9-i

CHAPTER 9. LIFE-CYCLE COST ANALYSIS

TABLE OF CONTENTS

9.1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-1

9.1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-1

9.1.2 General Description of Sources of Data . . . . . . . . . . . . . . . . . . . . . . . . 9-5

9.1.2.1 Residential Energy Consumption Survey . . . . . . . . . . . . . . . . . 9-5

9.1.2.2 National Oceanic and Atmospheric Administration . . . . . . . . . 9-6

9.1.2.3 Gas Appliance Manufacturers Association . . . . . . . . . . . . . . . . 9-7

9.1.2.4 Manufacturer Product Literature . . . . . . . . . . . . . . . . . . . . . . . . 9-7

9.1.3 Spreadsheet Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-7

9.2 HOT WATER DRAW MODULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10

9.2.1 Introduction to Hot Water Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10

9.2.2 Equation for Hot Water Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10

9.2.3 General Description of Key Variables . . . . . . . . . . . . . . . . . . . . . . . . . 9-12

9.2.4 General Description of Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . 9-13

9.2.5 Results of Hot Water Use Calculations . . . . . . . . . . . . . . . . . . . . . . . . 9-14

9.2.6 Importance Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-17

9.3 ENERGY ANALYSIS MODULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-22

9.3.1 Introduction to Energy Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-22

9.3.2 Equation for Energy Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-22

9.3.3 General Description of Key Variables . . . . . . . . . . . . . . . . . . . . . . . . . 9-23

9.3.4 General Description of Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . 9-24

9.3.4.1 Derivations of Energy Parameters . . . . . . . . . . . . . . . . . . . . . 9-24

9.3.4.2 Temperature Derivations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-31

9.3.5 Energy Analysis Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-33

9.3.5.1 Electric Water Heater Energy Use . . . . . . . . . . . . . . . . . . . . . . 9-33

9.3.5.2 Natural Gas Water Heater Energy Use . . . . . . . . . . . . . . . . . . 9-36

9.3.5.3 LPG Water Heater Energy Use . . . . . . . . . . . . . . . . . . . . . . . . 9-39

9.3.5.4 Oil-Fired Water Heater Energy Use . . . . . . . . . . . . . . . . . . . . . 9-41

9.3.6 Importance Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-43

9.4 OPERATING COST MODULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-48

9.4.1 Introduction to Operating Cost Module . . . . . . . . . . . . . . . . . . . . . . . . 9-48

9.4.2 Equations for the Operating Cost Module . . . . . . . . . . . . . . . . . . . . . . 9-48

9.4.2.1 Electric Water Heater Operating Cost Equations . . . . . . . . . . 9-48

9.4.2.2 Natural Gas and LPG Water Heater Operating Cost Equations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-49

9.4.2.3 Oil-Fired Water Heater Operating Cost Equations . . . . . . . . . 9-51

9.4.3 General Description of Key Variables . . . . . . . . . . . . . . . . . . . . . . . . . 9-51

9.4.4 Energy Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-54

9.4.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-54

9.4.4.2 Future Energy Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-54

9.4.4.3 Marginal Energy Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-58
9-ii

9.4.5 General Description of Data Sources and Calculations in Spreadsheets

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-61

9.4.6 Operating Cost Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-62

9.4.6.1 Electric Water Heater Operating Costs . . . . . . . . . . . . . . . . . . 9-62

9.4.6.2 Natural Gas Water Heater Operating Costs . . . . . . . . . . . . . . . 9-65

9.4.6.3 LPG Water Heater Operating Costs . . . . . . . . . . . . . . . . . . . . . 9-67

9.4.6.4 Oil-Fired Water Heater Operating Costs . . . . . . . . . . . . . . . . . 9-69

9.4.7 Importance Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-71

9.5 EQUIPMENT COST MODULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-76

9.5.1 Introduction to Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-76

9.5.2 Equation for Equipment Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-76

9.5.3 General Description of Key Variables . . . . . . . . . . . . . . . . . . . . . . . . . 9-78

9.5.4 Markup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-79

9.5.4.1 Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-79

9.5.4.2 Existing Baseline Retail Price . . . . . . . . . . . . . . . . . . . . . . . . . 9-80

9.5.4.3 Existing Baseline Manufacturing Cost . . . . . . . . . . . . . . . . . . 9-81

9.5.4.4 Summary of Markup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-83

9.5.5 Manufacturing Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-83

9.5.5.1 2003 Baseline Manufacturing Cost . . . . . . . . . . . . . . . . . . . . . 9-83

9.5.5.2 Incremental Manufacturing Costs for Design Options . . . . . . 9-84

9.5.6 Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-87

9.5.7 Installation Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-87

9.5.8 Equipment Cost Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-88

9.5.8.1 Electric Water Heater Equipment Costs . . . . . . . . . . . . . . . . . 9-88

9.5.8.2 Natural Gas Water Heater Equipment Costs . . . . . . . . . . . . . . 9-91

9.5.8.3 LPG Water Heater Equipment Costs . . . . . . . . . . . . . . . . . . . . 9-93

9.5.8.4 Oil-Fired Water Heater Equipment Costs . . . . . . . . . . . . . . . . 9-95

9.5.9 Importance Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-97

9.6 LIFE-CYCLE COST MODULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-102

9.6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-102

9.6.2 Equations and General Descriptions for LCC and Payback . . . . . . . 9-102

9.6.3 General Description of Key Variables . . . . . . . . . . . . . . . . . . . . . . . . 9-103

9.6.4 Life-Cycle Cost and Payback Results . . . . . . . . . . . . . . . . . . . . . . . . 9-106

9.6.4.1 Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-106

9.6.4.2 Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . 9-111

9.6.4.3 LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-116

9.6.4.4 Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-121

9.6.5 Importance Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-126

9.7 TRIAL STANDARD LEVELS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-134

9.8 STATISTICAL SIGNIFICANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-138

9.8.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-138

9.8.2 Analytic Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-138

9.8.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-142
9-iii

TABLES

Table 9.1.1 Definition of Design Options for Electric Water Heaters . . . . . . . . . . . . . . . . . 9-3

Table 9.1.2 Definition of Design Options for Natural Gas Water Heaters . . . . . . . . . . . . . . 9-4

Table 9.1.3 Definition of Design Options for LPG Water Heaters . . . . . . . . . . . . . . . . . . . . 9-4

Table 9.1.4 Definition of Design Options for Oil-Fired Water Heaters . . . . . . . . . . . . . . . . 9-5

Table 9.1.5 1997 RECS Household Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-6

Table 9.1.6 Profile of RECS Households Not Used in Consumer Sub-Group Analysis . . . 9-6

Table 9.2.1 Water Heater Sizes Selected for LCC Analysis . . . . . . . . . . . . . . . . . . . . . . . . 9-14

Table 9.3.1 Water Heater Design Characteristic Values . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-25

Table 9.3.2 Electric Water Heater Modeling Parameter Variations . . . . . . . . . . . . . . . . . . 9-26

Table 9.3.3 Natural Gas and LPG Water Heater Modeling Parameter Variations . . . . . . . 9-27

Table 9.3.4 Oil-Fired Water Heater Modeling Parameter Variations . . . . . . . . . . . . . . . . . 9-27

Table 9.3.5 Energy Efficiency Characteristics for 

Electric Water Heaters (50-gal) . . . . . . . . . . . . . . . . . . . 9-29

Table 9.3.6 Energy Efficiency Characteristics for

Natural Gas and LPG Water Heaters (40-gal) . . . . . . . . . . . . . 9-30

Table 9.3.7 Energy Efficiency Characteristics for 

Oil-Fired Water Heaters (32-gal) . . . . . . . . . . . . . . . . . . . . . . . 9-30

Table 9.3.8 Water Heater Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-33

Table 9.3.9 Energy Consumption for Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . 9-34

Table 9.3.10 Energy Consumption for Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . 9-36

Table 9.3.11 Energy Consumption for LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . 9-39

Table 9.3.12 Energy Consumption for Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . 9-41

Table 9.4.1 Marginal Residential Electricity Prices - RECS97 . . . . . . . . . . . . . . . . . . . . . 9-60

Table 9.4.2 Marginal Residential Natural Gas Prices - RECS97 . . . . . . . . . . . . . . . . . . . . 9-60

Table 9.4.3 Operating Costs for Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-62

Table 9.4.4 Operating Costs for Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . 9-65

Table 9.4.5 Operating Costs for LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-67

Table 9.4.6 Operating Costs for Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . 9-69

Table 9.5.1 Retail Price Data for Existing Baseline Water Heaters . . . . . . . . . . . . . . . . . . 9-81

Table 9.5.2 Total Manufacturing Cost Data for 

Typical Existing Baseline Water Heaters . . . . . . . . . . . . . . . . 9-82

Table 9.5.3 Total Manufacturing Cost Data for 

Standard-Size Existing Baseline Water Heaters . . . . . . . . . . . 9-82

Table 9.5.4 Markups by Fuel Type and Tank Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-83

Table 9.5.5 Incremental Costs for Electric Water Heaters (50-gal) . . . . . . . . . . . . . . . . . . 9-85

Table 9.5.6 Incremental Costs for Natural Gas Water Heaters (40-gal) . . . . . . . . . . . . . . . 9-86

Table 9.5.7 Incremental Costs for LPG Water Heaters (40-gal) . . . . . . . . . . . . . . . . . . . . . 9-86

Table 9.5.8 Incremental Costs for Oil-Fired Water Heaters (32-gal) . . . . . . . . . . . . . . . . . 9-87

Table 9.5.9 Existing Baseline Water Heaters for Installation Cost Data . . . . . . . . . . . . . . 9-88

Table 9.5.10 Equipment Costs for Electric Water Heaters (All Sizes) . . . . . . . . . . . . . . . . . 9-89

Table 9.5.11 Equipment Costs for Natural Gas Water Heaters (All Sizes) . . . . . . . . . . . . . 9-91

Table 9.5.12 Equipment Costs for LPG Water Heaters (All Sizes) . . . . . . . . . . . . . . . . . . . 9-93
9-iv

Table 9.5.13 Equipment Costs for Oil-Fired Water Heaters (All Sizes) . . . . . . . . . . . . . . . 9-95

Table 9.6.1 Water Heater Lifetimes by Fuel Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-105

Table 9.6.2 Life-Cycle Cost and Payback for Electric Water Heaters . . . . . . . . . . . . . . . 9-106

Table 9.6.3 Percent of Sample Having Net Savings or Costs for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-107

Table 9.6.4 Life-Cycle Cost and Payback for Natural Gas Water Heaters . . . . . . . . . . . . 9-111

Table 9.6.5 Percent of Sample Having Net Savings or Costs for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . 9-112

Table 9.6.6 Life-Cycle Cost and Payback for LPG Water Heaters . . . . . . . . . . . . . . . . . . 9-116

Table 9.6.7 Percent of Sample Having Net Savings or Costs for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-117

Table 9.6.8 Life-Cycle Cost and Payback for Oil-Fired Water Heaters . . . . . . . . . . . . . . 9-121

Table 9.6.9 Percent of Sample Having Net Savings or Costs for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-122

Table 9.7.1 Trial Standard Levels for Design Options: Electric Water Heaters . . . . . . . . 9-134

Table 9.7.2 Trial Standard Levels for Design Options: Natural Gas Water Heaters . . . . 9-135

Table 9.7.3 Trial Standard Levels for Design Options: LPG Water Heaters . . . . . . . . . . 9-136

Table 9.7.4 Trial Standard Levels for Design Options: Oil-Fired Water Heaters . . . . . . . 9-137

Table 9.8.1 Sample t-test Results for Electric Delta LCC . . . . . . . . . . . . . . . . . . . . . . . . 9-139

Table 9.8.2 Sample t-test Results for Electric Delta Q . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-139

Table 9.8.3 Sample t-test Results for Gas Delta LCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-140

Table 9.8.4 Sample t-test Results for Gas Delta Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-140

Table 9.8.5 Analysis of Variance for Electric Delta LCC . . . . . . . . . . . . . . . . . . . . . . . . . 9-141

Table 9.8.6 Analysis of Variance for Electric Delta Q . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-141

Table 9.8.7 Analysis of Variance for Gas Delta LCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-142

Table 9.8.8 Analysis of Variance for Gas Delta Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-142

FIGURES

Figure 9.2.1 Frequency Charts of Hot Water Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-16

Figure 9.2.2 Importance of Input Variables to Hot Water Use for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . 9-17

Figure 9.2.3 Importance of Input Variables to Hot Water Use for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . 9-19

Figure 9.2.4 Importance of Input Variables to Hot Water Use for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-20

Figure 9.2.5 Importance of Input Variables to Hot Water Use for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . 9-21

Figure 9.3.1 Comparison of Setpoint and Inlet Water Temperatures . . . . . . . . . . . . . . . . . . 9-32

Figure 9.3.2 Differences in Energy Consumption by Design Option for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-35

Figure 9.3.3 Differences in Energy Consumption by Design Option for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-38
9-v

Figure 9.3.4 Differences in Energy Consumption by Design Option for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-40

Figure 9.3.5 Differences in Energy Consumption by Design Option for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-42

Figure 9.3.6 Importance of Input Parameters to Annual Energy Consumption for 

2.5" Insulation on Electric Water Heaters . . . . . . . . . . 9-44

Figure 9.3.7 Importance of Input Parameters to Annual Energy Consumption for 

78% RE, 2" Insulation on Natural Gas Water Heaters

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-45

Figure 9.3.8 Importance of Input Parameters to Annual Energy Consumption for 

78% RE, 2" Insulation on LPG Water Heaters . . . . . . 9-46

Figure 9.3.9 Importance of Input Parameters to Annual Energy Consumption for 

2003 Baseline on Oil-Fired Water Heaters . . . . . . . . . 9-47

Figure 9.4.1 Electricity Price Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-56

Figure 9.4.2 Natural Gas Price Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-56

Figure 9.4.3 LPG Price Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-57

Figure 9.4.4 Oil Price Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-57

Figure 9.4.5 Difference in Operating Costs by Design Option for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-64

Figure 9.4.6 Difference in Operating Costs by Design Option for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-66

Figure 9.4.7 Difference in Operating Costs by Design Option for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-68

Figure 9.4.8 Difference in Operating Costs by Design Option for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-70

Figure 9.4.9 Importance of Input Parameters to Operating Cost for 

2.5" Insulation on Electric Water Heaters . . . . . . . . . . 9-72

Figure 9.4.10 Importance of Input Parameters to Operating Cost for 

78% RE 2" Insulation on Natural Gas Water Heaters

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-73

Figure 9.4.11 Importance of Input Parameters to Operating Cost for 

78% RE 2" Insulation on LPG Water Heaters . . . . . . . 9-74

Figure 9.4.12 Importance of Input Parameters to Operating Cost for 

2003 Baseline on Oil-Fired Water Heaters . . . . . . . . . 9-75

Figure 9.5.1 Difference in Total Installed Cost by Design Option for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-90

Figure 9.5.2 Difference in Total Installed Costs by Design Option for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-92

Figure 9.5.3 Difference in Total Installed Costs by Design Option for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-94

Figure 9.5.4 Difference in Total Installed Costs by Design Option for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-96

Figure 9.5.5 Importance of Input Variables to Total Installed Cost for 

2.5" Insulation on Electric Water Heaters . . . . . . . . . . . . . . . . 9-98
9-vi

Figure 9.5.6 Importance of Input Variables to Total Installed Cost for 

78% RE and 2" Insulation on Natural Gas Water Heaters . . . . 9-99

Figure 9.5.7 Importance of Input Variables to Total Installed Cost for 

78% RE and 2" Insulation on LPG Water Heaters . . . . . . . . 9-100

Figure 9.5.8 Importance of Input Variables to Total Installed Cost for 

2003 Baseline on Oil-Fired Water Heaters . . . . . . . . . . . . . . 9-101

Figure 9.6.1 Distribution of Consumer Real Discount Rates . . . . . . . . . . . . . . . . . . . . . . . 9-104

Figure 9.6.2 Percent of Sample Having Net Savings or Costs for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-107

Figure 9.6.3 Difference in Life-Cycle Costs by Design Option for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-109

Figure 9.6.4 Payback Period by Design Option for 

Electric Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-110

Figure 9.6.5 Percent of Sample Having Net Savings or Costs for Natural Gas

Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-113

Figure 9.6.6 Difference in Life-Cycle Costs by Design Option for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-114

Figure 9.6.7 Payback Period by Design Option for 

Natural Gas Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-115

Figure 9.6.8 Percent of Sample Having Net Savings or Costs for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-117

Figure 9.6.9 Difference in Life-Cycle Costs by Design Option for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-119

Figure 9.6.10 Payback Period by Design Option for 

LPG Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-120

Figure 9.6.11 Percent of Sample Having Net Savings or Costs for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-122

Figure 9.6.12 Difference in Life-Cycle Costs by Design Option for

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-124

Figure 9.6.13 Payback Period by Design Option for 

Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-125

Figure 9.6.14 Importance of Input Variables to the Life-Cycle Cost for 

2.5" Insulation on Electric Water Heaters . . . . . . . . . . . . . . . 9-127

Figure 9.6.15 Importance of Input Variables to the Life-Cycle Cost for 

78% RE 2" Insulation on Natural Gas Water Heaters . . . . . . 9-128

Figure 9.6.16 Importance of Input Variables to the Life-Cycle Cost for 

78% RE 2" Insulation on LPG Water Heaters . . . . . . . . . . . . 9-129

Figure 9.6.17 Importance of Input Variables to the Life-Cycle Cost for 

2003 Baseline Oil-Fired Water Heaters . . . . . . . . . . . . . . . . . 9-130

Figure 9.6.18 Importance of Input Variables to the Payback Period for 

2.5" Insulation on Electric Water Heaters . . . . . . . . . . . . . . . 9-131

Figure 9.6.19 Importance of Input Variables to the Payback Period for 

78% RE 2" Insulation on Natural Gas Water Heaters . . . . . . 9-132
9-vii

Figure 9.6.20 Importance of Input Variables to the Payback Period for 

78% RE 2" Insulation on LPG Water Heaters . . . . . . . . . . . . 9-133
a Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup,

retail price, and fuel price in the Life-Cycle Cost and subsequent analyses.

9-1

CHAPTER 9. LIFE-CYCLE COST ANALYSIS

9.1 INTRODUCTION

9.1.1 Overview

The life-cycle cost (LCC) analysis examines the economic impacts on individual consumers

from possible revisions to U.S. residential water heater energy-efficiency standards. LCC represents

the consumer’s cost of purchasing and installing a water heater and operating it for its lifetime. We

also calculate payback periods for consumers for each of the water heater designs considered.

The LCC that we calculate expresses, in 1998$, the costs of owning and operating a water

heater for its lifetime starting in the year 2004. We analyze various water heater models: a “2003

baseline” design, which is what we anticipate will be the standard design in 2003 prior to any new

efficiency standards, as well as various “design options”—models with additions to the baseline,

which represent efficiency improvements that meet possible energy-efficiency standards. These

design options, which are chosen in the Engineering Analysis (see Chapter 8), are the same in each

of the five modules that make up the LCC and are described in Tables 9.1.1 through 9.1.4 below.

They include an “existing baseline,” which represents water heaters in use in 1998. We consider

water heaters fueled by electricity, gas (both natural gas and LPG),a

 and oil. The “2003 baseline”

also accounts for changes in water heater insulation that will result from the elimination of the use

of HCFC-141b, a blowing agent which damages earth’s ozone layer and is scheduled by the U.S.

EPA to be phased out by January 1, 2003. We analyze designs utilizing HFC-245fa insulation, one

of the current leading candidates to replace HCFC-141b. For natural gas and LPG water heaters, we

also include a design change to resist ignition of flammable vapors (see Chapter 3.4.2) in the “2003

baseline”. 

The LCC spreadsheet contains five modules. For the variables in each of the five modules,

we use specific strategies to characterize uncertainty and variability, which are explained in the

sections below that describe each module in detail. The analysis uses the Monte Carlo statistical

method to calculate life-cycle cost. Monte Carlo analyses capture the effects of variability and

uncertainty in input variables on the output variables. In this analysis, we sample 10,000 times from

a distribution on each input value using Crystal Ball. Crystal Ball (available from Decisioneering,

Inc.) is an add-in program to Microsoft Excel, which performs the Monte Carlo calculations. The

final LCC results—percent of population benefitting (winners) from energy-efficiency improvements

and the mean LCC changes—are derived from these Crystal Ball runs. In general, our analysis uses

distributions, instead of fixed values, to account for variability and uncertainty in the variables. For

detailed information about our uncertainty and variability analyses, see Appendix E-1.
a

 We did not update the oil-fired analysis when the 1997 data became available because only a small number of

households use oil-fired water heaters.

9-2

The first of the five LCC modules, the Hot Water Draw Module, is used to calculate the

amount of hot water used by each household. The households are in a large sample that is taken

from U.S. DOE/EIA’s 1997 Residential Energy Consumption Survey (RECS) database for the

electric, natural gas, and LPG analyses1

 and from the 1993 RECS2 for oil-fired water heaters.a

RECS’ characterization of water heater sizes as small, medium, and large for each household is

translated into the most common sizes on the market for water heaters of each fuel type. We refer

to these as “standard sizes.” In some cases, where we rely on data from the Engineering Analysis

(Chapter 8), we refer to the three “typical” water heater sizes used in that analysis, i.e., 50-gal.

electric, 40-gal. natural gas and LPG, and 32-gal. oil-fired. We analyze a random selection of RECS

households, using a RECS weighting factor that accounts for how common each household

configuration is in the general population. A total of 3531 households were selected from the 1997

RECS database for the electric, natural gas, and LPG LCC analysis and 176 households from the

1993 RECS database were used for the oil-fired water heater analysis. For each water heater type,

we sample from this subset of households 10,000 times. Extensive Monte Carlo analyses (using

Crystal Ball) address uncertainty and variability in the household variables. 

 The second module in the LCC, the Energy Analysis Module, is used to calculate how much

energy of what type (electricity, natural gas, LPG, or oil) is used in each household analyzed in the

Hot Water Draw Module. We consider the 2003 baseline and design options for each size water

heater of each fuel type. The analysis accounts for the use of electricity required by some design

options for natural gas, LPG, and oil-fired water heaters.

The third LCC module, Operating Costs, is used to determine the annual cost of operating

each type of electric, natural gas, LPG, or oil water heater—i.e., the 2003 baseline and all design

options—for the same households analyzed in the previous two modules. We include average

annual maintenance costs for oil-fired water heaters (electric, gas, and LPG water heaters do not

require annual maintenance). We calculate annual water heater operating costs for its lifetime

starting in 1998 by taking the annual energy consumption calculated by the Energy Analysis Module

and applying the average fuel cost from RECS for each household analyzed. We translate RECS cost

data to 1998$ using historical inflation and energy price change rates. We project future costs over

the water heater lifetimes using DOE’s Energy Information Agency (EIA) and Gas Research Institute

(GRI) forecasts. We calculate the value of savings from the energy-efficient design options using

marginal prices, which are weighted according to seasonal water heater energy consumption. A

discussion of marginal prices is presented in Section 9.4.

The fourth module in the LCC analysis, the Equipment Cost Module, is used to calculate a

consumer’s cost to purchase and install the 2003 baseline and design option water heaters of each

size and fuel type. This calculation uses manufacturers’ costs from the Engineering Analysis, with

adjustments to account for the water heater sizes chosen for the LCC and for typical retail markups

for water heaters of each fuel type. We determined these markups from data collected during
9-3

interviews with retailers, wholesalers, plumbers, contractors, and utilities (see Chapter 7, Markups).

We also gathered information on installation prices. We account for sales tax and other costs

consumers pay: delivery fees, permit fees, or fees for removal of old water heaters. These taxes and

fees are added randomly to the purchase and installation costs for some water heaters. We also

incorporate additional installation costs (e.g., for new electrical connections or venting upgrades) for

some efficiency options.

