1

DRAFT MEMORANDUM

TO: Gil Wood, EPA/OAQPS/OID/RDPAG

FROM: Beth Friedman, EC/R, Incorporated

DATE: August 11, 2010

SUBJECT: Pellet Stove Cost Impacts

The purpose of this memorandum is to describe some of the factors that affect the potential 

cost impacts of emission reduction options being considered for pellet stoves as part of the New Source 

Performance Standards (NSPS) review of residential wood heaters.

I. Background

A pellet stove is defined as any wood burning heater which operates on pellet fuel. Wood 

pellets are tightly compacted and dense and have relatively low moisture content. The combination of 

fuel quality and precise metering of the fuel and air cause the pellets to burn more efficiently than 

cordwood. Types of pellet fuels include compressed sawdust, paper products, forest residue, wood 

chips and other waste biomass, ground nut-hulls and fruit pits, corn, and cotton seed. Pellet burning 

stoves look similar to wood stoves; however, they are usually smaller.1 Approximately 800,000 homes in 

the U.S. are using wood pellets for heat, in freestanding stoves, fireplace inserts and furnaces.2

The current NSPS definition of a residential wood heater currently exempts many pellet stoves 

from the standard due to the fact that they often exceed the specified air-to-fuel ratio in the 

combustion chamber of 35-to-1. The result is that many pellet stoves currently on the market have not 

been certified under the NSPS. If these units become subject to the NSPS, they would have to certify 

their emissions in order to continue to be sold in the U.S. In addition, depending on the level of the 

NSPS, some units might not be able to meet the emission limit without modifications. 

II. Size of the Pellet Stove Industry

North American sales of pellet stoves generated revenues of $166.9 million, accounting for 32.7 

percent of the total residential wood heaters, fireplaces, and hearth heating products market in 2008. 

This segment sold 130,381 units in 2008, accounting for 25.8 percent of the total number of units sold. 3 

Information provided by The Hearth, Patio & Barbecue Association (HPBA), reported 141,208 U.S. 

 

1 Outdoor Wood Stoves (pellet wood stoves). See: http://www.outdoorswoodstoves.com/wood-pellet-stoves.

2

Pellet Fuel Institute (What is pellet fuel?). See: http://www.pelletheat.org/3/residential/index.html.

3 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating 

Products Market. Prepared by Frost & Sullivan. April 26, 2010. P. 30.
2

industry shipments of pellet stoves and inserts in 2008. This number dropped 67% to 46,124 in 2009, 

due to the economic downturn.4 

Biomass stoves (some of which are pellet stoves and some of which are pellet furnaces or 

boilers) generated revenues of $9.6 million, accounting for 1.9 percent of the total market. This 

segment sold 6,819 units, accounting for 1.5 percent of the total number of units sold in 2008.5

The average price of pellet stoves is $1,279, with individual model prices ranging from $300 to 

$3,500 in 2008.6 HPBA reported a comparable average price of $1,348.

7

 Biomass stoves were reported 

to have an average price of $1,403, with individual model prices ranging from $350-$4,000 in 2008.

8

 All 

prices reflect the sales cost to the pellet stove dealer.

The results of the EPA survey of selected pellet stove manufacturers revealed comparable 

dealer sales prices, with an average price of $,1,340, with reported prices ranging from $780 to $2,100. 

The average cost to manufacture was $780, with reported prices ranging from $590 to $1,700.

These market conditions and prices influence the ability of manufacturers to invest in R&D to 

develop units that meet potentially lower emission standards. One issue raised by manufacturers is 

their available cash flow to fund R&D. Another concern is recovering R&D costs of the new models. 

One manufacturer provided an analysis showing the potential impact of the NSPS. In order to develop a 

new product family (3 to 4 models) over a 4.5 year period, he estimated the addition of $136.00 to the 

overhead costs of building the appliance. This would translate into a $226.00 increase in cost to the 

reseller of the product which ultimately would result in a $378.00 increase in consumer cost. This does 

not include additional actual manufacturing costs.9 

III. Universe of Sources Subject to a Potential NSPS

As described above, there are two potential ways that pellet stove manufacturers could be 

affected by an NSPS standard. The first group consists of pellet stoves that would meet the proposed 

standard, but have not yet been certified. Preliminary data indicate that most pellet stoves will meet 

the current Washington standard of 4.5 g/hr emissions, which is an option being considered. 

