EnergyConservationStandardsforResidentialWaterHeaters,DirectHeatingEquipment,andPoolHeatersPreliminaryActivitiesandAnalysesPublicMeetingRulemakingOverviewBuildingTechnologiesProgramOfficeofEnergyEfficiencyandRenewableEnergyU.S.DepartmentofEnergyFebruary9,2009PurposeofthePublicMeeting�Topresentmethodologiesandcharacterizeresultsforanalysestodate.�Todiscussspecificissuesrelatedtoeachanalysis.�Toseekinputfromattendeesonmethodologies,assumptionsanddatasources.�Todescribeupcominganalysesandnextsteps.2TheEnergyPolicyandConservationAct(EPCA)directsDOEtoconsidersevenfactorswhensettingenergyconservationstandardsFactorAnalysis1.EconomicimpactonconsumersandmanufacturersLife­cyclecostanalysisManufacturerimpactanalysis2.LifetimeoperatingcostsavingsLife­cyclecostanalysis3.TotalprojectedenergysavingsNationalimpactanalysis4.ImpactonutilityorperformanceScreeninganalysisEngineeringanalysis5.ImpactofanylesseningofcompetitionManufacturerimpactanalysis6.NeedfornationalenergyconservationNationalimpactanalysis7.OtherfactorstheSecretaryconsidersrelevantEnvironmentalassessmentUtilityimpactanalysisEmploymentimpactanalysis3StepsfortheHeatingProductsStandardsRulemaking:PreliminaryActivitiesandAnalysesScreeningAnalysisEngineeringAnalysisEnergyUseCharacterizationShipmentsAnalysisNationalImpactAnalysisMarkupstoDetermineProductPriceLife­CycleCostandPaybackPeriodAnalysesMarket&TechnologyAssessmentFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleEffectiveDate4KeyDocumentsDescribingthePreliminaryActivities�ExecutiveSummaryincludes:•Anoverviewofthepreliminaryactivitiesandpreliminarytechnicalsupportdocument(TSD);•Keyresultsoftheanalyses;and•IssuesonwhichDOEseekscommentfrominterestedparties.�Chapter2ofthepreliminaryTSDprovidesasummaryofthepreliminaryactivitiesandincludes:•Areviewoftheanalysesconducted;and•AdiscussionofcommentsontheanalyticalFrameworkfrominterestedpartiesandDOE’sresponsestothosecomments.�NoticeofPublicMeeting(NOPM)andAvailabilityofthePreliminaryTSDincludes:•DetailsofthepublicmeetingfortheHeatingProductspreliminaryactivitiesandanalyses;and•Adescriptionofthepreliminaryanalyses,results,anddocumentationavailableonthewebsiteforinterestedpartiestoreview.5NextStepsintheStandardsRulemaking:NOPRFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleEffectiveDateTrialStandardLevelsRevisePreliminaryAnalysesManufacturerImpactAnalysisUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis6CommentsfromParticipants�Participantsareinvitedtoprovidesummarycommentsorstatements.�Participantsareinvitedtoraiseadditionalissuesfordiscussiontoday.�InterestedpartiesmayprovidecommentsonthepreliminaryanalysesthroughMarch16,2009.78PreliminaryActivitiesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleNationalImpactAnalysisEnergyUseCharacterizationMarketandTechnologyAssessmentScreeningAnalysisEngineeringAnalysisMarkupsforProductPriceDeterminationLife­CycleCostandPaybackPeriodAnalysisShipmentsAnalysisIntroductionPurpose�Market&TechnologyAssessment:•Tocharacterizetheresidentialwaterheater,directheatingequipment,andpoolheatermarketstodetermineavailableproductefficiencies,manufacturers,shipmentsbyproductclass,andtechnologiesavailableforincreasingefficiencies.�ScreeningAnalysis:•ToapplyscreeningcriteriaestablishedbyDOEtodeterminewhichtechnologiestoevaluateandwhichtoscreenout.�EngineeringAnalysis:•Toevaluatetechnologiesthatimproveefficiencyrelativetothebaselineunits.•Tocharacterizemanufacturercost­efficiencyrelationshipsforhigherefficiencyproducts.9MarketandTechnologyAssessmentMarketCharacteristics:WaterHeaters�StorageWaterHeaters:•Threemajordomesticmanufacturersholdover90percentofthestoragewaterheatermarket.•ThemajorityofproductsaremanufacturedintheU.S.However,thereareseveralmanufacturingfacilitieslocatedoverseas.•4.4milliongas­firedstoragewaterheaters,24,000oil­firedstoragewaterheaters,and4.5millionelectricstoragewaterheaterswereshippedin2007(2007AHRIdata).�InstantaneousGas­FiredStorageWaterHeaters:•Productsareprimarilymanufacturedoverseas.•DOEidentifiedfivemanufacturersofinstantaneousgas­firedwaterheaters.–Fourofthesecompaniesareforeign­ownedandoperated.–Theonedomesticmanufacturerisalsoamajorstoragewaterheatermanufacturer.•Over322,000instantaneousgas­firedwaterheaterswereshippedin2007(2007AHRIdata).10MarketandTechnologyAssessmentWaterHeaters:ProductClassesNominalinputofover50,000Btu/hupto200,000Btu/h;ratedstoragevolumeof2gallonsorlessInstantaneousGas­Fired*Dimensionsof36incheshigh,25inchesdeep,and24incheswideTabletopNominalinputof12kW(40,956Btu/h)orless;ratedstoragevolumefrom20to120gallonsElectricStorage*Nominalinputof105,000Btu/horless;ratedstoragevolumeof50gallonsorlessOil­FiredStorage*Inputof12kWorless;containsnomorethanonegallonofwaterper4,000Btu/hofinputNominalinputof75,000Btu/horless;ratedstoragevolumefrom20to100gallonsCharacteristicsInstantaneousElectricGas­FiredStorage*ResidentialWaterHeaterType*DOEonlyconsideredgas­firedstorage,oil­firedstorage,electricstorage,andinstantaneousgas­firedwaterheatersintoday’srulemaking.11MarketandTechnologyAssessmentMarketCharacteristics:DirectHeatingEquipment�DOEidentifiedeightmanufacturersofdirectheatingequipment.•Threeofthemanufacturersproduceequipmentinallsixteenequipmentclasses.•Fiveofthemanufacturersexclusivelyproducefireplaceproducts.�Atleastthreemanufacturersproducedirectheatingequipmentdomestically.�Someproductclassesofdirectheatingequipmentaresoldexclusivelyasreplacementproducts.�Over169,000unitswereshippedin2005(2007AHRIdata),includingfireplaceheaters.12MarketandTechnologyAssessmentDirectHeatingEquipment:ProductClasses�These16productclasseswereestablishedbytheNationalAppliance13Over18,000upto20,000Over20,000upto27,000Over27,000upto46,000Over10,000upto12,000Over12,000upto15,000Over15,000upto19,000Over19,000upto27,000Over27,000upto46,000Over46,000Upto42,000GasWallFanUpto18,000GasRoomOver37,000Upto37,000GasFloorUpto10,000GasWallGravityOver46,000Over42,000HeatingCapacity(Btu/h)DirectHeatingEquipmentTypeEnergyConservationAct(NAECA).MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassesforVentedFireplaceHeaters�DOEdidnotseparatefireplaceheatersintoaseparateproductclass.�DOEdeterminedthatfireplaceheatersusethesamefuel,functionsimilarlytogaswallandgasroomheaters,anddonotcontainanyperformances­relatedfeaturesthatwouldaffectthemeasurementofannualfuelutilizationefficiency(AFUE)usingDOE’stestprocedure.�ManufacturerstestfireplaceheaterswithDOE’stestprocedureforventedhomeheatingequipmentinAppendixOtoSubpartBofPart430andcertifytostandardsprovidedinsection430.32(i)of10CFRPart430(EnergyandWaterConservationStandards:DirectHeatingEquipment).�DOEnotesthattheAHRIConsumers’Directorylistsfireplaceheatersaseitherroomheatersorwallfurnaces.14MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassesforVentedFireplaceHeatersDOEinvitescommentsfrominterestedpartiesontheinclusionofventedfireplaceheatersintheexistingproductclassesfordirectheatingequipment.Specifically,DOEinvitescommentonthemodificationoftheexistingproductclasses(asshownonthenextslide)toincludeventedfireplaceheaters.(Issue#2)15MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassesforVentedFireplaceHeaters�Inresponsetocomments,DOEproposesnewdescriptionstohelpinterestedpartiesOver18,000upto20,000Over20,000upto27,000Over27,000upto46,000Over10,000upto12,000Over12,000upto15,000Over15,000upto19,000Over19,000upto27,000Over27,000upto46,000Over46,000Upto42,000GasWallFanandGasRecessedFanHearthUpto18,000GasRoomandGasNon­RecessedHearthOver37,000Upto37,000GasFloorUpto10,000GasWallGravityandGasRecessedGravityHearthOver46,000Over42,000HeatingCapacity(Btu/h)DirectHeatingEquipmentTypedeterminewhichcategorytheirproductswouldfallunder:16MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassOrganization�DOEexaminedtherelationshipbetweenAFUEandinputratingfordirectheatingequipmentbyreviewingAHRI’sConsumers'Directoryandavailableproductliteratureanddeterminedthefollowing:�GasWallFan­typeDirectHeatingEquipment:•ThemarketdatademonstratetwotrendsbetweenAFUEandheatingcapacity:–Forlowerefficiencyproducts(i.e.,thosewithefficienciesrangingfrom73percentAFUEto77percentAFUE),DOEnoticedthemarketdatagenerallyshowsincreasingefficiencywithincreasingcapacity.–Forhigherefficiencyproducts(i.e.,thosewithefficienciesfrom78percentAFUEandhigher),DOEnoticedthemarketdatagenerallyshowstheoppositetrendofdecreasingefficiencywithincreasingcapacity.�GasWallGravity­typeDirectHeatingEquipment:•Manufacturersarenotofferingproductsovertheentireinputcapacityrange,sosomeproductclassesmaybeunnecessary.17MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassOrganization�GasFloor­TypeDirectHeatingEquipment:•TheAHRIdirectorylistsonly23models.