[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Rules and Regulations]
[Pages 43162-43213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16897]
[[Page 43161]]
Vol. 80
Tuesday,
No. 139
July 21, 2015
Part II
Department of Energy
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10 CFR Part 431
Energy Conservation Program: Energy Conservation Standards for
Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps;
Final Rule
Federal Register / Vol. 80 , No. 139 / Tuesday, July 21, 2015 / Rules
and Regulations
[[Page 43162]]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2012-BT-STD-0029]
RIN 1904-AC82
Energy Conservation Program: Energy Conservation Standards for
Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as
amended, prescribes energy conservation standards for various consumer
products and certain commercial and industrial equipment, including
packaged terminal air conditioner (PTAC) and packaged terminal heat
pump (PTHP) equipment. EPCA requires the U.S. Department of Energy
(DOE) to determine whether more-stringent standards for PTACs and PTHPs
would be technologically feasible and economically justified, and would
save a significant amount of energy. In this final rule, DOE is
adopting amended energy conservation standards for PTACs equivalent to
the PTAC standards in American National Standards Institute (ANSI)/
American Society of Heating, Refrigerating, and Air-Conditioning
Engineers (ASHRAE)/Illuminating Engineering Society (IES) Standard
90.1-2013. DOE is not amending the current energy conservation
standards for PTHPs, which are already equivalent to the PTHP standards
in ANSI/ASHRAE/IES Standard 90.1-2013. DOE has determined that adoption
of PTAC and PTHP standards more stringent than ANSI/ASHRAE/IES Standard
90.1-2013 is not economically justified.
DATES: The effective date of this rule is September 21, 2015.
Compliance with the amended standards established for standard-sized
PTACs in this final rule is required on January 1, 2017.
ADDRESSES: The docket, which includes Federal Register notices, public
meeting attendee lists and transcripts, comments, and other supporting
documents/materials, is available for review at regulations.gov. All
documents in the docket are listed in the regulations.gov index.
However, some documents listed in the index, such as those containing
information that is exempt from public disclosure, may not be publicly
available.
A link to the docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0029. This Web
page contains a link to the docket for this document on the
www.regulations.gov site. The www.regulations.gov Web page contains
simple instructions on how to access all documents, including public
comments, in the docket.
For further information on how to review the docket, contact Ms.
Brenda Edwards at (202) 586-2945 or by email:
[email protected].
FOR FURTHER INFORMATION CONTACT: Mr. Ronald Majette, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy, Building
Technologies Program, EE-5B, 1000 Independence Avenue SW., Washington,
DC 20585-0121. Telephone: (202) 586-7935. Email: [email protected].
Ms. Elizabeth Kohl, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC
20585-0121. Telephone: (202) 286-7796. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Final Rule
A. National Benefits
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for PTACs and PTHPs
III. General Discussion
A. Compliance Dates
B. Equipment Classes and Scope of Coverage
C. Test Procedure
D. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
E. Energy Savings
1. Determination of Savings
2. Significance of Savings
F. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
G. Additional Comments
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
B. Screening Analysis
C. Engineering Analysis
1. Methodology
2. Equipment Classes Analyzed
3. Cost Model
4. Baseline Efficiency Level
5. Incremental Efficiency Levels
6. Equipment Testing and Reverse Engineering
7. Cost-Efficiency Results
D. Markups to Determine Equipment Price
E. Energy Use Analysis
F. Life Cycle Cost and Payback Period Analyses
1. Equipment and Installation Costs
2. Unit Energy Consumption
3. Electricity Prices and Electricity Price Trends
4. Repair Costs
5. Maintenance Costs
6. Lifetime
7. Discount Rate
8. Base Case Efficiency Distribution
9. Payback Period Inputs
10. Rebuttable-Presumption Payback Period
G. Shipments Analysis
H. National Impact Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model
a. Government Regulatory Impact Model Key Inputs
b. Government Regulatory Impact Model Scenarios
c. Manufacturer Interviews
3. Discussion of Comments
K. Emissions Analysis
L. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Development of Social Cost of Carbon Values
c. Current Approach and Key Assumptions
2. Social Cost of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Commercial Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash Flow Analysis Results
b. Direct Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusions
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
[[Page 43163]]
B. Review Under the Regulatory Flexibility Act
1. Description and Estimated Number of Small Entities Regulated
a. Methodology for Estimating the Number of Small Entities
b. Manufacturer Participation
c. PTAC and PTHP Industry Structure and Nature of Competition
2. Description and Estimate of Compliance Requirements
3. Duplication, Overlap, and Conflict With Other Rules and
Regulations
4. Significant Alternatives to the Rule
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Summary of the Final Rule
Title III, Part C \1\ of the Energy Policy and Conservation Act of
1975 (EPCA or the Act) (42 U.S.C. 6291, et. seq.) established the
Energy Conservation Program for Certain Industrial Equipment.\2\ This
equipment includes packaged terminal air conditioners (PTACs) and
packaged terminal heat pumps (PTHPs), the subjects of this document.
The current Federal energy conservation standards for PTAC and PTHP
equipment were adopted in 2008. 73 FR 58772 (October 7, 2008).
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part C was redesignated Part A-1.
\2\ All references to EPCA in this document refer to the statute
as amended through the American Energy Manufacturing Technical
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
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EPCA, as amended, requires the U.S. Department of Energy (DOE) to
consider amending the existing Federal energy conservation standard for
certain types of listed commercial and industrial equipment, including
packaged terminal air conditioners and heat pumps, each time the
American Society of Heating, Refrigerating and Air-Conditioning
Engineers (ASHRAE) Standard 90.1, Energy Standard for Buildings Except
Low-Rise Residential Buildings, is amended with respect to such
equipment. (42 U.S.C. 6313(a)(6)(A)) On October 9, 2013, ASHRAE
Standard 90.1-2013 raised the standards for standard-size PTAC
equipment EPCA further directs that if ASHRAE Standard 90.1 is amended,
DOE must adopt amended energy conservation standards at the new
efficiency level in ASHRAE Standard 90.1, unless clear and convincing
evidence supports a determination that adoption of a more-stringent
efficiency level as a national standard would produce significant
additional energy savings and be technologically feasible and
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii))
Pursuant to EPCA, DOE must also, every six years, evaluate each
class of covered equipment and publish either a notice of the
determination that standards for the product do not need to be amended
or a notice of proposed rulemaking including new proposed standards.
(42 U.S.C. 6313(a)(6)(C)(i)) Under the six-year look back requirement,
DOE must also demonstrate clear and convincing evidence supporting
adoption of a national standard at a more-stringent efficiency level
than that in ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(C)) Conduct of
a rulemaking subsequent to ASHRAE action satisfies this six-year look
back requirement.
Based on the analysis supporting this final rule, DOE is not able
to show with clear and convincing evidence that energy conservation
standards for PTAC and PTHP equipment at any of the considered
efficiency levels that are more stringent than the minimum level
specified in the ANSI/ASHRAE/IES Standard 90.1-2013 are economically
justified. Therefore, in accordance with these and other statutory
provisions discussed in this document, DOE is amending energy
conservation standards for standard-sized PTAC equipment to be
equivalent to the standards for standard-sized PTAC equipment found in
ANSI/ASHRAE/IES Standard 90.1-2013.
The amended standards for PTACs, which are the minimum allowable
cooling efficiency, are shown in Table I.1. These amended standards
apply to all standard-sized PTAC equipment manufactured in, or imported
into, the United States on or after the compliance date indicated in
Table I.1. The standards for PTHP equipment remain unchanged.
Table I.1--Amended Energy Conservation Standards for Standard-Sized PTAC Equipment
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Equipment class
------------------------------------------------------------------------- Minimum cooling Compliance date
Equipment Category Cooling capacity efficiency * ***
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PTAC............................ Standard Size **.. <7,000 Btu/h...... EER = 11.9........ January 1, 2017.
>=7,000 Btu/h and EER = 14.0 -
<=15,000 Btu/h. (0.300 x Cap
[dagger][dagger]).
>15,000 Btu/h..... EER = 9.5.........
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* For equipment rated according to the DOE test procedure, Air Conditioning, Heating, and Refrigeration
Institute (AHRI) Standard 310/380-2014.
** Standard size refers to PTAC equipment with wall sleeve dimensions greater than or equal to 16 inches high,
or greater than or equal to 42 inches wide.
*** Amended standards shall become effective for equipment manufactured on or after a date which is two years
after the effective date of the applicable minimum energy efficiency requirement in the amended ASHRAE/IES
standard. (42 U.S.C. 6313(a)(6)(D)(i))
[dagger][dagger] Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F
outdoor dry-bulb temperature.
II. Introduction
The following section briefly discusses the statutory authority
underlying this final rule, as well as some of the relevant historical
background related to the establishment of standards for PTACs and
PTHPs.
A. Authority
Title III, Part C \3\ of EPCA (42 U.S.C. 6291, et. seq.),
established the Energy Conservation Program for Certain Industrial
Equipment, which includes the PTAC and PTHP equipment that is the
subject of this final rule.\4\ In general, this program addresses the
energy efficiency of certain types of commercial
[[Page 43164]]
and industrial equipment. Relevant provisions of the Act include
definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C.
6313), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C.
6315), and the authority to require information and reports from
manufacturers (42 U.S.C. 6316).
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\3\ For editorial reasons, upon codification in the U.S. Code,
Part C was re-designated Part A-1.
\4\ All references to EPCA in this document refer to the statute
as amended through the American Energy Manufacturing Technical
Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
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EPCA contains mandatory energy conservation standards for
commercial heating, air-conditioning, and water-heating equipment.
Specifically, EPCA sets standards for small, large, and very large
commercial package air-conditioning and heating equipment, PTACs and
PTHPs, warm-air furnaces, packaged boilers, storage water heaters,
instantaneous water heaters, and unfired hot water storage tanks. (42
U.S.C. 6313(a)) EPCA established Federal energy conservation standards
that generally correspond to the levels in ASHRAE Standard 90.1, as in
effect on October 24, 1992 (i.e., ASHRAE/Illuminating Engineering
Society of North America (IESNA) Standard 90.1-1989), for each type of
covered equipment listed in 42 U.S.C. 6313(a).
EPCA requires that DOE conduct a rulemaking to consider amended
energy conservation standards for a variety of enumerated types of
commercial heating, ventilating, and air-conditioning equipment
(including PTACs and PTHPs) each time ASHRAE Standard 90.1 is amended
with respect to the standard levels or design requirements applicable
to such equipment. (42 U.S.C. 6313(a)(6)(A)) Such review is to be
conducted in accordance with the procedures established for ASHRAE
equipment under 42 U.S.C. 6313(a)(6). According to 42 U.S.C.
6313(a)(6)(A), for each type of equipment, EPCA directs that if ASHRAE
Standard 90.1 is amended, DOE must publish in the Federal Register an
analysis of the energy savings potential of amended energy efficiency
standards within 180 days of the amendment of ASHRAE Standard 90.1. (42
U.S.C. 6313(a)(6)(A)(i)) EPCA further directs that DOE must adopt
amended standards at the new efficiency level specified in ASHRAE
Standard 90.1, unless clear and convincing evidence supports a
determination that adoption of a more-stringent level would produce
significant additional energy savings and be technologically feasible
and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) In addition,
EPCA requires DOE to review its already-established energy conservation
standards for ASHRAE equipment every six years. (42 U.S.C.
6313(a)(6)(C))
If DOE proposes an amended standard for ASHRAE equipment at levels
more stringent than those in ASHRAE Standard 90.1, DOE must determine,
after receiving comments on the proposed standard, whether the benefits
of the standard exceed its burdens by considering, to the maximum
extent practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the product in the type (or class) compared to any increase in
the price, initial charges, or maintenance expenses of the products
likely to result from the standard;
(3) The total projected amount of energy savings likely to result
directly from the standard;
(4) Any lessening of the utility or the performance of the products
likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy conservation; and
(7) Other factors the Secretary considers relevant.
(42 U.S.C. 6313(a)(6)(B)(ii))
Because ASHRAE did not update its efficiency levels for PTACs and
PTHPs in ANSI/ASHRAE/IES Standard 90.1-2010, DOE began this rulemaking
by analyzing amended standards consistent with the six-year look back
procedures defined under 42 U.S.C. 6313(a)(6)(C). However, before DOE
could finalize this rule, ASHRAE acted on October 9, 2013 to adopt
ANSI/ASHRAE/IES Standard 90.1-2013. This revision of ASHRAE Standard
90.1 contained amended standard levels for PTACs, thereby triggering
DOE's statutory obligation under 42 U.S.C. 6313(a)(6)(A) to promulgate
an amended uniform national standard at those levels unless DOE
determines that there is clear and convincing evidence supporting the
adoption of more-stringent energy conservation standards than the
ASHRAE levels. Consequently, DOE prepared an analysis of the energy
savings potential of amended standards at the ANSI/ASHRAE/IES Standard
90.1-2013 levels (as required by 42 U.S.C. 6313(a)(6)(A)(i)) and
updated the proposed rule and its accompanying analyses to reflect
appropriate statutory provisions, timelines, and compliance dates.
ANSI/ASHRAE/IES Standard 90.1-2013 did not contain amended standard
levels for PTHPs, and the PTHP standard levels published in ANSI/
ASHRAE/IES Standard 90.1-2013 are equivalent to the current Federal
minimum standards for PTHPs.
DOE is adopting amended standards for PTAC equipment equivalent to
those set forth in ANSI/ASHRAE/IES Standard 90.1-2013. DOE is not
adopting amended standards for PTHP equipment.
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not
prescribe an amended or new standard if interested persons have
established by a preponderance of the evidence that the standard is
likely to result in the unavailability in the United States of any
covered product type (or class) of performance characteristics
(including reliability), features, sizes, capacities, and volumes that
are substantially the same as those generally available in the United
States. (42 U.S.C. 6313(a)(6)(B)(iii)(II))
B. Background
1. Current Standards
In a final rule published on October 7, 2008 (73 FR 58772), DOE
prescribed the current energy conservation standards for all standard
size PTAC and PTHP equipment manufactured on or after September 30,
2012, and for all non-standard size PTAC and PTHP equipment
manufactured on or after September 30, 2010. (42 U.S.C. 6313(a)(3)) The
current energy conservation standards align with ANSI/ASHRAE/IES
Standard 90.1-2010. These levels are expressed in energy efficiency
ratio (EER) for the cooling mode and in coefficient of performance
(COP) for the heating mode. EER is defined as ``the ratio of the
produced cooling effect of an air conditioner or heat pump to its net
work input, expressed in Btu/watt-hour.'' 10 CFR 431.92. COP is defined
as ``the ratio of produced cooling effect of an air conditioner or heat
pump (or its produced heating effect, depending on model operation) to
its net work input, when both the cooling (or heating) effect and the
net work input are expressed in identical units of measurement.'' 10
CFR 431.92.
The current standards for PTACs and PTHPs are set forth in Table
II.1.
[[Page 43165]]
Table II.1--Federal Energy Efficiency Standards for PTACs and PTHPs
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Equipment class
--------------------------------------------------------------------------------------- Efficiency level *
Equipment type Sub-category Cooling capacity
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PTAC............................. Standard Size **......... <7,000 Btu/h............ EER = 11.7.
>=7,000 Btu/h and EER = 13.8 - (0.300 x
<=15,000 Btu/h. Cap [dagger][dagger]).
>15,000 Btu/h........... EER = 9.3.
Non-Standard Size <7,000 Btu/h............ EER = 9.4.
[dagger].
>=7,000 Btu/h and EER = 10.9 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
>15,000 Btu/h........... EER = 7.7.
PTHP............................. Standard Size **......... <7,000 Btu/h............ EER = 11.9.
COP = 3.3.
>=7,000 Btu/h and EER = 14.0 - (0.300 x
<=15,000 Btu/h. Cap [dagger][dagger]).
COP = 3.7 - (0.052 x Cap
[dagger][dagger]).
>15,000 Btu/h........... EER = 9.5.
COP = 2.9.
Non-Standard Size <7,000 Btu/h............ EER = 9.3.
[dagger]. COP = 2.7.
>=7,000 Btu/h and EER = 10.8 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
COP = 2.9 - (0.026 x Cap
[dagger][dagger]).
>15,000 Btu/h........... EER = 7.6.
COP = 2.5.
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* For equipment rated according to ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb
temperature for air-cooled products and evaporatively-cooled products and at 85 [deg]F entering water
temperature for water cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches
high, or greater than or equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high
and less than 42 inches wide. ASHRAE/IESNA Standard 90.1-1999 also includes a factory labeling requirement for
non-standard size PTAC and PTHP equipment as follows: ``MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO
BE INSTALLED IN NEW CONSTRUCTION PROJECTS.''
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F outdoor dry-bulb temperature.
2. History of Standards Rulemaking for PTACs and PTHPs
On October 29, 1999, ASHRAE adopted ASHRAE/IESNA Standard 90.1-
1999, ``Energy Standard for Buildings Except Low-Rise Residential
Building,'' which included amended efficiency levels for PTACs and
PTHPs. In amending the ASHRAE/IESNA Standard 90.1-1989 levels for PTACs
and PTHPs, ASHRAE acknowledged the physical size constraints among the
varying sleeve sizes on the market. Specifically, the wall sleeve
dimensions of the PTAC and PTHP can limit the attainable energy
efficiency of the equipment. Consequently, ASHRAE/IESNA Standard 90.1-
1999 used the equipment classes defined by EPCA, which are
distinguished by equipment type (i.e., air conditioner or heat pump)
and cooling capacity, and further separated these equipment classes by
wall sleeve dimensions.\5\ Table II.2 shows the efficiency levels in
ASHRAE/IESNA Standard 90.1-1999 for PTACs and PTHPs.
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\5\ Prior to 1999, ASHRAE/IESNA Standard 90.1 provided one
efficiency standard for all PTAC and PTHP and did not have different
standards by dimension. ASHRAE/IESNA Standard 90.1-1999 increased
the standards for all classes and established more stringent
standards for ``new construction'' than for ``replacements.'' DOE
energy conservation standards for PTACs and PTHPs did not
distinguish between wall sleeve dimensions for standard and non-
standard size units until 2010 (for non-standard size) and 2012 (for
standard size).
Table II.2--ASHRAE/IESNA Standard 90.1-1999 Energy Efficiency Levels for PTACs and PTHPs
----------------------------------------------------------------------------------------------------------------
Equipment class ASHRAE/IESNA Standard
--------------------------------------------------------------------------------------- 90.1-1999 efficiency
Equipment Category Cooling capacity levels *
----------------------------------------------------------------------------------------------------------------
PTAC............................. Standard Size **......... <7,000 Btu/h............ EER = 11.0.
>=7,000 Btu/h and EER = 12.5 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
>15,000 Btu/h........... EER = 9.3.
Non-Standard Size <7,000 Btu/h............ EER = 9.4.
[dagger].
>=7,000 Btu/h and EER = 10.9 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
>15,000 Btu/h........... EER = 7.7.
PTHP............................. Standard Size **......... <7,000 Btu/h............ EER = 10.8.
COP = 3.0.
>=7,000 Btu/h and EER = 12.3 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
COP = 3.2 - (0.026 x Cap
[dagger][dagger]).
>15,000 Btu/h........... EER = 9.1.
COP = 2.8.
Non-Standard Size <7,000 Btu/h............ EER = 9.3.
[dagger]. COP = 2.7.
>=7,000 Btu/h and EER = 10.8 - (0.213 x
<=15,000 Btu/h. Cap [dagger][dagger]).
COP = 2.9 - (0.026 x Cap
[dagger][dagger]).
[[Page 43166]]
>15,000 Btu/h........... EER = 7.6.
COP = 2.5.
----------------------------------------------------------------------------------------------------------------
* For equipment rated according to ARI standards, all EER values must be rated at 95 [deg]F outdoor dry-bulb
temperature for air-cooled products and evaporatively-cooled products and at 85 [deg]F entering water
temperature for water cooled products. All COP values must be rated at 47 [deg]F outdoor dry-bulb temperature
for air-cooled products, and at 70 [deg]F entering water temperature for water-source heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches
high, or greater than or equal to 42 inches wide.
