CHAPTER 5. ENGINEERING ANALYSIS

TABLE OF CONTENTS

5.1 INTRODUCTION

........................................................................................................... 5-1 5.2 TECHNOLOGIES UNABLE TO BE INCL UDED IN THE SNOPR ANALYSIS

....... 5-2 5.3 EQUIPMENT CLASSES ANALYZED

.......................................................................... 5-2 5.4 EFFICIENCY LEVELS

................................................................................................... 5-2 5.4.1 Baseline Units

........................................................................................................... ....... 5-2 5.4.2 Incremental Efficiency Levels

......................................................................................... 5-3 5.5 METHODOLOGY OVERVIEW

.................................................................................... 5-5 5.5.1 AHAM Data Request

....................................................................................................... 5 -5 5.5.2 Manufacturer Interviews

.................................................................................................. 5-5 5.5.3 Review of Previous Technical Support Documents

........................................................ 5-6 5.5.4 Equipment Testing

........................................................................................................ ... 5-6 5.6 ANALYSIS AND RESULTS

.......................................................................................... 5-6 5.6.1 AHAM Data

................................................................................................................ ..... 5-6 5.6.2 Review of the Most Recent TSD fo r Residential Clothes Washers

................................. 5-8 5.6.2.1 1996 AHAM Cost and Energy Use Data Submittal Review

......................... 5-9 5.6.2.2 2000 TSD Reverse-Engineering Review

..................................................... 5-14 5.6.2.3 Other Observations Regarding the 2 000 Residential Clothes Washer TSD 5-19 5.6.3 Cost-Efficiency Curves

.................................................................................................. 5 -22

LIST OF TABLES

Table 5.4.1 Baseline Modified Energy Fact or and Water Factor for Commercial Clothes Washers

................................................................................................... 5-3 Table 5.4.2 Efficiency Levels for Top-Lo ading Commercial Clothes Washers

..................... 5-4 Table 5.4.3 Efficiency Levels for Front-Lo ading Commercial Cl othes Washers

.................. 5-5 Table 5.6.1 AHAM Commercial Clothes Wash er Shipments and Shipment-Weighted MEF and WF Data Submittal

.............................................................................. 5-6 Table 5.6.2 AHAM Baseline MEF Commercial Clothes Washer Average Energy and Water Use Data Submittal

................................................................................... 5-7 Table 5.6.3 AHAM Commercial Clothes Washer Incremental Cost Data Submittal

............. 5-7 Table 5.6.4 1996 AHAM Residential Clothes Washer Cost Data Submittal

....................... 5-10 Table 5.6.5 1996 AHAM Residential Clothes Washer Energy and Water Use Data Submittal

............................................................................................................ 5-13 Table 5.6.6 Commercial Cl othes Washer Cost Efficiency Curves

........................................... 5-22

LIST OF FIGURES

Figure 5.6.1 AHAM Commercial Clothes Washer Incremental Cost Data Submittal

............. 5-8

5-iFigure 5.6.2 2000 Low-Volume versus Hi gh-Volume Clothes Washer Cost Disadvantage...................................................................................................... 5-17 Figure 5.6.3 2000 Cost Disadvantage of Producing 100,000 versus 1.5MM Clothes Washers per Year with Gr een Field Facility...................................................... 5-18

5-iiCHAPTER 5. ENGINEERING ANALYSIS

5.1 INTRODUCTION

After conducting the screening analysis, the U.S. Department of Energy (DOE) performed an engineering analysis based on th e remaining design options. The engineering analysis consists of estimating the energy and wa ter consumption and costs of CCWs at various levels of increased efficiency. This section provides an overview of the engineering analysis (section 5.1), considers technologies that are unable to analyzed for this rulemaking (section 5.2), discusses proposed equipment clas ses (section 5.3), establishes baseline unit specifications (section 5.4.1), discusses incremental efficiency levels (section 5.4.2), explains the methodology used during data gathering ( 5.5) and discusses the analys is and results (section 5.6) As described in section 1.3 of chapter 1 of this technical support document (TSD), DOE is continuing the rulemaking for energy conservation standards fo r microwave oven standby power, and analyses related to these products will be published in a separate TSD. In addition, DOE issued a final rule adopting energy conservation standa rds for conventional cooking products ( i.e. , cooktops and ovens) and microwave oven energy factor (EF), and details of the analyses for these products are contained in the corr esponding final rule TSD.

The primary inputs to the engine ering analysis are baseline information from the market and technology assessment (chapter 3 of this supplemental notice of proposed rulemaking (SNOPR) TSD) and technology options from the sc reening analysis (chapter 4.) Additional inputs include cost and energy efficiency data , which DOE received from the Association of Home Appliance Manufacturers (AHAM) and qualified and supplemented through teardown analysis and manufacturer intervie ws. The primary output of the e ngineering analysis is a set of cost-efficiency curves. In the subsequent ma rkups analysis (chapter 7), DOE determined customer ( i.e. equipment purchaser) pri ces by applying distributi on markups, sales tax and contractor markups. After applying these mar kups, they serve as the input to the building energy-use and end-use load characterization (c hapter 6) and the life- cycle cost (LCC) and payback period (PBP) analyses (chapter 8).

DOE typically structures its engineering analysis around one of three methodologies. These are: (1) the design-option approach, wh ich calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, which calculates the relative costs of achieving increases in ener gy efficiency levels, without regard to the particular design options used to achieve such increases; and/or (3) the reverse engineering or cost-assessment approach, which involves a “b ottom-up” manufacturing cost assessment based on a detailed bill of materials (BOM) derived from teardowns of the product or equipment being analyzed. Deciding which methodology to use fo r the engineering analysis depends on the equipment, the design options under study, and an y historical data th at DOE can draw on.

5-15.2 TECHNOLOGIES UNABLE TO BE INCLUDED IN THE SNOPR ANALYSIS
In performing the engineering analysis, DOE did not consider for analysis certain technologies that met the screeni ng criteria but were unable to be evaluated for one or both of the following reasons: (1) data are not available to evaluate c onsumer usage of equipment incorporating the technology and, therefore, the test procedure conditions and methods may not be applicable; and (2) data are not available to evaluate the energy efficiency characteristics of the technology. In these cases, DOE is unable to adequately assess how these technologies impact annual energy consumption. Furthermore, certain technologies cannot be measured according to the conditions and methods specified in the existing test procedure.

Although several manufacturers have made claims regarding improved wash performance and greater utility of improved drum designs for front-loading clothes washers, DOE is unaware of any publicly available data to corroborate a decrease in cycle time or water consumption or an increase in modified energy factor (MEF) as a result of implementing this design option. Therefore, DOE will not analyze this design option for the SNOPR.

Even though DOE considers consumer usage of CCWs to be well-defined, the current tests procedures do not measure standby power . Also, DOE is unaware of any data demonstrating energy savings associated with low-standby power supplies for CCWs. Thus, in the context of the present rulemaking, DOE e liminated the low-standby-power design option from the SNOPR analysis.

