The following case studies illustrate the factors that influence the diffusion of new technologies in the housing industry. They predate the PATH Program but may provide some insight into how PATH can influence the acceptance and deployment of new technologies in the future.
Vinyl siding has a growing share of the U.S. housing market for a number of reasons, including low up-front costs, simplified installation, easy waste disposal, appealing appearance, and consistent availability and pricing. Regional bias is also a factor.
When vinyl siding is properly installed, it has a decisive advantage over most competitors: is less expensive in terms of initial and life-cycle cost; does not need painting; and it will not rot. Therefore, home owners do not have to spend time and money scraping and painting. Reduced maintenance is also a big selling point. The attributes of vinyl siding are unusual in that reduced life-cycle costs are usually offset by higher initial costs. For example, brick and stone have the lowest life-cycle cost because of low maintenance costs, but they have the highest initial cost. Another significant feature of vinyl is that it usually comes with a 50-year warranty compared to wood and stucco, which have no warranties. However, the true value of a 50-year warranty is questionable if product failures occur. In these circumstances, the manufacturer or contractor may simply declare bankruptcy, nullifying the warranty.
The length of time for ownership of a home is decreasing. On average, home owners sell and move every five years. Lifetime costs have less influence when owners do not bear all of the life-cycle costs. Therefore, if market-share expectations were based on installed costs alone, the market share for wood siding would be undiminished because of its competitive initial cost. But vinyl is gaining market share and wood siding is decreasing. Vinyl's new-home market share has risen from 1 percent to 30 percent in the last 20 years. At the same time, the market share of wood has dropped from 40 percent to less than 20 percent.
Vinyl is attractive to remodelers because a major portion of the cost of re-siding is the removal and disposal of the existing siding. With vinyl, builders can overlay existing siding and avoid much of the removal and disposal cost. Perhaps this attribute should be considered a new technical improvement for the repair and remodeling sector.
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Page 54 C Historical Case Studies of Technology Diffusion The following case studies illustrate the factors that influence the diffusion of new technologies in the housing industry. They predate the PATH Program but may provide some insight into how PATH can influence the acceptance and deployment of new technologies in the future. VINYLSIDING Issues related to PATH goals: affordability and durability. Vinyl siding has a growing share of the U.S. housing market for a number of reasons, including low up-front costs, simplified installation, easy waste disposal, appealing appearance, and consistent availability and pricing. Regional bias is also a factor. When vinyl siding is properly installed, it has a decisive advantage over most competitors: is less expensive in terms of initial and life-cycle cost; does not need painting; and it will not rot. Therefore, home owners do not have to spend time and money scraping and painting. Reduced maintenance is also a big selling point. The attributes of vinyl siding are unusual in that reduced life-cycle costs are usually offset by higher initial costs. For example, brick and stone have the lowest life-cycle cost because of low maintenance costs, but they have the highest initial cost. Another significant feature of vinyl is that it usually comes with a 50-year warranty compared to wood and stucco, which have no warranties. However, the true value of a 50-year warranty is questionable if product failures occur. In these circumstances, the manufacturer or contractor may simply declare bankruptcy, nullifying the warranty. The length of time for ownership of a home is decreasing. On average, home owners sell and move every five years. Lifetime costs have less influence when owners do not bear all of the life-cycle costs. Therefore, if market-share expectations were based on installed costs alone, the market share for wood siding would be undiminished because of its competitive initial cost. But vinyl is gaining market share and wood siding is decreasing. Vinyl's new-home market share has risen from 1 percent to 30 percent in the last 20 years. At the same time, the market share of wood has dropped from 40 percent to less than 20 percent. Vinyl is attractive to remodelers because a major portion of the cost of re-siding is the removal and disposal of the existing siding. With vinyl, builders can overlay existing siding and avoid much of the removal and disposal cost. Perhaps this attribute should be considered a new technical improvement for the repair and remodeling sector.