[dagger] Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high
and less than 42 inches wide. ASHRAE/IESNA Standard 90.1-1999 also includes a factory labeling requirement for
non-standard size PTAC and PTHP equipment as follows: ``MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO
BE INSTALLED IN NEW CONSTRUCTION PROJECTS.''
[dagger][dagger] Cap means cooling capacity in kBtu/h at 95 [deg]F outdoor dry-bulb temperature.
Following the publication of ASHRAE/IESNA Standard 90.1-1999, DOE
analyzed whether more stringent levels would result in significant
additional energy conservation of energy and be technologically
feasible and economically justified. The report ``Screening Analysis
for EPACT-Covered Commercial [Heating, Ventilating and Air-
Conditioning] HVAC and Water-Heating Equipment'' (commonly referred to
as the 2000 Screening Analysis) \6\ summarizes this analysis. On
January 12, 2001, DOE published a final rule for commercial HVAC and
water heating equipment, which concluded that the 2000 Screening
Analysis indicated a reasonable possibility of finding ``clear and
convincing evidence'' that more stringent standards for PTACs and PTHPs
``would be technologically feasible and economically justified and
would result in significant additional conservation of energy.'' 66 FR
3336, 3349. Under EPCA, these are the criteria for DOE adoption of
standards more stringent than those found in ASHRAE/IESNA Standard
90.1. (42 U.S.C. 6313(a)(6)(A)(ii)(II))
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\6\ ``Energy Conservation Program for Consumer Products:
Screening Analysis for EPACT-Covered Commercial HVAC and Water-
Heating Equipment Screening Analysis,'' U.S. Department of Energy,
Office of Energy Efficiency and Renewable Energy. April 2000.
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In addition, on March 13, 2006, DOE issued a Notice of Availability
(NOA), in which DOE revised the energy savings analysis from the 2000
Screening Analysis. 71 FR 12634. DOE stated that, even though the
revised analysis reduced the potential energy savings for PTACs and
PTHPs that might result from more stringent standards than the
efficiency levels specified in ASHRAE/IESNA Standard 90.1-1999, there
was a possibility that clear and convincing evidence would support more
stringent standards. Therefore, DOE stated in the NOA that it was
considering more stringent standard levels than the efficiency levels
specified in ASHRAE/IESNA Standard 90.1-1999 for PTACs and PTHPs
through a separate rulemaking. 71 FR 12639. On March 7, 2007, DOE
issued a final rule stating that DOE had decided to explore more
stringent efficiency levels than those in ASHRAE/IESNA Standard 90.1-
1999 for PTACs and PTHPs through a separate rulemaking. 72 FR 10038,
10044.
In January 2008, ASHRAE published ANSI/ASHRAE/IESNA Standard 90.1-
2007, which reaffirmed the definitions and efficiency levels for PTACs
and PTHPs in ASHRAE/IESNA Standard 90.1-1999. On October 7, 2008, DOE
published a final rule amending energy conservation standards for PTACs
and PTHPs (2008 final rule). 73 FR 58772. The 2008 final rule divided
PTACs and PTHPs into two equipment classes, standard size and non-
standard size, based on the wall sleeve dimensions of the equipment.
Prior DOE energy conservation standards for PTACs and PTHPs had not
distinguished between standard and non-standard size units. Table II.1
shows the energy conservation standards for PTACs and PTHPs, as amended
by the 2008 final rule. Compared to ASHRAE/IESNA Standard 90.1-1999,
the standards in the 2008 final rule were identical for non-standard
sized PTACs and PTHPs, were more stringent for standard-size PTACs and
PTHPs (except for standard-size PTACs with capacity greater than 15,000
Btu/h, for which the standards in ASHRAE/IESNA Standard 90.1-1999 and
the 2008 final rule were equivalent).
In October 2010, ASHRAE published ANSI/ASHRAE/IES Standard 90.1-
2010, which reaffirmed the efficiency levels for non-standard size
PTACs and PTHPs and increased the efficiency levels for standard size
PTACs and PTHPs to match the DOE standards, effective as of October 8,
2012. Hence, DOE did not consider revision of PTAC and PTHP standards
at that time.
On February 22, 2013, DOE published a notice of public meeting and
availability of the framework document (``February 2013 Framework
Document'') regarding energy conservation standards for PTACs and
PTHPs. 78 FR 12252.
On October 9, 2013, ASHRAE published ANSI/ASHRAE/IES Standard 90.1-
2013, which reaffirmed the efficiency levels for standard size PTHPs
and for nonstandard size PTACs and PTHPs, and which increased the
cooling efficiency levels for standard size PTACs to equal the cooling
efficiency levels for standard size PTHPs, effective as of January 1,
2015. The issuance of ANSI/ASHRAE/IES 90.1-2013 triggered DOE's
statutory obligation under 42 U.S.C. 6313(a)(6)(A) to promulgate an
amended uniform national standard for PTACs at those levels unless DOE
determined that there is clear and convincing evidence supporting the
adoption of more-stringent energy conservation standards than the
ASHRAE levels.
On September 16, 2014, DOE published a notice of proposed
rulemaking (``September 2014 NOPR'') with proposed energy conservation
standards for PTACs and PTHPs. 79 FR 55538. On October 29, 2014, DOE
hosted a public meeting to discuss the proposed standards. DOE received
a number of comments from interested parties; the parties are
summarized in Table II.3. DOE considered these comments in the
preparation of the final rule. Relevant comments, and DOE's responses,
are provided in the appropriate sections of this document.
[[Page 43167]]
Table II.3--Interested Parties Providing Comments
------------------------------------------------------------------------
Name Abbreviation Type *
------------------------------------------------------------------------
Air-Conditioning, Heating and AHRI............... IR
Refrigeration Institute.
The U.S. Chamber of Commerce, The Associations... TA
the American Chemistry Council,
the American Forest & Paper
Association, the American Fuel
& Petrochemical Manufacturers,
the American Petroleum
Institute, the Council of
Industrial Boiler Owners, the
National Association of
Manufacturers, the National
Mining Association, the
National Oilseed Processors
Association, and the Portland
Cement Association.
Appliance Standards Awareness ASAP............... EA
Project.
Appliance Standards Awareness ASAP et al......... EA
Project, Alliance to Save
Energy, American Council for an
Energy-Efficient Economy,
Natural Resources Defense
Council, Northwest Energy
Efficiency Alliance.
Edison Electric Institute....... EEI................ U
Environmental Defense Fund, EDF et al.......... EA
Institute for Policy Integrity
at New York University School
of Law, Natural Resources
Defense Council, Union of
Concerned Scientists.
Environmental Investigation EIAI............... EA
Agency International.
General Electric................ GE................. M
Goodman Manufacturing Company, Goodman............ M
L.P.
Pacific Gas and Electric Company PG&E............... U
Pacific Gas and Electric CA IOUs............ U
Company, Southern California
Gas Company, San Diego Gas and
Electric, Southern California
Edison.
Southern Company Services....... SCS................ U
------------------------------------------------------------------------
* IR: Industry Representative; M: Manufacturer; EA: Efficiency/
Environmental Advocate; TA: Trade Association; U: Utility
III. General Discussion
A. Compliance Dates
ASHRAE adopted a revised ANSI/ASHRAE/IES Standard 90.1-2013, which
increases minimum efficiency standards for PTACs. The revision of the
ANSI/ASHRAE/IES standard requires that the Federal standard for PTAC
equipment become effective on or after a date two years after the
effective date of the applicable minimum energy efficiency requirement
in the amended ANSI/ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)(i))
The effective date of the amended ANSI/ASHRAE/IES standards for PTACs
is January 1, 2015. Therefore, PTAC equipment manufactured on or after
January 1, 2017, will be required to meet the amended ANSI/ASHRAE/IES
standard adopted as the Federal standard.
B. Equipment Classes and Scope of Coverage
When evaluating and establishing energy conservation standards, DOE
divides covered equipment into equipment classes by the type of energy
used or by capacity or other performance-related features that
justifies a different standard. In making a determination whether a
performance-related feature justifies a different standard, DOE must
consider such factors as the utility to the consumer of the feature and
other factors DOE determines are appropriate.
Existing energy conservation standards divide PTACs and PTHPs into
twelve equipment classes based whether the equipment is an air
conditioner or heat pump; the equipment's cooling capacity; and the
equipment's wall sleeve dimensions, which fall into two categories:
Standard size (PTAC or PTHP equipment with wall sleeve
dimensions greater than or equal to 16 inches high, or greater than or
equal to 42 inches wide)
Non-standard size (PTAC or PTHP equipment with wall sleeve
dimensions less than 16 inches high and less than 42 inches wide)
Goodman requested that DOE consider defining PTAC and PTHP
equipment as ``space-constrained products'' in a manner similar to the
current definition in 10 CFR 430.2. Goodman stated that the standard
proposed in the September 2014 NOPR would likely not warrant an
increase in the size of standard size PTACs and PTHPs. However, Goodman
stated that if there is a continual increase in the energy conservation
standard for PTACs and PTHPs, manufacturers likely would need to
increase the physical size of the equipment, which would significantly
impact consumer utility and/or the cost of installation. (Goodman, No.
31 at p. 2-3) \7\ DOE understands that the current definition of PTAC
and PTHP equipment does not place limits on the physical dimensions of
PTAC and PTHP equipment. (42 U.S.C. 6311(10)) Over the past 25 years,
the industry has settled on conventional wall sleeve dimensions for
PTACs and PTHPs that are 16 inches high by 42 inches wide. The
installation cost for equipment that exceeds the conventional cross
section would be high, because installation could require alterations
to existing wall sleeve openings in building structures. DOE accounts
for installation costs in the life cycle cost and payback period
analyses used to evaluate increased standard levels. These analyses
would account for any increased installation costs resulting from
manufacturers increasing the cross section of their equipment.
Therefore, DOE does not define PTACs and PTHPs as space-constrained
equipment.
---------------------------------------------------------------------------
\7\ A notation in the form ``Goodman, No. 31 at p. 2-3''
identifies a written comment: (1) Made by Goodman Manufacturing
Company (``Goodman''); (2) recorded in document number 31 that is
filed in the docket of the PTAC energy conservation standards
rulemaking (Docket No. EERE-2012-BT-STD-0029) and available for
review at www.regulations.gov; and (3) which appears on page 2-3 of
document number 31.
---------------------------------------------------------------------------
DOE is not amending energy conservation standards for non-standard
size PTAC and PTHP equipment in this rulemaking because this equipment
class represents a small and declining portion of the market, and due
to a lack of adequate information to analyze non-standard size units.
The shipments analysis conducted for the 2008 final rule projected that
shipments of non-standard size PTACs and PTHPs would decline from
approximately 30,000 units in 2012 (6.6% of the entire PTAC and PTHP
market) to approximately 16,000 units in 2042 (2.4% of the entire PTAC
and PTHP market).\8\
---------------------------------------------------------------------------
\8\ See DOE's discussion regarding shipment projections for
standard and non-standard PTAC and PTHP equipment and the results of
shipment projections in the PTAC and PTHP energy conservation
standard technical support document at: http://www1.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/ptac_pthp_tsd/chapter_10.pdf (Chapter 10, Section 10.5).
---------------------------------------------------------------------------
[[Page 43168]]
C. Test Procedure
DOE's current energy conservation standards for PTACs and PTHPs are
expressed in terms of the energy efficiency ratio (EER, in Btu/Watt-
hour) for cooling efficiency and coefficient of performance (COP,
unitless) for heating efficiency.
DOE's test procedures for PTACs and PTHPs is codified at Title 10
of the Code of Federal Regulations (CFR), Sec. 431.96. The test
procedures were established on December 8, 2006 in a final rule that
incorporated by reference the American National Standards Institute's
(ANSI) and AHRI Standard 310/380-2004, ``Standard for Packaged Terminal
Air-Conditioners and Heat Pumps'' (ANSI/AHRI Standard 310/380). 71 FR
71340, 71371. DOE amended the test procedures for PTACs and PTHPs on
June 30, 2015 (80 FR 37136).
The test procedures applicable to PTAC and/or PTHP equipment are
incorporated by reference at 10 CFR 431.95(a)(3). They include (1) AHRI
Standard 310/380-2014, (2) ANSI/ASHRAE Standard 16-1983 (RA 2014),
``Method of Testing for Rating Room Air Conditioners and Packaged
Terminal Air Conditioners'' (``ANSI/ASHRAE 16''); (2) ANSI/ASHRAE
Standard 58-1986 (RA 2014), ``Method of Testing for Rating Room Air
Conditioner and Packaged Terminal Air Conditioner Heating Capacity''
(``ANSI/ASHRAE 58''); and (3) ANSI/ASHRAE Standard 37-2009, ``Methods
of Testing for Rating Electrically Driven Unitary Air-Conditioning and
Heat Pump Equipment'' (``ANSI/ASHRAE 37'').
The California Utilities requested that the test procedure standard
for PTAC and PTHP include testing of equipment in operation modes
required by ASHRAE 90.1-2013. (CA IOUs, No. 33 at p. 5) The California
Utilities also commented that that PTHP equipment listing a COP should
certify that it meets the requirements of ASHRAE 90.1-2013 regarding
control of the electric resistance strip heater during the ``quick
heating'' mode. (CA IOUs, No. 33 at p. 4-5) Goodman commented regarding
the test procedure NOPR for PTACs and PTHPs and requested that DOE
maintain psychrometric testing as an option within the federal test
procedures. (Goodman, No. 31 at p. 4). DOE responded to these comments
in the rulemaking to amend the PTAC and PTHP test procedures. The
docket Web page for the PTAC and PTHP test procedure rulemaking can be
found at: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-TP-
0032.
D. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. DOE then
determines which of those means for improving efficiency are
technologically feasible. DOE considers technologies incorporated in
commercially available equipment or in working prototypes to be
technologically feasible. 10 CFR part 430, subpart C, appendix A,
section 4(a)(4)(i).
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on equipment utility or availability; and (3) adverse impacts
on health or safety. 10 CFR part 430, subpart C, appendix A, section
4(a)(4)(ii)-(iv). Section IV.B of this document discusses the results
of the screening analysis for PTACs and PTHPs, particularly the designs
DOE considered, those it screened out, and those that are the basis for
the TSLs in this rulemaking. For further details on the screening
analysis for this rulemaking, see chapter 4 of the final rule Technical
Support Document (TSD).
2. Maximum Technologically Feasible Levels
When DOE adopts (or does not adopt) an amended energy conservation
standard for a type or class of covered equipment, it must determine
the maximum improvement in energy efficiency or maximum reduction in
energy use that is technologically feasible for such equipment. DOE
determined the maximum technologically feasible (``max-tech'')
improvements in energy efficiency for PTACs and PTHPs in the
engineering analysis using the design parameters that passed the
screening analysis. The max-tech levels that DOE determined for this
rulemaking are described in section IV.C.5 of this final rule and in
chapter 5 of the final rule TSD.
E. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from the equipment that
is the subject of this rulemaking purchased in the 30-year period that
begins in the year of compliance with any amended standards. The
specific compliance years used in this analysis are discussed in
section III.A of this final rule.\9\ The savings are measured over the
entire lifetime of equipment purchased in the 30-year analysis period.
DOE quantified the energy savings attributable to each TSL as the
difference in energy consumption between each standards case and the
base case. The base case represents a projection of energy consumption
in the absence of amended efficiency standards, and it considers market
forces and policies that affect demand for more efficient equipment.
---------------------------------------------------------------------------
\9\ DOE also presents a sensitivity analysis that considers
impacts for equipment shipped in a 9-year period.
---------------------------------------------------------------------------
DOE uses its national impact analysis (NIA) spreadsheet models to
estimate energy savings from amended standards for the equipment that
is the subject of this rulemaking. The NIA spreadsheet model (described
in section IV.H of this document) calculates energy savings in site
energy, which is the energy directly consumed by equipment at the
locations where they are used. For electricity, DOE calculates national
energy savings in terms of primary energy savings, which is the savings
in the energy that is used to generate and transmit the site
electricity. For electricity and natural gas and oil, DOE also
calculates full-fuel-cycle (FFC) energy savings. As discussed in DOE's
statement of policy and notice of policy amendment, the FFC metric
includes the energy consumed in extracting, processing, and
transporting primary fuels (i.e., coal, natural gas, petroleum fuels),
and thus presents a more complete picture of the impacts of energy
efficiency standards. 76 FR 51281 (August 18, 2011), as amended at 77
FR 49701 (August 17, 2012).
To calculate primary energy savings, DOE derives annual conversion
factors from the model used to prepare the Energy Information
Administration's (EIA) most recent Annual Energy Outlook (AEO). For FFC
energy savings, DOE's approach is based on the calculation of an FFC
multiplier for each of the energy types used by covered products or
equipment. For more information, see section IV.H.
[[Page 43169]]
2. Significance of Savings
To adopt standards more stringent standards for PTACs and PTHPs
than the amended levels in ASHRAE Standard 90.1, clear and convincing
evidence must support a determination that the standards would result
in significant additional energy savings. (42 U.S.C.
6313(a)(6)(A)(ii)(II)) This final rule does not adopt more stringent
standards than the levels in ASHRAE Standard 90.1.
F. Economic Justification
1. Specific Criteria
EPCA provides seven factors to be evaluated in determining whether
a more stringent standard for PTACs and PTHPs is economically
justified. (42 U.S.C. 6313(a)(6)(B)(ii)) The following sections discuss
how DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of an amended standard on manufacturers,
DOE conducts a manufacturer impact analysis (MIA), as discussed in
section IV.J. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include industry net present
value (INPV), which values the industry on the basis of expected future
cash flows; cash flows by year; changes in revenue and income; and
other measures of impact, as appropriate. Second, DOE analyzes and
reports the impacts on different types of manufacturers, including
impacts on small manufacturers. Third, DOE considers the impact of
standards on domestic manufacturer employment and manufacturing
capacity, as well as the potential for standards to result in plant
closures and loss of capital investment. Finally, DOE takes into
account cumulative impacts of various DOE regulations and other
regulatory requirements on manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and payback period (PBP) associated with new or amended
standards. These measures are discussed further in the following
section. For consumers in the aggregate, DOE also calculates the
national net present value of the economic impacts applicable to a
particular rulemaking. DOE also evaluates the LCC impacts of potential
standards on identifiable subgroups of consumers that may be affected
disproportionately by a national standard.
b. Savings in Operating Costs Compared to Increase in Price
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered equipment compared
to any increase in the price of the covered product that are likely to
result from a standard. (42 U.S.C. 6313(a)(6)(B)(ii)(II)) DOE conducts
this comparison in its LCC and PBP analysis.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating expense (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the equipment. To account for uncertainty and variability in specific
inputs, such as equipment lifetime and discount rate, DOE uses a
distribution of values, with probabilities attached to each value. For
its analysis, DOE assumes that consumers will purchase the covered
equipment in the first year of compliance with amended standards.
The LCC savings and the PBP for the considered efficiency levels
are calculated relative to a base case that reflects projected market
trends in the absence of amended standards. DOE identifies the
percentage of consumers estimated to receive LCC savings or experience
an LCC increase, in addition to the average LCC savings associated with
a particular standard level. DOE's LCC analysis is discussed in further
detail in section IV.F.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for imposing an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6313(a)(6)(B)(ii)(III)) As
discussed in section IV.H, DOE uses the spreadsheet models to project
national energy savings.
d. Lessening of Utility or Performance of Equipment
In establishing classes of equipment, and in evaluating design
options and the impact of potential standard levels, DOE evaluates
potential standards that would not lessen the utility or performance of
the considered equipment. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on
data available to DOE, the standards adopted in this final rule would
not reduce the utility or performance of the equipment under
consideration in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition that is likely to result from energy conservation
standards. It also directs the Attorney General of the United States
(Attorney General) to determine the impact, if any, of any lessening of
competition likely to result from a standard and to transmit such
determination to the Secretary within 60 days of the publication of a
proposed rule, together with an analysis of the nature and extent of
the impact. (42 U.S.C. 6313(a)(6)(B)(ii)(IV)) DOE transmitted a copy of
its proposed rule to the Attorney General with a request that the
Department of Justice (DOJ) provide its determination on this issue.