The final step in the analysis, the LCC module, is used to determine the life-cycle cost and

payback for each water heater design option for the sample of RECS houses we studied. We

calculate LCC by taking the annual operating costs from a previous module for the lifetime of a

water heater and discounting these costs to the year 1998 using a distribution of discount rates from

an existing appliance standards analysis for clothes washers.3 The equipment lifetimes considered

are the same for all design options but differ by fuel type; these values were taken from a published

survey.4

The five modules that make up the LCC analysis are explained in detail in the following

sections.

 Tables 9.1.1 through 9.1.4 list the design options analyzed in this Technical Support

Document. In general and throughout this document, the “Short Name” is used to identify the

individual design options. These tables provide the full list of the individual combinations of design

features that make up the design options (these tables are also found at end of the Engineering

Analysis in the preceding chapter)

Table 9.1.1 Definition of Design Options for Electric Water Heaters

Short Name Full Description

2003 Baseline Baseline (245fa)

Heat Traps 2003 Baseline + Heat Traps

Tank Bottom Insulation 2003 Baseline + Heat Traps + Tank Bottom Insulation 

2" Insulation 2003 Baseline + Heat Traps + Tank Bottom Insulation + 2" Insulation

2.5" Insulation 2003 Baseline + Heat Traps + Tank Bottom Insulation + 2.5" Insulation

Plastic Tank 2003 Baseline + Heat Traps + 2.5" Insulation + Plastic Tank

3" Insulation 2003 Baseline + Heat Traps + 3" Insulation + Plastic Tank
9-4

Table 9.1.2 Definition of Design Options for Natural Gas Water Heaters

Short Name Full Description

2003 Baseline Baseline (245fa)

Heat Traps 2003 Baseline + Heat Traps

78% RE 2003 Baseline + Heat Traps + 78% RE

78% RE, 2" Insul 2003 Baseline + Heat Traps + 78% RE + 2" Insulation

78% RE, 2.5" Insul 2003 Baseline + Heat Traps + 78% RE + 2.5" Insulation

80% RE, 2" Insul 2003 Baseline + Heat Traps + 80% RE + 2" Insulation

80% RE, 2.5" Insul 2003 Baseline + Heat Traps + 80% RE + 2.5" Insulation

80% RE, 3" Insul 2003 Baseline + Heat Traps + 80% RE + 3" Insulation

Side Arm 2003 Baseline + Heat Traps + 80% RE + 3" Insulation + Side Arm + 

Electronic Ignition + Plastic Tank

RE= Recovery Efficiency

Table 9.1.3 Definition of Design Options for LPG Water Heaters

Short Name Full Description

2003 Baseline Baseline (245fa)

Heat Traps 2003 Baseline + Heat Traps

78% RE 2003 Baseline + Heat Traps + 78% RE

78% RE, 2" Insul 2003 Baseline + Heat Traps + 78% RE + 2" Insulation

78% RE, 2.5" Insul 2003 Baseline + Heat Traps + 78% RE + 2.5" Insulation

80% RE, 2" Insul 2003 Baseline + Heat Traps + 80% RE + 2" Insulation

80% RE, 2.5" Insul 2003 Baseline + Heat Traps + 80% RE + 2.5" Insulation

80% RE, 3" Insul 2003 Baseline + Heat Traps + 80% RE + 3" Insulation

Side Arm 2003 Baseline + Heat Traps + 80% RE + 3" Insulation + Side Arm + 

Electronic Ignition + Plastic Tank

RE= Recovery Efficiency
9-5

Table 9.1.4 Definition of Design Options for Oil-Fired Water Heaters

Short Name Full Description

2003 Baseline Baseline (245fa)

Heat Traps 2003 Baseline + Heat Traps

2" Insulation 2003 Baseline + Heat Traps + 2" Insulation

2.5" Insulation 2003 Baseline + Heat Traps + 2.5" Insulation

3" Insulation 2003 Baseline + Heat Traps + 3" Insulation

78% RE 2003 Baseline + Heat Traps + 3" Insulation + 78% RE

Interrupted Ignition 2003 Baseline + Heat Traps + 3" Insulation + 78% RE + Interrupted Ignition

Increased HX Area 2003 Baseline + Heat Traps + 3" Insulation + Interrupted Ignition +

Increased Heat Exchanger Area (82% RE)

9.1.2 General Description of Sources of Data

9.1.2.1 Residential Energy Consumption Survey

The analysis uses as its underlying data source the Residential Energy Consumption Survey

(RECS), now formally called the Household Energy Consumption and Expenditures. RECS

contains a more complete set of data for water heater analysis than any other survey reviewed for this

study. RECS data include household characteristics taken from an interview questionnaire and

annual fuel consumption and expenditures (excluding transportation fuel) derived from the records

of fuel suppliers. Also included are weather data and a weighting variable to account for variations

in household composition. The 1997 RECS survey consists of a total of 5,900 sample households

from the 50 states and the District of Columbia. See Table 9.1.5 for the household characteristics

of the RECS sample used in the analysis. Table 9.1.6 shows the number of records and their

weighted values that were not used in this analysis. Of the total 5,900 housing records (a weighted

population of 101,481,171), a total of 2,283 housing records (representing a 37,696,171 population)

were not used in the analysis.
a

 Data for oil-fired water heaters is from the 1993 RECS database.

9-6

Table 9.1.5 1997 RECS Household Characteristicsa

Electricity Natural Gas LPG Oil

Number of Households (records) 1577 1802 152 176

Number of Households (millions, weighted) 27.2 33.2 2.3 1.8

Household Size (average number of people) 2.45 2.82 2.58 2.87

Clothes Washer (% saturation) 83.2% 89.8% 88.7% 96.6%

Dishwasher (% saturation) 54.1% 55.3% 39.6% 56.8%

Average Thermostat Setpoint ((F) 133.2 134.5 135.4 137.5

Average Inlet Water ((F) 59.6 57.2 55.6 51.8

Average Hot Water Use (gals per day) 45.3 49.9 45.7 47.3

Table 9.1.6 Profile of RECS Households Not Used in Consumer Sub-Group Analysis

Category # of RECS Housing Records % Household Population (weighted)

Other Fuel Types 53 0.8

Shared WH Unit 640 10.3

No Water Heater Size

Indicated

901 14.1

No LPG Quantity

Indicated

270 3.7

No Fuel Oil Quantity

Indicated

2 0.0

Insufficient Billing

Data for Electric

Water Heaters

1524 24.9

Insufficient Billing

Data for Gas-Fired

Water Heaters

766 13.1

Unused Sample Size 2,283 37.1

9.1.2.2 National Oceanic and Atmospheric Administration

The National Oceanic and Atmospheric Administration (NOAA) of the U.S. Department of

Commerce, operates the National Climatic Data Center, which is the world's largest active archive

of weather data. This analysis uses NOAA's 30-year (1961-1990) average air temperatures.5
a

 For the oil-fired analysis, the reference case from the Annual Energy Outlook 1998 was used. The oil-fired

analysis was not updated because only a small number of households use oil-fired water heaters.

9-7

9.1.2.3 Gas Appliance Manufacturers Association

The Gas Appliance Manufacturers Association (GAMA) is a national trade organization

which represents water heater manufacturers in the U.S. GAMA collects and disseminates data on

water heating equipment. This analysis uses GAMA's shipments data, consumers' directory, and

manufacturer costs for most design options.

9.1.2.4 Manufacturer Product Literature

Most manufacturers of water heaters provide dealers (and consumers) with literature

describing their models, including efficiency ratings. A large collection of manufacturer product

literature was assembled and consulted for this analysis.

9.1.3 Spreadsheet Model

A spreadsheet model with five major modules forms the basis of the LCC calculations. The

major modules are LCC and Payback, Equipment Cost, Operating Cost , Energy Analysis, and Hot

Water Draw. Seven supporting sheets provide data for the calculations (Energy Price Data, Discount

Rate, Cost Data, Energy Price Data, Markup, and RECS Sample). The last two worksheets contain

RECS sub-population records: senior-only and low-income families. Each module has its own inputs

and outputs, with some modules using as inputs the outputs of other modules. To provide a general

overview, a flowchart showing the major sections of the spreadsheet and the data flow between the

modules is presented below in Figure 9.1.1.

An introductory worksheet presents a brief description of the spreadsheet model and

implementation procedures. It allows the user to select 1) a starting year for the LCC calculation,

2) a starting year for the payback calculation, 3) scenarios for future energy prices, and 4) population

groups that allow sub-group simulations. There is a separate spreadsheet available for each type of

water heater being considered: electric, natural gas, LPG, and oil-fired. The LCC spreadsheets are

available on the DOE web site.6

For this analysis, we ran the LCC spreadsheet using a base case scenario, the 2000 Reference

Case from DOE/EIA’s Annual Energy Outlook 20007

 (see Section 9.4.4 below for details)a. We also

ran the model using three alternative future energy price scenarios. The results are presented in

Appendix E-4. 

The main outputs of each module are summarized as tables and charts in the individual

sections. The summaries for each module give outputs by design option, except for the Hot Water
9-8

Draw module. The Draw module calculates hot water use for each household sample. The amount

of hot water use is not affected by water heater efficiency, so it is not calculated separately for each

design option. 

The summary tables list the average value for each output and the percent of households that

would benefit by using that design option. For example, in the LCC and Payback module, the values

reported in the tables are LCC and Payback. In other modules, other outputs are reported as

appropriate.

The impact of individual design options are shown in combined histogram and cumulative

frequency charts. These charts show the output by percent of the population. The bars of the

histograms show the relative frequency of different results out of 10,000 samples from each subset

of RECS households (1577 with electric water heaters, 1802 with natural gas, 152 with LPG, and

176 with oil-fired). RECS household weightings were used to select the samples. The lines show

cumulative percentages of the results for each value.

The final type of chart is a tornado chart, which shows the correlations between the inputs

of each module and the output in question. The importance of each input is measured as the rankorder correlation between each input and the output of interest. The higher the absolute value of the

correlation, the more influence the input has on the output. A negative correlation indicates a

decrease in output in response to an increase in the input. 
9-9

Figure 9.1.1 Flowchart of LCC Spreadsheet
9-10

9.2 HOT WATER DRAW MODULE

9.2.1 Introduction to Hot Water Use

Hot water use varies widely among households because it depends on household and water

heater characteristics, including: the number and age of the people who live in a home and the way

they consume hot water, the presence of hot water-using appliances, the tank size and thermostat

setpoint of the water heater, and the climate in which the home is situated. By accounting for these

five types of characteristics, the Hot Water Module estimates average daily volume of hot water used

by households.8

There is a degree of uncertainty in this estimation of hot water use because of errors

associated with the estimated coefficients in the equation. The uncertainties in the coefficients are

defined using normal distributions with the parameters provided in a regression analysis described

in a study prepared for the Electric Power Research Institute (EPRI).9 Crystal Ball was used to

characterize hot water use based on uncertainty and variability in inputs to the equation shown

below. 

9.2.2 Equation for Hot Water Use

The Hot Water Draw Model was developed by LBNL as an improvement on a previously

existing EPRI model.8 The equation is expressed as follows:

vol = { sea_coef + (per_coef * per) + (age1_coef * age1) + (age2_coef * age2) +

 [age34_coef * (age3 + age4)] + [Ttank_coef * (Ttank + Ttank_err)] +

 (Tanksz_coef * Tanksz) + (Tin_coef * Tin) + (Tair_coef * Tair) +

 (home_coef * athome) - [(0.692 * per + 1.335 * per) * no_dw] -

 [(1.1688 * per + 4.7737 * per) * no_cw] } * (senior_mf *senior_mf_coef

* no_pay*no_pay_coef)

where:

vol = hot water consumption, gal/day

per = total number of persons in household

age1 = number of preschool children, age 0-5 yrs

age2 = number of school age children, age 6-13 yrs

age3 = number of adults, age 14-64 yrs

age4 = number of adults, age 65 yrs and over
9-11

Ttank = water heater thermostat setting, o

F

Tanksz = water heater nominal tank size, gal

Tin = water heater inlet water temperature, o

F

Tair = outside air temperature, o

F

athome = presence of adults at home during day

no_dw = absence of a dishwasher

no_cw = absence of a clothes washer

senior_mf = senior-only household in a multi-family building

no_pay = household does not pay for hot water

. 

Ttank_err = estimation error for the thermostat setpoint (normal distribution)

sea_coef = coefficient for seasonal effects (normal distribution)

per_coef = coefficient for total number of persons in household (normal distribution)

age1_coef = coefficient for “age1" (normal distribution)

age2_coef = coefficient for “age2" (normal distribution)

age34_coef = coefficient for “age3" + “age4" (normal distribution)

home_coef = coefficient for “athome” (normal distribution)

Tanksz_coef = coefficient for water heater tank size (normal distribution)

 Ttank_coef = coefficient for water heater setpoint (normal distribution)

Tinlet_coef = coefficient for water heater inlet temperature (normal distribution)

Tair_coef = coefficient for average outside temperature (normal distribution)

senior_mf_coef= coefficient for senior-only household in a multi-family building (normal

 distribution)

no_pay_coef = coefficient for household does not pay for hot water (normal distribution)
9-12

9.2.3 General Description of Key Variables

Number of Persons in Household (per). The total number of household members.

Number of Preschool Children 0-5 (age1). The equation calls for the number of infants and young

children ages 0-5. However, unlike previous versions of RECS, the 1997 RECS bins ages of

household members. The closest age bin was infants 0-1, so that is what was used. This will

underestimate hot water usage due to this age category.

Number of School-Age Children 6-13 (age2). The equation calls for the number of children, ages

6 through 13. The closest age bin available in RECS was used, children 1-12. Hot water usage due

to this category will therefore be somewhat overestimated. 

Number of Adults 14-64 (age3). The equation calls for the number of adults, ages 14 to 64. The

closest RECS bin was used, ages 13 to 64. Hot water usage in this age category will be very slightly

overestimated.

Number of Adults 65+ (age4). The equation calls for number of adults, ages 65 or older. There is

a RECS age category that corresponds to this. 

Thermostat Setpoint (Ttank). The thermostat setting of the water heater.

Water Heater Tank Size (Tanksz). The nominal size of the water heater tank.

Outside Air Temperature (Tair). The average annual outside air temperature.

Inlet Water Temperature (Tin). The temperature of the water entering the water heater. 

Household Member (athome). The presence of an adult household member at home during the day.

Dishwasher (no_dw). Absence of a dishwasher in the household.

Clothes Washer (no_cw). Absence of a clothes washer in the household.

Senior Only (senior_mf). A senior-only (age 65 or more) household in a multi-family building.

No-Pay Household (no_pay). A household that does not pay to heat water.
a The 1993 RECS was used for oil-fired water heaters. The oil-fired analysis was not updated because only a small

number of households use oil-fired water heaters.

9-13

9.2.4 General Description of Data Sources

 The 1997 Residential Energy Consumption Survey (RECS)1

 is the primary source of data

for the LCC analysisa

. Most, but not all, RECS household records are used in the analysis. We

assume that the household records used, with their weighted averages, are representative of housing

nationwide. Our analysis includes only RECS households that have five defining features:

1. Running hot water

2. An individual water heater

3. An indication of water heater size (small, medium, or large)

4. One of four fuels: electricity, gas, LPG, or oil

5. Sufficient data to calculate marginal energy price

We use EIA weightings for each RECS household; these values indicate how commonly

each household configuration occurs in the general population.

RECS sometimes reports ranges rather than precise numbers for variables and lacks some

crucial information needed for our analysis. To correct for these missing or insufficient data, we

applied two methods: (1) when ranges were given, we made best-point estimates within the range;

and (2) when RECS data did not cover particular areas of interest to us, we used other studies to

develop the necessary information.

RECS provides data on the number, age, and employment status of household occupants, the

presence of a clothes washer or dishwasher, and the form of payment to fuel utilities.

The derivations of temperature variables for water heater thermostat setpoint, inlet water

temperature, and temperature of air surrounding the water heater are discussed in Section 9.3.4.2.

RECS reports three ranges of water heater tank size — small, medium, and large. For our

hot water draw analysis, however, specific sizes are needed. We used the three RECS ranges plus

the reported number of bathrooms in the house, as listed in Table 9.2.1, to assign an exact water

heater size to each RECS house.

Table 9.2.1 shows, by fuel type, the RECS water heater volumes and the corresponding

selections for this analysis.
9-14

Table 9.2.1 Water Heater Sizes Selected for LCC Analysis

RECS size RECS no. of

bathrooms

"Standard" Sizes Selected for LCC Analysis

(gal) (liters)

Electric Small all 30 (110)

Medium

0 or 1 40 (150)

 2 or more 50 (190)

Large

0 or 1 50 (190)

2 65 (250)

 3 or more 80 (300)

Gas and LPG Small all 30 (110)

Medium

0 or 1 40 (150)

2 or more 50 (190)

Large

0 to 2 50 (190)

3 or more 75 (280)

Oil Small all

32 (120)

Medium all

Large all 50 (190)

Terms and values for no_dw, no_cw, senior_mf, and no_pay were developed by Lawrence

Berkeley National Laboratory (LBNL) for the draw model.8

 Standard errors for the coefficients used

in the hot water draw equation were reported in the hot water consumption model described in the

study prepared for EPRI.9

 We used these values to specify the normal distributions for the

coefficients.

9.2.5 Results of Hot Water Use Calculations

Figure 9.2.1 shows a histogram of estimated daily hot water use for households with electric,

natural gas, LPG, and oil-fired water heaters. For households with electric water heaters, average

daily use is 45.3 gallons. For households with natural gas water heaters, the average daily use is 49.9

gallons of hot water. For households with water heaters fueled with LPG, the average daily use is

45.7 gallons of hot water. For oil-fired households, the average daily use is 47.3 gallons of hot water.
9-15

These differences in water use are due primarily to the number of people in the different

households. The same equation for hot water use is applied to all households, regardless of water

heater fuel type.
9-16

0 50 100 150 200 250

0 200 400 600 800 1000 1200 1400

Hot Water Use (gals/day)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

Electric Water Heaters

0 50 100 150 200 250

0 200 400 600 800 1000 1200

Hot Water Use (gals/day)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

Natural Gas Water Heaters

0 50 100 150 200 250

0 200 400 600 800 1000 1200 1400

Hot Water Use (gals/day)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

LPG Water Heaters

Figure 9.2.1 Frequency Charts of Hot Water Use
9-17

9.2.6 Importance Analysis

The following four charts, Figures 9.2.2 through 9.2.5, show the results of the importance

analysis for differences in household hot water use at Trial Standard Level 3 for electric, natural gas,

LPG, and oil-fired water heaters. Figure 9.2.2 shows the rank-order correlation of input variables

with hot water use for electric water heaters. Figures 9.2.3 and 9.2.4 show the same for 78% RE and

2" Insulation for natural gas and LPG water heaters, respectively. Figure 9.2.5 shows the rank-order

correlation of input variables for the 2003 Baseline oil-fired water heaters. Variables are ordered

with maximum correlation coefficients (positive or negative) on top and minimum coefficients on

the bottom.
9-18

0.0068

0.0086

0.0178

0.0187

0.0332

0.0457

-0.0471

0.0513

-0.0642

-0.0801

0.0975

-0.1073

0.1079

0.1079

0.1089

0.1285

0.1400

-0.1572

0.2298

0.2308

0.2807

0.3034

0.3151

-0.3394

0.4131

0.5230

0.7431

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Coefficient for "age1"

Coefficient for "per"

Coefficient for Seasonal Effect

Coefficient for "age2"

Coefficient for "athome"

Coefficient for "Tanksz"

Household Does Not Pay for Hot Water

Coefficient for "age3+age4"

Number of Occupants Age 65 Years or Older (age4)

Estimated Error for the Thermostat Setpoint

Number of Occupants Age 0 - 5 Years (age1)

Water Heater Thermostat Setpoint

Average Outdoor Air Temperature

Inlet Water Temperature

Coefficient for "Ttank"

Coefficient for "Tin"

Coefficient for "Tair"

Household Does Not Own Dishwashers

Nominal Size of Water Heater

Senior Only Household in Multi-Family Buildings

Adult at Home During Day

Coefficient for "senior_mf"

Coefficient for "no_pay"

Household Does Not Own Clothes Washers

Number of Occupants Age 6 - 13 Years (age2)

Number of Occupants Age 14 - 64 Years (age3)

Total Number of Occupants

Figure 9.2.2 Importance of Input Variables to Hot Water Use for 

Electric Water Heaters
9-19

0.0014

0.0023

0.0068

0.0135

0.0216

0.0310

0.0416

0.0500

-0.0641

-0.0698

0.0836

0.1015

0.1031

0.1265

0.1265

0.1272

0.1349

-0.1801

-0.1853

0.2491

-0.2547

0.3015

0.3379

0.3447

0.4362

0.5287

0.7433

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Coefficient for "age2"

Coefficient for "per"

Coefficient for Seasonal Effect

Coefficient for "age1"

Household Does Not Pay for Hot Water

Coefficient for "athome"

Coefficient for "age3+age4"

Coefficient for "Tanksz"

Estimated Error for the Thermostat Setpoint

Number of Occupants Age 65 Years or Older (age4)

Number of Occupants Age 0 - 5 Years (age1)

Coefficient for "Ttank"

Coefficient for "Tin"

Average Outdoor Air Temperature

Inlet Water Temperature

Coefficient for "Tair"

Senior Only Household in Multi-Family Buildings

Household Does Not Own Dishwashers

Water Heater Thermostat Setpoint

Nominal Size of Water Heater

Household Does Not Own Clothes Washers

Adult at home during day

Coefficient for "no_pay"

Coefficient for "senior_mf"

Number of Occupants Age 6 - 13 Years (age2)

Number of Occupants Age 14 - 64 Years (age3)

Total Number of Occupants

Figure 9.2.3 Importance of Input Variables to Hot Water Use for 

Natural Gas Water Heaters
9-20

0.0000

0.0000

0.0125

0.0175

0.0177

0.0323

0.0340

0.0439

0.0529

0.0614

0.0614

-0.0663

0.1097

0.1145

0.1243

-0.1316

0.1336

-0.1696

0.2104

-0.2828

0.2858

0.3146

0.3250

-0.3984

0.4555

0.5226

0.7428

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Household Does Not Pay for Hot Water

Senior Only Household in Multi-Family Buildings

Coefficient for Seasonal Effect

Coefficient for "per"

Coefficient for "age1"

Coefficient for "age2"

Coefficient for "athome"

Coefficient for "Tanksz"

Coefficient for "age3+age4"

Average Outdoor Air Temperature

Inlet Water Temperature

Estimated Error for the Thermostat Setpoint

Coefficient for "Tin"

Coefficient for "Ttank"

Number of Occupants Age 0 - 5 Years (age1)

Number of Occupants Age 65 Years or Older (age4)

Coefficient for "Tair"

Water Heater Thermostat Setpoint

Adult at home during day

Household Does Not Own Clothes Washers

Nominal Size of Water Heater

Coefficient for "no_pay"

Coefficient for "senior_mf"

Household Does Not Own Dishwashers

Number of Occupants Age 6 - 13 Years (age2)

Number of Occupants Age 14 - 64 Years (age3)

Total Number of Occupants

Figure 9.2.4 Importance of Input Variables to Hot Water Use for 

LPG Water Heaters
9-21

0.0026

0.0060

-0.0069

0.0224

0.0226

0.0430

-0.0620

0.0632

0.0804

0.0804

0.0806

0.0867

0.0986

-0.1039

0.1078

-0.1312

-0.1723

-0.1788

0.2161

-0.2387

0.2604

0.3148

0.3348

0.3525

0.4434

0.6092

0.7779

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Coefficient for Seasonal Effect

Coefficient for "age1"

Coefficient for "per"

Coefficient for "athome"

Coefficient for "age2"

Coefficient for "Tanksz"

Estimated Error for the Thermostat Setpoint

Coefficient for "age3+age4"

Average Outdoor Air Temperature

Inlet Water Temperature

Nominal Size of Water Heater

Coefficient for "Tin"

Coefficient for "Tair"

Water Heater Thermostat Setpoint

Coefficient for "Ttank"

Household Does Not Pay for Hot Water

Number of Occupants Age 65 Years or Older (age4)

Household Does Not Own Dishwashers

Senior Only Household in Multi-Family Buildings

Household Does Not Own Clothes Washers

Number of Occupants Age 0 - 5 Years (age1)

Coefficient for "no_pay"

Coefficient for "senior_mf"

Adult at Home During Day

Number of Occupants Age 6 - 13 Years (age2)

Number of Occupants Age 14 - 64 Years (age3)

Total Number of Occupants

Figure 9.2.5 Importance of Input Variables to Hot Water Use for 

Oil-Fired Water Heaters 
9-22

9.3 ENERGY ANALYSIS MODULE

9.3.1 Introduction to Energy Use

Residential water heater energy usage is accurately estimated, within 3% to 5% compared

to TANK or WATSIM, using a simplified energy equation, the Water Heater Analysis Model

(WHAM).10, 11 WHAM accounts for a variety of operating conditions and water heater

characteristics. WHAM uses three parameters—recovery efficiency (RE), standby heat-loss

coefficient (UA), and rated input power (Pon)—to describe water heater efficiency characteristics.