•75percenthaveaninputcapacityatorabove37,000Btu/h,andonlyoneproductisratedwithanAFUEbelow57percent(theFederalenergyconservationstandardforthehighercapacityrange).•Theexistingproductclassescouldbeconsolidatedintooneproductclass.�Gasroom­typedirectheatingequipment:•ThemarketdatashowageneraltrendofincreasingAFUEwithinputcapacityrange.•SomeinputcapacityrangescouldbeconsolidatedbasedonthedistributionofmodelsintheAHRIdirectory.18MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassOrganization�BasedonDOE’sreviewoftheproductsinAHRI’sConsumers’Directory,DOEproposestocombineandreducethenumberofproductclassesforeachofthefourproducttypeswithindirectheatingequipmentasfollows:Over27,000upto46,000Upto27,000Over27,000upto46,000Upto42,000Upto20,000Over20,000upto27,000Over42,000GasWallFanandGasRecessedFan­typeHearthGasRoomandGasNon­RecessedHearthAllGasFloorOver46,000GasWallGravityandGasRecessedGravity­typeHearthOver46,000HeatingCapacity(Btu/h)DirectHeatingEquipmentType19MarketandTechnologyAssessmentRequestforComment:DirectHeatingEquipment:ProductClassOrganizationDOEinvitescommentsfrominterestedpartiesontheconsolidationofproductclassesfordirectheatingequipment.(Issue#3)20MarketandTechnologyAssessmentMarketCharacteristics:PoolHeaters�DOEidentifiedfivemanufacturersofpoolheaters.�Allmanufacturersaredomesticallyownedandoperated.�Themajorityofproductsareshippeddomestically.�DOEestimatedtherewereapproximately300,000gas­firedpoolheatersshippedin2007basedonDOE’sshipmentsmodel.21MarketandTechnologyAssessmentPoolHeaters:ProductClassResidential,Gas­FiredProductClassDescription�DOEintendstoclassifyallgas­firedpoolheatersforresidentialuseasoneproductclass.�DOEdoesnotintendtospecifyaninputcapacityrangeforresidentialgas­firedpoolheaters.•EPCAdoesnotincludeaspecificinputcapacitylimitwhendeterminingthescopeofcoverageforresidentialpoolheaters.•EPCAdefinesconsumerproducts(i.e.,residentialproducts)as:–Anyarticle...which,toanysignificantextent,isdistributedincommerceforpersonaluseorconsumptionbyindividuals...(42U.S.C.6291(1))•Manufacturersshouldconsiderpoolheatersintendedforresidentialuse(i.e.,marketedforuseinaresidence)ascoveredbytheresidentialgas­firedpoolheaterenergyconservationstandard,regardlessofinputcapacity.22MarketandTechnologyAssessmentPoolHeaters:ProductClassResidential,Gas­FiredProductClassDescription�DOEincludesspaheaterswithinthepoolheaterproductclass.•Section321ofEPCAdefinespoolheatersasbeingcapableof“heatingwaterinswimmingpools,spas,hottubs,andsimilarapplications.”(42U.S.C.6291(25))•Spaheatersperformsimilarfunctionsaspoolheatersanddonotincludeanyperformanceoroperatingfeaturesthatwouldcausetheenergyefficiencytobedifferentfrompoolheaters.�DOEdidnotincludeelectricequivalents.•DOEcurrentlyhasnotestproceduretomeasurecoefficientofperformanceofheatpumppoolheaters.•Residentialgas­firedpoolheaterenergyconservationstandardsarebasedonthermalefficiency.23TechnologyAssessmentTechnologyAssessment�DOEidentifiedtechnologiesforeachproductcoveredinthisrulemakingfromthefollowingsources:•Technicalsupportdocumentsfrompreviousrulemakings;•Literaturereview;•Productteardowns;and•Inputfrominterestedparties.�ThefulllistoftechnologiesthatDOEidentifiedcanbefoundinChapter3theMarketandTechnologyAssessmentofthepreliminarytechnicalsupportdocument.24ScreeningAnalysisAdd­OnHeatPumpWaterHeaters�Add­onHeatPumpWaterHeaterswerenotconsideredinthisrulemaking.•Anadd­onheatpumpwaterheaterisdefinedas“anair­to­waterheatpumpdesignedforusewithastoragetypewaterheaterorastoragetankthatisnotspecifiedorsuppliedbythemanufacturer.”(10CFRPart430subpartBtoappendixE)•Add­onheatpumpwaterheatersarenotconsideredwaterheatersfromthepointofmanufacture;•Theyarefield­installedontoexistingwaterheaterinstallations;and•Add­onheatpumpwaterheaterscannotfunctionaswaterheatersuntiltheyareinstalledonanexisting,fullyoperatingstoragewaterheater.�Add­onHeatPumpWaterHeatersdonotmeetthedefinitionofwaterheaterfromthepointofmanufacture,andtherefore,arenotconsideredinthisrulemaking.25ScreeningAnalysisScreeningAnalysisMethodology�Technologieswerescreenedusingthefollowingcriteria:•Technologicalfeasibility;•Practicabilitytomanufacture,installandservice;•Adverseimpactsonproductutilityorproductavailability;and•Adverseimpactsonhealthorsafety.26ScreeningAnalysisTechnologiesScreenedOut:WaterHeaters�DOEappliedthescreeningcriteriatothegas­fired,oil­fired,electricstorageandinstantaneousgas­firedwaterheatersconsideredunderthisrulemaking.�DOEscreenedout10ofthetechnologiesconsideredintheTechnologyAssessmentforeachofthewaterheatertypes.�DOEscreenedin16technologies.�Chapter4theScreeningAnalysisincludesdetailsonthetechnologiesDOEscreenedout,therationaleforscreeningthosetechnologiesout,andhoweachcriteriawasapplied.27ScreeningAnalysisRequestforComment:ScreeningAnalysis:HeatPumpWaterHeaterPreliminaryScreeningAnalysisConclusion�Shipments:•Approximately10,000peryear(lessthan1percent).�IncentivePrograms:•ENERGYSTARhasannouncedHeatPumpWaterHeatercriteriaincluding:–Energyfactorof2.0orgreater;–Firsthourratingof50gallonsorgreater;and–Warrantyfor6yearsormoreonsealedsystem.28ScreeningAnalysisRequestforComment:ScreeningAnalysis:HeatPumpWaterHeaterPreliminaryScreeningAnalysisConclusion�ProductAnnouncements:•GE’sIntegralHeatPumpWaterHeaterinresponsetoENERGYSTAR.�Reliability:•OakRidgeNationalLab(ORNL)study,May2002.–Unitshadnofailuresassociatedwithcompressors,evaporatorfans,orpowerrelaysduringthedurabilitytest.–Unitshadnoperformancedegradationaftermorethan7,000compressorcycles(~10yearsofsimulateduse).•CaliforniaEnergyCommission(CEC)report,2004.–Failuresduringafieldtest:9outof20unitsexperiencedfailureswiththecontrolboard.–Sixofthosecontrolboardswerereplacedentirely.–Themanufactureraddressedandcorrectedtheseproblemsinsubsequentdesigns.•ORNLtest,2004.–Fiveredesignedunitscitedinthe2004CECreport.–Newunitsincludedmorerobustcontrolsystemsandcontrolboards.–Nounitsfailed.29ScreeningAnalysisRequestforComment:ScreeningAnalysis:HeatPumpWaterHeaterPreliminaryScreeningAnalysisConclusion�DOEinvitescommentsastowhetherHeatPumpWaterHeatersarepracticaltoinstall.DOEinvitescommentsonthefollowing:•Installationsinconfinedspaces;•Airflowrequirementstoevaporatorandimpactsonconditionedspace;•Impactsonsmallresidenceslessthan1,000squarefeet;•Installationsrequiringbuildingmodificationsforcondensateremovalandairflow;•Impactsonenergyefficiencyasaresultofinstallation’sairflowcharacteristics;•Noise;and•Condensateremovalandcondensateinhumidclimates.�DOEseekscommentsastowhetherHeatPumpWaterHeatersarepracticaltoserviceandarereliable.DOEinvitescommentsonthefollowing:•Serviceinfrastructure;•NumberofskilledprofessionalsqualifiedtoservicecomplexsystemsofHeatPumpWaterHeaters;•Failuremodesasaresultofanincreaseinproductcomplexity;•Historicalrecordoffailures;•Failureratedrelativetootherwaterheaters;and30•ReliabilitytestsandstudiesconductedsincetheJanuary2001FinalRule.ScreeningAnalysisRequestforComment:ScreeningAnalysis:HeatPumpWaterHeaterPreliminaryScreeningAnalysisConclusion�DOEinvitescommentsastowhetherHeatPumpWaterHeatersarepracticaltomanufacturer.DOEinvitescommentsonthefollowing:•SincetheJanuary2001FinalRuleheatpumpwaterheatersaleshavenotexceededonepercentofelectricstoragewaterheaters;•Themanufacturingconversionsassociatedwithintroducingheatpumpwaterheaterproducts;•TheportionofproductionthatwouldbeconvertedtoheatpumpwaterheatersinresponsetotheENERGYSTARProgram;and•Thepracticabilitytoconvertmanufacturingentirelytoheatpumpwaterheatersinresponsetoanamendedenergyconservationstandardforelectricstoragewaterheatersatalevelthatwouldrequireheatpumpwaterheaters.31ScreeningAnalysisRequestforComment:ScreeningAnalysis:HeatPumpWaterHeaterPreliminaryScreeningAnalysisConclusionDOEinvitescommentsfrominterestedpartiesontheviabilityofheatpumpwaterheatersasatechnologyforincreasingtheenergyefficiencyforelectricstoragewaterheaters.(Issue#4)32ScreeningAnalysisTechnologiesScreenedOut:DirectHeatingEquipmentandPoolHeaters�DirectHeatingEquipment.•DOEscreenedout4ofthetechnologiesconsideredintheTechnologyAssessmentforeachofthegaswallfan,gaswallgravity,gasfloor,andgasroomdirectheatingequipmenttypes.•DOEscreenedin13technologies.�Gas­FiredPoolHeaters.•DOEscreenedout1ofthetechnologiesconsideredintheTechnologyAssessmentforgas­firedpoolheaters.•DOEscreenedin5technologies.�Chapter4theScreeningAnalysisincludesdetailsonthetechnologiesDOEscreenedout,therationaleforscreeningthosetechnologiesout,andhoweachcriteriawasapplied.33EngineeringAnalysisPurposeoftheEngineeringAnalysis�Characterizetherelationshipbetweenmanufacturercostandenergyefficiency.DownstreamAnalyses•Life­CycleCostandPaybackPeriod•NationalImpacts•ManufacturerImpactAnalysisCost–EfficiencyRelationship

