[I have been working on this for about a month. I’ve found some interesting data, but am not quite ready to start number crunching. This is part 1 of 2.]
Seriously. The US government Department of Energy (DOE) has declared war on ceiling fans. The most recent shot was a month ago when the DOE announced new “efficiency” standards for these fans. It turns out that DOE has been studying ceiling fans and (gasp) ceiling fan lights since 2014. In the intervening near-decade, there have been several “final” recommendations. And all their studies are grossly incorrect because they used a very bad model to forecast future demand.
The ceiling fan market has two major segments: residential and commercial. Most of us are familiar with residential fans (see image below). We probably don’t think of the fan over the stove in our kitchen, but those count. Commercial fans are used wherever air exchange is necessary. A commercial kitchen will have pretty powerful fans over the stove(s). Interestingly, as far as I can tell, the DOE analysis mainly relies on the residential market.
This is stupid beyond belief. Ceiling fans are incredibly efficient compared to, well, just about any electrical device that moves and/or cools the air. And the department’s economic analysis appears to largely ignore the first law of demand, impact on the number of firms in the industry, and the long-run price increases that will result. There is one mention of demand elasticity (p.144 of the linked pdf file):
To estimate the impacts of potential standards on shipments, in the preliminary analysis, DOE used a relative price elasticity of demand of -0.34, which is the value DOE has typically used for residential appliances. Because it is relatively easy to replace the cooling provided by ceiling fans with other means, ALA requested DOE use a higher relative price elasticity of demand for ceiling fans in its analyses. (ALA, No. 90 at pp. 12-13) Hunter Fan Company also expressed concern that DOE’s analysis did not show a significant drop in shipments resulting from moving from a no-standards case to efficiency level 1. (Hunter Fan Company, Public Meeting Transcript, No. 83 at p. 256)
In the absence of data necessary to estimate a price elasticity specific to ceiling fans, DOE continued to use a relative price elasticity of -0.34 in its NOPR analysis. In addition, DOE notes that a standard at EL 1, EL 2, or EL 3 would affect a relatively small portion of the ceiling fan market, as a majority of the hugger and standard ceiling fan market is at EL 3 or above. The incremental cost associated with EL 1, EL 2, and EL 3 compared to the baseline is relatively small in relation to the total price of the ceiling fan. For example, the installed cost of EL 1 and EL 2 is the same as that of the baseline for hugger and standard ceiling fans. Thus, even if DOE were to use a higher price elasticity, the shipments model would project only a modest decrease in shipments …
This is insane. First, the appliances DOE used were refrigerators, washing machines, and dishwashers. (See p.9A-1 in the linked file.) The idea that these are substitutes for ceiling fans is about as dumb as is possible. I have some data and will try to get a more accurate elasticity estimate. Frankly, that shouldn’t be hard. (I actually have a preliminary result. The elasticity is -1.3.)
Second, demand becomes more elastic as products become more narrowly defined. The demand for food is pretty inelastic. The demand for fruit is more elastic, although probably still on the inelastic side. The demand for apples is likely to be somewhat elastic. The demand for Fuji apples is almost certainly elastic. (If you need to brush up on elasticity, click here.) There are many substitutes for a ceiling fan, starting with an ordinary floor fan. Ceiling fans must be carefully mounted in the ceiling (d’oh). Floor fans merely need to be removed from a box and plugged in. The idea that shipments of ceiling fans will not decrease very much when higher costs push the price up is, frankly, silly. Which pretty much destroys the validity of the entire body of research. Damage to customers must include the effect of reduced shipments and loss of a substitute for, say, air conditioners.
Third, the analysis is out of date. As far as I can tell, DOE started investigating ceiling fan efficiency in 2014. They’re still using a lot of that data and analysis today. Ceiling fan manufacturers should at least force them to update their data and methodology. And, judging by the documents I’ve looked at, the amount spent on producing them likely is far more than any savings from reducing power consumption in ceiling fans. These include documents, reports, and an elaborate spreadsheet. (This link takes you to a post describing the possible dangers of this Excel workbook, as well as some safety measures you can take.)
