D

Energy Efficiency 

HearthHeatingProd2014STD

Notice of Proposed Rulemaking Public Meeting on 

Conservation Standards for Hearth Product
2

Welcome

• Introductions (around the room)• Role of the Facilitator

• Ground Rules

– Speak one at a time.

– Say your name for the record – there will be a complete tra

this meeting.

– Be concise – share the ‘air‐time’.

– Keep the focus here – cell phones on silent; limit sidebar co

– Webinar participants turn phone on mute; “raise your hand

recognized to speak.

• Housekeeping Items• Agenda Review

• Opening Remarks
3

Agenda

9:00 – 9:15 am Welcome; Introductions; and Agenda Review 

9:15 – 10:00 am Purpose of Public Meeting; Opening Statements; Comment

Submission Instructions; and Regulatory Authority and

Rulemaking Overview

10:00 – 10:15 am Market & Technology Assessment 

10:15 – 10:30 am Break10:30 – 11:15 am Engineering Analysis 

11:15 – 12:30 pm Markups; Energy Use Characterization; and Lifecycle Cost

and Payback Period Analysis

12:30 – 1:30 pm Lunch (on your own)
4

Agenda

1:30 – 2:15 pm Shipments and National Impact Analysis; Regulatory

Impact Analysis

2:15 – 2:45 pm Manufacturer Impact Analysis 

2:45 – 3:00 pm Break

3:00 – 3:30 pm Utility Impact Analysis; Environmental Impact Analysis;

and Indirect Employment Analysis

3:30 – 4:00 pm Closing Remarks from Interested Parties 

4:00 pm Adjourn
5

Participating Via the Webcast

• The Department is broadcasting this meeting live ove

Internet.

• DOE is providing the webcast to accommodate stake

that are unable to attend the public meeting in perso

• The web broadcast allows stakeholders to listen in, v

slides, and participate directly.

• All stakeholders are encouraged to submit written co

after the public meeting.
6

Purpose of the Public Meeting

• Present the procedural and analytical approaches to e

potential energy conservation standards for residenti

products.

• Invite comment on the energy conservation standard

of proposed rulemaking (NOPR) and technical suppordocument (TSD), including DOE’s proposed standard l

• Invite participants to provide summary comments or

statements and raise additional issues for discussion.
7

Issues for Discussion

The deadline for submitting comments is April 10, 

Issue Box: DOE welcomes comments, data, and inform

concerning its proposed standards for residential hearth products. Whether invited by an issue box or not, commewelcome on any part of DOE’s analysis.
8

Opening Remarks

Meeting participants are invited to provide opening remar

statements at this time.
9

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
10

Regulatory Authority

Energy Policy and Conservation Act (EPCA) of 1975 (P.L• Established the Energy Conservation Program for Consumer Pro

Other Than Automobiles.

• Granted DOE authority to classify additional types of consumer 

as covered products (42 U.S.C. 6292(a)(20) and (b)) and to presc

energy conservation standards for those products if certain stat

criteria are met (42 U.S.C. 6295(l)(1)(A)‐(D)).

Energy Independence and Security Act of 2007 (EISA 20

110‐140)

• Required that any final rule establishing or revising an energy

conservation standard for a covered product must incorporate 

mode and off mode energy use into a single amended or new s

pursuant to 42 U.S.C. 6295(o), if feasible. (42 U.S.C. 6295(gg)(3
11

• On December 31, 2013, DOE published a proposed

determination of coverage for hearth products. 78 F

• DOE used the definition for “Hearth Product” as prop

DOE’s Notice of Proposed Determination to define th

for the NOPR. 78 FR 79638, 79640 (Dec. 31, 2013).

• There are currently no energy conservation standard

procedures for hearth products.

Regulatory History & Test Procedure
12

Criteria for Selecting Standard Levels

The Energy Policy and Conservation Act (EPCA) directs DOE to con

greatest extent practicable, the following seven factors when dete

whether potential energy conservation standards are economicall

EPCA Factor DOE Analysi

1. Economic impact on consumers

and manufacturers

Life‐cycle cost analysisManufacturer impact ana

2. Lifetime operating cost savings Life‐cycle cost analysis

3. Total projected energy savings National impact analysis

4. Impact on utility or performance Screening analysis Engineering analysis

5. Impact of any lessening of competition Manufacturer impact ana

6. Need for national energy conservation National impact analysis

7. Other factors the Secretary considers

relevant

Environmental assessmen

Utility impact analysisEmployment impact analy
13

Proposed Definition

Proposed DOE Definition of "Hearth Product"

“A gas‐fired appliance that simulates a solid‐fueled firep

presents a flame pattern (for aesthetics or other purpose) 

may provide space heating directly to the space in whic

installed.”

78 FR 79638, 79640 (Dec. 31, 2013).

Issue 1: DOE seeks comment on the proposed definition for “h

product” found in the December 2013 NOPD (78 FR 79638) an

range of products that would be covered by the proposed rule 

definition were applied in the final rule.
14

Hearth Product Examples

Vented

Fireplace,

Insert, Stove

Unvented

Fireplace,

Insert, Stove

Vented

Gas Log Sets

Unvented

Gas Log Sets

Note: Analysis groups do not constitute DOE product classes.
15

Regulatory Approach

DOE considered two options for energy conservation standards for 

products:1. Performance‐based standards (efficiency or maximum energy 

2. Design (prescriptive) standard

Pursuant to the definition of “energy conservation standard” at 42 

6291(6), DOE may establish either a performance standard or a des

for these products, but not both.

To assess these options, DOE:

• Reviewed available technology options for performance‐based 

and design standards.

• Compared options for reducing active mode and standby mode 

consumption.

