1. Wood Stove Market Impacts Including Efficiency and Emissions Standards Hearth, Patio & Barbecue Association Prepared and Presented by: Robert Ferguson Ferguson, Andors & Company 1

2. Wood Stove Market Factors The wood stove market is driven by many factors. – The influence of these factors is not the same for every potential purchaser or for every locale. Some of those factors: Positive Factors Increasing Conventional Energy Costs Self-Sufficiency Motivation Firewood Availability and Cost Tax (or Other) Incentives Capital Outlay/Investment Payback (ROI) Efficiency/Emissions Performance Aesthetics Negative Factors Lower (or Stable) Conventional Energy Costs Inconvenience and Extra Work Firewood Availability and Cost Capital Outlay and Investment Payback (ROI) Safety Concerns 2

3. Wood Stove Efficiency IRS Tax Credit – In 2009, IRS approved a tax credit program that included biomass heating equipment as long as minimum efficiency requirements were met. – Both HPBA and EPA worked to get a standard efficiency determination protocol included as part of the IRS program. This effort was unsuccessful other than getting clarification that the Lower Heating Value of the fuel could be used for determining efficiency. 3

4. Basics of HHV v. LHV HHV (Higher Heating Value) assumes that the water vapor produced when the solid fuel is burned can condense and therefore the heat released if that occurs is treated as “available” heat as part of the total heat input from the fuel. LHV (Lower Heating Value) assumes that the water vapor produced when the solid fuel is burned will never be allowed to condense, and therefore, that potential heat recovery shouldn’t be counted as part of the heat input from the fuel. Since efficiency is heat output divided by heat input, using LHV (smaller denominator) results in higher efficiency values. LHV is generally used in Europe for solid-fuel fired heaters. HHV is the general norm for rating all heating equipment in North America and allows direct comparison of efficiency of heaters burning different fuel types (gas, oil or wood). Since there are already condensing designs for gas and oil, and there is always the possibility of someone inventing a condensing system for solid fuel, HHV is the better way to rate ALL heaters. 4

5. How did this affect the IRS values? IRS allowed self-certification by manufacturers including using previously available efficiency data. The standard practice adopted by manufacturers in the absence of IRS guidance was to base the efficiency value on a single heat output category rather than the weighted average over the full operating range of the stove. In combination with the LHV, this resulted in “IRS” efficiency values that can be significantly higher when compared to the weighted average HHV efficiency. 5

6. HPBA supports the determination of the average overall efficiency using a standardized weighted average HHV efficiency test method (CSA B415.1-10) so the playing field is level for everyone. HPBA also supports determining the precision of the efficiency test method. Standardized efficiency values (including precision) should be disclosed to the buying public to aid their purchasing decision. –o–on hang tags –i–in advertising materials Marketplace pressures will ultimately drive manufacturers to improve efficiency levels for their lower performing models. 6 Wood Stove Efficiency

7. Wood Stove PM Emissions EPA Wood Stove Particulate Emissions are determined using a laboratory test procedure that consists of burning Douglas fir fuel cribs in at least four test runs that span the operating range of the stove. 7

8. The EPA test methods have limitations and a comprehensive evaluation of the precision 1 of the EPA test methods has shown that they cannot reliably distinguish emissions performance differences of less than 3 grams per hour. This means that EPA test methods are certainly capable of reliably distinguishing between good and bad performance, but they cannot reliably distinguish between “good, better and best” performance. 1 “EPA Wood Heater Test Method Variability Study - Analysis of Uncertainty, Repeatability and Reproducibility based on the EPA Accredited Laboratory Proficiency Test Database”, R. Curkeet and R. Ferguson. Submitted to EPA on October 6, 2010. The report is available upon request. The report was also summarized in Hearth and Home Magazine, March 2011 Issue. 8

9. The emission test results from the EPA laboratory-based test methods are also not a reliable predictor of in-home PM emission performance 2. In-home PM performance is generally higher and stove rankings can change. – A stove with a higher EPA emission certification rating may perform better in the field than a stove with a lower EPA number. 2 “A Comparison of Particulate Emission Rates from the In-Home Use of Certified Wood Stove Models with U.S. EPA Certification Emission Values and A Comparison between In-Home Uncertified and Certified Wood Stove Particulate Emissions”, Dr. James Houck, February 2012 9

10. Tightening performance standards will have definite impacts: – Stove prices will increase due to re-design costs, certification costs, cost impacts in manufacturing, and marketing and sales costs as well as the actual material cost increases for each stove produced - to name some of the elements. In the simplest terms, when stove prices increase, stove demand decreases. – Each 1% increase in retail price results in 1.6% fewer sales. – Impacts on replacement stoves may be even greater. 10

11. 11 8% Decrease in Sales Volume 5% Increase in Retail Price

12. 12 EPA NSPS Phase 2

13. Current trends show a modest 1% average increase in sales volume without added costs due to new regulation. With new or tighter regulations, that trend is likely to reverse -- with fewer sales than today. For PM emissions, lowering the passing grade will produce only the appearance of progress– nothing more. It will slow the rate of change-outs, by increasing the cost of new stoves and reducing the number of models available to consumers. 13

14. 2010 National Particulate Emissions by Freestanding Stove Category 14 ~3.3 Million Stoves – 14% of Total PM Total PM Emissions – 2010: 157,069 Tons Source: The Fraction of Freestanding Wood-Fueled Stoves in Current Use That are U.S. EPA Certified Cordwood Stoves and Wood Pellet Stoves, Dr. James Houck, July 2011

15. Conclusions Wood stove demand is volatile, can have regional differences and is influenced by many factors. Economic Factors are Primary Drivers for Consumers – Conventional Heating Costs – Availability and Cost of Firewood – Capital Investment and Payback (ROI) Tightening standards is a meaningless numbers game -- nothing more. It will however, drive up stove prices and reduce demand. – This reduces change-outs as consumers opt to keep their old stoves. Pre-certification era stove models produce the vast majority of PM from residential wood combustion. 15