Finally, saving the best for the last, the DOE itself has a recommendation for low-cost cooling. You guessed it, ceiling fans. Cognitive dissonance anyone?
After the conclusion, I’ll post two podcast discussions of this proposed regulation. Victor Davis Hanson, Jack Fowler, Jim Geraghty, and Greg Corombos discussed this on two separate podcasts: the Victor Davis Hanson Show (with Jack Fowler), and the Three Martini Lunch (Jim and Greg). I’ll include both the audio clips and transcripts of their discussion way down at the end of this piece.
Let’s look at the efficiency and economics.
Electricity Efficiency
A ceiling fan draws less than 0.5 ampere of current. Contrast that with, say, a 50 gallon electric water heater that pulls 37.5 amps. By comparison, our 8-bay QNAP TS-832PX network attached storage box draws 2.08 amps. (Data, sources, full descriptions of each appliance, and calculations are all in my Excel workbook. I’ll post it when I’m finished crunching numbers.)
The proposal would reduce ceiling fan electricity use by about 50%. The Department of Energy claims this will save consumers $39 over the life of the fan. Don’t bet on that. The same bureaucrats admit the increased equipment needed by fan manufacturers will total $86.6 million per year. I sure hope that amount isn’t per firm. From Fox News:
… the increased equipment will total $86.6 million per year, the department said …
Economics
The market for ceiling fans seems fairly competitive. Persistence Market Research reports that the top five firms control between 23 and 28 percent of the market. And all of them pretty much use the same basic technology. I’ll use the perfect competition model to analyze the impacts.
DOE used a “markup over unit cost” approach to calculate the impact of the cost increase on price. But there is no mention of the reduction in unit sales caused by the price increase.With lower sales, some firms will choose to leave the industry. Therefore, it’s safe to predict that the market price will rise, the number of firms will fall, and the number of ceiling fans bought by consumers will also fall. The demand curve slopes downward. A higher price lowers quantity demanded. If the DOE used their (incorrect) elasticity estimate, I could not find it.
Once the new quantity demanded is calculated, the next step is to figure out how many firms will leave the industry and the impact of that decision on market price.
Then there are problems with the data. After spending many hours tracking down their shipments data, I was disappointed to find there were no calculations. Instead, the Shipments tab in the Excel workbook contains only numbers typed into cells. Frustrating, especially since the table does not distinguish historical data from forecast data.
The history of energy saving appliances is not good. Generally, they have shorter life spans, cost more, and don’t really save that much money when all the costs are considered. If that’s true with ceiling fans, it’s a good bet that the forecast $39 saving will evaporate like the puff of smoke emitted by a failing electric motor.
Conclusion
I hope to finish part 2 in the next few weeks. This episode of “your tax dollars at work and play” has been brought to you by GonzoEcon.
Appendix:Two Conversations
About Ceiling Fans
Transcriptions via Otter.ai (with light editing by me). I recommend listening to the audio versions.
First, the Three Martini Lunch (Greg Corombos and Jim Geraghty).
Jon Gabriel on ceiling fans
SUMMARY KEYWORDS
biden, bad, governor, carter, gavin newsom, energy, towel, power generator, years, pillow, kamala, people, john, republicans, pick, ceiling fans, fan, backslash, latest, ceiling fan
SPEAKERS
Greg Corombos, Jon Gabriel
Greg Corombos 05:52
… [sponsor message deleted] All right, well, it’s gonna be a Biden rich Episode Three Martini lunch today. This time we’re going to be taking a look at a new policy from the Biden administration. So it’s less to do with him and what’s coming out of his energy department and former Michigan Governor Jennifer Granholm was running that department into the ground but according to Fox Business, ceiling fans are now the latest target in the Biden administration’s green agenda, sparking pushback from Republicans and manufacturers. The Department of Energy is proposing a rule that would require ceiling fans to be more energy efficient, arguing the move would save us households on energy costs, but they don’t. According to the Energy Department’s analysis, John, the new rules would save households about $39 over the lifespan of the fan $39 over the lifespan of the fan. Meanwhile, the cost of manufacturers associated with the increased equipment will total $86.6 million per year. And I don’t know John, I just got a hunch they might pass those extra costs on to consumers, which would mean you’ll be paying a lot more for your fan and it’s gonna take you a number of centuries for those energy savings to add up and even come close to evening out so what do you make of this latest bad example of policy and even worse math?