• Considered these for all hearth products meeting proposed de
16

Regulatory Approach

DOE concluded that a prescriptive design requirement would 

effective than a performance‐based requirement for the foll

reasons:• Less burden on manufacturers because testing not require

• Single requirement would apply to all products meeting th

product” proposed definition; and

• Product classes are unnecessary because standing pilot fu

components, and energy use are similar across all hearth p

• DOE notes that it did group different categories of 

products commonly found on the market for use in of potential performance standards.
17

NOPR Final Rule Effective Date

Rulemaking Overview

Markups for

Equipment Price

Determination

Life‐Cycle

Cost &

Payback

Period

Analysis

Engineering

Analysis

Energy Use &

End Use Load

Characterization

Market &

Technology

Screening

Analysis

Manufacturer

Impact Analysis

Shipments

Analysis

National

Impact

Analysis
18

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
19

Purpose: Develop qualitative and quantitative characterization o

hearth industry.

Methodology:

• Analyze publicly‐available data and information, as well as info

from manufacturers and other interested parties.

• Develop list of technologies that can be used to improve heart

efficiency or reduce overall fuel consumption.

Market Assessment
20

Market Assessment

• Vented – pipes carry products of combustio

building

• Fireplaces installed into walls or other frami

structures

• Inserts installed into existing solid‐fuel burn

fireplaces

• Stove is free‐standing, not installed into sur

structure

Vented

Fireplace,

Insert, Stove
21

Market Assessment

• Unvented – products of combustion remain 

• Similar varieties as vented group – gas firepl

for existing solid‐fuel fireplaces, free‐standin

• Require Oxygen Depletion Sensor (ODS) (AN

2013)

Unvented

Fireplace,

Insert, Stove
22

Market Assessment

• Installed in existing masonry fireplaces

• Require use of existing chimney for venting 

of combustion

• Do not include enclosure

• Installed in existing masonry fireplaces

• Byproducts of combustion remain in building

• Do not include enclosure

• Require Oxygen Depletion Sensor (ODS) (ANS

2013)

Vented Gas Log

Sets

Unvented Gas

Log Sets
23

Market Assessment

• Variety of forms

• Outdoor fireplace• Fire pit or burner

• Patio heater (pyramid or radiant)

Outdoor

Products
24

Market Assessment

Vented Fireplace,

Insert, Stove

Unvented

Fireplace, Insert,

Stove

Vented

Gas Log Sets

Unvented

Gas Log Sets

Note: Analysis groups do not constitute DOE product classes.

56.2% 4.4% 6.1% 18.3% 

Estimated Shares of Overall Hearth Products Ma

Based on HPBA Data (2005‐2013)
25

DOE found three general types of ignition systems in the hea

products market.1. Match lit – require user to use a match or lighter to ignit

burner

• No standby mode gas consumption

2. Constant burning (standing) pilot

• Consume gas while main burner off unless user

extinguishes pilot flame

3. Electronic ignition

• No standby mode gas consumption

Market Assessment
26

Market Assessment

Note: Analysis groups do not constitute DOE product classes.

Hearth Product Group

Estimated Market Sha

Match Lit

Standing

Pilot

Vented Fireplace, Insert, Stove 5 40 

Unvented Fireplace, Insert, Stove 0 88 

Vented Gas Log Sets 50 44 

Unvented Gas Log Sets 0 94 

Outdoor 50 26 
27

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
28

Purpose: Determine the difference in manufacturer production co

for hearth products resulting from potential standard.

Methodology:• Design Option Approach: Determine incremental cost of addin

technology design options.

• Reverse Engineering Approach: Cost assessment based on det

materials derived from physical teardowns.

Assumptions:• Standing pilot systems would convert to electronic ignition

• No effect on match lit systems

• Intermittent Pilot Ignition (IPI) are predominant in hearth mark

Engineering Analysis
29

Annual Standby

Energy

Consumption

Manufacturer Production Cost

Baseline (Standing Pilot)

“Max‐Tech” (Electr

Engineering Analysis

Incremental

MPC
30

Engineering Analysis

Hearth Product Group

RepresentativeStanding Pilot Type

(Baseline MPC)

RepElecIgn

Vented Fireplace, Insert, Stove Millivolt Gas Valve IPI*

Unvented Fireplace, Insert, Stove Millivolt Gas Valve IPI

Vented Gas Log Sets Manual Gas Valve IPI

Unvented Gas Log Sets Manual Gas Valve IPI

Outdoor Manual Gas Valve IPI, 

*IPI = Intermittent Pilot Ignition

**HWI = Intermittent Pilot with Hot Wire Igniter
31

Engineering Analysis

Hearth Product Group

RepresentativeShipmentVolume*

BaselineMPC ($)

Vented Fireplace, Insert, Stove 10,000 322 

Unvented Fireplace, Insert, Stove 2,000 281 

Vented Gas Log Sets 2,000 190 

Unvented Gas Log Sets 5,000 208 

Outdoor 3,000 210 

*Representative shipment volumes approximated using shipment totals by 

number of manufacturers producing each product group.**Incremental MPC is cost difference between standing pilot (baseline) and 

ignition system.
32

Issue 2: DOE requests comment on its assumption that ignition

component costs for vented fireplaces, inserts, and stoves are

equivalent.

Request for Comment

Engineering Analysis
33

• DOE applies a manufacturer markup to the calculated MPC’s to 

manufacturer selling prices (MSP)

• DOE estimates an average markup of 1.45 based on input from

confidential manufacturer interviews

Manufacturer Markup

ܵܩܱܥሺ	݈݀݋ܵ	ݏ݀݋݋ܩ	݂݋	ݐݏ݋ܥ ݐ݂݅݋ݎܲ	ݏݏ݋ݎܩ 	 ൌ ݌ݑ݇ݎܽܯ	ݎ݁ݎݑݐ݂ܽܿݑܽ݊ܯ

ܵܩܱܥ െ	 ݁ݑ݁݊ݒܴ݁ ൌ ݐ݂݅݋ݎܲ	ݏݏ݋ݎܩ

Issue 3: DOE requests comment on the derived manufacturer

production costs and markups.
34

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
35

Markups Analysis

Purpose

• Determine consumer price based on manufacturer’s selling price (M

baseline and higher‐efficiency products.

