Energy Conservation Program for Consumer Products: Energy Conservation Standards for Water Heaters
Federal RegisterApr 28, 2000
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DEPARTMENT OF ENERGY
Office of Energy Efficiency and Renewable Energy
10 CFR Part 430
[Docket Number EE-RM-97-900]
RIN 1904-AA76
Energy Conservation Program for Consumer Products: Energy Conservation Standards for Water Heaters
AGENCY:
Office of Energy Efficiency and Renewable Energy, Department of Energy (DOE).
ACTION:
Notice of proposed rulemaking and public workshop.
SUMMARY:
The Energy Policy and Conservation Act, as amended, prescribes energy conservation standards for certain major household appliances, and requires the Department of Energy (DOE) to administer an energy conservation program for these products. In this notice we are proposing to amend the energy conservation standards for water heaters to make them more efficient and announce a public hearing.
DATES:
Comments must be received on or before July 12, 2000. DOE is requesting a signed original, a computer disk (WordPerfect 8) and 10 copies of the written comments. The Department will also accept e-mailed comments, but you must also send a signed original. Oral views, data, and arguments may be presented at the public workshop (hearing) in Washington, DC, beginning at 9:00 a.m. on June 20, 2000.
The Department must receive requests to speak at the workshop and a copy of your statements no later than 4:00 p.m., June 6, 2000, and we request that you provide a computer diskette (WordPerfect 8) of each statement at that time. The DOE panel will read the statements in advance of the workshop and requests that speakers limit their oral presentations to a summary. Attendees will have an opportunity to ask questions.
ADDRESSES:
Please submit written comments, oral statements, and requests to speak at the workshop to Brenda Edwards-Jones, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Energy Conservation Program for Consumer Products: Water Heaters, Docket Number EE-RM-97-900, 1000 Independence Avenue, SW, Rm 1J018, Washington, DC 20585-0121. You may send email to: brenda.edwards-jones@ee.doe.gov. The workshop will begin at 9:00 a.m., in Room 1E-245 at the U.S. Department of Energy, Forrestal Building, 1000 Independence Avenue, SW, Washington, DC. You can find more information concerning public participation in this rulemaking proceeding in Section VI, “Public Comment Procedures,” of this notice of proposed rulemaking.
You may read copies of the public comments, the Technical Support Document for Energy Efficiency Standards for Consumer Products: Water Heaters (TSD) and the transcript of the public hearing and previous workshop transcripts at the DOE Freedom of Information (FOI) Reading Room, U.S. Department of Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-3142, between the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. You may obtain copies of the TSD and analysis spreadsheets from the Office of Energy Efficiency and Renewable Energy's (EERE) web site at http://www.eren.doe.gov/buildings/codes_standards/applbrf/waterheater.htm.
FOR FURTHER INFORMATION CONTACT:
Terry Logee, U.S. Department of Energy, EE-41, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-9127, email: terry.logee@ee.doe.gov or Francine Pinto, Esq., U.S. Department of Energy, Office of General Counsel, GC-72, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-7432, email: francine.pinto@hq.doe.gov or Eugene Margolis, Esq., GC-72, at the same address, (202) 586-9507, email: eugene.margolis@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of Proposed Rule
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Previous Rulemakings
3. Process Improvement
4. Test Procedures
III. Analysis and Methodology
A. Market and Technology Assessment
1. General
2. Product Specific
B. Technological Feasibility
C. Screening Analysis
1. Product Classes
2. Baseline Units
3. Screening of Design Options
a. Design Options that Reduce Standby Losses
b. Design Options that Improve Combustion Efficiency
c. Design Options that Improve System Efficiency
4. Results of Screening Analysis
a. Heat Pump Water Heater
b. Gas Condensing Water Heaters
c. Other Water Heater Design Options
D. Engineering Analysis of Design Options
1. Other Federal Agencies' Initiatives
2. Maximum Technologically Feasible Levels
3. Methodology
a. Energy Savings Potential
b. Comments on Design Options
c. Manufacturing Costs
d. Installation Costs
e. Maintenance Costs
f. Determination of Markups for Retail Prices
E. Economic Analysis
1. Life-Cycle-Cost (LCC) and Payback Analysis
a. Marginal Energy Price
b. Future Energy Prices
c. Discount Rates
d. Household Characteristics
e. Lifetime
2. LCC Spreadsheet Model
a. LCC and Payback Module
b. Equipment Cost Module
c. Operating Cost Module
d. Energy Analysis Module
e. Hot Water Draw Module
3. Consumer Subgroup Analysis
4. Payback Analysis for Rebuttable Presumption
F. National Impacts Analysis
1. Net Present Value (NPV) and Energy Savings
2. National Energy Savings Spreadsheet Model
a. Shipments
b. Energy Prices
3. Comments
G. Manufacturer Impact Analysis
1. Economic Impact on Manufacturers
2. Product Specific
3. GRIM: Industry Cash Flow
4. Manufacturer Subgroup Analysis
5. Interview Process
H. Other Factors
I. Utility Analysis
J. Environmental Analysis
K. Net National Employment
IV. Analytical Results
A. Trial Standard Levels
1. Economic Impacts on Consumers
a. Life-Cycle-Cost
b. Median Payback
c. Test Procedure Payback
2. Economic Impact on Manufacturers
B. Significance of Energy Savings
C. Lessening of Utility or Performance of Products
D. Impact of Lessening of Competition
E. Need of the Nation to Save Energy and Net National Employment
1. Environmental Impacts
2. Net National Employment
F. Conclusion
1. Comments on Standard Levels
2. Proposed Standard
V. Procedural Reviews
A. Review under the National Environmental Policy Act
B. Review under Executive Order 12866, “Regulatory Planning and Review”
C. Review under the Regulatory Flexibility Act
D. Review Under the Paperwork Reduction Act
E. Review Under Executive Order 12988, “Civil Justice Reform”
F. “Takings” Assessment Review
G. Federalism Review
H. Review Under the Unfunded Mandates Reform Act
I. Review Under the Plain Language Directives
J. Assessment of Federal Regulations and Policies on Families Review
VI. Public Comment Procedures
A. Written Comment Procedures
B. Public Workshop
C. Issues for Public Comment
Appendix A—Acronyms and Abbreviations
I. Summary of Proposed Rule
The Energy Policy and Conservation Act, as amended (hereinafter referred to as EPCA or the Act), specifies that any new or amended energy conservation standard the Department of Energy (DOE) prescribes shall be designed to “achieve the maximum improvement in energy efficiency . . . which the Secretary determines is technologically feasible and economically justified.” Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). Furthermore, the amended standard must “result in significant conservation of energy.” Section 325(o)(2)(B)(3)(B), 42 U.S.C. 6295(o)(2)(B)(3)(B).
In accordance with the statutory criteria discussed in this notice, DOE is proposing to amend the water heater energy efficiency standards. The proposed standards represent performance consistent with:
• electric water heaters with heat traps, 2.5 inches of insulation and an insulated tank bottom;
• gas-fired water heaters with heat traps, flue baffles that achieve a 78% recovery efficiency (RE) and 2 inches of insulation;
• no change from the current standard for oil-fired water heaters.
The proposed standard, trial standard level three, is based on using HFC-245fa as a blowing agent in the insulation and saves an estimated 4.75 quads of energy over 27 years, a significant amount. This amount is more than the primary energy used for heating water in all U.S. buildings (residential, commercial and industrial) in 1997 (3.82 quads). The economic impacts on consumers (i.e., the average life-cycle cost (LCC) savings) are positive. We identified and conducted analyses on two subgroups of the population, senior-only and low income consumers, because of concern that these groups might potentially be affected differently by the standards than the rest of the population. Our analyses showed no difference.
The national net present value (NPV) of trial standard level three is $3.4 billion from 2003-2030. This is the estimated total value of future savings discounted to 1998 minus the estimated increased equipment costs also discounted to 1998. The water heater industry net present value (INPV) today is estimated to be $322 million. If we adopt trial standard level three, we expect manufacturers may lose 5 percent of the INPV, which is approximately $15 million. Other government actions that require the phase out of HCFC-141b and the prevention of ignition of flammable vapors by gas-fired water heaters will result in losses of an estimated $28 million in INPV. The cumulative effects of all government actions is an estimated loss of $43 million of INPV, or about 13 percent. However, the present value of future energy savings for the U.S. are projected to be $3.4 billion. These substantial energy savings exceed industry losses due to energy efficiency standards by 227 times or, due to all Federal actions, by 79 times. Additionally, based on our interviews with four of the five major manufacturers, we do not expect any plant closings or loss of employment because the manufacturers stated that they would stay in business. During the interviews, the manufacturers all stated that only trial standard level four (incorporating plastic tanks and side-arm heaters) would severely impact employment levels and require new facilities.
The proposed standard has significant environmental benefits, addressing global climate change and reducing air pollution. This proposed standard level would result in cumulative greenhouse gas emission reductions of 83 million metric tons (Mt) of carbon equivalent. Additionally, air pollution would be reduced by the elimination of 229 thousand metric tons of nitrous oxides (NO
X
) from 2003-2030.
Trial standard level three has several other benefits. First, it maximizes the LCC savings to consumers, which means that total consumers' benefits are higher as a result of this standard level than any of the other standard levels analyzed. Second, this trial standard level causes similar cost increases between gas-fired and electric water heaters so the impacts in the market are fuel neutral.
Therefore, DOE has determined that the benefits to the nation outweigh the burdens and we conclude that trial standard level three is economically justified. Furthermore, DOE has determined that trial standard level three is technologically feasible. The design options incorporated in trial standard level three are commercially available on some models of electric and gas-fired heaters sold in the U.S.
II. Introduction
A. Authority
Part B of Title III of the Energy Policy and Conservation Act, Pub.L. 94-163, as amended by the National Energy Conservation Policy Act, Pub.L. 95-619, the National Appliance Energy Conservation Act, Pub.L. 100-12, the National Appliance Energy Conservation Amendments of 1988, Pub.L. 100-357, and the Energy Policy Act of 1992, Pub.L. 102-486, created the Energy Conservation Program for Consumer Products other than Automobiles. Water heaters are one of the consumer products subject to this program. Section 322(a)(4), 42 U.S.C. 6292(a)(4).
Under the Act, the program consists essentially of three parts: testing, labeling, and Federal energy conservation standards. The Department, with assistance from the National Institute of Standards and Technology (NIST), may amend or establish test procedures for each of the covered products. Section 323(b)(1)(A)-(B), 42 U.S.C. 6293(b)(1)(A)-(B). The test procedures measure the energy efficiency, energy use, or estimated annual operating cost of a covered product during a representative average use cycle or period of use. They must not be unduly burdensome to conduct. Section 323(b)(3), 42 U.S.C. 6293(b)(3). A test procedure is not required if DOE determines by rule that one cannot be developed. Section 323(d)(1), 42 U.S.C. 6293(d)(1). The water heater test procedures appear at Title 10 Code of Federal Regulations (CFR) part 430, subpart B, appendix E.
The Act prescribes an initial Federal energy conservation standard for each of the listed covered products, except television sets. The Department is authorized to amend these standards. Section 325, 42 U.S.C. 6295. Any new or amended standard must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). The Department's current review of standards is for water heaters. Section 325(e), 42 U.S.C. 6295(e).
Section 325(o)(2)(B)(i), 42 U.S.C. 6295(o)(2)(B)(i) provides that before DOE determines whether a standard is economically justified, it must first ask
for comments on a proposed standard. After reviewing comments on the proposal, DOE must determine that the benefits of the standard exceed its burdens, based, to the greatest extent practicable, on a weighing of the following seven factors:
(1) The economic impact of the standard on the manufacturers and the consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered products which are likely to result from the imposition of the standard;
(3) The total projected amount of energy or water savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered products likely to result from the imposition of the standard;
(5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary considers relevant.
In addition, Section 325(o)(2)(B)(iii), 42 U.S.C. 6295(o)(2)(b)(iii), establishes a rebuttable presumption of economic justification in instances where the Secretary determines that “the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy, and as applicable, water, savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure . . .” The rebuttable presumption test is an alternative path to establishing economic justification.
Section 327 of the Act, 42 U.S.C. 6297, addresses the effect of Federal rules on State laws or regulations concerning testing, labeling, and standards. Generally, all such State laws or regulations are superseded by the Act, unless specifically exempted in Section 327. The Department can grant a waiver of preemption in accordance with the procedures and other provisions of Section 327(d) of the Act. 42 U.S.C. 6297(d).
B. Background
1. Current Standards
The existing water heater efficiency standards have been in effect since 1991. Energy efficiency is measured in terms of an energy factor (EF), which measures overall water heater efficiency and is determined by the DOE test procedure. 10 CFR part 430, subpart B, appendix E. The water heater efficiency standards are as follows:
• electric, EF = 0.93—(0.00132 x rated volume)
• gas-fired, EF = 0.62—(0.0019 x rated volume)
• oil-fired, EF = 0.59—(0.0019 x rated volume)
where rated volume is the water storage capacity of a water heater in gallons, as specified by the manufacturer.
2. History of Previous Rulemakings
On September 28, 1990, DOE published an Advance Notice of Proposed Rulemaking (ANOPR) announcing the Department's intention to revise the existing water heater efficiency standard. (55 FR 39624). On March 4, 1994, DOE proposed a rule to revise the energy conservation standards for water heaters, as well as a variety of other consumer products. (59 FR 10464). On January 31, 1995, we published a determination that we would issue a revised notice of proposed rulemaking (NOPR) for water heaters. (60 FR 5880). This is the revised proposal for amending the energy efficiency standards for water heaters.
3. Process Improvement
The fiscal year (FY) 1996 appropriations legislation imposed a moratorium on proposed or final rules for appliance efficiency standards for FY 1996. Pub. L. 104-134. During the moratorium, the Department examined the appliance standards program and how it was working. Congress advised DOE to correct the standards-setting process and to bring together stakeholders (such as manufacturers and environmentalists) for assistance. Therefore, we consulted with energy efficiency groups, manufacturers, trade associations, state agencies, utilities and other interested parties to provide input to the process used to develop appliance efficiency standards. As a result, on July 15, 1996, the Department published a Final Rule: Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products (referred to as the Process Rule) (61 FR 36974), codified at 10 CFR part 430, subpart C, appendix A.
The Process Rule states that for products, such as water heaters, for which DOE issued a NOPR prior to August 14, 1996, DOE will conduct a review to decide whether any of the analytical or procedural steps already completed should be repeated. (61 FR 36982). DOE completed this review and decided to use the Process Rule, to the extent possible, in the development of the revised water heater standards.
We developed an analytical framework for the water heater standards rulemaking for our stakeholders, which we presented during a water heater workshop on June 24, 1997. The analytical framework described the different analyses (e.g., LCC, payback and manufacturing impact analyses (MIA)) to be conducted, the method for conducting them, the use of new LCC and national energy savings (NES) spreadsheets, and the relationship between the various analyses.
4. Test Procedures
The DOE test procedure determines the water heater EF, which is a measure of overall water heater efficiency. Two other water heater performance characteristics determined by the DOE test procedures are the overall heat transfer coefficient (UA) and the recovery efficiency (RE) for gas and oil-fired water heaters. The UA is referred to as the standby heat loss coefficient of the storage tank. It is a measure of the amount of heat in British thermal units (Btus) lost from a water heater in one hour. The RE is defined as the ratio of energy delivered to the water to the energy content of the fuel consumed by the water heater.
The Act does not allow DOE to set energy standards for a product unless there is a test procedure. The Department published a test procedure on May 11, 1998, that revised the first-hour rating of storage-type water heaters, added a new rating for electric and gas-fired instantaneous water heaters and amended the definition of a heat pump water heater. (63 FR 25996). This revision did not change the test method for determining energy efficiency standards.
III. Analysis and Methodology
This section describes the analyses and methodologies to be used in this rulemaking. It includes a general introduction to each analysis section and provides a discussion of issues relative to the water heater rule (see Chapter 2 of the TSD).