Jon Gabriel 08:23
This is totally fine. This is okay because won’t go into effect until 2028. They promise I don’t know how that helps anything. Okay, so we can put up a couple of years until up. Nobody can own a ceiling fan anymore. It’s just crazy. They’re just going down a list of one appliance after the other they announced similar things for water heaters for dishwashers for refrigerators. The list goes on and as everybody has experienced right now we had just called the washing machine repairman because our new sleek washing is down again. He was out here two weeks ago. So we all know that. They keep saying these things are more efficient, but they cost vastly more. They take longer to operate. They don’t do as good a job. It’s just happening again and again and again. And ceiling fans — I don’t even know if that is registered as an appliance and these are already energy efficient. It’s a fan. You know you’ll have a fan on your desk during the summer. These are not these are not high wattage appliances. They are not complicated. And this constant need to just meddle and tweak and metal and tweak it just enough already. I don’t know why the Republicans aren’t going to full hog bringing up bills and shutting this stuff down because no consumer wants this. No consumer wants to deal with this and we’ve already dealt with inflation, all these other economic insecurities. And it seems to be the Biden administration’s policy, especially the administrative state that they’re running, just to make American lives a little bit worse in everything that we do. Again, Republicans really have to jump on it and not by appearing on Fox and yelling, but pushing legislation and reversing some of this stuff, because they are going to keep pushing and as soon as this ceiling fan. They improve this time and by making our lives a little bit worse. They’re going to do it again in five years.
Greg Corombos 10:36
Yes, exactly. It’s the sacrifice that you need to make, John, while they gallivant all over the globe because their travel on their private jets is dwarfing your entire carbon footprint for your entire life. But nonetheless, they’re doing work to save the world as John Kerry told us earlier this year, But it was earlier this year there was a contractor at my mom’s home in Michigan, and he’s coming in to do some remodeling and he saw her old school washing machine, you know, the kind that actually lasts, she’s had it for a couple of decades. He’s like, “Don’t ever get rid of that. They last forever, They’re [the new models] not even designed to last very long. The smart ones you know, you get if you get it for 10 years to work. It’s you’re very, very lucky.” But they’re intentionally designed to not work after several years. So you have to go out and get another one. So what they’re throwing at you is not going to work. They’re already going after AC but I assume if they if they go over after it in a way that makes it impossible to use. That’s when you grab your pitchfork out there in Arizona, right?
Jon Gabriel 11:37
Yeah, mercifully. We dropped a small fortune on a new AC unit last summer. Because ours conveniently went out at least it was early in the summer, when it was a little bit bearable, but that is a necessity out here. And, every once in a while you see greenies, especially ensconced in a cubicle in Manhattan, or especially in the UK, demanding we just get rid of so much AC. No. Arizona will secede if that’s pushed on a national level,
Greg Corombos 12:10
If we can just get it down to half a degree in 50 years. Is there any proof that it’ll work? No. Okay, then we’re done here. Let’s move on. Thanks for that discussion.
Next, the Victor Davis Hanson podcast (Victor Davis Hanson and Jack Fowler):
Victor Davis Hanson on ceiling fans
SUMMARY KEYWORDS
people, ceiling fans, joe biden, victor, biden, electricity, bald eagles, amps, green, hoover institution, left, jack, ukraine, remember, victor davis hanson, destroy, guess, homes, put, energy
SPEAKERS
Victor Davis Hanson, Jack Fowler
[Note from Tony Lima: To match times in the audio track, subtract 47 seconds from the times shown.]
