughout 

the forecast period. 

Direct Heating Equipment. Total installed cost for direct heating equipment includes 

costs for both the product and the installation. DOE based average product prices on average 

manufacturer costs multiplied by average overall markup values. Using the relationship, 

presented in chapter 8, between the annual fuel utilization efficiency (AFUE) for direct heating 

equipment and total installed cost, DOE calculated the per-unit total installed cost for direct 

heating equipment products, based on the shipments-weighted energy efficiencies that 

correspond to the base case and each standards case (Table 10.4.3). 

Table 10.4.3	 Direct Heating Equipment: Shipments-Weighted Average per-Unit Total 

Installed Costs 

Product Base Efficiency Level 

Class Case 1 2 3 4 5 6 7 

AFUE (%) 74 75 76 77 80 

Gas Wall 

Fan DHE* 

Total Installed 

Cost (2007$) 1,825 1,854 1,872 1,902 2,023 

Gas Wall AFUE (%) 64 66 68 71 72 75 

Gravity 

DHE 

Total Installed 

Cost (2007$) 1,413 1,441 1,452 1,518 1,767 1,893 

AFUE (%) 64 65 66 67 68 70 78 93 

Gas Room 

DHE 

Total Installed 

Cost (2007$) 1,485 1,500 1,523 1,551 1,583 1,810 1,933 2,377 

AFUE (%) 57 58 61 62 65 78 

Gas Floor 

DHE 

Total Installed 

Cost (2007$) 2,038 2,046 2,078 2,111 2,360 2,486 

* Direct heating equipment. 

10-16 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
As noted in section 10.2, DOE assumed that forecasted energy efficiencies in the base 

and standards cases remain frozen at 2013 levels. Because per-unit total installed cost is a 

function of energy efficiency, DOE held the values shown in Table 10.4.3 constant throughout 

the forecast period. 

10.4.2.2 Annual Operating Cost Savings per Unit 

Per-unit annual operating cost includes costs for energy, repair, and maintenance. DOE 

determined the savings in per-unit annual operating cost for each product by multiplying the 

savings in per-unit annual energy consumption by the appropriate energy price. 

Estimates of per-unit annual energy consumption for the base case and each standards 

case were presented in section 10.3.2.1. As described previously, DOE forecasted the per-unit 

annual energy consumption for the base case and each standards case for gas storage water 

heaters and electric storage water heaters based on the estimated market impact of the new 

ENERGY STAR efficiency levels for water heaters. 

For all other products, DOE forecasted the per-unit annual energy consumption for the 

base case and each standards case by freezing the consumption at levels estimated for the 

effective year. DOE forecasted energy prices based on EIA’s AEO2008. The energy prices and 

price trends are described in chapter 8. 

10.4.2.3 Total Increases in Annual Installed Cost 

The increase in total annual installed cost for any given standards case is the product of 

the total installed cost increase per unit due to the standard and the number of units of each 

vintage. This approach accounts for differences in total installed cost from year to year. DOE 

used the following equation (also presented in section 10.4.1) to determine the increase in total 

annual installed cost for a given standards case. 

TIC ( y) = ∑UTIC ( y) × S( y) 

10.4.2.4 Total Savings in Annual Operating Cost 

The total savings in annual operating cost for any given standards case is the product of 

the annual operating cost savings per unit due to the standard and the number of units of each 

vintage. This approach accounts for differences in savings in annual operating cost from year to 

year. DOE used the following equation (also presented in section 10.4.1) to determine the total 

savings in annual operating cost for a given standards case. 

OCS ( y) = ∑UOCS ( y) × AffStock ( y) 

As discussed in chapter 8, the take-back in energy consumption associated with the 

rebound effect provides increased value to consumers (e.g., a warmer indoor environment). The 

net impact is the sum of the change in the cost of owning the heating product (that is, national 

10-17 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
consumer expenditures for total installed and operating costs) and the increased value of the 

enhanced service from the product. DOE believes that, if the increased national value (to 

consumers) produced by the rebound effect could be monetized, it would be similar to the 

monetary value of the foregone energy savings. For this analysis, DOE estimated that this 

increased value to consumers is equivalent to the monetary value of the energy savings that 

would have occurred without the rebound effect. The national economic impacts on consumers 

with or without the rebound effect, as measured by the NPV analysis, therefore are the same. 