5.3 EQUIPMENT CLASSES ANALYZED

DOE separated CCWs into equipment classes. In general, the criteria for separation into different classes are (1) type of energy used (natur al gas or electricity), and (2) capacity or other performance-related features such as those that pr ovide utility to the consumer, or others deemed appropriate by the Secretary th at would justify the establis hment of a separate energy conservation standard. (42 U.S.C. 6295 (q ) and 6316(a)) For CCWs, DOE is proposing the following equipment classes based on the method of access:

 Top-loading; and

 Front-loading.

5.4 EFFICIENCY LEVELS

5.4.1 Baseline Units

DOE selected baseline units as reference points for each equipment class, against which DOE measured changes resulting from energy cons ervation standards. The baseline unit in each

5-2equipment class represents the basic characterist ics of equipment in that class. Typically, a baseline unit is a unit that just meets current required energy conservatio n standards and provides basic consumer utility. DOE used the baseline un its in the engineering analysis and the life

cycle-cost and payback-period analysis. To de termine energy savings and changes in price, DOE compared each higher energy efficiency or lower energy efficiency design option with the baseline unit.

The identification of baseline units required esta blishing the baseline efficiency level. For CCWs, energy conservation standard levels are defined by two factors normalized by wash basket volume—MEF and water factor (WF). The MEF is the quotient of the cubic foot capacity of the clothes container divided by the total clothes washer ener gy consumption per cycle. The MEF takes into consideration not only the energy consumption of the washer but also the amount of energy required to dry clothes based on the remaining moisture co ntent (RMC) of the clothes. The WF is the quotient of the total weighted pe r-cycle water consumption divided by the cubic foot capacity of the clothes washer. These two va riables are only directly related to each other via the average hot water usage by a clothes washer as measured by the test procedure. Other measured variables affect only one variable or the other. For example, cold water consumption only affects the WF, while RMC only affects the MEF.

The Energy Policy and Conservation Ac t (EPCA) of 1975 (42 U.S.C. 6291–6309) establishes the following ener gy and water conservation standa rds for all CCWs: a minimum MEF of 1.26 cubic feet (ft 3 ) per kilowatt-hour (kWh) and a ma ximum WF of 9.5 gallons per ft 3

. (42 U.S.C. 6313(e); see also 70 FR 60416 (O ct. 18, 2005), adding 10 CFR 431.156) Based on comments and the determination at that time to consider a single equipment class for CCWs, DOE selected baseline levels for the a dvance notice of proposed rulemaking (ANOPR), published on November 15, 2007 (72 FR 64432; November 2007 ANOPR), that were based on current Federal energy conservation standards. B ecause, as discussed in detail in chapter 3, the determination of two equipment classes for CCWs was subsequently made, DOE revised the baseline levels presented in the November 2007 ANOPR to characterize top-loading and frontloading CCWs separately. DOE has select ed the baseline MEFs and WFs for the two equipment classes as listed in Table 5.4.1.

Table 5.4.1 Baseline Modified Energy Factor a nd Water Factor for Commercial Clothes Washers

Equipment Class MEF, ft

3 /kWh WF, gallons/ft 3 Top Loading 1.26 9.5 Front Loading 1.72 8.0

5.4.2 Incremental Efficiency Levels

DOE analyzed several efficiency levels for both equipment classes and obtained incremental cost data at each of these levels. Table 5.4.2 and Table 5.4.3 provide efficiency levels and the reference source of each level. The highest effi ciency levels were initially

5-3identified based on a review of available equipmen t literature for models commercially available. DOE conducted additional testing and analysis in response to comments received on the notice of proposed rulemaking (NOPR) to verify the maximum available efficiency level for toploading CCWs.

EPCA mandates that DOE determine bot h a minimum MEF and a maximum WF for CCWs. The two variables are related to a limite d extent, but it was not clear initially to DOE which factor is more important in setting the energy conservation standards. DOE determined, based on comments from stakeholders, that a high MEF and low WF are not necessarily correlated, and, thus, a max-tech le vel based on the highest MEF and lowest WF is not realistic. That is, a CCW with the highest possible ME F may not achieve the lowest possible WF. Similarly, a CCW with the lowest WF may not achieve the highest MEF. Therefore, DOE selected CCWs currently available on the market that exhibit a balance of high MEF and low WF to represent the max-tech levels.

For top-loading CCWs, DOE analyzed two e fficiency levels beyond the baseline, as listed in Table 5.4.2

. These levels were based on the CEE Commercial Clothes Washer Initiative, and maximum levels th at are currently commercially available (max-tech). For the NOPR, DOE proposed an additional, third efficiency level because market surveys of currently available models suggested a max-tech leve l of (1.76 MEF/8.3 WF) for top-loading CCWs. However, DOE received comments on the NOPR that raised questions on the validity of this max-tech level. Because EPCA requires DOE to c onsider the max-tech level in the analysis of efficiency levels for CCW energy conserva tion standards (42 U.S.C. 6295(o)(2)(A) and 6316(a)), DOE decided, in light of the uncerta inty surrounding the pe rformance of the CCW model upon which the top-loading ma x-tech level was based, to test several units of that model at an independent laboratory. Results from a 3-unit sample indicated that the MEF and WF of these units are below and above, respectively, the max-tech levels—1.63 MEF/8.4 WF. Therefore, for this SNOPR, DOE has revised the max-tech level downward one level to 1.60 MEF/8.5 WF.

Table 5.4.2 Efficiency Levels for Top-L oading Commercial Clothes Washers

Level Efficiency Level Source Efficiency Level MEF, ft 3 /kWh WF, gallons/ft 3
baseline DOE Standard (effective 2007) 1.26 9.5 1 CEE Tier 1 (January 1, 2004) 1.42 9.5 2 CEE Tier 2 (January 1, 2004) (Max-Tech) 1.60 8.5

For front-loading CCWs, DOE analyzed four efficiency levels beyond the baseline for CCWs, as listed in Table 5.4.3. These levels were based on ENERGY STAR, the CEE Commercial Clothes Washer Init iative, and maximum levels that are currently commercially available. Two gap-fill levels were added base d on stakeholder input between the CEE Tier 3A and the maximum available level. For front-l oading CCWs, DOE has determined a max-tech level of 2.35 MEF/4.4 WF, based on a currently av ailable CCW. This mode l was selected after an extensive market survey, and DOE’s research suggests that its combination of high MEF and low WF represents the best-in-class balance between MEF and WF.