• Characterize distribution channels for hearth products.

Methodology

• Analyze financial data from each market participant to determine ma

• Markups for hearth products apply to ignition component.

Replacements New Construction

Manufacturer Wholesaler Consumer Mechanical Contractor Manufacturer Wholesaler 

Mechanical Contractor 

C

Markups Data Sources

Manufacturer Markup Based on input from manufacturers (see engineering analysis)

Wholesaler Markup* Firm income statements from the HARDI 2013 Profit Report.

Mechanical Contractor Markup* ACCA 2005 Financial Analysis HVACR report.

General Contractor Markup* US Census Bureau, 2007 Economic Census: Residential Buildin

Sales Tax* 2013 Sales Tax Clearinghouse Data.

*Markups developed for each geographic area
36

Markups AnalysisBaseline Markups:

• Relate MSP of baseline products to consumer purchase price.

• Baseline markup is applied to the baseline MSP to determine the bas

consumer purchase price

Incremental Markups:

• Relate the change in the MSP of higher‐efficiency products (the incre

increase) to the change in the consumer purchase price.

• Covers only expenses that vary with MSP (e.g., operating expenses a

• Fixed costs such as overhead and labor do not scale with increased e• Incremental markup is applied to the MSP difference of higher‐efficie

baseline products.
37

Markups Analysis

Average Markups for Market Participants

Request for Comment

Issue 4: DOE invites comments on any aspect relating to th

Markups Analysis.

Market Participant

Replacement New Constructi

Baseline Incr. Baseline In

Manufacturer 1.45 1.45Wholesaler 1.36 1.10 1.36 1.Mechanical Contractor 1.53 1.23 1.42 1.

General Contractor ‐ 1.46 1.3

Sales Tax 1.07 ‐

Overall Markup 3.23 2.10 3.99 2.4

Baseline Markup Incremental Mar

Hearth Products 3.43 2.17

Average Overall Markups
38

Energy Use Characterization

Purpose

• Determine annual energy consumption of the hearth product ignitio

• Annual energy costs are inputs to Life‐Cycle Cost and Payback Period 

Methodology

• Ignition system power (QP): Standing pilot (SP) or intermittent pilot (IPI) ignit

power, determined in the engineering analysis.

– SP: Fuel input consumed by the standing pilot, Btu/hr.– IPI: Electrical power consumed by the intermittent pilot ignition system, W.

• Ignition System Operating Hours (OHP): On‐time of the SP or IPI ignition syst

– SP: Determined using field studies and RECS 2009 household data.– IPI: Determined based on hearth product main burner operation.

• Impact on Space Heating or Cooling Energy Use (Secondary Effects): Impac

operation on household space conditioning system energy use.

– Heating Season: SP heat is counted as beneficial heat and reduces furnace operatin– Non‐Heating Season: SP heat is counted as an additional cooling load and increase

operating hours.

࢙࢚ࢉࢋࢌࢌࡱ࢟࢘ࢇࢊ࢔࢕ࢉࢋࡿ	൅ ࡼࡴࡻ	 ൈ ࡼࡽ ൌ ࢒ࢇ࢚࢕ࢀࢋ࢙ࢁ࢟ࢍ࢘ࢋ࢔ࡱ
39

Energy Use Characterization

Building Sample

Product Class Count

# of

Households,

(million)

RECS 2009

Vented Sample 541 4.67

Ventless Sample 171 1.83

Out of

Sample

Yes

Uses NG

or LPG

No

RECS 2009

Sample

Out of

Sample

No

Venting

Uses a

Fireplace

for Space

Heating?

Yes
40

Energy Use Characterization

Ignition System Representative Power

Hearth Product Type Standing Pilot (Btu/h) Intermittent Pilot Ignition (W) Mai

(B

Vented Fireplace, Insert, Stove 1,000 50 3

Unvented Fireplace, Insert, Stove 1,200 50 3

Vented Gas Log Sets 700 50 3

Unvented Gas Log Sets 800 50 2

Outdoor 1,000 50 5

࢙࢚ࢉࢋࢌࢌࡱ࢟࢘ࢇࢊ࢔࢕ࢉࢋࡿ	൅ ࡼࡴࡻ	 ൈ ࡼࡽ ൌ ࢒ࢇ࢚࢕ࢀࢋ࢙ࢁ࢟ࢍ࢘ࢋ࢔ࡱ
41

Energy Use Characterization

Standing Pilot Operating Hours Methodology

• Propane users are expected to behave as

in mode 2, and constituted 25% of hearth

products users (based on RECS 2009).

• Frequency chart shows the fraction of

users with those operating hours

• SP operating hours (average): 3708

• DOE identified three behavior modes for gas‐fired hearth products, from a fie

1. 40% of users leave their SP on “all year.”

2. 20% of users turn off their SP daily when in use.

3. High variation among remaining 40% of users, with many turning their SP off at the 

heating season.