Water heater operating conditions are indicated by average daily hot water draw volume, inlet water

temperature, thermostat setting, and air temperature around the water heater. 

WHAM was developed to quickly and reliably estimate residential water heater energy

consumption. Because it is written as an equation, WHAM can be used in spreadsheets. It does not

require the detailed inputs that other water heater simulation models demand. In each of the LCC

analysis spreadsheets, water heater energy consumption is calculated for 10,000 different household

samples for existing and 2003 baseline water heaters and all design options being considered.

(Please refer to Section 9.1 for a definition of the 2003 baseline and design options.) We used

WHAM in conjunction with Crystal Ball to calculate water heater energy consumption.

The energy analysis module uses the average daily hot water consumption for all sampled

households, as calculated by the Hot Water Draw Module. Other key characteristics, such as water

temperature for each household, are derived from the RECS database.1

 The LCC analysis uses RE

and UA values from computer simulations developed for the Engineering Analysis (see Chapter 8)

and Pon from manufacturers’ product literature to describe the energy performance of water heaters.

9.3.2 Equation for Energy Use

The WHAM equation solves for average daily water heater energy consumption (Qin), and

is expressed as follows:

Qin

vol # den # C

p

# Ttank Tin

RE

# 1

UA # Ttank Tamb

Pon

24 # UA # Ttank Tamb

where:

Qin = total water heater energy consumption (Btu/day)

RE = recovery efficiency

Pon = rated input power (Btu/hr)

UA = standby heat-loss coefficient (Btu/hr-oF)
a Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup,

retail price, and fuel price in the Life-Cycle Cost and subsequent analyses.

9-23

Ttank = thermostat setpoint temperature (oF)

Tin = inlet water temperature (o

F)

Tamb = temperature of the air surrounding the water heater (o

F)

vol = volume of hot water drawn in 24 hours (gal/day)

den = density of stored water, set constant at 8.29 lb/gal

Cp = specific heat of stored water, set constant at 1.000743 Btu/lb-o

F

9.3.3 General Description of Key Variables

Recovery Efficiency (RE). The recovery efficiency (RE) is the ratio of energy added to the

water compared to the energy input to the water heater. It represents how efficiently energy is

transferred to the water when the heating element is on or the burner is firing. RE covers steady-state

efficiency only. It accounts for the amount of energy lost through the water heater jacket and the flue

and fittings while the heater is firing.

Rated Input Power (Pon). Rated input power is the nominal power rating the manufacturer

assigns to a particular design of water heater expressed in kW for electric water heaters or Btu/hr for

gas-fired (both natural gas and LPG)a

 or oil-fired water heaters. For gas-fired water heaters this

includes the pilot light.

Standby Heat-Loss Coefficient (UA). The standby heat loss coefficient (UA) indicates the

water heater hourly standby energy losses, expressed in Btu/hr-oF. UA is reported in terms of energy

input required to maintain the water at the setpoint temperature. This represents the rate at which

energy must be added to the water heater when it is not heating water for delivery.

Thermostat Setpoint Temperature (Ttank). The thermostat setpoint temperature is the

desired delivery temperature of the hot water.

Inlet Water Temperature (Tin). The inlet water temperature is the temperature of the water

supplied to the water heater.
9-24

Temperature of the Air Surrounding the Water Heater (Tamb). The temperature

surrounding the water heater is the ambient air temperature of the space where the water heater is

located.

Volume of Hot Water Drawn in 24-Hour Period (vol). This is the estimated daily

household use of hot water. It is calculated in the Hot Water Draw Model.

Density of Water (den). This is the density of hot water at the average of the setpoint and

inlet temperatures (8.29 lb/gal). It is mass per unit volume, expressed as lb/gal (kg/l).

Specific Heat of Water (Cp). This represents the specific heat of water at the average of the

setpoint and inlet temperatures (1.000743 Btu/lb-o

F). This is the amount of heat needed to increase

or decrease the temperature of 1 pound mass of water by 1 °F (1 kJ/kg - K).

9.3.4 General Description of Data Sources

9.3.4.1 Derivations of Energy Parameters

Introduction. We calculated total water heater energy consumption (Qin) using water heater

energy parameters including the recovery efficiency (RE), the standby heat loss coefficient (UA), the

rated input power (Pon), and the estimated hot water use. The definitions for the water heater energy

parameters are provided by the U.S. DOE Energy Factor (EF) test procedure for water heaters.12 We

developed the energy parameters using simulation models and customized calculation tools created

at LBNL, information from water heater manufacturer and retail contacts, and independent sources.

Determining RE, UA, and Pon. The LCC analysis uses RE and UA values from computer

simulations developed for the Engineering Analysis (Chapter 8). We used the WATSIM water

heating simulation program for electric water heaters, the TANK simulation program for gas-fired

water heaters (both natural gas and LPG), and WHAM for oil-fired water heaters.

WATSIM is a detailed electric water heater simulation program developed by EPRI.13 The

use of WATSIM is explained in the Engineering Analysis. WATSIM does not directly provide

values for RE and UA. It does, however, provide detailed temperature profiles of water inside the

water heater tank during the simulation run. These temperature readings can be used to determine

the energy parameters of an electric water heater using standard test procedure calculations. We

developed a spreadsheet tool, described in Appendix D-1, to calculate RE and UA.

TANK is a detailed gas-fired storage water heater simulation program developed by Battelle

for the Gas Research Institute.14 TANK is described in Chapter 8. The outputs of TANK include RE

and UA.

We used the simplified water heater model WHAM to analyze oil-fired water heaters. For

oil-fired water heaters, we calculated total daily energy consumption based on estimated burner
9-25

operating hours and then used a rearranged WHAM equation to estimate UA. The use of the WHAM

model for calculation of energy parameters for oil-fired water heaters is also explained in Chapter 8.

The primary data source for rated input power (Pon) is water heater manufacturers’ product

literature. In order to generate Pon values, we examined a large sample of water heaters and assigned

typical values for all standard water heater sizes analyzed in the LCC. Table 9.3.1 is a summary of

all standard water heater sizes studied in this analysis with corresponding values for UA, RE, and

Pon for the four fuel types. 

Table 9.3.1 Water Heater Design Characteristic Values

Rated Volume 

gal/liter

UA

Btu/hr-o

F

RE Pon

Btu/hr

Electric 30 (110) 2.92 0.972 15,354

40 (150) 3.40 0.968 15,354

50 (190) 3.64 0.967 15,354

65 (250) 3.98 0.966 15,354

80 (300) 4.42 0.965 15,354

Natural Gas

and

LPG

30 (110) 11.56 0.758 30,000

40 (150) 13.86 0.756 40,000

50 (190) 16.14 0.723 50,000

75 (280) 21.80 0.672 75,000

Oil-Fired 32 (120) 14.93 0.760 90,000

50 (190) 18.26 0.760 104,000

Water Heater Sizes. When we refer to “typical” water heater sizes, we mean the most

common water heater size for each fuel type, with an energy factor at the minimum allowed by

current energy-efficiency standards. These units have the largest market share in their product class

(50-gal/190 liter for electric, 40-gal/150 liter for natural gas and LPG, and 32-gal/120 liter for oilfired). We used “typical” sizes in the Engineering Analysis, so all data from that analysis are for

only these three sizes. However, for the purposes of the LCC analysis, we expanded the range of

sizes considered to include all those listed in Table 9.2.1 so that our analysis would accurately reflect

the broad range of water heater sizes and thus LCCs that consumers are likely to encounter. This

expanded repertoire of sizes is referred to as “standard” sizes and appears in Table 9.3.1 as well as

Table 9.2.1. 
a The height of the lower element and thermostat and the drain (feed-throughs) are kept constant across all tank

sizes to reflect standard manufacturing practice.

b

 Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup,

retail price, and fuel price in the Life-Cycle Cost and subsequent analyses.

9-26

We had to derive data for standard sizes using data for typical sizes. We derived all standardsize 2003 baseline models by adjusting the typical 2003 baseline models in the WATSIM and TANK

simulation tools. Table 9.3.2 shows the values of the electric water heater parameters that were

adjusted in WATSIM in order to model the standard tank sizes. We determined the typical tank

diameter for each standard size from a large sample of water heaters selected from the product

literature. The actual tank volume of an electric water heater is 10% less than the rated volume. We

used the values for tank diameter and actual tank volume to calculate tank height. We determined

the rest of the geometry parameters, such as the locations of the hot and cold water outlets, the

electric heater elements, the thermostats, and the miscellaneous feed-through fittings, by scaling

relative to the length of the baseline model.a In WATSIM, all heights are referenced from the bottom

of the tank support skirt (top of the base pad).

Table 9.3.2 Electric Water Heater Modeling Parameter Variations

30-gal 40-gal 50-gal 65-gal 80-gal

 Tank Diameter (ft) 1.17 1.17 1.32 1.50 1.67

 Tank Height (ft) 3.48 4.60 4.54 4.55 4.52

 Location of H.W. Inlet (ft) 3.48 4.60 4.54 4.55 4.52

 Height of Heater Element 1 (ft) 0.48 0.63 0.62 0.62 0.60

 Height of Heater Element 2 (ft) 2.48 3.28 3.24 3.25 3.23

 Height of Thermostat 1 (ft) 0.70 1.01 1.00 1.00 1.00

 Height of Thermostat 2 (ft) 2.79 3.69 3.64 3.65 3.62

 Height of Feed-Through 1 (ft) 3.48 4.60 4.54 4.55 4.52

 Height of Feed-Through 2 (ft) 3.48 4.60 4.54 4.55 4.52

 Height of Feed-Through 3 (ft) 0.13 0.13 0.13 0.13 0.13

 Height of Feed-Through 4 (ft) 3.48 4.60 4.54 4.55 4.52

Table 9.3.3 shows the values of the gas-fired (both natural gas and LPG)b

 water heater

parameters that were adjusted in TANK to model all the standard tank sizes. We determined all of

the required TANK input parameters, such as tank diameter, internal flue diameter, and firing rate

for each standard size, from a large sample of water heaters selected from product literature. The

actual tank volume of a gas-fired water heater is 5% less than the rated volume. The TANK

simulation program calculates most of the geometry parameters based on values for tank diameter

and volume. The location (elevation) of the thermostat does not change from size to size; it is fixed

at a height of 0.39 feet (11.9 cm). TANK requires an input for the “Volume to Thermostat (gal)”

parameter, which is the amount of water that would need to be added to an empty water heater tank
9-27

to raise the water level to the thermostat location. We determined this parameter using the specific

tank diameter and the thermostat elevation.

Table 9.3.3 Natural Gas and LPG Water Heater Modeling Parameter Variations

30-gal 40-gal 50-gal 75-gal

Tank Volume (gal) 28.5 38.0 47.5 71.2 

Firing Rate (Btu/hr) 30,000 40,000 50,000 75,000

Tank Diameter (in) 13.84 15.84 17.84 21.84

Internal Flue Diameter (in) 2.84 3.84 3.84 3.84

Volume to Thermostat (gal) 3.1 4.05 6.36 7.70

We performed detailed computer simulations for each design option and all combinations

of design options as they applied to all of the standard-size 2003 baseline models.

Table 9.3.4 shows the values of the oil-fired water heater parameters that were adjusted in

WHAM to model the 50-gal standard tank size.

Table 9.3.4 Oil-Fired Water Heater Modeling Parameter Variations

32-gal 50-gal

Tank Volume (gal) 30.5 47.5

Firing Rate (Btu/hr) 90,000 105,000

Tank Diameter (in) 17.84 19.84

Tank Height (in)* 29.6 41.0

Burner Power Draw (W) 282 282

*Tank height measured along outside tank wall.

Determination of Uncertainty Ranges for EF, RE, UA, and Pon. The energy factor (EF)

is the ratio of output energy in the form of hot water to the input energy at the standard test

conditions. We use the WHAM equation in the LCC analysis to calculate energy consumption for

all design options as a function of RE, UA, and Pon, which are calculated as explained at the

beginning of this section.
9-28

We developed a procedure to calculate uncertainty ranges for all the energy parameters. A

consultant provided an estimate of the EF values and the associated uncertainty ranges for all design

options added separately to typical existing baseline electric and gas water heaters.15

We used the EF uncertainty range data for the typical tank sizes to develop ratios that present

the variations of the EF values for all the standard tank sizes. 

We developed the range of uncertainty for RE and UA from the range of uncertainty for EF.

We calculated variations in RE and UA that would independently cause the desired variation of EF,

and reduced the range of the RE and UA terms by 1/2. This adjustment assumes that the RE and

UA distributions have approximately equal impacts on EF. A detailed explanation of the entire

procedure to develop the uncertainties for the water heater energy parameters is found in Appendix

E-2. Variations in Pon have a much smaller impact on EF within the operating limits of actual water

heaters. The variations in Pon for each standard size are from water heaters listed in the Gas

Appliance Manufacturers Association (GAMA) directory.16

The impact on EF for variations in RE, UA, and Pon are shown in Table 9.3.5 for electric,

in Table 9.3.6 for natural gas and LPG, and in Table 9.3.7 for oil-fired water heaters.
9-29

Table 9.3.5 Energy Efficiency Characteristics for 

Electric Water Heaters (50-gal) 

Design Options EFWHAM EFmin EFmax RE REmin REmax UA UAmin

Btu/hr-NF

UAmax Pon Pon min

Btu/hr

Pon max

ExistingBaseline(141b)

0.8714 0.8627 0.8801 0.9800 0.9721 0.9879 3.6401 3.4102 3.8748 15354 12966 18766

2003 Baseline (245fa) 0.8715 0.8627 0.8802 0.9800 0.9721 0.9879 3.6379 3.4079 3.8725 15354 12966 18766Heat Traps 0.8814 0.8703 0.8924 0.9800 0.9702 0.9898 3.2962 2.9857 3.5599 15354 12966 18766Tank Bottom Insulation 0.8860 0.8727 0.8993 0.9800 0.9684 0.9917 3.0979 2.7603 3.4457 15354 12966 187662" Insulation 0.8980 0.8801 0.9160 0.9800 0.9647 0.9953 2.6656 2.2237 3.1256 15354 12966 187662.5" Insulation 0.9077 0.8851 0.9304 0.9800 0.9611 0.9989 2.3248 1.7810 2.8965 15354 12966 18766Plastic Tank 0.9109 0.8836 0.9382 0.9800 0.9575 1.0026 2.2162 1.5691 2.9035 15354 12966 187663" Insulation 0.9177 0.8901 0.9452 0.9800 0.9577 1.0024 1.9841 1.3417 2.6663 15354 12966 18766
9-30

Table 9.3.6 Energy Efficiency Characteristics for

Natural Gas and LPG Water Heaters (40-gal)

Design Options EFWHAM EFmin EFmax RE REmin REmax UA UAmin

Btu/hr-NF

UAmax Pon Pon min

Btu/hr

Pon max

Existing Baseline (141b) 0.5431 0.5377 0.5485 0.7571 0.7495 0.7648 13.9930 13.6464 14.3466 40000 28000 600002003 Baseline (245fa) 0.5429 0.5375 0.5483 0.7572 0.7496 0.7649 14.0170 13.6703 14.3707 40000 28000 60000Heat Traps 0.5519 0.5450 0.5588 0.7561 0.7468 0.7655 13.1550 12.7297 13.5911 40000 28000 6000078% RE 0.5643 0.5530 0.5756 0.7717 0.7566 0.7871 12.7880 12.1282 13.4748 40000 28000 6000078% RE, 2" Insulation 0.5922 0.5744 0.6100 0.7799 0.7579 0.8023 10.9070 9.9736 11.8981 40000 28000 6000078% RE, 2.5" Insulation 0.5982 0.5773 0.6192 0.7818 0.7564 0.8078 10.5340 9.4613 11.6845 40000 28000 6000080% RE, 2" Insulation 0.6080 0.5867 0.6292 0.8002 0.7740 0.8271 10.5900 9.5359 11.7205 40000 28000 6000080% RE, 2.5" Insulation 0.6145 0.5914 0.6375 0.8022 0.7743 0.8308 10.2050 9.0904 11.4064 40000 28000 6000080% RE, 3" Insulation 0.6185 0.5922 0.6448 0.8027 0.7713 0.8350 9.9400 8.6912 11.2997 40000 28000 60000Side Arm 0.7149 0.6809 0.7488 0.8000 0.7699 0.8305 3.9894 2.7873 5.3114 40000 28000 60000

Table 9.3.7 Energy Efficiency Characteristics for 

Oil-Fired Water Heaters (32-gal)

Design Options EFWHAM EFmin EFmax RE REmin REmax UA UAmin

Btu/hr-NF

UAmax Pon Pon min

Btu/hr

Pon max

Existing Baseline (141b) 0.5290 0.5184 0.5396 0.7500 0.7349 0.7653 14.4935 13.8143 15.2064 90000 84000 1050002003 Baseline (245fa) 0.5290 0.5184 0.5396 0.7500 0.7349 0.7653 14.4935 13.8143 15.2064 90000 84000 105000Heat Traps 0.5350 0.5243 0.5457 0.7500 0.7350 0.7651 13.9435 13.2721 14.6487 90000 84000 1050002" Insulation 0.5506 0.5396 0.5616 0.7508 0.7362 0.7654 12.5979 11.9451 13.2826 90000 84000 1050002.5" Insulation 0.5543 0.5432 0.5653 0.7509 0.7365 0.7655 12.2950 11.6464 12.9751 90000 84000 1050003" Insulation 0.5568 0.5456 0.5679 0.7510 0.7366 0.7656 12.0890 11.4433 12.7660 90000 84000 10500078% RE 0.5780 0.5665 0.5896 0.7800 0.7650 0.7951 11.6441 11.0227 12.2955 90000 84000 105000Interrupted Ignition 0.5819 0.5702 0.5935 0.7852 0.7702 0.8004 11.5671 10.9485 12.2127 90000 84000 105000Increased HX Area 0.6114 0.5992 0.6237 0.8254 0.8096 0.8414 11.0077 10.4197 11.6213 90000 84000 105000
9-31

9.3.4.2 Temperature Derivations

The temperatures for water heater thermostat setpoint, inlet water temperature, and

temperature of the air surrounding the water heater are based on average annual outside air

temperature. 

RECS provides data on heating and cooling degree days but not air temperatures for each

household in the sample. To assign a physical location to each RECS household from which outside

air temperatures could be derived, we took three steps:

1. We used a weather zone classification which divided the continental United States into

841 different weather stations.

2. The National Oceanic and Atmospheric Administration (NOAA) provides daily maximum

and minimum air temperatures for all of the 841weather stations.5

 We assumed that the average daily

temperature would be the average of the maximum and minimum temperatures. We used the

average daily temperature to calculate heating and cooling degree days for each station. Cooling

degree days are the number of degrees the average temperature is above a base temperature. Base

temperatures of 65, 70 and 750

F were used. Heating degree days are the number of degrees the

average temperature is below a base temperature. Base temperatures of 50, 55, 60, 65 and 700F were

used. 

3. RECS reports heating degree days to base temperatures 50, 55, 60, 65 and 700F and

cooling degree days to base temperatures 65, 70 and 750

F for each housing record. We assigned each

RECS household to one of the 841 weather stations by calculating which weather station (within its

reported census region or large state) gave the best linear least squares fit of the RECS data to the

NOAA data.

Once each RECS household was associated with a weather station, we made other

temperature assignments based on the 30-year average annual temperatures from NOAA. 

We assumed inlet water temperature to be the same as groundwater temperature, which varies

according to geographic region. Groundwater temperatures are assumed to be slightly warmer than

air temperatures. We added two degrees to NOAA average annual outside air temperature data to

calculate the inlet water temperature.17 We compared the estimates to the National Well Water

Association’s published annual average groundwater temperatures for various regions in the

country.18 The comparison shows that, in the majority of cases, the inlet water temperature averages

2o

F warmer than the outside air temperature. 

We assigned water heater thermostat settings to RECS households based on their inlet water

temperatures and an equation derived from a California Energy Commission (CEC) study.19 The

CEC study examined single-family houses built between 1984 and 1988 to assess the accuracy of

the California Title 24 Energy Efficiency Standards modeling assumptions. The study measured hot
9-32

T T tank = ∗− 134.1 0 55 58 + . ( )in

and cold water temperatures, assuming that hot water temperatures were equal to water heater

thermostat setpoints and that cold water temperatures were equal to inlet water temperatures. 

The graph of the CEC data displayed in Figure 9.3.1 shows the correlation between

thermostat setpoint and inlet water temperature. The data indicate that people with colder inlet water

tend to set their water heaters to higher setpoint temperatures. This makes sense: either hotter water

or more hot water must be mixed with cold water to have warm water for household use. People are

often motivated to increase their hot water thermostat setpoint if they frequently run out of hot water.

Because individual households maintain a wide range of thermostat settings, we added a random

error with a mean of 0oF and a standard deviation of 13oF to account for this variability.

Hot vs Cold Water Temperature 

from CEC data for California

80

100

120

140

160

180

200

40 45 50 55 60 65 70 75 80

Cold Water Temperature (deg F)

Hot Water Temperature (deg F)

Figure 9.3.1 Comparison of Setpoint and Inlet Water Temperatures

The equation derived from the CEC data is shown below. The equation estimates that, if the

inlet water temperature for the household is 58o

F, then the water heater’s setpoint temperature is

134.1oF. As the inlet water temperature gets warmer, the setpoint temperature decreases.
9-33

We developed a set of assumptions to determine air temperature around water heaters based

on calls to 50 water heater installers from around the country regarding typical locations for water

heater installation.

1. RECS reports the presence or absence of basements in houses and, if there is a

basement, whether or not it is heated. If a house had a basement, we assumed that the

water heater was located in the basement. For unheated basements, the assigned

temperature was the average between the outside air temperature for that weather

station and a house air temperature of 72oF (22.2oC).

2. If RECS reports the basement as a heated space, then the temperature of the air around

the water heater was assumed to be the temperature of the house: 72oF (22.2oC).

3. If the house had no basement but did have a garage or carport, we assumed that the

water heater was in the garage or carport. The temperature assigned was 5oF (2.8oC)

higher than the outside air temperature for that house.