DOE received no adverse comments from DOJ regarding the proposed rule.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new or amended standard is economically
justified. (42 U.S.C. 6313(a)(6)(B)(ii)(VI)) DOE expects that the
energy savings from the amended standards are likely to provide
improvements to the security and reliability of the nation's energy
system. Reductions in the demand for electricity also may result in
reduced costs for maintaining the reliability of the nation's
electricity system. DOE conducts a utility impact analysis to estimate
how standards may affect the nation's needed power generation capacity,
as discussed in section IV.M.
Amended standards are also likely to result in environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases associated with energy production and use. DOE
conducts an emissions analysis to estimate how standards may affect
these emissions, as discussed in section IV.K. DOE reports the
emissions impacts from each TSL it considered, in section V.B.6 of this
document. DOE also reports estimates of the economic value of emissions
reductions resulting from the considered TSLs, in section IV.L of this
document.
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems to
[[Page 43170]]
be relevant. (42 U.S.C. 6295(o)(2)(B)(ii)(VII)) To the extent
interested parties submit any relevant information regarding economic
justification that does not fit into the other categories described
above, DOE could consider such information under ``other factors.'' No
other factors were considered in this rule.
2. Rebuttable Presumption
EPCA creates a rebuttable presumption that an energy conservation
standard is economically justified if the additional cost to the
consumer of a product that meets the standard is less than three times
the value of the first year's energy savings resulting from the
standard, as calculated under the applicable DOE test procedure. DOE's
LCC and PBP analyses generate values used to calculate the effects that
potential amended energy conservation standards would have on the
payback period for consumers. These analyses include, but are not
limited to, the 3-year payback period contemplated under the
rebuttable-presumption test. In addition, DOE routinely conducts an
economic analysis that considers the full range of impacts to
consumers, manufacturers, the nation, and the environment. The results
of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section V.B.1.c of this final rule.
G. Additional Comments
DOE received additional comments that are not classified in the
discussion sections above. Responses to these additional comments are
provided below.
AHRI commented that, by proposing energy conservation standards for
PTACs and PTHPs above the levels presented in ANSI/ASHRAE/IES 90.1-
2013, DOE failed to recognize the Congressional intent for commercial
standards-making to rely on the ASHRAE process. (AHRI, No. 35 at p. 2)
EPCA authorizes the adoption of an energy conservation standard above
the levels adopted by ASHRAE if clear and convincing evidence shows
that adoption of such a more stringent standard would result in
significant additional conservation of energy and be technologically
feasible and economically justified. 42 U.S.C. 6313(a)(6)(A)(ii)(II)
AHRI commented that DOE's economic justification in the NOPR falls
short of the elevated ``clear and convincing'' requirement of proof.
AHRI further commented that DOE failed to show with clear and
convincing evidence that significant energy savings will result
directly from the more stringent levels. (AHRI, No. 35 at p. 2-4)
Following the publication of the September 2014 NOPR, DOE revised its
analysis to incorporate feedback received through stakeholder comments.
Based on results of its revised analysis, DOE concludes that the trial
standard levels above ASHRAE 90.1-2013 would not be economically
justified. This final rule amends the energy conservation standards for
PTACs to be equal to PTAC standard levels in ANSI/ASHRAE/IES 90.1-2013.
(42 U.S.C. 6313(a)(6)(A)(ii)(I))
SCS commented that stakeholders should have an additional
opportunity to comment on the analysis after DOE completes the
analytical changes that SCS requested. SCS requested that DOE issue an
SNOPR if ECS levels above the ASHRAE 90.1-2013 levels are selected.
(SCS, No. 29 at p. 3) This final rule amends the energy conservation
standards for PTACs to be equal to PTAC standard levels in ANSI/ASHRAE/
IES 90.1-2013. (42 U.S.C. 6313(a)(6)(A)(ii)(I))
AHRI objects to the use by DOE of proprietary software such as
Crystal Ball to conduct its analysis in a public notice and comment
rulemaking with concerns that small businesses and consumer advocacy
groups would find the software cost prohibitive and unable to evaluate
the models DOE used for its analysis and assumptions. AHRI states that
all of DOE's models, process and software used in rulemaking under the
Administrative Procedure Act should be fully and reasonably accessible.
(AHRI, No. 35 at p. 4) The documentation in the TSD concerning the
methods, data inputs, and assumptions used to generate LCC and PBP
results provides stakeholders with sufficient information to adequately
review DOE's analysis. To make its analyses accessible, DOE will run
Monte Carlo simulations with its LCC spreadsheets utilizing Crystal
Ball and provide the results to any stakeholder interested in
researching specific scenarios.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to PTAC and PTHP. Separate subsections address
each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards considered in this document. The first tool is a spreadsheet
that calculates the LCC and PBP of potential amended or new energy
conservation standards. The national impacts analysis uses a second
spreadsheet set that provides shipments forecasts and calculates
national energy savings and net present value resulting from potential
energy conservation standards. DOE uses the third spreadsheet tool, the
Government Regulatory Impact Model (GRIM), to assess manufacturer
impacts of potential standards. These three spreadsheet tools are
available on the DOE docket Web page for this rulemaking: http://www.regulations.gov/#!docketDetail;D=EERE-2012-BT-STD-0029.
Additionally, DOE used output from the latest version of EIA's Annual
Energy Outlook (AEO), a widely known energy forecast for the United
States, for the emissions and utility impact analyses.
A. Market and Technology Assessment
When beginning an energy conservation standards rulemaking, DOE
develops information that provides an overall picture of the market for
the equipment concerned, including the purpose of the equipment, the
industry structure, and market characteristics. This activity includes
both quantitative and qualitative assessments based primarily on
publicly available information (e.g., manufacturer specification
sheets, industry publications) and data submitted by manufacturers,
trade associations, and other stakeholders. The market and technology
assessment presented in the September 2014 NOPR discussed scope of
coverage, equipment classes, types of equipment sold and offered for
sale, and technology options that could improve the energy efficiency
of the equipment under examination. See chapter 3 of the final rule TSD
for further discussion of the market and technology assessment. AHRI
commented that it planned to provide PTAC and PTHP shipments by
capacity level for 2008 through 2013. (AHRI, No. 35 at p. 8) DOE did
not receive further comments or information regarding the equipment
definitions or market assessments for PTACs and PTHP equipment.
GE commented that there are now PTACs on the market that
incorporate a ventilation system attachment that takes in make-up air
and provides supplemental conditioning for this make-up air:
Dehumidification when outdoor humidity levels are high and also
electric resistance heating when outdoor temperature is low. Admitting
makeup air and provision of supplemental conditioning increases PTAC/
PTHP energy use that is not
[[Page 43171]]
captured in the current test procedures for PTACs and PTHPs. GE
suggested that DOE address PTACs with add-on dehumidifiers as a
separate equipment class. (GE, No. 34 at p. 1) DOE acknowledges that
models with add-on or integrated dehumidification systems exist in the
current market. DOE believes that PTAC and PTHP units with add-on or
integrated dehumidification systems currently meet the definition of
PTACs and PTHPs, respectively. Thus, models with add-on or integrated
dehumidification systems should be tested using the current test
procedure and should meet the current energy conservation standards.
Currently, the DOE test procedure does not require that the
dehumidification module on such models be energized during testing, so
the energy use of the dehumidification system would not be measured or
accounted for in the EER metric. If DOE considers future amendments to
the test procedure to account for energy consumed by the
dehumidification systems, then DOE could consider designating a
separate equipment class for such equipment at that time.
The September 2014 NOPR listed all of the potential technology
options that DOE considered for improving energy efficiency of PTACs
and PTHPs. 79 FR at 55553 (September 16, 2014). These technology
options are listed in Table IV.1.
Table IV.1--Potential Technology Options for Improving Energy Efficiency
of PTACs and PTHPs
------------------------------------------------------------------------
---------------------------------------------------------------------------
Compressor Improvements
Scroll Compressors
Variable-speed Compressors
Higher Efficiency Compressors.
Complex Control Boards.
Condenser and evaporator fan and fan motor improvements:
Higher Efficiency Fan Motors
Clutched Motor Fans.
Microchannel Heat Exchangers.
Rifled Interior Heat Exchanger Tube Walls.
Increased Heat Exchanger Area.
Hydrophobic Material Treatment of Heat Exchangers.
Re-circuiting Heat Exchanger Coils.
Improved Air Flow and Fan Design.
Heat Pipes.
Corrosion Protection.
Thermostatic Expansion Valve.
Alternate Refrigerants (such as HCFC-32).
------------------------------------------------------------------------
DOE received several comments regarding the technology options
listed in Table IV.1, and these comments are addressed in the relevant
sections of the screening analysis in section IV.B. DOE did not receive
any comments regarding technology options not listed in Table IV.1.
B. Screening Analysis
After DOE identified the technologies that might improve the energy
efficiency of PTACs and PTHPs, DOE conducted a screening analysis. The
purpose of the screening analysis is to evaluate the technologies that
improve equipment efficiency to determine which technologies to
consider further and which to screen out. DOE uses four screening
criteria to determine which design options are suitable for further
consideration in a standards rulemaking. Namely, design options will be
removed from consideration if they are not technologically feasible;
are not practicable to manufacture, install, or service; have adverse
impacts on product utility or product availability; or have adverse
impacts on health or safety. (10 CFR part 430, subpart C, appendix A at
4(a)(4) and 5(b)) Details of the screening analysis are in chapter 4 of
the final rule TSD.
Technologies that pass through the screening analysis are referred
to as ``design options'' in the engineering analysis. These four
screening criteria do not include the propriety status of design
options. DOE will only consider efficiency levels achieved through the
use of proprietary designs in the engineering analysis if they are not
part of a unique path to achieve that efficiency level.
In view of the above factors, DOE screened out the following design
options in the September 2014 NOPR: Scroll compressors, heat pipes, and
alternate refrigerants. 79 FR at 55554 (September 16, 2014). DOE
received comments regarding alternative refrigerants, but did not
receive comments regarding scroll compressors or heat pipes.
Alternate Refrigerants
Nearly all PTAC and PTHP equipment is designed with R-410A as the
refrigerant. The Environmental Protection Agency's (EPA's) Significant
New Alternatives Policy (SNAP) Program evaluates and regulates
substitutes for the ozone-depleting chemicals (such as air conditioning
refrigerants) that are being phased out under the stratospheric ozone
protection provisions of the Clean Air Act (CAA). (42 U.S.C. 7401 et
seq.) \10\
---------------------------------------------------------------------------
\10\ Additional information regarding EPA's SNAP Program is
available online at: http://www.epa.gov/ozone/snap/.
---------------------------------------------------------------------------
On July 9, 2014, the EPA issued a notice of proposed rulemaking
proposing to list three flammable refrigerants (HFC-32 (R-32), Propane
(R-290), and R-441A) as new acceptable substitutes, subject to use
conditions, for refrigerant in the Household and Light Commercial Air
Conditioning class of equipment. 79 FR 38811 (July 9, 2014). EIAI
commented to suggest that DOE delay this PTAC/PTHP standards rulemaking
until the EPA finalizes its proposed rule. (EIAI, No. 32 at p. 1) On
April 10, 2015, the EPA published its final rule that allows the use of
R-32, R-290, and R-441A in limited amounts in PTAC and PTHP
applications. 80 FR 19454 (April 10, 2015) EEI commented that the EPA's
proposed rule would allow flammable refrigerants to be used in PTACs in
a limited amount. (EEI, NOPR Public Meeting Transcript, No. 37 at p.
47-8) \11\ EIAI commented citing several reports that favorably compare
HC-290 to R-410A. (EIAI, No. 32 at p. 4) EIAI requested that DOE fully
analyze the direct mitigation impacts and the energy efficiency savings
that can be achieved by using R-290 and R-441A. (EIAI, No. 32 at p. 1)
EIAI commented that the amended standards for PTACs and PTHPs will not
be as effective as possible if they exclude the alternative
refrigerants under consideration for SNAP approval. (EIAI, No. 32 at p.
5) DOE considered the possibility of using the alternative refrigerants
that EPA approved for limited use in PTAC and PTHP applications. The
EPA's final rule limits the maximum design charge amount of the
alternative refrigerants in PTAC and PTHP applications. For instance,
for a PTAC or PTHP with cooling capacity of 9,000 Btu/h, the EPA rule
imposes a maximum design charge of 140 grams of R-290 or 160 grams of
R-441A. 80 FR at 19500 (April 10, 2015) In comparison, DOE reverse
engineered eleven units with cooling capacities around 9,000 Btu/h and
found that these units had refrigerant charges ranging from 600 grams
to 950 grams and all units used refrigerant R-410A. The refrigerant
charges currently used in current PTAC and PTHP designs far exceed the
maximum charges that are allowed for alternative refrigerants under
EPA's final rule. DOE
[[Page 43172]]
acknowledges that it might be possible to incorporate the new
refrigerants under consideration into PTAC designs through the use of
microchannel heat exchangers or tube and fin heat exchangers with
smaller tube diameters than what is currently on the market. However,
DOE has not seen evidence that such designs are technologically
feasible. Therefore, DOE did not further consider the R-290 and R-441A
substitutes proposed by EPA.
---------------------------------------------------------------------------
\11\ A notation in the form ``EEI, NOPR Public Meeting
Transcript, No. 37 at p. 47-8'' identifies an oral comment that DOE
received during the October 29, 2014, PTAC energy conservation
standards NOPR public meeting, that was recorded in the public
meeting transcript in the docket for the PTAC energy conservation
standards rulemaking (Docket No. EERE-2012-BT-STD-0029), and is
maintained in the Resource Room of the Building Technologies
Program. This particular notation refers to a comment (1) made by
EEI during the public meeting; (2) recorded in document number 37,
which is the NOPR public meeting transcript that is filed in the
docket of this energy conservation standards rulemaking; and (3)
which appears on pages 47-8 of document number 37.
---------------------------------------------------------------------------
EIAI commented that DOE should include provisions in the rule that
incentivize the use of HFC-free technologies that receive SNAP
approval. (EIAI, No. 32 at p. 3) EPCA authorizes DOE to regulate the
energy efficiency of certain equipment such as PTACs and PTHPs. (42
U.S.C. 6311-6317) EPCA does not authorize DOE to regulate or
incentivize the use or substitution of alternative refrigerants.
The California Utilities stated that DOE should research potential
efficiency improvements, for future years, that can be achieved through
the use of alternative refrigerants. (CA IOUs, No. 33 at p. 4) EIAI
commented that the proposed rule does not address the executive action
announced on September 16, 2014, that encourages research and
development of next generation cooling technologies, including
alternatives to hydrofluorocarbon (HFC) refrigerants.\12\ (EIAI, No. 32
at p. 1) DOE responds that the engineering analysis considers
technology options that are technologically feasible. DOE considers
technologies incorporated in commercially available equipment or in
working prototypes to be technologically feasible. 10 CFR part 430,
subpart C, appendix A, section 4(a)(4)(i). The research and development
activities described by the California Utilities and EIAI do not
include options that are technologically feasible at this time.
---------------------------------------------------------------------------
\12\ EIAI's comment referenced a White House fact sheet
describing the Executive Action at: http://www.whitehouse.gov/the-press-office/2014/09/16/fact-sheet-obama-administration-partners-private-sector-new-commitments.
---------------------------------------------------------------------------
EIAI suggested that DOE evaluate the commercialized PTACs and PTHPs
using alternative refrigerants currently available in international
markets. (EIAI, No. 32 at p. 6) ASAP et al. commented that
manufacturers may have the option of utilizing alternative refrigerants
to improve efficiency, even though the engineering analysis does not
include alternative refrigerants as a technology option. (ASAP et al.,
No. 30 at p. 3) DOE is not aware of any PTAC or PTHP model that uses
alternative refrigerants approved by the EPA SNAP Program and achieves
higher efficiency than equipment using R-410A.
DOE is not aware of any SNAP-approved refrigerants, or any
refrigerants that have been proposed for SNAP approval, that are known
to enable better efficiency than R-410A for PTAC and PTHP equipment.
Hence, DOE did not consider alternate refrigerants for further
analysis.
Other Technologies Not Considered in the Engineering Analysis
Typically, energy-saving technologies that pass the screening
analysis are evaluated in the engineering analysis. However, some
technologies are not included in the analysis for other reasons,
including: (1) Available data suggest that the efficiency benefits of
the technology are negligible; or (2) data are not available to
evaluate the energy efficiency characteristics of the technology.
Accordingly, in the September 2014 NOPR, DOE eliminated the following
technologies from consideration in the engineering analysis based upon
these three additional considerations: re-circuiting heat exchanger
coils, rifled interior tube walls, microchannel heat exchangers,
variable speed compressors, complex control boards, corrosion
protection, hydrophobic material treatment of heat exchangers, clutched
motor fans, and thermostatic expansion valves. 79 FR at 55555
(September 16, 2014). DOE received a comment on variable speed
compressors.
Variable Speed Compressors
SCS commented that variable speed operation would enable PTACs and
PTHPs to provide better humidity control, and that the current
efficiency measurement of EER does not provide incentive to go to
variable speed operation. (SCS, NOPR Public Meeting Transcript, No. 37
at p. 164) While the efficiency measurement of EER would not capture
the benefits of variable speed operation, the existing EER (full load)
metric accurately reflects equipment efficiency during the year because
PTACs and PTHPs are believed to more often operate at full load rather
than part load conditions. Thus, DOE did not consider variable speed
compressors further in this analysis.
The technologies that DOE identified for consideration in the
engineering analysis are listed in Table IV.2 and described briefly
below.
Table IV.2--Design Options Retained for Engineering Analysis
------------------------------------------------------------------------
-------------------------------------------------------------------------
Compressor Improvements.
Higher Efficiency Compressors.\13\
Condenser and evaporator fan and fan motor improvements:
Higher Efficiency Fan Motors.
Increased Heat Exchanger Area.
Improved Air Flow and Fan Design.
------------------------------------------------------------------------
Higher Efficiency Compressors
Manufacturers can improve the energy efficiency of PTAC and PTHP
units by incorporating more efficient components, such as high
efficiency compressors, into their designs. Goodman commented to ask
whether DOE included predictions of efficiency increases over time for
compressors. (Goodman, NOPR Public Meeting Transcript, No. 37 at p. 28)
DOE did not include predictions of compressor efficiency changes over
time. DOE observed in reverse engineering analysis that PTAC and PTHP
manufacturers use several different compressor models with a wide range
of efficiency ratings. The capacities and efficiencies of the different
compressors observed in the reverse engineering analysis are presented
in the revised Tables 5.6.1 and 5.6.2 published in document 26 of the
rulemaking docket at http://www.regulations.gov/#!documentDetail;D=EERE-2012-BT-STD-0029-0026. Manufacturers of PTACs
and PTHPs may improve the unit efficiency of baseline models by
selecting high efficiency compressors currently available in the
market.
---------------------------------------------------------------------------
\13\ Currently, all PTAC and PTHP manufacturers incorporate
rotary compressors into their equipment designs. DOE is referring to
rotary compressors throughout this document unless specifically
noted.
---------------------------------------------------------------------------
Higher Efficiency Fan Motors
Manufacturers of baseline PTACs and PTHPs use permanent split
capacitor (PSC) fan motors due to their modest cost, compact design,
and durability. DOE believes any further gains in PSC fan motor
efficiency will be difficult to achieve, and has thus eliminated
improvement of PSC fan motors as a potential avenue for efficiency
improvement. PTAC and PTHP original equipment manufacturers (OEMs) can,
however, use permanent magnet (PM) motors. Such motors typically offer
higher efficiencies than PSC-based fan motors, but these improvements
come with increased costs for the motor unit and control hardware.