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Page 55 Style is also important. Virtually every vinyl manufacturer tries to mimic the look of wood. “Real wood grain” is a market goal. Satisfying consumers' desire to maintain an accepted architectural style appears to compensate for the substantive change in material. The message here is: lower up-front installed costs (especially in price-sensitive market segments, such as starter and low-end homes); simple installation, disposal and handling; attractive appearance; consistent availability and pricing; and reduced life-cycle and maintenance costs will result in the successful diffusion of a new technology. Market shares for vinyl siding are also influenced by regional bias. For example, vinyl captured 30 percent of the national new-home siding market in 1998. However, to achieve that average, it captured 51 percent in New England, 71 percent in the Mid-Atlantic region, and less than 10 percent in the Rocky Mountain and Pacific markets during the same period. It is worth noting that, even though aluminum siding has many of the same qualities as vinyl, it has had a reversal of fortune. Aluminum, which held 14 percent of the national new-home market in 1978, has decreased to 1 percent in 1998. It would be interesting to know exactly why aluminum siding has lost market presence. ORIENTED-STRAND BOARD Issues related to PATH goals: affordability, environmental protection, disaster resistance, and durability. Although adoption rates of oriented-strand board (OSB) have not been uniform throughout the United States, it is a good example of a very different, technically advanced product that has been rapidly adopted. OSB provides environmental benefits by using new-growth timber, although the glue used to hold it together has raised environmental concerns about air quality and recycling. The rapid adoption of OSB is attributable, in part, to builders' confidence in its performance and affordability. The preference of some builders for OSB over plywood illustrates the importance of promotion of a product and the development of performance standards by a trade association. Plywood, the once dominant structural panel product, gained popularity because it provided significant labor savings, as well as improved structural rigidity and uniformity. OSB looks like, and is, wood chips glued together. A popular misconception among the uninitiated is that “OSB falls apart.” This opinion is based partly on experience with waferboard, which is a similar product. Ironically, plywood suffered the same criticism not too long ago. Delamination of early plywood sheathings gave plywood a reputation as a nondurable material. As a result, many old-timers demanded solid board sheathing for the homes they built. Not many builders share that view today. Board sheathing is virtually nonexistent. In spite of widespread acceptance, some OSB product performance concerns remain. Swelling and deterioration of floor structures when they are exposed to rain during construction have caused in some builders to limit their use of OSB to vertical applications. Also, research in a Canadian laboratory has indicated that OSB swells indefinitely when exposed to water vapor and that it is much more impermeable than plywood, making it much more difficult for water vapor to escape from a building.
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Page 56 Moisture can build up in wall cavities, which promotes the growth of fungus and decay that can damage the structure. Moisture exposure for OSB components, as with all construction materials, can be controlled with appropriate construction detailing. History Portland Manufacturing Company made the first structural plywood from western woods in 1905. Like all structural plywood made until the mid-1930s, this plywood was bonded with nonwaterproof blood and soybean glue. Delaminations were routine until waterproof synthetic resins were developed during World War II. The adoption period for the use of plywood sheathing was long, and its acceptance was slow. Builders largely avoided plywood until the late 1950s when a technical fix for delamination was developed. In the late 1960s, advances in adhesive technology brought southern pine plywood to residential builders. Southern pine plywood experienced a rapid growth phase, and today it accounts for about half of all structural plywood. MacMillan Bloedel opened the first viable waferboard facility at Hudson Bay, Saskatchewan, in 1963. Aspenite, the first generation waferboard (called chipboard by many builders), was manufactured from the abundant supply of aspen in the region. Technology involving the random alignment of wood fibers in waferboard soon gave way to the development of structurally superior OSB, in which the wood fibers are aligned into layers that mimic the “plies' in plywood. Elmendorf Manufacturing Company, Clairmont, New Hampshire, made the first OSB in the United States in the 1980s. In just 15 years, OSB passed plywood, accounting for more than 55 percent of the structural sheathing market. Technical Merits All three model building codes use the phrase “wood structural panel” to describe plywood and OSB. Codes recognize these two materials as the same, and APA- The Engineered Wood Association (APA EWA), the association responsible for certifying more than 75 percent of the structural panels used in residential construction, treats OSB and plywood as equals in published performance guidelines. Wood scientists agree that the structural performance of OSB and plywood are equivalent. Perhaps this is the reason OSB took less time to be adopted than plywood. A builder's reputation often depends on new technologies delivering on their performance claims. Home owners expect builders to select materials and systems that perform well. Builders, in turn, need assurance from manufacturers that new products will work. OSB has the support of manufacturers and assurances from the associations that certify its performance and national code acceptance. Also, OSB has earned a reputation as a reliable, low-cost substitute for plywood. The development of a single, widely accepted standard by APA EWS created significant economies in the manufacture, marketing, and use of structural panels and became a catalyst for the growth of this industry sector. OSB is replacing plywood as the structural panel of choice. Twenty-one OSB plants opened between 1995 and 1997. No