4. In the absence of a basement, garage, or carport, it was assumed that the water heater

was in the house (in the kitchen or a utility closet), and we assigned a temperature of

72o

F (22.2oC) to the surrounding air.

Table 9.3.8 shows the percentages of assigned water heater locations.

Table 9.3.8 Water Heater Locations

Water Heater Location Percentage 

%

Unheated Basement 6.9

Heated Basement 29.6

Garage 34.3

Inside House 29.2

9.3.5 Energy Analysis Results

9.3.5.1 Electric Water Heater Energy Use

Table 9.3.9 lists average annual energy use for electric water heaters and average daily energy

savings for each design option evaluated in the LCC analysis, compared to the 2003 baseline water

heater.
9-34

Table 9.3.9 Energy Consumption for Electric Water Heaters 

Design Option Average Electricity

Use

kWh/yr

Average

Energy

Savings 

Btu/day

0 2003 Baseline 3460

1 Heat Traps 3402 539

2 Tank Bottom Insulation 3382 728

3 2" Insulation 3318 1325

4 2.5" Insulation 3272 1760

5 Plastic Tank 3263 1843

6 3" Insulation 3234 2114

Figure 9.3.2 shows a distribution and cumulative frequency plot of the difference in energy

consumption for each design option, compared to 2003 baseline, for electric water heaters. Note that

a negative difference in energy consumption for a given design option indicates a savings. The width

of the plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread of energy savings in the population. 
9-35

-4000 -2000 0 2000 4000 6000 8000

0 1000 2000 3000 4000 5000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-4000 -2000 0 2000 4000 6000 8000

0 1000 2000 3000 4000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Tank Bottom Insulation 

-4000 -2000 0 2000 4000 6000 8000

0 500 1000 1500 2000 2500 3000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

2" Insulation

-4000 -2000 0 2000 4000 6000 8000

0 500 1000 1500 2000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

2.5" Insulation

-4000 -2000 0 2000 4000 6000 8000

0 500 1000 1500 2000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

Plastic Tank

-4000 -2000 0 2000 4000 6000 8000

0 500 1000 1500

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

Figure 9.3.2 Differences in Energy Consumption by Design Option for 

Electric Water Heaters
9-36

9.3.5.2 Natural Gas Water Heater Energy Use 

Table 9.3.10 lists the average annual energy use for natural gas water heaters and the average

daily energy savings for each design option compared to the 2003 baseline water heater.

Table 9.3.10 Energy Consumption for Natural Gas Water Heaters

Design Option Average Energy Use Average

Energy

Savings 

MMBtu/yr kWh/yr Btu/day

0 2003 Baseline 23.4 0.0 –

1 Heat Traps 23.0 0.0 1320

2 78% RE 22.5 0.0 2455

3 78% RE, 2" Insulation 21.2 0.0 5996

4 78% RE, 2.5" Insulation 21.0 0.0 6683

5 80% RE, 2" Insulation 20.7 0.0 7422

6 80% RE, 2.5" Insulation 20.5 0.0 8114

7 80% RE, 3" Insulation 20.3 0.0 8565

8 Side Arm 16.9 21.8 17817
9-37

Figure 9.3.3 shows, for each design option, a distribution and cumulative frequency plot of

the difference in energy consumption compared to 2003 baseline natural gas water heaters. Note that

a negative difference in energy consumption for a given design option indicates a savings. The width

of the plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread of energy savings in the population. 
9-38

-5000 0 5000 10000 20000 30000

0 1000 3000 5000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-5000 0 5000 10000 20000 30000

0 1000 2000 3000 4000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

-5000 0 5000 10000 20000 30000

0 500 1000 1500 2000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

-5000 0 5000 10000 20000 30000

0 500 1000 1500 2000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

-5000 0 5000 10000 20000 30000

0 500 1000 1500 2000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

-5000 0 5000 10000 20000 30000

0 500 1000 1500

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

-5000 0 5000 10000 20000 30000

0 500 1000 1500

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

-5000 0 5000 10000 20000 30000

0 200 400 600 800

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.3.3 Differences in Energy Consumption by Design Option for 

Natural Gas Water Heaters
9-39

9.3.5.3 LPG Water Heater Energy Use

Table 9.3.11 lists the average annual energy use for LPG water heaters and the average daily

energy savings for each design option compared to the 2003 baseline.

Table 9.3.11 Energy Consumption for LPG Water Heaters

Design Option Average Energy Use Average

Energy

Savings 

MMBtu/yr kWh/yr Btu/day

0 2003 Baseline 22.8 0.0 –

1 Heat Traps 22.3 0.0 1371

2 78% RE 21.9 0.0 2412

3 78% RE, 2" Insulation 20.6 0.0 6005

4 78% RE, 2.5" Insulation 20.4 0.0 6722

5 80% RE, 2" Insulation 20.1 0.0 7429

6 80% RE, 2.5" Insulation 19.9 0.0 8141

7 80% RE, 3" Insulation 19.7 0.0 8570

8 Side Arm 16.2 21.3 18055

Figure 9.3.4 shows, for each design option, a distribution and cumulative frequency plot of

the difference in energy consumption compared to 2003 baseline LPG water heaters. Note that a

negative difference in energy consumption for a given design option indicates a savings. The width

of the plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread of energy savings in the population.
9-40

-10000 0 10000 20000 30000 40000 0 1000 3000 5000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-10000 0 10000 20000 30000 40000 0 1000 2000 3000 4000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

-10000 0 10000 20000 30000 40000 0 500 1000 1500 2000

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

-10000 0 10000 20000 30000 40000 0 500 1000 1500 2000

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

-10000 0 10000 20000 30000 40000 0 500 1000 1500

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

-10000 0 10000 20000 30000 40000 0 500 1000 1500

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

-10000 0 10000 20000 30000 40000 0 500 1000 1500

Energy Savings (Btu/day)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

-10000 0 10000 20000 30000 40000 0 200 400 600 800

Energy Savings (Btu/day)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.3.4 Differences in Energy Consumption by Design Option for 

LPG Water Heaters
9-41

9.3.5.4 Oil-Fired Water Heater Energy Use

Table 9.3.12 lists the average annual energy use for oil-fired water heaters and the average

daily energy savings for each design option compared to the 2003 baseline.

Table 9.3.12 Energy Consumption for Oil-Fired Water Heaters 

Design Option Average Energy Use Average

Energy

Savings 

MMBtu/yr kWh/yr Btu/day

0 2003 Baseline 25.4 75.1 –

1 Heat Traps 25.1 74.1 933

2 2" Insulation 24.2 71.5 3409

3 2.5" Insulation 24.0 70.9 3975

4 3" Insulation 23.9 70.5 4352 

5 78% RE 23.0 67.9 6782

6 Interrupted Ignition 23.0 25.5 7188

7 Increased HX Area 21.9 24.4 10244

Figure 9.3.5 shows, for each design option, a distribution and cumulative frequency plot of

the difference in energy consumption compared to 2003 baseline oil-fired water heaters. Note that

a negative difference in energy consumption for a given design option indicates a savings. The width

of the plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread of energy savings in the population.
9-42

-40000 -30000 -20000 -10000 0 10000 0 1000 2000 3000 4000

Delta Energy Consumption

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-40000 -30000 -20000 -10000 0 10000 0 1000 2000 3000

Delta Energy Consumption

0%

20%

40%

60%

80%

100%

Cumulative Pct

2" Insulation

-40000 -30000 -20000 -10000 0 10000 0 1000 2000 3000 4000

Delta Energy Consumption

Frequency

0%

20%

40%

60%

80%

100%

2.5" Insulation

-40000 -30000 -20000 -10000 0 10000 0 1000 2000 3000

Delta Energy Consumption

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

-40000 -30000 -20000 -10000 0 10000 0 500 1000 2000

Delta Energy Consumption

Frequency

0%

20%

40%

60%

80%

100%

78% RE

-40000 -30000 -20000 -10000 0 10000 0 500 1000 2000

Delta Energy Consumption

0%

20%

40%

60%

80%

100%

Cumulative Pct

Interrupted Ignition

-40000 -30000 -20000 -10000 0 10000 0 500 1000 1500

Delta Energy Consumption

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

Increased HX Area

Figure 9.3.5 Differences in Energy Consumption by Design Option for 

Oil-Fired Water Heaters
9-43

9.3.6 Importance Analysis

The following four charts (Figures 9.3.6, 9.3.7, 9.3.8, and 9.3.9) show the results of the

importance analysis for energy consumption at Trial Standard Level 3 for electric, natural gas, LPG,

and oil-fired water heaters. Figure 9.3.6 shows the rank-order correlation of input variables with

energy consumption for the 2.5" Insulation design option on electric water heaters. Figures 9.3.7 and

9.3.8 show the same for 78% RE and 2" Insulation on natural gas and LPG water heaters,

respectively. Figure 9.3.9 shows the rank-order correlation for 2003 Baseline on oil-fired water

heaters. Variables are ordered with maximum correlation coefficients, positive or negative, on top

and minimum coefficients on the bottom. For three types of water heaters (electric, natural gas, and

LPG), hot water use has the most significant impact on energy consumption, followed by standby

heat loss coefficient. For the natural gas-fired and oil-fired water heaters, rated input power was

almost as significant as the standby heat loss coefficient. The most significant impact on energy

consumption for oil-fired water heaters was the annual electricity consumption of the 2003 baseline

water heater, followed by the hot water use.
9-44

-0.0021

0.1211

-0.1418

-0.2184

0.2188

0.3158

0.8680

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Recovery Efficiency of 2.5"

Insulation Water Heater

Rated Input Power of Water Heater

Ambient Air Temperature (around

water heater)

Inlet Water Temperature

Water Heater Thermostat Setpoint

Standby Heat Loss Coefficient of

2.5" Insulation Water Heater

Daily Hot Water Use (gal/day)

Figure 9.3.6 Importance of Input Parameters to Annual Energy Consumption for 

2.5" Insulation on Electric Water Heaters
9-45

0.0303

-0.0601

0.1499

-0.1895

0.2048

0.2443

0.8191

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Recovery Efficiency of 78% RE, 2"

Insulation Water Heater

Ambient Air Temperature (around

water heater)

Water Heater Thermostat Setpoint

Inlet Water Temperature

Rated Input Power of Water Heater

Standby Heat Loss Coefficient of

78% RE, 2" Insulation Water Heater

Daily Hot Water Use (gal/day)

Figure 9.3.7 Importance of Input Parameters to Annual Energy Consumption for 

78% RE, 2" Insulation on Natural Gas Water Heaters 
9-46

0.0266

-0.1063

0.1684

0.2028

-0.2255

0.2579

0.8154

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Recovery Efficiency of 78% RE, 2"

Insulation Water Heater

Ambient Air Temperature (around

water heater)

Water Heater Thermostat Setpoint

Rated Input Power of Water Heater

Inlet Water Temperature

Standby Heat Loss Coefficient of

78% RE, 2" Insulation Water Heater

Daily Hot Water Use (gal/day)

Figure 9.3.8 Importance of Input Parameters to Annual Energy Consumption for 

78% RE, 2" Insulation on LPG Water Heaters 
9-47

0.0104

-0.0191

-0.0360

-0.1007

0.1276

0.1348

0.9792

0.9794

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Water Heater Thermostat Setpoint

Recovery Efficiency of 2003

Baseline Water Heater

Inlet Water Temperature

Ambient Air Temperature (around

water heater)

Standby Heat Loss Coefficient of

2003 Baseline Water Heater

Rated Input Power of Water Heater

Daily Hot Water Use (gal/day)

Annual Electricity Consumption of

2003 Baseline Water Heater

(kWh/Year)

Figure 9.3.9 Importance of Input Parameters to Annual Energy Consumption for 

2003 Baseline on Oil-Fired Water Heaters 
9-48

9.4 OPERATING COST MODULE

9.4.1 Introduction to Operating Cost Module

Operating a water heater involves two costs: fuel to operate the water heater and maintenance

to keep the water heater running properly. Fuel costs depend on the water heater’s energy usage and

the per-unit cost of fuel. Maintenance costs depend on water heater design. 

Four types of fuel are commonly used in residential water heaters—electricity, natural gas,

LPG, and fuel oil. More than one type of fuel may be used; for instance, electric water heaters use

only electricity, whereas natural gas and LPG water heaters use gas or LPG plus electricity for some

designs. All oil-fired water heaters use some electricity.

9.4.2 Equations for the Operating Cost Module

A generalized equation that describes the operating costs of all four types of water heaters—

electric, natural gas, LPG, and oil-fired—can be expressed as follows:

OprCostyear, option

EnergyType elec,gas,oil

AnnualQEnergyType, base # FutrPriceEnergyType, year

AnnualQEnergyType, option # FutrMarPriceEnergyType, year

MaintCost

For each type of water heater, the generic formula shows different specific forms.

9.4.2.1 Electric Water Heater Operating Cost Equations

OprCostyear,option = AnnualQinbase × FutrElecPriceyear -[AnnualQinbase - AnnualQinoption] ×

FutrElecMarPriceyear + MaintCost

and

FutrElecPriceyear = ElecPrice98 × ElecIncrRatioyear

and

ElecPrice98 = ElecRate ×ElecScaler 

and

FutrElecMarPriceyear = ElecMarPrice × ElecIncrRatioyear 
9-49

where: 

AnnualQin = average annual electricity consumption (kWh/year)

FutrElecPrice = future price of electricity expressed in 1998$ (¢/kWh)

ElecPrice98 = revised RECS house average electricity price expressed in

1998$ (¢/kWh)

ElecIncrRatio = ratio of future electricity price to 1998 price

ElecRate = RECS house average electricity price, derived from RECS

billing data, expressed in 1997$ (¢/kWh)

ElecScaler = a conversion factor for electricity price change that is the

ratio of the average electricity price in 1998 to that in

1997.

FutrElecMarPrice = future marginal price of electricity expressed in 1998$

(¢/kWh)

ElecMarPrice = RECS house marginal electricity price from regression

analysis of RECS billing data

MaintCost = No maintenance cost incurred for electric water heaters

9.4.2.2 Natural Gas and LPG Water Heater Operating Cost Equations

OprCost year,option = (AnnualQelecbase × FutrElecPriceyear) + (AnnualQgasbase × FutrFuelPriceyear) -

[(AnnualQelecbase - AnnualQelecoption) × FutrElecMarPriceyear] - 

[(AnnualQgasbase - AnnualQgasoption) × FutrFuelMarPriceyear] +MaintCost 

and

FutrFuelPriceEnergyType,year = FuelPriceEnergyType, 98 × FuelIncrRatioEnergyType,year

FutrFuelMarPriceEnergyType,year = FuelMarPriceEnergyType × FuelIncrRatioEnergyType,year 

 
a

 For LPG, the marginal price is assumed to be the same as the average price.

9-50

and, if EnergyType = Natural Gas, then

FuelPrice98 = FuelRate × GasScaler

or, if EnergyType = LPG, then

FuelPrice98 = FuelRate × LPGScaler

where:

AnnualQelec = annual electricity consumption (kWh/year)

AnnualQgas = annual water heating fuel consumption (MMBtu/year)

FutrFuelPrice = future price of water heating fuel($/MMBtu)

FuelPrice98 = revised water heating fuel price in 1998$ ($/MMBtu)

FuelIncrRatio = ratio of future water heating fuel price to 1998 price

FuelRate = RECS house water heating fuel price in 1997$ ($/MMBtu)

GasScaler = a conversion factor for natural gas price change that is the

ratio of the average natural gas price in 1998 to that in 1997.

LPGScaler = a conversion factor for LPG price change that is the ratio of

the average LPG price in 1998 to that in 1997.

FutrFuelMarPrice = future marginal price of water heating fuel in 1998$

FuelMarPrice = RECS house marginal water heating fuel pricea

MaintCost = Annual maintenance cost that only occurs for Side-Arm gas

 water heaters when a pump replacement is needed.
9-51

9.4.2.3 Oil-Fired Water Heater Operating Cost Equations

OprCost year,option =(AnnualQelecbase × FutrElecPriceyear) + (AnnualQoilbase ×FutrOilPriceyear) -

 [(AnnualQelecbase - AnnualQelecoption) × FutrElecMarPriceyear] - 

 [(AnnualQoilbase - AnnualQoiloption)] × FutrOilPriceyear + MaintCostoption

and

FutrOilPriceyear = OilPrice98 × OilIncrRatioyear

OilPrice98 = OilRate × OilScaler

where:

AnnualQoil = annual fuel oil consumption (MMBtu/year)

FutrOilPrice = future price of fuel oil ($/MMBtu)

Inflator97 = an inflation factor to convert 1997$ in AEO9920 to 1998$

Inflator96 = an inflation factor to convert 1996$ in GRI9821to 1998$

OilPrice98 = revised fuel oil price in 1998$ ($/MMBtu)

OilIncrRatio = ratio of future fuel oil price to 1998 price

OilRate = RECS house fuel oil price in 1993$ ($/MMBtu)

OilScaler = a conversion factor for fuel oil price change that is the

ratio of the average oil price in 1998 to that in 1993.

MaintCost = Annual maintenance cost of oil water heaters

9.4.3 General Description of Key Variables

AnnualQin is the average annual energy consumption, i.e., the total amount of energy consumed

by the water heater to heat water and to keep it hot. For electric water heaters, AnnualQin is in

kWh/yr. For fuel-fired water heaters, this is in Btu/yr.

AnnualQelec is the annual electricity consumption for oil-fired water heaters and for the electronic

ignition system and pump for side arm designs in gas-fired water heaters (kWh/yr).
9-52

AnnualQgas is the annual natural gas or LPG consumption of the water heater (MMBtu/year).

AnnualQoil is the annual fuel oil consumption of the water heater (MMBtu/year).

FutrElecPrice is the price of electricity (¢/kWh) in each future year. It is calculated as a product

of ElecPrice98 and ElecIncrRatio.

FutrFuelPrice is the price of water heating fuel ($/MMBtu) in each future year. It is calculated as

a product of FuelPrice98 and FuelIncrRatio for a particular fuel type.

FutrOilPrice is the price of fuel oil ($/MMBtu) in each future year. It is calculated as a product of

OilPrice98 and OilIncrRatio.

ElecPrice98 is the revised electricity price (¢/kWh) in 1998. It takes the RECS household electricity

price (ElecRate) and multiplies it by ElecScaler to change 1997$ to 1998$ to account for inflation

and electricity price change.

FuelPrice98 is the revised natural gas or LPG price ($/MMBtu) in 1998. It takes the RECS

household energy price (FuelRate) and multiplies it by the corresponding scalar for gas or LPG,

respectively, to change 1997$ to 1998$ to account for inflation and fuel price change.

OilPrice98 is the revised fuel oil price ($/MMBtu) in 1998. It takes the RECS household oil price

(OilRate) and multiplies it by OilScaler to change 1993$ to 1998$ to account for inflation and fuel

oil price change.

ElecIncrRatio is the ratio of national average electricity price between each future year and 1998

for the selected scenario. 1998 is the base year.

FuelIncrRatio is the ratio of national average natural gas or LPG price between each future year and

1998 for the selected scenario. 1998 is the base year.

OilIncrRatio is the ratio of national average oil price between each future year and 1998 for the

selected scenario. 1998 is the base year.

ElecRate is the price of electricity for the household as calculated from RECS billing data (in

1997$). The electricity price is defined as the average price per unit electricity (kWh) consumed.

FuelRate is the price for the household of LPG or of natural gas as calculated from RECS billing

data (in 1997$). The fuel price is defined as the average price per unit fuel (MMBtu) consumed.

OilRate is the price of fuel oil for the household as calculated from RECS billing data (in 1993$).

The oil price is defined as the average price per unit oil (MMBtu) consumed.
a

 The oil-fired analysis was not updated from 1993 RECS to 1997 RECS because only a small number of

households have oil-fired water heaters. So, the ElecScaler for the oil analysis is the ratio of the 1998 to 1993

prices, or 0.9940.

9-53

ElecScaler is a conversion factor for electricity price change, represented by the ratio of electricity

prices in 1998 to electricity prices in 1997, in nominal dollars.a

= = 0.9798

National Average Price1998

National Average Price1997

GasScaler is a conversion factor for gas price change in nominal dollars.

= = 0.9827

National Average Price1998

National Average Price1997

LPGScaler is a conversion factor for LPG price change in nominal dollars.

= = 0.7337

National Average Price1998

National Average Price1997

OilScaler is a conversion factor for oil price change in nominal dollars.

= = 0.7990

National Average Price1998

National Average Price1993

ElecMarPrice is the marginal price of electricity for each RECS household expressed in 1998$

(¢/kWh).

FuelMarPrice is the marginal price of water heating fuel (natural gas, LPG, and oil) for each RECS

household in 1998$ ($/MMBtu).

FutrElecMarPrice is the future marginal price of electricity for each RECS household expressed

in 1998$ (¢/kWh).

FutrFuelMarPrice is the future marginal price of water heating fuel (natural gas, LPG, and oil) for

each RECS household in 1998$ ($/MMBtu).

MaintCost is the price of regular maintenance or the price to repair a water heater when it fails

($/year). In reality, if electric or gas-fired (both natural gas and LPG) water heaters fail, residential
9-54

consumers tend to replace the heaters rather than having them serviced. Therefore, the maintenance

cost for electric and baseline gas-fired water heaters are assumed to be zero. Oil-fired water heaters

and burners are cleaned and maintained regularly; therefore, we account for maintenance costs for

these heaters. The maintenance cost associated with all sizes of baseline oil-fired models is $97.14

per year. This mean value comes from a collection of annual maintenance contract prices, which

were gathered from telephone conversations with seven oil-fired equipment suppliers in the eastern

U.S. 22 Note that the costs are from separate maintenance contracts only for water heaters. Costs

may go down significantly if multiple oil-fired appliances in a household are on the same contract.

9.4.4 Energy Prices

9.4.4.1 Introduction

We calculate energy prices as the per-unit cost of fuel for the four types of fuel (electricity,

natural gas, LPG, and oil) from the ratios of fuel expenditures to consumption, as reported in billing

data for the RECS97 household in 1997$ (RECS93 and 1993$ for oil-fired households). We then

converted the energy prices into 1998$ using scalars—ratios of average nominal fuel prices in 1998

to 1997 (or 1993 in the case of oil-fired)—to take into account both energy price changes and

inflation during the time period.

The converted RECS sample energy prices (called “revised energy prices” in the

spreadsheets) serve as the base year prices for the future energy price series of four energy price

scenarios (which were AEO2000 Reference, AEO2000 Low Growth, AEO2000 High Growth, and

GRI2000, for gas-fired or electric, and AEO99 Reference, AEO99 Low Growth, AEO99 High

Growth, and GRI98 for oil-fired, see section immediately following for details). 

We use the future energy price series of the scenarios to compute price ratios between future

years and 1998. These are then used to estimate future energy prices of RECS household samples

by multiplying the ratio by the revised RECS energy prices. All calculations are in 1998$.

We calculate future marginal energy prices using the same ratios and the derived marginal

energy prices from RECS household samples. The details of the derivation of the RECS marginal

rate are given below in Section 9.4.4.3.

9.4.4.2 Future Energy Prices

Future fuel costs will vary from house to house. Two primary factors contribute to this

variation. One is the existing variability in energy prices, which depends on the rate schedule of the

local utility and the consumption pattern of the particular household. The other is the uncertainty

of future energy prices,23 which is further complicated by the current restructuring of the electric

supply industry.
a

 The oil-fired analysis was not updated because only a small number of households use oil-fired water heaters. 

Therefore, for this analysis, the projections used were from AEO99 Reference Case, High and Low Growth Cases,

and GRI98.

