The upside of appliance efficiency regulations

July 31, 2013

It turns out that when the Dept. of Energy levies new energy efficiency regulations on makers  of home appliances, there are beneficial effects that go beyond mere energy use.

This is one of the conclusions to come out of a new study by the American Council for an Energy Efficient Economy. The focus of the study was to figure out why the DOE tended to overestimate the cost of implementing new energy efficiency standards. That's an interesting question because when it revises appliance standards, the DOE looks at the estimated benefits of standards relative to the estimated costs and only sets standards that it finds are cost-effective to consumers.

The study authors found that across nine energy efficiency rulemakings, DOE estimated the manufacturer’s selling price would rise by an average of $148. But the manufacturer’s average selling price actually dropped by $12.  Looked at another way, DOE estimated that the new standards would boost product prices by an average of 35% but average actual prices did not change after adjusting for inflation.

A lot of the price drop, apparently, comes from the need to redesign the manufacturing process to accommodate the more efficient models. One industry expert the authors interviewed noted that when manufacturers redesign products to meet new efficiency standards, they also look for opportunities to make the manufacturing process more efficient, which can reduce costs.

The authors say an example of how this can work is shown by investments made by General Electric to “re - shore” some overseas manufacturing back to its Appliance Park plant in Louisville, Kentucky. GE is moving many production lines to Louisville and in the process redesigning products to reduce manufacturing costs including material and labor. Specific data for clothes washers are not available in the literature, but a recent article on GE noted how re-shoring and redesign of its heat pump water heater was able to reduce the number of parts by 20%, material costs by 25%, and labor hours by 80% relative to the predecessor product that was produced in China.

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