• For each mode, DOE assumed a distribution of operating hours based on that 

household characteristics, including heating season length and main burner u

࢙࢚ࢉࢋࢌࢌࡱ࢟࢘ࢇࢊ࢔࢕ࢉࢋࡿ	൅ ࡼࡴࡻ	 ൈ ࡼࡽ ൌ ࢒ࢇ࢚࢕ࢀࢋ࢙ࢁ࢟ࢍ࢘ࢋ࢔ࡱ

1: Hayden, CANMET Energy Technology Centre (CETC), 1997
42

Energy Use Characterization

IPI Operating Hours

Assumptions

• Average Main Burner cycle time = 20 minutes1• Main Burner Cycles per hour = 3• IPI Operation per Cycle = 30 seconds

Results

• IPI operating hours (average) = 3.9 hours/year

ܱ݊ܫܲܫሺ ∗ ݏݎݑ݋ܪ	݅݊݃ݐܽݎ݁݌ܱ	ݎ݊݁ݎݑܤ	ܽ݅݊ܯ ൌ ݏݎݑ݋ܪ	݅݊݃ݐܽݎ݁݌ܱ	ܫܲܫ

െ

ܱ݊ܫܲܫ

െ

݊݋݅ݐܽݎ݁݌ܱ	ܫܲܫ ∗ ݎݑ݋݄	ݎ݁݌	ݏ݈ܿ݁ݕܥ	ݎ݊݁ݎݑܤ	ܽ݅݊ܯ ൌ ݎݑ݋ܪ ݎ݁݌ ܶ݅݉݁

࢙࢚ࢉࢋࢌࢌࡱ࢟࢘ࢇࢊ࢔࢕ࢉࢋࡿ	൅ ࡼࡴࡻ	 ൈ ࡼࡽ ൌ ࢒ࢇ࢚࢕ࢀࢋ࢙ࢁ࢟ࢍ࢘ࢋ࢔ࡱ

1: DOE Test Procedure for Vented Home Heating Equipment, 10 CFR Part 430, Subpart B, Appendix O.
43

Energy Use Characterization

Main Burner Operating Hours

ݕݐܽܿ݅݌ܽܥ	ݐݑ݌݊ܫ	ݎ݊݁ݎݑܤ	ܽ݅݊ܯ 

ܽܿܨ݆݀ܣ ൈ ݁ݏܷ	ݕ݃ݎ݊݁ܧ	ݐܿݑ݀݋ݎܲ	݄ݐݎ݁ܽܪ ൌ௥௡௘௥ ௨௔௜௡	஻ெܪܱ

• Hearth Product Energy Use: energy used by the hearth product.

– Determined from hearth product energy use as listed in RECS 2009

• Main Burner Input Capacity: determined in engineering analysis.

• Adjustment factors (AdjFactor) :

– Adjust heating/cooling load to projected 2021 value to accounting for building shel

(based on AEO 2014) and average climate conditions (based on 10‐year NOAA clima
44

Energy Use Characterization

Impact on Space Heating or Cooling Energy Us

• s (index)= season (heating or cooling season)

• QP = power consumption of the pilot

• OHP,S = pilot operating hours in that season

• EUSE,pilot = energy consumed by the pilot

• ߟܲ = fraction of useful heat from the pilot

– Distribution based on field study1– Assumed half for decorative units– Assumed double for unvented units

• ߟs = efficiency of the main heating or cooling appliance2

(ܵ݁ܿ݋݊݀ܽݕݎ	ܧ݂݂݁ܿݏݐሻݏ ൌ ா௎ௌா,௣௜௟௢௧∗ఎ௉ ఎs

ܧܷܵܧ

,

ௌ,௉ܪܱ ∗ ௉ܳ ൌ ݐ݋݈݅݌

1: ηࡼ derived from field study; includes furnace coincidence factor, infiltration, as well as heat

transfer (Armstrong et al, Canadian Centre for Housing Technology (CCHT), 2010)

2: AEO 2014

࢙࢚ࢉࢋࢌࢌࡱ࢟࢘ࢇࢊ࢔࢕ࢉࢋࡿ	൅ ࡼࡴࡻ	 ൈ ࡼࡽ ൌ ࢒ࢇ࢚࢕ࢀࢋ࢙ࢁ࢟ࢍ࢘ࢋ࢔ࡱ
45

Energy Use Characterization

Summary of SP Results

** No fuel use by IPI.*** Total impact of IPI are calculated using the market‐share‐weighted average of each product type.

† Reflects impacts of lack of standing pilot heat

Hearth Product Type Total Fuel Use* (MMBtu/yr)

Vented Fireplace, Insert, Stove 3.99Unvented Fireplace, Insert, Stove 3.52Vented Gas Log Sets 3.13

Unvented Gas Log Sets 2.29

Outdoor 3.91All SP Hearth Products 3.58

Hearth Product Type

Electricity

Use**

(kWh/yr)

Space Heating

Fuel Impact†

(MMBtu/yr)

Space Heating

Electricity Impact†

(kWh/yr)

Space Coo

Electricity Im

(kWh/y

Vented Fireplace, Insert, Stove 0.19 0.50 25.2 ‐12.8Unvented Fireplace, Insert, Stove 0.18 1.30 155 ‐49.5

Vented Gas Log Sets 0.30 0.29 15.5 ‐7.0

Unvented Gas Log Sets 0.22 0.92 102 ‐49.5

Outdoor 0.18 0.00 0.00 0.00All IPI Hearth Products*** 0.20 0.58 45.5 ‐21.1

Summary of IPI Results

* No electricity use by SP
46

Energy Use Characterization

Request for Comment

Issue 6: DOE invites comment on any aspect relating to the E

Use Characterization.

Issue 5: DOE requests comment on the pilot usage methodo

specifically the percentages of consumers who operate their

hearth product standing pilots year round, for only the heati

season, only when operating the unit, and the consideration 

heat input into the space.
47

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
48

Life‐Cycle Cost and Payback Period AnalysisPurpose

• Provide an economic evaluation from the consumer’s perspective.

• Life‐Cycle Cost (LCC) is the total consumer cost over the life of the pro

• Payback Period (PBP) is the time required to recover the increased pu

of more energy‐efficient products through reduced operating costs.

Method

• Use consumer samples developed in the energy use analysis.

• Analysis models the uncertainty and variability of inputs using Monte 

approach and probability distributions using Excel® with Crystal Ball.