 

4

http://pelletheat.org/pdfs/Hearth-Shipments-U.S.-98-2009-revised-official.pdf.

5 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating 

Products Market. Prepared by Frost & Sullivan. April 26, 2010. P. 30.

6 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating 

Products Market. Prepared by Frost & Sullivan. April 26, 2010. P. 35.

7 Market Information Questions & HPBA Responses. December 2009.

8 Market Research and Report on North American Residential Wood Heaters, Fireplaces, and Hearth Heating 

Products Market. Prepared by Frost & Sullivan. April 26, 2010. P. 35.

9 Letter from Mike Haefner, American Energy Systems, to Beth Friedman, EC/R, Inc. July 26, 2010.
3

The following figure shows the emissions performance of pellet stoves that are currently 

certified, with the addition of a few uncertified stoves, for which we have reproducible emissions data. 

As can be seen, all but one of the pellet appliances in this data set would meet the 4.5 g/hr emission 

limit. 

We also looked at the list of certified pellet stoves on both the EPA and Washington state lists. 

Of the 224 pellet stove models from both lists, 221 models produced by 35 manufacturers would meet 

the Washington limit. Only 3 models produced by 3 manufacturers would not meet the limit. (We are 

still reviewing potential impacts of a limit lower that the Washington limit). Assuming that the rest of 

the pellet stove market has comparable performance, we would expect to see only a small cost impact 

of requiring a 4.5 g/hr standard in terms of having to redesign units to meet an NSPS. The cost impacts, 

therefore, would be limited to certification costs of model lines.

However, for the option of tightening the emission standard, some number of pellet stove 

models will either be abandoned or manufacturers will invest in developing new model lines that can 

meet the standards. Any new models would incur both R&D costs and certification costs. 

IV. R&D and Certification Costs

Certification testing of the final product only costs about $5,000 per model based on the current 

test protocol.10 Total costs to the manufacturer to monitor the test, test at different fuels, etc. would 

increase this cost. Of greater concern to manufacturers than the cost may be the availability of existing 

test labs to meet the demand for certification testing in the timeframe allowed by the NSPS 

implementation schedule.

 

10 Conversation with John Dupree, EPA. August 20, 2009.
4

We have heard various estimates of the costs to bring a wood heater from concept to 

completion. A recent Hearth and Home article estimated the total cost to bring a model from 

conception to market as $645,000 to $750,000 for steel stoves and over $1 million for cast-iron, 

enameled wood stoves. Costs would decrease for separate models in the same line by up to 25%. One 

manufacturer estimates that the NSPS and safety testing component of these costs would constitute 

$40,000 per model.

11

 

Another manufacturer estimated costs to bring a product family to certification (3 to 4 

individual models) of $2,141,500. These costs include several elements, such as salaries for the design 

engineer and other staff, lab & laboratory equipment, test lab salaries, prototypes, test fuel, pre-testing 

services, testing services, outside consultants, re-tooling, marketing expenses, and education expenses. 

The manufacturer estimated that the cost of testing a flex fuel appliance would be $67,500.00 per 

model or $202,500.00 for a product family of 3 models. 12 (Note that this manufacturer focuses on 

manufacturing flex fuel appliances, which are more difficult to design and produce than traditional wood 

pellet fuel appliances. These costs include testing for additional fuel types.)

Other manufacturers estimated an average cost $1,360,000 to bring four fireboxes to market 

to remain competitive in the market place. Each firebox will take at least 14 to 18 months to design and 

certify (with an average of 16 months per firebox).13

These R&D costs apply whether there is an NSPS or not, as manufacturers routinely update their 

model lines or develop new model lines to meet consumer demand for new features, improved 

appearance, and improved performance. Therefore, it is difficult to attach the entire R&D cost to the 

costs associated with meeting a certain emission limit, assuming that the rate at which a model line is 

developed remains the same as it would in the absence of an NSPS limit that forces redesign. The 

timeframe in which the NSPS is implemented and the average model turnover rate are important 

variables. 

 

11 James E. Houck and Paul Tiegs. There’s a Freight Train Comin’. Hearth and Home. December 2009.

12 Letter from Mike Haefner, American Energy Systems, to Beth Friedman, EC/R, Inc. July 26, 2010.

13 Stove Builder International and United States Stove Company. NSPS Review/Revision and Impact on our 

Companies. June 2010.