9-55

To deal with variations in energy prices, we derived marginal energy prices for RECS

households in order to establish energy price variability from house to house. To account for future

uncertainties, we applied various scenarios of projected future energy prices (trends by national

average) to each household’s marginal energy price. The following four possible fuel price scenarios

were built into the LCC calculations:a

Annual Energy Outlook 2000, High Economic Growth7

Annual Energy Outlook 2000, Reference Case

Annual Energy Outlook 2000, Low Economic Growth

2000 Edition of the GRI Baseline Projection 24

Figures 9.4.1 through 9.4.4 show the trends for the projected future prices for each of the four

water heater fuels (electricity, gas, LPG, and oil).

The figures show that all electricity price projections are declining; the price projections for

gas and LPG are more varied. Oil prices remain relatively flat in the GRI98 scenario, and rise in the

AEO scenarios. 

After we adjusted for inflation and energy price changes, we scaled energy prices for the

RECS households from the starting year by the projected average future energy prices. Thus, each

sample house from RECS has four different future annual energy price series associated with it. We

estimated future annual operating costs as annual energy use multiplied by the annual energy price

series for each of the four scenarios. Section 9.4.5 gives a detailed description of how the calculation

is implemented in the spreadsheet models.
9-56

6.00

6.50

7.00

7.50

8.00

8.50

9.00

1995 2000 2005 2010 2015 2020 2025 2030

Year

cents/kWh (1998$)

GRI2000

AEO2000 Reference

AEO2000 High Growth

AEO2000 Low Growth

Figure 9.4.1 Electricity Price Scenarios

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

1995 2000 2005 2010 2015 2020 2025 2030

Year

$/MMBTU (1998$)

GRI2000

AEO2000 Reference

AEO2000 High Growth

AEO2000 Low Growth

Figure 9.4.2 Natural Gas Price Scenarios
9-57

$7.00

$8.00

$9.00

$10.00

$11.00

$12.00

$13.00

$14.00

$15.00

$16.00

1995 2000 2005 2010 2015 2020 2025 2030

Year

$/MMBTU (1998$)

AEO2000 Reference

AEO2000 High Growth

AEO2000 Low Growth

Figure 9.4.3 LPG Price Scenarios

$5

$6

$7

$8

$9

1995 2000 2005 2010 2015 2020 2025

Year

1998$/mmBtu

AEO99

GRI98

GRI Extended

AEO99 High Growth

AEO99 Low Growth

Figure 9.4.4 Oil Price Scenarios
a Average energy prices for a consumer are derived by dividing annual energy costs by annual energy consumption. 

At the utility level, average energy prices are derived by dividing annual revenues by annual energy sales.

b Marginal prices as discussed here are those prices consumers pay (or save) for their last units of energy used (or

saved). Marginal prices reflect a change in a consumer’s bill (that might be associated with new energy efficiency

standards) divided by the corresponding change in the amount of energy the consumer used.

c We thank Robert Latta, U.S. DOE, Energy Information Administration, for first proposing this approach.

9-58

9.4.4.3 Marginal Energy Prices

Overview. Previous analyses of the life-cycle costs of and consumer bill savings possible

from appliance energy efficiency standards were based on average energy prices.a

 Using marginal

energy prices in these analyses is more theoretically sound.b Accordingly, in April 1998 the

Advisory Committee on Appliance Energy Efficiency Standards delivered a letter to the Secretary

of Energy recommending, among other things, that DOE replace the use of national average energy

prices with the full range of consumer marginal energy prices in its life-cycle cost analyses. Because

neither published nor readily available data existed for consumer marginal energy prices, a major

research effort was required to derive consumer marginal energy prices.

25

Method. We estimated seasonal marginal electricity and natural gas for RECS households

as the slope of the regression line between household monthly bill and corresponding consumption.c

For oil and LPG, average fuel price for each household was used, because the marginal fuel price

is not expected to be significantly different from the average, as discussed below.

For electricity, we divided the billing data into two seasons, summer and “non-summer”,

where a bill was defined to be a summer bill if the midpoint of the billing period fell between June 1

and September 30 and “non-summer” was the remainder of the year. This division was done because

electric utilities often have different rates in summer vs. non-summer, and most utilities define

summer to fall within this range of dates. We used these seasonal marginal prices by household

directly in the LCC analysis. For RECS97, natural gas billing data was split into seasons in a manner

parallel to electricity data. The “peak” winter season was defined as those billing periods whose

midpoint fell in any of the following four months: November, December, January, February. The

remaining eight months constitute the non-winter season. In addition to the two seasonal regressions

for each household, a single “annual” regression using all of the data for the household was also

performed.

The criterion for accepting regression line slopes as marginal prices was established using

an r2

 cutoff of 0.90. That is, regression slopes of household billing data were not accepted as

household marginal prices unless the r2 value was at least 0.90. This criterion was used with both

the electricity and natural gas billing data. 
9-59

We calculated the annual equivalent marginal energy price by weighting the summer and

non-summer marginal energy prices by the fraction of annual water heater energy consumption that

occurs in those seasons. Monthly allocation factors—the fraction of annual energy consumption in

a given month—were determined as the weighted averages of the results of six different water heater

energy use field studies.26, 27, 28, 29, 30, 31 These studies collectively metered 527 households,

nationwide, from 1978 to 1994. The marginal electric price for summer months was weighted at

28.9%, the non-summer months at 71.1%. The marginal natural gas price for the winter months was

weighted at 36.9%, the non-winter months at 63.1%. For households where one or both seasonal

regressions did not yield acceptable results (not enough points to calculate, or r2 too low) but the

“annual” regression did, the annual value was used as that household’s marginal price.

For both electricity and natural gas, we performed a statistical analysis comparing the data

sets for each fuel before and after dropping the households for which we were unable to calculate

marginal energy prices, in order to determine if any bias was being introduced by dropping those

households. We found that the households that were dropped were disproportionately those whose

utility bills were included in the household’s rent; billing data could not be collected from those

households. Other than this, no major differences were found between the data sets.

We also examined prices of residential fuel oil and LPG. We conducted brief telephone

interviews of fuel oil and LPG distributors from January 25 to February 5, 1999 in order to

understand and characterize regional variations in pricing and distribution of fuel oil and LPG. We

selected a sample of distributors from relevant Internet sites, including that of the National Propane

Gas Association. The goal was to interview distributors that represent a cross-section of the industry

in terms of company size and location. Questions were designed to identify factors (including

wholesale price, annual usage, delivery, tank rental, and taxes) that affect the actual cost of fuel oil

and LPG for residential customers and to determine any divergence between average and marginal

price for these fuels. 

Because our interviews indicated that bills paid by residential consumers for both fuel oil and

LPG are essentially volume-driven, with a single block rate, we calculated the average prices

inherent in those bills, as reported in RECS, as being equivalent to marginal prices for the purposes

of the LCC price analysis.

Average prices for all four fuels were calculated for each RECS household using the

available billing data for that household. These average prices were then used to calculate the

percent difference between marginal price and average price for that household. Weighted means

of the percent difference between marginal price and average price were also calculated for the set

of households with acceptable seasonal prices, the set of households without acceptable seasonal

prices, and for all of the households.

Results of the Analysis. Table 9.4.1 below display the results of the residential electricity

price analysis by showing the relationship between marginal electricity prices and average electricity

prices for the residential sector in the summer and the non-summer. Table 9.4.2 displays the results

of the residential natural gas price analysis.
9-60

Table 9.4.1 Marginal Residential Electricity Prices - RECS97

Electricity – RECS97 Prices (¢/kWh, in 1997$)

(Weighted Mean)

% Difference between 

Marginal Price and Average Price

Marginal

Annual

Average

Weighted

Mean Range

Households

w/Acceptable 

Seasonal Prices

Summer 9.1

9.4

-2.5% -76.1% to +288.9%

Non-Summer 8.5 -10.0% -72.2% to +73.3%

Households w/o Acceptable

Seasonal Prices 9.0 9.6 -4.5% -55.3% to +397.5%

All Households 8.7 9.4 -6.9%

Table 9.4.2 Marginal Residential Natural Gas Prices - RECS97

Natural Gas – RECS97 Prices (¢/ccf, in 1997$)

(Weighted Mean)

% Difference between 

Marginal Price and Average Price

Marginal

Annual

Average Weighted

Mean

Range

Households

w/Acceptable 

Seasonal Prices

Winter 70.1

76.5

-4.4% -96.5% to +179.4%

Non-Winter 63.7 -15.3% -81.6% to +57.9%

Households w/o Acceptable

Seasonal Prices 66.4 82.4 -14.5% -90.8% to +33.7%

All Households 66.0 78.5 -12.6%

In this analysis, we used the marginal electricity and natural gas prices that we derived

directly from RECS. For Tables 9.4.1 and 9.4.2, any household showing a negative percent

difference between marginal price and average price indicates that the household’s marginal price

is smaller than the household’s average price. A positive percent difference between marginal price

and average price indicates that the household’s marginal price is larger than the household’s average

price. Those marginal electricity prices in the summer (June-September) range from 76% below to

289% above the average price for the same customer. At the consumption-weighted mean of the

differences, marginal electricity prices are 2.5% lower than average electricity prices in the summer.

Marginal natural gas prices range from 96% below to 179% above the average price for the same

customer. At the consumption-weighted mean of the differences, marginal natural gas prices are

4.4% lower than average natural gas prices.
a

 1993 RECS for oil. The oil-fired analysis was not updated with 1997 RECS values because only a small number

of water heaters are oil-fired.

b

 Because the oil analysis was not updated, AEO99 and GRI98 price scenarios were used. Because GRI98 fuel

price projections are reported as 1996$, we convert them into 1998$ (multiplied by Inflator96). Similarly, we

convert AEO99 fuel price projections, reported in 1997$, into 1998$ (multiplied by Inflator97).

9-61

9.4.5 General Description of Data Sources and Calculations in Spreadsheets

We calculate average annual energy consumption input to the operating cost module with

WHAM (see Section 9.3.1 for a full discussion of WHAM). In the electric water heater model,

average annual energy consumption represents the annual electricity use of a water heater

(AnnualQin). For water heaters that use more than one type of fuel, we calculate the annual usage

of each type of fuel separately. For instance, in some designs of gas-fired water heaters, AnnualQin

is a sum of the annual natural gas or LPG (AnnualQgas) and the electricity consumption

(AnnualQelec). 

We use fuel rates as reported for 1997 RECSa

 as a base to capture the variability of fuel

prices across the nation. We use Gross Domestic Product (GDP) indices from the U.S. Department

of Commerce, Bureau of Economic Analysis, to calculate Inflator96 and Inflator97 (used in the

oil analysis only), which are 1.0290 and 1.0102, respectively. 

Similarly, we use national average energy prices reported in the EIA Annual Energy Review

32 to compute scalars (ElecScaler, GasScaler, LPGScaler, and OilScaler) so that they take into

account energy price changes since the 1997 RECS survey (or 1993, in the case of oil). Multiplying

FuelRate by the corresponding scalar yields the value of unit fuel price (Elec/Fuel/OilPrice) in

1998$ for each RECS household. 

DOE/EIA publishes projections of future energy prices in its Annual Energy Outlook 2000

(AEO2000).7 The projections include three cases: reference, high economic growth, and low

economic growth. These three projections show a similar pattern but vary in magnitude. The Gas

Research Institute (GRI) also publishes a forecast for future fuel rates (electricity, natural gas, and

oil) in its 2000 Edition of the GRI Baseline Projection.

24 ( See Figures 9.4.1, 9.4.2, and 9.4.4.) We

use the four scenarios to help demonstrate how future energy price trends affect the outcome of the

LCC analysisb

. Since our analysis covers the period through 2030, and the projections only go

through 2020 for AEO and 2015 for GRI, we extended the projections to 2030 as follows. For

electricity, we project that prices will remain flat, assuming that the current restructuring of this

market will have reached equilibrium. For natural gas, LPG, and oil, we take the annual rate of

growth in prices from 1998 through the end of the projection period, and assume this same growth

through 2030.

Two additional details regarding the GRI forecast scenario need to be noted. First, the GRI

forecast only predicts prices for the years 1998, 2000, 2005, 2010, and 2015. We did a linear
9-62

interpolation of prices for the other years between 1998 and 2015. Second, GRI does not include

a projection for future LPG prices. We therefore only analyzed the three AEO scenarios for LPG

water heaters

We derive the incremental ratios of the energy price scenarios (ElecIncrRatio for electricity,

FuelIncrRatio for gas and LPG, and OilIncrRatio for fuel oil) by dividing each year’s projected

price by the 1998 price. We apply the result to the corresponding Elec/Fuel/OilPrice of each RECS

sample house to represent its future energy prices (FutrElecPrice for electricity, FutrFuelPrice for

gas and LPG, FutrOilPrice for fuel oil) for the selected scenario. We then compute the annual

operating costs of the water heater based on the equations described in Section 9.4.2.

The derivation of marginal prices is discussed in Section 9.4.4.2, above.

9.4.6 Operating Cost Results

9.4.6.1 Electric Water Heater Operating Costs

Table 9.4.3 lists the average annual operating costs for the 2003 baseline and design options

for all sizes of electric water heaters, based on 1997 RECS. The average operating cost savings from

the baseline are listed for each design option.

Table 9.4.3 Operating Costs for Electric Water Heaters

Design Option

Average 

Annual Operating Cost

($)

Average 

Savings from Baseline

($)

0 2003 Baseline 256 –

1 Heat Traps 252 4.00

2 Tank Bottom Insulation 251 5.39

3 2" Insulation 246 9.80

4 2.5" Insulation 243 13.05

5 Plastic Tank 242 13.64

6 3" Insulation 240 15.66
9-63

Figure 9.4.5 shows a distribution and cumulative frequency plot of the difference in operating

cost for each design option compared to the 2003 baseline for electric water heaters. Note that a

negative difference in operating cost for a given design option indicates a savings. The width of the

plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread of energy savings in the population.
9-64

-60 -40 -20 0 20 40 60

0 2000 4000 6000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-60 -40 -20 0 20 40 60

0 1000 2000 3000 4000 5000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Tank Bottom Insulation 

-60 -40 -20 0 20 40 60

0 1000 2000 3000 4000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

2" Insulation

-60 -40 -20 0 20 40 60

0 500 1000 1500 2000 2500 3000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

2.5" Insulation

-60 -40 -20 0 20 40 60

0 500 1000 1500 2000 2500 3000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

Plastic Tank

-60 -40 -20 0 20 40 60

0 500 1000 1500 2000 2500 3000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

Figure 9.4.5 Difference in Operating Costs by Design Option for 

Electric Water Heaters
9-65

9.4.6.2 Natural Gas Water Heater Operating Costs

Table 9.4.4 lists the average annual operating costs for the 2003 baseline and for design

options for all standard sizes of natural gas water heaters, based on 1997 RECS data. The average

operating cost savings compared to the 2003 baseline are listed for each design option.

Table 9.4.4 Operating Costs for Natural Gas Water Heaters

Design Option

Average 

Annual Operating Cost

($)

Average 

Savings from Baseline

($)

0 2003 Baseline 160 –

1 Heat Traps 158 2.81

2 78% RE 155 5.21

3 78% RE, 2" Insulation 148 12.74

4 78% RE, 2.5" Insulation 146 14.19

5 80% RE, 2" Insulation 145 15.76

6 80% RE, 2.5" Insulation 143 17.24

7 80% RE, 3" Insulation 142 18.18

8 Side Arm 126 33.95

Figure 9.4.6 shows a distribution and cumulative frequency plot of the difference in operating

cost for each design option compared to the 2003 baseline for natural gas water heaters. Note that

a negative difference in operating cost for a given design option indicates a savings. The width of

the plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread.
9-66

-100 -80 -60 -40 -20 0 20 40

0 2000 4000 6000 8000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-100 -80 -60 -40 -20 0 20 40

0 1000 3000 5000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

-100 -80 -60 -40 -20 0 20 40

0 1000 2000 3000 4000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

-100 -80 -60 -40 -20 0 20 40

0 1000 2000 3000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

-100 -80 -60 -40 -20 0 20 40

0 1000 2000 3000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

-100 -80 -60 -40 -20 0 20 40

0 500 1500 2500

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

-100 -80 -60 -40 -20 0 20 40

0 500 1500 2500

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

-100 -80 -60 -40 -20 0 20 40

0 500 1000 1500

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.4.6 Difference in Operating Costs by Design Option for 

Natural Gas Water Heaters
9-67

9.4.6.3 LPG Water Heater Operating Costs

Table 9.4.5 lists the average annual operating costs for the 2003 baseline and for design

options for all standard sizes of LPG water heaters, based on 1997 RECS data. The average

operating cost savings compared to the 2003 baseline are listed for each design option.

Table 9.4.5 Operating Costs for LPG Water Heaters

Design Option

Average 

Annual Operating Cost

($)

Average 

Savings from Baseline

($)

1 2003 Baseline 257 –

2 Heat Traps 251 5.59

3 78% RE 247 9.92

4 78% RE, 2" Insulation 232 24.59

5 78% RE, 2.5" Insulation 229 27.52

6 80% RE, 2" Insulation 226 30.48

7 80% RE, 2.5" Insulation 223 33.38

8 80% RE, 3" Insulation 222 35.12

9 Side Arm 186 70.54

Figure 9.4.7 shows a distribution and cumulative frequency plot of the difference in operating

cost for each design option compared to the 2003 baseline for LPG water heaters. Note that a

negative difference in operating cost for a given design option indicates a savings. The width of the

plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread.
9-68

-250 -200 -150 -100 -50 0 50

0 2000 4000 6000 8000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-250 -200 -150 -100 -50 0 50

0 1000 3000 5000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

-250 -200 -150 -100 -50 0 50

0 1000 2000 3000 4000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

-250 -200 -150 -100 -50 0 50

0 1000 2000 3000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

-250 -200 -150 -100 -50 0 50

0 1000 2000 3000 4000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

-250 -200 -150 -100 -50 0 50

0 1000 2000 3000

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

-250 -200 -150 -100 -50 0 50

0 1000 2000 3000

Delta Operating Costs(1998$)

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

-250 -200 -150 -100 -50 0 50

0 500 1000 1500

Delta Operating Costs(1998$)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.4.7 Difference in Operating Costs by Design Option for 

LPG Water Heaters
9-69

9.4.6.4 Oil-Fired Water Heater Operating Costs

Table 9.4.6 lists the average annual operating cost for the 2003 baseline and design

options for standard oil-fired water heaters, based on 1993 RECS data. The average operating cost

savings compared to the 2003 baseline are listed for each design option.

Table 9.4.6 Operating Costs for Oil-Fired Water Heaters

Design Option

Average 

Annual Operating Cost

($)

Average 

Savings from Baseline

($)

1 2003 Baseline 249 –

2 Heat Traps 247 2.22

3 2" Insulation 241 8.12

4 2.5" Insulation 240 9.47

5 3" Insulation 239 10.37

6 78% RE 233 16.14

7 Interrupted Ignition 229 20.25

8 Increased HX Area 222 27.35

Figure 9.4.8 shows a distribution and cumulative frequency plot of the difference in operating

cost for each design option compared to the 2003 baseline for oil-fired water heaters. Note that a

negative difference in operating cost for a given design option indicates a savings. The width of the

plot shows the spread of savings in the population. In general, the design options with higher

efficiencies tend to show a wider spread.
9-70

-150 -100 -50 0 50

0 2000 4000 6000

Delta Operating Costs($98)

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-150 -100 -50 0 50

0 2000 4000 6000

Delta Operating Costs($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

2" Insulation

-150 -100 -50 0 50

0 1000 3000 5000

Delta Operating Costs($98)

Frequency

0%

20%

40%

60%

80%

100%

2.5" Insulation

-150 -100 -50 0 50

0 1000 2000 3000 4000

Delta Operating Costs($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

-150 -100 -50 0 50

0 1000 2000 3000 4000

Delta Operating Costs($98)

Frequency

0%

20%

40%

60%

80%

100%

78% RE

-150 -100 -50 0 50

0 1000 2000 3000 4000

Delta Operating Costs($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

Interrupted Ignition

-150 -100 -50 0 50

0 500 1500 2500

Delta Operating Costs($98)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

Increased HX Area

Figure 9.4.8 Difference in Operating Costs by Design Option for 

Oil-Fired Water Heaters
9-71

9.4.7 Importance Analysis

The following four importance charts (Figures 9.4.9 through 9.4.12) show the results of the

importance analysis for operating costs at Trial Standard Level 3 for electric, natural gas, LPG, and

oil-fired water heaters. Figure 9.4.9 shows the rank order correlation of input variables with the

operating cost for the 2.5" Insulation design option on electric water heaters. Figures 9.4.10 and

9.4.11 show the same for 78% RE and 2.5" Insulation on natural gas and LPG water heaters,

respectively. Figure 9.4.12 shows the rank order correlation for the 2003 Baseline on oil-fired water

heaters. Variables are ordered with maximum correlation coefficients, positive or negative, on top

and minimum coefficients on the bottom. As expected, the operating cost correlates most strongly

with energy consumption for all four types of water heaters.
9-72

0.2946

0.3318

0.8856

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Revised electricity price in 1998$

($/kWh)

Revised marginal electricity price in

1998$ ($/kWh)

Annual Electricity Consumption of

2.5" Insulation Water Heater

(kWh/Year)

Figure 9.4.9 Importance of Input Parameters to Operating Cost for 

2.5" Insulation on Electric Water Heaters
9-73

0.3506

0.4214

0.8142

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Revised Marginal Fuel Price in

1998$ ($/mmBTU)

Revised Fuel Price in 1998$

($/mmBTU)

Annual Gas Consumption of a 78%

RE, 2" Insulation Water Heater

(MMBtu/year)

Figure 9.4.10 Importance of Input Parameters to Operating Cost for 

78% RE 2" Insulation on Natural Gas Water Heaters
9-74

0.5285

0.5285

0.7686

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Revised Fuel Price in 1998$

($/mmBTU)

Revised Marginal Fuel Price in

1998$ ($/mmBTU)

Annual LPG Consumption of a 78%

RE, 2" Insulation Water Heater

(MMBtu/year)

Figure 9.4.11 Importance of Input Parameters to Operating Cost for 

78% RE 2" Insulation on LPG Water Heaters
9-75

0.1344

0.1965

0.2107

0.8601

0.8823

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Revised Oil Price in 1998$ ($/gal)

Revised Electricity Marginal Price in

1998$ ($/kWh)

Revised Electricity Price in 1998$

($/kWh)

Annual Electricity Consumption of

2003 Baseline Water Heater

(kWh/Year)

Annual Fuel Oil Consumption of

2003 Baseline Water Heater

(gal/Year)

Figure 9.4.12 Importance of Input Parameters to Operating Cost for 

2003 Baseline on Oil-Fired Water Heaters
9-76

9.5 EQUIPMENT COST MODULE

9.5.1 Introduction to Equipment Cost

Equipment cost represents the cost to a consumer to buy and install a water heater. It is the

sum of the water heater’s retail price, sales tax, and installation costs. Installation costs can also

include delivery, removal, permits, and parts fees. Retail price is calculated from the manufacturer’s

cost multiplied by an overall markup. 

The first half of this discussion addresses the typical existing baseline model in all standard

sizes, that is, water heaters in use in 1998, for all sizes considered in the LCC. The 2003 baseline

model is our projection of what baseline water heater models will look like in 2003 prior to any new

energy-efficiency standards. It is the basis for the later description of design options that follows in

Section 9.5.5.2.

9.5.2 Equation for Equipment Cost

Water heater equipment cost is calculated using the equation:

EquipCostoption, size = (MfrCostoption, size x Markup size) x (1 + SalesTax) + TotlInstCostoption, size 

where:

MfrCost = cost to manufacture the water heater (1998$)

Markup = overall markup from manufacturer’s cost to retail price

SalesTax = sales tax on water heater (%)

TotInstCost = total cost to install the water heater ($).