ൌ ܲܤܲ

ݐݏ݋ܥ	݈݈ܽ݁݀ݐݏ݊ܫ	݈ܽݐ݋ܶ∆

ݐݏ݋ܥ	݅݊݃ݐܽݎ݁݌ܱ	ݎܻ݁ܽ	ݐݏݎ݅ܨ∆

ݐݏ݋ܥ	݅݊݃ݐܽݎ݁݌ܱ	݅݉݁ݐ݂݅݁ܮ ൅ ݐݏ݋ܥ	݈݈ܽ݁݀ݐݏ݊ܫ	݈ܽݐ݋ܶ ൌ ܥܥܮ

௘௦஻௔ܥܥܮ െ ௌ௧ௗܥܥܮ ൌ ݏ݅݊݃ݒܵܽ	ܥܥܮ
49

Life‐Cycle Cost and Payback Period Analysis

LCC & Payback Period Analysis Flowchart

EngineeringAnalysisMarkups toDetermineProduct Price

Energy UseCharacterization

Baseline

Manufacturer

Cost

Standard‐Level

Manufacturer

Cost

Manufacturer

Markup

Distributer &

Contractor

Markups

Sales Tax

Baseline Energy

Consumption

Standard‐Level

Energy

Consumption

Consumer

Price

Installation

Cost

Total

Installed Cost

Annual

Energy Cost

Repair

Cost

Maintenance

Cost

Annual

Operating

Expense

Lifetime

Discount

Rate

Energy Price

Trend

Lifet

Oper

Expe

Payb

Per

Marginal Energy

Prices
50

Life‐Cycle Cost and Payback Period Analysis

Consumer Price

ݏ݌ݑ݇ݎܽܯ ൈ ݐݏ݋ܥ	݅݊݃ݎݑݐ݂ܽܿݑܽ݊ܯ ൌ ݅ܿ݁ݎܲ	ݎ݉݁ݑݏ݊݋ܥ

• Manufacturing production costs derived from engineering analysis.

• Markups and sales taxes determined from the markups analysis.

• Consumer prices determined for both ignition systems.

• Price trend assumed constant.

Ignition Type Average Consumer Price

(2013$)

Standing Pilot 165.21Intermittent Pilot 247.29
51

LCC and Payback Period Analysis

Installation Costs

Purpose• Represent the labor and material costs necessary to install the heart

ignition system.

– Incremental costs of ignition system only

– Electric Connection, considered for houses built prior to 1990

– Electrical Grounding, considered for houses built prior to 1960

Sources

• 2013 RS Means (Mechanical and Labor Cost Data)

• Manufacturer literature

Issue 7: DOE requests comment on installation and retrofit assumptions 

electrical connections and grounding.

Description Average Cost (2013$) Percent of Household

Electrical Connection 141 13.3%Electrical Grounding 32 2.6%
52

Energy Prices

LCC and Payback Period Analysis

Purpose

• Develop average marginal monthly prices by geographical area.

Methodology

• Multiplied most current average annual energy prices by monthly pr

and marginal price factors.

− 2012 average annual energy prices by geographical area based on:

• Electricity Prices: EIA’s 2012 Form 826 data

• Natural Gas: EIA’s 2012 Natural Gas Navigator monthly data

• Oil: EIA’s 2012 State Energy Consumption, Price, and Expenditures Estimates (

− Monthly energy price factors by geographical area based on:

• Electricity Prices: EIA’s 1990‐2012 Form 826 monthly data

• Natural Gas: EIA’s 1989‐2012 Natural Gas Navigator monthly data• Oil and LPG: EIA’s 2009 Short‐Term Energy Outlook, 1995‐2009 historical data

− Marginal energy price factors for electricity and natural gas by 30 geogra

based on EIA monthly data from 2003‐2012.
53

Methodology

• 2012 average monthly marginal energy prices by geographical area m

the projected annual energy price trends for the corresponding Cens

− 2021‐2040 trends based on EIA’s AEO 2014 by Census Division− After 2040 trends based on Federal Energy Management Program (FEMP

• Marginal energy prices calculated from current energy prices and m

factors by geographical area.

Energy Price Trends

National Projected Residential Energy Prices

Life‐Cycle Cost and Payback Period Analysis
54

LCC and Payback Period Analysis

Repair and Maintenance

• Maintenance Costs: Labor and material required to ensure ongoing product o

did not identify specific maintenance requirements for either hearth product 

system, and assumed no maintenance cost.

• Repair Costs: Cost of replacing or repairing failed components. Because the ig

is a component of the hearth product, DOE assumed repair and replace cost a

– Frequency: Determined based on warranty info and hearth product lifetime.

– Cost: Equal to the component cost of the module.

• Sources

– Material cost: Engineering analysis

– Labor cost: 2013 RS Means Facilities Repair and Maintenance Data

– Manufacturer literature and interviews

Issue 8: DOE requests comment on ignition module repair.

Description Average Value

Ignition Repair Year 9.6 years

Standing Pilot Repair Cost $248

Intermittent Pilot Repair Cost $322
55

Lifetime

LCC and Payback Period Analysis

• Definition: Age when the hearth product is retired from service.

• Methodology: The distribution of lifetimes is based on warranty info

manufacturer literature, published studies on the lifetime distributio

similar products2 for the average lifetime.

• Results: Median lifetime of 15.0 years.

Issue 9: DOE requests comment on lifetime assumptions.

1: Lutz, et al, Using national survey data to estimate lifetimes of residential appliances, 20112: DHE: 10 CFR 430 ID: EERE‐2006‐STD‐0129‐0170
56

Discount Rates

LCC and Payback Period Analysis

• Purpose: Used to determine the present value of lifetime operating expense

product is retired from service.

• Methodology: Used data on interest or return rates for various types of debt 

calculate a real effective discount rate for each household. To account for va

households in rates for each of the types of debt and equity, DOE sampled a 

for each household from a distribution of discount rates for each of six incom

• Primary data sources: The Federal Reserve Board’s Survey of Consumer Finan

1998, 2001, 2004, 2007, and 2010

• Results: Average discount rate: 4.2%

Distribution of Real Discount Rates by Income Group
57

Base‐Case Efficiency Distribution

LCC and Payback Period Analysis

Purpose: Reflects the projected market share of products at different eff

in the base case (in the absence of a standard) in 2021.