10.4.2.5 Discount Factors 

DOE multiplies monetary values in future years by a discount factor to determine present 

values. The discount factor (DF) is described by the equation: 

1 DF = _ 

(1+ r)

( y y p ) 

Where:


r = discount rate,


y = year of the monetary value, and


yP = year in which the present value is being determined.


DOE used both a 3-percent and a 7-percent real discount rate when estimating national 

impacts. These discount rates were applied in accordance with the Office of Management and 

Budget (OMB)’s guidance to Federal agencies on developing regulatory analyses (OMB Circular 

A-4, September 17, 2003, and section E., “Identifying and Measuring Benefits and Costs,” 

therein). DOE defines the present year as 2007. 

10.4.2.6 Present Value of Costs 

The present value of increased installed costs is the annual increase in installed cost for 

each year (i.e., the difference between the standards case and base case), discounted to the 

present and summed over the period for which DOE is considering the installed products (from 

the effective date of energy conservation standards through 30 years later). 

The increase in total installed cost refers to both product and installation costs associated 

with the higher energy efficiency of products purchased in the standards case compared to the 

base case. DOE calculated annual increases in installed cost as the difference in total cost of new 

products installed each year, multiplied by the shipments in the standards case. 

10.4.2.7 Present Value of Savings 

The present value of savings in operating cost is the annual savings in operating cost (i.e., 

the difference between the base case and standards case), discounted to the present and summed 

over the period that begins with the effective date of standards and ends when the last installed 

unit is retired from service. 

10-18 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Savings represent decreases in operating cost (including costs for energy, repair, and 

maintenance) associated with the higher energy efficiency of products purchased in a standards 

case compared to the base case. Total annual savings in operating cost are the savings per unit 

multiplied by the number of units of each vintage that survive in a particular year. Because 

equipment consumes energy throughout its lifetime, the energy consumption for units installed in 

the past year includes energy consumed until the unit is retired from service. 

10.5 CALCULATION RESULTS 

The NIA model provides estimates of the NES and NPV produced by various efficiency 

levels. The inputs to the NIA model were discussed in sections 10.3.2 (NES Inputs) and 10.4.2 

(NPV Inputs). DOE generated the NES and NPV results using a Microsoft Excel spreadsheet, 

which is accessible on the Internet (www.eere.energy.gov/buildings/appliance_standards/). 

Details and instructions for using the spreadsheet are provided in Appendix 9-A, user 

instructions for shipments and national energy savings spreadsheet model, in the section titled, 

“NES and NPV input summary.” 

Table 10.5.1 summarizes inputs to the NIA model. 

Table 10.5.1 Inputs to National Energy Savings and Net Present Value 

Input Data Description 

Shipments Annual shipments from shipments model (see chapter 9). 

Effective Date of Standard 2015 for water heaters, 2013 for pool heaters and DHE 

Energy Efficiencies Forecasted for Base 

Case 

Shipments-weighted unit energy consumption (UEC) 

determined for each year. 

Energy Efficiencies in Standards Cases “Roll-up” scenario assumed for determining shipmentsweighted UEC for each standards case (see section 10.2.). 

Annual Energy Consumption per Unit Annual weighted-average values are a function of shipmentsweighted UEC. 

Total Installed Cost per Unit Annual weighted-average values are a function of efficiency 

level. 

Energy Cost per Unit Annual weighted-average values are a function of the annual 

UEC and energy prices (see chapter 8 for energy prices). 

Repair Cost and Maintenance Cost per 

Unit 

Annual values are a function of efficiency level (see chapter 8). 

Escalation of Energy Prices Based on EIA AEO2008 forecasts (to 2030) and on 

extrapolation to 2043 (see chapter 8). 

Energy Site-to-Source Conversion 

Factor 

Conversion, which differs yearly, is generated by DOE/EIA’s 

NEMS* program (a time-series conversion factor that includes 

electric generation, transmission, and distribution losses). 

Discount Rate 3 percent and 7 percent real. 

Present Year Future expenses are discounted to the year 2007. 

* Chapter 13 in the Utility Impact Analysis and the Environmental Assessment Report provide more detail on 

NEMS.


10-19


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

2

3

4

5

6

10.5.2 National Energy Savings Results 

The following sections provide results of calculating NES for each of the three heating 

products in the standards cases. NES results, which are cumulative to 2043, are shown as 

primary energy savings. Because DOE based the inputs to the NIA model on weighted-average 

values, results are discrete point values, rather than a distribution of values as produced by the 

LCC and PBP analyses. 