Several manufacturers use PM motors in their higher-efficiency PTAC and
PTHP models.
[[Page 43173]]
Increased Heat Exchanger Area
Manufacturers of PTACs and PTHPs increase unit efficiency by
increasing heat exchanger size, either through elongating the face of
the heat exchanger or increasing the number of heat exchanger tube
rows. Standard size PTACs are dimensionally constrained by the standard
16'' x 48'' wall opening in which they fit. This constraint limits the
size of heat exchanger that can fit in the unit and thus limits the
efficiency gains that may be achieved by increasing heat exchanger
size. At least one manufacturer has incorporated bent heat exchanger
coils to increase the heat exchanger face area while remaining inside
the standard size unit constraints. AHRI commented that DOE did not
account for the additional pressure drop from bent heat exchangers in
the analysis. (AHRI, No. 35 at p. 12) DOE interprets this comment to
mean that AHRI expects bent heat exchangers to increase the airside
pressure drop across the heat exchangers leading to increased fan power
consumption and lower unit efficiency. DOE considered any pressure drop
impacts associated with bent heat exchangers. In its analysis, DOE
considered at least three units that contained a bent heat exchanger.
DOE based its analysis on the measured performance of these units (one
of which performed at the max-tech efficiency level). The measured
performance of these units includes the impact of additional pressure
drop associated with the bent heat exchangers.
AHRI asked what the DOE analysis showed as the efficiency
improvement from implementing improved air flow design and increased
heat exchanger area. (AHRI, NOPR Public Meeting Transcript, No. 37 at
p. 38) The combined efficiency level and cost assessment method used in
this analysis does not separately evaluate the efficiency effects of
individual design options. Among the units that DOE reverse engineered
in the engineering analysis, the most efficient units had injection
molded fan blades and volutes and achieved greater heat exchanger area
within the constrained unit dimensions by incorporating a bent outdoor
heat exchanger coil.
Improved Air Flow and Fan Design
Manufacturers of PTACs and PTHPs currently use several techniques
to shape and direct airflow inside PTAC and PTHP units. Different
equipment designs may have higher or lower resistance to air flow.
Equipment designs with lower resistance to air flow will require lower
fan power input, which would improve unit efficiency. Among the units
that DOE reverse engineered in the engineering analysis, the most
efficient units had injection molded fan blades and volutes to direct
airflow. Manufacturers may improve unit efficiency improving fan blade
designs, optimizing air paths, and optimizing fan selection.
Goodman commented that utilizing design features such as improved
airflow and fan design would lead to redesigned products larger than
the wall footprints for standard size PTACs and PTHPs. (Goodman, No. 31
at p. 3) In contrast, Ebm-papst commented in the framework phase that
efficiency gains may result in existing units from optimizing the fan
selection and design so that the fan's operational efficiency in the
unit matches the fan's peak efficiency exactly. (Ebm-papst, No. 8 at p.
1) DOE's analysis did not consider any such larger PTAC/PTHP designs.
Any improvement associated with improved airflow and fan design
represented in the analysis is associated with the existing designs
evaluated in the analysis, which conform to size of currently available
PTACs and PTHPs.
Goodman commented that the technology options of bent heat
exchangers [to increase heat exchanger area] and improved air flow are
contradictory because bent heat exchangers will restrict air flow.
(Goodman, NOPR Public Meeting Transcript, No. 37 at p. 82) DOE notes
that, among the units that DOE reverse engineered in the engineering
analysis, the most efficient units at both representative capacities of
9,000 Btu/h and 15,000 Btu/h incorporated a bent outdoor heat exchanger
coil.
Based on all available information, DOE did not change the
screening analysis between the September 2014 NOPR and this final rule.
Additional detail on the screening analysis is contained in chapter 4
of the final rule TSD.
C. Engineering Analysis
The engineering analysis establishes the relationship between an
increase in energy efficiency of the equipment and the increase in
manufacturer selling price (MSP) associated with that efficiency
increase. This relationship serves as the basis for cost-benefit
calculations for individual consumers, manufacturers, and the nation.
In determining the cost-efficiency relationship, DOE estimates the
increase in manufacturer cost associated with increasing the efficiency
of equipment above the baseline up to the max-tech efficiency level for
each equipment class.
1. Methodology
DOE has identified three basic methods for developing cost-
efficiency curves: (1) The design-option approach, which provides the
incremental costs of adding design options to a baseline model that
will improve its efficiency (i.e., lower its energy use); (2) the
efficiency-level approach, which provides the incremental costs of
moving to higher energy efficiency levels, without regard to the
particular design option(s) used to achieve such increases; and (3) the
reverse-engineering (or cost-assessment) approach, which provides
``bottom-up'' manufacturing cost assessments for achieving various
levels of increased efficiency, based on teardown analyses (or physical
teardowns) providing detailed data on costs for parts and material,
labor, shipping/packaging, and investment for models that operate at
particular efficiency levels.
In the February 2013 Framework Document and the September 2014
NOPR, DOE described the approach for this engineering analysis that
combines an efficiency-level approach with a cost-assessment approach
to determine the relationship between cost and efficiency. 78 FR 12252
(February 22, 2013) and 79 FR at 55556-9 (September 14, 2014). The
range of efficiency levels and costs considered were represented by the
test data and/or ratings of specific PTAC and PTHP models available in
the market that included different groups of design options.
DOE identified the efficiency levels for the analysis based on the
range of rated efficiencies of PTAC and PTHP equipment in the AHRI
database. DOE selected PTAC and PTHP equipment that was representative
of the market at different efficiency levels, then purchased, tested,
and reverse engineered the selected equipment. DOE used the cost-
assessment approach to determine the manufacturing production costs
(MPCs) for PTAC and PTHP equipment across a range of efficiencies from
the baseline to max-tech efficiency levels. DOE observed that
manufacturers used different approaches to improve unit energy
efficiency. AHRI commented that it is not clear what efficiency gains
the equipment will achieve based on implementing the technology options
that DOE has considered. (AHRI, NOPR Public Meeting Transcript, No. 37
at p. 10) DOE notes that the combined efficiency level and cost-
assessment approach does not separately evaluate the effects of
individual design options and does not prescribe a particular set of
design options for manufacturers to
[[Page 43174]]
improve unit efficiency. Instead, it selects units spanning a range of
efficiency levels, estimates MPCs for those units, and constructs a
cost curve to define the relationship between energy efficiency and
MPC.
Where feasible, DOE selected models for reverse engineering with
low and high efficiencies from a given manufacturer, at both
representative cooling capacity levels and for both PTACs and PTHPs.
The methodology used to perform reverse engineering analysis and derive
the cost-efficiency relationship is described in chapter 5 of the final
rule TSD. ASAP et al. commented to express their support for DOE's
approach to the engineering analysis. (ASAP et al., No. 30 at p. 3)
2. Equipment Classes Analyzed
DOE developed its engineering analysis for the six equipment
classes associated with standard-size PTACs and PTHPs. As discussed in
section III.B of this final rule, DOE did not amend energy efficiency
standards for non-standard size equipment classes because of their low
and declining market share and because of a lack of adequate
information to analyze these units.
For the PTAC and PTHP equipment classes with a cooling capacity
greater than or equal to 7,000 Btu/h and less than or equal to 15,000
Btu/h, the energy efficiency equation characterizes the relationship
between the EER of the equipment and cooling capacity (i.e., EER is a
function of the cooling capacity of the equipment) in which EER
decreases as capacity increases. For all cooling capacities less than
7,000 Btu/h and all cooling capacities greater than 15,000 Btu/h, the
EER is calculated based on the energy efficiency equation for 7,000
Btu/h or 15,000 Btu/h, respectively.
For PTACs and PTHPs, DOE focused its analysis on high-shipment-
volume cooling capacities spanning the range of available equipment.
Based on manufacturer interviews,\14\ DOE found that the majority of
shipments are in the classes with cooling capacity between 7,000 Btu/h
to 15,000 Btu/h (see chapter 9 of the final rule TSD for more details
on the shipments data). As described in the September 2014 NOPR, DOE
selected two cooling capacities for analysis: 9,000 Btu/h and 15,000
Btu/h. 79 FR at 55557. DOE selected 9,000 Btu/h as a representative
capacity because the AHRI Directory lists more PTAC models around the
9,000 Btu/h capacity level than any other capacity level. DOE selected
15,000 Btu/h as a representative capacity in response to manufacturer
comments stating that it is technically challenging to achieve high
efficiency in 15,000 Btu/h models and the analysis should explicitly
analyze the 15,000 Btu/h capacity. AHRI commented that the two
equipment sizes that DOE selected for testing and teardowns may not
accurately represent the full capacity range of the product category.
AHRI observed that a greater number of high-efficiency models are
available at the 9,000 Btu/h capacity compared with other unit
capacities. (AHRI, NOPR Public Meeting Transcript, No. 37 at p. 10)
AHRI observation does not indicate that a cost/efficiency relationship
determined based on the 9,000 Btu/h and 15,000 Btu/h capacities would
not be representative of the full range of cooling capacities. The
design changes that DOE observed in units at the representative
capacities of 9,000 Btu/h and 15,000 Btu/h can be interpolated and
extrapolated to include other common capacities (such as 7,000 Btu/h
and 12,000 Btu/h) that were not directly analyzed in the reverse
engineering analysis. It would not be feasible to conduct teardown
analysis for every cooling capacity available in the market. DOE
selected the representative cooling capacities of 9,000 and 15,000 Btu/
h in response to comments from the framework stage of this rulemaking;
available information indicates that these capacities accurately
represent the markets for PTAC and PTHP equipment.
---------------------------------------------------------------------------
\14\ DOE conducted interviews with high- and low-volume PTAC and
PTHP manufacturers, and collected information regarding shipments of
PTACs and PTHPs at different cooling capacity levels.
---------------------------------------------------------------------------
Using its analysis of two cooling capacities, DOE investigated the
slope of the energy efficiency-capacity relationship. Further details
on this relationship are provided in chapter 5 of the final rule TSD.
3. Cost Model
DOE developed a manufacturing cost model to estimate the MPCs of
PTAC and PTHP units over a range of cooling efficiencies. The cost
model is a spreadsheet model that converts the materials and components
in the bills of materials for PTAC and PTHP equipment into dollar
values based on the price of materials, average labor rates associated
with fabrication and assembling, and the cost of overhead and
depreciation, as determined based on manufacturer interviews and
equipment cost information compiled by DOE. To convert the information
in the bills of materials into dollar values, DOE collected information
on labor rates, tooling costs, raw material prices, and other factors.
For purchased parts, the cost model estimates the purchase price based
on volume-variable price quotations and detailed discussions with
manufacturers and component suppliers. For fabricated parts, the prices
of raw metal materials (e.g., tube, sheet metal) are estimates on the
basis of five-year averages (from 2009 to 2014). DOE estimated the cost
of transforming the raw materials into finished parts based on current
industry pricing. Further details on the manufacturing cost analysis
are provided in chapter 5 of the final rule TSD.
Developing the cost model involved disassembling PTACs and PTHPs at
various efficiencies, analyzing the materials and manufacturing
processes, and estimating the costs of purchased components. DOE also
collected supplemental component cost data from manufacturers of PTAC
and PTHP equipment. DOE reports the MPCs in aggregated form to maintain
confidentiality of sensitive component data. DOE obtained input from
stakeholders on the MPC estimates and assumptions to confirm accuracy.
DOE used the cost model for all of the representative cooling
capacities within the PTAC and PTHP equipment classes. Chapter 5 of the
final rule TSD provides details and assumptions of the cost model.
4. Baseline Efficiency Level
The engineering analysis estimates the incremental costs for
equipment with efficiency levels above the baseline in each equipment
class. For the purpose of the engineering analysis, DOE used the
engineering baseline EER as the starting point to build the cost
efficiency curves. As discussed in section III.A, ANSI/ASHRAE/IES
Standard 90.1-2013 was issued in the course of this rulemaking, and
this revised standard amended minimum efficiency levels for PTACs,
raising standards by 1.8% above the Federal minimum energy conservation
standards for PTACs. DOE is obligated either to adopt those standards
developed by ASHRAE or to adopt levels more stringent than the ASHRAE
levels if there is clear and convincing evidence in support of doing
so. (42 U.S.C. 6313(a)(6)(A)). For the purposes of calculating energy
savings over the ANSI/ASHRAE/IES Standard 90.1-2013, DOE identified the
ANSI/ASHRAE/IES Standard 90.1-2013 as the baseline efficiency
level.\15\ SCS agreed that it is correct to use ASHRAE 90.1-
[[Page 43175]]
2013 as the baseline for analysis. (SCS, NOPR Public Meeting
Transcript, No. 37 at p. 26-27)
---------------------------------------------------------------------------
\15\ DOE's estimates of potential energy savings from an amended
energy conservation standard are further discussed in section IV.H.
---------------------------------------------------------------------------
The baseline efficiency levels for each equipment class are
presented in Table IV.3.
Table IV.3--Baseline Efficiency Levels
----------------------------------------------------------------------------------------------------------------
Baseline
Equipment type Equipment class efficiency Cooling capacity Baseline efficiency
equation level
----------------------------------------------------------------------------------------------------------------
PTAC........................... Standard Size..... EER = 14.0 - 9,000 Btu/h...... 11.3 EER.
(0.300 x Cap 15,000 Btu/h..... 9.5 EER.
[dagger]/1000).
PTHP........................... Standard Size..... EER = 14.0 - 9,000 Btu/h...... 11.3 EER.
(0.300 x Cap 15,000 Btu/h..... 9.5 EER.
[dagger]/1000).
----------------------------------------------------------------------------------------------------------------
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-bulb temperature.
5. Incremental Efficiency Levels
DOE examined performance data of standard size PTACs and PTHPs
published in the AHRI Directory and on manufacturers' Web sites to
select efficiency levels for consideration in the rulemaking. DOE used
Web site-published data as an initial screening mechanism to select
units for reverse engineering; a third party test facility verified the
actual performance of the units selected for analysis.
DOE analyzed the baseline efficiency level and efficiency levels
that are 2.2%, 6.2%, 10.2%, 14.2%, and 16.2% more efficient than the
ANSI/ASHRAE/IES Standard 90.1-2013 baseline.\16\ The rated efficiencies
of PTACs listed in the AHRI Directory extend up to 17.5% above the
ANSI/ASHRAE/IES Standard 90.1-2013 baseline efficiency level. However,
based on testing of individual units conducted for this rulemaking, DOE
considered efficiencies up to only 16.2% above the baseline level. DOE
expects that PTAC equipment without a reversing valve should be able to
attain the cooling mode efficiencies as least as high as PTHPs. This is
because the reversing valve of a PTHP, which allows for reverse cycle
(heat pump) operation and is not required in a PTAC, imposes pressure
drop which would reduce PTHP efficiency.
---------------------------------------------------------------------------
\16\ DOE notes that these efficiency levels are 4%, 8%, 12%,
16%, and 18% more efficient than the amended PTAC standards that
became effective on October 8, 2012.
---------------------------------------------------------------------------
For the heating efficiency of PTHPs, DOE correlated the COP
associated with each efficiency level with the efficiency level's EER
based on COP and EER ratings from the AHRI database. DOE established a
representative curve based on this data to obtain a relationship for
COP in terms of EER. DOE used this relationship to select COP values
corresponding to each efficiency level. This approach considers the
fact that a PTHP's EER and COP are related and cannot be independently
analyzed, while basing the analysis on a representative average
relationship between the two efficiency metrics. To determine the
typical relationship between EER and COP, DOE examined the entire
database of rated equipment and determined a relationship based on the
EER and COP ratings of the collective body of certified PTAC and PTHP
equipment.
The efficiency levels for each equipment class that DOE considered
are presented in Table IV.4. The percentages associated with efficiency
levels (ELs) indicate the percentage above the baseline level for PTACs
and PTHPs. In the September 2014 NOPR, DOE presented efficiency levels
using percentages relative to the current Federal standard for PTACs.
79 FR at 55559. This method of presentation caused confusion among
stakeholders. AHRI and SCS commented presenting efficiency increases as
a percentage above current Federal minimum standards for PTACs was
confusing. (AHRI, NOPR Public Meeting Transcript, No. 37 at p. 77; SCS,
NOPR Public Meeting Transcript, No. 37 at p. 78) In response to these
comments, DOE has changed the base value used in determining the
percentage increase of EER so that the percentages represents increases
above the ASHRAE 90.1-2013 efficiency level rather than increases above
the current DOE standard. The EER values for this baseline are equal to
those for the DOE PTHP standards and the ASHRAE 90.1-2013 PTHP
standards. Table IV.4 presents percentages relative to the new baseline
level, which is the same for PTACs and PTHPs.
Table IV.4--Incremental Efficiency Levels for Standard Size PTACs and PTHPs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency levels (percentages relative to baseline)
-------------------------------------------------------------------------------------------------------------------------------------------
Equipment type Cooling capacity Current Federal EL6, 16.2%
PTAC ECS * EL1, Baseline ** EL2, 2.2% EL3, 6.2% EL4, 10.2% EL5, 14.2% (MaxTech)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC............................ All, EER.......... 13.8 - (0.300 x 14.0 - (0.300 x 14.4 - (0.312 x 14.9 - (0.324 x 15.5 - (0.336 x 16.0 - (0.348 x 16.3 - (0.354 x
Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger])
9,000 Btu/h....... 11.1 EER.......... 11.3 EER.......... 11.5 EER.......... 12.0 EER.......... 12.4 EER.......... 12.9 EER.......... 13.1 EER
15,000 Btu/h...... 9.3 EER........... 9.5 EER........... 9.7 EER........... 10.0 EER.......... 10.4 EER.......... 10.8 EER.......... 11.0 EER
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment type Cooling capacity N/A Baseline ** EL1, 2.2% EL2, 6.2% EL3, 10.2% EL4, 14.2% EL5, 16.2%
(MaxTech)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PTHP............................ All, EER.......... N/A............... 14.0 - (0.300 x 14.4 - (0.312 x 14.9 - (0.324 x 15.5 - (0.336 x 16.0 - (0.348 x 16.3 - (0.354 x
Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger]). Cap [dagger])
All, COP.......... N/A............... 3.7 - (0.052 x Cap 3.8 - (0.058 x Cap 4.0 - (0.064 x Cap 4.1 - (0.068 x Cap 4.2 - (0.070 x Cap 4.3 - (0.073 x Cap
[dagger]). [dagger]). [dagger]). [dagger]). [dagger]). [dagger])
9,000 Btu/h....... N/A............... 11.3 EER.......... 11.5 EER.......... 12.0 EER.......... 12.4 EER.......... 12.9 EER.......... 13.1 EER
3.2 COP........... 3.3 COP........... 3.4 COP........... 3.5 COP........... 3.6 COP........... 3.6 COP
[[Page 43176]]
15,000 Btu/h...... N/A............... 9.5 EER........... 9.7 EER........... 10.0 EER.......... 10.4 EER.......... 10.8 EER.......... 11.0 EER
2.9 COP........... 2.9 COP........... 3.0 COP........... 3.1 COP........... 3.2 COP........... 3.2 COP
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the current Federal minimum for PTAC equipment.
** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline for PTAC and PTHP equipment since DOE is required to, at
a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that the Baseline level is 1.8% higher than current Federal ECS for PTAC equipment,
but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline level is also termed EL1, and is compared to current Federal ECS in the energy savings analysis
in section V.B.3.a.
[dagger] Cap means cooling capacity in thousand Btu/h at 95[deg]F outdoor dry-bulb temperature.