A. Market and Technology Assessment
The market and technology assessment characterizes the relevant product markets and existing
technology options including prototype designs.
1. General
When initiating a standards rulemaking, the Department develops information on the present and past industry structure and market characteristics of the product(s) concerned. This activity consists of both quantitative and qualitative efforts to assess the industry and products based on publicly available information. Issues to be addressed include: (1) manufacturer market share and characteristics; (2) trends in the number of firms; (3) the financial situation of manufacturers; (4) existing non-regulatory efficiency improvement initiatives; and (5) trends in product characteristics and retail markets. The information collected serves as resource material to be used throughout the rulemaking.
2. Product Specific
There are five major manufacturers in the residential water heater market. We estimate they have the following market shares as of 1997: Bradford White 10%, American and AO Smith 16% each, Rheem 28% and State Industries 29%; all others add up to 1%. Annual residential water heater shipments (i.e., the total number of water heaters delivered to and installed in consumers' homes) have gradually increased from 7.4 million units in 1987 to 9.1 million units per year in 1997.
Financial information for most water heater manufacturers is not publicly available, with only one publicly traded water heater manufacturer in the United States. Information from the U.S. Census Bureau Current Industrial Reports for 1997 and other public sources shows industry shipments with a value of $1.3 billion for 9.1 million water heaters. Typical industry profits are 6 percent of revenues.
There is no current national non-regulatory water heater efficiency improvement program. However, DOE is considering an Energy Star® water heater program and currently is supporting a program to demonstrate a 50 gallon, 6,000 Btu input heat pump water heater and to develop a residential condensing gas-fired water heater. If successful, the DOE heat pump water heater program will eliminate the installation, service and some of the product utility issues that formed most of our basis for screening out heat pump water heaters. This DOE heat pump water heater is designed to be a “drop-in” replacement for a standard electric water heater. Therefore it requires only standard plumbing and wiring connections and it will fit in most electric water heater closets. However, it still will not fit under counters or in spaces less than four feet tall.
In addition, the Federal Energy Management Program's (FEMP) “Buying Energy Efficient Products Program” identifies the upper 25% energy efficient residential gas and electric water heaters. These levels are recommended to Federal agencies with the ultimate goal of moving the entire U.S. market toward higher energy efficiency. We are aware of a few gas and electric utility programs that encourage the use of higher efficiency water heaters, including consumer rebates or dealer incentive programs, financing, consumer education, and rental/guarantee programs that often include installation and maintenance costs. In the past decade, the number of these utility programs has diminished considerably due to restructuring of the electric and gas utility industries.
The water heater market is largely a replacement market, accounting for 80-85% of sales. The remaining 15-20% of sales are for new installations. Of the 9.1 million water heaters sold annually, we estimate plumbing wholesalers sell approximately 4.3 million, while retail outlets such as Sears, Wards, Home Depot, and Lowes sell the majority of the remaining 4.8 million. Characteristics of the replacement market include: (1) consumers typically replace the existing water heater with one of similar fuel and capacity; (2) consumers consider the ease of installation—it has to fit in the existing space; (3) consumers usually replace water heaters under emergency conditions when they fail; and (4) consumers typically ask for and follow the installers' recommendations.
Residential water heating uses about 2.6 quads per year of primary energy out of 19 quads (year 1997) for all residential buildings, at a cost of $26.4 billion. Where natural gas is available, 74% of households use gas to heat water and 24% heat with electric. Where gas is not available, 84% of households use electric water heaters and the remaining households use oil-fired water heaters or liquid petroleum gas (LPG).
B. Technological Feasibility
Under the guidelines in the Process Rule, DOE will eliminate from consideration, early in the process, any design options that present unacceptable problems with respect to technological feasibility, practicability to manufacture, install, and service, product utility or unavailability, or safety. In order to conduct the screening analysis, the Department gathers information regarding all current technology options and prototype designs. In consultation with interested parties, the Department develops a list of design options for consideration in the rulemaking. All technologically feasible design options are candidates in this initial assessment. We identified heat pump water heaters and gas condensing water heaters as the maximum technologically feasible designs based on measured EF's greater than 2.0 and 0.9, respectively.
The Department considers design options technologically feasible if they are already in use by the respective industry or research has progressed to the development of a working prototype. The Process Rule sets forth a definition of technological feasibility as follows: “Technologies incorporated in commercial products or in working prototypes will be considered technologically feasible.” 10 CFR 430, subpart C, appendix A(4)(a)(4)(i).
The Department has determined that all of the design options discussed in today's notice are technologically feasible as required by Section 325(o)(2)(A) of EPCA, as amended.
C. Screening Analysis
Screening identifies those design options the Department will consider in the engineering analysis. This includes all technologically feasible design options not eliminated in the screening analysis. The screening analysis provides a basis for eliminating certain problematic design options from further consideration early in the process. Initially, the candidate design options encompass all those technologies considered to be commercially available or in working prototypes. The Process Rule establishes the factors DOE uses for screening design options. The factors are as follows:
• Technological feasibility. DOE will only consider technologies that are incorporated in commercially available products or in working prototypes.
• Practicability to manufacture, install, and service. A technology must be able to be mass produced, installed and serviced on a scale that will serve the relevant market at the time of the effective date of the standard.
• Impacts on product utility to consumers. DOE must determine if any energy efficiency designs have significant adverse impacts on product utility, including impacts on significant subgroups of consumers, or if a product would become unavailable with performance characteristics that are substantially the same as products presently available in the U.S.
• Adverse impacts on health and/or safety. DOE will not consider any designs that have significant adverse impacts on health or safety.
10 CFR part 430, subpart C, appendix A(4)(a)(4) and (5)(b).
1. Product Classes
DOE divides water heaters into classes based on the type of fuel used to heat water: electricity, natural gas/LPG, and oil. Different energy efficiency standards will apply to different product classes. DOE defines residential storage water heaters in the following classes:
• An electric water heater has a storage capacity of 20-120 gallons and a heat input of 12 kilowatt (kW) or less.
• A gas-fired water heater has a storage capacity of 20-100 gallons and a heat input of 75,000 Btu per hour or less.
• An oil-fired water heater has a storage capacity of 50 gallons or less and a heat input of 105,000 Btu per hour or less.
2. Baseline Units
In order to analyze design options for energy efficiency improvements, the Department defines a baseline unit. For each product class, the baseline unit is one that meets the existing standard. We determined the following baseline units for each fuel type:
• The baseline electric water heater is a 50-gallon glass-lined steel tank with 1.5 inch polyurethane foam insulation and two 4,500 watt heater elements. The baseline EF is 0.86.
• The baseline gas water heater is a 40-gallon glass-lined steel tank with a nominal 4 inch center flue. The heat input rate is 40,000 Btu/hr with a 450 Btu/hr pilot light. The tank is insulated with 1 inch of polyurethane foam. The energy factor is 0.54 and the recovery efficiency is 76%.
• The baseline oil-fired water heater is a 32 gallon glass-lined steel tank insulated with 1 inch of polyurethane foam. The heat input rate is 90,000 Btu/hr and it has a center flue. It has an EF of 0.53 and the RE is 75%.
3. Screening of Design Options
In the water heater rulemaking analysis, DOE considered three categories of design options: designs that reduce standby losses, designs that improve combustion efficiency, and designs that improve system efficiency. For a complete description of these design options, see Chapter 4.2 in the TSD.
a. Design Options That Reduce Standby Losses
Some designs that reduce standby losses—heat traps and increased jacket insulation—are frequently applicable to all fuel types. A heat trap is a device that keeps hot water from circulating into a piping distribution system because of natural convection. Manufacturers insulate water heaters by filling the cavity between the jacket and the tank with polyurethane foam insulation. Most water heaters on the market today have at least 1 inch thick foam insulation, while some models have 2- or 3-inch thick insulation. An alternate way to reduce jacket heat losses is to use advanced insulation materials such as evacuated panels.
The following design options reduce standby losses, but usually are restricted to one type of fuel:
• Plastic water heater tanks reduce conducted heat. This design option is used with electric water heaters or with indirect water heating techniques.
• A manufacturer can insulate the bottom of the tank, but this design option can be used only with electric water heaters or with gas or oil-fired burners mounted beside the water tank and using a heat exchanger to transfer heat to the water.
• A damper installed either at the flue exit or in the vent pipe of gas water heaters minimizes off-cycle heat losses.
• The side-arm heater design avoids flue losses by using a small, separate heat exchanger to heat water and a small circulation pump on gas-fired water heaters.
• An electronic ignition device can replace a standing pilot ignition system in gas-fired water heaters.
b. Design Options That Improve Combustion Efficiency
DOE considered six design options that improve combustion efficiency. Four design options are applicable for gas-fired and three for oil-fired water heaters:
• First, increased heat exchange from a flue baffle, multiple flues, or submerged combustion improves heat transfer. The flue baffle is a twisted strip of metal inserted into the flue of a gas or oil-fired water heater that improves heat transfer to the flue. Increased heat exchanger surface area, usually from multiple flues, improves the heat transfer from the flue gas to the water. In submerged combustion or direct-fired combustion systems for gas-fired water heaters, water is heated by direct contact with the flue products.
• Second, a condensing gas-fired water heater condenses some of the water vapor in the flue gas and extracts more heat.
• Third, an inverted U-shaped flue increases recovery efficiency and reduces standby losses of oil-fired water heaters.
• Fourth, a thermophotovoltaic or thermoelectronic generator uses silicon photovoltaic cells (energized by heat or light from the burning fuel) to generate power to run a fan and operate the electronic ignition and controls on a gas-fired water heater. This is more efficient because it eliminates the standing pilot and does not require any connection to an outside electric power source.
• Fifth, the two-phase thermosiphon is a heat pipe that transfers heat from the gas burner to the storage tank.
• Sixth, the air-atomized burner (oil-fired only) uses a stream of air to atomize the oil. This improves combustion efficiency and results in less unburned fuel in the flue.
The heat pump is the only design option that improves the heating efficiency of an electric water heater. A heat pump water heater can double the EF of an electric water heater compared to a resistance type because it uses heat from the air within the house. This can cause beneficial dehumidification or unwanted overcooling. During those times when heat gains from normal household activities or from the environment are not large enough to keep the house comfortable, e.g., the winter, the house heating system must provide the makeup heat to the house.
c. Design Options That Improve System Efficiency
There are several system improvement applications:
• The timer design option limits the amount of time during the day when an electric water heater may be energized.
• The solar pre-heat technique uses solar collectors as pre-heaters for a standard electric or gas storage-type water heater.
• The drain water heat recovery system uses a heat exchanger to recover waste heat from the drain water.
• A tempering tank—an un-insulated storage tank installed in a conditioned space— raises the inlet water temperature to the ambient temperature.
• Dip-tubes that prevent the buildup of sediment on the bottom of the tank may reduce the degradation of efficiency and prolong the life of the water heater.
While system improvement features may save energy, they are typically a part of the water heater system, not the water heater. For example, the tempering tank is a separate tank that is
plumbed to the water heater. Each of these designs was eliminated in the screening analysis because none is defined as a water heater in the Act. Section 321(27), 42 U.S.C. 6291(27).
4. Results of Screening Analysis
In accordance with the Process Rule, the Department conducted a screening analysis and published the results in “Technology Assessment and Screening Analysis,” Appendix B: Supplement to the Water Heater Rulemaking Framework, January 1998. DOE notified stakeholders of the availability of this document in the
Federal Register
on January 14, 1998. (63 FR 2186).
We received many comments on the elimination of the heat pump water heater as a design option. Several stakeholders commented that DOE should consider all design options, including heat pump water heater designs. (American Gas Association (AGA), No. 28 at 4; Okaloosa, No. 29 at 1; Clearwater, No. 30 at 1; Mesa, No. 34 at 1; Barley, No. 32 at 1; 13 Letters from Various Gas Utilities, No. 31 at 1; and Laclede, No. 47 at 2).
DOE eliminated the heat pump water heater due to issues concerning the practicability to manufacture, install, and service on the scale necessary to serve the relevant market at the time of the effective date of the standard and product utility of these units. DOE eliminated heat pump water heaters after careful consideration of the current electric resistance and heat pump water heater markets and manufacturing technology, and after applying the factors to be considered in screening design options contained in the Process Rule. 10 CFR 430, subpart C, appendix A(4)(a)(4) and (5)(b). See Chapter 4.2.2.10 in the TSD for a discussion of the heat pump water heater screening analysis.
Several other stakeholders, including Gas Appliance Manufacturers Association (GAMA), Edison Electric Institute (EEI), Southern Company (SC), and Virginia Power (VP) supported DOE's decision to screen out heat pump water heaters. (GAMA, No. 51 at 4; EEI, No. 36 at 2; SC, No. 12 at 2 and No. 42 at 1; and VP, No. 45 at 3).
Similarly, the screening criteria were applied to condensing gas-fired water heaters. DOE eliminated gas condensing water heaters because we determined they are not technologically feasible. 10 CFR 430, subpart C, appendix A(4)(a)(4) and (5)(b). See Chapter 4.2.2.10 in the TSD for a discussion of the condensing gas-fired water heater screening analysis.
a. Heat Pump Water Heaters
Practicability to Manufacture.
From meetings with the water heater industry, DOE has determined that water heater manufacturers would not have the lead time necessary to ramp up heat pump water heater production to present sales levels in the three-year time frame established by the NOPR. Since the late 1970s, sales of heat pump water heaters have not exceeded 10,000 per year (<0.33% of electric water heater sales, <0.17% of all water heater sales) and presently sales of residential heat pump water heaters are less than 4,000 residential water heaters a year in categories covered by the present rulemaking. None of the five major manufacturers of residential water heaters currently have a heat pump design in their residential product line, and only two (State and Rheem) have had a heat pump water heater in their product lines in the last 10 years.
LaClede Gas commented that DOE should not screen heat pump water heaters out as a design option because DOE is presently supporting the development of a residential heat pump water heater product. (LaClede, No. 25 at 3) The heat pump water heater design being researched by DOE is an integral heat pump water heater design which uses a small compressor with 40% less heating capacity than any used in existing heat pump water heater products (and has about 25% of the heating capacity of a typical electric resistance hot water heater). This should assist in installation in smaller spaces as it will physically use smaller components (particularly the compressor and evaporator/fan system), and will likely be quieter in operation. Present designs of the DOE heat pump re-inject condensate back into the air to be re-condensed in the evaporator. DOE believes this may simplify installation, at some expense to system capacity, efficiency and dehumidification of the residence.
The integral heat pump water heater design proposed by DOE uses a 50-gallon tank, but even the small compressor and heat exchanger used in that design adds approximately a foot in height to that tank. The attached 50-gallon storage tank is sized to provide ample water for a typical day's use in most residences. Smaller tank sizes are not being proposed, as the cost effectiveness of the heat pump decreases rapidly with smaller tank sizes and characteristic lower water usage. Presently, the smallest integral heat pump water heater design available in the U.S. is an 80-gallon unit. The design proposed by DOE would still need access to the same amount of household heat any heat pump water heater would require to serve the residence load; however, the lower heat extraction rate of the DOE unit may allow for installation in locations with smaller surrounding air volume than is required for existing designs.
The unit is being developed with input from DOE, Arthur D. Little, and Oak Ridge National Laboratory and has been designed from the outset to address many of the known market barriers facing the adoption of residential heat pump water heaters. The first barrier is the high cost of heat pump water heaters due to the heat pump motor, compressor and controls. A second barrier is the more complex (and more costly) installation for heat pump water heaters. There are size, air flow, filter replacement and condensate removal considerations. Third, poor reliability of many models has caused a lack of consumer confidence. Fourth, heat pump water heaters require more maintenance. Presently, no mass market service infrastructure exists.