10.5.2.1 Water Heaters 

Tables 10.5.2 through 10.5.5 show the NES results for the standard levels analyzed for 

water heaters. The largest savings by far are associated with electric water heaters at level 6, 

which calls for a heat pump water heater. For this efficiency level, DOE estimated the increased 

cost of switching from an electric heat pump water heater to a gas water heater for each gas 

water heater efficiency level (see chapter 9.) The NES results that account for switching (Table 

10.5.3) include the reduced electricity savings associated with fewer heat pump water heaters, as 

well as the gas consumption of the gas water heaters that some households switch to. Estimated 

energy savings decrease slightly when switching is included, because the gas-fired water heater 

designs use slightly more energy than does an electric heat pump water heater. 

Table 10.5.2 Gas-Fired Storage Water Heaters: Cumulative National Energy Savings 

Energy NES 

Efficiency 

Level 

EF 

No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

0.62 0.98 0.49 0.21 

0.63 1.31 0.65 0.28 

0.64 1.24 0.61 0.27 

0.65 1.56 0.77 0.33 

0.66 1.88 0.93 0.40 

0.77 4.26 2.11 0.91 

10-20 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table 10.5.3 Electric Storage Water Heaters: Cumulative National Energy Savings


Energy Efficiency Level 

EF NES 

No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

1 0.91 0.24 0.12 0.05 

2 0.92 0.58 0.28 0.12 

3 0.93 0.93 0.46 0.20 

4 0.94 1.32 0.65 0.28 

5 0.95 1.71 0.84 0.36 

6 - No Switching 

6 - Switching with GSWH 

efficiency level 6 

2.2 

2.2 

8.70 

8.47 

4.27 

4.17 

1.83 

1.79 

6 - Switching with GSWH 

efficiency level 5 2.2 8.35 4.12 1.77 

6 - Switching with GSWH 

efficiency level 4 2.2 8.33 4.43 1.99 

6 - Switching with GSWH 

efficiency level 3 2.2 8.32 4.10 1.76 

6 - Switching with GSWH 

efficiency level 2 2.2 7.75 3.85 1.66 

6 - Switching with GSWH 

efficiency level 1 2.2 7.71 3.83 1.65 

Table 10.5.4 Oil-Fired Storage Water Heaters: Cumulative National Energy Savings


Energy NES 

Efficiency 

Level 

EF 

No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

1 0.54 0.001 0.001 0.000 

2 0.56 0.004 0.002 0.001 

3 0.58 0.006 0.003 0.001 

4 0.60 0.008 0.004 0.002 

5 0.62 0.011 0.006 0.002 

6 0.66 0.018 0.009 0.004 

7 0.68 0.022 0.011 0.005 

10-21 

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

2

3

4

5

6

7

1

2

3

4

5

6

7

8

Table 10.5.5 Gas-Fired Instantaneous Water Heaters: Cumulative National Energy 

Savings 

Energy NES 

Efficiency 

Level 

EF 

No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

0.69 0.00 0.00 0.00 

0.78 0.00 0.00 0.00 

0.80 0.00 0.00 0.00 

0.82 0.02 0.01 0.00 

0.84 0.14 0.07 0.03 

0.85 0.21 0.10 0.04 

0.92 0.69 0.33 0.13 

10.5.2.2 Pool Heaters 

Table 10.5.6 shows results of calculating the NES for the efficiency levels analyzed for 

pool heaters. 

Table 10.5.6 Pool Heaters: Cumulative National Energy Savings 

Energy Thermal NES 

Efficiency 

Level 

Efficiency 

(%) No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

79 0.001 0.000 0.000 

81 0.020 0.010 0.005 

82 0.043 0.022 0.010 

83 0.171 0.087 0.039 

84 0.222 0.113 0.051 

86 0.336 0.170 0.077 

90 0.560 0.284 0.129 

95 0.814 0.413 0.187 

10.5.2.3 Direct Heating Equipment 

Tables 10.5.7 through 10.5.10 show the results of calculating NES for the efficiency 

levels analyzed for direct heating equipment. 