5-4Table 5.4.3 Efficiency Levels for Front-L oading Commercial Clothes Washers

Level Efficiency Level Source Efficiency Level MEF, ft 3 /kWh WF, gallons/ft 3
baseline ENERGY STAR (effective 2007) 1.72 8.0 1 CEE Tier 3A (January 1, 2004) 1.80 7.5 2 Gap Fill 1 2.00 5.5 3 Gap Fill 2 2.20 5.1 4 Max-Tech 2.35 4.4

5.5 METHODOLOGY OVERVIEW

DOE used data submitted by AHAM as the primary source of cost information for the engineering analysis. AHAM pr ovided DOE with aggregated incremental manufacturing cost data from it member companies. DOE conducte d an independent review of the AHAM data using several methods and data sources. To ga in a better understanding of the data submitted by member companies and to be able to relate th e costs of improving effici ency to discrete (or system) technologies, DOE conducted interviews with manufacturers of CCWs and revised estimates accordingly. In addition, DOE review ed the previous TSD for residential clothes washers to evaluate technology options, and performed limited equipment teardowns and performance testing.

5.5.1 AHAM Data Request

In support of this rulemaking effort, DOE requested incremental cost data from AHAM for CCWs. The data represent the average incr emental production cost to improve a baseline unit to a specified efficiency level. This met hodology constitutes an effici ency-level approach to the engineering analysis because DOE examined aggregated incremental increases in manufacturer selling price at sp ecified levels of energy efficiency. In addition, DOE requested shipments, shipment-weighted average efficiency, and market share efficiency data. Tables of aggregated data provided to DOE by AHAM are contained in appendix 5A.

5.5.2 Manufacturer Interviews

AHAM provided to DOE shipment-weighted ma nufacturer costs. These costs included the shipment-weighted average cost as well as the lowest and highest single-manufacturer cost to achieve efficiency levels above the baseline level. Presenting the data in this manner enables interested parties to appreciate the variability in baseline units, desi gn strategies, and cost structures that exist among manufacturers. To better understand and explai n the causes of these cost variances, DOE supplemented these cost data with information obtained through follow-up manufacturer interviews. These confidential interviews provide d a deeper understanding of the various combinations of technologies used to in crease equipment efficiency, and their associated manufacturing costs. Sample questions asked during the follow-up interviews, which were also conducted in support of the manufacturer impact analysis, are contained in appendix 13B.

5-5During the interviews, DOE also gathered information about the capital expenditures required to increase the efficiency of the ba seline units to various efficiency levels ( i.e.
, conversion capital expenditures by efficiency or energy-use level). The interviews provided information about the size and the nature of the capital investments. DOE also requested information about the depreciation method used to expense the conversion capital.

5.5.3 Review of Previous Technical Support Documents

DOE reviewed the 2000 residential clothes wa sher TSD, since residential and CCWs share the same design options, are frequently built on the same chassis, and are therefore subject to similar economic impacts.

5.5.4 Equipment Testing

DOE conducted performance testing of three units of the max-tech model identified for the NOPR. These tests, consisting of measur ing the MEF and WF according to the DOE test procedure, were carried out at an independent te st laboratory.

5.6 ANALYSIS AND RESULTS

5.6.1 AHAM Data

To support the DOE rulemaking, AHAM collect ed incremental CCW manufacturing cost data from its member companies in Octobe r 2006. Table 5.6.1 compiles unit shipment and energy efficiency data for CCWs from 2002–2005.

Table 5.6.1 AHAM Commercial Clothes Was her Shipments and Shipment-Weighted MEF and WF Data Submittal

Year Total Shipments MEF ( ft

3 /kWh) WF (gallons / ft 3 ) 2002 175,187 1.30 11.77 2003 190,720 1.33 11.42 2004 178,382 1.33 11.33 2005 177,394 1.41 10.91

Table 5.6.2 reproduces AHAM's 2006 data submittal for the average water and power consumption agitator top-loadi ng CCWs that meet the baseline 1.26 MEF energy efficiency level. Since January 2007, however, clothes wa shers manufactured at this baseline 1.26 MEF must meet a lower WF (9.5) than the one listed in the AHAM data submittal.

5-6Table 5.6.2 AHAM Baseline MEF Commercia l Clothes Washer Average Energy and Water Use Data Submittal

Attributes of Average 1.26 MEF Washer Power Consumption per Wash Cycle (kWh)

MEF ( ft

3 /kWh) WF (gallons / ft

3 ) Washer Capacity (ft

3 ) Water Use (gallons/cycle) Standby Power Consumption (W) Hot Water Machine Power Dryer Power 1.26 11.1 3.1 34.3 * 0.87 0.18 1.38
DOE initially requested incremental cost data for efficiency levels presented in the framework document for the single equipment cla ss including both top-load ing and front-loading CCWs. Data submitted by AHAM for the November 2007 ANOPR, shown in Table 5.6.3, represents aggregated input fr om the producers of CCWs sold in the United States The shipment-weighted incremental cost at each level is the cost to upgrade the baseline efficiency machine (1.26 MEF/9.5 WF) to that efficiency le vel for the single equipment class. The CCW industry currently has only three manufacturers with more than 1 pe rcent market share, and there are a limited number of CCWs that operate at different efficiency points, restri cting the amount of data that AHAM could submit a . Four efficiency levels c ontain no cost data since AHAMrequires a minimum of three data points per efficiency level before submitting shipmentweighted results. Therefore, AHAM submitted two manufacturing cost estimates: (1) $74.63 at efficiency level 1; and (2) $316.35 at e fficiency level 5, as noted in Table 5.6.3.

Table 5.6.3 AHAM Commercial Clothes Washer Incremental Cost Data Submittal Efficiency Level 1 2 3 4 5 6 Exploratory MEF Levels – Commercial Clothes Washers 1.42 1.6 1.72 1.8 2 2.2 Exploratory WF Levels – Commercial Clothes Washers 9.5 8.5 8.0 7.5 5.5 5.1 Incremental Costs ($ Per Unit) – Shipment-Weighted $ 74.73 * * * $ 316.35 * * Insufficient data reported
Figure 5.6.1 plots the efficiency levels for the single CCW equipment class established in the November 2007 ANOPR for which AHAM submitte d incremental manufacturing cost data, i.e. the baseline efficiency level, effici ency level 1, and efficiency level 5.

a AHAM is limited to publishing data to efficiency levels where at leas t three AHAM members can submit cost efficiency data, which AHAM then weights according to unit shipments by manufacturer.

5-7Baseline EL: 9.5WF EL 1: 9.5WF EL 5: 5.5WF

0 50 100 150 200 250 300 350Incremental Mfg. Cost ($/unit)

1.2 1.4 1.6 1.8 2 2.2
MEF EL = Efficiency Level

Figure 5.6.1 AHAM Commercial Clot hes Washer Incremental Cost Data Submittal

Manufacturers stated that the baseline e fficiency level (1.26 MEF/9.5 WF) and the efficiency level 1 (1.42 MEF/9.5WF) are attainable with agitator top-loading clothes washers. Manufacturers also stated that efficiency level 5 (2.00 MEF/5.5 WF) would require the use of front-loading clothes washers. Theref ore, DOE believes the data in Table 5.6.3 is subject to a platform change from agitator top-loading to front-loading clothes wash ers between efficiency level 1 and efficiency level 5. Given the persis tent manufacturing cost difference between these platforms, an incremental cost “curve” with mo re intermediate data points would thus likely exhibit a steep step change wherever that platform change occurs.