Jack Fowler 01:02
Hello ladies, hello, gentlemen, this is the Victor Davis Hanson show. I am Jack Fowler, the host. The star and namesake — that’s Victor Davis Hanson. He is the Martin and Illie Anderson senior fellow at the Hoover Institution and the Wayne and Marcia Buske Distinguished Fellow in History at Hillsdale College where he is about to head off to for a week or so, ,,, Victor has a website, the blade of Perseus. Its web address is VictorHanson.com. I’ll tell you a little more about that later in this podcast. Victor, some interesting things to talk about and one would seem mundane: ceiling fans. But guess what, like everything else in your home it’s something that the Biden administration wants to regulate. And it bespeaks a larger theology of green and we’ll get your thoughts on that, plus another a bunch of other interesting topics and one of them is about shouldn’t call it interesting. troubling. It’s Gold Star families irate still about how Joe Biden has treated the families of the 13 men and women who were killed in Afghanistan and a botched pull out their fury with the buck with President Biden himself and the administration. We’ll get your thoughts on these matters Victor right after these initial important messages. [commercial break] Back with the Victor Davis Hanson show. So, Victor, here’s a headline. This is from … Fox News, the Biden administration’s latest home appliance crackdown, ceiling fans are now the target. In the Biden administration’s green agenda. The Department of Energy and reading from an article here is proposing a rule that would require ceiling fans to be more energy efficient, arguing the move would save us households on energy costs, how much stricter while they calculate $39 over the lifespan of the new quote unquote, energy efficient fan. However, the cost to manufacturers associated with the increased equipment will total at $6.6 million per year. That has consequences. Victor, quoting now from the from the Republican members of Congress wrote a letter to Energy Secretary Jennifer Granholm said quote this rule would require numerous small business fan manufacturers to redesign their products and may put between 10 and 30% of small business ceiling fan manufacturers out of business. Who cares about them anyway picture right there is a God to worship also and even raise this factor. We just discussed this before coming on line. Speaking of fans, the big ones the big windmills, first cousins so the big brothers have ceiling fans. The queasy knocks of the sky that chop up bald eagles and all other protected species. Also, there’s a piece by Michael Shellenberger in the New York Post that’s out today, August 27. About the wind, wind farms in water and how they seem to be having a deleterious effect deadly effect on whales. Lot of whales are now beaching themselves. whales were the things we were supposed to save bald eagles with the things we were supposed to you can even have a bald eagle feather Victor victim Victor and all these things are true.
Victor Davis Hanson 04:48
Remember, we had some illegal aliens that killed bald eagles and then we were confronted with an intersectionality existential crisis. Every once in a while, Jack, you see these charts that people draw is kind of mocking the whole left but they have a hierarchy of whether you’re gay, green, black, brown, or trans feminist, how many points you get, and then which one quad is kind of like? Remember in civics class they have the Congress, the Supreme Court the executive branch with all the checks and balances, but you could check each other what was like which one can check the other one or hop? leapfrog over the one on the intersectionality chart? I don’t know the answer to that. I think trans now I think if you’re a trans polluter It’s okay. Whereas it’s it’s gone above green but I do think that green is above gayness race and almost anything else because remember the two illegal aliens killed bald eagles. And they were they didn’t do anything to them. But so maybe illegal aliens are up. I guess it’s trans illegal aliens and then green and then maybe, I don’t know black and then gay and then Latino and then Asian and then white. And then on married? I don’t know. But there’s an intersectionality chart that gives you points and if you’re green, trans, black, and atheist Europe they’re way high. Right? In this case. You know, I’ve been telling people as I’m speaking today, I have two guys that are still finishing this year long. We wiring up my 150 year old Victorian two storey old farmhouse and I mean there was like 45 circuits they took out they were all it was just a mouse and then they’re doing the final piece that resistance where