6. Equipment Testing and Reverse Engineering
As discussed above, for the engineering analysis, DOE specifically
analyzed representative capacities of 9,000 Btu/h and 15,000 Btu/h to
develop incremental cost-efficiency relationships. DOE selected twenty
different models representing PTAC and PTHP equipment types at 9,000
Btu/h and 15,000 Btu/h capacities. DOE selected the models as a
representative sample of the market at different efficiency levels. DOE
based the selection of units for testing and reverse engineering on the
efficiency data available in the AHRI certification database. Details
of the key features of the tested units are presented in chapter 5 of
the final rule TSD.
DOE conducted testing on each unit according to the DOE test
procedure outlined at 10 CFR 431.96. At the time of testing, the DOE
test procedure incorporated by reference AHRI Standard 310/380-2004,
which itself incorporates ANSI/ASHRAE 16, ANSI/ASHRAE 37, and ANSI/
ASHRAE 58. In June, 2015, DOE revised the test procedure to incorporate
by reference AHRI Standard 310/380-2014. The amendments adopted in the
revised test procedure do not affect measured energy use. DOE then
conducted physical teardowns on each test unit to develop a
manufacturing cost model and to evaluate key design features (e.g.,
improved heat exchangers, compressors, fans/fan motors).
7. Cost-Efficiency Results
The results of the engineering analysis are reported as a set of
cost-efficiency data (or ``curves'') in the form of MPC (in dollars)
versus EER, which form the basis for other analyses in the final rule.
DOE created cost-efficiency curves for the two representative cooling
capacities within the two standard-size equipment classes of PTACs and
PTHPs, as discussed in section IV.C.3. DOE developed the incremental
cost-efficiency results shown in Table IV.5 for each representative
cooling capacity. These cost results are incremented from a baseline
efficiency level equivalent to the ANSI/ASHRAE/IES Standard 90.1-2013.
Details of the cost-efficiency analysis are presented in chapter 5 of
the final rule TSD.
Table IV.5--Incremental Manufacturing Production Costs (MPC) for Standard Size PTACs and PTHPs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency levels
-----------------------------------------------------------------------------------------------
Equipment type Cooling capacity EL1, baseline
* EL2 EL3 EL4 EL5 EL6
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC.............................. 9,000 Btu/h......... $0.00 $4.44 $13.08 $22.41 $32.45 $37.73
15,000 Btu/h........ 0.00 4.26 15.93 30.97 49.38 59.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline * EL1 EL2 EL3 EL4 EL5
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTHP.............................. 9,000 Btu/h......... $0.00 $4.44 $13.08 $22.41 $32.45 $37.73
15,000 Btu/h........ 0.00 4.26 15.93 30.97 49.38 59.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is
required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that the Baseline level is
1.8% higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline
level is also termed EL1.
AHRI commented that DOE should publish the design options
associated with different energy efficiency levels. (AHRI, NOPR Public
Meeting Transcript, No. 37 at p. 85) Goodman requested that DOE clarify
exactly what designs can help achieve the energy savings associated
with higher efficiency levels. (Goodman, NOPR Public Meeting
Transcript, No. 37 at p. 82) Goodman also commented that DOE should
publish the efficiency improvements associated with individual design
options, as DOE has done for previous rulemakings. (Goodman, NOPR
Public Meeting Transcript, No. 37 at p. 86-87) For this rulemaking, DOE
used a combined efficiency level and reverse engineering approach. This
approach is unlike the design option approach in that it does not
specify the options that manufacturers may use to achieve different
efficiency levels. During the teardown analysis, DOE observed that
different manufacturers use different design options to improve unit
efficiency, and there is no single path to improved efficiency.
Stakeholders interested in the specific design options used in
different units should refer to chapter 5 of the final rule TSD, where
DOE published the design options for each unit observed in the teardown
analysis in Tables 5.6.1 and 5.6.2.
Goodman commented that the analysis did not capture the design
changes that manufacturers made to increase from the current Federal
minimum to the minimum level in ANSI/ASHRAE/IES Standard 90.1-2013,
which for PTAC equipment is 1.8% more stringent than the current
Federal minimum. (Goodman NOPR Public Meeting Transcript, No. 37 at p.
28) The efficiency level approach used in this analysis does capture
the design changes that manufacturers used to
[[Page 43177]]
increase equipment efficiency from the current Federal minimum up to
the ANSI/ASHRAE/IES Standard 90.1 level. Because DOE used an efficiency
level approach rather than a design option approach, however, the
design options used to attain the initial efficiency improvement are
not specified in the analysis. DOE did examine units with efficiency
levels above and below the ANSI/ASHRAE/IES Standard 90.1 level. DOE
based its cost analysis on the observed differences in designs between
these units. The engineering analysis does not account for the
incremental manufacturing costs associated with an increase from the
current Federal minimum up to the ANSI/ASHRAE/IES Standard 90.1-level.
The analysis did not intend to capture these costs because DOE is
required to, at a minimum, adopt the ANSI/ASHRAE/IES Standard 90.1
level as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) DOE
investigated what efficiency levels higher than the ASHRAE 90.1 level
are cost effective, rather than evaluating whether the ASHRAE 90.1
level is cost effective as a step above the current DOE PTAC standard.
DOE revised the MIA analysis in section IV.J to include an additional
set of product conversion costs intended to capture the R&D and testing
and certification burden of meeting amended ASHRAE standards in 2015.
The results of the MIA analysis can be found in chapter 12 of the final
rule TSD.
To convert the MPCs into manufacturer selling prices (MSPs), DOE
applied non-production cost markups to the MPCs estimated in the
engineering analysis for each equipment class and efficiency level.
Based on publicly-available financial information for manufacturers of
PTACs and PTHPs as well as feedback received from manufacturers during
interviews, DOE assumed the average non-production cost baseline
markup--which includes SG&A expenses, R&D expenses, interest, and
profit--to be 1.27 for all PTAC and PTHP equipment classes. As part of
its manufacturer impact analysis, DOE then modeled multiple markup
scenarios to capture a range of potential impacts on manufacturers
following implementation of amended energy conservation standards.
These scenarios lead to different markup values, which, when applied to
MPCs, result in varying revenue and cash flow impacts. Further details
on manufacturer markups can be found in section IV.J.2 and in chapter
12 of the final rule TSD.
D. Markups To Determine Equipment Price
The markups analysis develops appropriate markups in the
distribution chain to convert the estimates of manufacturer selling
price to consumer prices. (``Consumer'' refers to purchasers of the
equipment being regulated.) DOE calculates overall baseline and
incremental markups based on the equipment markups at each step in the
distribution chain. The incremental markup relates the change in the
manufacturer sales price of higher efficiency models (the incremental
cost increase) to the change in the consumer price.
DOE developed supply chain markups in the form of multipliers that
represent increases above MSP and include distribution costs. DOE
applied these markups to the MSPs it developed in the engineering
analysis, and then added sales taxes to arrive at the equipment prices
for baseline and higher efficiency equipment. See chapter 6 of the
final rule TSD for additional details on markups.
DOE identified and used four distribution channels for PTACs and
PTHPs to describe how the equipment passes from the manufacturer to the
consumer. Equipment is distributed to two end-use applications: New
construction and replacement. In the new construction market, the
manufacturer sells the equipment directly to the consumer through a
national account. In the replacement market, the manufacturer sells to
a wholesaler, who sells to a mechanical contractor, who in turn sells
the equipment to the consumer or end user. In the third distribution
channel, used in both the new construction and replacement markets, the
manufacturer sells the equipment to a wholesaler. The wholesaler sells
the equipment to a mechanical contractor, who sells it to a general
contractor, who in turn sells the equipment to the consumer or end
user. In the fourth distribution channel, also used in both the new
construction and replacement markets, the manufacturer sells the
equipment to a wholesaler, who directly sells to the purchaser.
Table IV.6--Distribution Channels for PTAC and PTHP Equipment
----------------------------------------------------------------------------------------------------------------
Channel 1 Channel 2 Channel 3 Channel 4
----------------------------------------------------------------------------------------------------------------
Manufacturer (through national Manufacturer........... Manufacturer........... Manufacturer.
accounts). Wholesaler............. Wholesaler............. Wholesaler.
Mechanical Contractor.. Mechanical Contractor.
General Contractor.
Consumer............................. Consumer............... Consumer............... Consumer.
----------------------------------------------------------------------------------------------------------------
DOE also estimated percentages of the total sales in the new
construction and replacement markets for each of the four distribution
channels, as shown in Table IV.7.
Table IV.7--Share of Market by Distribution Channel for PTAC and PTHP
Equipment
------------------------------------------------------------------------
New construction
Distribution channel (%) Replacement (%)
------------------------------------------------------------------------
Wholesaler-Consumer........... 30 15
Wholesaler-Mech Contractor- 0 25
Consumer.....................
Wholesaler-Mech Contractor- 38 60
General Contractor-Consumer..
National Account.............. 32 0
-----------------------------------------
Total..................... 100 100
------------------------------------------------------------------------
[[Page 43178]]
For each of the steps in the distribution channels presented above,
DOE estimated a baseline markup and an incremental markup. DOE defines
a baseline markup as a multiplier that converts the MSP of equipment
with baseline efficiency to the consumer purchase price for that
equipment. An incremental markup is defined as the multiplier to
convert the incremental increase in MSP of higher efficiency equipment
to the incremental consumer purchase price for that equipment. Both
baseline and incremental markups are independent of the efficiency
levels of the PTACs and PTHPs.
DOE developed the markups for each step of the distribution
channels based on available financial data. DOE utilized updated
versions of the following data sources: (1) The Heating, Air
Conditioning & Refrigeration Distributors International 2012 Profit
Report \17\ to develop wholesaler markups; (2) the Air Conditioning
Contractors of America's (ACCA) 2005 Financial Analysis for the HVACR
Contracting Industry \18\ and U.S. Census Bureau economic data \19\ to
develop mechanical contractor markups; and (3) U.S. Census Bureau
economic data for the commercial and institutional building
construction industry to develop general contractor markups.\20\ DOE
estimated an average markup for sales through national accounts to be
one-half of the markup for the wholesaler-to-consumer distribution
channel. DOE determined this markup for national accounts on an
assumption that the resulting national account equipment price must
fall somewhere between the MSP (i.e., a markup of 1.0) and the consumer
price under a typical chain of distribution (i.e., a markup of
wholesaler, mechanical contractor, or general contractor).
---------------------------------------------------------------------------
\17\ ``2012 Profit Report,'' Heating Air Conditioning &
Refrigeration Distributors International. February 2012. Available
online at: www.hardinet.org/Profit-Report.
\18\ ``2005 Financial Analysis for the HVACR Contracting
Industry,'' Air Conditioning Contractors of America. 2005.
\19\ ``Plumbing, Heating, and Air-Conditioning Contractors.
Sector 23: 238220. Construction: Industry Series, Preliminary
Detailed Statistics for Establishments, 2007,'' U.S. Census Bureau.
2007.
\20\ ``2007 Economic Census, Construction Industry Series and
Wholesale Trade Subject Series,'' U.S. Census Bureau. Available
online at https://www.census.gov/newsroom/releases/archives/construction_industries/2009-07-27_economic_census.html.
---------------------------------------------------------------------------
The overall markup is the product of all the markups (baseline or
incremental markups) for the different steps within a distribution
channel. Replacement channels include sales taxes, which were
calculated based on State sales tax data reported by the Sales Tax
Clearinghouse.
DOE requested comment regarding the selected channels and
distribution of shipments through the channels in the NOPR. AHRI stated
that some national accounts purchase replacements through direct sales.
(AHRI, No. 35 at p. 14) DOE did not find any data to indicate the
magnitude of PTAC/PTHP replacement sales through national accounts.
However, DOE understands that in general replacement purchases of PTACs
and PTHPs are not in large volume as one would expect in national
accounts. Thus, DOE believes that this channel is likely to be a
minimal part of the market. DOE therefore retained the set of markups
used in the September 2014 NOPR.
E. Energy Use Analysis
The energy use analysis provides estimates of the annual unit
energy consumption (UEC) of PTAC and PTHP equipment at the considered
efficiency levels. The annual UECs are used in subsequent analyses.
DOE adjusted the UECs for each equipment class of PTAC and PTHP
from the 2008 standards rulemaking. 73 FR 58772. DOE began with the
cooling UECs for PTACs and the combined cooling and heating UECs for
PTHPs utilized in the 2008 standards rulemaking. 73 FR 58772. The
cooling and heating UECs for PTHPs were split, assuming equal cooling
energy use for PTACs and PTHPs. In addition, DOE adjusted the base-year
UECs to account for changes in climate (i.e., heating degree-days and
cooling degree-days) between 2008 and 2013, based on a typical
meteorological year (TMY) hourly weather data set (referred to as TMY2)
and an updated TMY3 data set.
Where identical efficiency levels and cooling capacities were
available, DOE used the cooling or heating UEC directly from the
previous rulemaking. For additional efficiency levels, DOE scaled the
cooling UECs based on interpolations between EERs and scaled the
heating UECs based on interpolations between COPs, both at a constant
cooling capacity. Likewise, for additional cooling capacities, DOE
scaled the UECs based on interpolations between cooling capacities at a
constant EER.
SCS expressed concern that DOE's adjustments to UEC estimates for
higher efficiency levels are based on sensible heat only. SCS
recommended that the energy modeling be based on compliance with ASHRAE
62.1-2010 ventilation standard. (SCS, No. 29 at p. 2) DOE notes that
UEC estimates for higher efficiency levels include latent heat because
the UECs upon which estimates are based include latent heat. DOE
appreciates SCS's recommendation to comply with ventilation
requirements in the simulation to ASHRAE 62.1-2010. As the simulations
exceed the ventilation requirements of ASHRAE 62.1-2010, DOE does not
intend to make modifications. SCS also suggested that DOE examine the
occupancy rates for buildings where PTACs and PTHPs would be installed,
since that would affect their operating hours. (SCS, NOPR Public
Meeting Transcript, No. 37 at p. 103) The simulations account for
variations in occupancy rates.
AHRI asked why DOE included the space conditioning load of lobby
and lounge spaces, which are typically not conditioned by PTACs and
PTHPs, in the building load of the energy simulations, suggesting that
this is something that DOE should correct. (AHRI, No. 35 at p. 8) While
DOE's whole-building simulations did include the energy consumption
from the equipment conditioning the lobby and lounge zones, the per-
unit energy consumption excluded from its total energy use the energy
of such spaces prior to dividing by the number of PTAC or PTHP
equipment conditioning the guest rooms.
AHRI suggested that DOE account for changes to ASHRAE 90.1 in its
energy use analysis, incorporating at a minimum the following control-
related provisions from ASHRAE 90.1-2013: manual changeover or dual
setpoint thermostat; controls that prevent supplemental electric
resistance strip heating when the heating load can be met; and zone
thermostatic controls for off-hour, automatic shutdown, and setback.
(AHRI, No. 35 at p. 7; AHRI, NOPR Public Meeting Transcript, No. 37 at
p. 102) Similarly, SCS and Goodman stated that DOE did not include the
control requirements from ASHRAE Standard 90.1-2013 and thus
modifications to the simulations would ultimately reduce the UEC of
PTACs and PTHPs. (SCS, No. 29 at p. 1; Goodman, No. 31 at p. 5) The
control provisions of ASHRAE Standard 90.1-2013 would in certain
situations save energy and were included in the energy use simulations
performed for the 2008 PTAC and PTHP final rule, which were in turn the
basis for this analysis. PG&E also asked whether energy from defrost
and from electric resistance heating below 40 [deg]F was included in
the simulations. (PG&E, NOPR Public Meeting Transcript, No. 37 at pp.
103-105) DOE notes that energy from defrost and from electric
resistance heating below 40 [deg]F were included in the energy use
analysis.
[[Page 43179]]
For the LCC and PBP analyses, UECs were determined for the
representative cooling capacities of 9,000 Btu/h and 15,000 Btu/h for
which cost-efficiency curves were developed, as discussed in section
IV.C.7. For the NIA, UECs were determined for the cooling capacities of
7,000 Btu/h, 9,000 Btu/h, and 15,000 Btu/h for which aggregate
shipments were provided by AHRI, as highlighted in section IV.G.
National UEC estimates for PTACs and PTHPs for the above analyses are
described in detail in chapter 8 of the final rule TSD.
AHRI asked why national UEC estimates for PTACs are lower in the
ASHRAE Standard 90.1-2013 notice of data availability and request for
public comment (ASHRAE Standard 90.1-2013 NODA) (79 FR 20114) than in
the September 2014 NOPR. (AHRI, No. 35 at p. 9) For the analysis in the
ASHRAE Standard 90.1-2013 NODA, DOE did not use a multiplier to account
for the weather as the data were not finalized at the time. Taking
these multipliers into account, energy use increased in the UECs
submitted for the September 2014 NOPR.
In the framework stage of this rulemaking, AHRI and Goodman
commented that new requirements for minimum air filter effectiveness
finalized in 2013 for ASHRAE Standard 62.1 would increase pressure drop
and increase fan power. (AHRI, No. 11 at p. 4; Goodman, No. 13 at p. 6)
In the September 2014 NOPR, DOE cited a study \21\ that found the
extent of the impact on energy consumption due to the change in filter
effectiveness at the levels finalized in ASHRAE Standard 62.1 is less
than 1%. Based on this finding, DOE concluded that the change in ASHRAE
Standard 62.1 minimum air filter effectiveness requirements would not
significantly impact the energy use outputs. 79 FR at 55561 (September
16, 2014). AHRI commented that the study cited by DOE was for
residential products and stated that the results showing negligible
impact cannot be extrapolated to commercial equipment. As such, AHRI
stated that DOE must consider the energy and monetary implications for
manufacturers to comply with the increased filtration requirement.
(AHRI, No. 35 at p. 14) DOE understands that manufacturers have thus
far not used filters rated with a Minimum Efficiency Reporting Value
(MERV) filters in their PTAC equipment, and there is no reason to
believe that they will begin using MERV-rated filters in the near term.
Thus, the shift in ASHRAE 62.1 from requiring MERV 6 filter to
requiring MERV 8 filters would not impact the operation or energy use
of PTAC equipment. The change in ASHRAE 62.1 filtration requirements
would also not affect the certification of PTAC equipment, since the
PTAC and PTHP test procedures specify that equipment is to be tested
using the filter that ships with it (or using a MERV 1 filter, if the
equipment is shipped without a filter).
---------------------------------------------------------------------------
\21\ Walker, I.S., et al., ``System Effects of High Efficiency
Filters in Homes,'' Lawrence Berkeley National Laboratory, LBNL-
6144E, 2013.
---------------------------------------------------------------------------
F. Life Cycle Cost and Payback Period Analyses
The purpose of the LCC and PBP analysis is to analyze the effects
of potential amended energy conservation standards on consumers of PTAC
and PTHP equipment by determining how a potential amended standard
affects their operating expenses (usually decreased) and their total
installed costs (usually increased).
The LCC is the total consumer expense over the life of the
equipment, consisting of equipment and installation costs plus
operating costs over the lifetime of the equipment (expenses for energy
use, maintenance, and repair). DOE discounts future operating costs to
the time of purchase using consumer discount rates. The PBP is the
estimated amount of time (in years) it takes consumers to recover the
increased total installed cost (including equipment and installation
costs) of a more efficient type of equipment through lower operating
costs. DOE calculates the PBP by dividing the change in total installed
cost (normally higher) due to a standard by the change in annual
operating cost (normally lower) that results from the standard.
For any given efficiency level, DOE analyzed these impacts for PTAC
and PTHP equipment starting in the compliance years as set forth in
section V.B.1.a by calculating the change in consumer LCCs likely to
result from higher efficiency levels compared with the ASHRAE baseline
efficiency levels for the PTAC and PTHP equipment classes discussed in
the engineering analysis.
DOE conducted the LCC and PBP analyses for the PTAC and PTHP
equipment classes using a spreadsheet model developed in Microsoft
Excel. When combined with Crystal Ball (a commercially available
software program), the LCC and PBP model generates a Monte Carlo
simulation to perform the analyses by incorporating uncertainty and
variability considerations in certain of the key parameters as
discussed below. Inputs to the LCC and PBP analysis are categorized as:
(1) Inputs for establishing the total installed cost and (2) inputs for
calculating the operating expense. Results of the LCC and PBP analyses
were applied to other equipment classes through linear scaling of the
results by the cooling capacity of the equipment class.