5.6.2 Review of the Most Recent TSD for Residential Clothes Washers

In 2001, DOE concluded a rulemaking for residentia l clothes washers. The intent of this section is to review some of the conclusi ons drawn in the 2000 TSD that supported that rulemaking, to update the data presented in it, and to assess in which ways the residential clothes washer TSD can be used in the context of this CCW rulemaking. In particular, this review focuses on the manufacturing costs publis hed in the 2000 TSD. First, the 1996 AHAM residential clothes washer cost data submitta l provided for the 2000 TSD is examined, followed by the 2000 reverse-engineering analysis and an update on the low-volum e manufacturer case.

5-85.6.2.1 1996 AHAM Cost and Energy Use Data Submittal Review

In 1996, manufacturers submitted manufacturing cost and energy use estimates by efficiency level for residential clothes washer s to AHAM. This data was then aggregated by market share and efficiency level to prevent th e disclosure of confiden tial information, and the results were used in the analysis reported in the 2000 TSD. Wh ile this process yielded viable results in the residential clothes washer rulemaking, the results are not directly applicable to the current CCW rulemaking due to differences in the following key parameters: (1) intended use and cycle life, (2) production scale, (3) technica l advancements, (4) market share, (5) platform mixing, and (6) incompatibility of the MEF and WF pairings in the data submittal.

Intended Use and Cycle Life

Clothes washer manufacturers have traditiona lly designed their commercial units to share many parts with their residential platforms. Shared components typically c onsist of parts that do not affect unit life, such as cabinet stampings, th at may or may not be selectively upgraded. For example, entry-level residential clothes washer cabinets typically featur e a powder-coated plastic finish whereas commercial models may feature a more durable enameled finish. Purchased components such as motors, timers, and switches ma y also be customized to reflect the different and more rigorous usage patterns expected in commercial applications. For example, one manufacturer stated that their CCWs are expected to last 12,000 wash cycles whereas residential models are expected to last 6,000 or fewer wash cycles.

Production Scale

In 1996, a twenty-fold scale difference existe d between residential and CCW market unit shipments. Since then, residential clothes wash er shipments have grown while CCW sales have stagnated or declined. As a re sult, the current scale differenc e is more than forty-fold.

The scale difference helps explain why CC Ws have traditionally been a product extension of existing residential clothes washer platforms for most manuf acturers. By sharing many components with residential models, research and development, tooling and equipment, and other costs can be spread ove r the largest number of clothes washers. Consequently, any additional investment required for CCWs alone is depreciated over a much smaller production volume.

As efficiency standards are ra ised, manufacturers may be required to make investments in the form of capital expenditures, research and development, and implementation to meet such standards. Investments such as new tooling a nd research, in particular, are “step” functions, requiring a minimum investment regardless of production volume. A standard that affects CCWs first may thus require a substantial invest ment that can only be depreciated over a much smaller production volume.

As a result of the much lower production volumes, the per-unit conversion costs to accommodate higher efficiencies ar e greater per efficiency increm ent for CCWs than they are for

5-9residential models. Therefore, DOE believe s Table 4.2 published in the 2000 TSD (duplicated below as Table 5.6.4) is not valid for CCWs, because the fixed costs are assumed to be depreciated over a much larger product vol ume and because the higher-volume production processes manufacturers envisioned minimize variable cost increases. Most manufacturers of residential clothes washers in 1996 had production levels in excess of 300,000 units per year, with the leading manufacturer producing about 3 .5 million top-loading washers per year. In contrast, the two leading CCW manufacturers in 2007 had total CCW production levels of about 100,000 units per year.

Currently, as in 1996, there is a low-volume ma nufacturer (LVM) that operates in both the residential and CCW markets. While its volumes in the residential market are very small on a percentage basis, this manu facturer is very prominent in the CCW market. Unlike its diversified competitors, this company exclusively manufactures laundry equipment. A review of the Securities and Exchange Commission (SEC) 10-K documents revealed that, as of 2005, this company derived 22 percent of its total revenue from the sale of front- and top-loading clothes washers and 87 percent of that income was from the commercial market. As a result, this company will be affected disproportionately by the CCW rulemaking compared to its competitors, for whom CCWs represent about 2 percen t of total clothes washer sales. For more information on the LVM, see chapter 13 and appendix 13A of this TSD.

Table 5.6.4 1996 AHAM Residential Clothe s Washer Cost Data Submittal

Product Characteristics Incremental Variable Costs ( $ per Unit ) Total Fixed Costs ($ per unit ) Incre

mental Mfg. Cost ($ per unit ) No. of Res

pon dents Percent Improve

ment MEF WF Ma

terials Labor Over

head Total Baseline 0.817 13.779 5 0.860 13.732 $0.01 $0.01 $0.00 $0.02 $0.07 $0.09 5 10 0.908 13.710 $0.25 $0.04 $0.01 $0.30 $0.61 $0.91 5 15 0.961 13.670 $3.18 $0.10 $0.04 $3.32 $1.01 $4.33 5 20 1.021 13.342 $10.71 -$0.02 $1.80 $8.89 $6.21 $15.10 5 25 1.089 9.220 $36.14 $8.61 $0.09 $44.84 $19.29 $64.13 5 30 *
35 1.257 7.601 $86.73 $10.94 $7.78 $105.45 $22.72 $128.17 5 40 1.362 7.610 $87.15 $10.94 $7.78 $105.87 $22.72 $128.59 5 45 1.485 8.570 $125.58 $15.52 $14.51 $155.61 $24.67 $180.28 4 50 1.634 8.570 $132.40 $15.68 $14.51 $162.59 $24.67 $187.26 4 * No data were submitted at this efficiency level

Technical Advancements

While the general function of clothes wash ers has not changed si nce the 2000 TSD, many different technologies have been implemented. As with dishwashers and other residential appliances, clothes washers are built on platform s whose baseline performance can be improved with design options. Some platforms are inheren tly more energy and water efficient than others, allowing a manufacturer to use fe wer design options to reach a part icular efficiency level, but

5-10there are efficiency limits inherent to every pl atform regardless of how many design options are employed. These limits affect the MEF as well as the WF.

Clothes washers currently often use electroni c controllers instead of electromechanical controllers, which were more pr evalent at the time of the 2000 TSD. Electronic controllers usually carry a cost premium over electromechan ical timers, driving up manufacturing cost. However, such controllers are appealing to cust omers and are required for some design options. Besides enabling certain design options, electron ic controllers allow owners to more easily monitor washer utilization, functiona l status, and other parameters. There are potential reliability benefits as well. For example, one reason that variable-water-height sele ctors are atypical in commercial top-loading clothes washers is that ow ners prefer not to give users the ability to select water levels. If they di d, users could attempt to wash a fu ll load on a “low water” setting, potentially damaging the washer and/or the clothe s being washed. Electronic controllers may be able to detect such overload conditions and stop the wash cycle before the clothes washer is harmed. Alternatively, controller s can be programmed to “reset” to default settings after each wash cycle. This forces the end-user select the appropriate cycle fo r each use, potentially reducing the incidence of accidental overloads.