10-22 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Table 10.5.7 Gas Wall Fan Direct Heating Equipment: Cumulative National Energy 

Savings 

Energy NES 

Efficiency 

Level 

AFUE 

(%) No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

1 75 0.018 0.009 0.004 

2 76 0.024 0.011 0.005 

3 77 0.030 0.015 0.006 

4 80 0.052 0.025 0.011 

Table 10.5.8 Gas Wall Gravity Direct Heating Equipment: Cumulative National Energy 

Savings 

Energy NES 

Efficiency 

Level 

AFUE 

(%) No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

1 66 0.008 0.004 0.002 

2 68 0.020 0.011 0.005 

3 71 0.044 0.023 0.011 

4 72 0.068 0.036 0.017 

5 75 0.087 0.046 0.022 

Table 10.5.9 Gas Room Direct Heating Equipment: Cumulative National Energy Savings


Energy NES 

Efficiency 

Level 

AFUE 

(%) No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

1 65 0.010 0.005 0.002 

2 66 0.026 0.013 0.006 

3 67 0.045 0.023 0.010 

4 68 0.066 0.033 0.015 

5 70 0.166 0.084 0.038 

6 78 0.301 0.152 0.068 

7 93 0.523 0.264 0.118 

10-23 

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

2

3

4

5

Table 10.5.10 Gas Floor Direct Heating Equipment: Cumulative National Energy Savings


Energy NES 

Efficiency 

Level AFUE 

(%) 

No 

Discount 

(quads) 

3% 

Discount 

Rate 

(quads) 

7% 

Discount 

Rate 

(quads) 

58 0.000 0.000 0.000 

61 0.000 0.000 0.000 

62 0.001 0.000 0.000 

65 0.001 0.001 0.000 

78 0.002 0.001 0.001 

10.5.3 Annual Costs and Savings 

Figure 10.5.1 illustrates the basic inputs to calculations of the NPV for the example of the 

non-discounted annual increases in installed cost and annual savings in operating cost for gasfired storage water heaters under efficiency level 2. The figure also shows net savings, which is 

the difference between the savings and costs for each year. The annual product cost is the sum of 

the increase in the total installed cost for products purchased each year during the forecast 

period. The annual savings in operating cost is the savings for products operating in each year. 

(Incremental repair and maintenance costs are zero for this efficiency level.) The NPV is the 

difference between the cumulative annual discounted savings and the cumulative annual 

discounted costs. Figures similar to the one presented below could be created for each of the 

considered products’ standard cases. 

10-24 

EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
-$0.20 

$0.00 

$0.20 

$0.40 

$0.60 

$0.80 

$1.00 

$1.20 

2015 2025 2035 2045 

Billions of 2007 Dollars 

Equipment Cost 

Operating Cost Savings 

Maintenance and Repair Cost 

Net Savings 

Figure 10.5.2 Non-Discounted Increases in Annual Installed Cost 

and Savings in Operating Cost for Gas-Fired 

Storage Water Heaters: Efficiency Level 2 

10.5.4 Net Present Value Results 

The following sections provide results from calculations of NPV for the efficiency levels 

considered for the product classes of each considered product. Results, which are cumulative, are 

shown as the discounted value of the net savings in dollar terms. Because DOE based the inputs 

to the NIA model on weighted-average values, results are discrete point values, rather than a 

distribution of values as produced by the LCC and PBP analyses. 

The present value of total increased installed costs is the total annual increase in installed 

cost (i.e., the difference between the standards case and base case), discounted to the present and 

summed over the period for which DOE evaluates the impact of energy conservation standards. 

Savings are decreases in operating costs associated with the higher energy efficiency of products 

purchased in the standards cases compared to the base case. Total savings in operating cost are 

the savings per unit multiplied by the number of units of each vintage (year of manufacture) that 

survive in a particular year. For units purchased up through the final year (2043 or 2045), the 

operating cost includes energy consumed until the last unit is retired from service. 

10.5.4.1 Water Heaters 

Tables 10.5.11 through 10.5.14 show the results of calculating the NPV for the efficiency 

levels analyzed for each water heater product class. The highest EFs that have positive NPVs are 

10-25 

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

2

3

4

5

6

1 1

2 2

3 3

4 4

5 5

6

0.63 for gas-fired storage water heaters, 2.2 for electric storage water heaters, 0.66 for oil-fired 

storage water heaters, and 0.85 for gas-fired instantaneous water heaters. 

Table 10.5.12 shows the effect of consumers potentially switching from electric heat 

pump water heaters to gas-fired water heaters at efficiency level 6. The NPV results reflect the 

lower installed and operating costs for the electric heat pump water heaters that some households 

switch away from, as well as the installed and operating costs for the gas water heaters that they 

switch to. 