they’re doing these circuit breakers sub panel and junction box connection to the outdoor to the outside line. It’s a huge job. But anyway, my point is that I’m starting to learn. I kind of was a really dangerous person with electricity. In other words, when I was farming, I knew enough to wire stuff but also enough to get in trouble. So with electricity, you either know what you’re doing or know nothing. Right? But I knew just enough to walk because they were finding some of the circuits I made that and they’re giving me lectures about how dangerous they were. But anyway, I know some about amps. So a ceiling fan. We were just wiring them about three months ago, a ceiling fan uses less than a half an amp per hour. And so when you’re talking about that just give you an example we just did yesterday the hot water heater, it was on a 12 gauge, 12 two wire and that was wrong. It should have been on 10 two wire but it was ancient wire. So we put it on 10 two and we wanted to see how many amps. We shut it down and after two days the water was cold so when you turned it on, every thermostat went on the little echo modulator heat pump didn’t and so it was pulling a lot of amps 22 amps. So what I’m getting that is and then you know I have a mini split in this office where and that’s about 18 to 20 amps. So what I’m getting at Jack is the average person with a little mini split 18 12,000 or 1800 18,000 BTUs or somebody with a hot water heater in this case, it’s a 50 gallon. They’re pulling 40 ceiling fans. Do you really believe that to take that little four amp draw from a ceiling fan and go down to what 2.2 amps? [Pretty sure Prof. Hanson means 0.4 amp draw being reduced to 0.2 amps.] You’re going to save anything? I mean … if I had 40 ceiling fans it would not take as much electricity as the water heater. It’s ridiculous. Why would you not the what they’re going to do is they’re either going to make them so expensive, or as they all do. They’re less, they’re less mechanically reliable. I had two pumps for my pool that were 30 years old. And when they were out when they finally broke down after 18 years, the code said they had to put on these electricity efficient ones and they I’ve been through three of them since, Jack, three. They last about three years and they burn out. So my point is that what they’re going to do is they’re going to force people to use they’re going to say well we have these ceiling fans are expensive. The new ones are not 100 bucks anymore. They’re 300 probably and they’re not reliable, they’ll break down and I’m just going to use my air conditioner. So they’re they’re going to drive people away from what is a very efficient, cheap way of doing it. And when you look at all the other things they’re doing, you as far as energy efficiency you ask as to why they’re doing it. And the answer is that they have an agenda to destroy affordable electricity generation. So here in California, we’re blowing up as I speak for dams on the Klamath River. And PG&E was told by the State and the Department of Energy federal it’s a three it’s a state and federal destruction. I think I’ve mentioned it that some of the money jacked from the state of the $500 million to blow up the four dams that have been there since the 20s. It came from a water bond to build dams so they just diverted the use. But this was what was I’m getting that 80,000 homes depend on cheap hydroelectric and they’re going to have to replace it what they’ve said. “Access to 80,000 homes. Don’t worry, there’s 40 million people in California.” So when they want to destroy something, then they deprecate the energy consequences when they go off on some unicorn chase. After ceiling fans and all of a sudden about point 4.5 amps 2.2 amps [Again, 0.45 and 0.22 amps] is incredibly important. It’s just mind boggling what they do. They like to destroy anything out there needless they’d like to destroy civilization they despise their grandparents. or great grandparents. They have no idea what those people suffered. I can remember what as a little kid 1963 My grandfather brought, for the first time a little tiny. It could have been a word three or 4000 BTUs window air conditioner you turned it on and it sounded like I don’t know an explosion. It was so loud. And I know it gulped electricity, but everybody would huddle around it in the daytime when we came in from work. It was just like heaven compared to a swamp cooler that we had, you know, we didn’t have to go up on the roof and change the past the water pumps didn’t break. It didn’t leak. It was just wonderful. And but they don’t understand what were those incremental advances in civilization they’re gonna they’re protecting us back. And so they