Some manufacturers have also phased out mech anical transmission a nd clutch systems, replacing them with variable-sp eed electronic drive systems. Benefits include a reduction in mechanical complexity, increased cabinet sp ace to accommodate potential expansion of the basket/tub, and greater wash program flexibility. The substitution of electronics for mechanical systems can increase overall unit co st, particularly if fixed in-house assets that had been used to manufacture mechanical transmission and clutch systems become stranded assets.

Many design options available in residential clothes washer have ye t to find application in CCWs. The reliability and longevity requir ements of CCWs combined with the production scale issues are such that manufacturers avoid adding design options unless necessary. As the part count increases, so does the probability that the clothe s washer will break down, and purchased parts sourced just for CCWs are likely to carry a cost premium. Thus, DOE expects manufacturers will continue to introduce new feat ures first in the residential markets before transitioning them to the commercial field.

Since the 2000 residential clothes washer TSD was written, there have been numerous technological advances incorpor ated into clothes washers, and the manufacturing costs submitted to AHAM were based on residential clothes wash er models that are no longer in production. Thus, even if DOE could ascertain the manufact uring cost differential between commercial and residential clothes washers in 1996, that differential would no longer be valid for current models.

Most importantly, manufacturers have been able to improve the MEF and WF of agitator clothes washers at a much lower cost than they projected in 1996. Instead of using front-loading or non-agitator top-loading clothes washers as projected to meet a 1.26 MEF, current baseline 1.26 MEF CCWs consist of agitato r models with reduced water consumption, lower wash temperatures, and improved control systems. Thus , manufacturers were able to reach the current efficiency requirements at much lower cost than projected in 1996. One ma nufacturer noted that

5-11the costs of improved control systems are substantially higher than those of the electromechanical controls they replaced and th at the wash performance and hence end-user utility of top-loading clothes washers are aff ected by lower WF and higher MEF requirements.

Market Share

The market shares that AHAM used to aggr egate manufacturer-submitted data were valid for the residential clothes washer market in 1996. However, since then th ere has been significant consolidation by domestic producers, and multiple foreign brands have started selling their clothes washers in the United States. More impor tantly, the market shar es of producers in the residential clothes washer market are not equivalent to the market shares of manufacturers in the CCW industry.

Four to five residential cl othes washer manufacturers subm itted manufacturing cost data estimates for each efficiency level for the 1996 AHAM data request. However, there are currently essentially only three U.S. CCW manufacturers: Alliance Laundry Systems LLC (Alliance), General Electric GE Consumer & Indus trial (GE), and Whirlpool (via its acquisition of Maytag Corporation (Maytag)). The low num ber of manufacturers limits current AHAM data submittals to DOE since AHAM requires a minimum of three data points per efficiency level before it publishes any results.

Since AHAM adjusts incremental manufacturing cost data submittals by efficiency level on a market-share basis, the manufacturing cost s submitted by the largest manufacturers have the greatest weight. As noted above, the distri butions of market share by manufacturer for commercial and residential clothe s washers are quite different. Since DOE does not have access to the disaggregated data, ther e is no opportunity to compensate for market share differences between markets, even if the costs of manuf acturing residential and CCWs were the same.

Platform Mixing

DOE’s efforts to update the 1996 AHAM data submittal are hindered by the submittal’s aggregation of top- and front -loading clothes washers. Based on the AHAM-supplied energy and water use data, reproduced in Table 5.6.5, DOE assumes that the co st and energy use tables contained only agitator top-loading data for efficiency improvement levels of up to, and including, 20 percent. This assumption is driven by the consistent water usage up to that point and the low incremental costs to reach that effi ciency level. Similarly, DOE assumes that the two highest efficiency levels, 45 and 50 percent improvement, ex clusively incorporated frontloading clothes washers. The 25 to 40 per cent improvement categor ies appear to have aggregated high-efficiency top- as well as front-l oading clothes washers.

5-12Table 5.6.5 1996 AHAM Residential Clothes Washer Energy and Water Use Data Submittal Product Characteristics Energy Use ( kWh/cycle ) Water Use Percent Improve

ment MEF Total Energy w/Dryer ( kWh /cycle ) Clothes Container ( ft

3 ) Hot Water Machine Energy Dryer Energy ( gal / cycle ) ( gal / ft

3 ) Baseline 0.817 3.227 2.847 1.587 0.209 1.430 39.181 13.779 5 0.860 3.165 2.817 1.543 0.209 1.413 38.613 13.732 10 0.908 3.017 2.822 1.408 0.209 1.400 38.613 13.710 15 0.961 2.833 2.832 1.216 0.209 1.407 38.621 13.670 20 1.021 2.739 2.893 1.113 0.218 1.408 38.446 13.342 25 1.089 2.292 2.866 0.715 0.304 1.273 26.600 9.220 30 *
35 1.257 1.866 2.749 0.462 0.133 1.270 21.030 7.601 40 1.362 1.859 2.749 0.462 0.133 1.263 21.030 7.610 45 1.485 1.651 2.736 0.429 0.114 1.107 23.405 8.570 50 1.634 1.574 2.736 0.413 0.114 1.047 23.405 8.570 * No data were submitted at this efficiency level.
Since DOE does not have access to the disaggregated data and the clothes washer platforms that underlie the AHAM data submittals , there is no method by which DOE can assess how relevant the data submittal is to the curr ent rulemaking. It is not clear to DOE which models were submitted at each efficiency level, whether these models use the same platforms as current CCWs, nor what efficiency improvements ma nufacturers have been able to achieve with these models since 1996.

Incompatibility of the MEF and WF Pairings

Table 5.6.5 shows the lowest shipment-weighte d WF at 1.26 MEF. No top-loading clothes washers could reach 1.634 MEF in 1996, sugge sting that the clothes washers at the two highest efficiency levels consis ted of front-loading clothes wa shers, whereas baseline units consisted of agitator top-loading cl othes washers. The WF is lowe st at 1.26 MEF, indicating that the shipment-weighted WF for that efficiency level included clothes washers that had a lower WF than residential front-loading cl othes washers did at that time.

DOE is aware of an agitator top-loading CC W platform from a major manufacturer that had achieved a 7.3 WF via spray rinse. However, this unit was withdrawn from the market a number of years ago, allegedly due to end-user complaints rega rding rinse performance. The CEC database of current CCWs lists no top-load ing clothes washers with a similar WF. The closest model is an agitator top-loading wash er platform with an 8.3 WF. The top-loading clothes washer platforms currently listed in th e CEC residential clothes washer database that meets the 7.6 WF does not exist in a commercial version and consists of a non-agitator design.