Preliminary field tests of the DOE design are likely to start in the spring of 2000. Larger scale utility testing is slated for late 2000 to 2001. Accelerated reliability testing is also scheduled sometime after initial field testing has resulted in a more or less stable product. If field and reliability testing are positive, limited commercial production and sales are possible by 2003. Actual production and sales would be through an existing air-conditioning equipment manufacturer who would likely purchase storage tanks from an existing water heater manufacturer. Because of the issues that have plagued heat pump water heaters in the past, DOE is requiring its partners to introduce the product cautiously, correcting problems encountered during field testing and fully testing the corrections. A market study done by Arthur D. Little projected potential sales for the DOE design up to 300,000 units per year 10 years after commercial introduction, or 7.5% of present electric water heater sales. (ADL Report #46230 to DOE).
Although most manufacturers could develop, either alone or in partnership with others, a working heat pump water heater design in the next few years, there are significant difficulties in capitalizing and building heat pump water heater manufacturing facilities to provide for the present 4 million plus electric water heater sales annually.
Manufacturers of heat pump water heaters would need to design a completely new product and build new production facilities to supply the current electric water heater market.
This market has a market volume greater than that of all room air-conditioner shipments in the U.S. (1993 DOE Report, EE-0009). In a 1994 A. D. Little report, the estimated investment cost to convert to heat pump water heaters was $750 million. Given the current levels of profitability of the water heater industry and the limited capital resources, some manufacturers will not be able to finance these costs. (Dieckmann, Topping and Shorey, August 31, 1994, ADL Report to GAMA, “Technical Analysis of the Proposed DOE Heat Pump Water Heater Energy Efficiency Standard”)
In addition, given the high initial cost for heat pump water heaters, poor reliability with past heat pump water heater designs, and anticipated impact on consumer utility, initial sales of electric water heaters after a heat pump water heater standard may be low as consumers look for other alternatives. With a government imposed time frame for shifting all production to heat pump water heaters and a shifting market size, it is unclear how the electric water heater industry could plan and secure investments to satisfy an unknown final market volume.
Considering these issues with regard to manufacturability and achieving sufficient production volume, DOE has concluded that the screening criterion of practicability to manufacture, on the scale necessary to serve the relevant market at the time of the effective date of the standard, will not be met.
Practicability to Install.
Based on our analysis of current heat pump water heater designs and the DOE drop-in heat pump water heater prototype, we do not believe heat pump water heaters can be used as direct replacements for electric water heaters in many applications. There are many replacement water heater applications where present electric resistance water heaters are installed in small spaces, in attics and under counters. An example of such small spaces are the approximately 27% (10 million) of all electric water heaters installed in residences smaller than 1,000 ft
2
(average size: approximately 760 ft
2
). In many of these installations, space restrictions would make it impossible to simply replace the existing electric resistance water heater with any of the existing heat pump water heater designs sold today. The DOE “drop-in” water heater is a candidate for some of these applications, but its current design does not address the problems of small spaces or small sizes.
Even the small (4,000-6,000 Btu/h) heat pump unit for the DOE “drop-in” water heater mounted on top of a tank will add approximately 8-12 inches on top of the tank for compressor, evaporator coils, and evaporator fan. Assuming no change in tank size from the electric resistance model, the extra height of the heat pump design will present installation problems where the existing water heater enclosure is height limited, such as many existing lowboy water heater installations.
GAMA reported that electric lowboy shipments account for about 18 percent of residential electric water heater shipments. (GAMA, No. 91 at 1). DOE appreciates the electric lowboy shipment information from GAMA.
About 18% of electric water heater sales are lowboy models. An integral heat pump water heater would not fit into these locations. Perhaps 50% of the lowboy sales would require an add-on heat pump unit. (The other 50% are for new construction.) Additionally, over one million standard sized electric water heaters per year are installed in residences of 1,000 ft
2
or less. Perhaps as many as half of these installations would also require an add-on heat pump unit. The lowboy and small residence replacements could equal 850,000 add-on heat pump water heaters per year. These add-on heat pump units require a space with at least 100 cubic feet per minute of warm air and wiring and plumbing connections (probably through one or more walls) for water pipes and a condensate drain. We would characterize this installation as “difficult.” Without an extensive survey, we are unable to determine how many of these difficult installations would be feasible, although costly, and how many would result in loss of product utility as discussed later in this section.
We have determined that almost a million households could be affected each year. Therefore, DOE eliminated heat pump water heaters as a design option from further consideration because of problems concerning practicability to install on the scale necessary to serve the relevant market at the time of the effective date of the standard.
Practicability to Service.
We are also aware of the thousands of comments from interested consumers about heat pump water heaters in our 1994 NOPR. These comments cited lack of a good service infrastructure, noise, and reliability, among other factors. We have more recent comments from Northeast Utilities (NU) that significant (10%) reliability problems are still evident in some heat pump water heater designs. (NU, No. 4 at 1).
Two hundred sixteen comments to the 1994 rulemaking process (docket EE-RM-90-201) claimed that “the infrastructure to service heat pump water heaters is not capable of handling a large quantity of heat pump water heater units.” The issues faced in service and maintenance of heat pump water heaters have not changed since 1994. The present installation and service infrastructure for electric resistance water heaters consists, for the most part, of plumbers.
Heat pump water heaters are more complex in design and based on fundamentally different technology from electric resistance water heater designs. Because of this, they require a broader range of skills to service the units. Plumbers generally do not have training or background in repair of appliances like a failing heat pump water heater. Generally, this type of repair work is done by small appliance repair personnel who repair refrigerators, freezers, room air conditioners, and other “white” goods (e.g., washing machines). According to the Bureau of Labor and Statistics, of the approximately 71,000 home appliance repair workers in the U.S., two out of three work directly for department stores or household appliance stores. (1998-1999 Occupational Outlook handbook, U.S. Dept. of Commerce, BLS) These stores represent a small fraction of water heater sales but might be potential sales and service outlets for heat pump water heaters.
Presently, no mass-market servicing infrastructure for heat pump water heaters exists. While the air conditioning industry could provide servicing capabilities, only one company has any relationship with major water heater manufacturers or with plumbers who install water heaters. There is no precedent in the history of the U.S. major appliance industries to suggest that a new service and repair infrastructure could develop, on the scale of several million units per year, in a roughly three-year time frame.
Therefore, DOE eliminated heat pump water heaters as a design option from further consideration because of problems concerning practicability to service on the scale necessary to serve the relevant market at the time of the effective date of the standard.
Product Utility.
Heat pumps need a certain amount of space for proper operation because a heat pump heats water by removing heat from the household air. Many heat pump water heaters currently available require a volume of at least 1,000 ft
3
of heated air to provide adequate heat exchange and minimize overcooling of the space, which can impact performance. Approximately 14% of all households
are smaller than 1000 ft
2
and presently use electric water heaters. The volume of heated air required for a heat pump is equal to 12% of the floor space of a 1,000 ft
2
home. Therefore, in smaller residences, current or prototype heat pump units would have to be located in the living space, or have vigorous (100 cubic feet per minute) air exchange within the living space. Such a location can lead to significant homeowner dissatisfaction due to loss of space occupied by the unit and related piping, as well as the potential for noise of the fan and compressor. This is particularly a concern in small, slab-on-grade housing, mobile/manufactured homes or apartments.
If there is no space to incorporate both the water tank and the refrigeration subsystem in the same location, a reduced tank size may have to be installed. This could cause a 20% to 25 % loss of tank volume on a standard 50 gallon water heater. Any substantial reduction in the tank size to accommodate the heat pump would reduce the first hour rating, since first hour rating depends on tank size and reheat capacity. The first hour rating is, “an estimate of the maximum volume of “hot” water that a storage-type water heater can supply within an hour that begins with the water heater fully heated.” (10 CFR 430, subpart B, appendix E). We interpret losses of first hour rating as a loss of product utility.
DOE believes heat pump water heaters should be eliminated from further consideration because there would be a loss of utility to a significant portion of the population (10 million households). Therefore, because of this significant adverse impact to significant subgroups of consumers, the Department has eliminated heat pump water heaters as a design option from further consideration.
In summary, DOE has eliminated residential heat pump water heaters as a design option for this rulemaking because they fail to meet two of the three screening criteria listed earlier—namely, they are impracticable to manufacture, install, and service and have adverse impacts on product utility. There is no foreseeable means for the technology to advance enough in the short term to allow heat pump water heaters to fill market needs and to continue to provide a reasonable level of consumer utility.
As a result of its screening analysis, DOE has determined that heat pump water heaters are not economically justified. This conclusion is based on the following factors: (1) a capital investment that is 2.3 times the current industry net present value; (2) adverse utility impacts on about 10 million households living in homes with less than 1,000 square feet; and (3) adverse impacts on low income and seniors-only households due to a price increase about 3 times the expected 2003 baseline price for electric water heaters.
b. Gas Condensing Water Heaters
Although several manufacturers offer gas condensing water heaters, these are only in commercial sizes. Results from a GRI sponsored field test showed no serious reliability or durability problems and confirmed technical feasibility. (ASHRAE Transactions, 1987, 93(2) p. 1485-1500.) However, DOE is not aware of any prototypes or commercially available residential condensing gas-fired water heaters. Therefore, we have eliminated this design option based on a lack of technological feasibility. We discuss the details in Chapter 4.2.2 of the TSD.
c. Other Water Heater Design Options
DOE has eliminated air-atomized oil burners, power vents, and increased heat exchanger surface areas. Based on comments, DOE eliminated air-atomized burners on the basis that they are not technologically feasible because the prototype has not been applied to water heaters. We eliminated power vents because they require special venting systems that cannot be installed in applications such as existing multifamily homes and some existing town homes and condos. However, the Department is aware of a new, low volume fan that may allow power venting of an oil-fired water heater unit with conventional negative draft vent systems. Test results of this technology are not available. We eliminated the increased heat exchanger surface areas (for gas-fired water heaters) because improved flue baffles can provide the same efficiency improvement and are preferred by manufacturers.
After considering the above, the following are the design options considered for the rulemaking (see Table 1).
Table 1.—Design Options Used in the Analysis
Design options—description
Gas
Electric
Oil
Heat traps
X
X
X
Plastic tank
(1)
X
X
Increased jacket insulation
X
X
X
Insulating the tank bottom (electric only)
X
Improved flue baffle/forced draft
X
X
Increased heat exchanger surface area
X
X
Flue damper (electro-mechanical)
X
Side-arm heater
X
Electronic (or interrupted) ignition
X
X
1
used only in conjunction with the side-arm heater option.
D. Engineering Analysis of Design Options
The engineering analysis determines the maximum technologically feasible energy efficiency level, calculates unit energy savings and payback, and estimates the retail price for each design option and combination of design options. It analyzes the design options identified as a result of the screening analysis. This section discusses DOE's analytical tools and the critical assumptions DOE used in the water heater engineering analyses. We also discuss two initiatives by other Federal agencies that impact the rulemaking analyses.
1. Other Federal Agencies' Initiatives
Two actions by other Federal agencies outside of the DOE efficiency standards process will affect our engineering analyses. First, the U.S. Environmental Protection Agency (EPA) is requiring a phase out of the blowing agent currently used by the water heater industry for foam insulation (HCFC-141b). Second, manufacturers have reached a voluntary agreement with the Consumer Product Safety Commission (CPSC), to produce gas-fired water heaters resistant to ignition of flammable vapors. The first will affect the efficiency of water
heaters, and the second will increase the price of gas-fired water heaters.
Most residential water heaters are insulated with polyurethane foam in the cavity between the tank and the jacket. Currently, water heater manufacturers use a hydrochlorofluorocarbon, HCFC-141b, as a blowing agent for this insulation. HCFC-141b is an ozone-depleting blowing agent and, as a result of the Montreal Protocol, the EPA has scheduled the phase-out of this blowing agent by January 1, 2003. Water heater manufacturers must use another blowing agent after that time.
A number of alternative blowing agents are available. The industry is considering HFC-245fa, HFC-356mfc, HFC-134b, cyclopentane and water blown foam. DOE decided to analyze two blowing agents—water-based and HFC-245fa. We based our decision on a number of criteria, including zero ozone depletion potential, low global warming potential, availability by 2003, and price. In our preliminary analysis, presented at the July 1999 Workshop, we only analyzed one of the alternatives—water blown insulation. Some stakeholders raised concerns about our failure to include HFC-245fa blown insulation in our preliminary analysis. Therefore, we added HFC-245fa blown insulation to our analysis.
We used HFC-245fa and water blown foam in our analysis. For cost information, Honeywell, the licensee to manufacture HFC-245fa in the U.S., provided estimates of HFC-245fa costs. For efficiency data, we used published laboratory measurements of physical parameters. In order to keep the baseline efficiency (those with HCFC-141b insulation) and the energy use characteristics of water heaters with HFC-245fa insulation the same, we modeled it with appropriately thicker insulation. We also increased the amount and cost of steel used for the water heater jacket in addition to the extra volume and cost of insulation. The analysis and test results using HFC-245fa and water blown foam to evaluate design options can be found in Chapter 3.4.1 of the TSD.
Many comments addressed the potential of other alternatives. GRI claimed other types of insulation may be preferable to HFC-245fa blown insulation. (GRI, No. 48 at 2). The Oregon Office of Energy (OOE) requested that DOE provide a succinct and complete summary of the alternative insulations and why they were not considered in the analysis. (OOE, No. 96 at 5).
In addition to the water/carbon dioxide (CO
2
) and HFC-245fa blowing agents, there are cyclopentane, HFC-134a, and HFC-365mfc. All of these have zero ozone depletion potential and thus will meet the Montreal Protocol's requirements. Cyclopentane, widely used in Europe, is relatively inexpensive and highly flammable; U.S. manufacturers have been cautious about its use. HFC-134a is currently available, but its thermal resistance is lower than HFC-245fa. HFC-365mfc may be a good potential alternative blowing agent, but it also has a lower thermal resistance than HFC-245fa and its price is not available. Our decision to analyze both HFC-245fa and water/CO
2
blowing agents allowed us to cover the range of performance and costs of the suggested alternative blowing agents. We have more detailed information about alternative blowing agents in Chapter 3.4 of the TSD.
Although we have analyzed HFC-245fa as a blowing agent, there is continuing concern about its availability. Representatives from Honeywell, the licensee to manufacture the material in the U.S., stated at the July 1999 workshop that it would have a commercial size plant ready to produce HFC-245fa by mid-2002. (July 22, 1999 Water Heater Workshop Transcript, pg. 105). We received comments from several manufacturers, GAMA, an individual, and an insulation supplier about the availability of HFC-245fa and Honeywell's capacity to supply the market. GAMA and manufacturers are concerned that Honeywell is the only source for HFC-245fa. They are also concerned that manufacturers need samples of HFC-245fa soon as it will take about six to nine months to replace existing low pressure foaming equipment with high pressure equipment and shrinkage tests will take 250 days. (Stepan, No. 86 at 1; Bradford White, No. 89 at 2; Vaughn, No. 56 at 1; Rheem, No. 95 at 1; GAMA, No. 91 at 2; and Energy Market and Policy Analysis, Inc. (EMPA), No. 88 at 9).
Several comments suggested ways to deal with issues concerning the availability of HFC-245fa. The American Council for an Energy-Efficient Economy (ACEEE) suggested HCFC-141b could be stockpiled, the EPA could be petitioned to extend the phase out of HCFC-141b, or DOE could make the new standard conditional on the availability of HFC-245fa. (ACEEE, No. 93 at 7). SC and EEI suggested DOE delay implementation of the new water heater standard if HFC-245fa based insulation materials are not available. (SC, No. 42 at 2 and EEI, No. 39 at 2).
DOE is concerned about the relatively short time the manufacturers have to incorporate a new blowing agent into production and to perform the necessary tests to measure results using the new blowing agent. Since the choice of insulation blowing agent has a significant impact on energy savings and water heater cost, we request stakeholder comment on the cost and availability of HFC-245fa and water blown foam, and other alternative blowing agents. We also invite comments on approaches that would enhance the transition to a new blowing agent for manufacturers, including, but not limited to, the timing needed for the transition of HFC-245fa, water blown foam, or any other alternative blowing agent manufacturers suggest would be appropriate to use in implementing a new standard. Manufacturers are requested to submit supporting data for alternative blowing agents.