The following sections contain brief discussions of comments on the
inputs and key assumptions of DOE's LCC and PBP analysis. They are also
described in detail in chapter 8 of the final rule TSD.
1. Equipment and Installation Costs
The equipment costs faced by purchasers of PTAC and PTHP equipment
are derived from the MSPs estimated in the engineering analysis and the
markups estimated in the markups analysis.
To develop an equipment price trend for the September 2014 NOPR,
DOE derived an inflation-adjusted index of the producer price index
(PPI) for ``all other miscellaneous refrigeration and air-conditioning
equipment'' from 1990-2014.\22\ Although the inflation-adjusted index
shows a declining trend from 1990 to 2004, and a rising trend from
2004-2008, data since 2008 have shown a flat-to-slightly rising trend.
Given the uncertainty as to which of the trends will prevail in coming
years, DOE applied a constant price trend (2014 levels) for each
efficiency level in each equipment class for the September 2014 NOPR.
---------------------------------------------------------------------------
\22\ ``Producer Price Indexes,'' Bureau of Labor Statistics
(BLS). 2014. Available online at www.bls.gov/ppi/.
---------------------------------------------------------------------------
AHRI stated that DOE should utilize a trend based on the steady and
significant price increase since 2004, a trend that has not been
affected by the slowdown in activity since 2008. (AHRI, No. 35 at p. 5)
While the historical data show an increasing price from 2004-2008, the
data show a decreasing price trend from 1990 to 2004 and several years
of constant prices after the economic slowdown. It is not clear if a
new upward trend has been established. Given such uncertainty, DOE
maintained its approach in the September 2014 NOPR to use a constant
price assumption to project future PTAC and PTHP equipment prices.
For installation costs, DOE used a specific cost from RS Means \23\
for PTACs and PTHPs and linearly scaled the cost according to the
cooling capacities of the equipment classes.
---------------------------------------------------------------------------
\23\ RS Means Company, Inc. RS Means Mechanical Cost Data 2013.
2013. Kingston, MA.
---------------------------------------------------------------------------
2. Unit Energy Consumption
The calculation of annual per-unit energy consumption at each
considered
[[Page 43180]]
efficiency level and capacity is described in section IV.E.
3. Electricity Prices and Electricity Price Trends
DOE determined electricity prices for PTAC and PTHP users based on
tariffs from a representative sample of electric utilities. Since air-
conditioning loads are strongly peak-coincident, regional marginal
prices were developed from the tariff data and then scaled to
approximate 2014 prices. This approach calculates energy expenses based
on actual commercial building marginal electricity prices that
consumers are paying.\24\
---------------------------------------------------------------------------
\24\ Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and
J. E. McMahon, ``Tariff-based Analysis of Commercial Building
Electricity Prices.'' Lawrence Berkeley National Laboratory. LBNL-
55551. 2008.
---------------------------------------------------------------------------
The Commercial Buildings Energy Consumption Survey completed in
1992 (CBECS 1992) and in 1995 (CBECS 1995) provides monthly electricity
consumption and demand for a large sample of buildings. DOE used these
values to help develop usage patterns associated with various building
types. Using these monthly values in conjunction with the tariff data,
DOE calculated monthly electricity bills for each building. The average
price of electricity is defined as the total electricity bill divided
by total electricity consumption. From this average price, the marginal
price for electricity consumption was determined by applying a 5
percent decrement to the average CBECS consumption data and
recalculating the electricity bill. Using building location and the
prices derived from the above method, a marginal price was determined
for each region of the U.S.
The tariff-based prices were updated to 2013 using the commercial
electricity price index published in the AEO and then adjusted to
2014$. An examination of data published by the Edison Electric
Institute \25\ indicates that the rate of increase of marginal and
average prices is not significantly different, so the same factor was
used for both pricing estimates. DOE projected future electricity
prices using trends in average U.S. commercial electricity price from
AEO 2014.\26\ More information can be found in chapter 8 of the final
rule TSD.
---------------------------------------------------------------------------
\25\ ``EEI Typical Bills and Average Rates Report (bi-annual,
2007-2012),'' Edison Electric Institute, Washington, DC. 2012.
\26\ ``Annual Energy Outlook 2014,'' U.S. Energy Information
Administration. May, 2014. Available online at http://www.eia.gov/forecasts/aeo/.
---------------------------------------------------------------------------
4. Repair Costs
Repair costs are associated with repairing or replacing components
that have failed. In the September 2014 NOPR, DOE determined the cost
of repair costs by annualizing warranty contract's prices and linearly
scaling by cooling capacity and MSP to cover the equipment classes and
considered efficiency levels.
DOE received comments regarding repair costs. AHRI stated that
repair costs are significantly more expensive after the warranty has
expired and that DOE should account for repair costs after five years.
(AHRI, No. 35 at p. 13; AHRI, NOPR Public Meeting Transcript, No. 37 at
p. 154) Goodman recommended that DOE reevaluate the repair cost amounts
specified in the NOPR TSD, adding that equipment lifetime can be
substantially longer than the typical equipment warranty and that using
warranty costs as a proxy for lifetime repair prices understates
average annual repair costs. Goodman also recommended that DOE survey
contractors to determine average labor costs associated with repair
work. (Goodman, No. 31 at pp. 3-4)
In response to these comments, DOE reevaluated the repair costs it
had proposed in the September 2014 NOPR. For the final rule, DOE used
the material and labor costs associated with repair of equipment
components covered and not covered by a standard manufacturer warranty.
Based on a report of component failure probability and warranty terms,
and on component material and labor costs from RS Means data,\27\ DOE
determined the expected value of the total cost of a repair and
annualized it to determine the annual repair cost. Similar to the
approach used in the September 2014 NOPR, DOE scaled by cooling
capacity and MSP to determine repair costs for the equipment classes
and considered efficiency levels.
---------------------------------------------------------------------------
\27\ RS Means Company, Inc. ``RSMeans Facilities Maintenance &
Repair Cost Data,'' 2013.
---------------------------------------------------------------------------
5. Maintenance Costs
Maintenance costs are costs associated with general maintenance of
the equipment (e.g., checking and maintaining refrigerant charge levels
and cleaning heat-exchanger coils). In the September 2014 NOPR, DOE
utilized estimates of annual maintenance cost from the previous
rulemaking with the values adjusted to current material and labor rates
to estimate maintenance cost for PTACs. For PTHPs, DOE scaled the
adjusted estimate of PTAC maintenance costs with the ratio of PTHP to
PTAC annualized maintenance costs from RS Means data.\28\ Since
maintenance tasks do not change with efficiency level, DOE does not
expect maintenance costs to scale with efficiency level. Maintenance
costs were linearly scaled by cooling capacity to all equipment
classes. For the final rule, DOE adopted the approach used in the
September 2014 NOPR to determine maintenance costs for PTAC and PTHP
equipment.
---------------------------------------------------------------------------
\28\ RS Means Company, Inc. RSMeans Online. (Last accessed March
26, 2013.) http://www.rsmeansonline.com.
---------------------------------------------------------------------------
6. Lifetime
Equipment lifetime is the age at which the equipment is retired
from service. In the September 2014 NOPR, DOE used a median equipment
lifetime of 10 years with a maximum lifetime of 20 years. AHRI reminded
DOE that ASHRAE had recommended the 15-year service life estimate based
on a survey conducted in 1976 be used with caution. (AHRI, No. 35 at p.
7) AHRI questioned DOE's use of ``time-to-failure'' instead of
``service life'' and thereby urged DOE to recalibrate the Weibull
distribution to have a mean of 5 years and a maximum of 12 years.
(AHRI, No. 35 at p. 7) SCS commented that many hotel chains remodel
their rooms and replace PTAC/PTHP equipment every seven to ten years.
SCS believes that DOE is using a longer equipment lifetime than is
applicable in real world use. (SCS, NOPR Public Meeting Transcript, No.
37 at pp. 123-124)
The comments of manufacturers, prevalent practice of lodging
business operators, observations of lenders to hotel real estate, and
expert insight have led DOE to recognize that major renovations of
lodging businesses occur on a seven to ten year cycle and consist of
replacing, adding, removing, or altering fixed assets. As capital
investments ultimately shorten equipment lifetime, the distribution of
businesses that renovate within a cycle form the basis for the mean
lifetime. The distribution of businesses that do not renovate within
one cycle, performing belated renovations or observing eventual
equipment failure at the actual maximum lifetime of the equipment, form
the basis of the maximum lifetime. Based on these distributions, DOE
used a mean of 8 years and a maximum of 15 years in its analyses for
the final rule. See chapter 8 of the final rule TSD for further
discussion.
7. Discount Rate
The discount rate is the rate at which future expenditures are
discounted to estimate their present value. The cost of
[[Page 43181]]
capital commonly is used to estimate the present value of cash flows to
be derived from a typical company project or investment. Most companies
use both debt and equity capital to fund investments, so the cost of
capital is the weighted-average cost to the firm of equity and debt
financing. DOE uses the capital asset pricing model (CAPM) to calculate
the equity capital component, and financial data sources to calculate
the cost of debt financing.
DOE estimated the cost of capital of companies that purchase PTAC
and PTHP equipment. The types of companies that DOE used are large
hotel/motel chains, independent hotel/motel, assisted living/health
care, and small office. More details regarding DOE's estimates of
consumer discount rates are provided in chapter 8 of the final rule
TSD.
8. Base Case Efficiency Distribution
For the LCC analysis, DOE analyzes the considered efficiency levels
relative to a base case (i.e., the case without amended energy
efficiency standards). This analysis requires an estimate of the
distribution of equipment efficiencies in the base case (i.e., what
consumers would have purchased in the compliance year in the absence of
amended standards). DOE refers to this distribution of equipment energy
efficiencies as the base case efficiency distribution.
In the September 2014 NOPR, DOE reviewed the AHRI certified
products directory \29\ for relevant equipment classes to determine the
distribution of efficiency levels for commercially-available models
within each equipment class analyzed. DOE bundled the efficiency levels
into efficiency ranges and determined the percentage of models within
each range. To estimate the change between the present and the
compliance year, DOE applied a slightly increasing efficiency trend, as
explained in section IV.H. For the final rule, DOE adopted the approach
used in the September 2014 NOPR to determine the base case efficiency
distribution for PTAC and PTHP equipment.
---------------------------------------------------------------------------
\29\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
---------------------------------------------------------------------------
The distribution of efficiencies in the base case for each
equipment class can be found in Table IV.8 and Table IV.9.
Table IV.8--Compliance Year Base Case Efficiency Market Shares for Packaged Terminal Air Conditioning Equipment
----------------------------------------------------------------------------------------------------------------
PTAC <12,000 Btu/h cooling capacity PTAC >=12,000 Btu/h cooling capacity
----------------------------------------------------------------------------------------------------------------
EER Market share (%) EER Market share (%)
----------------------------------------------------------------------------------------------------------------
11.1-11.29 0.0 9.3-9.49 0.0
11.3-11.49 43.6 9.5-9.69 25.8
11.5-11.99 24.3 9.7-9.99 34.8
12.0-12.39 29.5 10.0-10.39 34.7
12.4-12.89 2.1 10.4-10.79 2.7
12.9-13.09 0.5 10.8-10.99 1.4
>=13.1 0.0 >=11.0 0.7
----------------------------------------------------------------------------------------------------------------
Table IV.9--Compliance Year Base Case Efficiency Market Shares for Packaged Terminal Heat Pump Equipment
----------------------------------------------------------------------------------------------------------------
PTHP <12,000 Btu/h cooling capacity PTHP >=12,000 Btu/h cooling capacity
----------------------------------------------------------------------------------------------------------------
EER Market share (%) EER Market share (%)
----------------------------------------------------------------------------------------------------------------
11.3-11.49 52.5 9.5-9.69 63.1
11.5-11.99 8.9 9.7-9.99 0.0
12.0-12.39 26.1 10.0-10.39 28.4
12.4-12.89 12.4 10.4-10.79 7.2
12.9-13.09 0.0 10.8-10.99 1.4
>=13.1 0.0 >=11.0 0.0
----------------------------------------------------------------------------------------------------------------
9. Payback Period Inputs
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more efficient equipment,
compared to baseline equipment, through energy cost savings. Payback
periods are expressed in years. Payback periods that exceed the life of
the equipment mean that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation are the increase in the total
installed cost of the equipment to the consumer for each efficiency
level and the annual operating cost savings for each efficiency level.
The PBP calculation uses the same inputs as the LCC analysis, except
that discount rates are not needed.
10. Rebuttable-Presumption Payback Period
EPCA establishes a rebuttable presumption that a standard is
economically justified if the Secretary finds that the additional cost
to the consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value of
the energy (and, as applicable, water) savings during the first year
that the consumer will receive as a result of the standard, as
calculated under the test procedure in place for that standard. (42
U.S.C. 6295(o)(2)(B)(iii) and 42 U.S.C. 6316(a)) For each considered
efficiency level, DOE determines the value of the first year's energy
savings by calculating the quantity of those savings in accordance with
the applicable DOE test procedure, and multiplying that amount by the
[[Page 43182]]
average energy price forecast for the year in which compliance with the
amended standards would be required.
G. Shipments Analysis
DOE uses projections of shipments for PTACs and PTHPs together to
calculate equipment stock over the course of the analysis period, which
in turn is used to determine the impacts of potential amended standards
on national energy savings, net present value, and future manufacturer
cash flows. DOE developed shipment projections based on historical data
and an analysis of key market drivers for this equipment. Historical
shipments data are used to build up an equipment stock and also to
calibrate the shipments model. DOE separately calculated shipments
intended for new construction and replacement applications. The sum of
new construction and replacement shipments is the total shipments.
New construction shipments were calculated using projected new
construction floor space of healthcare, lodging, and small office
buildings from AEO 2014 and historical PTAC and PTHP saturation in new
buildings, which was estimated by dividing historical shipments by
historical new construction floor space. Due to unrepresentative market
conditions during the recession of 2008-2010, DOE used historical data
from the analysis of the 2008 final rule to determine the value for the
PTAC and PTHP saturation, which was used for each year of the analysis
period. DOE then projected shipments based on the product of the
saturation and AEO's projected new floor space.
Replacement shipments equal the number of units that fail in a
given year. DOE used a retirement function in the form of a Weibull
distribution with inputs based on lifetime values from the LCC analysis
to estimate the number of units of a given age that fail in each year.
When a unit fails, it is removed from the stock and a new unit is
introduced in its stead. Replacement shipments account for the largest
portion of total shipments.
DOE determined the distribution of total shipments among the
equipment classes using shipments data by equipment class provided by
AHRI for the previous PTAC and PTHP rulemaking. 73 FR 58772. For the
NIA, DOE considered the following equipment classes for which it
received shipments data:
PTAC: <7,000 Btu/h cooling capacity, >=7000 and <=15000 Btu/h
cooling capacity, and >=15000 Btu/h cooling capacity; and
PTHP: <7,000 Btu/h cooling capacity, >=7000 and <=15000 Btu/h
cooling capacity, and >=15000 Btu/h cooling capacity.
For further information on the shipments analysis, see chapter 9 of
the final rule TSD.
H. National Impact Analysis
The NIA assesses the national energy savings (NES) and the national
net present value (NPV) from a national perspective of total consumer
costs and savings that would be expected to result from new or amended
standards at specific efficiency levels. (``Consumer'' in this context
refers to consumers of the equipment being regulated.) DOE calculates
the NES and NPV based on projections of annual equipment shipments,
along with the annual energy consumption and total installed cost data
from the energy use and LCC analyses.\30\
---------------------------------------------------------------------------
\30\ For the NIA, DOE adjusts the installed cost data from the
LCC analysis to exclude sales tax, which is a transfer.
---------------------------------------------------------------------------
DOE evaluates the impacts of new and amended standards by comparing
a base-case projection with standards-case projections. The base-case
projection characterizes energy use and consumer costs for each
equipment class in the absence of new or amended energy conservation
standards. For the base-case projection, DOE considers historical
trends in efficiency and various forces that are likely to affect the
mix of efficiencies over time. DOE compares the base-case projection
with projections characterizing the market for each equipment class if
DOE adopted new or amended standards at specific energy efficiency
levels (i.e., the TSLs or standards cases) for that class. For the
standards cases, DOE considers how a given standard would likely affect
the market shares of equipment with efficiencies greater than the
standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing various input quantities
within the spreadsheet. The NIA spreadsheet model uses typical values
(as opposed to probability distributions) as inputs.
To develop the NES, DOE calculates annual energy consumption for
the base case and the standards cases. DOE calculates the annual energy
consumption using per-unit annual energy use data multiplied by
projected shipments. DOE calculated energy savings for TSLs more
stringent than the levels specified by ANSI/ASHRAE/IES Standard 90.1-
2013 in each year relative to a base case, defined as DOE adoption of
the efficiency levels specified by ANSI/ASHRAE/IES Standard 90.1-2013.
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are: (1) Total annual installed cost; (2)
total annual savings in operating costs; and (3) a discount factor to
calculate the present value of costs and savings. DOE calculates net
savings each year as the difference between the base case and each
standards case in terms of total savings in operating costs versus
total increases in installed costs. DOE calculates operating cost
savings over the lifetime of each product shipped during the forecast
period. DOE used a discount factor based on real discount rates of 3
percent and 7 percent to discount future costs and savings to present
values.
As discussed in section IV.F.1, DOE applied a constant price trend
(2014 levels) for each efficiency level in each equipment class.
A key component of the NIA is the equipment energy efficiency
forecasted over time for the base case and for each of the standards
cases. To estimate a base-case efficiency trend, DOE started with the
base-case efficiency distribution described in section IV.F.8. For the
equipment classes that were not covered in the LCC analysis, DOE used
the same source (i.e., the AHRI Directory) to estimate the base-case
efficiency distribution.
The base case efficiency distributions are set forth in Table IV.10
and Table IV.11.
[[Page 43183]]
Table IV.10--Base Case Efficiency Market Shares in Compliance Year for Packaged Terminal Air Conditioning
Equipment
----------------------------------------------------------------------------------------------------------------
PTAC <7000 Btu/h cooling capacity PTAC >=7000 to <=15000 Btu/h cooling PTAC >=15000 Btu/h cooling capacity
------------------------------------- capacity -------------------------------------
--------------------------------------
EER Market share (%) EER Market share (%) EER Market share (%)
----------------------------------------------------------------------------------------------------------------
11.7 0 11.1 0 9.3 0
11.9 0 11.3 38 9.5 65
12.2 63 11.5 29 9.7 17
12.6 37 12.0 29 10.0 18
13.1 0 12.4 3 10.4 0
13.6 0 12.9 1 10.8 0
13.8 0 13.1 0 11.0 0
----------------------------------------------------------------------------------------------------------------
Table IV.11--Base Case Efficiency Market Shares in Compliance Year for Packaged Terminal Heat Pump Equipment
----------------------------------------------------------------------------------------------------------------
PTHP <7000 Btu/h cooling capacity PTHP >=7000 to <=15000 Btu/h cooling PTHP >=15000 Btu/h cooling capacity
------------------------------------- capacity -------------------------------------
--------------------------------------
EER Market share (%) EER Market share (%) EER Market share (%)
----------------------------------------------------------------------------------------------------------------
11.9 72 11.3 56 9.5 72
12.2 14 11.5 8 9.7 3
12.6 14 12.0 26 10.0 25
13.1 0 12.4 9 10.4 0
13.6 0 12.9 1 10.8 0
13.8 0 13.1 0 11.0 0
----------------------------------------------------------------------------------------------------------------
For years after the compliance year, DOE applied a trend largely
based on the trend from 2012 to 2035 that was used in the 2004
commercial unitary air conditioner Advance Notice of Proposed
Rulemaking (ANOPR), which estimated an increase of approximately 1 EER
every 35 years.\31\ 69 FR 45460 (July 29, 2004). DOE adjusted this
trend for PTACs by assuming that a gradual replacement of equipment at
the Federal minimum with equipment at the ASHRAE standard occurs over
10 years after the first year of expected compliance.