• Not all consumers purchase products at current minimum standard.

• Consumers already purchasing products at efficiencies greater than or equal 

prospective standard level are not impacted by the standard.

Methodology: Used historical model data. Assumed constant distribution 

Issue 10: DOE requests comment on the estimated base‐case efficiency d

Hearth Product Type Fraction of All

Hearth Products

SP 

Vented Fireplace, Insert, Stove 61% 42% 

Unvented Fireplace, Insert, Stove 5% 88% Vented Gas Log Sets 4% 88% 

Unvented Gas Log Sets 21% 94% 

Outdoor 9% 52% 

Weighted Average of all Hearth Products 58% 

*Includes fireplaces, inserts, and stoves.
58

Parameter Value or Source

Compliance Year 2021

Dollar Year 2013$

Building Sample RECS 2009

Labor Costs 2013 RS Means

Installation Costs Average $20 increase in cost

Repair Equal to material cost multiplied by repair markup

Energy Prices

Electricity: EIA’s Form 826 data

Natural gas: EIA’s Natural Gas Navigator

LPG: EIA’s 2012 State Energy Consumption, Price, and Expenditures Es

Energy Price Trends EIA’s AEO 2014

Discount Rates 1995 ‐ 2010 Federal Reserve Board’s Survey of Consumer Finances dat

Lifetime

• Average ignition system repair year: 9.6 years

• Average hearth product lifetime: 15 years

Base‐Case EfficiencyDistribution

• SP Market Share: 58%

• IPI Market Share: 42%

Product Switching Assumed no product switching in the standard case

Life‐Cycle Cost and Payback Period Analysis

Summary of NOPR LCC Inputs

Weighted average of allhearth products types
59

Life‐Cycle Cost and Payback Period Analysis

LCC and PBP Analysis Results

TSL Design

Average Costs 2013$

Installed

Cost

First Year’s

Operating

Cost

Lifetime

Operating

Cost

LCC

0 SP $166 $50 $602 $769 1 IPI $268 $15 $174 $442 

TSL Design LCC Savings (2013$) Consumers with Net Cost (%)

1 IPI 165 23
60

Life‐Cycle Cost and Payback Period Analysis

Issue 11: DOE requests comment on the constant price trend a

to the hearth product MSP.

Request for Comment

Issue 12: DOE invites comment on any aspect relating to the L

Cost and Payback Period Analysis.
61

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
62

Purpose

• Forecast the hearth products that would be expected to be shipped 

2021 and 2050 with and without an energy conservation standard.

Methodology

• Shipment Projections: Estimate the number of hearth products shipp

in the absence of new standards (base case) and standards case betw

and 2050.

– Historical hearth product shipments are highly correlated with housing st– Estimated hearth product shipments from 2021 to 2050 based on housin

projections.3

• Price Elasticity: Accounts for the impact of increased prices due to a 

shipments.

Shipments Analysis

1: Congruent with industry analysts. See Houck, James E. "Gas Heart of the Hearth." Hearth & Home Sept. 2014: 58.

2: Correlation factor r = 0.98

3: EIA’s AEO 2014
63

Historical Projected

Shipments Analysis

Historical and Projected Shipments for Hearth Pro

AEO 2014 

Starts Pro

Price Elasticity Effe

Correlation Coefficient in =standard 0.98 year (2
64

Historical Projected

Shipments Analysis

Historical and Projected Shipments for Hearth Pro

AEO 2014 

Starts Pro
65

Historical Projected

Shipments Analysis

Historical and Projected Shipments for Hearth Pro

AEO 2014 

Starts Pro
66

Historical Projected

Shipments Analysis

Historical and Projected Shipments for Hearth Pro

Price Elasticity Effe

in standard year (2
67

Shipments Analysis

Issue 13: DOE requests comment on DOE’s methodology to cor

housing starts with hearth products shipments.

Request for Comment

Issue 14: DOE invites comment on any aspect relating to the

Shipments Analysis
68

National Impact AnalysisPurpose

• Estimate national impacts of an energy conservation standard over the lifetim

products shipped between 2021 and 2050.

• National Energy Savings (NES): Difference in the lifetime energy consumptio

products for the base case compared to the standard case.

• Net Present Value (NPV): Difference between the present value of installed c

present value of operating costs over the analysis period (2021‐2050).

Methodology

• For each product type in the standard case:

1. Determine per‐unit cost increase and per‐unit energy savings due to the standard.

2. Determine number of units (stock) based on shipments in the analysis period and th

3. Determine NES by multiplying the annual energy savings for each case by the projec

product shipments for each year, summing over the lifetime of units shipped in the 

4. Determine net cost savings as the aggregate difference each year between the ope

and increased installed costs.

5. Apply a discount factor to determine present value of savings and costs.

6. Determine the national NPV by summing the present value of all shipments in the a
69

National Impact Analysis

* Over lifetime of products shipped from 2021‐2050.

National Energy Savings

Standard‐Cas

Cumulative Ene

Use*

Base‐Case Annual Energy

Consumption

Shipments Analysis

Base‐Case Cumulative

Energy Use*

National Energy

Savings

Site‐to‐Source Energy

Conversion

Standard‐Case A

Energy Consump

Sta

Base‐Case

Projection
70

National Impact Analysis

Net Present Value

Sta

Base‐Case

Projection

Cumulative T

Consumer Cost In

Energy Cost

Net Present

Value

Discount Rate Cumulative Operating Cost Savings*

Shipments Analysis

Maintenance and

Repair Cost Product Cost Energy Cost Maintenance a

Repair Cost 

* Over lifetime of products shipped from 2021‐2050.
71

Input Methodology

Annual Unit Energy Consumption (UEC) Determined from LCC analysis results.