On September 13, 1999, we received updated information indicating that Honeywell had received EPA approval for production of HFC-245fa. Honeywell has since announced it would start building a commercial plant for producing HFC-245fa in Geismar, Louisiana. Based on Honeywell's announcement, we have decided to base our decision on insulation blown with HFC-245fa because such insulation is 42% more effective in reducing thermal losses than water blown insulation. Therefore, since our proposed standard uses HFC-245fa, this notice addresses the results based on HFC-245fa blown insulation. However, the Department has completed an identical analysis using water blown foam in order to anticipate the unlikely event that HFC-245fa does not become available.
The other action affecting this rulemaking is a CPSC initiative to make gas-fired water heaters resistant to ignition of flammable vapors. Most current designs for gas-fired water heaters rely on a standing pilot to ignite the main burner. If flammable vapors are in the air near a water heater, there is the possibility of unintended ignition. This is a potential safety problem because water heaters are often installed in garages and basements, where flammable liquids such as gasoline or paint thinners may be used. The CPSC staff recommended publication of an advance notice of proposed rulemaking for the development of a test procedure that would determine whether a particular gas-fired water heater design would ignite flammable vapors. However, before the notice was published, the water heater manufacturers agreed to voluntarily develop a test procedure and new gas burner designs.
The CPSC worked with GRI and the water heater industry to develop a test
procedure for gas-fired water heater designs that will resist ignition of flammable vapors. The American National Standards Institute (ANSI) Z21 Committee approved this test procedure in May 1999, but final approval by the full ANSI committee is still pending. Gas-fired water heaters designed to be resistant to the ignition of flammable vapors are now on the market. Manufacturers have agreed to begin marketing gas-fired water heaters resistant to ignition of flammable vapors by April 2001. DOE will consider those additional economic impacts on manufacturers of the transition to designs resistant to flammable vapors. The voluntary agreement between manufacturers and the CPSC will be implemented by April 1, 2001, which will be close to the effective date of this rule.
The impact of this initiative on the water heater rulemaking analyses is an increase in manufacturing cost. Based on discussions with the Water Heater Industry Joint Research and Development Consortium, DOE decided to add an extra $35 per unit of manufacturer cost for designs resistant to ignition of flammable vapors. In this analysis, the $35 is applied to the manufacturing cost of all design options for gas-fired water heaters, including the baseline design. EEI stated that the cost of $35 may be very conservative. (EEI, No. 39 at 5). We believe until flammable vapor ignition resistant designs are widely available in the market, and a market price is established, a manufacturer cost of $35 is reasonable. We discussed this during the manufacturing interviews, and several agreed with this cost estimate. Furthermore, the design does not require electricity for the water heater or modifications of the venting system. DOE also anticipates no changes in efficiency from flammable vapor ignition-resistant water heater designs. DOE will monitor this situation to verify these assumptions or to update the analysis, as designs meeting the ANSI standard become available.
2. Maximum Technologically Feasible Levels
Amendments to a standard are required to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). Furthermore, Section 325(p)(2) requires that the Secretary determine the maximum technologically feasible level (max tech) for each type (or class) of covered product and then, if the proposed standard is not designed to achieve the max tech levels, state the reasons that it will not meet those levels.
The Secretary has determined heat pump water heaters for electric, and gas condensing water heaters, are the max tech design options. This means the max tech level for electric is 1.7 EF and for gas is 0.91 EF. The max tech level for oil is 0.61 EF. However, as a result of our screening analysis, the max tech levels for electric and gas-fired water heaters have been eliminated. Therefore, the proposed standard for both electric and gas-fired water heaters will not achieve the max tech levels. The reasons for this decision are described in our discussion on screening, and in Chapter 4.2.2 of the TSD. Accordingly, the Department has satisfied the requirements of Section 325(p)(2), 42 U.S.C. 6295(p)(2).
Therefore, we combined the design option technologies that were not screened out into successively more efficient design options until we reached the highest efficiency levels for each product class. We combined design options by using our payback analysis. We define payback as the time required to recover the cost of efficiency improvements through energy savings. We started with the design option with the shortest payback and continued to add design options with the next shortest payback at each higher efficiency level. See Table 3 for design option combinations. The highest efficiency levels for this rulemaking are approximately 0.91 EF for 50-gallon electric water heaters, 0.71 EF for 40-gallon gas-fired water heaters, and 0.61 EF for 32-gallon oil-fired water heaters.
3. Methodology
Table 2 summarizes the information we used in the engineering analysis and the assumptions we made. We briefly discuss many of the assumptions in this section. For complete details about the engineering analysis, please see Chapter 8 in the TSD.
Table 2.—Key Elements Used in the Engineering Analysis
Description
Elements
Product classes
Electric, gas (includes LPG) & oil.
Analysis approach
Design options.
Designs analyzed
Heat traps, thicker insulation, tank bottom insulation on electric, 78% & 80% RE on gas, 78% & 82% RE on oil, plastic tank on electric, side-arm heater, & IID on gas, interrupted ignition on oil.
Simulation models
WATSIM for electric, TANK for gas, WHAM for oil.
Basis for energy factor
DOE water heater test procedure, 64.3 gpd.
Baseline energy factor
Electric, 50 gallon =.86, gas, 40 gallon =.54, oil, 32 gallon =.53.
Cost data
Provided by GAMA and consultants and the Water Heater Consortium ($35, resistance to ignition of flammable vapors).
Price data
Water heater price database.
Insulation blowing agent
HFC-245fa (Water blown insulation analyzed in TSD).
Insulation cost
Existing—HCFC-141b blown—$1/lb from Honeywell.
New—HFC-245fa blown—$1.32/lb, from Honeywell.
Insulation thicknesses
2 inch, 2.5 inch & 3 inch.
Warranty on baseline
6 years or less.
Markup
Average baseline price divided by average manufacturer baseline cost.
Installation costs
$160 for door jamb removal & replacement on 27% of all designs with 3-inch insulation.
$114 for Type-B vent connectors in 25% of homes in northern states with 78% RE on gas-fired.
$433 for chimney relining and Type-B vent connectors in 25% of homes in northern states with 80% RE on gas-fired.
Maintenance costs
None on electric, $14.73/yr for the side-arm heater for gas-fired and a $97.14 yearly maintenance contract for oil-fired.
a. Energy Savings Potential
Having determined the highest energy efficiency levels for each product in this rulemaking, the Department then estimates the energy savings potential of individual design options or combinations of design options. Table 3 shows the design option combinations for each fuel type at incremental levels of efficiency. (These do not represent trial standard levels.) We use simulation model calculations and manufacturer data to determine the efficiency levels corresponding to various design option combinations.
Table 3.—Design Option Combinations
Design
option level
Design option for electric water heaters
Design options for gas-fired water
heaters
Design options for oil-fired water
heaters
1
Heat traps
Heat traps
Heat traps.
2
Heat traps + tank bottom insulation
Heat traps + flue baffles (78% RE)
Heat traps + 2 inch insulation.
3
Heat traps + tank bottom insulation + 2 inch insulation
Heat traps + flue baffles (78% RE) + 2 inch Insulation
Heat traps + 2.5 inch insulation.
4
Heat traps + tank bottom insulation + 2.5 inch insulation
Heat traps + flue baffles (78% RE) + 2.5 inch insulation
Heat traps + 3 inch insulation.
5
Heat traps + 2.5 inch insulation + plastic tank
Heat traps + flue baffles (80% RE) + 2 inch insulation
Heat traps + 3 inch insulation + flue baffles (78% RE).
6
Heat traps + 3 inch insulation + plastic tank
Heat traps + flue baffles (80% RE) + 2.5 inch insulation
Heat traps + 3 inch insulation + flue baffles (78% RE) + interrupted ignition.
7
Heat traps + flue baffles (80% RE) + 3 inch insulation
Heat traps + 3 inch insulation + interrupted ignition + increased heat exchanger area (82% RE).
8
Heat traps + flue baffles (80% RE) + 3 inch insulation + side arm + electronic ignition + plastic tank
2003 Baseline Model. As discussed earlier, the Department defines a baseline unit in order to analyze options which increase energy efficiency over the baseline. Because DOE expects new energy-efficiency standards to take effect near the phase-out date (2003) of HCFC-141b, we had to create a baseline model for this analysis which uses foam insulation blown with an acceptable alternative blowing agent. After considering all possible insulation choices, the Department determined that the most likely alternatives to replace HCFC-141b appears to be water and HFC-245fa. Consequently, we performed a complete analysis using these two different blowing agents. After weighing the comparative benefits and costs of HFC-245fa and water blown foam and then taking into account Honeywell's announcement on the availability of HFC-245fa, we ultimately selected HFC-245fa as the insulation for our proposed trial standard levels.
To model the baseline electric water heater under existing efficiency standards with the alternative blowing agents, we increased the foam insulation thickness to 1.55 inches for HFC-245fa. To model the gas-fired water heater baseline for the alternative blowing agents, we increased the foam insulation thickness to 1.0 inch for HFC-245fa. To model the oil-fired water heater baseline for the alternative blowing agents, we assumed a foam insulation thickness of 1.01 inches for HFC-245fa. We made similar calculations for water blown foam so we could perform a comparative analysis throughout the TSD.
Computer Simulation Models.
To analyze the energy efficiency of water heaters with various combinations of design options, DOE used computer simulation models for electric (WATSIM) and gas-fired (TANK) water heaters, and a spreadsheet model (WHAM) for oil-fired water heaters. AGA commented that it preferred modeling results because modeling allows the use of consistent assumptions across design options. (AGA, No. 49 at 1).
WATSIM Model for Electric Storage Water Heaters.
WATSIM is a detailed electric water heater simulation program developed by Electric Power Research Institute (EPRI). (Report #TR-101702, 10/92). WATSIM contains two simulation algorithms: one for the detailed simulation of water heater tanks and the other for controlling water draw profiles. The output of WATSIM provides detailed temperature profiles of the water inside the water heater tank. We use these temperature profiles to determine the EF and other parameters of the water heater using the test DOE procedure calculations.
Our analysis began with a simulation of a baseline model (i.e., one that is currently marketed that achieves a minimum allowable efficiency of 0.86 EF). When simulating the typical existing electric water heater, WATSIM was able to achieve the minimum allowable efficiency of 0.86 EF by simulating a jacket thickness of 1.5 inches of HCFC-141b foam insulation. OOE, The Northwest Energy Efficiency Alliance (NEEA), The Northwest Power Planning Council (NWPPC), and ACEEE, did not support DOE's use of 1.5 inches of foam on electric water heaters to adjust the model results of EF 0.83 to reach the minimum EF of 0.86. (OOE, No. 44 at 3; NEEA, No. 53 at 2; NWPPC, No. 43 at 1; and ACEEE, No. 52 at 2). The commenters did not support this because the GAMA directory listed one model with 1 inch of insulation. Manufacturers indicated to DOE that 1.5 inches of foam insulation on electric water heaters is the norm to meet the minimum efficiency of 0.86 EF for a 50-gallon electric water heater. Therefore DOE chose to use 1.5 inches in its simulation.
Complete verification of the WATSIM program is not currently available to the public. The WATSIM user's manual states the model “has been vigorously verified for use in tank and system design, equipment sizing, and individual or diversified demand analyses, as well as for energy consumption analysis.” (EPRI, TR-101702, 10/92). The Department validated the WATSIM simulations by comparing them to NIST measurements. NIST tested four mid-efficiency 50-gallon commercially available electric water heaters and reported an average 0.89 EF. (Fanney, 1999 ASHRAE Summer Meeting). The Department compared the NIST EFs with WATSIM simulations of identical water heater models. The results agree within 0.01
EF. Subsequently, NIST tested five high efficiency electric water heaters and we validated the WATSIM model to the highest of the five test results, 0.91 EF. The WATSIM modeled results were within 0.002 EF of the NIST test results. These validations are in Chapter 8.2.4.1 of the TSD. Therefore, we believe WATSIM is accurate over the range of EFs considered in this rulemaking.
Based on our selected design options, the WATSIM model predicts a maximum of 0.91 EF for electric water heaters. Stakeholders raised concerns at the November 1998 Workshop that the GAMA directory lists 0.93 EF and higher EFs for electric water heaters. NEEA, NWPPC, VP, OOE, the National Resources Defense Council (NRDC), and ACEEE claim DOE should investigate and reconcile the differences between the EFs predicted by computer models and those listed in the GAMA directory. (NEEA, No. 53 at 1; NWPPC, No. 43 at 1; VP, No. 45 at 1; OOE, No. 44 at 1; NRDC, No. 46 at 1; and ACEEE, No. 52 at 1). ACEEE stated the difference between computer simulation and directory listings is about 0.03 efficiency points for electric water heaters. ACEEE stated DOE must explain what it intends to do to ensure that EF ratings are accurate. (ACEEE, No. 75 at 3). DOE is investigating the discrepancies in EF ratings between the GAMA directory and the WATSIM modeled results.
NIST measured one high efficiency electric water heater from each manufacturer and found an average 0.036 EF lower on test results than in the GAMA directory listing. DOE also received data from GAMA on its certification testing program for 1994 through 1998. We reviewed this data and found that for the 26 high efficiency electric water heaters measured, results averaged 0.02 EF lower than published EFs in the GAMA directory. The NIST and GAMA certification program test results were consistent with the WATSIM simulation program results. Therefore, DOE will base its analysis of electric water heater performance on WATSIM results.
Some stakeholders raised concerns about the test procedure. EEI and SC claimed there may be measurement problems when determining the electric water heater EF, since electric water heaters are close to their maximum potential thermodynamic efficiency levels. (EEI, No. 39 at 2 and SC, No. 42 at 2). Vaughn claimed the error factor in the test equipment is greater than the obtainable increase in energy efficiency. (Vaughn, No. 56 at 1). VP recommended DOE determine and report the confidence level of EF results from the water heater test procedure to ensure that the difference between the existing efficiency standard and any proposed standard is within the accuracy of the test procedure. (VP, No. 45 at 2). EPRI claimed that routine EF testing performed at testing laboratories is only within 3 percent accuracy. (EPRI, No. 41 at 1). DOE investigated this problem with Intertek Testing Services (ITS), NIST, and the manufacturers. ITS claimed that its test repeatability is within 0.5%. NIST has demonstrated accuracy better than 1 percent. NIST and ITS recently measured the EF on the same model of two electric water heaters. The results agreed within 0.008 EF. Based on these responses, DOE does not believe there is a problem in accurately measuring performance results that will adversely affect any manufacturers' ability to certify compliance with the proposed energy efficiency standard for electric, gas-fired, or oil-fired water heaters.
TANK Model for Gas-Fired Storage Water Heaters.
TANK is a detailed gas-fired storage water heater computer simulation program developed by Battelle for GRI, (GRI-93/0186). TANK calculates energy flows throughout a water heater including water draws, flue heat losses, jacket heat losses, fittings heat losses, and combustion chamber heat losses. Unlike WATSIM outputs, TANK outputs include the EF, RE, and UA from the DOE test procedure.
To validate the analytical models comprising the TANK program, Battelle conducted actual water heater testing and monitoring. Battelle performed a set of tests to investigate the impacts of different flue baffle designs, increased insulation thickness, and different pilot light input rates on EFs. Battelle compared test results to the TANK model results. Battelle then tested gas water heaters under the assumptions of the DOE test procedure to validate the analytical predictions of TANK. Battelle reported the results in terms of EF, RE, UA, and total standby loss. Overall, the difference between the experimental values (measured) and the predicted values (simulated by TANK) is less than 0.01 EF for all of the above parameters.
With the TANK simulation model for gas-fired water heaters, we consulted with Battelle to develop characteristics similar to the Battelle baseline model with a nominal insulation thickness of 1 inch. GAMA comments stated that the manufacturers use a 450 Btu/hr pilot light on gas water heaters. (GAMA, No. 51 at 1). DOE used this new heat input rate for pilot lights on gas-fired water heaters. See Chapter 8.2 of the TSD for details about the simulation models and the baseline characteristics.