destroy things and with the the nexus of all this, the reason that ties all of these crazy agendas together is they will not build downs for hydroelectric anymore. They’re destroying them. They will not build nuclear plants which would give us cheap, clean energy and they will not allow cheap, natural glatt gas, clean burning. It’s got to be solar and wind and they have no way to create energy at night. There’s just not a way to do it. And then cold weather we saw what happened in Texas, right and as long as you say solar or wind, you can murder anything you want. You can murder bald eagles, you can perish and peregrine falcons any rare species that gets caught and sucked into those things. It’s okay. Are any turtle migratory tortoise migratory path in the desert that’s disrupted okay. So in the case of the whales, you put all these things along the shore out in the ocean, it disrupts the sonar I guess that’s a term we would use high frequency sound of these whales and makes them go crazy or bumping into things or loser kids or whatever. They can’t. They’re female male can’t follow each other that the baby whales get disorientated, they can’t find the mother. Or they they introduce I guess all new traffic to areas that no but there weren’t boats because they have to go out there and build them and service them and and so you’re out disturbing in a pristine ocean. But that’s okay because it’s so called green. And notice where Joe Biden was today. It’s doing all this he’s he was at the art, archetypal green person, Tom Steyer. He was on the Board of Trustees of Stanford University. We remember he ran for president in 2016. The billionaire who made his fortune remember Jack and Indonesian coal burning plants, when he was young and in his penance for his mortal sins of fossil fuel. promulgation, he decided he was a radical green, so he’s got a huge mansion. Now think about he’s got a mansion in the Bay Area. He’s got other mansions. But Joe Biden is there. So Joe Biden has three homes and they’re all huge are like 4000 5000 square feet. He’s running one, Virginia’s got one in Wilmington. He’s got one on the beach and this Steyer characters got a huge one. And that’s where Joe Biden is right now in Tahoe and in Tahoe, right? Yes. And nobody ever says, Do you really need a mansion with all the energy and space when people are homeless? And they can’t afford something? And you’re a man of the left and think of all I mean, I have an old farmhouse and we have 40 circuits. I bet you the panel on that mansion is a 6000 amp panel. That’s just crazy. It’s like Al Gore.
Jack Fowler 15:36
Why is credit so yeah, why? Why is Joe
Victor Davis Hanson 15:39
Biden doing all these things? And he’s ever mansion. That’s not even necessary. Right? And when we had fires here in California, at the Aspen, they just said that the Forest Service was delighted that they burned down these forests cabins that had leases from the government, after people couldn’t afford to rebuild, they were happy, and then they hit him with a $50,000 bill to restore you know, break up the slab we store the house site to its 19th century condition equals 50 ground. So they do all these things to the average person. We’re getting back to all of our Anthony again and what he was trying to say about the Richmond north of Richmond, this this whole class to start to dictate into people and they’re totally exempt. From the consequences of their own ideology. And they are like John Kerry with his yacht or Al Gore with his huge home. They just feel that they’re blessed. They’re apparat, part of the apparat and it’s disgusting. And so when you don’t create affordable electricity, and you can’t, or you won’t, because you refuse to do hydro or natural gas, or clean burning coal or nuclear, then you have to go around and alter the lifestyles of everybody and look at every single consumer consumption of electricity that possible and you end up zeroing in on point five amp ceiling fans to get it down to point to size just blank blank. Ridiculous.
Jack Fowler 17:17
What’s the left are toasters, but would you be surprised if there was some Biden administration plan?
Victor Davis Hanson 17:23
We know what’s not working with them and we know what is we know that is that’s off the list. Gulfstream 4s are off the list and Citations are off the list. Third, third homes are off the list. Homes over 4000 square feet are off the list. Certain types of cars such as black SUV, Lincoln Navigator, a 15 mile a gallon behemoth are off the list. We know that so what are they going to go after? They’re gonna go after Oliver Anthony’s ceiling fan and his $750 eBay or Craigslist trailer that he bought used? That’s the point.
,,,