Shipments Projected shipments for each product type under the base 

case. See TSD chapter 9.

Product Stock Determined using annual shipments and lifetimes for eac

Base‐Case Efficiencies

Developed a distribution of efficiencies in the base case fo

chapter 8). In each standard case, “roll‐up” scenario is use

efficiency distribution.

Site‐to‐Power Plant and Full‐Fuel‐Cycle

(FFC) Energy Factors

Converts site electricity into primary (power plant) energy 

addition, FFC accounts for the energy used for resource ex

distribution losses.

Total Installed Cost per Unit Determined from LCC analysis results.

Total Operating Cost per Unit Includes costs for energy, maintenance, and repair determ

type based on LCC analysis.

Discount Factor Used to determine present value of future monetary valu

rate (see appendix 8D).

National Impact Analysis

National Impact Analysis (NIA) Inputs
72

Input Value

Compliance Year 2021

Dollar Year 2013$

Discount Factors 3% and 7% in accordance with the Office 

Management and Budget’s guidance.

LCC Output Results to NIA Disaggregated by product type.Energy Price Trends EIA’s AEO 2014.

Base Case Ignition System Distribution SP Market Share: 58% IPI Market Share: 42%

Standard Case Ignition System

Distribution

SP Market Share: 0%IPI Market Share: 100%

Site‐to‐Power Plant and Full‐Fuel‐Cycle

(FFC) Energy Use Factors Based on EIA’s AEO 2014.

National Impact Analysis

Input Values
73

• Products below standard will “roll‐up” to comply with a standard. Pr

above the standard will not be affected.

• IPI market share will increase from the baseline estimate of 42% to 1

after the standard comes into effect.

Trial Standard Level (TSL) Selection Criteria:

• TSL 1: disallow standing pilot lights.

TSL Market Share for Hearth Product IPI

Base case 42%1 100%

Base‐Case Efficiency and Trial Standard Leve

National Impact Analysis
74

National Impact Analysis

Description 

Primary National Energy Savings (quads) 

Full‐Fuel‐Cycle National Energy Savings (quads) 

NPV of Consumer Benefit, Discounted at 3% (billion 2013$) 

NPV of Consumer Benefit, Discounted at 7% (billion 2013$) 

Summary of NIA Results for Hearth Products
75

National Impact Analysis

Request for Comment

Issue 15: DOE invites comment on any aspect relating to 

National Impact Analysis.
76

Purpose

• Investigate national impacts of non‐regulatory alternatives to manda

amended energy conservation standards.

Methodology

• Used modified NIA spreadsheet to evaluate non‐regulatory alternativ

proposed standard:

Results

• NES and NPV for non‐regulatory alternatives.• No alternative was found to be as beneficial as the proposed energy 

standard. (See chapter 17 of the TSD for methodology and results.)

Regulatory Impact Analysis

• No New Regulatory Action • Manufacturer Tax Credits

• Consumer Rebates • Voluntary Energy Efficiency Ta

• Consumer Tax Credits • Bulk Government Purchases
77

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
78

Purpose:• To assess the impacts of standards on manufacturers;

• To identify and estimate impacts on manufacturer subgroups 

more severely affected than the industry as a whole; and

• To examine the direct employment, manufacturing capacity, 

cumulative regulatory impacts on the industry.

Methodology:• Analyze industry cash flow and industry net present value (IN

use of the Government Regulatory Impact Model (GRIM); and

• Interview manufacturers to refine inputs to the GRIM, develo

analyses, and address qualitative issues.

MIA: Overview

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
79

• Phase 1

– DOE creates an industry profile to characterize the mar

identify important issues that require further investiga

• Phase 2

– DOE prepares an industry cash‐flow model and an inte

questionnaire to guide subsequent discussions with

manufacturers.

• Phase 3

– DOE interviews manufacturers and assesses the impact

standards both quantitatively (using the GRIM) and qua

(impacts on employment, competition, manufacturing 

and regulatory burden).

MIA: Methodology

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
80

MIA: Methodology

• Upstream Inputs

– Market and Technology Assessment (MTA) Industry Pro

– Engineering MPCs– Shipments

• MIA Inputs

– Markup Scenarios

– Conversion Costs

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
81

MIA: Key Issues

• Impacts on Manufacturer Profitability

– Manufacturers indicated cost increases could redu

sales volumes and profits.

• Impacts on Industry Competition

– Smaller manufacturers expressed concern regardi

their ability to compete against larger manufactur

• Impacts on Product Performance

– Several manufacturers stated that electronic igniti

systems are more complicated and less reliable th

standing pilot lights.

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
82

• DOE modeled two markup scenarios to capture a rang

potential financial impacts on the industry:

– Preservation of Gross Margin Percentage Markup Scen

• Represents the upper bound of profitability impacts.

– Preservation of Per‐Unit Operating Profit Markup Scen

• Represents the lower bound of profitability impacts.

MIA: Markup Scenarios

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
83

MIA: INPV Results

Units Base Case TSL 1

INPV 2013$M 125.3 122.0 to 125.8

Change in INPV

2013$M ‐ (3.3) to 0.5

% Change ‐ (2.6) to 0.4

Product Conversion

Costs 2013$M ‐ 7.8

Capital Conversion

Costs 2013$M ‐ 0.9

Total Conversion

Costs 2013$M ‐ 8.7

Note: Parentheses indicate negative values.

• Summary of TSL 1

– Expected INPV change in the range of ‐2.6% to 0.4%

– Expected conversion costs total $8.7 million for the indus

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
84

MIA: Small Business Impacts• DOE identified 66 domestic small business manufacturers 

products.

– Small businesses were defined as having 500 employe

fewer based on SBA small business size standards.

• The proposed standard disallowing use of standing pilot l

require manufacturers to purchase more expensive comp

electronic ignition systems.