WHAM Energy Calculation for Oil-Fired Storage Water Heaters.
We used a simplified spread-sheet model (WHAM) for our engineering analysis of oil-fired water heaters. WHAM is based on the 24-hour simulated use test portion of the DOE test procedure. The model calculates energy consumption from a water heater's RE, UA, and rated input (P
on
). (Lutz, J., et al, 1998, ACEEE Summer Study on Energy Efficiency in Buildings, pp. 1.171-1.183). The model assumes the water temperature remains at the set point temperature throughout the tank. We also assume RE and UA are constant.
To validate WHAM, we compared the results of the WHAM equation to results of the WATSIM and TANK simulation models of residential electric and gas-fired storage water heaters with excellent agreement. WHAM and WATSIM results are within 3% or less and WHAM and TANK results are within 5% for normal operating conditions, tank sizes and design options.
b. Comments on Design Options
Tank Bottom Insulation.
One design option considered for electric water heaters is insulation under the bottom of the tank, referred to as tank bottom insulation. EPRI and Bradford White commented that they do not observe the efficiency improvement from insulating the tank bottom that WATSIM predicts. (EPRI, No. 70 at 2 and Bradford White, No. 89 at 3). Based on DOE's computer simulation results, and loss mechanisms NIST observed by infrared photography, DOE believes the improvement in efficiency is real. The infrared photography shows much warmer regions at the base of water heaters and around piping penetrations than any other tank surfaces. (Fanney, Zarr and Ketay-Paprocki, 1999 American Society for Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Summer Meeting). We have also discussed this approach with a manufacturer who uses molded insulation under its tanks. This manufacturer believes water heater performance is improved but did not provide any test data to confirm the observation. Therefore, we will continue to use the WATSIM EF results in our analyses.
Insulation Effectiveness.
Due to water heater tank geometry and the method of pouring liquid insulation into the jacket which then forms in place, the insulation effectiveness may not be consistent between the sides and top of the tank. Bradford White recommended DOE limit the foam cavities to 2.5 inches in electric, 1.5 inches in gas-
fired, and 1 inch in oil-fired water heaters. Bradford White stated the insulation effectiveness of foam does not double for 2 inches or triple for 3 inches due to variations in cell structure as the foam rises vertically and spreads horizontally in the jacket cavity. (Bradford White, No. 89 at 3). To account for this, we derated the effectiveness of HFC-245fa blown insulation by about 10%. This allowed us to assume a uniform thickness and constant insulation effectiveness on the sides and top of the tank in the simulation models.
Insulation Thickness.
With water heaters, the thickness of the insulation cavity helps determine the diameter and height for a given tank volume. This is an important consideration in water heater product utility since some water heaters are installed in tight spaces and reduction of tank volume could reduce the first hour rating. SC and EEI claimed water heaters can become too wide to fit through residential interior doors if the insulation is too thick, and therefore the thickness of the insulation should be limited. (SC, No. 42 at 2 and EEI, No. 39 at 7). GAMA stated DOE should not consider insulation thicknesses beyond 3 inches because replacement units must be able to fit through doorways. (GAMA, No. 33 at 3). DOE agrees with the GAMA recommendation and has limited insulation thicknesses to 3.0 inches or less.
We also have comments from GAMA, Connecticut Natural Gas (CNG) and New England Gas Association (NEGA) that thicker insulation will raise installation costs, cause installation of multiple smaller units, or inconvenience consumers with a smaller sized, lower capacity unit. (GAMA, No. 91 at 1; CNG, No. 85 at 2; and NEGA, No. 90 at 3). GAMA and Bradford White claimed a 2.5 inch insulation thickness will increase the diameter and height of electric water heaters and product utility will be impaired, particularly for 20-50 gallon lowboys and tabletop models. (GAMA, No. 71 at 4 and Bradford White, No. 74 at 2). We reviewed the application of these water heaters in households in multi-family buildings, mobile homes and manufactured housing, and we estimate only a small percentage of households may be affected (see Chapter 3.4.4 in the TSD). Furthermore, we believe a 6 kW heating element should eliminate any lost first hour rating in those situations where a smaller capacity tank is required.
Flue Baffles.
The flue baffle, the twisted strip of metal inserted into the flue of a gas or oil-fired water heater, is the most commonly used method to improve heat transfer, thereby improving RE. RE is the percentage of energy transferred to the hot water compared to input energy. It takes into account the amount of energy lost through the flue and other parts of the water heater.
There are many design options available to increase RE. Because of the low cost, the Department has assumed in its analysis the flue baffle alone would be the most cost effective method for increasing RE up to 80%. GAMA stated recovery efficiencies higher than 78% cannot be attained by modifying the flue baffle only. (GAMA, No 71 at 3). ACEEE claimed there are other technologies that can be combined with flue baffles to achieve 80% RE in gas-fired water heaters. (ACEEE, No. 93 at 6). However, several manufacturers and consultants told DOE they could reach 80% RE by modifying flue baffles alone. For the July 1999 workshop, DOE assumed flue baffles could be modified to increase RE to 78% or 80% from the current baseline of 76%. We will analyze 78% and 80% RE based on modifying flue baffles as design options.
Bradford White claimed the flue baffle improvement to increase the recovery efficiency in oil products is possible, but only with a specific patented approach. (Bradford White, No. 74 at 3). DOE's analysis assumes several designs are possible, such as multi-flues, internally finned flues or a finned combustion chamber. We used the patented Bock Turboflue as a proxy to determine the performance of the increased heat exchanger area on oil-fired water heaters and reduced the performance to be conservative, since we were not confident a non-proprietary design would achieve the same level of performance. To estimate the costs of the increased heat exchanger area design, we examined other approaches for providing increased heat exchanger area that are not proprietary, and we have estimated retooling and materials costs based on the use of these other approaches. We used this design to complete the list of energy factors and costs for oil-fired water heaters since this is the maximum technologically feasible level for oil-fired water heaters.
Venting for Gas-fired Water Heaters.
Most water heaters sold today are for the replacement market, where an existing vent system is in use. Improving the flue baffle can significantly increase the RE of a water heater, which in turn can reduce the temperature of the flue gases leaving the water heater. A reduction in temperature of the flue gases can increase the likelihood of condensation. Due to excessive moisture condensing from the flue gases, use of increased RE gas-fired water heaters with existing venting systems not designed for increased RE gas-fired water heaters can lead to excessive corrosion and failure of the vent system in certain climates. Studies conducted by GRI/Battelle have shown corrosion can occur when a vent wall becomes wet. While it is not uncommon for a vent to be wet immediately after the appliance starts, the appliance must heat the vent system and dry the walls before turning off. If the vent does not dry, corrosion may occur during a long period of wetness.
While we have discussed RE for water heaters, typically appliances are characterized for venting purposes by flue-loss efficiency. Flue-loss efficiency measures how much of the input heat does
not
go up the flue. The DOE test procedure for rating residential water heaters does not measure flue-loss efficiency; it measures RE instead. Therefore, RE was used in this analysis for measuring the impact on the flue vent system, but in order to estimate the impact of increasing the RE of a water heater, a relationship between RE and flue loss efficiency was needed. Flue loss efficiency is not always directly proportional to RE, but flue loss efficiency is typically 2-4% higher than RE.
RE of more than 80% is associated with flue-loss efficiencies exceeding 84%, resulting in excessive condensation within the vent system, which can lead to corrosion and a reduced vent system life. To ensure that condensation does not occur in the flue, only design options that increase RE to a maximum of 80% were selected for analysis. However, the Department recognizes that potential venting problems may occur in the 78-80% RE range and could require Type-B vent connectors and chimney relining. A Type-B vent connector is a double wall vent, with an aluminum inner wall and a galvanized steel outer wall. The special double wall construction keeps flue gases hot while inside the vent, providing a strong draft and minimizing condensation. Additionally, the aluminum inner wall is more corrosion resistant to condensation that may occur in the vent.
A number of comments supported a maximum RE level of 80% for an improved flue baffle design option. (ACEEE, No. 52 at 4; OOE, No. 64 at 1-4; ACEEE, No. 75 at 2; and OOE, No. 76 at 1). Additionally, ACEEE claimed, based on Table 3 in the GRI study (GRI-95/0198), the lowest flue-loss efficiency for homes with Type-B vent connectors and masonry chimneys is 84.5% and therefore no chimney relining should be needed for 80% RE. (ACEEE, No. 93 at
5). OOE claimed there are no inherent safety issues associated with REs of up to 80%. (OOE, No. 96 at 4).
Other comments raised concerns with a maximum level of 80% RE. LaClede Gas and GAMA stated DOE should not exceed a 76% RE in order to maintain an adequate margin of safety. (LaClede, No. 69 at 6 and GAMA, No. 71 at 3). CNG and NEGA claimed setting a standard level at 78% RE could lead to condensation and chimney degradation. (CNG, No. 85 at 1 and NEGA, No. 90 at 2). Bradford White said 78% is the maximum RE to avoid corrosion in the vent, but 77% is more realistic. (Bradford White, No. 74 at 2-3 and No. 89 at 2).
The Department is very concerned about public safety for venting of gas-fired water heaters. We appreciate the analysis by OOE and GRI. We also discussed venting concerns with state experts and chimney installers. As a result of these discussions and comments, as well as the GRI study (GRI-94/0193), we believe there are no technological barriers to using either 78% or 80% RE gas-fired water heaters in a replacement installation. Furthermore, in most replacement applications, vent systems and chimney reliners are available on the market to meet the venting requirements for water heaters with 78% or 80% RE. In new construction, installers can follow manufacturers recommendations so there are no problems with either a 78% or 80% RE.
Heat Traps.
In its analysis for the July 1999 workshop, DOE used WATSIM and TANK default values for heat trap performance. Manufacturers claimed they could not achieve performance for heat traps when installed on actual water heaters. In its comments on heat traps, GAMA claimed DOE should use a 0.01 EF increase. (GAMA, No. 71 at 5). Bradford White provided heat trap data for oil-fired, gas-fired, and electric water heaters. (Bradford White, No. 74 at 1). ACEEE stated DOE should only change the heat trap effectiveness based on independent test data. (ACEEE, No. 93 at 8). DOE has averaged the GAMA and Bradford White heat trap data. This has not affected gas-fired water heaters' heat trap results, but it has reduced heat trap performance on electric water heaters by 0.005 EF. Based on the above, heat traps are estimated to result in improvements of 0.012 EF for electric, 0.09 EF for gas-fired, and 0.006 EF for oil-fired. These are the improvement values used in the analysis.
c. Manufacturing Costs
After determining the design option combinations, the Department also had to determine the cost to manufacturers and consumers to achieve increased efficiency. In the 1997 Rulemaking Framework Workshop, DOE and stakeholders discussed three methods used to generate the manufacturing costs for the engineering analysis. These methods included: (1) The design-option approach, reporting the incremental costs of adding design options to a baseline model; (2) the efficiency-level approach, reporting relative costs of achieving energy efficiency improvements; and (3) the cost-assessment approach, which requires a “bottom-up” manufacturing cost assessment based on a detailed bill of materials.
In written comments, GAMA recommended DOE use the design option approach in its economic analyses because “there are only a few identifiable discrete efficiency improvement measures possible for residential water heaters.” (GAMA, No. 5 at 4). There were no other comments. At the water heater standards rulemaking workshop in June 1997, GAMA suggested it could collect and aggregate manufacturer costs on the design options of interest to DOE for this rulemaking. DOE accepted that offer and agreed to use the GAMA manufacturing cost data.
The use of a design-option approach provides useful information, such as the identification of potential technological paths manufacturers could use to achieve increased energy efficiency. It also allows the use of engineering models to simulate the energy consumption of different design configurations under various user profiles and applications. However, the Department recognizes that the manufacturer cost information derived in the design-option approach may not reflect the variability in design strategies and cost structures that can exist among manufacturers. Therefore, the Department derived additional manufacturing cost estimates from other approaches based on consultant's estimates, component manufacturers' prices, and occasionally from other interested parties. DOE had two retired water heater manufacturing engineers as consultants provide cost estimates and peer review our analysis results. We describe these costs in the TSD in Chapter 8.3.3 for electric, Chapter 8.4.3 for gas-fired and Chapter 8.5.3 for oil-fired water heaters.
GAMA provided most of the manufacturer costs with the exception of all oil-fired water heaters, the tank bottom insulation, and the plastic tank costs for electric and side-arm heater costs for gas-fired water heaters, which our consultants provided. GAMA based its cost estimates on the production of a 50-gallon electric or 40-gallon gas-fired water heater. GAMA separated the costs into variable (material, labor, transportation, overhead) and fixed (capital, product design) costs on a per-unit basis and provided a distribution of fixed, variable, and total manufacturing costs for several design options. We used GAMA's cost data and consultant data to determine the water heater manufacturer costs for all combinations of design options. OOE claimed GAMA's manufacturing costs for gas water heaters are too high. (OOE, No. 44 at 7). DOE could not get independent cost data directly from individual manufacturers, so we are unable to determine if the manufacturing costs for gas-fired water heaters are too high. We believe the data best represents the costs of all water heater manufacturers, as well as the incremental costs between design options.
GAMA based its existing baseline model cost estimates on an electric water heater with 1.5 inches of foamed jacket insulation using HCFC-141b as a blowing agent. The existing baseline is the starting point to construct the 2003 baseline cost, to determine markup, to develop incremental costs for heat traps and to build up incremental costs for a unit thickness of new insulation. For gas-fired water heaters, GAMA based its existing baseline model cost estimates on 1 inch of foamed jacket insulation using HCFC-141b as a blowing agent. To develop costs for thicker insulation, we estimated the material costs for the additional foam and blowing agent as well as the cost for additional sheet metal. We used Honeywell's estimate of $4 per pound for the material costs of the HFC-245fa blowing agent and Honeywell's estimate of 15% blowing agent in a standard insulation mixture. Since the blowing agent is only 15% of the final foam insulation, total insulation cost is $1.32 per pound for HFC-245fa compared to $1 per pound for HCFC-141b. We also assumed a value of $35 additional incremental manufacturing cost ($15 variable costs and $20 fixed cost) for designs to resist flammable vapor ignition in gas-fired water heaters. We discuss the cost assumptions for each design option below.
Heat Traps.
GAMA provided manufacturer costs for electric and gas water heaters with heat traps. GAMA did not provide costs for the heat trap component. Vaughn stated the costs for heat traps should be the same for gas and electric water heaters. (Vaughn, No. 56 at 2). Vaughn is correct. Based on component costs from the heat trap
manufacturer, we know heat trap costs are the same for gas and electric. However, we did not use the component costs because we needed to include labor, overhead, and other costs. Therefore, we continue to use the combined water heater plus heat trap costs.
Increased Jacket Insulation.
GAMA provided variable and fixed cost data for jacket insulation increases based on HCFC-141b blown insulation from a baseline level of 1.5 inches on electric and 1 inch on gas-fired water heaters to a thickness of 2 inches only. Since HCFC-141b will be phased out in 2003, we had to develop costs for alternative insulation. Our consultant developed the cost of the 2003 baseline by adding incremental costs for HFC-245fa and sheet metal to the HCFC-141b baseline provided by GAMA. Our consultant used the same approach, adding the incremental costs for HFC-245fa and sheet metal to the GAMA data, for the 2 inch insulation thickness. Then, our consultant developed cost ratios from the incremental cost differences for 2.5 and 3 inch insulation thicknesses for the HFC-245fa blowing agent. We multiplied GAMA's incremental costs for 2 inches of insulation by these ratios to generate cost data in 2.5 inches and 3 inches of insulation. For cost information see Chapter 6.4 in the TSD.