Table 10.5.11 Gas-Fired Storage Water Heaters: Cumulative Net Present Value 

Energy 

Efficiency 

Level 

EF NPV 

3% Discount 

Rate 

(billion 2007$) 

7% Discount 

Rate 

(billion 2007$) 

0.62 7.62 2.91 

0.63 9.50 3.56 

0.64 -22.35 -11.66 

0.65 -20.14 -10.87 

0.66 -18.34 -10.25 

0.77 -13.12 -9.66 

Table 10.5.12 Electric Storage Water Heaters: Cumulative Net Present Value


Energy Efficiency Level EF NPV 

3% Discount 

Rate 

(billion 2007$) 

7% Discount 

Rate 

(billion 2007$) 

0.9 1.94 0.72 

0.9 4.84 1.82 

0.9 6.58 2.33 

0.9 6.78 2.06 

0.9 8.63 2.60 

6 - No Switching 2.2 28.08 5.89 

6 - Switching with GSWH level 6 2.2 27.15 5.60 

6 - Switching with GSWH level 5 2.2 26.89 5.55 

6 - Switching with GSWH level 4 2.2 26.81 5.52 

6 - Switching with GSWH level 3 2.2 26.72 5.49 

6 - Switching with GSWH level 2 2.2 24.68 4.87 

6 - Switching with GSWH level 1 2.2 24.48 4.80 

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1

2

3

4

5

6

7

1

2

3

4

5

6

7

Table 10.5.13 Oil-Fired Water Heaters: Cumulative Net Present Value


Energy 

Efficiency 

Level 

EF NPV 

3% Discount 

Rate 

(billion 2007$) 

7% Discount 

Rate 

(billion 2007$) 

0.54 0.01 0.00 

0.56 0.03 0.01 

0.58 0.05 0.02 

0.60 0.07 0.03 

0.62 0.10 0.04 

0.66 0.04 0.01 

0.68 -0.02 -0.02 

Table 10.5.14 Gas-Fired Instantaneous Water Heaters: Cumulative Net Present Value


Energy 

Efficiency 

Level 

EF NPV 

3% Discount 

Rate 

(billion 2007$) 

7% Discount 

Rate 

(billion 2007$) 

0.69 0.00 0.00 

0.78 0.00 0.00 

0.8 -0.04 -0.02 

0.82 0.06 0.00 

0.84 0.54 0.09 

0.85 0.81 0.13 

0.92 -1.81 -1.78 

10.5.4.2 Pool Heaters 

Table 10.5.15 shows the results of calculating the NPV for the efficiency levels analyzed 

for pool heaters. The highest thermal efficiency that has a positive NPV at 7 percent and 3 

percent discount rate is 86 percent (efficiency level 6). 

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

2

3

4

5

6

7

8

1

2

3

4

5

6

7

Table 10.5.15 Pool Heaters: Cumulative Net Present Value Results


Energy 

Efficiency 

Level 

Thermal 

Efficiency 

(%) 

NPV 

3% Discount 

Rate 

(billion 2007$) 

7% Discount 

Rate 

(billion 2007$) 

79 0.007 0.003 

81 0.190 0.079 

82 0.287 0.110 

83 0.922 0.326 

84 1.087 0.372 

86 1.252 0.410 

90 0.030 -0.333 

95 0.924 -0.070 

10.5.4.3 Direct Heating Equipment 

Table 10.5.16 shows the results of calculating the NPV for the efficiency levels analyzed 

for each product class of direct heating equipment. 

Table 10.5.16 Direct Heating Equipment: Cumulative Net Present Value 

Standard 

Level 

Gas Wall Fan 

DHE 

Gas Wall Gravity 

DHE Gas Room DHE Gas Floor DHE 

7% 

Discount 

Rate 

(billion 

2007$) 

3% 

Discount 

Rate 

(billion 

2007$) 

7% 

Discount 

Rate 

(billion 

2007$) 

3% 

Discount 

Rate 

(billion 

2007$) 

7% 

Discount 

Rate 

(billion 

2007$) 

3% 

Discount 

Rate 

(billion 

2007$) 

7% 

Discount 

Rate 

(billion 

2007$) 

3% 

Discount 

Rate 

(billion 

2007$) 