---------------------------------------------------------------------------
\31\ See DOE's technical support document underlying DOE's July
29, 2004 ANOPR. (Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078).
---------------------------------------------------------------------------
To estimate the impact that amended energy conservation standards
may have in the first year of compliance, DOE typically uses a ``roll-
up'' scenario in its standards rulemakings. Under the ``roll-up''
scenario, DOE assumes equipment efficiencies in the base case that do
not meet the new or amended standard level under consideration would
``roll up'' to meet that standard level, and equipment shipments at
efficiencies above the standard level under consideration would not be
affected. AHRI asked how roll-up was possible if 100% of the market was
already above a certain TSL, citing the example of the PTACs <7,000
Btu/h equipment class that was already above TSL 3, as noted in the
ASHRAE Standard 90.1-2013 NODA. (AHRI, No. 35 at p. 8) For those cases
where the market share is entirely at or above a given potential
standard level, DOE did not perform a roll-up operation.
After the compliance year, DOE applied the same rate of efficiency
growth in the standards cases as in the base case.
Using the distribution of efficiencies in the base case and in the
standards cases for each equipment class analyzed, DOE calculated
market-weighted average efficiency values for each year. The market-
weighted average efficiency value represents the average efficiency of
the total units shipped at a specified potential standard level. The
market-weighted average efficiency values for the base case and the
standards cases for each efficiency level analyzed for each equipment
class is provided in chapter 10 of the final rule TSD.
DOE converted the site electricity consumption and savings to
primary energy (power sector energy consumption) using annual
conversion factors derived from the AEO 2014 version of the National
Energy Modeling System (NEMS). Cumulative energy savings are the sum of
the NES for each year in which equipment shipped during the analysis
period continues to operate.
In 2011, in response to the recommendations of a committee on
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use full-fuel-cycle (FFC) measures of
energy use and greenhouse gas and other emissions in the national
impact analyses and emissions analyses included in future energy
conservation standards rulemakings. 76 FR 51281 (August 18, 2011).
After evaluating the approaches discussed in the August 18, 2011
document, DOE published a statement of amended policy in which DOE
explained its determination that EIA's NEMS is the most appropriate
tool for its FFC analysis and its intention to use NEMS for that
purpose. 77 FR 49701 (August 17, 2012). NEMS is a public domain, multi-
sector, partial equilibrium model of the U.S. energy sector \32\ that
EIA uses to prepare its Annual Energy Outlook. The approach used for
deriving FFC measures of energy use and emissions is described in
appendix 10-B of the final rule TSD.
---------------------------------------------------------------------------
\32\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview, DOE/EIA-0581 (98) (Feb.1998)
(Available at: http://www.eia.gov/oiaf/aeo/overview/).
---------------------------------------------------------------------------
I. Consumer Subgroup Analysis
In analyzing the potential impacts of new or amended standards on
commercial consumers, DOE evaluates impacts on identifiable groups
(i.e., subgroups) of consumers that may be disproportionately affected
by a national standard. For the September 2014
[[Page 43184]]
NOPR, DOE evaluated impacts on a subgroup consisting of independently-
operating lodging businesses using the LCC and PBP spreadsheet model.
To the extent possible, it utilized inputs appropriate for this
subgroup.
SCS stated that consumers in the northern region of the U.S. should
be considered as a separate subgroup because they may be
disproportionally impacted by the proposed standard. SCS reasoned that
the proportion of consumers using heat pumps is much less than in the
southern U.S. (SCS, No. 29 at p. 3) DOE does not have sufficient
information for PTAC and PTHP equipment to define a separate subgroup
for consumers in the northern region. However, the distribution of LCC
and PBP results reflects the impacts for consumers located in different
regions.
The commercial consumer subgroup analysis is discussed in chapter
11 of the final rule TSD.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impact of amended
energy conservation standards on manufacturers of PTACs and PTHPs, and
to calculate the potential impact of such standards on employment and
manufacturing capacity. The MIA has both quantitative and qualitative
aspects. The quantitative part of the MIA primarily relies on the
Government Regulatory Impact Model (GRIM), an industry cash-flow model
with inputs specific to this rulemaking. The key GRIM inputs are data
on the industry cost structure, equipment costs, shipments, and
assumptions about markups and conversion expenditures. The key output
is the industry net present value (INPV). Different sets of assumptions
(markup scenarios) will produce different results. The qualitative part
of the MIA addresses factors such as equipment characteristics, impacts
on particular subgroups of firms, and important market and equipment
trends. The complete MIA is outlined in chapter 12 of the final rule
TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE conducted interviews with a representative cross-
section of manufacturers and prepared a profile of the PTAC and PTHP
industry. During manufacturer interviews, DOE discussed engineering,
manufacturing, procurement, and financial topics to identify key issues
or concerns and to inform and validate assumptions used in the GRIM.
See section IV.J.2 for a description of the key issues manufacturers
raised during the interviews.
DOE used information obtained during these interviews to prepare a
profile of the PTAC and PTHP industry, including a manufacturer cost
analysis. Drawing on financial analysis performed as part of the 2008
energy conservation standard for PTACs and PTHPs as well as feedback
obtained from manufacturers, DOE derived financial inputs for the GRIM
(e.g., sales, general, and administration (SG&A) expenses; research and
development (R&D) expenses; and tax rates). DOE also used public
sources of information, including company SEC 10-K filings,\33\
corporate annual reports, the U.S. Census Bureau's Economic Census,\34\
and Hoover's reports,\35\ to develop the industry profile.
---------------------------------------------------------------------------
\33\ U.S. Securities and Exchange Commission. Annual 10-K
Reports. Various Years. <http://www.sec.gov>.
\34\ ``Annual Survey of Manufacturers: General Statistics:
Statistics for Industry Groups and Industries.'' U.S. Census Bureau.
2014. Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t.
\35\ Hoovers, Inc. Company Profiles. Various Companies. <http://www.hoovers.com>.
---------------------------------------------------------------------------
In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of an amended energy conservation
standard on manufacturers of PTACs and PTHPs. In general, energy
conservation standards can affect manufacturer cash flow in three
distinct ways: (1) Create a need for increased investment; (2) raise
production costs per unit; and (3) alter revenue due to higher per-unit
prices and possible changes in sales volumes. To quantify these
impacts, DOE used the GRIM to perform a cash-flow analysis for the PTAC
and PTHP industry using financial values derived during Phase 1.
In Phase 3 of the MIA, DOE evaluated subgroups of manufacturers
that may be disproportionately impacted by amended energy conservation
standards or that may not be represented accurately by the average cost
assumptions used to develop the industry cash-flow analysis. For
example, small manufacturers, niche players, or manufacturers
exhibiting a cost structure that largely differs from the industry
average could be more negatively affected. DOE identified two subgroups
for separate impact analyses: (1) Manufacturers with production assets;
and (2) small businesses.
DOE initially identified 22 companies that sell PTAC and PTHP
equipment in the U.S. However, most companies selling in the U.S.
market do not own production assets; rather, they import and distribute
PTACs and PTHPs manufactured overseas, primarily in China. DOE
identified a subgroup of three U.S. manufacturers that own production
assets. Together, these three manufacturers account for approximately
80 percent of the domestic PTAC and PTHP market. Because manufacturers
with production assets will incur different costs to comply with
amended energy conservation standards compared to their competitors who
do not own production assets, DOE conducted a separate subgroup
analysis to evaluate the potential impacts of amended energy
conservation standards on manufacturers with production assets. The
subgroup analysis of PTAC and PTHP manufacturers with production assets
is discussed in chapter 12 of the final rule TSD and in section V.B.2
of this document.
For the small businesses subgroup analysis, DOE applied the small
business size standards published by the Small Business Administration
(SBA) to determine whether a company is considered a small business.
See 13 CFR part 121. To be categorized as a small business under North
American Industry Classification System (NAICS) code 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and
Industrial Refrigeration Equipment Manufacturing,'' a PTAC and PTHP
manufacturer and its affiliates may employ a maximum of 750 employees.
The 750-employee threshold includes all employees in a business's
parent company and any other subsidiaries. Based on this
classification, DOE identified 12 manufacturers that qualify as small
businesses. The PTAC and PTHP small manufacturer subgroup is discussed
in chapter 12 of the final rule TSD and in section VI.B of this
document.
2. Government Regulatory Impact Model
DOE uses the GRIM to quantify the changes in cash flow due to
amended standards that result in a higher or lower industry value. The
GRIM analysis uses a standard, annual cash-flow analysis that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from an amended energy conservation standard. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2015 (the base year of the analysis) and continuing for a
30-year period that begins in the compliance year for each equipment
[[Page 43185]]
class. DOE calculated INPVs by summing the stream of annual discounted
cash flows during this period. DOE used a real discount rate of 8.5
percent, which was derived from industry financials and then modified
according to feedback received during manufacturer interviews.
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between a base case and each standards
case. The difference in INPV between the base case and a standards case
represents the financial impact of the amended energy conservation
standard on manufacturers.
DOE collected information on critical GRIM inputs from a number of
sources, including publicly available data and interviews with
manufacturers (described in the next section). The GRIM results are
shown in section V.B.2. Additional details about the GRIM, the discount
rate, and other financial parameters can be found in chapter 12 of the
final rule TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
Manufacturing more efficient equipment is typically more expensive
than manufacturing baseline equipment due to the use of more complex
components, which are typically more costly than baseline components.
The changes in the MPCs of the analyzed equipment can affect the
revenues, gross margins, and cash flow of the industry, making these
equipment cost data key GRIM inputs for DOE's analysis.
In the MIA, DOE used the MPCs for each considered efficiency level
calculated in the engineering analysis, as described in section IV.C
and further detailed in chapter 5 of the final rule TSD. In addition,
DOE used information from its teardown analysis, described in chapter 5
of the final rule TSD, to disaggregate the MPCs into material, labor,
and overhead costs. To calculate the MPCs for equipment above the
baseline, DOE added the incremental material, labor, and overhead costs
from the engineering cost-efficiency curves to the baseline MPCs. These
cost breakdowns and equipment markups were validated and revised with
manufacturers during manufacturer interviews.
Shipments Forecasts
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of these values by efficiency
level. Changes in sales volumes and efficiency mix over time can
significantly affect manufacturer finances. For this analysis, the GRIM
uses the NIA's annual shipment forecasts derived from the shipments
analysis. See section IV.G above and chapter 10 of the final rule TSD
for additional details.
Product and Capital Conversion Costs
An amended energy conservation standard would cause manufacturers
to incur conversion costs to bring their production facilities and
equipment designs into compliance. DOE evaluated the level of
conversion-related expenditures that would be needed to comply with
each considered efficiency level in each equipment class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
Product conversion costs; and (2) capital conversion costs. Product
conversion costs are investments in research, development, testing,
marketing, and other non-capitalized costs necessary to make equipment
designs comply with the amended energy conservation standard. Capital
conversion costs are investments in property, plant, and equipment
necessary to adapt or change existing production facilities such that
new compliant equipment designs can be fabricated and assembled.
To evaluate the level of capital conversion expenditures
manufacturers would likely incur to comply with amended energy
conservation standards, DOE used manufacturer interviews to gather data
on the anticipated level of capital investment that would be required
at each efficiency level. DOE validated manufacturer comments through
estimates of capital expenditure requirements derived from the
equipment teardown analysis and engineering analysis described in
chapter 5 of the final rule TSD.
DOE assessed the product conversion costs at each considered
efficiency level by integrating data from quantitative and qualitative
sources. DOE considered market-share-weighted feedback regarding the
potential costs of each efficiency level from multiple manufacturers to
estimate product conversion costs and validated those numbers against
engineering estimates of redesign efforts.
In general, DOE assumes that all conversion-related investments
occur between the year of publication of the final rule and the year by
which manufacturers must comply with the new standard. The conversion
cost figures used in the GRIM can be found in section V.B.2 of this
document. For additional information on the estimated product and
capital conversion costs, see chapter 12 of the final rule TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
Manufacturer selling prices (MSPs) include direct manufacturing
production costs (i.e., labor, materials, and overhead estimated in
DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, and
interest), along with profit. To calculate the MSPs in the GRIM, DOE
applied non-production cost markups to the MPCs estimated in the
engineering analysis for each equipment class and efficiency level.
Modifying these markups in the standards case yields different sets of
impacts on manufacturers. For the MIA, DOE modeled two standards-case
markup scenarios to represent the uncertainty regarding the potential
impacts on prices and profitability for manufacturers following the
implementation of amended energy conservation standards: (1) A
preservation of gross margin percentage markup scenario; and (2) a
preservation of per unit operating profit markup scenario. These
scenarios lead to different markup values that, when applied to the
inputted MPCs, result in varying revenue and cash flow impacts.
Under the preservation of gross margin percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within an equipment class. As production costs
increase with efficiency, this scenario implies that the absolute
dollar markup will increase as well. Based on publicly-available
financial information for manufacturers of PTACs and PTHPs as well as
comments from manufacturer interviews, DOE assumed the average non-
production cost markup--which includes SG&A expenses, R&D expenses,
interest, and profit--to be 1.27 for all PTAC and PTHP equipment
classes.
Because this markup scenario assumes that manufacturers would be
able to maintain their gross margin percentage markups as production
costs increase in response to an amended energy conservation standard,
it represents a high bound to industry profitability.
In the preservation of per unit operating profit scenario,
manufacturer markups are set so that operating profit one year after
the compliance date of the
[[Page 43186]]
amended energy conservation standard is the same as in the base case on
a per unit basis. Under this scenario, as the costs of production
increase under an amended standards case, manufacturers are generally
required to reduce their markups to a level that maintains base-case
operating profit per unit. The implicit assumption behind this markup
scenario is that the industry can only maintain its operating profit in
absolute dollars per unit after compliance with the new standard is
required. Therefore, operating margin in percentage terms is reduced
between the base case and standards case. DOE adjusted the manufacturer
markups in the GRIM at each TSL to yield approximately the same
earnings before interest and taxes in the standards case as in the base
case. This markup scenario represents a low bound to industry
profitability under an amended energy conservation standard.
c. Manufacturer Interviews
As part of the MIA, DOE discussed the potential impacts of amended
energy conservation standards with manufacturers of PTACs and PTHPs.
DOE interviewed manufacturers representing approximately 90 percent of
the market by revenue. Information gathered during these interviews
enabled DOE to tailor the GRIM to reflect the unique financial
characteristics of the industry.
3. Discussion of Comments
During the NOPR public comment period, interested parties commented
on assumptions and results described in the September 2014 NOPR and
accompanying TSD. Comments address several topics related to
manufacturer impacts. These include: Multiple redesign cycles due to
ASHRAE; conversion costs; impacts on the subgroup of manufacturers with
production assets; and cumulative regulatory burden.
a. Multiple Redesign Cycles
AHRI and Goodman commented that DOE's EPCA baseline analysis should
account for the financial impacts on manufacturers of multiple redesign
cycles, the first to comply with amended ASHRAE standards (2015) and
the second to comply with amended federal energy conservation standards
(2019). (AHRI, No. 35 at pp. 6 and 11; Goodman, No. 31 at pp. 1-2)
Southern Company Services (SCS) also commented that the proposed level
would entail an undue burden on manufacturers by requiring them to
undertake multiple redesign cycles. (SCS, No. 29 at p. 2) To better
account for the impacts of multiple redesign cycles on manufacturers,
DOE revised its EPCA baseline analysis to include an additional set of
product conversion costs intended to capture the R&D and testing and
certification burden of meeting amended ASHRAE standards in 2015. See
chapter 12 of the final rule TSD for more information on the EPCA
baseline analysis.
b. Conversion Costs
AHRI commented that DOE underestimated the product conversion costs
industry would incur to comply with amended standards. AHRI stated that
DOE underestimated the number of PTAC and PTHP models that would
require redesign and suggested that DOE should not assign one set of
R&D costs to similar models of PTACs and PTHPs. (AHRI, No. 35 at pp. 9-
11) DOE clarifies that it assigned separate product conversion costs
for PTACs and PTHPs. DOE also based its product conversion cost model
on the number of equipment platforms that would require redesign as
opposed to the number of individual equipment listings, where equipment
platforms were defined based on cooling capacity within a given
equipment class. DOE assumed R&D costs ranging from $50,000 to $200,000
per platform based on the complexity of the redesign anticipated at
each TSL. DOE further clarifies that it validated its conversion cost
estimates against feedback received from manufacturers during
interviews.
c. Impacts on the Subgroup of Manufacturers With Production Assets
EEI and AHRI expressed concern that the subgroup of three
manufacturers with production assets would bear a disproportionate
share of the costs associated with the proposed rule. (EEI, No. 37 at
pp. 180-181; AHRI, NOPR Public Meeting Transcript, No. 37 at pp. 183)
Goodman also commented that this subgroup appears to be at a
significant competitive disadvantage and further stated that this
subgroup would have to absorb 90 percent of the industry's conversion
costs while producing only 40 percent of equipment. Goodman referred to
Chapter 16 of the NOPR TSD for the 40 percent figure. (Goodman, No. 31
at pp. 4-5)
To clarify, the subgroup of manufacturers with production assets
evaluated as part of the MIA encompasses three U.S.-headquartered
manufacturers that own PTAC and PTHP production facilities and tooling.
These three companies' production assets may be located within the U.S.
or in other countries. At standard levels more stringent than ASHRAE,
these manufacturers would be expected to incur capital conversion costs
that their competitors who strictly import and/or private label would
not. As described in section V.B.2.d of this document and Chapter 12 of
the final rule TSD, DOE estimates that these three manufacturers
account for 80 percent of PTAC and PTHP production. Under the standard
proposed in the September 2014 NOPR, this subgroup would have incurred
an estimated 89 percent of total industry conversion costs and
experienced more severe INPV impacts than the industry as a whole, as
commenters noted; this discrepancy in conversion costs and related INPV
impacts was DOE's reason for analyzing the subgroup as distinct from
the industry as a whole. However, in this final rule, DOE is adopting
standards for PTACs and PTHPs equivalent to those set forth in ANSI/
ASHRAE/IES Standard 90.1-2013. DOE is required to adopt minimum
efficiency standards either equivalent to or more stringent than those
set forth by ASHRAE. Because this rule adopts the baseline as the
standards level, DOE's modeling does not show any negative financial
impacts on industry, including manufacturers with production assets, as
a direct result of the standard.
d. Cumulative Regulatory Burden
Goodman stated that EPA's refrigerant regulations contribute to
manufacturers' cumulative regulatory burden and urged DOE to account
for refrigerant regulations in both its INPV analysis and its
discussion of cumulative regulatory burden. (Goodman, No. 37 at pp. 46-
47) SCS also stated that this rule combined with other pending
rulemakings would pose an undue burden on manufacturers and could
constrain capacity at testing and certification facilities. (SCS, No.
29 at p. 2) DOE is required to adopt PTAC and PTHP standards as set
forth in ASHRAE 90.1-2013. DOE has added a discussion of EPA's SNAP
Program to its analysis of cumulative regulatory burden found in
section V.B.2.e of this document.
K. Emissions Analysis
In the emissions analysis, DOE estimated the change in power sector
emissions of carbon dioxide (CO2), nitrogen oxides
(NOX), sulfur dioxide (SO2), and mercury (Hg)
from potential energy conservation standards for PTAC and PTHP
equipment. In addition, DOE estimated emissions impacts in production
activities (extracting, processing, and transporting fuels) that
provide the energy inputs to power plants. These are referred to as
``upstream'' emissions. Together, these emissions account for the full-
fuel-cycle (FFC). In accordance with DOE's FFC Statement of Policy (76
FR 51281
[[Page 43187]]
(August 18, 2011), as amended at 77 FR 49701 (August 17, 2012)), the
FFC analysis includes impacts on emissions of methane (CH4)
and nitrous oxide (N2O), both of which are recognized as
greenhouse gases.