Increased insulation creates a larger water heater than those typically installed today. Many replacement installations require the water heater to match the dimensions of the one it is replacing. One approach that addresses this issue was suggested in comments and discussed at the July 23, 1999 workshop, is to reduce the inner tank diameter slightly. Manufacturing a smaller inner tank diameter would require retooling for many manufacturers. Bradford White claimed retooling for different diameters of tanks cost $100,000 for each diameter. (Bradford White, No. 89 at 2). We agree with Bradford White on the retooling costs. From discussions with GAMA, we determined that the GAMA data accounts for any retooling cost associated with the trial standard levels, including any potential design changes to the inner tank diameter.
Insulating the Tank Bottom.
ACEEE claimed GAMA's $40 cost for bottom insulation on electric water heaters is excessive. (ACEEE, No. 52 at 6). Based on discussions with manufacturers who use similar techniques, and our consultants' estimates, we determined the cost to be between $2 and $4. After the July 1999 workshop, GAMA and Bradford White claimed DOE should increase the $2-4 cost for tank bottom insulation because it has to be molded. (GAMA, No. 71 at 5 and Bradford White, No. 74 at 2). Based on our consultant's analysis and discussions with manufacturers who use tank bottom insulation, we believe the $2-4 cost is reasonable, so we did not change these costs after the July 1999 workshop. See Chapter 6.4 of the TSD for more details.
Plastic Tank.
Our consultant provided the manufacturer costs for a plastic tank electric water heater design. See Chapter 6.4 of the TSD. Although GAMA did not provide cost information, GAMA believed the cost of the plastic tank option has been significantly underestimated. (GAMA, No. 51 at 3). Since GAMA did not provide any data to substantiate its statement, DOE has not changed its cost estimate.
Improved Flue Baffle.
GAMA provided manufacturer costs for the improved flue baffle design. Originally, the costs were based on a flue baffle design that increased the RE to 78.5%. After the November 1998 workshop, we decided to use flue baffles that achieve 78% and 80% RE because we believed 80% RE was feasible although it entailed more risk of venting system condensation. Our consultant estimated that the manufacturing costs for tooling a flue baffle to achieve a 78% or 80% RE are identical. There is no change in material cost for a flue baffle achieving 78% or 80% RE.
OOE claimed as long as a conventional furnace shares the flue with a water heater, there should be no need for relining the flue regardless of the water heater efficiency. ACEEE estimated 1% of homes will need Type-B vent connectors and 17% will need flue relining. (ACEEE, No. 93 at 4-5). NEGA stated many New England consumers would have to install flue liners and Type-B vents at a cost of $800 if higher flue-loss efficiency gas-fired water heaters are mandated. (NEGA, No. 90 at 3). DOE estimates that at 78% RE, about 10% of the households with gas-fired water heaters in homes with over 5,000 heating degree days need Type-B vent connectors; at 80% RE, about 25% of these homes need Type-B vent connectors and chimney relining. DOE based its estimates on GRI data (GRI 91/0298) modified for: gas-fired water heaters in new homes (since 1994) that use different venting systems; and the current National Fuel Gas Code (NFGC), which requires replacement furnaces with higher efficiencies to have better vents in existing installations. Since 1992, the DOE furnace energy efficiency standards placed gas furnaces in a new category of the NFGC and consequently requires better vent systems in new construction. DOE also determined that Type-B vent connectors and chimney relining, which might be needed in the New England states, cost an average of $508.
OOE claimed the GRI report shows water heaters located in a conditioned space have no special venting requirements and no requirement or cost for a Type-B vent connector. OOE claimed Type-B connectors should be used when water heaters are installed in unheated spaces. Therefore, there is no additional vent connector or flue relining cost associated with higher water heater efficiencies. (OOE, No. 44 at 5). OOE claimed there is no need for Type-B venting or relining of chimneys for a water heater with an 80% RE that would not also be required for one with a 76% RE. (OOE, No. 96 at 2). In order to be conservative and provide a margin of safety, DOE assumed up to 25% of homes in cold climates with gas-fired water heaters may need vent connectors or relining of chimneys for 80% RE. We included this assumption in both the LCC and NPV analyses. It effectively increases consumer costs.
Electro-Mechanical Flue Damper.
GAMA provided manufacturer costs to include an electro-mechanical flue damper and electronic ignition with a gas-fired water heater. We used these costs in the analysis.
Side-Arm Heater and Plastic Tank.
Our consultant provided manufacturer costs for the side-arm heater for a gas-fired water heater design because GAMA received a response from only one manufacturer and could not provide this information for confidential reasons. We considered costs for six types of side-arm heater designs: 76%, 78%, and 80% RE designs using a metal tank and electronic ignition, and 76%, 78%, and 80% RE designs using a plastic tank and electronic ignition. Based on our analysis, we determined the cost increase of the 78% or 80% RE designs were the same and were equal to the cost of the improved flue baffle design option. This means heat exchanger costs for side-arm heaters with 78% or 80% RE are equal. GAMA disagreed with DOE's cost estimate for the side-arm heater design option; however it did not provide any specific information. (GAMA, No. 51 at 3). Therefore, we are using our cost estimate, absent any other information. Furthermore, GAMA did not comment on this issue at our July 1999 workshop.
Oil-Fired Water Heaters.
GAMA did not receive information from enough manufacturers to allow it to aggregate cost data for oil-fired water heaters. Therefore, DOE relied completely on its consultants' cost data for each design
option considered for the oil-fired water heater analysis. See Chapter 6.4.3 of the TSD for details.
Bradford White suggested DOE only increase the performance of oil-fired water heaters by applying heat traps because the burner is usually not supplied with the tank and would therefore need a conversion kit. Bradford White also stated DOE's cost estimates for a conversion kit are too low. (Bradford White, No. 89 at 3). DOE considered two trial standard levels using only heat traps for oil-fired water heaters. However, the oil burner manufacturer, who supplies most of the water heater oil burners, provided our cost estimates for the conversion kit.
d. Installation Costs
The installation cost is the cost to the consumer of installing the water heater and is separate from the retail price. The cost of installation covers all labor and material costs associated with the simple replacement of an existing water heater. Delivery, removal, and permit fees are also included.
We established the installation costs of baseline 50-gallon electric, 40-gallon gas-fired, and 32-gallon oil-fired water heaters from the same sources as the retail price data. DOE assumed only the 3-inch insulation thickness would increase installation costs for gas-fired and electric water heaters installed within a conditioned space based on stakeholder comments and discussions at the manufacturer interviews. Four design options increased the cost of installing a gas-fired water heater. They are the improved flue baffle, electronic ignition, electro-mechanical flue damper, and side-arm heater.
In comments, ACEEE and VP claimed installation costs differ in new construction and in existing homes. (ACEEE, No. 23 at 2 and No. 52 at 6; and VP, No. 45 at 2). GAMA suggested DOE's analysis of revised water heater standards should be based on installed costs of replacement water heaters only. (GAMA, No. 51 at 3-4). DOE used the same installation costs for both markets. We based these costs on replacement costs because there are no cost installation data for new construction. New construction costs are combined with the plumbing and venting costs and we could not separate out the water heater installation costs.
Installation Cost for 3 Inch Thick Insulation.
Thicker insulation creates a larger water heater than the typical unit sold today. VP claimed we should account for the impact of increasing unit size on installation ease and cost in replacement applications. (VP, No. 45 at 3). Rheem and SC claimed customers should not have to knock out walls and ceilings or relocate a water heater during replacement. (Rheem, No. 95 at 1 and SC, No. 84 at 2).
From the Residential Energy Consumption Survey (RECS) 1993 public use data, 54% of water heaters are located in a conditioned space. We assumed at least 50% of those homes would need the closet or an attic door removed to facilitate water heater replacement installation for 3 inch thick insulation. We estimated this cost at $160 using responses from water heater installers and the 1996 Craftsman National Construction Estimator. This installation cost is for the removal and replacement of door jambs for 50% of all water heaters located in a conditioned space. We assumed oil-fired water heaters are not installed in conditioned spaces and therefore this cost is not applicable to oil-fired water heaters.
We also do not believe people should have to knock out ceilings or walls to replace a water heater. Therefore, we investigated the impact of reducing tank volume by 20% on the first hour rating. The first hour rating is a measure of how much usable hot water can be supplied by a water heater in one hour starting from a fully heated tank. It is determined by the DOE test procedure. We believe that increasing the heating element from 4.5-6 kW can adequately compensate for the 10 gallons of storage volume lost by a 20% reduction in a 50-gallon electric water heater. We also believe that a similar increase in gas burner input rate can achieve the same effect with gas-fired water heaters.
Venting Costs.
If people replace their gas-fired water heater located in a conditioned space with one which has a higher RE, then there may be additional installation costs. In an attempt to account for these costs, DOE assumed a Type-B vent connector is installed when replacing an existing gas-fired water heater located in a conditioned space with a water heater with an RE of 78%, in 25% of homes in climate regions exceeding 5,000 heating degree days. Note that heating degree days are the number of degrees the average temperature is below 65°F. For water heaters with flue baffles that achieve 80% RE, we assumed a Type-B vent connector is installed and a masonry chimney is relined when replacing an existing gas-fired water heater located in a conditioned space in 25% of homes in climate regions exceeding 5,000 heating degree days. In comments, Bradford White, LaClede and CNG stated we must add more installation cost to gas-fired and oil-fired water heaters for larger diameters and heights, pressure and temperature relief valves, relining masonry chimneys and for condensate removal. (Bradford White, No. 74 at 3; LaClede, No. 69 at 6; and CNG, No. 85 at 2).
DOE believes we have accounted for the installation costs associated with higher RE gas-fired water heaters. We used installers' estimates to calculate the cost of installing Type-B vent connectors and to determine the cost to reline masonry chimneys. These estimates are slightly higher than the GRI estimates. We estimated the number of homes needing Type-B vent connectors for 78% RE gas-fired water heaters from comments, and from an AGA survey in a GRI report. (GRI-91/0298). We also used the AGA survey data to determine, by region, the number of water heaters connected to masonry chimneys. In the same manner, we estimated installers would reline 25% of the masonry chimneys in climate regions exceeding 5,000 heating degree days when replacing an existing gas-fired water heater with an 80% RE water heater. DOE developed its installation costs for Type-B vent connectors and masonry chimney relining based on the replacement market and installers' cost estimates for a typical installation, which would include the pressure and temperature relief valve. See Appendix D-3 in the TSD.
We did not raise the RE enough to create condensation nor do we anticipate higher installation costs for 2 or 2.5 inch insulation thicknesses. Therefore, we added $160 for removal and replacement of door jambs for 50% of gas-fired water heaters with 3 inch thick insulation located in conditioned spaces. From the GRI data, we estimate that 25% of households with gas-fired water heaters in regions with over 5,000 heating degree days would need Type-B vent connectors at a cost of $114 for 78% RE. We estimated that 25% of households with gas-fired water heaters in regions with over 5,000 heating degree days would need chimney relining at a cost of $433 for 80% RE gas-fired water heaters. This is about one-half of the households with gas-fired water heaters common vented with gas furnaces.
Cost to Install Electricity.
The three remaining gas-fired water heater design options (electronic ignition, electro-mechanical flue damper, and side-arm heater) all require electricity to operate. We used data from GRI to estimate the number of households that would require electricity. We also used GRI data to estimate the cost of labor and wiring and adjusted these estimates for inflation to obtain 1998 cost estimates,
see Chapter 8.4.5 in the TSD for more details.
e. Maintenance Costs
The electro-mechanical flue damper and the side-arm heater are the only design options that increase a gas-fired water heater's maintenance cost. We used the TSD water heater analysis for the March 4, 1994, NOPR to estimate the maintenance cost of the flue damper. (59 FR 10464, March 4, 1994) In this analysis, we assumed the flue damper failed in the tenth year of operation. We discounted the maintenance cost of the flue damper at a 6 percent rate to get its present value in 1998 dollars.
In response to a comment from Battelle, we included the maintenance cost to replace the side-arm heater circulation pump. (Battelle, No. 66 at 9 and No. 83 at 11). We assumed 10% of the installations would require a replacement of the circulation pump each year. We estimated the cost using contractor estimates and the 1998/99 Grainger Catalog.
The intermittent ignition device (IID) of gas-fired water heaters may incur maintenance costs due to the failure of the control module or the sensor. We assumed the IID maintenance cost to be equivalent to the maintenance cost of replacing the standing pilot light and therefore did not assign any incremental cost to it.
With the exception of the electro-mechanical flue damper, the IID and the side-arm circulation pump, information gathered to date suggests there is virtually no maintenance of residential electric or gas-fired water heaters. However, there were some suggestions from the manufacturer interviews that side-arm gas-fired water heater designs may incur increased maintenance costs due to clogging of the heat exchanger from scaling associated with hard water, but no data were identified or provided to confirm this.
We included a typical annual maintenance charge for oil-fired water heaters. Since we anticipate that none of the oil-fired water heater design options will affect maintenance, this charge has no bearing on the final engineering analysis of the design options.
f. Determination of Markups for Retail Prices
The retail price is the consumer cost of the water heating equipment. We determined the retail price for any design option simply by multiplying the manufacturer cost by the derived markup for the particular product class. We obtained a manufacturer cost-to-retail price markup by dividing the retail price by the manufacturer cost. We performed this calculation separately for electric, gas-fired, and oil-fired water heaters. In the engineering analysis, we assumed that the baseline manufacturer cost-to-retail price markup was constant for all design options within a fuel class. Our approach results in different average markups for each fuel class in the engineering analysis.
In order to obtain the retail price, DOE created the Water Heater Price Data Base. This Data Base contains extensive data on retail prices for electric and gas-fired water heaters and very limited information regarding retail prices of oil-fired water heaters. While the data in the Water Heater Price Database are based on information from water heater vendors in many regions of the U.S. (e.g., large retailers, plumbing wholesalers, small suppliers, web-sales and utility representatives), the majority of price information was gathered from large retailers and plumbing wholesalers. Although the database lacks information on the number of specific models sold, it contains actual prices representative of many models. We received the oil-fired water heater retail prices from approximately 25 oil equipment installers who buy water heaters from manufacturers and sell directly to consumers. In the case of oil-fired water heaters, the retail price does not include the cost of the burner, which is typically purchased separately.
We determined an average price for an existing baseline 50-gallon electric, 40-gallon gas-fired, or 32-gallon oil-fired water heater with HCFC-141b foam insulation . Since the length of the manufacturer's warranty affects the price of the water heater, we originally considered only water heaters with a five year or less warranty as baseline models. However, at the November 1998 workshop, water heater manufacturers provided information that six-year warranties are typical of those models that are produced in large quantities (i.e., baseline models). A longer warranty period, in addition to raising the price, also may indicate the presence of some design features not normally found in baseline models. Based on this information, we have changed the analysis to include water heaters with warranties of six-years or less in our baseline models.
The Water Heater Price Database includes installation costs that are part of the total cost to consumer. This price includes miscellaneous fees such as the delivery fee, removal fee, permit fee, and parts fee. We applied additional installation costs to some design options'for example, to account for replacing vent connectors, relining masonry chimneys, or installing larger water heaters in small spaces.
In their comments, AGA and EMPA claimed the database is not representative of all manufacturers or states. (AGA, No. 49 at 5; EMPA, No. 50 at 3; and No. 88 at 4-6). NEEA, NWPPC, ACEEE, Pacific Gas and Electric (PG&E) and OOE claimed DOE's retail prices are too high or DOE's incremental costs are too large. They cited data from the Eugene, Oregon Water and Light Board or the California Residential Contractors Program. (NEEA, No. 53 at 2; NWPPC, No. 43 at 2; ACEEE, No. 52 at 6 and No. 93 at 4; PG&E, No. 94 at 4; and OOE, No. 44 at 6; and No. 76 at 10). We received comments regarding the basis of the markups. For example, the analysis only included water heaters sold through stores (ACEEE, No. 52 at 6); the data may have been skewed by high sales volume models used as loss leaders (GAMA, No. 71 at 1); and the markup results should be reasonably consistent with prices found in the Northwest. (OOE, No. 44 at 7).