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Page 57 new plywood plants were built during this period. Production of structural plywood dropped by 7 percent in 1996, while production of OSB increased by 25 percent. The increase in OSB production is expected to lower prices for all structural panels. Reliable supplies, low prices, and reduced price volatility are expected to increase demand for OSB technology. Regional Bias Market data show that the conversion from plywood to OSB among builders is irregular. The northeastern and southwestern housing markets are still predominately plywood markets. The north central and southeastern regions have largely converted to OSB. In some areas of the Pacific Northwest, where plywood originated, plywood-skinned houses are hard to find. ENGINEERED WOODEN I-JOISTS Issues related to PATH goals: affordability, environmental protection, disaster resistance, and durability. The adoption of engineered-wood products illustrates the critical influence of consumer demand and design, as well as the crucial role of manufacturers, in diffusion of a new technology. The adoption of I-joists also illustrates the barriers that must be overcome in the development of performance standards and product labels. Trus Joist Corporation (TJ), the company that invented the wood I-joist, started production in 1969. TJ not only pioneered the development of this industry but has also maintained a clear leadership role in a hotly contested market. Weyerhaeuser purchased the company late in 1999. Stiff competition, rapid technological advancement, and broad-based acceptance of this product are evident in the new-home market. It has taken nearly 30 years for I-joists to capture 35 percent of the residential floor-framing market, and it is expected to capture up 60 percent by 2005. Cost and performance drove the development of wood I-joists. Contemporary designs, first made popular in the 1970s, demanded open floor plans that required long clearspans. Lumber joists longer than 20 feet were expensive, hard to find, and lacked the load-carrying capacity required for long spans. Early versions of I-joists were also expensive, but they were straight, lightweight, and achieved the desired performance. Recently, because timber markets have been unstable, the stable price and availability of engineered-wood products have made them more attractive to builders. Market Profile TJ essentially shaped the I-joist industry. TJ, which has always dominated the I-joist market, claimed roughly 55 percent of the estimated $750 million national I-joist market in 1999. The company positioned itself as the industry leader through smart
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Page 58 marketing and abundant high-quality technical support. TJ also developed an entire family of engineered-wood products to build a complete floor system. MicroLam (laminated veneer lumber [LVL]), Timberstrand (laminated strand lumber), Parallam (parallel strand lumber) and TJI (I-joists) were all developed under the TJ umbrella. The technology required to manufacture LVL and I-joists has been adopted by a host of newcomers. More than a dozen manufacturers are now manufacturing I-Joists at a rate exceeding 300 feet per minute. Exact market shares are closely guarded, but it is safe to say that five manufacturers sell 80 percent of I-joists. TJ clearly leads with about 55 percent. Boise Cascade, Louisiana-Pacific, Willamette Industries, and Georgia Pacific share 20 percent to 25 percent of annual sales. A growing number of smaller companies are fighting hard for market position. In this highly competitive marketplace, builders are the winners as manufacturers are offering products at low prices. Performance I-joist manufacturers identify dimension lumber as their biggest competitor. About 65 percent of all floors are still framed with dimension lumber, although the performance of I-joists is clearly superior to the performance of dimension lumber. I-joists have the following advantages: design flexibility with increased span potential increased on-center spacings and longer lengths that save time greater strength greater stiffness more consistent sizes, appearance, and performance dimensional stability lighter weight webs that are easier to drill less waste Some aspects of I-joist performance have raised concerns. For example, fire marshals almost generally oppose the use of wood I-joists because the web sections (1/2 inch) burn through more quickly than solid lumber (1 1/2 inches), which accelerates structural collapses that endanger both occupants and firefighters. Also, some environmental and health officials are concerned that the resin in the glue will be released as an off-gas during a fire and degrade air quality. High prices and unfamiliarity with a new product have kept I-joists from being deployed on most job sites. Until recently, it was difficult for I-joists to compete with sawn lumber for starter homes and houses with a basic design. A recent market survey found that 80 percent of builders want to learn how to use engineered wood. Through training provided by manufacturers and builder associations, I-joists are gradually becoming more familiar and builders less intimidated. During the last five years, the I-joist market has grown rapidly, and sales are predicted to increase by 50 percent in the next four years.