The markup is calculated for existing baseline models and is applied to all design options

using the following ratio:

Markup size = RetlPrice size / MfrCost size 

where:

RetlPrice size = current retail prices for existing baseline water heaters of a

given size ($)

This markup is then applied to all design options.
a

 Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup,

retail price, and fuel price in the Life-Cycle Cost and subsequent analyses.

9-77

Total installation cost is calculated as:

TotInstCostoption, size = InstCost size + AddInstCostoption

where:

InstCost = cost to install a baseline water heater of a particular size ($)

AddInstCost = additional cost(s) to install water heaters with certain design

options ($)

The additional installation cost is calculated as follows:

AddInstCostoption = AddElecCostoption + AddVentCostoption + AddRelineCostoption + AddInstCostfor3in + 

AddTubeCostoption + DrainPanCostoption + TempValCostoption

where:

AddElecCost = additional cost of installing a new electric circuit for gas-fired (both

natural gas and LPG)a

 water heaters with design options that require

electricity ($)

AddVentCost = additional cost of upgrading the vent connector for gas-fired (both

natural gas and LPG) water heaters with RE greater than 78% ($)

AddRelineCost = additional cost of relining masonry chimney for gas-fired (both

natural gas and LPG) water heaters with RE greater than 80% ($)

AddInstCostfor3in = additional installation cost for water heaters with 3" insulation ($)

AddTubeCost = additional cost to install a burner tube extension for oil-fired water

heaters with thicker insulation ($)

DrainPanCost = additional cost to add a drain pan for water heaters with thicker

insulation ($)

TempValCost = additional cost to install a tempering valve for water heaters with

thicker insulation ($)
9-78

9.5.3 General Description of Key Variables

MfrCost is the manufacturing cost of producing a water heater. This cost is the sum of

variable and fixed costs to the manufacturer. The variable costs are the sum of materials, labor, and

overhead costs. The variable manufacturer cost is also called “full production cost.” Fixed costs are

the sum of the capital cost and the product design cost to convert to production of a new water heater

design. The fixed manufacturer cost is sometimes called a conversion cost.

Markup is defined as the ratio between the retail price and the manufacturer’s cost for

baseline water heaters. The markup is different for different tank sizes. This is an overall markup;

it may include several intermediate markups applied by a wholesaler or other intermediate sellers.

See Chapter 7, Markups, for a full discussion of markups, both retail and manufacturers’.

SalesTax is the state, county, and/or local tax applied to a water heater at the point of sale.

RetlPrice is defined as the retail price of the water heater, paid directly by the customer.

This price does not include installation costs or any other miscellaneous costs, such as delivery,

removal, permit, and parts fees.

TotInstCost is the total installation cost for the water heater. It is the price paid directly by

the customer to have the water heater installed, including additional charges for some design options.

InstCost is the installation cost of the baseline water heater. It is the price paid directly by

the customer to have the water heater installed, including any miscellaneous costs such as delivery,

removal, permit, and parts fees. It does not include the cost of adding a new electrical circuit and/or

upgrading the venting system, as needed for some gas-fired (both natural gas and LPG) water heater

design options.

AddInstCost is the additional installation cost to install an electric circuit and/or to upgrade

the venting system of a gas-fired (both natural gas and LPG) water heater, or to install a burner tube

extension for an oil-fired water heater with thicker insulation. (An additional cost is added for water

heaters with 3" insulation for a subset of houses.)

AddElecCost is the additional cost of installing an electric circuit for a gas-fired (both

natural gas and LPG) water heater when the design option includes an intermittent ignition device

and a circulating pump, and there is no pre-existing electrical outlet near the water heater.

AddVentCost is the additional cost to upgrade an existing venting system to eliminate

condensation problems from gas-fired (both natural gas and LPG) water heaters with design options

that increase recovery efficiency. As discussed in the Engineering Analysis, Chapter 8, we consider

design options that raise recovery efficiency to either 78 or 80% (for purposes of this analysis, DOE

limits recovery efficiency to a maximum of 80%). For options that raise recovery efficiency to 78%,

we added the cost of installing a type-B vent connector to some houses in the Northeast and Midwest
9-79

to assure that the venting system operates correctly. For design options that raise recovery efficiency

to 80%, we added, for some houses in the Northeast and Midwest with masonry chimneys, the costs

of a type-B vent connector and relining of the masonry chimneys (see Appendix D-3).

AddTubeCost is the additional cost to install a burner tube extension for an oil-fired water

heater with thicker insulation than the baseline unit.

DrainPanCost is the additional cost to add a drain pan for an electric or gas-fired water

heater with thicker insulation than the original unit when the water heater is in a conditioned space

without a slab-on-grade floor.

TempValCost is the additional cost to install a tempering valve on an electric or gas-fired

water heater of a smaller size than the original unit when the water heater is in a household subject

to space constraints and the new water heater setpoint is > 140(F.

9.5.4 Markup

The manufacturer-to-retail markup is defined as the ratio of the retail price to the

manufacturer cost. Because the retail price and the estimated manufacturer cost differ for each fuel

type and for each size (rated volume), the markup is different for each standard-size existing baseline

model.

The manufacturer-to-retail markup was assumed to be constant for all design options for each

standard size model. Thus, the retail price for any design was determined simply by multiplying its

manufacturer cost by the derived markup for the existing baseline water heater of that size. Retail

prices are for water heaters sold in 1998.

9.5.4.1 Data Sources

To determine a water heater’s equipment cost, data were needed on manufacturing cost, retail

price, installation cost, and sales tax. GAMA provided a range of water heater manufacturing costs

for typical existing baseline models.33 LBNL contracted with a consultant 15 recommended by

GAMA to acquire additional data.

The Water Heater Price Database, which contains data collected from large retail chains and

wholesale distributors, is the source of retail prices, sales tax, and installation costs (see Appendix

B, Water Heater Price Database).

Markup, as used here, is retail price divided by manufacturing cost for existing baseline

models. The retail prices for all standard-size existing baseline models are drawn from the Water

Heater Price Database. A maximum six-year manufacturing warranty and no special design features

are the criteria for including these models. Manufacturing costs for typical size water heaters were

provided by GAMA.34 Manufacturing costs for all other standard sizes of existing baseline water

heaters are based on the manufacturing cost for the typical water heater plus (or minus) incremental
9-80

costs for extra (or less) foam insulation and sheet metal. Because retail price and manufacturing cost

vary by tank size and fuel type, so do markups.

9.5.4.2 Existing Baseline Retail Price

The retail price is defined as the retail outlet price paid directly by the customer for a water

heater. This price does not include the installation cost or any other miscellaneous costs such as

delivery, removal, permit, or parts fees. The retail price analysis is based on the Water Heater Price

Database. The models selected for the analysis are baseline models with a six-year manufacturer

warranty or less and no special design features. Table 9.5.1 presents the average, minimum, and

maximum retail prices for the existing baseline models in all standard sizes. These data for electric,

natural gas, and oil-fired are based on discrete values taken from the Water Heater Price Database.

The data for LPG are approximated from LPG retail prices.
9-81

Table 9.5.1 Retail Price Data for Existing Baseline Water Heaters

Existing Baseline Average Retail

Price

Cost Uncertainty Range

Total

$

Minimum 

$

Maximum 

$

Electric (30-gal) 188 97 370

Electric (40-gal) 187 110 302

Electric (50-gal) 193 128 385

Electric (65-gal) 346 210 429

Electric (80-gal) 394 297 552

Natural Gas (30-gal) 176 118 379

Natural Gas (40-gal) 167 115 276

Natural Gas (50-gal) 248 163 500

Natural Gas (75-gal) 546 350 900

LPG (30-gal) 285 235 323

LPG (40-gal) 289 199 355

LPG (50-gal) 357 265 397

LPG (75-gal) 682 507 759

Oil-Fired (32-gal) 446 410 619

Oil-Fired (50-gal) 446 410 619

9.5.4.3 Existing Baseline Manufacturing Cost

The typical existing baseline manufacturing cost data used in the analysis for the four fuel

types are presented in Table 9.5.2.
9-82

Table 9.5.2 Total Manufacturing Cost Data for 

Typical Existing Baseline Water Heaters

Typical Existing Baseline Average Total

Costs

Cost Uncertainty Range

Total

$

Minimum 

$

Maximum 

$

Electric (50-gal) 114 88 133

Natural Gas (40-gal) 112 86 130

LPG (40-gal) 145 124 164

Oil-Fired (32-gal) 139 125 153

As explained above, the manufacturing costs for the range of standard size water heaters 

considered in the LCC are based on the manufacturing costs for the typical existing baseline water

heater plus (or minus) incremental costs for extra (or fewer) materials, i.e., foam insulation and sheet

metal. Table 9.5.3 presents the calculated incremental costs for all standard-size existing baseline

models.

Table 9.5.3 Total Manufacturing Cost Data for 

Standard-Size Existing Baseline Water Heaters

Rated Volume Incremental Cost Average Total Cost

$ $

 Electric 30-gal -7.78 106.08

 Electric 40-gal -2.83 111.67

 Electric 65-gal 3.87 117.59

 Electric 80-gal 7.39 123.20

 Natural Gas 30-gal -3.15 127.25

 Natural Gas 50-gal 2.23 131.84

 Natural Gas 75-gal 7.50 137.41

 LPG 30-gal -3.15 142.40

 LPG 50-gal 2.23 145.94

 LPG 75-gal 7.50 151.77

 Oil-Fired 50-gal 66.88 206.12
9-83

9.5.4.4 Summary of Markup

Table 9.5.4 presents a summary of the markups for electric, natural gas, LPG, and oil-fired

water heaters. A complete discussion of markups is provided in Chapter 7.

Table 9.5.4 Markups by Fuel Type and Tank Size

Fuel Type Tank Size Markup

gal

Average Minimum Maximum

Electric 30 1.81 0.78 4.46

40 1.70 0.84 3.44

50 1.70 0.97 4.30

65 3.00 1.53 4.62

80 3.21 2.13 5.28

Natural Gas 30 1.44 0.86 3.69

40 1.33 0.80 2.65

50 1.95 1.12 4.31

75 4.00 2.28 7.56

LPG 30 2.05 1.54 2.79

40 2.04 1.31 2.93

50 2.41 1.72 3.20

75 4.26 3.21 5.53

Oil 32 3.53 2.74 4.77

50 3.54 2.79 4.56

9.5.5 Manufacturing Cost

9.5.5.1 2003 Baseline Manufacturing Cost

The general methodology for determining the 2003 baseline manufacturing cost is as follows:

1) GAMA distributions of the existing baseline manufacturing cost are adjusted for the use of HFC245fa. 2) These distributions of manufacturing costs are then modified to account for the different

amounts of steel and insulation used in the other standard sizes (see Chapter 6, Manufacturing Cost
9-84

Assessment). We recalculate the insulation, sheet metal, and blowing agent costs to reflect the

slightly thicker insulation of baseline water heaters with HFC-245fa insulation.

As explained in the Engineering Analysis, Chapter 8, the HCFC-141b blowing agent

currently in use will be replaced by the year 2003. Because new energy-efficiency standards are

expected to take effect about the same time as the phase-out of HCFC-141b, the baseline model for

our analysis uses one of the leading alternative blowing agents, HFC-245fa. As also discussed in

Chapter 8, future gas-fired and LPG water heaters must be able to resist ignition of flammable

vapors, for health and safety reasons. The new 2003 baseline models for gas-fired and LPG water

heaters therefore includes the cost of design changes to resist ignition of flammable vapors. 

9.5.5.2 Incremental Manufacturing Costs for Design Options

 The incremental manufacturing costs for design options were supplied primarily by GAMA.

No data were provided for 2.5" Insulation or Plastic Tank for electric water heaters; 2.5" Insulation,

and Side Arm for gas-fired water heaters; nor any of the design options for oil-fired water heaters.

We obtained the missing data from consultants.15, 35

Design Option Combinations. Many combinations of design options were initially analyzed

(see Appendix D-5 for the full listing) . The selected designs consist of combinations of basic design

options. Chapter 8 explains in detail the selection of design option combinations. A list of selected

the design option combinations is shown in Table 9.1.1 through 9.1.4 at the beginning of this

chapter.

For each design option combination, incremental manufacturer costs were calculated from

costs of each design component as explained in Chapter 8. The range of incremental total cost for

some of the design options were provided by GAMA.34 Some of the costs (Plastic Tank and Side

Arm) were calculated using ranges provided by consultants.15 Because these uncertainty values were

for existing models, the next step was to recalculate the data to apply to the 2003 baseline and design

options.

Incremental Manufacturing Costs. The LCC analysis uses individual design options that

are then grouped together in combinations according to the results of the engineering analysis. This

analytic procedure requires incremental manufacturing costs for individual design options.

The distribution of manufacturing costs for design options were provided by GAMA as

cumulative frequency tables. GAMA data only applied to 50-gal electric water heaters and to 40-gal

natural gas water heaters. These data are used as the basis for the calculation of incremental

manufacturing costs. 

The same incremental costs for Plastic Tank and Tank Bottom Insulation design options were

applied to all standard sizes of water heaters. The distribution of the manufacturing costs for design

options not provided by GAMA are based on data provided by consultants. 15
9-85

For a discussion of how we transformed cumulative distributions into frequency distributions,

see Appendix E-3.

Table 9.5.5 lists the incremental costs for the individual design options for the typical (50-

gal) electric water heater.

Table 9.5.5 Incremental Costs for Electric Water Heaters (50-gal)

Design Option Average Incremental Manufacturing Cost 

$

Heat Traps 3.56

Tank Bottom Insulation 7.49

2" Insulation 30.01

2.5" Insulation 41.55

Plastic Tank 65.52

3" Insulation 79.91

Table 9.5.6 lists the incremental costs for the individual design options for the typical (40-

gal) natural gas water heater.
9-86

Table 9.5.6 Incremental Costs for Natural Gas Water Heaters (40-gal)

Design Option Average Incremental Manufacturing Cost 

$

Heat Traps 2.30

78% RE 9.69

78% RE, 2" Insulation 25.61

78% RE, 2.5" Insulation 37.11

80% RE, 2" Insulation 25.61

80% RE, 2.5" Insulation 37.11

80% RE, 3" Insulation 51.65

Side Arm 186.89

Table 9.5.7 lists the incremental costs for the individual design options for the typical (40-

gal) LPG water heater.

Table 9.5.7 Incremental Costs for LPG Water Heaters (40-gal)

Design Option Average Incremental Manufacturing Cost 

$

Heat Traps 2.31

78% RE 9.73

78% RE, 2" Insulation 25.55

78% RE, 2.5" Insulation 37.09

80% RE, 2" Insulation 25.55

80% RE, 2.5" Insulation 37.09

80% RE, 3" Insulation 51.64

Side Arm 186.96
9-87

 Table 9.5.8 lists the incremental costs for the individual design options for the typical

(32-gal) oil-fired water heater.

Table 9.5.8 Incremental Costs for Oil-Fired Water Heaters (32-gal)

Design Option Average Incremental Manufacturing Cost 

$

Heat Traps 5.35

2" Insulation 13.99

2.5" Insulation 20.86

3" Insulation 27.51

78% RE 37.92

Interrupted Ignition 16.39

Increased HX Area 106.00

9.5.6 Sales Tax

Sales taxes range from a minimum of 0% (some states have no sales tax) to a maximum of

9.00%, with an average of 5.22%. See Retail Prices, Chapter 5, for a detailed discussion.

9.5.7 Installation Cost

The installation cost of a water heater is the price paid by a customer to have the water heater

installed. This price does not include the retail price but does include other miscellaneous costs

such as delivery, removal, permit, and parts fees.

Installation costs are included in the Water Heater Price Database. The baseline models were

selected for our analysis of installation costs using the same criteria used for the retail price

determination: a maximum six-year manufacturing warranty and no special design features.

Table 9.5.8 presents the installation cost data for all standard sizes of the baseline models.
9-88

Table 9.5.9 Existing Baseline Water Heaters for Installation Cost Data

Existing Baseline Average

Installation

Cost

Cost Uncertainty Range

Total 

$

Minimum 

$

Maximum 

$

Electric (30-gal) 152 65 234

Electric (40-gal) 148 65 231

Electric (50-gal) 160 65 269

Electric (65-gal) 140 75 170

Electric (80-gal) 138 90 262

Natural Gas (30-gal) 162 65 258

Natural Gas (40-gal) 162 65 292

Natural Gas (50-gal) 178 30 418

Natural Gas (75-gal) 207 90 287

LPG (30-gal)* 162 65 258

LPG (40-gal) 162 65 292

LPG (50-gal) 178 30 418

LPG (75-gal) 207 90 287

Oil-Fired (32-gal) 491 363 771

Oil-Fired (50-gal) 491 363 771

*

Assumes the same costs as natural gas water heaters

9.5.8 Equipment Cost Results

9.5.8.1 Electric Water Heater Equipment Costs

Table 9.5.10 lists the average manufacturing and total installed costs for the 2003 baseline

and the design option combinations for all sizes of electric water heaters. Total installed cost is the

total cost to the customer, i.e., the sum of retail price, sales tax, and installation costs.
9-89

Table 9.5.10 Equipment Costs for Electric Water Heaters (All Sizes)

Design Option Average 

Manufacturing Costs 

$

Average

Retail Price

$

Average 

Total Installed

Costs 

$

0 2003 Baseline 114 220 385

1 Heat Traps 117 227 392

2 Tank Bottom Insulation 121 235 400

3 2" Insulation 143 278 446

4 2.5" Insulation 155 300 486

5 Plastic Tank 179 347 535

6 3" Insulation 193 375 615

Figure 9.5.1 shows, for all standard sizes, the difference in total installed cost for each design

option compared to the 2003 baseline for electric water heaters. Variations in total installed cost

include variations in manufacturing cost, markup, and installed cost. An additional installation cost

is added for water heaters with 3" insulation for a fraction of housing units to account for the

removal and re-installation of doorjambs. This is shown in the figure for design options that include

3" insulation. In general, design options with higher efficiencies show a wider spread in total

incremental installed cost.
9-90

0 100 200 300 400 500 600 700

0 2000 4000 6000 8000 10000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

0 100 200 300 400 500 600 700

0 2000 4000 6000 8000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

Tank Bottom Insulation 

0 100 200 300 400 500 600 700

0 1000 2000 3000 4000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

2" Insulation

0 100 200 300 400 500 600 700

0 500 1000 1500 2000 2500

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

2.5" Insulation

0 100 200 300 400 500 600 700

0 500 1000 1500

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

Plastic Tank

0 100 200 300 400 500 600 700

0 200 400 600 800 1000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

Figure 9.5.1 Difference in Total Installed Cost by Design Option for 

Electric Water Heaters
9-91

9.5.8.2 Natural Gas Water Heater Equipment Costs

Table 9.5.11 lists the average manufacturing and total installed costs for the 2003 baseline

and the design option combinations for all sizes of natural gas water heaters; total installed cost is

the final total cost to the customer, i.e., retail price, sales tax, plus installation costs.

Table 9.5.11 Equipment Costs for Natural Gas Water Heaters (All Sizes)

Design Option Average 

Manufacturing Costs 

$

Average

Retail Price

$

Average 

Total Installed

Costs 

$

0 2003 Baseline 166 264 443

1 Heat Traps 168 267 447

2 78% RE 176 279 474

3 78% RE, 2" Insulation 191 304 501

4 78% RE, 2.5" Insulation 203 323 531

5 80% RE, 2" Insulation 191 304 568

6 80% RE, 2.5" Insulation 203 323 597

7 80% RE, 3" Insulation 218 346 664

8 Side Arm 353 561 924

Figure 9.5.2 shows, for all standard sizes, the difference in total installed costs for each

design option compared to the 2003 baseline for natural gas water heaters. Variations in total

installed cost include variations in manufacturing cost, markup, and installed cost. An additional

installation cost is added for water heaters with 3" insulation for a fraction of housing units to

account for the removal and re-installation of doorjambs. This is shown in the figure for design

options that include 3" insulation. In general, design options with higher efficiencies have a wider

spread in total installed cost. 
9-92

0 500 1000 1500 2000 2500

0 2000 4000 6000 8000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

0 500 1000 1500 2000 2500

0 2000 4000 6000 8000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

0 500 1000 1500 2000 2500

0 2000 4000 6000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

0 500 1000 1500 2000 2500

0 1000 2000 3000 4000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

0 500 1000 1500 2000 2500

0 2000 4000 6000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

0 500 1000 1500 2000 2500

0 1000 2000 3000 4000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

0 500 1000 1500 2000 2500

0 1000 2000 3000 4000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

0 500 1000 1500 2000 2500

0 200 600 1000 1400

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.5.2 Difference in Total Installed Costs by Design Option for 

Natural Gas Water Heaters
9-93

9.5.8.3 LPG Water Heater Equipment Costs

Table 9.5.12 lists the average manufacturing and total installed costs for the 2003 baseline

and the design option combinations for all sizes of LPG water heaters; total installed cost is the final

total cost to the customer, i.e., the sum of retail price, sales tax, and installation costs.

Table 9.5.12 Equipment Costs for LPG Water Heaters (All Sizes)

Design Option Average 

Manufacturing Costs 

$

Average

Retail Price

$

Average 

Total Installed

Costs 

$

0 2003 Baseline 181 392 578

1 Heat Traps 183 397 583

2 78% RE 190 413 616

3 78% RE, 2" Insulation 206 448 653

4 78% RE, 2.5" Insulation 218 473 693

5 80% RE, 2" Insulation 206 448 729

6 80% RE, 2.5" Insulation 218 473 769

7 80% RE, 3" Insulation 232 504 849

8 Side Arm 367 798 1192

Figure 9.5.3 shows, for all standard sizes, the difference in total installed costs for each

design option compared to the 2003 baseline for natural gas water heaters. Variations in total

installed cost include variations in manufacturing cost, markup, and installed cost. An additional

installation cost is added for water heaters with 3" insulation for a fraction of housing units to

account for the removal and re-installation of doorjambs. This is shown in the figure for design

options that include 3" insulation. In general, design options with higher efficiencies have a wider

spread in total installed cost. 
9-94

-500 0 500 1000 1500 2000 2500 3000

0 2000 4000 6000 8000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-500 0 500 1000 1500 2000 2500 3000

0 2000 4000 6000 8000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE

-500 0 500 1000 1500 2000 2500 3000

0 1000 3000 5000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

78% RE, 2" Insul

-500 0 500 1000 1500 2000 2500 3000

0 1000 3000 5000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

78% RE, 2.5" Insul

-500 0 500 1000 1500 2000 2500 3000

0 1000 3000 5000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 2" Insul

-500 0 500 1000 1500 2000 2500 3000

0 1000 3000 5000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

80% RE, 2.5" Insul

-500 0 500 1000 1500 2000 2500 3000

0 1000 2000 3000 4000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

80% RE, 3" Insul

-500 0 500 1000 1500 2000 2500 3000

0 200 600 1000 1400

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

Side Arm

Figure 9.5.3 Difference in Total Installed Costs by Design Option for 

LPG Water Heaters
9-95

9.5.8.4 Oil-Fired Water Heater Equipment Costs

Table 9.5.13 lists the average manufacturing and total installed costs for the 2003 baseline

and the design option combinations for all sizes of oil-fired water heaters; total installed cost is the

final total cost to the customer, i.e., retail price, sales tax, plus installation costs.

