Product Price Forecasting

The EES group conducts analyses to forecast price trends in appliances and equipment that are subject to efficiency standards, striving consistently to improve the accuracy of its forecast methodology. Until recently, the technical analyses conducted in support of U.S. energy conservation standards for residential appliances and commercial equipment have assumed that manufacturing costs and retail prices remain constant during the projected 30-year analysis period. Yet, there exists considerable evidence that manufacturing costs and consumer prices of residential appliances have decreased in real terms over the last several decades. This phenomenon is generally attributable to manufacturing efficiency gained with cumulative experience producing a certain good and is modeled by an empirical experience curve. Using price data from the Bureau of Labor Statistics, the EES group has developed U.S. experience curves for room air conditioners, clothes dryers, central air conditioners, furnaces, refrigerators, and freezers. These experience curves were incorporated into recent energy conservation standards analyses for these products. Including experience curves increases the national consumer net present value of potential standard levels. In some cases a potential standard level exhibits a net benefit when considering experience, whereas, without experience, it exhibits a net cost. These results highlight the importance of modeling more-representative market prices.