Incremental Manufacturing CostEfficiency34EngineeringAnalysisEngineeringAnalysis:RepresentativeProducts�DOEconductedtheengineeringanalysisbyfirstexaminingrepresentativeproducts.�DOEreviewedtheshipmentsdataandconsideredtheproductswiththehighestnumberofshipmentsas“representative”ofaproductclass.�DOEdistinguishedrepresentativeproductsby:•Storagevolumeforstoragewaterheaters;•Inputcapacityforinstantaneousgas­firedwaterheaters;•Inputcapacityfordirectheatingequipment;and•Inputcapacityforpoolheatersbyratedinputcapacity.�DOEdeterminedmanufacturingproductcosts(MPCs)foreachoftherepresentativeproducts.35EngineeringAnalysisEngineeringAnalysis:RepresentativeProductsOver46,000Btu/hGasRoomDirectHeatingEquipment0gallons(199kBtu/hInputCapacity)InstantaneousGas­FiredWaterHeaterOver42,000Btu/hGasWallFanDirectHeatingEquipmentOver27,000upto46,000Btu/hGasWallGravityDirectHeatingEquipmentOver37,000Btu/hGasFloorDirectHeatingEquipmentGas­FiredPoolHeatersElectricStorageWaterHeaterOil­FiredStorageWaterHeaterGas­FiredStorageWaterHeater30gallons250,000Btu/h50gallons40gallonsRepresentativeProducts36EngineeringAnalysisEngineeringAnalysis:BaselineEfficiencyLevels�DOEdeterminedbaselineefficiencylevelsforeachrepresentativeproductbasedontheFederalenergyconservationstandards.•Forexample,thebaseline,(i.e.,theFederalenergyconservationstandard)forgas­firedstoragewaterheatersat40gallons(i.e.,therepresentativestoragevolume)is0.59EF.64percentAFUEGasRoomDirectHeatingEquipment0.62EFInstantaneousGas­FiredWaterHeater74percentAFUEGasWallFanDirectHeatingEquipment64percentAFUEGasWallGravityDirectHeatingEquipment57percentAFUEGasFloorDirectHeatingEquipmentGas­FiredPoolHeatersElectricStorageWaterHeaterOil­FiredStorageWaterHeaterGas­FiredStorageWaterHeater0.53EF78percentthermalefficiency0.90EF0.59EFBaselineEfficiencyLevels�DOEanalyzedbothpilotandelectronicignitionforgas­firedpoolheatersaspartofthebaselinedesign.37EngineeringAnalysisEngineeringAnalysis:Max­TechEfficiencyLevels�DOEreviewedpubliclyavailablemarketdata,productcatalogs,technicaljournals,andprototypetechnologiestodeterminetheefficiencylevelscorrespondingtothemaximumtechnology(i.e.,max­tech)efficiencylevelsforeachproductclass.93percentAFUEGasRoomDirectHeatingEquipment0.92EFInstantaneousGas­FiredWaterHeater80percentAFUEGasWallFanDirectHeatingEquipment75percentAFUEGasWallGravityDirectHeatingEquipment78percentAFUEGasFloorDirectHeatingEquipmentGas­FiredPoolHeatersElectricStorageWaterHeaterOil­FiredStorageWaterHeaterGas­FiredStorageWaterHeater0.68EF95percentthermalefficiency2.2EF0.77EFMax­TechEfficiencyLevels38­EngineeringAnalysisEfficiency­LevelApproach�Cost­efficiencycurvesweredevelopedbyDOE.•Materialandcomponentcostsweregeneratedduringproductteardownanalysisandenteredintocostmodel.•Costmodelgeneratedmanufacturing,material,labor,andoverheadcosts.•Physicalteardownanalysisconductedwithrepresentativeproducts.Costmodelextendedanalysistootherproducts(i.e.,othercapacities,efficiencies)with“virtualteardowns.”FullProductionCostConversionCosts(NonProductionCosts)ManufacturerCost+=�Directmaterial�Sales&marketing�Directlabor�Research&development�Factoryoverhead�Building�Depreciation�Tooling/Equipment�Manufacturerinterviewswereconductedtofurtherrefinetheanalysisinputsandtheresultsgeneratedbythecostmodel.39EngineeringAnalysisEngineeringAnalysisMethodsandApproach√√√ProductTeardownRepresentativePoolHeatersDirectHeatingEquipmentWaterHeaters√√√√All√√√√AllEfficiency­LevelApproachRepresentative√√√√AllRepresentativeManufacturerInterviewsIdentificationofEfficiencyPathwayIdentificationofTechnologiesMarketDataGatheringMethod�DOEconductedeachanalysisforallproductscoveredbytheappropriateratedvolumeorcapacityrangeforeachproductclass.�DOEalsoconductedphysicalteardownsfortherepresentativeproductsandusedthecostmodeltoexpandtheanalysistoallcoveredproducts.40EngineeringAnalysisReverse­EngineeringMethodologyRawMaterialsFinishedMaterialsPurchasedPartsSelectionofUnitsPhysicalTeardownBillofMaterialsAssemblyProcessesManufacturingCostFabricationProcesses41EngineeringAnalysisDevelopBaselineCalculateCostsDevelopEfficiencyPathwayGenerateCostEfficiencyCurvesCost­EfficiencyCurveDevelopment�Definebaselinespecificationsforeachproductclass;�Identifyefficiencylevelsfromthebaselinetothemax­techasapathwayforimprovingenergyefficiency;�Conductteardownanalysisforrepresentativeproductsattheefficiencylevelsidentified;and�Generatecost­efficiencycurves,whichaccountingforfullproductioncosts.42EngineeringAnalysisGas­FiredStorageWaterHeaters:EngineeringAnalysisResults(40Gallons,RepresentativeRatedStorageVolume)0.770.660.650.640.630.620.59EnergyFactor(EF)$425Condensing,PowerVent,2”InsulationMax­Tech$291ElectronicIgnition,PowerVent,2”Insulation5$283$276$175$167$1604321BaselineEfficiencyLevelManufacturerProductionCost(MPC)ElectronicIgnition,PowerVent,1.5”InsulationElectronicIgnition,PowerVent,1”InsulationStandingPilot,2”InsulationStandingPilot,1.5”InsulationCurrentFederalStandard,StandingPilot,1”InsulationTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.43EngineeringAnalysisOil­FiredStorageWaterHeaters:EngineeringAnalysisResults(30Gallons,RepresentativeRatedStorageVolume)0.680.660.620.600.580.560.540.53EnergyFactor(EF)$540ElectronicIgnition,1”FiberglassInsulation,EnhancedFlueBaffles6$551ElectronicIgnition,1”FoamInsulation,EnhancedFlueBafflesMax­Tech$547ElectronicIgnition,2.5”FoamInsulation5$534$539$529$518$5104321BaselineEfficiencyLevelManufacturerProductionCost(MPC)ElectronicIgnition,2”FoamInsulationElectronicIgnition,2.5”FiberglassInsulationElectronicIgnition,2”FiberglassInsulationElectronicIgnition,1.5”FiberglassInsulationCurrentFederalStandard,ElectronicIgnition,1”FiberglassInsulationTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.44EngineeringAnalysisElectricStorageWaterHeaters:EngineeringAnalysisResults(50Gallons,RepresentativeRatedStorageVolume)2.20.950.940.930.920.910.90EnergyFactor(EF)$490HeatPumpWaterHeaterMax­Tech$1604”FoamInsulation5$144$136$132$128$1224321BaselineEfficiencyLevelManufacturerProductionCost(MPC)3”FoamInsulation2.5”FoamInsulation2.25”FoamInsulation2”FoamInsulationCurrentFederalStandard,1.5”FoamInsulationTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.45EngineeringAnalysisRequestforComment:WaterHeaters:Energy­EfficiencyEquations�Thecurrentconservationstandardsforgas­firedandelectricstoragewaterheaterscharacterizetherelationshipbetweenenergyfactor(EF)andratedstoragevolumeusingthefollowingenergy­efficiencyequations:EF=0.97–(0.00132XRatedStorageVolume)ElectricStorageEF=0.67–(0.0019XRatedStorageVolume)FederalEnergy­EfficiencyEquationGas­FiredStorageResidentialWaterHeaterType�DOEisconsideringchangestotheenergy­efficiencyequations.�DOEisinvestigatingthesechangesinresponsetoarequestsubmittedbyAHRIforgas­firedstorageandelectricstoragewaterheaters.�DOEchosenottoinvestigatetheenergy­efficiencyequationforoil­firedstoragewaterheaters.46Engineering AnalysisRequest for Comment:Water Heaters:  Current Energy­Efficiency Equations�In response to AHRI’s request, DOE further investigated the relationship between EFand rated storage volume for gas­fired and electric storage water heaters.�If DOE maintains the slope of the Federal energy conservation standards and amendsthe standard by changing the y­intercept, then the efficiencies analyzed for electricstorage water heaters (as an example) would take the form:1.000.95�Electric StorageWater Heaters.Current Standard0.91EF Standard0.92EF Standard0.900.93EF Standard0.94EF Standard0.95EF Standard0.85

