Friday, October 02, 2009

The Good Old Days Are Right Now

The chart above shows the significant increases in the energy efficiency of home appliances over time, with the refrigerator registering the most dramatic improvement (data were purchased from the Association of Home Appliance Manufacturers website).

In 1980, the energy factor (EF, a standard measure of an appliance's overall energy efficiency) of a standard home refrigerator was 5.59, and by 2008 the EF increased almost three-fold to 15.50, for a 177.3% improvement in energy efficiency in only 28 years. The other standard home appliances in the chart also had significant improvements in energy efficiency, from a 41.5% increase for the room air-conditioner, to a 91.4% increase for the dishwasher (thanks to Dennis Gartman for alerting me to these data in a recent "The Gartman Letter").

If the energy efficiency of a refrigerator has almost tripled since 1980, what's happened to its price, measured by the cost of the time it takes an average American to earn enough income to purchase a standard refrigerator?

In 1979, the 17-cubic foot Kenmore refrigerator pictured below from a Sears catalog cost $469.95 (on sale at the "lowest price in 1979"), and the average
hourly wage then was $6.34 (Total: Private Industries), meaning that it would take 74.1 hours of work at the average hourly wage to earn enough income to purchase the refrigerator.

A 17.5 cubic-foot Whirlpool refrigerator (pictured below) is currently listed on the Sears website for sale at $524.99. At the current average hourly wage of $18.67, it would take the average American today only 28.1 hours of work to buy the refrigerator compared to 74.1 hours in 1979.


Bottom Line: A standard refrigerator today is not only almost 3 times more energy efficient than a comparable 1979-1980 model, its cost today is only about 1/3 the price of the 1979 model, measured in what is ultimately most important: our time. Put those two factors together, and the average American's refrigerator is almost nine times better than the refrigerator of 1980. Stated differently, if refrigerators hadn't fallen in price by almost a factor of 3 since 1980, and if they hadn't improved in energy efficiency by almost a factor of 3, Americans might be paying $1,500 today for a 17 cubic-foot refrigerator instead of $525, and it would be almost three times as costly to operate.

Despite our current economic problems and high unemployment, in many areas American consumers have never had it so good. Ever. The "good old days" are now.

18 Comments:

At 10/02/2009 2:56 PM, Blogger QT said...

Frigs have also become much larger. A passage from The Handbook of energy efficiency and renewable energy by Frank Kreith & D. Yogi Goswami offers some interesting info:

The average size of refrigerators has more than doubled from less than 10 cubic ft. in 1947 to over 20 cubic feet in recent years. Meanwhile the efficiency of refrigerators has increased dramatically. In the early 1960s, the average electricity consumptionof a new refrigerator was around 1,000 kWh/year and they were about 12 cubic feet. Since 2001k, new refrigerators consume less than 500 kWh/year and have adjusted volumes around 20 cubic feet. The net result is that current refrigerators, although 70% larger than those forty years ago consume about 50% less electricity.

 
At 10/02/2009 3:04 PM, Anonymous Anonymous said...

Note that this is due to the State of California making regulations, not the market because until recently efficiency was not high in customer decision making because electricity was so cheap. It also proves that if you orient engineers in one direction they can achieve wonders, by letting engineers do their work.
What is the energy star program but a government program to raise awareness of energy use?
Those who denounce government regulations must recognize that at least this one worked at no cost to the consumer.

 
At 10/02/2009 5:32 PM, Blogger Chuck said...

Add a microwave or two, 4 or 5 color tv's, desktop computer, laptop or two, enough lighting for stadium (non CFL off course), game console,3 or 4 cell phones, 2 or 3 ac units in a 3500+ sq ft McMansion , a pool than filters 24 hrs per day, misc other electronic gadgets and a heart attack when you get your health care and energy bill, water bill for the 10 zone sprinkler system, sewerage fees...it's the model for energy efficiency

 
At 10/02/2009 5:53 PM, Blogger QT said...

Good one, Chuck

 
At 10/02/2009 6:47 PM, Anonymous Anonymous said...

"that at least this one worked at no cost to the consumer."

No cost? Really? Or is that you can't see the cost?

 
At 10/02/2009 7:07 PM, Anonymous Anonymous said...

Note that this is due to the State of California making regulations ...

This study looks at the true cost of California "making regulations":

This study measures and reports the cost of regulation to small business in the State of California. It uses original analyses and a general equilibrium framework to identify and measure the cost of regulation as measured by the loss of economic output to the State’s gross product, after controlling for variables known to influence output. It also measures second order costs resulting from regulatory activity by studying the total impact – direct, indirect, and induced. The study finds that the total cost of regulation to the State of California is $492.994 billion which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs which is a tenth of the State’s population. Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.

California State University, Sacramento

Those who denounce government regulations must recognize that at least this one worked at no cost to the consumer.

Maybe you should be looking at the cost of regulation in the aggregate.

 
At 10/02/2009 7:16 PM, Anonymous Anonymous said...