0.056 0.162 0.022 0.058 0.012 0.048 0.000 0.000 

0.066 0.198 0.069 0.170 0.033 0.127 0.002 0.004 

0.075 0.235 0.141 0.354 0.056 0.218 0.002 0.004 

0.054 0.210 0.078 0.291 0.078 0.313 0.003 0.008 

0.053 0.258 -0.017 0.346 0.006 0.014 

0.002 0.422 

0.001 0.963 

10.6	 IMPACT OF STANDARDS ON NATURAL GAS PRICES AND ASSOCIATED 

CONSUMER BENEFITS 

The NIA described in the preceding sections examines the potential impacts of alternative 

standard levels on consumers of the products being considered. To evaluate potentially important 

indirect effects of energy efficiency standards on energy users in general, DOE analyzed the 

potential impact on natural gas prices resulting from new standards on water heaters and the 

associated benefits for all natural gas consumers in all sectors of the economy. DOE considered 

two scenarios for standards. The selected efficiency levels scenario consists of standards on gasfired storage water heaters, gas-fired instantaneous water heaters, and electric storage water 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
heaters that reflect the energy efficiency levels found to have the greatest average LCC savings 

and NPV. The assumed standard is 0.95 EF for electric storage water heaters.a The max-tech 

scenario encompasses standards on the above products that reflect the identified max-tech energy 

efficiency levels. The max-tech scenario represents the upper bound for impacts on natural gas 

prices. Table 10.6.1 shows the energy efficiency levels included in each scenario. 

Table 10.6.1	 Energy Efficiency Levels in Scenarios Used to Analyze Impacts on 

Natural Gas Price 

Product Class Selected 

Efficiency Levels 

(EF) 

Max-Tech 

(EF) 

Gas-Fired Storage WH 0.62 0.77 

Gas-Fired Instantaneous WH 0.85 0.92 

Electric Storage WH 0.95 2.20 

DOE’s analysis used a version of the National Energy Modeling System – Building 

Technology (NEMS-BT) modified to account for natural gas savings associated with possible 

standards. Like other widely-used energy-economic models, NEMS uses the elasticities in 

energy price to estimate the price change that would result from a change (increase or decrease) 

in energy demand. The elasticity of price to a decrease in demand is the “inverse price 

elasticity.” The inverse price elasticity incorporated in NEMS differs throughout the forecast 

period in response to the dynamics of natural gas supply and demand. The average value of 

elasticity during the forecast period is 0.79 in the selected efficiency levels scenario, and 0.81 in 

the max-tech scenario. A value of 0.79 means that given a one-percent decrease in demand, the 

price of gas would decline by 0.79 percent. 

The average inverse price elasticity reported above is generally consistent with other 

studies that used versions of NEMS to examine the impacts on natural gas prices resulting from 

2 reductions in natural gas demand. In a review of such studies, Wiser and Bollinger examined 

analyses that reported the reductions in natural gas demand caused by certain energy policies, 

and the resulting decline in the average U.S. wellhead gas price. Wiser and Bollinger found that 

the average values of the inverse price elasticity throughout the forecast period in each study 

ranged from 0.7 to 4.7. The average inverse price elasticities in 13 of 19 analyses were between 

0.8 and 2.0. The average values from DOE's current analysis (0.79-0.81) fall in the lower end of 

that range. 

Other widely used, complex energy demand/supply models produce price elasticities that 

are similar to those incorporated in NEMS. Table 10.6.2 compares the results of several studies 

that modeled the response of natural gas prices to changes in gas consumption. These results are 

a For this notice of public meeting, DOE included no results for a scenario like the selected efficiency levels 

scenario, but did include a standard that effectively would require a heat pump water heater design. DOE excluded 

from consideration a scenario similar to the selected efficiency levels scenario, because that scenario incorporates 

considerable switching from electric to gas-fired water heaters, resulting in only minor savings of natural gas and 

low potential impacts on natural gas prices. 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
3 summarized in a 2003 study by Stanford's Energy Modeling Forum (EMF). Although the 

magnitude of the price response (as summarized by the inverse price elasticity) varies 

considerably among the models, they generally confirm a sizable price effect associated with 

changes in natural gas consumption.b It is worth noting that the NEMS average value 

determined by the EMF study is smaller than that of most of the other models. Therefore, it is 

reasonable to conclude that the impacts estimated by NEMS are conservative. 

Table 10.6.2 Natural Gas Inverse Price Elasticity from Seven Energy Models 

2005 2010 2015 2020 Average 

NEMS 1.8 2.2 0.53 0.11 1.2 

POEMS 2.4 1.8 2.5 1.8 2.1 

CRA 3.5 2.5 1.1 0.9 2.0 

NANGAS 5.4 7.0 7.6 5.1 6.3 

E2020 1.5 1.0 1.0 0.7 1.1 

MARKAL N/A 2.0 N/A 2.1 2.1 

NARG 8.7 12.4 5.6 2.4 7.3 

Source: Based on EMF, 2003.