Energy Factor (EF)0.80203040506070809010011012047Rated Volume (Gallons)Engineering AnalysisRequest for Comment:Water Heaters:  Alternative Energy­Efficiency Equations�As one alternative, DOE could group water heaters by model series and assign an efficiency level toeach model series.  DOE could then vary the slope to maximize the number of models that meet theappropriate efficiency level for the range of rated storage volumes. Additionally for electric storagewater heaters, DOE could cap the energy­efficiency equations at 0.95 EF.1.00�Alternative forElectric Storage0.95Water Heaters.Current Standard0.91EF Standard0.92EF Standard0.900.93EF Standard0.94EF Standard0.95EF Standard0.850.80203040506070809010011012048Rated Volume (Gallons)

Energy Factor (EF)Engineering AnalysisRequest for Comment:Water Heaters:  Alternative Energy­Efficiency Equations�DOE could also conduct this analysis for gas­fired storage water heaters.0.850.800.75�Alternative forGas­Fired Storage0.70Current StandardWater Heaters.0.62EF Standard0.63EF Standard0.650.64EF Standard0.65EF Standard0.66EF Standard0.600.550.500.452030405060708090100Rated Volume (Gallons)49

Energy Factor (EF)EngineeringAnalysisRequestforComment:WaterHeaterTestingandTeardownAnalysisforEnergy­EfficiencyEquationDevelopment�DOEiscurrentlytestinggas­firedandelectricstoragewaterheaters.•DOEisconductingtestinginaccordancewiththeDOEtestprocedure.•DOEisimplementingthesametestingmethodsusedforAHRIproductcertification.�DOEisconductingtestingtoconfirmandvalidateenergyfactors.•DOEisconductingtestingtoverifyEFsbeyondtherequiredtwosignificantfigures.�DOEwillthenconductateardownanalysistodeterminethespecificmethodsmanufacturersusetoobtainvariousEFsatvariousgallonsizes.•DOEwillpayparticularattentiontoamountofinsulationonthetopandthesidesofthewaterheaters.�DOEwillusethisdatatovalidatethedevelopmentofenergy­efficiencyequationsforgasfiredandelectricstoragewaterheaters.50EngineeringAnalysisRequestforComment:WaterHeaterTestingandTeardownAnalysisforEnergy­EfficiencyEquationDevelopmentDOEinvitescommentonitsapproachfordevelopingalternativeenergy­efficiencyequationsforgas­firedandelectricstoragewaterheaters.DOEalsoinvitescommentsonitsmethodforvalidatingthealternativeenergy­efficiencyequationswithateardownanalysis.(Issue#7)51EngineeringAnalysisInstantaneousGas­FiredWaterHeaters:EngineeringAnalysisResults(199kBtu/h,RepresentativeInputCapacity)TheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.0.920.850.840.820.800.780.690.62EnergyFactor(EF)$388ElectronicIgnition,PowerVent,ImprovedHeatExchangerArea,DirectVent6$643CondensingMax­Tech$379ElectronicIgnition,PowerVent,ImprovedHeatExchangerArea5$361$343$270$235$2254321BaselineEfficiencyLevelManufacturerProductionCost(MPC)ElectronicIgnition,PowerVent,ImprovedHeatExchangerAreaElectronicIgnition,PowerVentElectronicIgnition,ImprovedHeatExchangerAreaStandingPilot,ImprovedHeatExchangerAreaCurrentFederalStandard,StandingPilotTechnology52EngineeringAnalysisRequestforComment:SafetyConcernsforNear­CondensingEfficiencyLevelsforInstantaneousGas­FiredWaterHeatersDOEinvitescommentonthepotentialforsafetyissuesofinstantaneousgas­firedwaterheateroperatingatnearcondensingefficiencylevels.�DOEincludedinstantaneousgas­firedwaterheatersatnear­condensingandcondensingEFlevelsbecauseproductswereidentifiedattheselevelsthatarecurrentlyavailableonthemarket.Ifmanufacturerswerefacedwithapotentialamendedstandardatnearcondensinglevelsforallinstallations,DOEinvitescommenton:•HowwouldmanufacturerschangecurrentdesignstomitigatecorrosivecondensationformationattheseEFlevelsthatmaybepresentinsomeinstallations?•Howwouldmanufacturersaltercurrentdesignsofinstantaneousgas­firedwaterheaterstoachievesafeoperationifapotentialamendedstandardrequiredallinstallationstooperateatnear­condensingEFlevels?53EngineeringAnalysisGasWallFan­typeDirectHeatingEquipment:EngineeringAnalysisResults(Over42,000Btu/h,RepresentativeInputCapacityRange)8077767574AnnualFuelUtilizationEfficiency(percentAFUE)$468InducedDraftandElectronicIgnitionMax­Tech$413$396$382$335321BaselineEfficiencyLevelManufacturerProductionCost(MPC)ElectronicIgnition,2SpeedBlower,ImprovedHeatExchangerElectronicIgnition,ImprovedHeatExchangerElectronicIgnition,2SpeedBlowerCurrentFederalStandard,StandingPilotTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.54EngineeringAnalysisGasWallGravity­typeDirectHeatingEquipment:EngineeringAnalysisResults(Over27,000Btu/handupto46,000Btu/h,RepresentativeInputCapacityRange)757271686664AnnualFuelUtilizationEfficiency(percentAFUE)$284ElectronicIgnition4$337InducedDraftMax­Tech$259$231$224$198321BaselineEfficiencyLevelManufacturerProductionCost(MPC)StandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerCurrentFederalStandard,StandingPilotTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.55EngineeringAnalysisGasFloor­typeDirectHeatingEquipment:EngineeringAnalysisResults(Over37,000Btu/h,RepresentativeInputCapacityRange)786562615857AnnualFuelUtilizationEfficiency(percentAFUE)$410ImprovedHeatExchanger,ElectronicIgnition4$468InducedDraftMax­Tech$383$368$353$338321BaselineEfficiencyLevelManufacturerProductionCost(MPC)StandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerCurrentFederalStandard,StandingPilotTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.56EngineeringAnalysisGasRoom­typeDirectHeatingEquipment:EngineeringAnalysisResults(Over27,000Btu/handupto46,000Btu/h,RepresentativeInputCapacityRange)9378706867666564AnnualFuelUtilizationEfficiency(percentAFUE)$307ElectronicIgnition5$361InducedDraft6$282StandingPilot,ImprovedHeatExchanger4$552CondensingMax­Tech$267$252$237$221321BaselineEfficiencyLevelManufacturerProductionCost(MPC)StandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerStandingPilot,ImprovedHeatExchangerCurrentFederalStandard,StandingPilotTechnologyTheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.57EngineeringAnalysisGas­FiredPoolHeaters:EngineeringAnalysisResults(250,000Btu/h,RepresentativeInputCapacity)959086848382817978ThermalEfficiency$961SealedCombustion,Condensing,ImprovedHeatExchangerDesignMax­Tech$903SealedCombustion,Condensing,ImprovedHeatExchangerDesign7$664PowerVenting,ImprovedHeatExchangerDesign5$691SealedCombustion,Condensing6$648PowerVenting4$559/$578$544/$547$531/$534$520/$5233*2*1*Baseline*EfficiencyLevelManufacturerProductionCost(MPC)ImprovedHeatExchangerDesign,MoreEffectiveInsulation(CombustionChamber)ImprovedHeatExchangerDesignImprovedHeatExchangerDesignCurrentFederalStandardTechnology*Technologiesincorporatingeitherastandingpilotorelectronicignition.Efficiencylevelsaboveefficiencylevel3includeelectronicignition.TheMPCincludesthecostofmaterials,labor,anddirectoverheadusedtomanufactureaproduct.58EngineeringAnalysisRequestforComment:SafetyConcernsforNear­CondensingEfficiencyLevelsforGas­FiredPoolHeatersDOEinvitescommentonthepotentialforsafetyissuesofgas­firedpoolheatersoperatingatnear­condensingefficiencylevels.(Issue#6)�DOEincludedgas­firedpoolheatersatnear­condensingandcondensingEFlevelsbecauseproductswereidentifiedattheselevelsthatarecurrentlyavailableonthemarket.DOEreceivedcommentsregardingsafetyforgas­firedpoolheatersoperatingat85and86percentthermalefficiency.Ifmanufacturerswerefacedwithapotentialamendedstandardatnearcondensinglevelsforallinstallations,DOEinvitescommenton:•Howwouldmanufacturerschangecurrentdesignstomitigatecorrosivecondensationformationatthesethermalefficiencylevelsthatmaybepresentinsomeinstallations?•Howwouldmanufacturersaltercurrentdesignsofgas­firedpoolheaterstoachievesafeoperationifapotentialamendedstandardrequiredallinstallationstooperateatnear­condensingthermalefficiencylevels?59EngineeringAnalysisManufacturerSellingPrices�MSPaccountsforthenon­productioncostsandprofit(i.e.,the“manufacturermarkup”).�DOEcalculatedMSPsforResidentialHeatingProductsbyusing:•U.S.SecuritiesandExchangeCommission(SEC)10­Kreports;and•Feedbackfromengineeringinterviews.�MPCsaremultipliedbythemanufacturermarkuptodetermineMSPs.�MSPsareaninputtotheLCCanalysis.1.45InstantaneousGas­FiredWaterHeater1.38DirectHeatingEquipmentGas­FiredPoolHeatersStorageWaterHeaters1.381.38ManufacturerMSPMarkup60IssuesOtherIssuesDOEinvitescommentsandrecommendationsfrominterestedpartiesonanyotheraspectsrelatingtotheMarketandTechnologyAssessment,theScreeningAnalysis,andtheEngineeringAnalysis.61PreliminaryManufacturerImpactAnalysisPreliminaryManufacturerImpactAnalysis(MIA)Overview�DOEconductedon­siteandtelephoneinterviewswithmanufacturersof:•ResidentialWaterHeaters;•DirectHeatingEquipment;and•PoolHeaters.�Topicsincluded:•Engineeringanalysisoverview,methodology,andresults;•KeyIssues(asdefinedbymanufacturer);•Currentmarketconditions(shipments,marketshare,productmix,profitability);•Manufacturersub­groupanalysis;•Productutilityandinnovation(performancevs.efficiency,designoptions);•Potentialimpactsofamendedenergyconservationstandards(esp.conversioncosts);and•Cumulativeregulatoryburdens(state,federal,international).62PreliminaryManufacturerImpactAnalysisResidentialWaterHeaterMIA�DOEinterviewedmanufacturersrepresentingover90percentoftheU.S.residentialwaterheatingmarket.ManufacturerSub­GroupAnalysisProductUtilityandInnovationImpactsofEfficiencyStandardsCurrentMarketConditionsKeyIssuesCumulativeRegulatoryBurden63PreliminaryManufacturerImpactAnalysisResidentialWaterHeaterKeyIssues�ENERGYSTAR:•RequirementsforwaterheatersissuedonApril1,2008.•PotentialamendedenergyconservationstandardsshouldbelowenoughtoallowforpremiumefficiencyproductstobedevelopedforENERGYSTARcertification.�IncreasesinInstallationCosts:•Electricalconnections,specificventconfigurations,condensingdesigns,andheatpumpscanraiseinstallationcosts.•Increasecostsmaydecreasemarketshareandincreaseproductswitchingtoinstantaneoussystems.•Themajorityofinstantaneoussystemsaremanufacturedoverseas,whichmayimpactdomesticemployment.64PreliminaryManufacturerImpactAnalysisResidentialWaterHeaterKeyIssues�IncreasesinShippingCosts:•Asinsulationthicknessesincrease,overallproductdimensionsincrease.•Asproductsincreaseinsize,fewerproductscanbeplacedintoshippingtrailersandmoreshipmentsandtrucksarerequired.•Shippingcostsincreaseandoverallpricesbecomemoresensitivetofuelprices.�SafetyConcernsatNearCondensingLevels:•Corrosivecondensatemayformininstantaneousgas­firedwaterheatersforcertaininstallations.•Manufacturersmaybeunwillingtobeartherisksassociatedwiththeselevelsandrespondbymanufacturingfullycondensingdesigns.