Table 9.5.13 Equipment Costs for Oil-Fired Water Heaters (All Sizes)

Design Option Average 

Manufacturing Costs 

$

Average 

Total Installed Costs

$

0 2003 Baseline 155 1128

1 Heat Traps 163 1158

2 2" Insulation 175 1227

3 2.5" Insulation 185 1262

4 3" Insulation 192 1299

5 78% RE 230 1443

6 Interrupted Ignition 246 1506

7 Increased HX Area 316 1769

Figure 9.5.4 shows, for all standard sizes, the difference in total installed costs for each

design option compared to the 2003 baseline for oil-fired water heaters. Variations in total installed

cost include variations in manufacturing cost, markup, and installed cost. In general, design options

with higher efficiencies have a wider spread in total installed cost.
9-96

-200 0 200 400 600 800 1000 1200

0 2000 4000 6000 8000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

Heat Traps

-200 0 200 400 600 800 1000 1200

0 1000 3000 5000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

2" Insulation

-200 0 200 400 600 800 1000 1200

0 1000 3000 5000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

2.5" Insulation

-200 0 200 400 600 800 1000 1200

0 1000 2000 3000 4000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

3" Insulation

-200 0 200 400 600 800 1000 1200

0 1000 2000 3000

Delta Total Installed Cost

Frequency

0%

20%

40%

60%

80%

100%

78% RE

-200 0 200 400 600 800 1000 1200

0 1000 2000 3000

Delta Total Installed Cost

0%

20%

40%

60%

80%

100%

Cumulative Pct

Interrupted Ignition

-200 0 200 400 600 800 1000 1200

0 500 1000 1500 2000

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

Increased HX Area

Figure 9.5.4 Difference in Total Installed Costs by Design Option for 

Oil-Fired Water Heaters
9-97

9.5.9 Importance Analysis

The following four input importance charts (Figures 9.5.5 through 9.5.8) show the results of

the importance analysis for total installed costs at Trial Standard Level 3 for electric, natural gas,

LPG, and oil-fired water heaters. Figure 9.5.5 shows the rank-order correlation of input variables

with the difference in total installed cost for the 2.5" Insulation design option on electric water

heaters. Figures 9.5.6 and 9.5.7 show the same for 78% RE and 2" Insulation on natural gas and

LPG water heaters, respectively. Figure 9.5.8 shows the rank-order correlation for the 2003 Baseline

on oil-fired water heaters. Variables are ordered with maximum correlation coefficients, positive or

negative, on top and minimum coefficients on the bottom. For electric, natural gas-fired, and LPG

water heaters, overall markup is the input which is most important in determining the total installed

cost. For oil-fired water heaters, installation cost is the most important input to the total installed

cost.
9-98

0.0692

0.0849

0.2774

0.7974

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Sales Tax

Cost to Manufacture a 2.5"

Insulation Water Heater (1998$)

Cost to Install an Electric Water

Heater (1998$)

Total Combined Markup from

Manufacturer Cost to Retail Price

Figure 9.5.5 Importance of Input Variables to Total Installed Cost for 

2.5" Insulation on Electric Water Heaters 
9-99

0.0685

0.0725

0.4804

0.7871

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Sales Tax

Cost to Manufacture a 78% RE, 2"

Insulation Water Heater (1998$)

Cost to Install a Gas-Fired Water

Heater (1998$)

Total Combined Markup from

Manufacturer Cost to Retail Price

Figure 9.5.6 Importance of Input Variables to Total Installed Cost for 

78% RE and 2" Insulation on Natural Gas Water Heaters
9-100

0.0547

0.1227

0.5686

0.6449

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Cost to Manufacture a 78% RE, 2"

Insulation Water Heater (1998$)

Sales Tax

Cost to Install a LPG Water Heater

(1998$)

Total Combined Markup from

Manufacturer Cost to Retail Price

Figure 9.5.7 Importance of Input Variables to Total Installed Cost for 

78% RE and 2" Insulation on LPG Water Heaters
9-101

0.0105

0.3472

0.4655

0.6108

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Sales Tax

Total Combined Markup from

Manufacturer Cost to Retail Price

Cost to Manufacture a 2003

Baseline Water Heater (1998$)

Cost to Install an Oil-Fired Water

Heater (1998$)

Figure 9.5.8 Importance of Input Variables to Total Installed Cost for 

2003 Baseline on Oil-Fired Water Heaters
a Water heaters fueled by natural gas and LPG are considered as one product class from the point of view of

physical and efficiency characteristics. They are treated separately with respect to manufacturing cost, markup,

retail price, and fuel price in the Life-Cycle Cost and subsequent analyses.

9-102

( ) NPV OprCost

D

year

rate

year

year

Lifetime

= = + ∑

1 1

9.6 LIFE-CYCLE COST MODULE

9.6.1 Introduction

Life-cycle cost is defined as the total cost a consumer pays during the lifetime of a water

heater, including purchase price and operating expenses (which include energy expenditures). Future

operating expenses are discounted to the time of purchase and summed over the water heater’s

lifetime.

9.6.2 Equations and General Descriptions for LCC and Payback

Life-cycle cost is defined by the following equation:

LCCoption = EquipCostoption + NPV(Drate, OprCostyear,option, Lifetime)

where:

EquipCost = cost of buying and installing a water heater ($)

= (Mfr. Cost * Markup) × (1 + sales tax) + (installation cost)

options = one of six design options for electric water heaters; one of eight

design options for natural gas and LPG water heaters;a

 and one of

seven for oil-fired water heaters.

NPV = Net present value ($) is defined by the following equation:

Drate = Discount rate (real) (%)

OprCost = cost of operating a water heater ($/year)

= (energy usage) × (energy price) + (maintenance cost)

Lifetime = Lifetime of water heater (years)
9-103

9.6.3 General Description of Key Variables 

EquipCost is defined as the cost associated with buying and installing a water heater. This includes

the cost of the water heater plus sales tax, installation charges, and, if the water heater is being

replaced, charges for the removal of the old water heater.

NPV (Net Present Value ) is the present-day value of a future stream of expenditures or earnings.

Drate is defined as the rate at which future expenditures are discounted to establish their present

value. A distribution of discount rates was derived to represent the variability in financing methods

consumers use in purchasing appliances. The resulting distribution of discount rates is used to

calculate a distribution of life-cycle costs for water heaters.

Consumers purchase appliances separately or as part of new homes. Purchases through retail

vendors may be paid by cash, credit cards, or retailer loans. Whirlpool Corporation indicated that

approximately 40% of white goods are purchased in cash, 35% with credit cards, and 25% with

retailer loans. The same manufacturer indicated that 25% of appliance purchases are for new homes.

(For water heaters, it is estimated that purchases for new homes are currently about 20%.) The

method of purchase use is assumed to indicate the source of funds and type of financing used by

these consumers.

We estimated a range of future interest rates that can reasonably be applied to different types

of consumer savings or financing.

For new housing, the estimated nominal mortgage rate ranges from 5 to 8%, the derived aftertax rate is based on a tax of 28%, and an inflation rate of 2% is subtracted from the total. The result

is a range of real mortgage rates from 1.60 to 3.76%. (Example: 5% * (100%-28%) - 2% = 1.60%)

For cash, the minimum interest rate is 0%. This rate applies to consumers making cash

purchases without withdrawing from savings accounts. For the maximum rate, the opportunity cost

is represented by the interest that could have been earned in a savings account. The historical

nominal maximum savings rate ranged from 4.5 to 5.5% from 1970 to 1986 (real rates of -8.27 to

+3.58%). A real rate of 3% was selected as of the maximum.

The interest rates for retailer loans and credit cards are assumed to have the same range. The

minimum credit card rate is taken as 6% real. Introductory rates on some credit cards today are 5.9%

nominal, but after the introductory period (often six months), the rate can increase sharply.

Maximum rates are more than 20% nominal. However, if the consumer pays with a credit card and

the balance is paid in less than the life of the water heater, then the effective interest rate is lower

than the nominal credit card rate. The current assumption is a range of 6 to 15% real.

DOE recognizes that other factors might be considered in the estimation of real consumer

discount rates, such as the actual impacts of appliance purchases on consumer savings, indebtedness,

or consumption, and the expressed or imputed consumer preferences for obvious payment methods.
9-104

Although such data, if it were to become available, may provide a stronger analytical basis for

DOE’s choice of discount rates, it is considered unlikely that such data would have a significant

effect on the range of values considered in the current analysis.

Figure 9.6.1 shows the distribution of real discount rates, ranging from 0 to 15%, with a mean

of 6%.

Consumer Real Discount Rate 

0%

4%

8%

12%

16%

20%

0% 2% 4% 6% 8% 10% 12% 14% 16%

Discount Rate

weights 

Figure 9.6.1 Distribution of Consumer Real Discount Rates

OprCost is defined as the annual expenditure necessary to keep a water heater operating. It

has two parts: fuel and maintenance. Fuel costs are calculated by multiplying annual water heater

energy use by the energy price paid by the household. Maintenance costs are repair charges or the

cost of a service contract.

Lifetime is the period of time the water heater will provide service. Table 9.6.1 shows

lifetimes for water heaters by fuel type.4

 LPG and oil water heaters are assumed to have the same

distribution of lifetimes as natural gas water heaters.
9-105

Table 9.6.1 Water Heater Lifetimes by Fuel Type

Fuel Type Lifetime (years)

Minimum Average Maximum

Electric 6 14 21

Natural Gas 5 9 13

LPG and Oil 5 9 13

The simple payback period measures the amount of time needed to recover the additional

premium that a consumer pays for increased efficiency. This investment is recovered through

reductions in operating costs.

The payback period equation can be expressed as:

Payback 

EquipCost EquipCost

OprCost OprCost

option

option base

base option

=

−

−

where:

base = the typical 2003 baseline design

Numerically, the simple payback period is the ratio of the increase in purchase (and

installation) price to the decrease in annual operating expenditures (including maintenance). The

comparisons are made from replacing the 2003 baseline water heater with a water heater

incorporating another design option. Payback periods are expressed in years. A payback period of

three years means that the increased purchase price for the energy efficient water heater is equal to

three times the value of reduced operating expenses in the year of purchase; in other words, the

increased purchase price is recovered in approximately three years because of lower operating

expenses. Payback periods greater than the life of the product mean that the increased purchase price

is never recovered in reduced operating expenses.
9-106

9.6.4 Life-Cycle Cost and Payback Results

9.6.4.1 Electric Water Heaters

Table 9.6.2 lists the portion of the population that benefits, in terms of reduced life-cycle

cost, from each energy-efficiency design option for electric water heaters. The average LCC savings

and median payback are also shown.

Table 9.6.2 Life-Cycle Cost and Payback for Electric Water Heaters

Design Option Fraction of Population

Benefitting

%

Average

LCC

Savings

$

Median

Payback

yrs

1 Heat Traps 92 31 1.79

2 Tank Bottom Insulation 90 36 2.92

3 2" Insulation 68 32 6.47

4 2.5" Insulation 59 23 7.43

5 Plastic Tank 38 -21 10.97

6 3" Insulation 26 -82 14.37

Figure 9.6.2 together with Table 9.6.3 present summary life-cycle cost information for

electric water heaters. Each bar refers to a specific design option. The bar’s height above the

horizontal axis shows the percentage of households that have a life-cycle savings. Conversely, the

portion of the bar below the horizontal axis shows the percentage of households that have a life-cycle

net cost. As the design options increase energy efficiency and cost, the bars show a greater fraction

of the population having net costs. The positive and negative portions of the bars are shaded to show

three ranges: significant savings; significant costs; and no significant change. A change of less than

two percent of the average baseline life-cycle cost is considered insignificant. The average baseline

life-cycle cost is included as a reference point. For the households benefitting by a design option, the

table shows the average and maximum savings for that fraction of the population and also the

average and maximum costs for the corresponding disadvantaged fraction of the population.
9-107

Table 9.6.3 Percent of Sample Having Net Savings or Costs for 

Electric Water Heaters 

Population

Heat

Traps

Tank

Bottom

Insulation

2 Inch

Insulation

2.5 Inch

Insulation

Plastic

Tank

3 Inch

Insulation

Significant 

Savings

% of sample 15% 21% 27% 30% 19% 14%

Avg Savings $84 $90 $111 $133 $139 $149

Max Savings $310 $451 $608 $788 $837 $761

Insignificant (a) % of sample 85% 78% 70% 56% 46% 29%

Significant 

Cost

% of sample 0.06% 0.10% 4% 15% 35% 56%

Avg Cost $80 $72 $76 $121 $124 $180

Max Cost $127 $92 $176 $691 $730 $756

Total (100%) Avg Savings $31 $36 $32 $23 -$21 -$82

(a) cost or savings < 2% of average baseline LCC [ $56 ] 









 

































































-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Heat Traps

Tank Bottom

Insulation 2 Inch Insulation 2.5 Inch Insulation Plastic Tank 3 Inch Insulation

% of sample having

<------- Net Costs | Net Savings----->

Average Baseline Life-Cycle Cost for Electric Water Heaters = $2811



 



Significant Savings ( > 2% of average baseline LCC [ $56 ] )

Insignificant ( cost or savings < 2% of average baseline LCC [ $56 ] )

Significant Cost ( > 2% of average baseline LCC [ $56 ] )

Figure 9.6.2 Percent of Sample Having Net Savings or Costs for 

Electric Water Heaters 
9-108

Figure 9.6.3 shows the cumulative frequency of differences in LCC by design option for

electric water heaters. The percentages of the population that do and do not benefit are also shown

on the graph. Note that a negative difference in life-cycle cost for a given design option indicates

a savings. The width of the plot shows the spread of savings in the population. In general, the

design options with higher efficiencies tend to show a wider spread of LCC differences in the

population.

Figure 9.6.4 shows the cumulative frequency of payback period by design option. The percent

of population that would have a payback less than or equal to three years is indicated. A three-year

payback period was chosen because it was assumed that design options that satisfy this criterion are

most likely to be included in the proposed DOE efficiency standard. In general, design options with

higher efficiencies tend to show a wider spread of payback period in the population.
9-109

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

92% Benefitting

8% Disadvantaged

Heat Traps

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

90% Benefitting

10% Disadvantaged

Tank Bottom Insulation 

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

68% Benefitting

32% Disadvantaged

2" Insulation

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

59% Benefitting

41% Disadvantaged

2.5" Insulation

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

38% Benefitting

62% Disadvantaged

Plastic Tank

-1000 -500 0 500 1000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

26% Benefitting

74% Disadvantaged

3" Insulation

Figure 9.6.3 Difference in Life-Cycle Costs by Design Option for 

Electric Water Heaters
9-110

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

73% Less Than or

 Equal to 3 Years

or more

Heat Traps

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

52% Less Than or

 Equal to 3 Years

or more

Tank Bottom Insulation 

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

9% Less Than or

 Equal to 3 Years

or more

2" Insulation

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

8% Less Than or

 Equal to 3 Years

or more

2.5" Insulation

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

4% Less Than or

 Equal to 3 Years

or more

Plastic Tank

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

2% Less Than or

 Equal to 3 Years

or more

3" Insulation

Figure 9.6.4 Payback Period by Design Option for 

Electric Water Heaters
9-111

9.6.4.2 Natural Gas Water Heaters

Table 9.6.4 lists the portion of the population that benefits, in terms of reduced life-cycle

cost, from each design option. The average LCC savings and average payback are also shown.

Table 9.6.4 Life-Cycle Cost and Payback for Natural Gas Water Heaters

Design Option Fraction of

Population

Benefitting

%

Average 

LCC Savings

$

Median Payback

yrs

1 Heat Traps 96 16 1.34

2 78% RE 75 5 3.40

3 78% RE, 2" Insulation 78 30 3.59

4 78% RE, 2.5" Insulation 64 11 5.12

5 80% RE, 2" Insulation 82 -15 2.88

6 80% RE, 2.5" Insulation 71 -34 4.21

7 80% RE, 3" Insulation 48 -95 6.92

8 Side Arm 18 -244 12.14

Figure 9.6.5 together with Table 9.6.5 present summary life-cycle cost information for natural

gas water heaters. Each bar refers to a specific design option. The bar’s height above the horizontal

axis shows the percentage of households that have a life-cycle savings. Conversely, the portion of

the bar below the horizontal axis shows the percentage of households that have a life-cycle net cost.

As the design options increase energy efficiency and cost, the bars show a greater fraction of the

population having net costs. The positive and negative portions of the bars are shaded to show three

ranges: significant savings; significant costs; and no significant change. A change of less than two

percent of the average baseline life-cycle cost is considered insignificant. The average baseline lifecycle cost is included as a reference point. For the households benefitting by a design option, the

table shows the average and maximum savings for that fraction of the population and also the

average and maximum costs for the corresponding disadvantaged fraction of the population.
9-112

Table 9.6.5 Percent of Sample Having Net Savings or Costs for 

Natural Gas Water Heaters

Population Heat

Traps

78%

RE

78%

RE, 

2-Inch

Insul.

78%

RE,

2.5-

Inch

Insul.

80%

RE,

2-Inch

Insul.

80%

RE,

2.5-

Inch

Insul.

80%

RE, 

3-Inch

Insul.

SideArm

Significant 

Savings

% of sample 10% 22% 52% 40% 65% 52% 33% 14%

Avg Savings $41 $49 $73 $75 $87 $88 $88 $126

Max Savings $97 $156 $359 $349 $452 $459 $515 $700

Insignificant (a) % of sample 90% 67% 36% 39% 23% 28% 25% 9%

Significant 

Cost

% of sample 0.0% 11% 12% 21% 12% 19% 41% 77%

Avg Cost - $109 $92 $94 $603 $420 $304 $342

Max Cost $26 $246 $300 $385 $1,863 $1,897 $2,087 $2,365

Total (100%) Avg Savings $16 $5 $30 $11 -$15 -$34 -$95 -$244

(a) cost or savings < 2% of average baseline LCC [ $31 ] 





































































































































-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Heat Traps 78% RE

78% RE, 2-

Inch Insul.

78% RE, 2.5-

Inch Insul.

80% RE, 2-

Inch Insul.

80% RE, 2.5-

Inch Insul.

80% RE, 3-

Inch Insul. Side-Arm

% of sample having

<------- Net Costs | Net Savings----->

Average Baseline Life-Cycle Cost for Natural Gas Water Heaters = $1556









Significant Savings ( > 2% of average baseline LCC [ $31 ] )

Insignificant ( cost or savings < 2% of average baseline LCC [ $31 ] )

Significant Cost ( > 2% of average baseline LCC [ $31 ] )

Figure 9.6.5 Percent of Sample Having Net Savings or Costs for 

Natural Gas Water Heaters 
9-113

Figure 9.6.6 shows the cumulative frequency of differences in LCC by design option for

natural gas water heaters. The percentages of the population that do and do not benefit are also

shown on the graph. Figure 9.6.7 shows cumulative frequency of payback period by design option.

The percent of population that would have a payback of less than or equal to three years is indicated.
9-114

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

96% Benefitting

4% Disadvantaged

Heat Traps

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

75% Benefitting

25% Disadvantaged

78% RE

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

78% Benefitting

22% Disadvantaged

78% RE, 2" Insul

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

64% Benefitting

36% Disadvantaged

78% RE, 2.5" Insul

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

82% Benefitting

18% Disadvantaged

80% RE, 2" Insul

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

71% Benefitting

29% Disadvantaged

80% RE, 2.5" Insul

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

48% Benefitting

52% Disadvantaged

80% RE, 3" Insul

-1000 -500 0 500 1000 1500 2000 2500

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

18% Benefitting

82% Disadvantaged

Side Arm

Figure 9.6.6 Difference in Life-Cycle Costs by Design Option for 

Natural Gas Water Heaters
9-115

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

86% Less Than or

 Equal to 3 Years

or more

Heat Traps

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

43% Less Than or

 Equal to 3 Years

or more

78% RE

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

39% Less Than or

 Equal to 3 Years

or more

78% RE, 2" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

19% Less Than or

 Equal to 3 Years

or more

78% RE, 2.5" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

52% Less Than or

 Equal to 3 Years

or more

80% RE, 2" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

30% Less Than or

 Equal to 3 Years

or more

80% RE, 2.5" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

12% Less Than or

 Equal to 3 Years

or more

80% RE, 3" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

1% Less Than or

 Equal to 3 Years

or more

Side Arm

Figure 9.6.7 Payback Period by Design Option for 

Natural Gas Water Heaters
9-116

9.6.4.3 LPG Water Heaters

Table 9.6.6 lists the portion of the population that benefits, in terms of reduced life-cycle

cost, from each design option for LPG water heaters. The average LCC savings and average payback

are also shown.

Table 9.6.6 Life-Cycle Cost and Payback for LPG Water Heaters

Design Option Fraction of

Population

Benefitting

%

Average 

LCC Savings

$

Median Payback

yrs

1 Heat Traps 98 34 1.03

2 78% RE 83 32 2.70

3 78% RE, 2" Insulation 89 97 2.82

4 78% RE, 2.5" Insulation 78 77 3.96

5 80% RE, 2" Insulation 88 62 2.28

6 80% RE, 2.5" Insulation 82 42 3.29

7 80% RE, 3" Insulation 62 -26 5.13

8 Side Arm 37 -122 8.33

Figure 9.6.8 together with Table 9.6.7 present summary life-cycle cost information for LPG

water heaters. Each bar refers to a specific design option. The bar’s height above the horizontal axis

shows the percentage of households that have a life-cycle savings. Conversely, the portion of the bar

below the horizontal axis shows the percentage of households that have a life-cycle net cost. As the

design options increase energy efficiency and cost, the bars show a greater fraction of the population

having net costs. The positive and negative portions of the bars are shaded to show three ranges:

significant savings; significant costs; and no significant change. A change of less than two percent

of the average baseline life-cycle cost is considered insignificant. The average baseline life-cycle cost

is included as a reference point. For the households benefitting by a design option, the table shows

the average and maximum savings for that fraction of the population and also the average and

maximum costs for the corresponding disadvantaged fraction of the population.
9-117

Table 9.6.7 Percent of Sample Having Net Savings or Costs for 

LPG Water Heaters 

Population

Heat

Traps

78%

RE

78%

RE, 2-

Inch

Insul.

78%

RE,

2.5-

Inch

Insul.

80%

RE, 2-

Inch

Insul.

80%

RE,

2.5-

Inch

Insul.

80%

RE, 3-

Inch

Insul.

SideArm

Significant 

Savings

% of sample 22% 35% 69% 58% 78% 69% 48% 30%

Avg Savings $71 $91 $143 $150 $175 $178 $186 $312

Max Savings $326 $574 $1,242 $1,389 $1,750 $1,548 $2,071 $3,111

Insignificant (a) % of sample 78% 56% 26% 32% 12% 19% 22% 12%

Significant 

Cost

% of sample 0.00% 9% 5% 11% 10% 12% 30% 57%

Avg Cost - $116 $104 $112 $778 $671 $395 $378

Max Cost $35 $233 $230 $335 $1,840 $1,880 $2,060 $2,202

Total (100%) Avg Savings $34 $32 $97 $77 $62 $42 -$26 -$122

(a) cost or savings < 2% of average baseline LCC [ $47 ]













































































































 





 

























-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Heat Traps 78% RE

78% RE, 2-

Inch Insul.

78% RE, 2.5-

Inch Insul.

80% RE, 2-

Inch Insul.

80% RE, 2.5-

Inch Insul.