NEMS (National Energy Modeling System, 2002); POEMS (Policy Office Electricity Modeling System); CRA


(Charles River Associates); NANGAS (North American Natural Gas Analysis System), E2020 (Energy 2020);


MARKAL (MARKet ALlocation); NARG (North American Regional Gas model).


In addition to the models listed in Table 10.6.2, studies have been conducted by the 

4 5 National Petroleum Council and the National Commission on Energy Policy that are based on 

the EEA model. The EEA model has higher inverse price elasticities (between 4.0 and 16.8) than 

those predicted by NEMS and most other national energy models, leading to larger natural gas 

price reductions for a given decrease in demand. 

As described in chapter 13, utility impact analysis, using NEMS-BT to analyze impacts 

of relatively small annual changes in energy consumption typically involves using higherdecrement runs to isolate the impacts of the standards from numerical noise. DOE utilized a 

regressed interpolation toward the origin to derive the price effects associated with the energy 

savings resulting from water heater standards. 

Figure 10.6.1 shows the annual change in U.S. natural gas consumption, relative to the 

base case involving no new standards, for each considered scenario. Because the standards 

decrease electricity demand, and a large percentage of electricity is generated using natural gas, 

the standards reduce natural gas consumption in the utility sector as well as the residential sector. 

b The EMF scenarios modeled the effect of increased gas demand on price. Assuming a smooth supply curve over 

the long term, however, the elasticities implied by an increase in demand should be equivalent to those implied by a 

decrease in demand. For undetermined reasons, two of the models studied in the Wiser and Bollinger report 

(NANGAS and NARG) report somewhat anomalous inverse elasticities. 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
Change in Gas Consumption 

-0.25 

-0.20 

-0.15 

-0.10 

-0.05 

0.00 

2015 2018 2021 2024 2027 2030 

quads 

Selected Efficiency 

Max Tech 

Figure 10.6.2	 Change in U.S. Natural Gas Consumption Associated 

with Scenarios for Water Heater Standards 

Figure 10.6.2 shows the annual change in average U.S. wellhead price for natural gas, 

relative to the base case, for each considered scenario. The price reduction averages 0.7 cents per 

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

2006$) in the max-tech scenario. These average price reductions equal 0.1 percent in the selected 

efficiency levels scenario and 0.4 percent in the max-tech scenario. 

Change in Wellhead Prices 

-0.04 

-0.04 

-0.03 

-0.03 

-0.02 

-0.02 

-0.01 

-0.01 

0.00 

2015 2018 2021 2024 2027 2030 

2006$/MMBtu 

Selected Efficiency 

Max Tech 

Figure 10.6.3 Effects of Water Heater Standard Scenarios on 

Average Natural Gas Prices at U.S. Wellheads 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
It is worth noting that the decline in wellhead gas prices likely would reduce electricity 

prices somewhat, because a large percentage of electricity is generated using natural gas. The 

new water heater standards also would decrease electricity demand, further affecting electricity 

prices. 

10.6.2 Impact of Changes in Natural Gas Price on Users 

Although calculations indicate that the new water heater standards reduce natural gas 

prices only slightly, the associated economy-wide savings in natural gas expenditures during the 

forecast period are substantial. DOE calculated the nominal savings in total natural gas 

expenditures in each year by multiplying the annual change in the wellhead price for natural gas 

by the total annual U.S. natural gas consumption associated with each scenario. The calculation 

of the NPV of the savings in natural gas expenditures for 2015–2030 (applying a 7-percent 

discount rate) yields a value of $0.8 billion in the selected efficiency levels scenario and $2.7 

billion in the max-tech scenario. The water heater standards would continue to reduce demand 

for natural gas after 2030 (which is the last year in the NEMS forecast). The estimated economywide savings for 2015–2043 (the period used to estimate the NPV of the national consumer 

benefits from water heater standards) has an NPV of $1.0 billion for the selected efficiency 

levels scenario and $3.6 billion for the max-tech scenario.c 

10.6.3 Components of the Benefit 

A decline in natural gas consumption may lower natural gas prices for two primary 

reasons. One reason is that decreasing consumption would lower the output of existing natural 

gas production capacity, leading to increased competition and downward pressure on prices. A 

second reason is that reduced consumption slows the depletion of low-cost gas reserves, lowers 

the future cost of finding and extracting natural gas resources, and dampens expectations for 

future prices. 