•CondensingtechnologyincreasesMPCsignificantly.•Aninstantaneousgas­firedwaterheaterat0.85EFdoesnothaveanadequatesafetymarginbetweennon­condensingandcondensingoperationforallinstallations.65PreliminaryManufacturerImpactAnalysisResidentialWaterHeaterKeyIssues�FuelSwitching:•Fuelswitchingmayoccurifamendedenergyconservationstandardsrequireheatpumpwaterheaters.•Consumersmayswitchtogas­firedproductsorrepairfailedunits(ratherthanreplace).•Highcostsofheatpumpwaterheatersmaymakeswitchinganaffordableoptionandmayjustifytheinstallationofventingandgaslinestoaccommodategas­firedwaterheaters.�EquipmentSwitching:•Storageandinstantaneousgas­firedwaterheaterenergyconservationstandardsshouldbeamendedtolevelswherethestringencyismaintained,orswitchingbetweenthetwoproducttypesmayoccur.•Switchingmayimpactdomesticemploymentbecausethemajorityofinstantaneousproductsaremanufacturedoverseas.66PreliminaryManufacturerImpactAnalysisDirectHeatingEquipmentMIA�DOEinterviewedmanufacturersrepresentingthemajorityoftheU.S.residentialdirectheatingequipmentmarket.ManufacturerSub­GroupAnalysisProductUtilityandInnovationImpactsofEfficiencyStandardsCurrentMarketConditionsKeyIssuesCumulativeRegulatoryBurden67PreliminaryManufacturerImpactAnalysisDirectHeatingEquipmentKeyIssues�IncreasesinInstallationCosts:•Amendedenergyconservationstandardsthatrequireelectricalconnections,powerventsandcondensateremovalwillincreaseinstallationcosts.•Highercostsmayreducemarketshareandconsumersmayswitchtoalternativeheatingmethods.•Somedirectheatingequipmentisshippedasreplacementproductsonlyandmarketsharedoesnotgrow.Highercostsmayreduceandeliminatemarketshareforthesereplacementproducts.�Derating:•Manufacturersmayderateproductstomeetenergyconservationstandards.•ManufacturersavoidchangingdesignssothatMPCdoesnotincreaseandreplacementsdonotrequireconsumerstomakeinstallationchanges.•Deratingmayadverselyimpactproductutility.68PreliminaryManufacturerImpactAnalysisPoolHeaterMIA�DOEinterviewedmanufacturersrepresentingthemajorityoftheU.S.residentialpoolheatingmarket.ManufacturerSub­GroupAnalysisProductUtilityandInnovationImpactsofEfficiencyStandardsCurrentMarketConditionsKeyIssuesCumulativeRegulatoryBurden69PreliminaryManufacturerImpactAnalysisPoolHeaterKeyIssues�IncreasesinInstallationCosts:•Powervents,electricalconnections,specificventconfigurations,andcondensingdesignscanraiseinstallationcosts.•Complexdesignsmayalsorequireadditionaltrainingforfieldtechnicians.•Manufacturersaretypicallyburdenedwithprovidingtrainingtofieldtechnicians.�ProductPriceIncreasesResultinginDecliningMarket:•Increasesintotalinstallationcostandproductcomplexitymaydiscourageconsumersfrompurchasingpoolheatersentirely.•Poolheatersarenotconsideredacommodity,ratheraluxuryproduct.•Aconsumersdecisiontobuyapoolheateroftendependsonfinancialstatus,desireofuse,andweather,inadditiontocost.70PreliminaryManufacturerImpactAnalysisPoolHeaterKeyIssues�SafetyConcernsatNearCondensingLevels:•Corrosivecondensatecausessafetyconcernsforpoolheatersoperatingat85and86percentthermalefficiencyforcertaininstallations.•85and86percentthermalefficiencydonotprovidesafetymarginsbetweennon­condensingandcondensingoperationforallinstallations.•Manufacturersmaychoosetoproducefullycondensingdesignsornotchoosetoproducemodelsattheselevelstoavoidsafetyissues.•CondensingtechnologyincreasesMPCsignificantly.•Nearcondensinglevelsmayresultinalossofmarketshareforpoolheatermanufacturers.71PreliminaryManufacturerImpactAnalysisOtherIssuesDOEwelcomescommentsandrecommendationsfrominterestedpartiesonanyaspectsrelatedtothePreliminaryManufacturerImpactAnalysis.7273PreliminaryActivitiesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleNationalImpactAnalysisEnergyUseCharacterizationMarketandTechnologyAssessmentScreeningAnalysisEngineeringAnalysisMarkupsforProductPriceDeterminationLife­CycleCostandPaybackPeriodAnalysisShipmentsAnalysisLife­CycleCostandPaybackPeriodAnalysisPurpose�MarkupsforProductPriceDetermination:•Tocharacterizethechannelsforhowproductsaredistributedfromthemanufacturertotheconsumer.•Todeterminepricespaidbyconsumersbasedonmanufacturersellingpricesforbaselineandhigherefficiencyproducts.�EnergyUseCharacterization:•Todevelopenergyconsumptionsavingsestimatesforselectedproductefficiencylevels.�Life­CycleCost(LCC)andPaybackPeriod(PBP)Analysis:•Todeveloptheconsumerlife­cyclecostsavingsandpaybackperiodforhigherefficiencyproducts.74LifetimeDiscountRateEnergyPriceTrendAnnualOperatingExpenseLife­CycleCostandPaybackPeriodAnalysisLCC&PaybackPeriodAnalysisFlowchartFromEngineeringAnalysisFromMarkupstoDetermineProductPrice75TotalInstalledCostLifetimeOperatingExpensePaybackPeriodLife­CycleCostManufacturerMarkupSalesTaxRetailerorDistributorMarkupConsumerPriceBaselineManufacturerCostStd­LevelManufacturerCostInstallationCostFromEnergyUseCharacterizationEnergyConsumptionEnergyPricesAnnualEnergyCostRepairCostMaintenanceCostLife­CycleCostandPaybackPeriodAnalysisMethod�LCCequalstotalinstalledcostplusthesumofoperatingcostsdiscountedtoaparticularbaseyear.�Economicevaluationfromtheconsumerperspective.�AnalysismodelstheuncertaintyandvariabilityofinputsusingMonteCarloapproachandprobabilitydistributions.�AnalysisimplementedinanExcel®spreadsheetcombinedwithCrystalBall.®FirstCost(ConsumerPrice+InstallationCost)OperatingExpensesCombineChangesinCostsLCCResultsConverttoPresentValue76MarkupsAnalysisPurpose,Inputs,andOutputoftheMarkupAnalysis�Purpose:•Determineconsumerproductpricesbasedonmanufacturercosts.•Characterizeproductdistributionchannelsandmarketsegments.�Inputs:•ManufacturerMarkups.–EngineeringAnalysis.•Retailer,Distributor,Contractor,BuilderMarkups.–Retailers:U.S.CensusBureauFinancialDataforHouseholdApplianceStores.–Distributors:U.S.CensusBureauFinancialDataforMerchantWholesalers,Machinery,Equipment,andSupplies.–Contractors:Air­ConditioningContractorsofAmericaHVACfinancialanalysis.–Builders:U.S.CensusBureauGeographicAreaSeriesforConstruction.�Output:•Baselineandincrementalmarkups.77MarkupsAnalysisDistributionChannels­ WaterHeatersReplacementAReplacementBNewHomesANewHomesBManufacturerManufacturerManufacturerManufacturerRetailerDistributorDistributorDistributorContractorBuilderContractorBuilderConsumerConsumerConsumerConsumer78MarkupsAnalysisDistributionChannelsDirectHeatingEquipmentPoolHeatersReplacementNewHomesReplacementNewHomesManufacturerManufacturerManufacturerManufacturerDistributorDistributorDistributorDistributorContractorContractorServiceCompanyPoolBuilderBuilderConsumerConsumerConsumerConsumer79MarkupsAnalysisBaselineandIncrementalMarkups�Markupsrelateconsumerpricetocostofgoodssold(CGS).�Baselinemarkupsrelatepricetocostpriortoachangeinefficiency.•Baselinemarkupsindicateaconsumerpricethatcoversallofaretailer’sordistributor’sexpensesplusprofit.•Directlaborcosts(salaries,payroll,rentalandoccupancy)areincluded.�IncrementalmarkupsrelatetheincrementalchangeinconsumerpricetotheincrementalchangeinCGS.•SomecostsremainconstantwithCGSincreases.•IncrementalmarkupscoveronlyexpensesthatvarywithCGS–inthiscase,expensesthatincreaseduetoanincreaseinproductefficiency.–Forexample,directlaborcosts(salaries,payroll,rentalandoccupancy)donotvarywithefficiency­inducedchangesinCGS.•DOEassumesotheroperatingcostsandprofitscaleproportionallywithCGS.80MarkupsAnalysisAverageOverallMarkupsbyProductClassBaselineIncrementalGas­FiredStorageWaterHeaters(GSWH)2.241.77ElectricStorageWaterHeaters(ESWH)2.171.76Oil­FiredStorageWaterHeaters(OSWH)2.221.76GasWallFanDHEInstantaneousGas­FiredWaterHeaters(IGWH)2.742.352.241.92GasWallGravityDHE2.702.21GasFloorDHE2.642.17PoolHeaters(PH)GasRoomDHE2.272.881.842.3381ConsumerPriceDeterminationConsumerPrice�ConsumerPrice=ManufacturingPricexMarkups.•Manufacturingcostvs.efficiencyrelationshipsdevelopedintheEngineeringAnalysis•MarkupsandSalesTaxesdevelopedintheMarkupstoDetermineProductPriceSalesTaxRetailerorDistributorMarkupConsumerPriceBaselineManufacturerSellingPriceStd­LevelManufacturerSellingPrice82InstallationCostInstallationCostApproachInstallationcostsrepresentthelaborandmaterialsnecessarytoinstalltheappliance.Installationcostsweredevelopedseparatelyfornewconstructionsandreplacements.�WaterHeaters:•Sources:GSWH,ESWH,andIGWHbasedonRSMeans,expertconsultations,furnaceinstallationmodel;OSWHsbasedonpreviouswaterheaterrulemaking.xLargerBurnerKitxHeatPumpAdditionalCostsxSpaceConstraintsxxCondensateFilterxxElectricalOutletxxDrainPanxxxVentingxxxxBasicInstallationIGWHOSWHESWHGSWHInstallationCostComponents•BasicInstallationincludes:–Settingupandputtinginplacenewwaterheater,removalofoldwaterheater,permitfee,removal/disposalfee,tripcharge,gasandwaterpiping,additionalchargeforlargerwaterheaters(75gallonsandlarger).83InstallationCostInstallationCostApproach,continued�WaterHeaters,continued:•VentingCostincludes:–GSWH–non­stainlesssteelorplasticvents.–IGWH­ non­stainlesssteel,stainlesssteel,orplasticvents.–OSWH­ ventingadderathighefficiency.•ESWHSpaceConstraintsincludesaddingtemperingvalvesandremoval&replacementofdoorjambs.•HeatPumpWaterHeaters­additionalinstallationcostincludesadditionallaborhoursandspaceconstraints.�PoolHeaters:•Sources:RSMeansandexpertconsultations.•BasicInstallationincludesset­up,connecting,start­up,removingoldunit,tripcharge,addinggaslinefromgasmetertoPH,polyvinylchloride(PVC)waterlines.•HigherEfficiencyEquipmentmayrequireadditionalelectricaloutlet,condensatedrainpiping.�DirectHeatingEquipment:•Source:1993DHETechnicalSupportDocument.•Assumptions:Installationcostsdonotvarywithefficiencywhennoelectricityrequired.•HigherEfficiencyEquipmentmayrequireadditionalelectricaloutlet.84InstallationCostInstallationCostFlowchartLaborHours(#workers*#hours)LaborCostperhour(nationalaverage)LaborCostInvoiceVariablesChargesTripHours(#workers*#hours)TripChargeCostReplacementOnlyMaterialCostsInstallationCost85InstallationCostInstallationCostDeterminationExample:Gas­FiredStorageWaterHeater–BasicInstallationReplacementCasePerson2008BareCostsTotalincl.DescriptionCrewHoursMat.Labor*Equip.TotalO&PTripCharge2Plumbers1$0$47$0$47$70RemoveOldWaterHeater2Plumbers1.6$0$75$0$75$112Installation2Plumbers3.2$25$149$0$174$252Totals5.8$25$271$0$296$435*Laborcost–NationalAverageSource:2008RSMeansMechanicalCostData86TotalInstalledCostTotalInstalledCostsbyEfficiencyLevelExample:Gas­FiredStorageWaterHeaters(40gallon)$300$500$700$900$1,100$1,300$1,500$1,700$1,9000.590.610.630.650.670.690.710.730.750.77EnergyFactor(EF)