80% RE, 3-

Inch Insul. Side-Arm

% of sample having

<------- Net Costs | Net Savings----->

Average Baseline Life-Cycle Cost for LPG Water Heaters = $2367



 



Significant Savings ( > 2% of average baseline LCC [ $47 ] )

Insignificant ( cost or savings < 2% of average baseline LCC [ $47 ] )

Significant Cost ( > 2% of average baseline LCC [ $47 ] )

Figure 9.6.8 Percent of Sample Having Net Savings or Costs for 

LPG Water Heaters 
9-118

Figure 9.6.9 shows the cumulative frequency of differences in LCC by design option for LPG

water heaters. The percentages of the population that do and do not benefit are also shown on the

graph. Figure 9.6.10 shows cumulative frequency of payback period by design option. The percent

of population that would have a payback of less than or equal to three years is indicated.
9-119

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

98% Benefitting

2% Disadvantaged

Heat Traps

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

83% Benefitting

17% Disadvantaged

78% RE

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

89% Benefitting

11% Disadvantaged

78% RE, 2" Insul

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

78% Benefitting

22% Disadvantaged

78% RE, 2.5" Insul

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

88% Benefitting

12% Disadvantaged

80% RE, 2" Insul

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

82% Benefitting

18% Disadvantaged

80% RE, 2.5" Insul

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

62% Benefitting

38% Disadvantaged

80% RE, 3" Insul

-2000 -1000 0 1000 2000 3000

Delta LCC(1998$)

0%

20%

40%

60%

80%

100%

37% Benefitting

63% Disadvantaged

Side Arm

Figure 9.6.9 Difference in Life-Cycle Costs by Design Option for 

LPG Water Heaters
9-120

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

95% Less Than or

 Equal to 3 Years

or more

Heat Traps

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

56% Less Than or

 Equal to 3 Years

or more

78% RE

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

55% Less Than or

 Equal to 3 Years

or more

78% RE, 2" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

30% Less Than or

 Equal to 3 Years

or more

78% RE, 2.5" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

68% Less Than or

 Equal to 3 Years

or more

80% RE, 2" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

43% Less Than or

 Equal to 3 Years

or more

80% RE, 2.5" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

21% Less Than or

 Equal to 3 Years

or more

80% RE, 3" Insul

-20 0 20 40 60 80 100

Payback Period(years)

0%

20%

40%

60%

80%

100%

3% Less Than or

 Equal to 3 Years

or more

Side Arm

Figure 9.6.10 Payback Period by Design Option for 

LPG Water Heaters
9-121

9.6.4.4 Oil-Fired Water Heaters

Table 9.6.8 lists the portion of the population that benefits, in terms of reduced life-cycle cost

from each design option for oil-fired water heaters. The average LCC savings and average payback

are also shown.

Table 9.6.8 Life-Cycle Cost and Payback for Oil-Fired Water Heaters 

Design Option Fraction of Population

Benefitting

(%)

Average 

LCC

Savings

($)

Median

 Payback

(yrs)

1 Heat Traps 25 -15 8.2

2 2" Insulation 7 -46 12.3

3 2.5" Insulation 3 -72 14.2

4 3" Insulation 1 -103 16.5

5 78% RE 0.1 -209 19.9

6 Interrupted Ignition 0.4 -242 19.4

7 Increased HX Area 0.1 -459 24.6

Figure 9.6.11 together with Table 9.6.9 present summary life-cycle cost information for oilfired water heaters. Each bar refers to a specific design option. The bar’s height above the horizontal

axis shows the percentage of households that have a life-cycle savings. Conversely, the portion of

the bar below the horizontal axis shows the percentage of households that have a life-cycle net cost.

As the design options increase energy efficiency and cost, the bars show a greater fraction of the

population having net costs. The positive and negative portions of the bars are shaded to show three

ranges: significant savings; significant costs; and no significant change. A change of less than two

percent of the average baseline life-cycle cost is considered insignificant. For all but the first two or

three design options, the majority of households with oil-fired water heaters face a significant cost.

The average baseline life-cycle cost is included as a reference point. For the households benefitting

by a design option, the table shows the average and maximum savings for that fraction of the

population and also the average and maximum costs for the corresponding disadvantaged fraction

of the population.
9-122

Table 9.6.9 Percent of Sample Having Net Savings or Costs for 

Oil-Fired Water Heaters

Population

Heat

Traps

2-Inch

Insul.

2.5-

Inch

Insul.

3-Inch

Insul.

78%

RE

Inter.

Ignition

Incr. HX

Area

Significant

Savings

% of sample 0.1% 0.3% 0.1% 0.04% 0.03% 0.1% 0.1% 

Avg Savings $66 $72 $75 $82 $201 $146 $251 

Max Savings $100 $105 $113 $100 $253 $440 $478 

Insignificant1 % of sample 91% 62% 33% 13% 1% 1% 0% 

Significant Cost % of sample 8.80% 38% 67% 87% 99% 99% 100% 

Avg Cost $73 $73 $93 $114 $211 $245 $460 

Max Cost $159 $159 $242 $281 $442 $504 $919 

Total (100%) Avg Savings -$15 -$46 -$72 -$103 -$209 -$242 -$459 

1

 Cost or savings < 2% of average baseline LCC [ $56 ]











   





   

















































  





































































































































-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Heat Traps 2-Inch Insul. 2.5-Inch Insul. 3-Inch Insul. 78% RE Inter. Ignition Incr. HX Area

Average Baseline Life-Cycle Cost for Oil-Fired Water Heaters (HFC-245fa) = $2804









Significant Savings ( > 2% of average baseline LCC [ $56 ] )

Insignificant ( cost or savings < 2% of average baseline LCC [ $56 ] )

Significant Cost ( > 2% of average baseline LCC [ $56 ] )

Figure 9.6.11 Percent of Sample Having Net Savings or Costs for 

Oil-Fired Water Heaters
9-123

Figure 9.6.12 shows the cumulative frequency of differences in LCC by design option for oilfired water heaters. The percentages of the population that do and do not benefit are also shown on

the graph. Figure 9.6.13 shows cumulative frequency of payback period by design option for oilfired water heaters. The percent of population that would have a payback of less than or equal to

three years is indicated.
9-124

-400 -200 0 200 400 600 800 1000

0 1000 2000 3000

LCC($98)

Frequency

0%

20%

40%

60%

80%

100%

20% Benefitting

80% Disadvantaged

2" Insulation

-400 -200 0 200 400 600 800 1000

0 1000 2000 3000 4000

LCC($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

11% Benefitting

89% Disadvantaged

Heat Traps

-400 -200 0 200 400 600 800 1000

0 500 1500 2500

LCC($98)

Frequency

0%

20%

40%

60%

80%

100%

8% Benefitting

92% Disadvantaged

2.5" Insulation

-400 -200 0 200 400 600 800 1000

0 500 1000 2000

LCC($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

3% Benefitting

97% Disadvantaged

3" Insulation

-400 -200 0 200 400 600 800 1000

0 500 1000 1500

LCC($98)

Frequency

0%

20%

40%

60%

80%

100%

0% Benefitting

100% Disadvantaged

78% RE

-400 -200 0 200 400 600 800 1000

0 500 1000 1500

LCC($98)

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Benefitting

100% Disadvantaged

Interrupted Ignition

-400 -200 0 200 400 600 800 1000

0 200 400 600 800

LCC($98)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Benefitting

100% Disadvantaged

Increased HX Area

Figure 9.6.12 Difference in Life-Cycle Costs by Design Option for

Oil-Fired Water Heaters
9-125

-20 0 20 40 60 80 100

0 500 1000 1500 2000

Payback Period(years)

Frequency

0%

20%

40%

60%

80%

100%

17% Less than or

 Equal to 3 Years

or more

Heat Traps

-20 0 20 40 60 80 100

0 500 1500 2500

Payback Period(years)

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Less than or

 Equal to 3 Years

or more

2" Insulation

-20 0 20 40 60 80 100

0 500 1000 2000

Payback Period(years)

Frequency

0%

20%

40%

60%

80%

100%

0% Less than or

 Equal to 3 Years

or more

2.5" Insulation

-20 0 20 40 60 80 100

0 500 1000 1500 2000

Payback Period(years)

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Less than or

 Equal to 3 Years

or more

3" Insulation

-20 0 20 40 60 80 100

0 500 1000 1500 2000 2500

Payback Period(years)

Frequency

0%

20%

40%

60%

80%

100%

0% Less than or

 Equal to 3 Years

or more

78% RE

-20 0 20 40 60 80 100

0 500 1000 1500 2000

Payback Period(years)

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Less than or

 Equal to 3 Years

or more

Interrupted Ignition

-20 0 20 40 60 80 100

0 500 1000 1500

Payback Period(years)

Frequency

0%

20%

40%

60%

80%

100%

Cumulative Pct

0% Less than or

 Equal to 3 Years

or more

Increased HX Area

Figure 9.6.13 Payback Period by Design Option for 

Oil-Fired Water Heaters 
9-126

9.6.5 Importance Analysis

Figures 9.6.14 through 9.6.17 show the results of the importance analysis for LCC for

electric, natural gas, LPG, and oil water heaters for Trial Standard Level 3. Figures 9.6.18, 9.6.19,

and 9.6.20 show the input importance analysis for payback period for electric, natural gas, and LPG

water heaters for Trial Standard Level 3. Because the oil water heater design option which

corresponds to Level 3 is the baseline water heater, it is not possible to calculate the payback for this

level, since payback is defined by differences in installed and operating costs between the design

option and the baseline water heater. Variables are ordered with maximum correlation coefficients

values (positive or negative) on top and minimum coefficients on the bottom. The input of most

importance to the LCC is annual operating cost, followed by discount rate for electric water heaters,

and lifetime for natural gas, LPG, and oil water heaters.
9-127

0.1518

0.2165

-0.3903

0.8629

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Total Cost to Buy and Install a 2.5"

Insulation Water Heater (1998$) 

Lifetime of Individual Water Heaters

(Years)

Discount Rate

Annual Operating Cost in 2003 of

2.5" Insulation Water Heater 

(1998$)

Figure 9.6.14 Importance of Input Variables to the Life-Cycle Cost for 

2.5" Insulation on Electric Water Heaters
9-128

0.2279

-0.3228

0.3507

0.8270

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Lifetime of Individual Water Heaters

(Years)

Discount Rate

Total Cost to Buy and Install a 78%

RE, 2" Insulation Water Heater

(1998$) 

Annual Operating Cost in 2003 of

78% RE, 2" Insulation Water Heater

(1998$)

Figure 9.6.15 Importance of Input Variables to the Life-Cycle Cost for 

78% RE 2" Insulation on Natural Gas Water Heaters
9-129

0.2154

0.2337

-0.3140

0.8880

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Lifetime of Individual Water Heaters

(Years)

Total Cost to Buy and Install a 78%

RE, 2" Insulation Water Heater

(1998$) 

Discount Rate

Annual Operating Cost in 2003 of

78% RE, 2" Insulation Water Heater

(1998$)

Figure 9.6.16 Importance of Input Variables to the Life-Cycle Cost for 

78% RE 2" Insulation on LPG Water Heaters
9-130

0.2792

-0.4554

0.5483

0.5878

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Total Cost to Buy and Install a 2003

Baseline Water Heater (1998$) 

Discount Rate

Lifetime of Individual Water Heaters

(Years)

Annual Operating Cost in 2003 of

2003 Baseline Water Heater 

(1998$)

Figure 9.6.17 Importance of Input Variables to the Life-Cycle Cost for 

2003 Baseline Oil-Fired Water Heaters
9-131

-0.2283

0.4486

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Annual Operating Cost in 2003 of

2.5" Insulation Water Heater 

(1998$)

Total Cost to Buy and Install a 2.5"

Insulation Water Heater (1998$) 

Figure 9.6.18 Importance of Input Variables to the Payback Period for 

2.5" Insulation on Electric Water Heaters
9-132

-0.2702

0.5873

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Annual Operating Cost in 2003 of

78% RE, 2" Insulation Water Heater

(1998$)

Total Cost to Buy and Install a 78%

RE, 2" Insulation Water Heater

(1998$) 

Figure 9.6.19 Importance of Input Variables to the Payback Period for 

78% RE 2" Insulation on Natural Gas Water Heaters
9-133

0.4208

-0.4692

-1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00

Total Cost to Buy and Install a 78%

RE, 2" Insulation Water Heater

(1998$) 

Annual Operating Cost in 2003 of

78% RE, 2" Insulation Water Heater

(1998$)

Figure 9.6.20 Importance of Input Variables to the Payback Period for 

78% RE 2" Insulation on LPG Water Heaters
9-134

9.7 TRIAL STANDARD LEVELS

The Engineering and Life-Cycle Cost Analyses are done for all design options separately for

each fuel. The subsequent analyses (e.g., Consumer Sub-Group, Shipments) are done using trial

standard levels and all fuels are considered together. Trial standard levels consist of one design

option from each fuel type. Tables 9.7.1 through 9.7.4 show the assignment of design options to trial

standard levels for electric, natural gas, LPG, and oil-fired water heaters, respectively. 

Table 9.7.1 Trial Standard Levels for Design Options: Electric Water Heaters

Trial Standard

Level

Design

Option

Short Name Full Description

00 Existing

Baseline

Baseline (141b)

0 2003 Baseline Baseline (245fa)

1 Heat Traps 2003 Baseline + Heat Traps

1 2 Tank Bottom

Insulation

2003 Baseline + Heat Traps + Tank Bottom

Insulation 

2 3 2" Insulation 2003 Baseline + Heat Traps + Tank Bottom

Insulation + 2" Insulation

3 4 2.5" Insulation 2003 Baseline + Heat Traps + Tank Bottom

Insulation + 2.5" Insulation

5 Plastic Tank 2003 Baseline + Heat Traps + 2.5" Insulation

+ Plastic Tank

4 6 3" Insulation 2003 Baseline + Heat Traps + 3" Insulation +

Plastic Tank
9-135

Table 9.7.2 Trial Standard Levels for Design Options: Natural Gas Water Heaters

Trial Standard

Level

Design

Option

Short Name Full Description

00 Existing

Baseline

Baseline (141b)

0 2003 Baseline Baseline (245fa)

1 Heat Traps 2003 Baseline + Heat Traps

2 78% RE 2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE)

1, 3 3 78% RE, 2"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE) + 2" Insulation

2 4 78% RE, 2.5"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE) + 2.5" Insulation

5 80% RE, 2"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 2" Insulation

6 80% RE, 2.5"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 2.5" Insulation

7 80% RE, 3"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 3" Insulation

4 8 Side Arm 2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 3" Insulation + Side Arm +

Electronic Ignition + Plastic Tank

RE= Recovery Efficiency
9-136

Table 9.7.3 Trial Standard Levels for Design Options: LPG Water Heaters

Trial Standard

Level

Design

Option

Short Name Full Description

00 Existing

Baseline

Baseline (141b)

0 2003 Baseline Baseline (245fa)

1 Heat Traps 2003 Baseline + Heat Traps

2 78% RE 2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE)

1, 3 3 78% RE, 2"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE) + 2" Insulation

2 4 78% RE, 2.5"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (78% RE) + 2.5" Insulation

5 80% RE, 2"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 2" Insulation

6 80% RE, 2.5"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 2.5" Insulation

7 80% RE, 3"

Insul

2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 3" Insulation

4 8 Side Arm 2003 Baseline + Heat Traps + Improved Flue

Baffles (80% RE) + 3" Insulation + Side Arm +

Electronic Ignition + Plastic Tank

RE= Recovery Efficiency
9-137

Table 9.7.4 Trial Standard Levels for Design Options: Oil-Fired Water Heaters

Trial Standard

Level

Design

Option

Short Name Full Description

00 Existing

Baseline

Baseline (141b)

3 0 2003 Baseline Baseline (245fa)

1, 2 1 Heat Traps 2003 Baseline + Heat Traps

2 2" Insulation 2003 Baseline + Heat Traps + 2" Insulation

3 2.5" Insulation 2003 Baseline + Heat Traps + 2.5" Insulation

4 3" Insulation 2003 Baseline + Heat Traps + 3" Insulation

5 78% RE 2003 Baseline + Heat Traps + 3" Insulation +

Improved Flue Baffles (78% RE)

6 Interrupted

Ignition

2003 Baseline + Heat Traps + 3" Insulation +

Improved Flue Baffles (78% RE) + Interrupted

Ignition

4 7 Increased HX

Area

2003 Baseline + Heat Traps + 3" Insulation +

Interrupted Ignition + Increased Heat

Exchanger Area (82% RE)

RE= Recovery Efficiency
9-138

9.8 STATISTICAL SIGNIFICANCE

9.8.1 Background

We tested the validity of our LCC calculation methodology by conducting a statistical

analysis of the LCC results. We wanted to verify that the differences between design options were

true differences and not the result of sampling variation. Results for 10,000 simulations of life-cycle

and energy costs under different design options were examined to determine which design option(s)

generated lower life-cycle and/or energy costs.

Since each simulation consists of the same input variables (representing a hypothetical

household) measured at both a baseline and different design options, the variables used in the

analysis were calculated by subtracting the appropriate baseline value from the value obtained under

one of the proposed design options. This achieves two very important goals. First, since each

household serves as its own control, the precision of statistical tests is dramatically increased,

allowing techniques such as t-tests and analysis of variance (ANOVA) to effectively detect

differences undetected from samples not having built-in controls. Secondly, using differences instead

of the original values eliminates possible problems due to correlation among the simulations. We

considered two variables: Delta LCC, representing the difference in LCC value between a design

option and its baseline value, and Delta Q, representing the difference in energy consumption

between a design option and its baseline value.

9.8.2 Analytic Results 

With data representing differences from a baseline value, there are usually two main

questions of interest. First, since a difference of zero represents no change, it is of interest to

determine if the mean difference observed under a particular design option is different from zero.

The appropriate statistical test for this purpose is a one-sample t-test. The results of one-sample ttests for both the Delta LCC values and the Delta Q values are summarized in Tables 9.8.1 through

9.8.4. We have shown the results for electric and gas-fired water heaters.

The extremely low probability levels (Pr(mean = 0)) seen in the tables are an indication that

the means being studied are significantly different from zero. Thus, for each of the design options,

the mean value reported can be considered to be different from zero, and electric water heater design

options 1, 2, 3, and 4 result in lower-than-baseline LCC values, while design options 5 and 6 result

in higher-than-baseline LCC values. Gas-fired water heater design options 1, 2, 3, and 4 result in

lower-than-baseline LCC values, while design options 5, 6, 7, and 8 result in higher-than-baseline

LCC values. For the energy consumption variables, it is clear that each of the electric water heater

design options shows lower energy consumption, and, as we proceed through the design options

going from 1 to 6, the reduction in consumption increases, with design option 6 showing the largest

reduction. However, for gas-fired water heaters, each design option shows an increased energy

consumption with design option 8 showing the largest increase.
9-139

Table 9.8.1 Sample t-test Results for Electric Delta LCC

Delta LCC

Design

Option

Lower 95%

Confidence

Interval

$

Average

$

Upper 95%

Confidence

Interval

$

t-value

$

Pr (average = 0)

1 -31.14 -30.56 -29.98 -102.84 < .0001

2 -36.57 -35.85 -35.13 -97.38 < .0001

3 -32.93 -31.69 -30.46 -50.27 < .0001

4 -24.62 -22.64 -20.67 -22.51 < .0001

5 18.39 20.55 22.71 18.64 < .0001

6 79.25 82.12 85.00 55.94 < .0001

Table 9.8.2 Sample t-test Results for Electric Delta Q

Delta Q

Design

Option

Lower 95 %

Confidence

Interval

(Btu/day)

Average

(Btu/day)

Upper 95 % 

Confidence Interval

(Btu/day)

t-value

(Btu/day)

Pr (average = 0)

1 -544 -539 -533 -176 <.0001

2 -735 -728 -721 -207 <.0001

3 -1336 -1325 -1315 -253 <.0001

4 -1777 -1760 -1744 -205 <.0001

5 -1861 -1843 -1825 -200 <.0001

6 -2133 -2114 -2095 -215 < .0001
9-140

Table 9.8.3 Sample t-test Results for Gas Delta LCC

Delta Q

Design

Option

Lower 95 %

Confidence

Interval

(Btu/day)

Average

(Btu/day)

Upper 95 % 

Confidence Interval

(Btu/day)

t-value

(Btu/day)

Pr (average = 0)

1 -15.88 -15.65 -15.41 -132.47 <.0001

2 -6.36 -5.43 -4.49 -11.35 <.0001

3 -31.66 -30.44 -29.21 -48.70 <.0001

4 -12.88 -11.45 -10.02 -15.69 <.0001

5 9.62 15.10 20.59 5.40 <.0001

6 28.29 33.84 39.38 11.96 < .0001

7 88.69 94.66 100.63 31.09 < .0001

8 237.24 244.17 251.10 69.09 < .0001

Table 9.8.4 Sample t-test Results for Gas Delta Q

Delta Q

Design

Option

Lower 95 %

Confidence

Interval

(Btu/day)

Average

(Btu/day)

Upper 95 % 

Confidence Interval

(Btu/day)

t-value

(Btu/day)

Pr (average = 0)

1 1308 1320 1331 225 <.0001

2 2436 2455 2475 243 <.0001

3 5962 5996 6029 352 <.0001

4 6645 6683 6720 352 <.0001

5 7380 7421 7464 347 <.0001

6 8068 8114 8159 350 < .0001

7 8517 8565 8612 352 < .0001

8 17733 17817 17900 419 < .0001

Having established that the changes in LCC and energy consumption values are actually

different from zero, the other statistical question of interest has to do with comparisons among the

different design options. For example, Table 9.8.1 indicates that the average difference from baseline
9-141

LCC values for design options 2 and 3 are -35.85 and -31.69, respectively. Having established that

both of these values are significantly different from zero, it is of interest to test to see if these two

mean values differ from each other. The appropriate statistical technique to test questions of this type

is ANOVA, followed by a suitable multiple comparison procedure. Tables 9.8.5 and 9.8.6 present

the results of these analyses for the Delta LCC and Delta Q values, respectively. 

The very low probability values (Pr > F) in Tables 9.8.3 and 9.8.4 indicate that there are

dramatic differences among the means of both LCC and energy consumption under the six electric

water heater design options and eight gas-fired water heater design options. The multiple comparison

test for electric delta LCC showed that the mean of each design option was significantly different

from all the others, except for design options 1 and 3 which were not significantly different. The

multiple comparison test for electric delta Q showed that the mean of each design option was

significantly different from all of the other design options.

Table 9.8.5 Analysis of Variance for Electric Delta LCC

Source df Sum of

Squares

Mean Square F-value Pr > F

Design Option 5 108487177 216978435 2601.32 < 0.0001

Residuals 59994 500406166 8341

Total 59999 608893343

Table 9.8.6 Analysis of Variance for Electric Delta Q

Source df Sum of

Squares

Mean Square F-value Pr > F

Design Option 5 20332616649 4066523330 8034.00 < 0.0001

Residuals 59994 30366828258 506164

Total 59999 50699444907

The multiple comparison test for gas delta LCC (Table 9.8.7) showed that the means for

design options 1, 2, and 4 were not significantly different, but that the means for the other design

options were significantly different from 1, 2, and 4 as well as from all the other design options. The

multiple comparison test for gas delta Q (Table 9.8.8) showed that the means for all the design

options were significantly different from each other.
9-142

Table 9.8.7 Analysis of Variance for Gas Delta LCC

Source df Sum of

Squares

Mean Square F-value Pr > F

Design Option 7 580969548.81 82995649.83 1712.95 < 0.0001

Residuals 79992 3875761505.45 48451.86

Total 79999 4456731054.25

Table 9.8.8 Analysis of Variance for Gas Delta Q

Source df Sum of

Squares

Mean Square F-value Pr > F

Design Option 7 1.741903E+12 2.488433E+11 47617.56 < 0.0001

Residuals 79992 4.180279E+11 5.225871E+06

Total 79999 2.159931E+12

9.8.3 Conclusion 

When the simulation results are viewed as paired observations between a baseline and a

proposed design option (representing different design options), each of the design options produces

changes in LCC and energy consumption values which are significantly different from zero. LCC

values decreased for four of the electric and gas design options, and increased for the remaining.

Energy consumption values decreased for all electric design options, with higher-numbered design

options demonstrating increased reductions in consumption.
9-143

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