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Page 59 Standardization Perhaps the major issue (aside from fire safety) concerning I-joists involves product standardization. Currently, each manufacturer provides specifications and span recommendations. APA EWA believes that a uniform standard for all I-joists would accelerate the adoption of I-joists. APA EWA has a long history of advancing the quality of structural-wood products used in the building industry. Consumers have benefited from the standardization of plywood, OSB, and other panel products. In large part, APA EWA is credited with the reliable high performance of structural panels. APA EWA began exploring the idea of standardizing I-joist production in the mid-1990s. The APA EWA Performance Rated I-Joist (PRI) standard was introduced in 1997. Manufacturers can participate by using the PRI standard. Subscribing APA EWA members stamp the maximum allowable spans for each of 12”-, 16”-, 19.2”- and 24”-inch on-center spacing on every I-joist they produce. This practice is good for builders, but not widely accepted by manufacturers. So far, only 20 percent of I-joists manufacturers follow this standard. In market studies conducted by a variety of research organizations, APA EWA, retailers, builders, and building officials overwhelmingly supported the standardization of sizes, performance, and span tables. One study showed that nearly 100 percent of building officials want a uniform identification system for I-joists. Manufacturers who produce 80 percent of the I-joists do not support APA EWA's plan. Georgia Pacific and Willamette are the only two large manufacturers participating in the PRI program. The political motives for choosing sides is clear. APA EWA wants to increase membership revenue, and established manufacturers want to maintain control of the market share they have fought to pioneer. There are also more substantive issues. First, some people fear that setting a standard will drive products to the lowest common denominator, and superior products will not receive the credit they deserve. A standard might remove the incentive for innovation and the development of new products. Second, many argue that I-joists are structural elements that require careful engineering. But, I-joists are not direct substitutes for lumber joists. Installation of I-joists requires special consideration of point loads, offset loads, and special fastening requirements. Standardization would not eliminate the need for technical support and design services. Builders will still need expert advice for structural design. COMPACT FLUORESCENT LAMPS Issues Related to PATH: affordability, durability, life-cycle cost, and energy efficiency Compact fluorescent lighting (CFL) is slowly increasing its market share in the U.S. housing market because it is a durable product that lasts 15 to 20 times longer and uses less electrical energy than incandescent light bulbs, the product it replaces. Market penetration has been very slow because of the product's high first costs and relatively low energy prices. Supplies and increased demand for energy, coupled with increased
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Page 60 environmental concerns and electrical energy deregulation, are likely to cause an increase in energy prices and, perhaps, an increase in the use of CFLs. Lighting, which accounts for about 20 percent of the electrical energy consumed in the United States, accounts for 15 percent of electricity used in residences and is therefore a significant component of the average home owner's electrical utility bill. CFLs have the potential to greatly reduce electrical energy costs and, by extension, make homes more affordable. CFLs are simply variations of the linear fluorescent lamps used in a wide variety of residential and commercial buildings. CFLs are actually conventional fluoresecent lamps that have been reduced in size and configured in geometries that can be used in place of incandescent lamps. Performance CFL lamps have two distinct advantages over comparable incandescent lamps: a service life of 20,000 hours compared to 750 to 1,000 hours; and they provide the same light output as incandescent bulbs using less than 30 percent of the energy. Thus a 27-watt CFL has the same light output as a 100-watt incandescent bulb. In addition, a CFL produces just 10 percent of the thermal energy of an incandescent bulb, thus lowering cooling costs. A single CFL saves almost $63.00 in electricity and replacement costs over a period of four-and-one-half years, the lifetime of a typical CFL. The first demonstration of fluorescent lighting took place in April 1938 at the Chicago World's Fair, but the principle of this technology dates back to 1896 when Edison first integrated it into a lamp. It was perfected and mass produced during World War II, initially for commercial and industrial uses. CFL was developed in the 1970s and has been used in Europe for more than 20 years. In Korea and Japan, where there are significant energy shortages and high energy prices, CFL lamps account for about 80 percent of residential lighting. CFL lamps were not significant in the U.S. market until the late 1980s, when electric utilities promoted them through demand-side management programs. CFL lamps are highly dependent on magnetic or electronic ballasts for the high initial voltage required for starting and regulating their operation. Because of their energy and functional advantages, miniaturized electronic ballasts, which were developed at Lawrence Berkeley Laboratory, are beginning to dominate the CFL market. With these ballasts, CFLs can be connected to dimmers, thus solving one of the early problems with this technology. Additional technical developments improved color rendering and eliminated flickering. CFL lamps appear at first glance to be a sure technological winner, yet their market penetration is very low. The fundamental reason is the high initial cost. A typical 100-watt incandescent bulb costs just $0.50; the equivalent 27-watt CFL sells for $14.00. For a typical new house with 20 lighting fixtures, CFL lamps would cost $280 (versus $10 for incandescent bulbs). However, CFLs are now being offered by a small but growing number of home builders involved with ENERGY STAR. A variety of factors are likely to lead to the dominance of CFL lamps in the residential lighting market over the next decade: higher energy prices; price spikes, such as those that recently occurred in southern California; tighter environmental regulations,
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Page 61 especially around major metropolitan areas, to address air quality problems; and recognition of the long-term advantages of energy-efficient housing by financial markets. Awareness will increase through the emergence of government-sponsored programs, such as Energy-Efficient Mortgages and ENERGY STAR. CFL lamps have the potential to become the lighting technology of choice in the future.