Cost (2007$)TotalInstalledCostInstallationCostConsumerPriceTotalInstalledCosts=ConsumerPrice+InstallationCost87EnergyUseCharacterizationSelectionofHouseholdSamplesExample:WaterHeaters88EnergyUseCharacterizationEnergyConsumptionCalculation–AllProductsEnergyConsumptionSelectHouseholdAssignBaseCaseProduct**LoadCalculation**PH&DHEloadcalculatedusingRECSenergyuseandtheefficiencyofexistingequipment;waterheatersusedHotWaterDrawModel.**Basecaseassignmentbasedonestimatedmarketsharedistributionateachefficiencylevelbytheeffectivedate.89EnergyUseCharacterizationWaterHeaters:HotWaterDrawModelWaterHeaterTankSizeRECSDataHouseholdCharacteristicsHouseholdOccupants(Number,Age)OtherHotWaterUsingAppliancesTemperatureParametersWeatherDataHotWaterUse(gal/day)90EnergyUseCharacterizationWaterHeaters:HotWaterUseResultsHotWaterUseRangesAverage;Median;Box25%­75%;Whisker:5%­95%11.69.910.294.789.688.845.543.043.00102030405060708090100GasWHElectricWHOilWH

Hot Water Use (gallons)medianAverage91IssuesRequestforComment:HotWaterUseforInstantaneousGas­FiredWaterHeaters�DOEassumedthatahouseholdwithaninstantaneousgas­firedwaterheaterusesthesamevolumeofhotwaterasitdoeswithastorage­typewaterheater(i.e.,45.5gallonsdaily).DOEseeksstudiesordatashowinghotwateruseforinstantaneousgas­firedwaterheater.DOEinvitescommentonthehotwateruseforinstantaneousgas­firedwaterheaters.(Issue#8)92ProductAssignmentinBaseCase�Basecaseproductefficiencyassignmentaccountsfortheprojectedmarketshareofproductsatdifferentefficiencylevels.•Notallconsumerspurchaseproductsatcurrentminimumstandard.•LCCanalysisrecognizesthatconsumersalreadypurchasingproductsatefficienciesgreaterthanorequaltoaprospectivestandardlevelarenotimpactedbythestandard.Example:WaterHeatersBaseCaseMarketSharesBaselineEfficiencyLevelGas­FiredStorageElectricStorageOil­FiredStorageInstaGasFiredntaneous0.59EF82%MarketShare%0.90EF54%MarketShare%0.53EF27%MarketShare%0.62EF0%MarketShare%10.627%0.9122%0.547%0.690%20.632%0.926%0.560%0.781%30.641%0.9311%0.583%0.813%40.652%0.941%0.618%0.8257%50.663%0.951%0.6227%0.8415%60.772%2.25%0.669%0.8511%70.689%0.923%93EnergyUseDeterminationEnergyUseCalculationExample:WaterHeaters94EnergyUseDeterminationKeyEnergyUseParametersExample:WaterHeaters�EnergyUseDeterminationbasedonWaterHeaterAnalysisModel(WHAM).�EfficiencyCharacteristics­ EnergyFactor(EF),RecoveryEfficiency(RE),LossCoefficient(UA),andRatedCapacity(Pon)�Temperatureconditions:•Tamb(Temperatureoftheairsurroundingthewaterheater)­ basedoninstallationlocationassignmentandRECS2001householdthermostatsettings.•Tin(InletWaterTemperature)­ basedonapproachdevelopedbytheNRELandwhetherahouseholdhasawell(fromRECS2001).•Ttank(WaterHeaterThermostatSetpointTemperature)­ basedon2006Plumbing&MechanicalMagazineContractorSurvey(average124degF).�EnergyUseofHPWH:•Performanceadjustedtoaccountfordifferentambienttemperatures.•Energyuseadjustedtoaccountforthecooling/heatingimpactonconditionedspace.�EnergyUseofIGWH:•Performanceadjustedtoaccountforfieldconditions­ source:2006CECReport,MeasureInformationTemplate:TanklessGasWaterHeaters(8.8percentreduction).95IssuesRequestforComment:EnergyUsebyInstantaneousGas­FiredWaterHeaters�DOEcalculatedenergyusebyinstantaneousgas­firedwaterheatersbyincorporatingaperformancefactortoaccountfortheratedenergyefficiencyoverstatingtheactualperformance.DOEinvitescommentonitstreatmentofenergyusebyinstantaneousgas­firedwaterheaters.(Issue#9)96EnergyUseResultsBaselineAverageAnnualEnergyUseResultsWaterHeatersElectricity(kWh/yr)Fuel(MMBtu/yr)BaselineEfficiencyLevelGas­FiredStorage0.59EF16.70ElectricStorage0.90EF02,703Oil­FiredStorage0.53EF19.456InstantaneousGas­Fired0.62EF17.00DirectHeatingEquipmentGasWallFan74percentAFUE27.135GasWallGravity64percentAFUE29.60GasFloor57percentAFUE30.40GasRoom64percentAFUE22.0078percentTE53.60PoolHeaters97EnergyPricesHistoricalEnergyPrices�Electricity:•BasedonEIAForm861Data.�NaturalGas:•BasedondatafromEIA’sNaturalGasNavigator.�Oil:•BasedondatafromEIA’sPetroleumNavigator.�LiquefiedPetroleumGas(LPG):•BasedondatafromEIA’sStateEnergyConsumption,Price,andExpenditureEstimates.Note:Energypricesdevelopedfor13Regions:9CensusDivisionsand4LargeStates.98EnergyPricesAEO2008EnergyPriceForecastsNaturalGasElectricity11.0011.5012.0012.5013.0013.5014.0014.50 2 0 05 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 3 2015 2 0 1 7 2 0 1 9 2021 2 0 2 3 2 0 2 5 2027 2 0 2 9Year

2007$/MMBtuHigh GrowthReferenceLowGrowth9.5010.0010.5011.0011.5012.00 2005 2 007 2 009 2 0 11 2013 2 015 2 0 17 2019 2021 2 0 2 3 2025 2027 2 029Year

cents(2007$)/kWhHighGrowthReferenceLowGrowth�Energypriceprojectionsto2030basedonEIA’sAnnualEnergyOutlook2008.99RepairandMaintenanceRepair&MaintenanceCosts­ KeyAssumptions�MaintenanceCosts(priceofregularscheduledproductmaintenance($/year):Gas­Fired&ElectricStorageWaterHeatersnoneHeatPumpWaterHeaterevery5­yearpreventivemaintenanceapplicabletosomehouseholds.Oil­FiredStorageWaterHeatersincludedinannualcontract(includesrepaircosts)InstantaneousGas­FiredWaterHeaterincludesannualdelimingcostPoolheaters&DHEevery5­yearpreventivemaintenance.�RepairCosts(priceforreplacingorrepairingcomponentswhichhavefailed)•applicabletoafractionofhouseholds•accountsforcomponentslikelytoberepairedduringthelifetimeoftheproductComponentRequiringReplacementProductsUsedPilotIgnition(StandingPilotorMilivolt)GSWH,IGWH,DHE,PHElectronicIgnition(IID,DirectSpark,orHotSurface)IGWH,PH,DHE,GSWHPowerVentorInducedDraftFanGSWH,IGWH,PH,DHECirculatingAirBlowerMotorDHE*HeatPumpCompressor&EvaporatorFanComponentESWH***NotapplicabletoGasWallGravityDHE**NorepaircostsforESWHs(exceptHPWH).100RepairandMaintenanceRepair/MaintenanceCostEstimationMethodologyLaborHourstoRepairComponent(#workers*#hours)BareLaborCostperhour(national average)LaborCostInvoiceVariablesChargesTripHours(#workers*#hours)TripChargeCostMaterial CostsLaborMarkupsMaterial MarkupsBareMaterial CostsTotal MaintenanceorRepairCost101IssuesRequestforComment:Life­CycleCostAnalysisInputsforHeatPumpWaterHeaters�DOEincludedinstallation,repairandmaintenancecostsforheatpumpwaterheatersbasedonlimiteddata.DOEisinterestedinreceivingdataonthemagnitudeandfrequencyofthesecoststoconsumers.DOEinvitescommentonitsestimatesofinstallation,repair,andmaintenancecostsforheatpumpwaterheaters.(Issue#10)102OtherInputsforLCCOtherInputsforLCC�DiscountRates(Primarydatasource:FederalReserveBoard’sSurveyofConsumerFinancesfortheyears1989,1992,1995,1998,2001,and2004).HousingTypeFinanceCostBasedon:Mean(%)NewConstructionMortgage3.2ReplacementsHomeequityloans,Creditcard,Otherloans,Checking&savingsaccounts,Certificatesofdeposit,Bonds,Stocks5.5�EquipmentLifetime(BasedonvarioussourcesincludingAppliancemagazineandpastDOETechnicalSupportDocuments).ProductClassMinimumAverageMaximumGas­FiredStorageWaterHeaters71220ElectricStorageWaterHeaters61420Oil­FiredStorageWaterHeaters5913DirectHeatingEquipmentInstantaneousGas­FiredWaterHeatersPoolHeaters103815620202030103­­PreliminaryResultsLCCSavingsandPBPResultsExample:Gas­FiredStorageWaterHeaters,40gallons18.117.522%2%75%­3073,2711,4891,7820.77632.828.822%6%73%­3243,2881,7531,5360.66543.034.120%7%73%­3433,3091,7901,5190.65454.041.418%9%73%­3683,3351,8291,5060.6432.01.989%11%0%1162,8071,8089980.6321.11.182%18%0%952,8301,8499820.621­­­­­­2,9451,9789670.59BaselineNetBenefitNoImpactNetCostAverageMedianHouseholdswithAverageSavings(2007$)AverageLCCAverageOperatingCostAverageInstalledPricePaybackPeriod(years)LifeCycleCostSavingsLifeCycleCost(2007$)EnergyFactorEfficiencyLevel104­­PreliminaryResultsLCCSavingsandPBPResultsExample:ElectricStorageWaterHeaters,50gallons22.28.350%5%45%2293,2331,7591,4752.2066.73.876%6%18%783,3902,6047860.9556.92.875%7%18%613,4072,6487590.9443.92.373%18%9%653,4032,6947090.9332.12.177%23%0%503,4222,7406820.9222.62.554%46%0%203,4612,7876740.911­­­­­­3,4982,8366620.90BaselineNetBenefitNoImpactNetCostAverageMedianHouseholdswithAverageSavings(2007$)AverageLCCAverageOperatingCostAverageInstalledPricePaybackPeriod(years)LifeCycleCostSavingsLifeCycleCost(2007$)EnergyFactorEfficiencyLevel105IssuesOtherIssuesDOEinvitescommentandrecommendationsfrominterestedpartiesonanyotheraspectsrelatedtotheLife­CycleCostAnalysis.106107PreliminaryActivitiesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleNationalImpactAnalysisEnergyUseCharacterizationMarketandTechnologyAssessmentScreeningAnalysisEngineeringAnalysisMarkupsforProductPriceDeterminationLife­CycleCostandPaybackPeriodAnalysisShipmentsAnalysisNationalImpactAnalysisPurpose�ShipmentsAnalysis:•Toestimateheatingproductshipmentsovertime.�NationalImpactAnalysis:•ToestimatetheNationalEnergySavings(NES)fromheatingproductenergyconservationstandardsatdifferentefficiencylevels.•Toestimatethenationaleconomicimpactonheatingproductconsumers(ortheNetPresentValue(NPV))fromheatingproductenergyconservationstandardsatdifferentefficiencylevels.108NationalImpactAnalysisNationalImpactAnalysisProcessNationalEnergySavings(Quads)NationalNetPresentValue(2007$,billion)�Nationalenergysavingscalculatedforperiodfrom2013(2015)­2043.�NPVcalculatedforproductsshippedoverthesameperiod.ShipmentsModelNationalEnergySavingsNationalConsumerEconomicImpactsLCCAnalysisResultsandOtherInputs109ShipmentsAnalysisShipmentAnalysisFlowchartExample:WaterHeatersHistoricalShipmentsWaterHeaterLifetimeReplacementShipmentsCombinedShipmentsNewHomeConstructionNewHomeWaterHeaterSaturationNewConstructionShipments(ForHeatPumpWaterHeaters)TotalShipmentsFractionGIWHvs.GSWHShipmentsShifttoGasWaterHeaterAdjustedNewConstructionShipmentsAdjustedCombinedShipments110a a  ource escr p onnpuShipmentsAnalysisShipmentsModelInputs111PoolHeaters&DHEAmericanHousingSurvey2005,RECS2001NewHousingWHSaturationsWaterHeatersNewConstructionShipmentsFromLife­CycleCostAnalysisLifetimeNewConstructions&ReplacementsAnnualEnergyOutlook2008ForecastedNewHousingAnnualEnergyOutlook2008ForecastedNewConstructionHistoricalShipmentsShipmentDistributionbyProductClassAHRIDataSubmittalWaterHeaters,PoolHeaters,DHEDtS/DitiItWaterHeatersAHRIDataSubmittalPoolHeatersP.K.Data,Inc.,previousrulemaking(1993)DHEAHRIDataSubmittal,AHRIStatisticalSummaries,previousrulemaking(1993)ShipmentsAnalysisScenariosofMarketPenetrationofInstantaneousGas­FiredWaterHeaters0%5%10%15%20%25%30%35%40%45%199019952000200520102015202020252030Year