Thus, the results at 1.26 MEF in Table 5.6.5 suggest multiple platforms, likely consisting of agitator top-loading with spray rinse, non-agitator top- loading, and front-l oading residential clothes washers. Neither spray-rinse agitator no r non-agitator clothes wa shers are currently in production for commercial purposes. The incompa tibility between the WF of machine properties

5-13submitted to AHAM for the 1996 data submittal and machines currently on the market is yet another indication of how the pr ojections of manufacturers dive rged from the agitator toploading clothes washers they developed to meet the 1.26 MEF/9.5 WF requirements.

Conclusion

There are sufficient changes in market condi tions due to intended use and cycle life, production scale, technical advancements, and market share to precl ude the use of the 1996 AHAM data submittal as a basis for the curren t CCW analysis. Furthermore, the 1996 AHAM data submittal cannot be factored into the analysis due to pl atform mixing and the resulting inability to disaggregate the data into top- and front-loading machines.

5.6.2.2 2000 TSD Reverse-Engineering Review

Further manufacturing cost data by effi ciency level was developed for the 2000 residential clothes washer rulemaking by DOE. Since DOE has access to this data, DOE has decided to review and publish data that rema ins relevant to the current CCW rulemaking.

Reviewed Models

For the 2000 residential clothes washer TSD, DOE reverse-engineered eight residential clothes washers in 1999 from manu facturers with substantial mark et shares. DOE subsequently developed cost models to estimate the manuf acturing costs of these washers at varying production levels.

The market share covered by the residential cl othes washer platforms reverse-engineered in 1999 was about 80 percent. Three of the wash ers shared a chassis with CCWs in 1999. DOE could make estimates regarding th e costs to update these platforms for commercial use, but the market share covered by these platforms is currently less than 20 percent of the commercial market, limiting the usefulness of the results.

All three of the major manufacturers currently serving the CCW industry have introduced new models or significantly revised existing m odels since the 2000 reside ntial clothes washer TSD. Some manufacturers have updated the drive systems and other major system components to differentiate their equipment or improve ener gy efficiency. As a result, there have been significant changes in the baseli ne cost of clothes washers th at the 2000 TSD could not have analyzed, even if it had re viewed CCW models.

Market Share and Scale

The U.S. CCW market is very small compared to the residential clothes washer market. Whereas shipments of residentia l clothes washers have been increasing, with more than 9.2 million units in 2005, CCW sales have stagnated or declined to about 200,000 units per year. The residential clothes washer market is dominated by the merged Whirlpool-Maytag entity, which has an approximate combined market share of 70 percent. The residential clothes washer

5-14sales of this entity exceed 6 million units pe r year, approximately 30 times the entire CCW market.

This scale difference is important in this anal ysis because agitator top-loading residential and CCWs typically share many parts to minimize tooling and equipment investments. Thus, a manufacturer that benefits from high manufacturing volumes on th e residential side has a much larger potential base of units over which to depr eciate investments. Commercial assembly lines can be repurposed towards residential clothes washer production if the commercial top-loading washer platform is no longer cost effective to produce.

While the largest competitor in the U.S. cl othes washer manufacturing business may not realize much cost benefit due to manufacturing s cale in moving to 6 million units per year versus the 1.5 million units per year modeled during th e 2001 residential clothes washer rulemaking, there are other advantages to scale. For exam ple, research and development and other overhead functions can be leaner as a percentage of sa les revenue, yet still have far more available resources than comparable departments at lower-volume competitors.

High-volume competitors have a long history of improving the performance of agitator top-loading clothes washers via add-on design options such as sp ray rinse, nutating plates, and other means. For a lower-volume manufacturer, it is inherently more difficult to assemble and defend an intellectual-property portfolio. Sim ilarly, a low-volume manufacturer may have to wait for innovations to trickle down from comm on suppliers since high- volume manufacturers typically get first (and sometimes ex clusive) access to new technologies.

Manufacturers whose production comprises a high percentage of CCWs are thus impacted disproportionately by any regulatory bu rden regarding CCWs. One low-volume U.S. clothes washer manufacturer was contractually barred from manufacturi ng residential clothes washers from 1999 until 2004. While its subsequent SEC 10-K reports show significant growth in the residential market segment, commercial sales are still substantially highe r. As a result, this LVM is not only concentrated in the CCW market, but its lack of diversification makes it particularly sensitive to any im pacts on its CCW business as well.

The Low-Volume Manufacturer Case

The LVM has been successfully competing with much larger competitors in the commercial laundry market for several years. Based on the LVM's public SEC 10-K filings, DOE has estimated that the LVM derives about a third of its total revenues from the sales of clothes washers and dryers, which are usually bundled. Clothes washer sales by themselves account for more than 20 percent of total re venue. Laundry equipmen t for institutional use largely makes up the balance. For a detail ed breakdown of LVM revenues by product line, equipment line, and market segment, see chapte r 13 and appendix 13A of the TSD, which details DOE's methodology and results for the LVM analysis.

As of 2006, agitator top-loading clothes wash ers sold by the LVM into the commercial market segment represented about 65 percent of total clothes washer unit shipments and about 60 percent of total CCW revenues. Thus, any legisl ation that eliminates the use of such clothes

5-15washers from the commercial market would affect the LVM disproportionabl y due to the relative importance of the business and its effect on manufacturing scale. Such a transition also poses a business risk since a platform change will reduce the value of accumulated spare-parts inventories, technician training, etc. to route operators. Thus , any switching cost to other brands could be substantially reduced.

The LVM released a front-loadi ng clothes washer for sale in 1999 and does not presently manufacture any non-agitator top- loading clothes washers. As of 2005, its sales of front-loading clothes washers represented approximately 20 percent of total wash er unit shipments and approximately 35 percent of total washer revenues. Given the scal e of the manufacturer at the time, the front-loading design was likely optimized for very low production volume. Should the entire CCW industry be forced to migrate to fr ont-loading clothes washers, the LVM would thus have to make substantial investments to make its design more cost competitive. As of 2008, the proportion of front-loading to top-loading washers grew to 30 versus 70 percent, respectively. While the LVM is already at work to reduce front- loading unit costs, a market transition to frontloading washers accelerated by federal standards would most likely result in the LVM moving its front-loading manufacturing offshore.

However, unlike its larger rivals, the LVM doe s not benefit from very large scale in its residential operations to help amortize the investments in research, development, plant expenditures, and implementation expenses. The size of the CCW market by itself is simply too small to justify large lump-sum investments. The agitator top-load ing units that the LVMmanufactures have benefited from years of investments and refinements, whereas the frontloading model received its first update in 2003.

Besides benefiting from ongoing development and investments, agitator top-loading clothes washers at the LVM also benefit from well-depreciated equipment and tooling and a long-term knowledge base. In the past, the LVM had residential sales well in excess of its CCW sales before a non-compete contract cut off the LVM from the residential market from 1999 until 2004. Thus, while the LVM has gained the experi ence of producing hundreds of thousands of top-loading clothes washers per ye ar, it has yet to gain the same experience with its front-loading clothes washer line.