In response to these comments DOE collected more data to make the database more representative. DOE added more retail price data from wholesalers and plumbing distributors. DOE added price data from the Eugene Water and Light Board's database but DOE added only a limited number of these prices so that its database would continue to be representative of regional populations in the entire U.S. Nevertheless, the addition of these data did not significantly change the average retail price of gas-fired or electric water heaters. DOE believes its price database, from more than 130 retail distributors and plumbing wholesalers (representing all 12 Census divisions and all five major manufacturers), provides an accurate representation of prices with good regional representation.
OOE claimed a constant price should not be used for the entire analysis period because water heater prices should match today's prices in the mature market of the Pacific Northwest within 5-7 years after the imposition of a standard. (OOE, No. 96 at 6). We appreciate the price data provided by OOE and we have used a portion of the data in our national Water Heater Price Database. However, we kept the prices representative of each region in the U.S. by maintaining a fixed relationship between the number of water heater prices and the population of each region. See Chapter 5.2 in the TSD.
We obtained a manufacturer cost-to-retail price markup by dividing the retail price by the manufacturer cost. Our approach results in different average markups for each product class
(i.e., 1.49 for electric, 1.22 for gas-fired, and 3.2 for oil-fired water heaters).
Since oil-fired water heaters are essentially a niche product, the large markup was not surprising. However, several commenters believed that the gas-fired water heater markup should be nearly identical or identical to the electric water heater markup. ACEEE commented that DOE's retail costs showed inconsistent markups between electric, gas-fired, and oil-fired water heaters. (ACEEE, No. 52 at 6). GAMA claimed the markup value for gas-fired water heaters was too low because DOE only sampled the retail market and some of the models are direct vent models. (GAMA, No. 51 at 4). GAMA, AGA, EPRI, SC, CNG, and Bradford White suggested DOE apply the same markup to electric and gas-fired water heaters. (GAMA, No. 51 at 4; AGA, No. 49 at 5; EPRI, No. 70 at 3; SC, No. 72 at 2; CNG, No. 85 at 3; and Bradford White, No. 74 at 3). VP claimed there is no justification for using one average markup. (VP, No. 45 at 2). Battelle claimed the gas-fired water heater markup is too low. (Battelle, No. 83 at 8). SC did not believe retail markups for electric water heaters are twice as high as those for gas-fired water heaters. (SC, No. 84 at 1). EPRI disagreed with DOE's markup approach because it raises the price of heat traps differently for each fuel and tank size. (EPRI, No. 41 at 4).
We derived the markups by comparing retail prices to the baseline costs provided by GAMA. We believe these prices are representative of the national market for residential water heaters. Additionally, we applied our approach uniformly to all fuel types. Chapter 5 of the TSD provides a discussion on retail prices.
E. Economic Analysis
1. Life-Cycle-Cost (LCC) and Payback Analysis
In determining economic justification, the Act directs the Department to consider a number of different factors, including the economic impact of potential standards on consumers. Section 325(o)(2)(B)(i)(I), 42 U.S.C. 6295(o)(2)(B)(i)(I). The Act also establishes a rebuttable presumption that a standard is economically justified if the additional product costs attributed to the standard are less than three times the value of the first year energy cost savings. EPCA, § 325(o)(2)(B)(iii), 42 U.S.C. 6295 (o)(2)(B)(iii).
The payback, for purposes of the rebuttable presumption test, attempts to capture the payback to consumers affected if a new standard is promulgated. It compares the cost and energy use of water heaters consumers would buy in the year the standard becomes effective with what they would buy without a new efficiency standard. DOE calculates a simple payback which is the ratio of the increase in purchase price (including installation) to the decrease in annual operating expense (including maintenance).
In considering this factor, the Department calculates changes in LCCs to the consumers that are likely to result from the proposed standard and two different simple payback periods: the median payback period and the test procedure payback period. The difference between these payback calculations is due to the way we calculate energy savings. The median payback is based on the LCC analysis using a derived amount of hot water dependent on characteristics of each household. The test procedure payback is based on hot water usage of 64.3 gallons per day, the estimate of hot water usage used in the DOE test procedure.
The effect of standards on individual consumers includes a change in the operating expense (usually decreased) and a change in the purchase price (usually increased). The net effect is analyzed by calculating the change in LCC as compared to the base case. Inputs to the LCC calculation include the installed consumer cost (purchase price plus installation cost), operating expenses (energy and maintenance costs), lifetime of the appliance, and a discount rate.
In addition to analyzing price and energy cost effects on each household in a national database, DOE also determines which segments and what size of the population, if any, may be adversely affected. The Department has decided to consider the LCC impacts on low income and seniors-only consumer subgroups in this rulemaking. We chose the low-income subgroup because higher water heater prices might affect that subgroup more than the general population. We chose the seniors-only subgroup because many of them may be in the low-income subgroup and because they tend to use less hot water than the general population. Lower water usage could increase the payback of some efficiency improvements.
The LCC and one of the payback periods (median payback) are calculated using the LCC spreadsheet model developed in Microsoft Excel for Windows 95, combined with Crystal Ball (a commercially available software program) based on actual distributions of input variables. The LCC outputs from this program are a range of values that allow us to determine what fraction of the population will benefit from energy efficiency standards.
Based on the results of the LCC analysis, DOE selects candidate standard levels for a more detailed analysis. The range of candidate standard levels typically includes: (1) the most energy-efficient combination of design options or most energy-efficient level; (2) the combination of design options or efficiency level with the lowest LCC; and (3) the combination of design options or efficiency levels with a payback period of not more than three years. Additionally, candidate standard levels that incorporate noteworthy technologies or fill in large gaps between efficiency levels of other candidate standards levels may be selected. 10 CFR Part 430, Subpart C, Appendix A(5)(c)(3).
Table 4 lists the major input distributions DOE used in the water heater LCC analysis for the HFC-245fa blowing agent. We also completed an analysis for water blown insulation in the TSD. We discuss many of these assumptions briefly in this section. For more details on the LCC analysis for both blowing agents, please see Chapter 9 in the TSD.
Table 4.—Input Distribution Used in the LCC Analysis
LCC analysis assumptions
Description
Assumption
Blowing agent
HFC-245fa blowing agent.
Energy prices
Marginal energy prices for incremental cost savings; average energy prices for base line costs.
Future energy prices
AEO99 reference case to the year 2020 with extrapolations to the year 2030.
Discount rates
0-15% with an average about 6%.
Water heater prices
From the engineering analysis.
Installation costs & baseline retail prices
LBNL water heater price database.
Design option combinations
From the engineering analysis.
Markup
Retail prices divided by GAMA's manufacturing costs, calculated for each house in RECS ‘93.
Household characteristics
1993 RECS public use database, 5222 households.
Lifetime
Electric, 4-19 years, most likely 12 years; gas and oil, 3-15 years, most likely 9 years.
Energy consumption
Using RE, standby losses and input heating rates from the engineering analysis and calculated with WHAM.
Daily hot water use
Based on number of people, tank size and type of appliances from RECS, and thermostat settings and location imputed from the RECS data; climate data from NOAA 30 year averages; inlet water temperature and air temperature based on climate data.
To get data representative of all U.S. residential households we used DOE's Energy Information Administration (EIA)
Residential Energy Consumption Survey
(RECS) for 1993. The RECS public use data survey weights each household so that the data properly represent the 96.1 million households in the 50 states and the District of Columbia. The 1993 RECS public use data survey provides information concerning energy consumption in the residential sector and contains a more complete set of data for water heater analysis than any other survey reviewed and available for this study. The survey contains basic data concerning household characteristics from an interview questionnaire and annual fuel consumption and expenditures (excluding transportation fuel) derived from the records of fuel suppliers. It also includes weather data (in the form of heating and cooling degree days) and a weighting variable. The households included in the analysis (75% of the RECS public use data) all have running hot water, and an individual water heater using one of four fuels: electricity, oil, natural gas, or LPG. Households without these features, which did not report their water heater size, or for which a marginal energy price could not be calculated, are not used in the analysis.
The Department has received comments concerning the RECS data. EMPA claimed the 1993 RECS public use data is not valid, reliable, or representative because the useable data on electricity and gas consumption and costs is from only a portion of the households. (EMPA, No. 88 at 6). The RECS public use data is the most comprehensive national data set concerning residential water heating energy use. DOE used the entire data set that pertains to the types and sizes of water heaters in this rulemaking. We believe this subset is nationally representative and thus a valid data set.
a. Marginal Energy Price
DOE formerly used average energy prices, but stakeholders objected because these prices did not represent a consumer's true savings. For the LCC analyses, the Advisory Committee on Appliance Energy Efficiency Standards recommended DOE use the full range of consumer marginal energy prices instead of national average energy prices. Marginal energy prices are those prices consumers pay (or save) for their last units of energy used (or saved). The Department agreed that marginal energy prices would improve the accuracy of the LCC analysis and estimated marginal rates for electricity and natural gas from the 1993 RECS database.
EIA gathered monthly energy bills and energy consumption data for the RECS public use data. It did not gather information on rate schedules, fixed charges, or marginal prices. DOE estimated consumer marginal electricity and natural gas prices directly from household data in the 1993 RECS public use data survey as the change in household monthly energy bills divided by the change in monthly energy consumption for each fuel, referred to as the change in monthly bill method. This provides a precise marginal energy rate based on actual household bills.
For electricity, DOE calculated the slopes of the regression lines for four summer months (June-September) and, separately, for the winter (October-May) months. DOE derived the annual marginal price by taking the weighted average of the two seasonal prices, where the weighting used was the relative energy consumption of the appliance in each season. For water heaters, the weighting was 28% summer and 72% winter. For natural gas, DOE calculated the slopes of the regression lines at the annual level because there was no seasonal difference in marginal gas prices.
In order to understand and characterize regional variations in pricing and distribution of fuel oil and LPG, we collected information relating to pricing and distribution of fuel oil and LPG. We learned that bills paid by residential consumers for both fuel oil and LPG are essentially volume-driven, with a single block rate. We interpreted the average prices inherent in those bills, as reported in the RECS public use data, as being equivalent to marginal prices for the purposes of the LCC price analysis.
Several stakeholders commented on DOE's marginal energy prices. EEI and LaClede commented that marginal rates from the RECS public use data did not agree with EEI or AGA estimates. (EEI, No. 67 at 1-2; and LaClede, No. 82 at 2). EEI claimed DOE overstates actual electric costs by 12.8% due to the use of Inflator93. (Inflator93 is a scaling factor DOE used in an earlier analysis to adjust electricity prices from 1993-1998.) (EEI, No. 67 at 1-2). EMPA claimed that DOE did not account for the sampling and non-sampling errors in the RECS public use data and that DOE included fixed costs. (EMPA, No. 88 at 6-7).
We discovered that the Inflator93 coefficient in the July 1999 Workshop Analysis was incorrect and we removed it. There is no direct comparison between DOE's change in monthly bill method and EEI's and AGA's method of subtracting fixed costs because of differences in the level of aggregation (rate class vs. individual households), sample set, and time period. Furthermore, DOE believes a marginal energy price based on subtraction of fixed costs is not correct due to variable rate schedules and seasonal rates. DOE's change in monthly bill method can and does account for variable rates and seasonal rates.
VP stated that statistical probability analysis on many of the analysis inputs, use of marginal energy prices, and accurate conversion efficiencies provide greater assurance that the final rule will be appropriate and not overly burdensome. (VP, No. 45 at 3). DOE believes this is true. Our analysis methodology uses distributions on many analysis inputs, marginal energy prices and conversion efficiencies which change during the analysis based on EIA forecasts.
We recognize there are sampling and non-sampling errors in the RECS public use data. However, these errors are
small and we expect they will have very little impact on marginal energy rates. For example, EIA compared the results from RECS with the American Housing Survey results and found the maximum difference between the two surveys was 3.2%. EIA also compared results to Consumer Expenditures (CE) estimates by the Bureau of Labor Statistics and found fuel expenditures for the CE were 2% higher for gas and 6% higher for electricity.
DOE used projected future trends in average energy prices to derive estimates of future consumer marginal energy prices for the economic analysis of proposed standards. We created an index (scaling factor) from the trend in average prices (by fuel and sector) and applied it to the 1993 marginal prices calculated from the RECS public use database. The index accounts for both inflation and real energy price changes and it is different than Inflator93. For example, the average residential electricity price declined by 20% from 1993-1998, so we assume the marginal price for each household declines by 20% over the same period of time.
b. Future Energy Prices
Given the uncertainty of projections of future energy prices, DOE used scenario analysis to examine the robustness of proposed energy efficiency standards under different energy price conditions. The LCC calculations used these scenarios. Each scenario integrates energy supply and demand into its energy price. The scenarios differ in the energy prices that result. The Advisory Committee on Appliance Energy Efficiency Standards suggested the use of three scenarios with high, low, and middle levels of energy prices because three scenarios should be sufficient to bound the range of energy prices. This is also the guidance provided in the Process Rule, 10 CFR 430 subpart C, appendix A 13(b).
The EIA's 1999 Annual Energy Outlook (AEO99) reference case provides a middle scenario. For the high and low energy price scenarios, DOE used the scenarios with the highest and lowest energy prices in the economic sector and the fuel of interest from AEO99. DOE also used the reference case from the GRI projection, 1998 GRI Baseline Projection: Residential Natural Gas, Electricity, and Distillate Fuel Oil Prices Tables. The future trend in energy prices assumed in each of the four scenarios is clearly labeled and accessible in each spreadsheet. Stakeholders can substitute alternative assumptions in the spreadsheets to examine additional scenarios as needed.
c. Discount Rates
The Process Rule states that DOE will establish real (adjusted for federal taxes) discount rates for residential consumers by considering a range of three different real discount rates: credit card financing rate, a rate based on consumers having substantial savings, and a mid-range rate. 10 CFR 430, subpart C, appendix A13(d). The mid-range discount rate will represent DOE's approximation of the average financing cost (or opportunity cost of reduced savings) experienced by typical consumers.
Based on the guidelines from the Process Rule, we derived a distribution of discount rates to reflect the variability in financing methods consumers can use in purchasing water heaters. The real interest rate associated with financing an appliance purchase is a good indicator of the additional costs incurred by consumers who pay a higher first cost, but enjoy future savings, although it is not the only indicator of such costs. While the method used to derive this distribution relies on a number of uncertain assumptions regarding the financing methods used by consumers, DOE believes the resulting distribution of discount rates encompasses the full range of discount rates that are appropriate to consider in evaluating the impacts of standards on consumers (
i.e.,
values represented by the mid-range financing cost, consumers with no savings, and consumers with substantial savings), as well as all the discount rates that fall between the high and low extreme values.
DOE assumes the method of purchase used by consumers is indicative of the source of the funds and the type of financing used, although DOE is not aware of detailed research into this relationship. Whirlpool Corporation indicated that approximately 40% of white goods are purchased in cash, 35% with credit cards, and 25% with retailer loans. (1994 Eight Product Notice of Proposed Rulemaking, 59 FR 10464, March 4, 1994.) The same manufacturer indicated that 25% of appliance purchases are for new homes. However, we know consumers purchase 20% of water heaters with new homes,
i.e.,
in mortgages, and 80% as replacements for existing water heaters in separate retail purchases. Consumers pay for retail purchases by cash, credit cards, or loans. In the case of water heating equipment, we assumed consumers would usually use credit cards because most water heater purchases are emergency replacements. In order to derive a full distribution of discount rates, DOE estimated a range of interest rates, based on historical data and judgments of future trends, for different types of consumer savings or financing.
For new housing, the estimated nominal mortgage rate ranges from 5-8%, the derived after-tax rate is based on a tax of 28%, and a 2% inflation rate is subtracted from the total. The result is a range of real mortgage rates from 1.60%-3.76%. Example: 5%*(100%-28%)-2% =1.6%.
For cash, the minimum interest rate is 0%. This rate applies to consumers making cash purchases without withdrawing from savings accounts or interest bearing checking accounts. For the maximum rate, the opportunity cost is the interest that could have been earned in a savings account or mutual fund. The historical nominal maximum savings rate ranged from 4.5-5.5% from 1970-1986 (real rates of -8.27 to +3.58%). We believe the current maximum is the opportunity cost represented by the interest earned in a typical mutual fund (assumed to be 6% real). DOE selected a real rate of 3% as the mean.