Market Share (%)HighPenetrationScenarioReferencePenetrationScenarioLowPenetrationScenario`�DOEmodeledthreescenariosofinstantaneousgas­firedwaterheatermarketpenetrationbasedonexperiencewithinstantaneouswaterheatersinAustralia.�HighscenariooffuturemarketpenetrationassumesthattheevolutionoftheU.S.marketis25percentlowerperyearthanthatseeninAustralia.MediumandLowscenariosassume50and75percentlower,respectively.112IssuesRequestforComment:MarketPenetrationofInstantaneousGas­FiredWaterHeaters�DOEmodeledscenariosofinstantaneousgas­firedwaterheatermarketpenetrationbasedonreviewofinstantaneousgas­firedwaterheatermarketinAustralia.DOEinvitescommentonitsapproachforestimatingthemarketpenetrationofinstantaneousgas­firedwaterheaters.(Issue#11)113ShipmentsAnalysisGas­FiredStorageandInstantaneousGas­FiredWaterHeatersHistorical&ModeledShipmentsGas­FiredStorageWaterHeatersInstantaneousGas­FiredWaterHeaters0.01.02.03.04.05.06.01980198519901995200020052010201520202025203020352040

Shipments (million units)ModeledNewConstructionModeledReplacementsHistoricalData0.00.20.40.60.81.01.21.41.61.82.020042009201420192024202920342039

Shipments (million units)ModeledNewConstructionModeledReplacementsHistoricalData�Accountedfornewconstruction,replacements,andmarketsharegrowthforinstantaneousgas­firedwaterheaters.114ShipmentsAnalysisPoolHeaterHistorical&ModeledShipments0.000.100.200.300.400.500.600.700.801981198719931999200520112017202320292035

Shipments, million unitsFirstTimeOwnersNewHousingInstallationsModeledReplacementsHistoricalData115ShipmentsAnalysisDHEHistoricalandModeledShipments0.0000.0500.1000.1500.2000.2500.30019901995200020052010201520202025203020352040

Shipments (million)GasRoomDHEGasWallGravityDHEGasWallFanDHEGasFloorDHE�TheriseofgasroomDHEshipmentsin2001duetotheadditionofhearthproductsshipments.116IssuesRequestforComment:ForecastofDirectHeatingEquipmentShipments�DOEbaseditsshipmentsforecastforgaswallfanandgaswallgravityDHEontrendsduringthe2002­2006period.�DOEheldgasroomDHEconstantusingtheaverageshipmentsduringthe2002­2005period.�DOEbaseditshipmentsforecastforgasfloorDHEonthedownwardtrendduringthe2000­2007period.DOEinvitesfeedbackonthisapproach.(Issue#12)117ShipmentsAnalysisFuelSwitchingAnalysis�Electricheatpumpwaterheaters(HPWHs)togas­firedstoragewaterheaters:•Potentialforfuelswitchingatefficiencylevelcorrespondingtoelectricheatpumpwaterheaters(efficiencylevel6)duetoincreaseintotalinstalledcost.•Analysisevaluatesmaximumfuelswitchingpotentialbasedonthefractionofelectricstoragewaterheaterhouseholdsforwhichaswitchtogas­firedstoragewaterheatersisfeasibleandhasalowertotalinstalledcost.•Preliminaryassessmentshowsthatdependingonthetechnology(naturaldraft,powervent,orcondensing),between3.3and8.2percentofthehouseholdsinreplacementscasesmayswitchtogas­firedstoragewaterheaters.Noswitchingispredictedinnewconstructioninstallations.�Gas­firedstoragewaterheaterstoelectricstoragewaterheaters:•DOEdidnotincludeswitchingfromagas­firedtoanelectricstoragewaterheater.118ShipmentsAnalysisRequestforComment:FuelSwitchingAnalysis�DOEincludedfuelswitchingconsiderationsforelectricstorageheatpumpwaterheaters(HPWHs)(efficiencylevel6)togas­firedstoragewaterheaters(allefficiencylevels).�DOEdidnotincludefuelswitchingfromagas­firedtoanelectricstoragewaterheater.DOEinvitescommentonitsfuel­switchinganalysis.(Issue#14)119NationalImpactAnalysisNationalImpactAnalysisInputsTotalInstalledCostAnnualweighted­averageperunitvaluesasafunctionofefficiencyleveltakenfromLCCanalysis.RepairandMaintenanceCostsAnnualvaluesareafunctionofefficiencylevel(fromLCCanalysis).AnnualEnergyUseAnnualweighted­averageperunitvaluesasafunctionofefficiencyleveltakenfromLCCanalysis.Base­CaseEfficienciesShipments­weightedefficienciesdeterminedfortheeffectiveyear.BasedonbasecaseefficiencydistributionsfromLCCanalysis.Standards­CaseForecastedEfficienciesRoll­upscenarioassumedfordeterminingshipment­weightedefficiencyforeachstandardscase.BothBase­ andStandards­Caseefficiencies:Frozenattheeffectiveyearlevelswiththeexceptionofefficienciesforgasandelectricwaterheaters.EnergyPricesAveragepricesandforecastedenergypricesfromEIAAEO2008forecasts(to2030)andextrapolationto2043.ElectricitySite­toSourceConversionFactorsConversionfactorsbasedonmarginalheatratesfromNEMScorrespondingto2007AEO.Factorsvaryannuallyandaccountforgeneration,distribution,andtransmissionlosses.DiscountRate7percentand3percentrealfromOMB’sRegulatoryAnalysisGuidelineA­4.PresentYearFutureexpensesarediscountedtotheyear2007.ReboundEffectWaterHeaters–10percent;DHE–15percent;PoolHeaters–10percent120IssuesRequestforComment:ReboundEffect�Basedonavailableinformation,DOEusedareboundeffectof10percentforwaterheaters,15percentfordirectheatingequipment,and10percentforpoolheaters.DOEinvitescommentonitsestimatesofthereboundeffectforthethreeheatingproducts.(Issue#15)1210.59BaselineEFLevel82%BaseCaseEfficiencyLevels(analyzed)1234560.6217%89%0.6322%2%91%0.6431%1%1%93%0.6542%2%2%2%94%0.6653%3%3%3%3%98%0.7762%2%2%2%2%2%100%Shipments­WeightedEF0.600.630.630.640.650.660.77NationalImpactAnalysisForecastedEfficienciesEfficiencyExample:Gas­FiredStorageWaterHeatersMarketShares�Base­CaseefficiencydistributionfromLCCanalysis.•BasedonAHRIdatasubmittalexceptgas­firedandelectricstoragewaterheaterswhichalsoaccountforthemarketimpactfromENERGYSTARlevels.�Standards­Caseefficiencydistributionsbasedon“Roll­up”scenario.•Efficienciesbelowthestandardlevel“roll­up”tothestandardlevel.•Efficienciesabovethestandardlevelareunaffected.�Forecastedefficienciesassumedtoremainconstantateffectivedatelevel,exceptforGSWHandESWH.122IssuesRequestforComment:Base­CaseandStandards­CaseForecastedEfficiencies�DOEforecastedbase­caseandstandards­caseefficienciesforgas­firedandelectricstoragewaterheatersbasedonmarketimpactfromENERGYSTARlevels.Foroil­firedstorageandinstantaneousgas­firedwaterheatersaswellasforDHEandpoolheaterstheforecastedefficienciesremainfrozenthroughouttheanalysisperiod.DOEinvitescommentonitsmethodologiesforbothforecastingefficienciesandestimatingtheimpactthatstandardshaveonproductefficiencies.(Issue#13)123201 5 201 7 201 9 202 1 202 3 202 5 202 7 202 9 2031 2033 2035 2037 2039 2041 2043124NationalEnergySavingsResultsExample:Gas­FiredStorageWaterHeaters–AnnualValuesEfficiencyLevel1­ 0.62EFNationalImpactAnalysisResultsNationalEnergySavingsofGasWHat0.62EF0.000.010.020.030.040.050.060.07Year

National Savings, QuadsNationalImpactAnalysisResultsNetPresentValueResultsExample:Gas­FiredStorageWaterHeaters–AnnualValuesEfficiencyLevel1­ 0.62EFFinancialImpactsofGasWHat0.62EF­$0.10$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.802015202520352045

Billions of 2007 DollarsEquipmentCostOperatingCostSavingsMaintenanceandRepairCostNetSavingsDiscountedFinancialImpactsofGasWHat0.62EF­$0.10$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.802015202520352045