The loss of the commercial market for agitator top-loading clothes washers is likely to make residential models of those clothes washer s too expensive to manufacture due to the much smaller scale. Whether the LVM could remain in the front-loading clothes washer business despite the loss of the agitator top-loading clothes washer business is also uncertain. To date, the LVM has been able to grow its business despit e adverse market conditions and much larger competitors.

Implications of Scale for the Low-Volume Manufacturer

As discussed previously, most of the clothes washers under review in the 2001 residential clothes washer rulemaking did not share a chassis with a commercial model. Thus, the results of

5-16the engineering analysis in the 2000 TSD do not apply to present day CCWs except for a very narrow set of observations.

A universal factor in manufact uring is scale, which descri bes how many units over which a fixed investment can be amortized. As part of the 2000 reverse-engi neering analysis for residential clothes washers, DOE tried to understand the implications of low-volume manufacturing. Figure 5.6.2, origin ally published as Figure 5.10 in the 2000 residential clothes washer TSD, averages the cost differences am ong multiple baseline top-loading vertical-axis residential clothes washers at production levels of 1.5 million and 0.3 million units per year. It also averages front-loading horizontal-axis resu lts for the residential front-loading horizontalaxis clothes washers that DOE reverse-engineered.

Figure 5.6.2 2000 Low-Volume versus High-Volume Clothes Washer Cost Disadvantage

While the units under review in the 2000 re sidential clothes washer TSD are not applicable to the current CCW analysis, the impact of manufacturing scale is still relevant to the CCW market. As manufacturing vol umes shrink, labor costs rise due to growing inefficiencies within the fabrication and assembly lines. The effect of manufacturing scale on depreciation is even more pronounced, as there are minimum too ling and equipment investments required to start operations, regardless of what the actual manufacturing volume turns out to be. Careful design will minimize the amount of additional tooling required to bring new equipment to market.

5-17Results from the 2000 TSD analysis for the effects of manufacturing scale are presented as follows, recognizing that similar results will li kely apply to CCWs. Figure 5.6.3 examines the case of very low-production volumes (100,000 units per year) versus producing at high volumes (1,500,000 units per year). Driven mainly by incr eases in depreciation costs, the very lowvolume manufacturing cost increment over high -volume manufacturing increases to about $80 for both top-loading vertical-a xis and front-loading horizonta l-axis clothes washers.

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00USD Other Depreciation Labor Materials

V-Axis H-Axis

Figure 5.6.3 2000 Cost Disadvantage of Producing 100,000 versus 1.5MM Clothes Washers per Year with Green Field Facility

The agitator top-loading clothe s washer market is largely commoditized, resulting in fierce price competition. As of 2006, a $156 price difference for the end user ($80 manufacturing cost multiplied by a 1.93 total mar kup (see chapter 7 of this TSD)) was not likely to be sustainable. However, the LVM is aided in this equipment segment by the extant tooling and equipment, years of research and deve lopment, etc. which represent a sunk cost.

In contrast, the front-loading clothes washer manufacturing line would have to increase its output by multiples to meet the unit demand that the top-loading line currently sustains. Since the two platforms do not share many components, the top-loading line would be likely to be written off, while substantial investments would be required to expand the output of the frontloading line. Such investments may not be justified by the pote ntial market for them, and the larger rivals have a great adva ntage in terms of leveraging th eir residential clothes washer shipments to minimize depreciation on a per-unit basis.

5-18Thus, while the LVM may be able to compet e with its bigger rivals on the agitator toploading platform due to depreciated plant and equipment, prior high-volume experience, and a long learning curve, it would be competing at a great disadvantage with it s larger rivals should front-loading CCWs become the only platform that can meet future energy efficiency standards.

Manufacturers operating at very low volumes are likely to face margin pressure for both top- and front-loading clothes washers. To c ounter pressure from hi gh-volume manufacturers, low-volume producers have to compete on the ba sis of service, reliability, bundling, and equipment differentiation. Its long legacy in the agitator top-loading mark et also aids the LVM in competing successfully with larger rivals.

Conclusion

In conclusion, the LVM faces larger rivals in all of the clot hes washer markets it competes in, yet the LVM has been able to grow its revenue despite bein g heavily concentrated in the stagnant CCW market. As a result, the elimination of the agitat or top-loading clothes washer platform from the CCW market would impact this manuf acturer disproportionately and could therefore represent a mate rial risk to the company.

5.6.2.3 Other Observations Regarding the 2000 Residential Clothes Washer TSD

Historic Background

When DOE began the 2001 residential clothe s washer rulemaking, the U.S. residential clothes washer market consisted almost exclusivel y of top-loading vertical-axis platforms. Table 3.9 in the 2000 TSD noted that top-loading ve rtical-axis clothes wa shers comprised a 99.9 percent market share as of 1995. Available fr ont-loading horizontal-axis clothes washers were limited to imported goods and two domestic platfo rms. While the majority of overall clothes washer shipments in the United States still consis t of top-loading clothes washers, the shipment levels and market share of front-loading clothes washers have grown significantly.

Unlike in 1995, all remaining U.S. manufactur ers now sell front-loading clothes washers that are either produced in thei r own factories or outsourced. Th e majority of residential frontloading clothes washers sold in the United Stat es today are manufactur ed abroad. While a greater proportion of CCWs are made domestically, significant market scale differences remain. Thus, as markets for top-loading clothes washer s decline, domestic clothes washer production will likely decline also.

In the 1996 AHAM data submittal, the maximum potential improvement was capped at an MEF of 1.634, whereas front-loading clothes washers from multiple vendors currently reach MEFs in excess of 2.00. Manufacturers have also increased the basket capacity of top- and front-loading clothes washers, reaching up to 4.7 ft 3 in some residential models. The WFs are also significantly lower on se veral current front-loading cl othes washers found in either residential or CCW markets than they were for models in the 2000 TSD.

5-19As a result of the residential clothes wash er rulemaking, the standards for residential clothes washers were increased in two steps, reaching an MEF of 1.26 as of January 1, 2007. When that standard was issued, no front-loadi ng clothes washer MEFs were below 1.26. Thus, only top-loading clothes washers we re affected by the rulemaking. In the interim, manufacturers worked to find the most cost-effective way to mo dify their top-loading platforms to meet the current minimum MEF.

At the time of the 2000 TSD, a correlation was noted and assumed between MEF and WF (see Table 5.6.5). However, no WF was imposed in the final rulemaking. As a result, manufacturers could largely focu s on reducing the energy content of the wash and rinse water rather than having to jointly focus on the MEF and the WF. None of the agitator top-loading clothes washers that currently meet the 1.26 MEF minimum efficiency standard also reach the WF predicted for that efficiency level by the 2000 TSD. Typically, su ch current top-loading clothes washers use two more gallons of water per ft 3 of capacity than the WF associated with the 1.26 MEF standard in the 2000 TSD.