DOE assumed the interest rates for retail loans and credit cards have the same range. The minimum credit card rate is 6% real. Introductory rates on some credit cards today are 5.9% nominal, but after the introductory period (often six months), the rate can increase sharply. Maximum rates are more than 20% nominal. However, if the consumer pays with a credit card and the balance is paid in less than the life of the water heater, then the effective interest rate is lower than the nominal credit card rate. The current assumption is a range of 6-15% real.
Combining the assumed shares of each financing method, the above real interest rates result in a weighted-average (mean) value of 6% and a distribution that varies from 0-15%. Sensitivity studies show that while the LCC results are sensitive to the value chosen for the mean discount rate, the LCC results are not sensitive to the distribution of discount rates.
DOE believes the methods described above are valid for establishing a distribution of discount rates relevant to most purchasers of the products covered by this rulemaking. However, the Department acknowledges that different assumptions could be made about likely interest, inflation and marginal tax rates, or about consumer financing methods, and that different approaches to identifying consumer discount rates might also be valid. For example, it is possible to base consumer discount rates on the average real rates of return on consumer investment or other measures of the opportunity costs
incurred by consumers who purchase the covered products. DOE does not believe, however, such alternative assumptions or alternative approaches would significantly alter the range of discount rates used by the Department or the conclusions drawn from the LCC analyses conducted using these discount rates.
The Department is seeking any information that would support significant alterations in the range or distribution of the discount rates derived from its analysis. Alternatively, DOE is soliciting comment on the possible use of a standardized distribution of discount rates ranging from approximately 4-12%, with a mean of 6%. The use of such a standardized distribution would explicitly recognize the many uncertainties associated with DOE's current analysis and, based on sensitivity analyses already performed by DOE, such a standardized distribution would not significantly alter the conclusions of DOE's life cycle cost analyses.
Two stakeholders, EEI and EMPA, claimed the discount rates in the LCC appear to be very low for consumers. (EEI, No. 39 at 7 and EMPA, No. 50 at 2). They do not reflect the actual consumer purchasing behavior as measured by an implicit discount rate. Such discount rates are often higher. DOE policy is to base discount rates on average financing costs (or opportunity cost of reduced savings) experienced by typical consumers.
d. Household Characteristics
The 1993 RECS public use data provide a sample of 7,111 households from the population of all primary, occupied residential housing units in the U.S. Of the 7,111 households, we use 5,222 household records in the analysis and we assume these households are representative of housing on a national scale. The households included in the analysis (see Table 5) have four defining features:
1. Water heater size
2. An individual water heater
3. One of four fuels: electricity, oil, natural gas, LP gas
4. Billing data for electric and gas-fired water heaters and gallons of fuel oil or LPG used
Of the households not included, 11.8% shared water heaters or used other fuels; these water heaters are not subject to this rulemaking. Of the remaining households not included, 6.2% had no water heater size indicated and 8.2% had insufficient billing data for energy price analysis.
EEI commented that the RECS public use data are more than five years old. (EEI, No. 39 at 3 and No. 67 at 1). The detailed 1997 RECS public use data were released in mid-January 2000. However, the Department has not had an opportunity to analyze the impact at this time. We will, however, determine the impacts of this updated information for the final rule. We have accounted for the age of the energy price data by adjusting the 1993 data to represent 1998 prices. We did this by multiplying the 1993 data by the ratio of the average annual energy prices from the EIA AEO between 1993 and 1998.
Table 5 provides some information about households in the 1993 RECS public use data used in the LCC analysis. The weighted number of households are the total households represented by the RECS data. The average hot water use is not from RECS but is determined from the results of a California Energy Commission (CEC) study of hot water usage. We have included the average water heater set point and average inlet water temperature, which are not part of the RECS public use data. These are derived from the location of the household using the National Oceanic and Atmospheric Administration's (NOAA) 30-year (1961-1990) database of average air temperatures to estimate average annual outdoor and inlet water temperatures (NOAA database: www.ncdc.noaa.gov/ol/climate/online/ccd). A more complete discussion of the data not from RECS is found in section III.E.2.d., Energy Analysis Module.
Table
5.—1993
RECS Household Characteristics
Gas
Electricity
LPG
Fuel Oil
All Fuels
Number of Households (records)
2475
2323
248
176
5222
Number of Households (weighted)
35,959,707
30,279,600
2,540,960
1,807,350
70,587,617
Household Size (average number of people)
2.79
2.58
2.70
2.87
2.70
Clothes Washer (percent saturation)
89.2
82.0
89.1
96.6
86.3
Dishwasher (percent saturation)
52.4
49.1
32.5
56.8
50.4
Average Thermostat Set point (deg F)
134.6
133.5
135.0
137.5
134.2
Average Inlet Water (deg F)
57.1
59.1
56.3
51.8
57.8
Average Hot Water Use (gallons per day)
48.6
45.4
47.3
47.3
47.1
Low Income Households (percent of total)
5.68
5.69
0.64
0.12
12.13
Senior-Only Households (percent of total)
8.13
7.66
0.72
0.39
16.90
Senior-Only and/or Low income (percent of total)
12.59
12.17
1.17
0.492
6.42
Stakeholders raised concerns about the RECS data. Battelle commented that some fraction of households in the RECS database incorrectly identifies fuel type of water heaters. (Battelle, No. 66 at 5).
Battelle and AGA claimed DOE “fabricated data not in the database.” They believe this has led to higher average set point temperatures for gas water heaters (134.5°F for gas vs. 133.7°F for electric), cooler air temperatures where the water heater is installed (55.1°F for gas vs. 56.7°F for electric), and colder entering water temperatures (57.3°F for gas and 58.7°F for electric). (Battelle, No. 83 at 2 and AGA, No. 92 at 3).
Set point temperature, air temperatures and entering water temperatures are not in the RECS database. To obtain the set point, air and entering water temperatures, the Department used the following approach. DOE used heating degree days to determine an approximate location for each household. This is necessary because household locations are confidential. Based on the location, we used the 30-year NOAA data to determine the average air temperature. We derived cold water inlet temperatures based on the average annual air temperature. (NOAA database: www.ncdc.noaa.gov/ol/climate/online/ccd). From a study by the CEC (CEC, 1990, Report No. P400-90-009), DOE has inferred the set point temperature based on the cold water inlet temperature. This methodology is applied equally to all of the RECS public use data—gas, oil and electric. Any difference in the results among fuels is due to regional differences of
saturations of water heater fuel types and not to the data that DOE uses.
Battelle disagreed with DOE's preliminary results showing average daily water use of 48.5 gallons per day for households with gas-fired water heaters versus 45.4 gallons per day for households with electric water heaters. Battelle claimed DOE's results will increase the energy used by 3.3% and will cause 3.2% more standby losses for gas water heaters. (Battelle, No. 83 at 3). DOE believes the differences in average energy use and standby losses between gas and electric water heaters are due to regional differences in numbers of water heaters by fuel type and household size, among other factors. These differences are not caused by inadequate data.
e. Lifetime
Appliance Magazine
was the source of information for water heater lifetimes. We created a triangular distribution using 4-19 years as the base for electric water heaters and the most likely value of 12 years as the peak. Similarly, for gas-fired water heaters the base is 3-15 years with the most likely value at 9 years. We assumed that oil-fired water heaters have the same lifetime as gas-fired water heaters.
2. LCC Spreadsheet Model
In order to simplify handling large amounts of input data, the water heater LCC analysis spreadsheet has five modules. The modules are LCC and Payback, Equipment Cost, Operating Cost, Energy Analysis, and Hot Water Draw. Chapter 9 in the TSD contains a detailed discussion of the spreadsheet and the individual modules.
a. LCC and Payback Module
The LCC analysis uses a spreadsheet model developed in Microsoft Excel combined with Crystal Ball (a commercially available software program). The model uses a Monte Carlo simulation to perform the analysis while considering uncertainty and variability of many input values. Crystal Ball is a program that provides risk analysis capabilities to help analyze the variability and uncertainties associated with the data. We organized the spreadsheet so ranges (distributions) are entered for each input variable needed to perform the calculations.
Recognizing that each household is unique, we accounted for variability in the model by performing the LCC calculation for a large number of individual households. The Monte Carlo simulation samples individual households from the RECS public use data. The results show the fraction of households having a particular LCC and payback.
For the LCC calculations, we randomly sampled the set of households 10,000 times. The analysis used separate LCC spreadsheets for each fuel type (electricity, natural gas, and fuel oil) and blowing agent (water and HFC-245fa). Chapter 9.1 of the TSD describes the sampling methodology and contents of the RECS public use data.
In comments, EMPA claimed 10,000 Monte Carlo runs are not enough, and consumers' actual savings depend on their specific energy prices and amount of usage of the appliance. (EMPA, No. 88 at 2-7). AGA claimed manufacturers' costs and consumer prices are correlated so DOE should use a correlated Monte Carlo approach. (AGA, No. 92 at 5).
We believe 10,000 Monte Carlo runs are sufficient because, when tested at 20,000 runs, there was less than 1% difference in the results. The manufacturers' cost data is not connected with a specific model but is only provided as a cost distribution. Therefore, manufacturers' costs and the prices in the Lawrence Berkeley National Laboratory (LBNL) price database cannot be correlated. There is no one-to-one correlation between the cost of a specific model to the price for that same model because GAMA only provided cost distribution data.
We analyzed all design options for water heaters as if they were at production levels equivalent to the typical existing baseline models, i.e., possessing similar economies of scale. We performed the LCC analysis separately for each energy source: electric, gas (including LPG) and oil. We calculated the analysis twice, once for water-blown insulation and again for HFC-245fa blown insulation. The LCC analysis does not address fuel choice; this is addressed in Section F, National Energy Savings and Shipments. See Section IV.A.1.a of this notice for the results of the LCC analysis.
The Department calculates payback and LCC for each design option combination and compares it to the 2003 baseline model for every sample household.
b. Equipment Cost Module
Equipment cost represents the sum of the retail price, sales tax, and installation costs. We calculated the retail price from the manufacturer's cost multiplied by an overall markup. GAMA provided estimates of water heater manufacturing costs for typical existing baseline models. The source of the retail price, the sales tax, and the installation cost of existing baseline models is the Water Heater Price Database, which is described in Section III.D.3.e. See Chapter 5.3 of the TSD.
In its analysis for the November 1998 workshop, we estimated the manufacturing costs for all other standard size existing baseline water heaters based on the manufacturing cost for the typical water heater plus (or minus) incremental costs for extra foam insulation, sheet metal, and other components. We determined the retail price of each combination of design options by multiplying the manufacturing cost times the markup. See Chapter 7 on markups and Chapter 9.5 in the TSD for a complete discussion of this.
AGA claimed DOE used average markups in the LCC. (AGA, No. 92 at 5). DOE does not use average markups in the LCC. As described above, we calculate an overall markup for each RECS household by dividing a randomly chosen retail price from the Water Heater Price Database by a randomly chosen manufacturing cost from the cost distribution data for each standard-size existing baseline model. We apply this markup to all of the subsequent design options for that household. We limited the markup algorithm to ensure the retail price was never lower than the manufacturing cost.
c. Operating Cost Module
Operating a water heater involves two costs: Fuel to operate the water heater and maintenance to keep the water heater running properly. Fuel costs depend on the water heater's energy usage and the per-unit cost of fuel. Maintenance costs depend on water heater design and were determined from consultants' discussions with manufacturers and installers.
In the LCC analysis, we calculate the operating cost for the baseline product class (fuel type) for each household in the RECS database using average annual energy prices. For each design option or combination of design options, we multiply the energy savings by the marginal energy price. The operating cost is the baseline operating cost minus the operating cost savings for the particular design option or combination of design options. Therefore, we apply marginal energy prices to only the portion of total operating cost resulting from improved energy efficiency.
To account for future uncertainties, we apply various scenarios of projected future energy prices (trends by national average) to each household's marginal energy price. After we adjusted for inflation and energy price changes, we adjusted energy prices for the RECS public use data from the starting year by
the projected average future energy prices. Thus, each sample house from the RECS public use data has four different future annual energy price series associated with it. We estimated future annual operating costs as annual energy use multiplied by the annual energy price series for each of the four scenarios: AEO99 High Growth, AEO99 Reference Case, AEO99 Low Growth, and the 1998 GRI Baseline Projection. The user can choose from among these four scenarios in the spreadsheets or can input his or her own price forecast.
d. Energy Analysis Module
Since we can write WHAM as an equation, DOE used it in the LCC spreadsheets to quickly and reliably estimate residential water heater energy consumption. We validated WHAM with the TANK and WATSIM simulation programs for gas-fired and electric water heaters for many water heater characteristics. The WHAM results were within 3% of predicted energy consumption for electric, and within 5% of predicted energy consumption for gas-fired water heaters. Three parameters—RE, UA and rated input power—describe the efficiency characteristics of the water heater. The operating conditions of the water heater are the average daily hot water used, inlet water temperature, hot water outlet temperature, and air temperature around the water heater.
We used the RE and standby heat loss coefficient values from computer simulations developed for the Engineering Analysis and rated input power from manufacturers' product literature to describe the energy performance of water heaters.
WHAM uses the average daily hot water consumption for each household calculated by the Hot Water Draw Module, discussed below. We calculated temperatures for inlet water and the air surrounding the water heater from the outdoor air temperature and the location of the water heater in the house. The RECS public use database provides data on heating and cooling degree days, but not air or water temperatures, for each household in the sample. Each household was assigned to the climate zone within its reported Census division with the closest number of heating and cooling degree days for 1993. Once each household was associated with a climate zone, we made other temperature assignments from NOAA's 30-year average annual temperatures. (NOAA database: www.ncdc.noaa.gov/ol/climate/online/ccd).
To assign hot water outlet temperatures for households, we derived an equation from a CEC study that measured delivered water temperature and cold water temperatures. (CEC, 1990, Report No. P400-90-009) The equation derived from the CEC data indicates that the water heater set point varies inversely with inlet water temperature. For every degree the average inlet water temperature increases, the hot water set point temperature decreases about half a degree. See Chapter 9.3.4 in the TSD for a discussion of the CEC data.
e. Hot Water Draw Module
Hot water use varies widely among households because it is dependent on household and water heater characteristics, including the number and age of the people who live in the home, the presence of appliances using hot water, the tank size and thermostat setting of the water heater, and the climate in which the home is situated. By accounting for these five characteristics, the hot water draw model estimates average daily hot water used.
There is a degree of uncertainty in estimating hot water use because of the limited data on measured actual hot water use. We estimate uncertainty attached to the weighting factors using normal distributions for parameters provided in the 1985 EPRI study. Based on the 1985 EPRI study, “Electric Water Heating for Single-Family Residences: Group Load Research and Analysis,” LBNL developed values for daily hot water used for the number and age of people living in the home and for the presence of appliances. (1996. LBNL-37805)
RECS provides data on the number and age of household occupants, presence of a clothes washer or dishwasher, and three ranges of water heater tank size: small, medium, and large. For this analysis, however, we needed specific water heater sizes. By matching the three RECS ranges (small, medium, and large) with the standard water heater sizes, we assigned an exact water heater size to each RECS house. Generally, small is equivalent to 30 gallons, medium to 40 gallons, and large to 50 gallons or larger.
3. Consumer Subgroup Analysis
In the Process Rule, DOE committed to considering the LCC impacts on consumer subgroups who might be uniquely affected by a rulemaking. Process Rule, Appendix A (11)(d). DOE used LCC as the metric to determine consumer impacts. See Chapter 10 in the TSD for consumer subgroup analysis.
The Consumer Subgroup Analysis for water heaters estimates the variation in energy consumption and LCC for different subgroups of consumers under different trial standard levels. Of particular interest is the potential effect of standards on households with low incomes and on seniors over 65. DOE identified these two subgroups from stakeholder input at the water heater worksh
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