order to raise the rating? Will they find a way to achieve efficiency levels greater than 100 percent in resistance water heaters? Of course not. Whether the value of the metric is 1 or 99, the ability of resistance water heater manufacturers to improve their efficiency does not change. Therefore changing the measurement metric of a standard by itself will make no difference in the efficiency of the water heater.

Similarly, changing the efficiency metric with gas (or oil-fired) water heaters will make no difference in the manufactured efficiency levels. With gas equipment, the efficiency ceiling for non-condensing units has been the cost effectiveness of the units. While improvements are technically achievable, it has not been deemed cost effective to do so. Changing the metric assigned to the efficiency rating does not change that fact. Gas water heater manufacturers are still faced with the same economic hurdles.

DOE has enough information available now to require higher levels of efficiency where possible and cost effective. Manufacturers are continually looking to improve their product, and with the higher energy costs higher efficiency becomes a greater competitive advantage. Changing the efficiency metric does not change any of that ability or incentive.

If the standard were to change, the other required decision factors would still have to be considered, regardless of using site or source energy. In the case of water heaters, there are significant additional costs for raising the standard higher, such as difficulty fitting water heaters through doorways and other clearances due to increased insulation levels. Insulation materials are also more costly, because of the elimination of low cost, high performance materials that contained ozone- depleting chemicals. If the standard did change slightly, electric water heaters could potentially use better, more costly insulation materials, while gas water heaters could do the same.

However, if the standard changed significantly, such that there would be elimination of entire classes of products (e.g., non-condensing gas water heaters). It is likely that the DOE manufacturer impact analysis would detail the negative effects on manufacturers, and the US Justice Department would be obligated to detail the negative impact on competition, such that the standard would likely not be implemented.

  1. (a) If no change in the efficiency standard would be made by changing from site to source energy when standards are established, what are the two most important results of the change from the perspective of the consumer? What would the consumer see that is different? (Different labels?) (b) From society's perspective, how would things be different if no change would be made in the efficiency standard using source instead of site energy?

It is difficult to provide a succinct answer without seeing a final version of the following: the source energy metric; the label provided by the appliance manufacturer; and the FTC Energy Guide label.

The most important result of the change from the consumer's perspective would be the difficulty in comparing the efficiency of the current water heater using site energy to a new water heater based on source energy. At present, when consumers shop for water heaters, they can compare various models using metrics that they are familiar with, such as kWh's of electricity used per year, therms or cubic feet of gas used per year, gallons of oil consumed per year, and annual operating costs. Consumers are familiar with these terms because these terms are the basis of consumer utility bills as well as other guides that consumers use. Changing the label to a metric based on a new unfamiliar term and concept will not result in increased energy efficiency, but rather in consumer confusion. The result will be a loss in consumer credibility in the standards process and a loss in the "societal" investment made by the Department of Energy and the Federal Trade Commission over the last 20 years in educating consumers about smart energy choices.

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