Cool article on mandated efficiency and coordination effects from government interference in the market.

Keep it up.

Karl M

 
At 10/02/2009 10:53 PM, Blogger Greg said...

So why isn't the dollar worth 3 times as much?

 
At 10/02/2009 11:37 PM, Blogger OA said...

Anonymous said...

Note that this is due to the State of California making regulations, not the market because until recently efficiency was not high in customer decision making because electricity was so cheap.


Right, and who is it that regulates the price of electricity in California? Certainly not the market. California is legislating to counter the poor incentives from the controlled electricity rates.

Don't forget it was the legislators who ridiculously left the consumer rates fixed and let the generation side float a decade ago. So Enron and other entities figured out that demand wouldn't decrease no matter how high the generation rates went.

All California is doing is prudently targeting the most electrically intense thing in most houses.

 
At 10/03/2009 12:07 AM, Anonymous Anonymous said...

OA is right that CA screwed up on electric deregulation (how much did Ken Lay pay for that I wonder? Since Enron saw it as a great boon, its almost that they designed a system that made them a mint)
The fridge standards started out before the deregulation because the goal was to avoid building new power plants in the old regulated environment where new plants were going to be paid for by the rate payers since utilities ran on a cost plus basis.
Note that another story can be made with central air which has according to eia.gov gone from 7.34 in 1978 to 14+ today for new units for an essential doubling of efficency.

 
At 10/03/2009 12:12 AM, Anonymous Steve said...

Quite incredible the advances that have occurred in efficiency. I was hoping the government would pass a cash for clunkers program for appliances so I could update a number of appliances that I have.

 
At 10/03/2009 4:32 AM, Anonymous Anonymous said...

"The Good Old Days Are Right Now"...

Yeah I think that's a pretty good assessment...

I look at cars over the last 10 to 20 years...

I have had the experience that they run longer with less problems than they did in the 60's, 70's, and 80's...

I mean one can always be unlucky and get a lemon but by and large cars really are better...

 
At 10/03/2009 10:23 AM, Anonymous Phil | Best Air Conditioner Reviews said...

The energy star rating for an air conditioner only requires 10% greater efficiency than the federally mandated level. That means that for a smaller room air conditioner the overall savings is almost negligible. A lot of people actually tend to focus instead on noise levels and other bells and whistles instead which may explain why the 41.5% increase is staggeringly small compared to the refrigerator's improvements over time (considering they essentially use very similar technologies).

 
At 10/03/2009 6:03 PM, Anonymous Anonymous said...

I agree that the efficiency of room ac units is a good bit lower than central units, for example energy star for room ac is about 10.8 seer while it is 14 for central split units. So a new central unit is about 30% more efficient than a room unit.
In addition central units in use more energy than the room type. In the southern part of the US central air may cost more than heating. As a result a reduction of 50% in energy usage since the 1970's is large.

 
At 10/03/2009 7:00 PM, Blogger JimJinNJ said...

MP's conclusions make sense to me and seem to stand on their own. The half-full crowd can pick around the edges. It seems to me, one who generaly is biased against gov regulation, that it does sometimes work. We should be working to find the nature of successful ones and model future interventions thusly. It isn't a yes-no question. It is rather clear however that CA on balance gets it wrong more often than right. E.g., real thinking could have determined that the policies they were putting in place would/could lead to someone like Enron taking advantage of the system. But bec governments don't seem to use logic and analysis to address problems they create silliness that begets more silliness. A blind squirrel occasionally finds a nut.

 
At 10/03/2009 11:50 PM, Anonymous Anonymous said...

Yes a number of consumer goods are drastically better, remember carb icing in cars in cool weather, and as the video that has been going around that crashed a 59 chevy into a 2009 showing the improvement in crash safety.
A large part of it is the migration of computer tech into more and more things allowing them to get smarter. For example its is not unlikely that in 10 to 15 years the vision GM presented in the 1939 worlds fair of cars driving themselves may at least on some roads come true, darpa is leading tests on this for combat purposes now. Imagine if convoys in Iraq had just an armored humvee at each end and the trucks were driven by the folks in the humvees. If we can have uav, unmanned trucks in the middle of a convoy can't be to hard.

 
At 10/05/2009 8:59 AM, Anonymous Anonymous said...

Did you take into account that the refrigerators in the 70s tended to last much longer than those made today? And is it fair to compare the same refrigerator? Why not the one most widely purchased at the time?

 
At 10/05/2009 11:00 AM, Anonymous feeblemind said...

My sister recently bought one of those new 'energy efficient' refrigerators to store drugs in at her veterinary clinic after the old one died. But guess what? They are energy efficient because they don't have the cooling capacity of the old refrigerators. The new refrigerator could not keep the inside cool when the door was constantly being opened and closed during the day. Her alternatives were to find a good older refrigerator or by a "commercial grade" refrigerator at about 4 times the price. Like 'fuel efficient' automobiles, the efficiency comes at a cost as physics rears its ugly head.

 

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