Impact of Equipment Test Procedures

EPACT 2005 amended EPCA to require DOE to rate CCWs with the same test procedure established for residential clothes washers. (42 U.S.C. 6314(a)(8)) DOE adopted test procedures for CCWs in a final rule published on Oc tober 18, 2005. 70 FR 60407, 60416. The testing procedure for residential clothes washers is codified in 10 CFR part 430, subpart B, appendix J1.

When calculating MEF, the DOE test procedur e factors in end-user-selectable variables including the wash and rinse water temperatures, and fill level. Thus, adaptive water levels (either user-set or automatic) a nd temperature choices are accounted for in the calculation. Some design options, such as reducing th e amount of rinse water, have an efficiency benefit regardless of the user-set program. Thes e and other design options have allowed the three highest-volume CCW manufacturers to reach the 1.26 MEF standard level at relatively low cost by making evolutionary changes to thei r top-loading platforms.

For example, the calculated MEF is a func tion of the cycle water temperatures. By requiring a cold rinse and offering more warm or cold wash programs while reducing the number of hot wash cycle options, the MEF of a washer can be raised without affecting the WF. The incremental cost of offering more wash temperat ures or lowering the temperatures overall is relatively minor. Similarly, the added cost and complexity of offering a water level selector switch is relatively minor but it allows manufacturers to take advantage of the credits that the DOE test procedure gives to washer s that have this design option.

At the time of the AHAM data submittal for the 2000 TSD, clothes washer manufacturers had little experience with the upda ted clothes washer test proce dure, which was not published in the Federal Register until August 27, 2000. The only top-load ing clothes washers on the market at the time that could reach an MEF of 1.26 were proprietary in design. Furthermore, the clothes washer manufacturing cost estimates for the 1.26 MEF levels were an amalgam of the high-cost proprietary top-loading design and se veral front-loading washers.

5-20In conclusion, the cost of upgrading top-lo ading washers to reach an MEF of 1.26 was lower than manufacturers estimated accordi ng to the AHAM-supplied data. No expensive design options had to be employed to push the top-loading platform to that MEF level. Therefore, DOE believes that the current manufactur ing cost of an agitat or top-loading clothes washer that meets the 1.26 MEF/9.5 WF efficiency level is within 10 perc ent of the cost of a baseline washer in Table 5.6.5 once these costs are adjusted for inflation.

Persistence of Baseline Top-loading versu s Front-loading Clothes Washer Cost Differential

Since the publication of the 2000 TSD, the clothes washer market has been transformed by the entrance of more foreign competitors, significant market consolidation, and the appearance of residential clothe s washers that have higher load capacities than the basketcapacity limits defined by EPACT 2005. For exam ple, front-loading residential clothes washers from BSH Home Appliances Cor poration (Bosch-Siemens), GE, LG Electronics, Inc. (LG), and Whirlpool have a stated basket capacity in excess of the 3.5 ft 3 capacity product class definition limit set by EPACT 2005 for resi dential clothes washers.

Despite the entrance of multiple front-loadi ng clothes washers into the commercial and residential markets, a significant retail price diffe rence between agitator top- and front-loading clothes washer platforms persists. This suggest s that manufacturers ha ve yet to overcome the inherently higher costs associat ed with manufacturing front-loadi ng clothes washer platforms.

These cost differences are due in part to the suspensions, seals, drive systems, and stainless-steel wash baskets that front-loading clothes washers em ploy and which can be simpler, unnecessary, and/or less expensiv e in baseline top-loading models. The higher strength, stiffness, and vibration-resistan ce requirements for front-loading cl othes washers add further cost and complexity. Electronic drive systems are found in all front-loading clothes washers, whereas simpler and less expensive induction motors ar e typically found on baselin e top-loading clothes washers.

High-volume manufacturers of t op-loading clothes washers al so benefit from a plant and equipment stock that have been largely depreciate d, yet remain functional. The growth in frontloading clothes washer sales continues to demand factory expansi on and the resultant investments.

As noted above, the reverse-engineering anal ysis of the 2000 residential clothes washer TSD is largely not a valid basis upon which to compare costs in the commercial market. However, it is interesting to note how manufacturers were able to meet the current 1.26 MEF residential clothes washer standard with little to no additional manufacturi ng cost. Thus, the cost of a baseline top-loading washer has not changed much in the in terim, other than to reflect changes in raw materials costs. Front-loading clothes washer costs are similarly affected, so that the manufacturing cost differential between the two residential clothes washer platforms has remained largely the same.

5-21The retail pricing survey for this current TSD underscores this persiste nt differential, as noted in Figure 3.11.1 in chapter 3 of this TSD. This figure demonstrates that the average retail price difference between commercial top-loadi ng and front-loading wash ers varies between $531 for washers with coin boxes and $625 for washers without coin boxes. As noted in chapter 7 of this TSD, the total markup from manufacturer to end user is 1.93 fo r CCWs. Therefore there is a manufacturing cost difference of $275 to $327 between top-loading and front-loading CCW platforms.
This difference is about $100 higher than th e average difference cal culated in the 2000 residential clothes washer TSD between a baseli ne top-loading and two front-loading clothes washers that were subjected to reverse-engineering an alysis. However, the residential designs were produced at much a higher manufacturing s cale, suggesting higher co st optimization, better purchasing power, and lower ra w material costs. Higher- volume manufacturing allows a manufacturer to consider more platform and design options th at could not be economically justified at a very low manufacturing scale.

Thus, the $316 cost difference in the AHAM-s ubmitted data for top-loading and frontloading CCWs is plausible. A cost difference highe r than that found in the residential market is reasonable since CCWs are designed to be more r ugged, are required to be more reliable, and are produced at a much lower scale. As a conse quence, manufacturers cannot readily cost-optimize front-loading designs to the extent that they have been able to refine their extant top-loading units. In addition, even an optimized front-loa ding CCW will remain inherently more expensive to produce than a high-volume residential mode l built on the same platform due to the volume over which customized items like cont rollers have to be depreciated.

5.6.3 Cost-Efficiency Curves
Based on its analysis, for this SNOPR, the De partment has retained all cost estimates presented in the October 2008 NOPR, though they were revised with a Producer Price Index (PPI) multiplier to update them to 2008$. These are shown in Table 5.6.6.

Table 5.6.6 Commercial Clothes Wa sher Cost Efficiency Curves

Efficiency

Level Modified Energy Factor (ft 3 /kWh) / Water Factor (gallons/ft 3 ) Incremental Cost

Top-Loading Front-Loading TopLoading FrontLoading Baseline 1.26/9.5 1.72/8.0 $0.00 $0.00
1 1.42/9.5 1.8/7.5 $77.60 $0.00
2 1.6/8.5 2.0/5.5 $134.99 $14.21
3 N/A 2.2/5.1 N/A $39.34
4 N/A 2.35/4.4 N/A $66.16

5-22