When gas prices drop in response to a lower output of existing natural gas production 

capacity, consumers benefit, but producers suffer. In economic terms, the situation represents a 

benefits transfer to consumers (whose expenditures fall) from producers (whose revenue falls 

equally).d When prices decrease because extraction costs decline, however, consumers and 

producers both benefit, and the change in natural gas prices represents a net gain to society. 

Consumers benefit from the lower prices, and producers, whose revenues and costs both fall, are 

made no worse off. 

The short-term impact of lower consumption on natural gas price likely results from 

changes in the utilization of natural gas production and capacity. It is likely that reduced 

c The estimate for 2031–2045 applies the average price reduction in 2015–2030 to estimated total gas consumption 

in 2031–2045. This 15-year average reflects guidance from EIA for extrapolating AEO energy price forecasts after 

2030. DOE estimated the latter value by extrapolating the average rate of change (decline) for 2025–2030. 

d Gas producers include domestic, other North American, and overseas LNG producers. The proportion of domestic 

producers is expected to decline in the future. 

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EE-2006-STD-0129 and EERE-2006-BT-STD-0129 COMMENT 32.2
consumption has only a short-term impact on capacity utilization in the natural gas industry. 

Producers can adjust to changes in consumption in the long term by either increasing or 

decreasing investments in infrastructure to bring capacity utilization rates back to original levels. 

The long-term impact on natural gas prices probably results from changes in extraction 

costs. Natural gas is an exhaustible resource, and conventional natural gas sources are limited. 

When those low-cost sources are depleted, producers must turn to higher-cost sources of natural 

gas, at which point extraction costs and wellhead prices will increase. Reduced demand creates 

downward pressure on extraction costs and prices because it delays the depletion of low-cost 

reserves and forestalls a shift toward higher-cost sources. 

Because the NEMS is a complex model, it is difficult to determine exactly how much of 

the model-estimated drop in natural gas price in any given year is explained by a decrease in 

utilization of capacity, and how much is explained by a decrease in extraction costs. One would 

expect, however, that most of the forecasted price decline after 2015 is caused by a decline in 

extraction costs. Supporting evidence for this conclusion derives from comparing the sources of 

natural gas drawn upon to supply consumers in the base case (without standards) and the 

standards cases of the model runs. The three principal sources of natural gas considered in 

NEMS for 2030 are termed conventional sources, unconventional sources, and imports 

[primarily liquefied natural gas (LNG) imports]. Conventional sources are the lowest-cost, and 

imports are the highest-cost source of natural gas, as forecast by NEMS. 

The effect of standards on extraction costs is revealed by comparing the rate of natural 

gas production from the three natural gas sources in model runs for the base case with the rates 

for the standards cases. As shown in the recent furnace/boiler rulemaking (see the TSD, chapter 

10), NEMS indicates that standards produce decreases in natural gas production from all three 

sources, but production from the higher-cost sources declines most of all. This result suggests 

that, based on the NEMS model, energy efficiency standards decrease future costs for natural gas 

extraction because they result in decreased rates of depletion of low-cost natural gas supplies and 

decreased imports of high-cost LNG. This result further suggests that a large part of the longterm decreases in wellhead prices forecasted by the NEMS represents both a benefit to 

consumers of natural gas and a net benefit to society. 

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REFERENCES


1.	 U.S. Department of Energy–Energy Information Administration. Annual Energy Outlook 

2008 (Revised Early Release) with Projections to 2030. 2008. Washington, D.C. 

2.	 Wiser, R., M. Bolinger, and M. St. Clair. Easing the Natural Gas Crisis: Reducing 

Natural Gas Prices through Increased Deployment of Renewable Energy and Energy 

Efficiency. January, 2005. Lawrence Berkeley National Laboratory. Report No. 56756. 

3.	 Energy Modeling Forum. Natural Gas, Fuel Diversity and North American Energy 

Markets. September 2003. Energy Modeling Forum, Stanford University. EMF Report 

No. 20. 

4.	 National Petroleum Council. Balancing Natural Gas Policy–Fueling the Demands of a 

Growing Economy: Vol. I, Summary of Findings and Recommendations. September 25, 

2003. National Petroleum Council. 

5.	 National Commission on Energy Policy. Increasing U.S. Natural Gas Supplies: A 

Discussion Paper and Recommendations from the National Commission on Energy 

Policy. October, 2003. <www.energycommission.org> 

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