• Large manufacturers tend to produce at higher volumes a

enjoy a competitive advantage due to their ability to sour

electronic ignition components at lower cost.

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
85

MIA: Subgroup of Gas Log Set Manufacturers

• Add a few bullets plus table of INPV impacts

• DOE identified 90 manufacturers of hearth products, including 

manufacturers of gas log sets.

• During interviews, gas log set manufacturers noted:

– Gas log sets represent a distinct market segment, competing with wood a

pre‐existing fire places.

– Electronic ignition systems1 take up more space than standing pilot lights, 

to conceal, and could impact product aesthetics and installation costs.

– MPCs are relatively low, and a shift to more expensive electronic ignition s

have a greater proportional impact on MPC.

Product Group Baseline MPC MPC with Electronic Ignition % Increase in Overall MPC

Vented 

Fireplace/Insert/Stove $322 $350 9%

Unvented 

Fireplace/Insert/Stove $281 $313 11%

Vented Gas Logs $190 $260 37%

Unvented Gas Logs $208 $264 27%

Outdoor $210 $265 26%

1The vast majority of gas log sets are unvented units. Under ANSI Z21.11.2, which bans match-lit i

vent-free units, these products would not have the option of converting to match-lit and would have electronic ignition.

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
86

MIA: Small Business Impacts

Issue 16: DOE requests comment on the number of small manufacturers of hearth products; on the potentiaimpacts of an energy conservation standard on those small manufacturers; and on the severity of those impacts.

Details of the Manufacturer Impact Analysis can be found in chapter 12 of the TSD
87

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
88

Emissions Analysis

Purpose

• Estimate emission reductions resulting from a standard.

• Includes full‐fuel‐cycle (FFC) emissions, which account for power plant and u

emissions.

• Includes fugitive methane emissions.

Methodology

• DOE assessed the environmental impacts using AEO 2014 to derive emission

which are applied to the annual energy savings.

Results

• Energy savings from the proposed standard would be expected to reduce cum

emissions by:

– 37.0 million metric tons (Mt) of CO2

– 125 thousand tons of NOX– 0.01 thousand tons of N2O

– 486 thousand tons of CH4

• Due to increased electricity use, the proposed standard would be expected t

cumulative emissions by:

– 4.26 tons of SO2– 0.01 tons of Hg
89

Monetization of Emission Reductions

Purpose

• Estimate the monetary benefit of reduced emissions resulting from the propose

conservation standard.

Methodology

• Used the most current Social Cost of Carbon (SCC) values developed through in

reviews.

– SCC is intended to be a monetary measure of the incremental damage resulting from 

(GHG) emissions, including but not limited to agricultural productivity loss, human hea

from rising sea levels, and changes in the ecosystem.

• Interagency estimates1 of the potential global benefits resulting from reduced C

2015 are $12.0, $40.5, $62.4, and $119.0 per metric ton (2013$).

• For emission reductions that occur in later years, these values grow based on th

growth rates for 2040‐2050 in the 2013 interagency update.

• DOE also monetized NOx emissions2 reductions resulting from an amended stan

– Estimates of monetary value range from $476 to $4,893 per short ton.

– DOE calculated monetary benefits using a median value of $2,684 per short ton.

Benefits of Emissions Reductions (million 2013$)

CO2 226 to 3405

NOX 3% discount rate 147.5

NOX 7% discount rate 57.9

1: Interagency Working Group, 2010 and 20132: OMB report to Congress, 2006
90

Utility Impact Analysis

Purpose

• Assess impacts on electric utility sector due to adoption of the propo

Methodology

• Used data from the AEO reference case and efficiency‐related side ca

estimate marginal impact factors.

– The marginal impact factors quantify the change in generation, installed 

emissions per unit of site electricity demand reduction.

• Total utility sector impacts are equal to the impact factors multiplied 

Results

• Changes in total electricity generation by fuel type.

• Changes in primary fuel consumption (e.g., natural gas, coal, and pet

fuels).

• Changes to total installed capacity by fuel and technology type.

For further details, see chapter 15 of the NOPR TSD.
91

Indirect Employment Impact Analysis

Purpose

• Assess the overall impact on indirect* national employment from th

energy conservation standard that results from shifting consumer ex

among goods and services and changing product and energy costs.

Methodology

• Used the Impact of Sector Energy Technologies (ImSET) model to ev

indirect employment impacts.

• Changes in national product and energy expenditures from the NIA a

as inputs into ImSET.

Results

• Net labor market impacts will be small over time due to the small m

the short‐term effects. (See chapter 16 of the TSD.)

*Direct national employment impacts are discussed in the Manufacturer Impact Analysis (MIA).
92

Public Meeting Agenda

1 Overview2 Market & Technology Assessment3 Engineering Analysis4 Markups Analysis and Energy Use5 Life-Cycle Cost and Payback Period Analysis6 Shipments, National, Regulatory Impact Analyses

7 Manufacturer Impact Analysis

8 Environmental, Utility, Indirect Employment Impact A

9 Closing Remarks and How to Submit Comments
93

How to Submit Comments

• In all correspondence, please include all of the follow

o Energy Conservation Standards for Hearth Products

o Docket Number: EERE‐2014‐BT‐STD‐0036

o Regulatory Identification Number (RIN): 1904‐AD35

• Contact Information

Email: HearthHeatingProd2014STD0036@ee.doe.gov

Postal Mail:

Ms. Brenda Edwards

U.S. Department of Energy

Building Technologies Office

Mailstop EE‐5B

1000 Independence Avenue, S.W.

Washington, DC 20585‐0121

Courier:

Ms. Brenda Edwards

U.S. Department of E

Building Technologies 

L’Enfant Plaza, S.W., S

Washington, DC 2002Telephone: (202) 586

• Comment period closes April 10, 2015 at 11:59 PM EDT