Billions of 2007 DollarsEquipmentCostOperatingCostSavingsMaintenanceandRepairCostNetSavings125NaturalGasPriceImpactsNaturalGasPriceImpactsMethodologyandResultsDOEconductedananalysisofthepotentialimpactsofwaterheaterenergyconservationstandardsonnaturalgaspricesonallsectorsoftheeconomy(thisanalysisispresentedtoprovideabaseforinputfrominterestedpartiesonananalysisDOEplanstoincludeintheNOPRstageoftherulemaking).�Methodology:•DOE’sanalysisusedNEMS,whichutilizesenergypriceelasticitiestoestimatethechangeinpricesthatwouldresultfromachangeinenergydemand.•Twoscenarioswereanalyzedforthreewaterheaterproductclasses:a)selectionofcost­effectiveefficiencylevels,andb)allmax­techoptions.�Results:•Theestimatednaturalgaspricereductionaverages0.7centsperMMBtuforasetofcosteffectiveefficiencylevelsand2.3centsperMMBtuforasetofmax­techefficiencylevels.�NationalBenefits:•Theestimatedeconomy­widesavingsovertheperiod2015–2043hasanNPV(at7percentdiscountrate)of$1.0billion(scenarioa)and3.6billion(scenariob).126IssuesRequestforCommentImpactonNaturalGasPricesResultingfromEnergyConservationStandardsfortheThreeHeatingProducts�Theappropriatenessofconsideringthepotentialimpactonnaturalgaspricesfromamendedenergyconservationstandards.�Themagnitudeofsuchimpactsandtheextenttowhichtheseimpactsshouldbeconsideredtransfersfromproducerstoconsumers,ratherthanneteconomicbenefits.DOEinvitescommentonitsmethodologiesforestimatingtheimpactonnaturalgaspricesresultingfromenergyconservationstandardsforheatingproducts.(Issue#16)127IssuesOtherIssuesDOEinvitescommentandrecommendationsfrominterestedpartiesonanyotheraspectsrelatedtotheNationalImpactsAnalysis.128NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesManufacturerImpactAnalysisUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis129TrialStandardLevelsSelectionofTrialStandardLevels�Purpose:•Todevelopalistofpotentialamendedstandardlevelsfromwhichimpactsareweighedandaproposedstandardlevelisselected.–Eachtrialstandardlevelconsistsofasetofefficiencylevelscoveringallproductclasses,andmayvarybetweenproductclasses.–NOPRanalysesassessimpactsfortrialstandardlevels(notefficiencylevelsforeachproductclass).�Method:•Trialstandardlevelsareassembledfromtheproductclassesandefficiencylevelsidentifiedinthepreliminaryanalyses.–Trialstandardlevelscoverarangeofefficienciesandcaninclude:�Mostenergyefficientlevel(max­tech);�Efficiencylevelwiththelowestlife­cyclecost;�Efficiencylevelwithapaybackperiodofthreeyearsorless;�Efficiencylevelswithnoteworthytechnologies;and�Efficiencylevelsthatfillinlargegaps.130IssuesRequestforComment:CriteriafortheSelectionofTrialStandardLevels�AcriticalpartoftheNOPRanalysisonwhichDOEisseekingearlyguidanceisthecriteriausedinselectingtrialstandardlevels.�Trialstandardlevelsarecreatedfromcombinationsofefficiencylevelsattheproductclasslevel.DOErequestsfeedbackonthecriteriaitshoulduseforbasingtheselectionofTrialStandardLevels.(Issue#20)131NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysisManufacturerImpactAnalysis132ManufacturerImpactAnalysisManufacturerImpactAnalysis�Purpose:•Toassesstheimpactsofstandardsonresidentialwaterheater,directheatingequipmentandpoolheatermanufacturers.•Toidentifyandestimateimpactsonmanufacturersub­groupsthatmaybemoreseverelyimpactedthantheindustryasawhole.•Toexaminetheimpactofcumulativeregulatoryburdensontheindustry.�Method:•AnalyzeindustrycashflowandnetpresentvaluethroughuseoftheGovernmentRegulatoryImpactModel(GRIM).•InterviewmanufacturerstorefineinputstotheGRIM,developsub­groupanalyses,andaddressqualitativeissues.�Output:•IndustryNetPresentValueimpacts;•Sub­groupNetPresentValueimpacts;and•Otherimpacts.133ManufacturerImpactAnalysisManufacturerImpactAnalysisProcess�TheMIAconsistsofthreephases:Phase1Phase2Phase3IndustryprofileDevelopstraw­manGRIM*DevelopinterviewguideInterviews&industrywide/subgroupanalysesAssessdirectemployment,competition,cumulativeburdenFinalizeMIAresultsforNOPR*GovernmentRegulatoryImpactModel(GRIM)134Screening AnalysisEngineering AnalysisLCC AnalysisNational EnergySavings AnalysisConsumer SubgroupUtility ImpactsEnvironmental ImpactsIndirect EmploymentImpacts135TheMIAisbothconcurrentandcoordinatedwithactivitiesManufacturerImpactAnalysisthroughouttherulemakingprocess.PhaseIIndustryProfilePhaseIIIManufacturerInterviewsRevisedIndustryCashFlowManufacturerSubgroupAnalysisQualitativeAssessmentPhaseII“Strawman”GRIMManufacturerImpactAnalysisOtherRulemakingAnalysesScreeningAnalysisEngineeringAnalysisLCCAnalysisNationalEnergySavingsAnalysisConsumerSubgroupUtilityImpactsEnvironmentalImpactsIndirectEmploymentImpactsManufacturerImpactAnalysisPhaseI:IndustryProfile�Collectfinancialandmarketinformation:•Industryreports;•Companyannualreportsandwebsites;•Tradejournals;•U.S.CensusBureau;•SEC10­Kformfilings;•InformationfromthepreliminaryactivitiesprecedingtheNOPR:manufacturerproductioncosts,markups;andmanufacturersellingprices,shipments.136ManufacturerImpactAnalysisPhaseII:DevelopStraw­manGRIM�TheGovernmentRegulatoryImpactModel(GRIM)isanindustrycashflowanalysisthatestimatesthechangeinindustryvalueduetotheintroductionofnewefficiencystandards.ManufacturerPricesShipmentsManufacturingCostsFinancialInformationCashFlowImpacts,ChangesinIndustryNPVGRIM137ManufacturerImpactAnalysisPhaseII:DevelopInterviewGuide�AcriticalaspectoftheMIAinvolvesinterviewswithmanufacturers.AninterviewguideissenttomanufacturersinpreparationforPhaseIII.�Interviewtopicswillinclude:•Engineeringanalysis;•Shipmentsmodel;•Coststructureandfinancialparameters;•Conversioncosts(capitalexpenditures,tooling,R&D,testing);•Impactofotherregulations/cumulativeburden;•Directemploymentimpacts;•Import/Exportissues;•Consolidation/competitiveimpacts;•Replacementpartsorrefurbishments;•Impactofthestandard’seffectivedate;and•Othertopicsimportanttomanufacturers.138ManufacturerImpactAnalysisPhaseIII:ManufacturerInterviews�Expectedtimeframe.�Timeandpersonnelcommitmentformanufacturers(industry­wideGRIM,GRIMassumptions,subgroupanalysisdiscussion).�Confidentialityagreements.139ManufacturerImpactAnalysisPhaseIII:ManufacturerSubgroupAnalysis�Thesubgroupanalysisisamorefocusedversionoftheindustry­wideanalysis.•Workwithsubgrouprepresentativestobetterunderstandandqualifythedifferentialimpactsofpotentialamendedenergyconservationstandardsonthesegroups.•Considerandfocusonissuesofimportancetothesubgroup,includingemployment,capacityutilizationandcumulativeburden.•Reviewdraftfindingswithsubgroupmembersduringdevelopment.140ManufacturerImpactAnalysisRequestforComment:CumulativeRegulatoryBurden�DOEseekstomitigatetheoverlappingeffectsonmanufacturersofamendedenergyconservationstandardsandotherregulatoryactionsaffectingthesameproducts.�Whileanyoneregulationmaynotimposeasignificantburdenonmanufacturers,thecombinedeffectsofseveralimpendingregulationsmayhaveseriousconsequencesforsomemanufacturers,groupsofmanufacturers,oranentireindustry.�AspartoftheMIA,DOEwillassessthepotentialcumulativeregulatoryburdenonmanufacturersofresidentialwaterheaters,directheatingequipment,andpoolheaters.141ManufacturerImpactAnalysisRequestforComment:CumulativeRegulatoryBurden�DOEidentifiedthefollowingregulationsthatcouldimpactmanufacturersofheatingproducts:•SouthCoastAirQualityManagementDistrict(SCAQMD)superlowNOxrequirements;•DOE’samendedenergyconservationstandardsforotherproducts;•StateemissionrequirementsandotherStateregulations;•Internationalenergyefficiencystandards;•Uniformplumbing,building,andsafetycodes;and•FlammableVaporIgnitionResistantrequirements.DOErequestscommentonthepotentialregulationsfacingtheheatingproductsindustry.(Issue#17)142PreliminaryManufacturerImpactAnalysisRequestforComment:SmallBusinessImpacts�DOEidentifiedsmallbusinessesandisinterestedinthepotentialimpactsasaresultofamendedenergyconservationstandards.�DOEdefinessmallbusinessesusingtheSmallBusinessAdministration(SBA)definitions.•ResidentialheatingproductsarematchedtotheNorthAmericanIndustryClassificationSystem(NAICS)code335228,OtherMajorHouseholdApplianceManufacturing,orNAICScode333414,HeatEquipment(exceptWarmAirFurnaces)Manufacturing.•Smallbusinessesunderthesecodesaredefinedas500employeesorfewer.�WaterHeaters:•DOEidentifiedtwosmallbusinesses.�DirectHeatingEquipment:•DOEidentifiedthreesmallbusinesses.�PoolHeaters:•DOEidentifiedtwosmallbusinesses.143PreliminaryManufacturerImpactAnalysisRequestforComment:SmallBusinessImpactsDOEinvitescommentsontheidentificationofanysmallbusinesseswithinthewaterheating,directheatingequipment,orpoolheatingindustries.144NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysisManufacturerImpactAnalysis145UtilityImpactAnalysisUtilityImpactAnalysis�Purpose:•Toinvestigatetheeffectsonutilitiesfromreducedenergysalesandpeakloaddemandduetopotentialstandards.�Method:•Usesnationalenergysavingsresults.•UsestheEnergyInformationAdministration’sNationalEnergyModelingSystem(NEMS)tailoredforDOE’sBuildingTechnologiesProgram(NEMS­BT).�Output:•Changeinenergysalesandpricebyregion.•Changeinthemixofelectricitygeneration.•Changeinnewcapacityconstruction.146NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesManufacturerImpactAnalysisUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis147EmploymentImpactAnalysisEmploymentImpactAnalysis�Purpose:•Toreportnetjobscreatedoreliminatednationallyasaconsequenceofnewenergyconservationstandards.�Method:•UsestheImSETtool,aspreadsheetmodeloftheU.S.economythatfocuseson188sectorsmostrelevanttoindustrial,commercial,andresidentialbuildingenergyuse.•ChangesinproductandenergyexpenditurestakenfromtheNationalImpactAnalysis.•Estimatesthenationalemploymentandincomeeffectsofenergysavingappliances.•DirectemploymentimpactstakenfromtheManufacturerImpactAnalysis.�Output:•Changeinemploymentbysectorasaconsequenceofnewstandards.148NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesManufacturerImpactAnalysisUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis149EnvironmentalAssessmentEnvironmentalAssessment�Purpose:•Toreportenvironmentalimpactsasaconsequenceofnewenergyconservationstandards,includingchangesinpowerplantemissionsaswellasemissionsinhouseholdsduetotheuseofgasappliances.�Method:•EnergysavingsresultstakenfromtheNationalImpactAnalysis.•EnergyInformationAdministration’sNationalEnergyModelingSystem(NEMS)providespower­plantemissions.•‘In­Building’emissionsduetofossil­fuelfiredappliancestobedeterminedusingemissionfactors.•Economicbenefitsresultingfromemissionsreductionsbasedonarangeofmonetaryvalues.�Output:•EstimateofnationalemissionreductionsofSO2,NOx,mercuryandCO2.–PowerplantSO2,NOx,andmercuryareeffectivelycappedthroughCongressionallegislationresultinginlittletonoemissionreductionsduetostandards.–In­buildingSO2andNOxstillemittedbyfossil­fuelfiredappliances.150NOPRAnalysesFlowDiagramFrameworkDocumentPreliminaryActivitiesNOPRFinalRuleTrialStandardLevelsRevisePreliminaryAnalysesManufacturerImpactAnalysisUtilityImpactAnalysisEnvironmentalAssessmentRegulatoryImpactAnalysisEmploymentImpactAnalysis151RegulatoryImpactAnalysisRegulatoryImpactAnalysis�Purpose:•Toinvestigatethenationalimpactsduetonon­regulatoryalternativescomparedwithmandatoryenergyconservationstandards.•Thenon­regulatoryalternativesthatmaybeconsidered:–Nonewregulatoryaction;earlyreplacement;prescriptivestandards;consumertaxcredits;manufacturertaxcredits;consumerrebates;voluntaryefficiencytargets;bulkgovernmentprocurement.�Method:•ModifyNESspreadsheetmodeltoconsidernon­regulatoryscenarios.–Non­regulatoryscenariosincreaseoverallapplianceefficiencyandaremodeledbymodifyingthebasecaseefficiencytrend.–NPVcalculatedfornon­regulatoryalternativesinthesamewayasfortheadoptedstandard.�Eachnon­regulatoryscenariowilldecreasenationalapplianceoperatingcostsandincreaseapplianceequipmentprices.�Output:•NationalEnergySavingsandNetPresentValueofthenon­regulatoryalternatives.152FinalCommentsandQuestionsDOErequestscommentsandinvitesquestionsfrominterestedpartiesregardingtheDepartmentofEnergy’sHeatingProductsRulemaking.153HowtoSubmitComments...�PublicMeeting–Oralcommentswillbecapturedinthetranscriptandbecomepartofthepublicrecord.�Writtencomments–PreliminaryActivitiesandAnalysescommentperiodopenuntilMarch16,2009.Referencedocket#:EE–2006–STD–0129and/orRIN#:1904–AA90.Email:ResWaterDirectPoolHtrs@ee.doe.govMail:Ms.BrendaEdwardsU.S.DepartmentofEnergyBuildingTechnologiesProgram,MailstopEE­2JANOPRforResidentialWaterHeaters,DirectHeatingEquipment,andPoolHeatersEE­2006­STD­01291000IndependenceAvenue,SWWashingtonDC,20585­0121Courier:Ms.BrendaEdwardsU.S.DepartmentofEnergyBuildingTechnologiesProgram950L’EnfantPlaza,SW,Suite600Washington,DC,20024154