DOE primarily conducted the emissions analysis using emissions
factors for CO2 and most of the other gases derived from
data in AEO 2014. Combustion emissions of CH4 and
N2O were estimated using emissions intensity factors
published by the Environmental Protection Agency (EPA) in its GHG
Emissions Factors Hub.\36\ DOE developed separate emissions factors for
power sector emissions and upstream emissions. The method that DOE used
to derive emissions factors is described in chapter 13 of the final
rule TSD.
---------------------------------------------------------------------------
\36\ See http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------
For CH4 and N2O, DOE calculated emissions
reduction in tons and also in terms of units of carbon dioxide
equivalent (CO2eq). Gases are converted to CO2eq
by multiplying each ton of gas by the gas' global warming potential
(GWP) over a 100-year time horizon. Based on the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change,\37\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------
\37\ IPCC, 2013: Climate Change 2013: The Physical Science
Basis. Contribution of Working Group I to the Fifth Assessment
Report of the Intergovernmental Panel on Climate Change [Stocker,
T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A.
Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
Chapter 8.
---------------------------------------------------------------------------
Each Annual Energy Outlook incorporates the projected impacts of
existing air quality regulations on emissions. AEO 2014 generally
represents current legislation and environmental regulations, including
recent government actions, for which implementing regulations were
available as of October 31, 2013. Key regulations are discussed below.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States and the
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2
emissions from 28 eastern States and DC were also limited under the
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR
created an allowance-based trading program that operates along with the
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court
of Appeals for the District of Columbia Circuit, but it remained in
effect.\38\ In 2011, EPA issued a replacement for CAIR, the Cross-State
Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21,
2012, the D.C. Circuit issued a decision to vacate CSAPR,\39\ and the
court ordered EPA to continue administering CAIR. On April 29, 2014,
the U.S. Supreme Court reversed the judgment of the D.C. Circuit and
remanded the case for further proceedings consistent with the Supreme
Court's opinion.\40\ On October 23, 2014, the D.C. Circuit lifted the
stay of CSAPR.\41\ Pursuant to this action, CSAPR went into effect (and
CAIR ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------
\38\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008);
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
\39\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696,
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
\40\ See EPA v. EME Homer City Generation, 134 S.Ct. 1584, 1610
(U.S. 2014). The Supreme Court held in part that EPA's methodology
for quantifying emissions that must be eliminated in certain States
due to their impacts in other downwind States was based on a
permissible, workable, and equitable interpretation of the Clean Air
Act provision that provides statutory authority for CSAPR.
\41\ See Georgia v. EPA, Order (D.C. Cir. filed October 23,
2014) (No. 11-1302).
---------------------------------------------------------------------------
Because AEO 2014 was prepared prior to the Supreme Court's opinion,
it assumed that CAIR remains a binding regulation through 2040. Thus,
DOE's analysis used emissions factors that assume that CAIR, not CSAPR,
is the regulation in force. However, the difference between CAIR and
CSAPR is not relevant for the purpose of DOE's analysis of emissions
impacts from energy conservation standards.
The attainment of emissions caps is typically flexible among EGUs
and is enforced through the use of emissions allowances and tradable
permits. Under existing EPA regulations, any excess SO2
emissions allowances resulting from the lower electricity demand caused
by the adoption of an efficiency standard could be used to permit
offsetting increases in SO2 emissions by any regulated EGU.
In past rulemakings, DOE recognized that there was uncertainty about
the effects of efficiency standards on SO2 emissions covered
by the existing cap-and-trade system, but it concluded that negligible
reductions in power sector SO2 emissions would occur as a
result of standards.
Beginning in 2016, however, SO2 emissions will fall as a
result of the Mercury and Air Toxics Standards (MATS) for power plants.
77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a
standard for hydrogen chloride as a surrogate for acid gas hazardous
air pollutants (HAP), and also established a standard for
SO2 (a non-HAP acid gas) as an alternative equivalent
surrogate standard for acid gas HAP. The same controls are used to
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be
reduced as a result of the control technologies installed on coal-fired
power plants to comply with the MATS requirements for acid gas. AEO
2014 assumes that, in order to continue operating, coal plants must
have either flue gas desulfurization or dry sorbent injection systems
installed by 2016. Both technologies, which are used to reduce acid gas
emissions, also reduce SO2 emissions. Under the MATS,
emissions will be far below the cap established by CAIR, so it is
unlikely that excess SO2 emissions allowances resulting from
the lower electricity demand would be needed or used to permit
offsetting increases in SO2 emissions by any regulated EGU.
Therefore, DOE believes that energy conservation standards will
generally reduce SO2 emissions in 2016 and beyond.
CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia.\42\ Energy conservation standards
are expected to have little effect on NOX emissions in those
States covered by CAIR because excess NOX emissions
allowances resulting from the lower electricity demand could be used to
permit offsetting increases in NOX emissions. However,
standards would be expected to reduce NOX emissions in the
States not affected by the caps, so DOE estimated NOX
emissions reductions from the standards considered in this final rule
for these States.
---------------------------------------------------------------------------
\42\ CSAPR also applies to NOX and it would supersede
the regulation of NOX under CAIR. As stated previously,
the current analysis assumes that CAIR, not CSAPR, is the regulation
in force. The difference between CAIR and CSAPR with regard to DOE's
analysis of NOX emissions is slight.
---------------------------------------------------------------------------
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, DOE's energy conservation
standards would likely reduce Hg emissions. DOE estimated mercury
emissions reduction using emissions factors based on AEO 2014, which
incorporates the MATS.
EEI commented that things are changing dramatically in the power
sector; new rules are changing the amount of emissions that power
producers are allowed to emit, and DOE should include these changes in
its analysis. (EEI, NOPR Public Meeting Transcript, No. 37 at pp. 196-
197) SCS commented that DOE is likely overestimating the amount of
emissions
[[Page 43188]]
reductions by not accounting for the anticipated effects of new
emissions rules that are currently under consideration. (SCS, NOPR
Public Meeting Transcript, No. 37 at pp. 197-198) It would not be
appropriate for DOE to account for regulations that are under
consideration, because whether they will be adopted and their final
form are matters of speculation at this time.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this rule, DOE considered the
estimated monetary benefits from the reduced emissions of
CO2 and NOX that are expected to result from each
of the TSLs considered. In order to make this calculation analogous to
the calculation of the NPV of consumer benefit, DOE considered the
reduced emissions expected to result over the lifetime of equipment
shipped in the forecast period for each TSL. This section summarizes
the basis for the monetary values used for each of these emissions and
presents the values considered in this final rule.
For this final rule, DOE relied on a set of values for the social
cost of carbon (SCC) that was developed by a Federal interagency
process. The basis for these values is summarized in the next section,
and a more detailed description of the methodologies used is provided
as an appendix to chapter 14 of the final rule TSD.
1. Social Cost of Carbon
The SCC is an estimate of the monetized damages associated with an
incremental increase in carbon emissions in a given year. It is
intended to include (but is not limited to) changes in net agricultural
productivity, human health, property damages from increased flood risk,
and the value of ecosystem services. Estimates of the SCC are provided
in dollars per metric ton of CO2. A domestic SCC value is
meant to reflect the value of damages in the United States resulting
from a unit change in CO2 emissions, while a global SCC
value is meant to reflect the value of damages worldwide.
Under section 1(b) of Executive Order 12866, ``Regulatory Planning
and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent
permitted by law, ``assess both the costs and the benefits of the
intended regulation and, recognizing that some costs and benefits are
difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs.'' The purpose of the SCC estimates presented here is
to allow agencies to incorporate the monetized social benefits of
reducing CO2 emissions into cost-benefit analyses of
regulatory actions. The estimates are presented with an acknowledgement
of the many uncertainties involved and with a clear understanding that
they should be updated over time to reflect increasing knowledge of the
science and economics of climate impacts.
As part of the interagency process that developed these SCC
estimates, technical experts from numerous agencies met on a regular
basis to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. The main
objective of this process was to develop a range of SCC values using a
defensible set of input assumptions grounded in the existing scientific
and economic literatures. In this way, key uncertainties and model
differences transparently and consistently inform the range of SCC
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
When attempting to assess the incremental economic impacts of
CO2 emissions, the analyst faces a number of challenges. A
report from the National Research Council \43\ points out that any
assessment will suffer from uncertainty, speculation, and lack of
information about: (1) Future emissions of GHGs; (2) the effects of
past and future emissions on the climate system; (3) the impact of
changes in climate on the physical and biological environment; and (4)
the translation of these environmental impacts into economic damages.
As a result, any effort to quantify and monetize the harms associated
with climate change will raise questions of science, economics, and
ethics and should be viewed as provisional.
---------------------------------------------------------------------------
\43\ National Research Council, Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use, National Academies Press:
Washington, DC (2009).
---------------------------------------------------------------------------
Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
CO2 emissions. The agency can estimate the benefits from
reduced (or costs from increased) emissions in any future year by
multiplying the change in emissions in that year by the SCC values
appropriate for that year. The NPV of the benefits can then be
calculated by multiplying each of these future benefits by an
appropriate discount factor and summing across all affected years.
It is important to emphasize that the interagency process is
committed to updating these estimates as the science and economic
understanding of climate change and its impacts on society improves
over time. In the meantime, the interagency group will continue to
explore the issues raised by this analysis and consider public comments
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing carbon dioxide emissions. To ensure consistency in how
benefits are evaluated across Federal agencies, the Administration
sought to develop a transparent and defensible method, specifically
designed for the rulemaking process, to quantify avoided climate change
damages from reduced CO2 emissions. The interagency group
did not undertake any original analysis. Instead, it combined SCC
estimates from the existing literature to use as interim values until a
more comprehensive analysis could be conducted. The outcome of the
preliminary assessment by the interagency group was a set of five
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33,
$19, $10, and $5 per metric ton of CO2. These interim values
represented the first sustained interagency effort within the U.S.
government to develop an SCC for use in regulatory analysis. The
results of this preliminary effort were presented in several proposed
and final rules.
c. Current Approach and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to generate improved SCC estimates.
Specially, the group considered public comments and further explored
the technical literature in relevant fields. The interagency group
relied on three integrated assessment models commonly used to estimate
the SCC: The FUND, DICE, and PAGE models. These models are frequently
cited in the peer-reviewed literature and were used in the last
assessment of the Intergovernmental Panel on Climate Change (IPCC).
Each model was given equal weight in the SCC values that were
developed.
Each model takes a slightly different approach to model how changes
in emissions result in changes in economic damages. A key objective of
the interagency process was to enable a consistent exploration of the
three models, while respecting the different approaches to quantifying
damages
[[Page 43189]]
taken by the key modelers in the field. An extensive review of the
literature was conducted to select three sets of input parameters for
these models: Climate sensitivity, socio-economic and emissions
trajectories, and discount rates. A probability distribution for
climate sensitivity was specified as an input into all three models. In
addition, the interagency group used a range of scenarios for the
socio-economic parameters and a range of values for the discount rate.
All other model features were left unchanged, relying on the model
developers' best estimates and judgments.
In 2010, the interagency group selected four sets of SCC values for
use in regulatory analyses. Three sets of values are based on the
average SCC from the three integrated assessment models, at discount
rates of 2.5, 3, and 5 percent. The fourth set, which represents the
95th percentile SCC estimate across all three models at a 3-percent
discount rate, was included to represent higher-than-expected impacts
from climate change further out in the tails of the SCC distribution.
The values grow in real terms over time. Additionally, the interagency
group determined that a range of values from 7 percent to 23 percent
should be used to adjust the global SCC to calculate domestic
effects,\44\ although preference is given to consideration of the
global benefits of reducing CO2 emissions. Table IV.12
presents the values in the 2010 interagency group report,\45\ which is
reproduced in appendix 14A of the final rule TSD.
---------------------------------------------------------------------------
\44\ It is recognized that this calculation for domestic values
is approximate, provisional, and highly speculative. There is no a
priori reason why domestic benefits should be a constant fraction of
net global damages over time.
\45\ Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866. Interagency Working Group on Social Cost of
Carbon, United States Government (February 2010) (Available at:
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).
Table IV.12--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------------------
Year 5% 3% 2.5% 3%
---------------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................ 4.7 21.4 35.1 64.9
2015................................ 5.7 23.8 38.4 72.8
2020................................ 6.8 26.3 41.7 80.7
2025................................ 8.2 29.6 45.9 90.4
2030................................ 9.7 32.8 50.0 100.0
2035................................ 11.2 36.0 54.2 109.7
2040................................ 12.7 39.2 58.4 119.3
2045................................ 14.2 42.1 61.7 127.8
2050................................ 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
The SCC values used for this document were generated using the most
recent versions of the three integrated assessment models that have
been published in the peer-reviewed literature.\46\
---------------------------------------------------------------------------
\46\ Technical Update of the Social Cost of Carbon for
Regulatory Impact Analysis Under Executive Order 12866, Interagency
Working Group on Social Cost of Carbon, United States Government
(May 2013; revised November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
---------------------------------------------------------------------------
Table IV.13 shows the updated sets of SCC estimates from the 2013
interagency update in 5-year increments from 2010 to 2050. The full set
of annual SCC estimates between 2010 and 2050 is reported in appendix
14B of the final rule TSD. The central value that emerges is the
average SCC across models at the 3-percent discount rate. However, for
purposes of capturing the uncertainties involved in regulatory impact
analysis, the interagency group emphasizes the importance of including
all four sets of SCC values.
Table IV.13--Annual SCC Values from 2013 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------------------
Year 5% 3% 2.5% 3%
---------------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................ 11 32 51 89
2015................................ 11 37 57 109
2020................................ 12 43 64 128
2025................................ 14 47 69 143
2030................................ 16 52 75 159
2035................................ 19 56 80 175
2040................................ 21 61 86 191
2045................................ 24 66 92 206
2050................................ 26 71 97 220
----------------------------------------------------------------------------------------------------------------
[[Page 43190]]
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable because they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The National Research
Council report mentioned previously points out that there is tension
between the goal of producing quantified estimates of the economic
damages from an incremental ton of carbon and the limits of existing
efforts to model these effects. There are a number of analytical
challenges that are being addressed by the research community,
including research programs housed in many of the Federal agencies
participating in the interagency process to estimate the SCC. The
interagency group intends to periodically review and reconsider those
estimates to reflect increasing knowledge of the science and economics
of climate impacts, as well as improvements in modeling.
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report adjusted to 2014$ using the implicit price
deflator for gross domestic product (GDP) from the Bureau of Economic
Analysis. For each of the four sets of SCC cases specified, the values
for emissions in 2015 were $12.2, $41.2, $63.4, and $121 per metric ton
avoided (values expressed in 2014$). DOE derived values after 2050
using the relevant growth rates for the 2040-2050 period in the
interagency update.
DOE multiplied the CO2 emissions reduction estimated for
each year by the SCC value for that year in each of the four cases. To
calculate a present value of the stream of monetary values, DOE
discounted the values in each of the four cases using the specific
discount rate that had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
As noted previously, DOE has taken into account how considered
energy conservation standards would reduce site NOX
emissions nationwide and decrease power sector NOX emissions
in those 22 States not affected by the CAIR. DOE estimated the
monetized value of net NOX emissions reductions resulting
from each of the TSLs considered for this final rule based on estimates
found in the an OMB report to Congress.\47\ DOE calculated monetary
benefits using an average value for reducing NOX from
stationary sources of $2,727 per ton (in 2014$), and real discount
rates of 3 percent and 7 percent.
---------------------------------------------------------------------------
\47\ U.S. Office of Management and Budget, Office of Information
and Regulatory Affairs, 2006 Report to Congress on the Costs and
Benefits of Federal Regulations and Unfunded Mandates on State,
Local, and Tribal Entities (2006) (Available at: www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf).
---------------------------------------------------------------------------
DOE is evaluating appropriate monetization of avoided
SO2 and Hg emissions in energy conservation standards
rulemakings. DOE has not included monetization of those emissions in
the current analysis.
In responding to the September 2014 NOPR, AHRI, Goodman, and the
Associations stated that DOE should refrain from using SCC values to
establish monetary figures for emissions reductions until the SCC
undergoes a more rigorous notice, review, and comment process. (AHRI,
No. 35 at p. 14; Goodman, No. 31 at p. 6; The Associations, No. 28 at
p. 3) AHRI and Goodman cited several reasons why the SCC estimates
should be withdrawn and not used in any rulemaking: (1) The SCC
estimates fail in terms of process and transparency; (2) the modeling
systems used for the SCC estimates and the subsequent analyses were not
subject to peer review as appropriate; (3) the modeling conducted in
this effort does not offer a reasonably acceptable range of accuracy
for use in policymaking; (4) the Federal interagency working group has
failed to disclose and quantify key uncertainties; and (5) by
presenting only global SCC estimates and downplaying domestic SCC
estimates, the interagency working group has severely limited the
utility of the SCC for use in benefit-cost analysis and policymaking.
(AHRI, No. 35 at pp. 14-15; Goodman, No. 31 at p. 6)
In contrast, EDF et al. stated that the current SCC values are
sufficiently robust and accurate to continue to be the basis for
regulatory analysis going forward. They contended that current values
are likely significant underestimates of the SCC. They stated that the
interagency working group's analytic process was science-based, open,
and transparent, and that the SCC is an important and accepted tool for
regulatory policy-making, based on well-established law and fundamental
economics. (EDF et al., No. 22 at pp. 1-12)
In conducting the interagency process that developed the SCC
values, technical experts from numerous agencies met on a regular basis
to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. Key
uncertainties and model differences transparently and consistently
inform the range of SCC estimates. These uncertainties and model
differences are discussed in the interagency working group's reports,
which are reproduced in appendix 14A and 14B of the final rule TSD, as
are the major assumptions. Specifically, uncertainties in the
assumptions regarding climate sensitivity, as well as other model
inputs such as economic growth and emissions trajectories, are
discussed and the reasons for the specific input assumptions chosen are
explained. However, the three integrated assessment models used to
estimate the SCC are frequently cited in the peer-reviewed literature
and were used in the last assessment of the IPCC. In addition, new
versions of the models that were used in 2013 to estimate revised SCC
values were published in the peer-reviewed literature (see appendix 14B
of the final rule TSD for discussion). Although uncertainties remain,
the revised estimates that were issued in November, 2013 are based on
the best available scientific information on the impacts of climate
change. The current estimates of the SCC have been developed over many
years, using the best science available, and with input from the
public. In November 2013, OMB announced a new opportunity for public
comment on the interagency technical support document underlying the
revised SCC estimates. See 78 FR 70586. The comment period for the OMB
announcement closed on February 26, 2014. OMB is currently reviewing
comments and considering whether further revisions to the 2013 SCC
estimates are warranted. DOE stands ready to work with OMB and the
other members of the interagency working group on further review and
revision of the SCC estimates as appropriate.
AHRI and Goodman also stated that DOE does not conduct the cost-
benefit analysis for NPV and SCC values over the same time frame and
within the same scope, an important principle of cost-benefit analysis.
They criticized DOE's use of global rather than domestic SCC values.
(AHRI, No. 35 at p. 15; Goodman, No. 31 at p. 6)
For the analysis of national impacts of standards, DOE considers
the lifetime impacts of equipment shipped in a 30-year period. With
respect to energy and energy cost savings, impacts continue past 30
years until all of the equipment shipped in the 30-year period is
retired. With respect to the valuation of CO2 emissions
reductions, the SCC estimates developed by the interagency working
group are meant to represent the full discounted value (using an
appropriate range of discount rates) of emissions
[[Page 43191]]
reductions occurring in a given year. DOE is thus comparing the costs
of achieving the emissions reductions in each year of the analysis,
with the carbon reduction value of the emissions reductions in those
same years. DOE's analysis estimates both global and domestic benefits
of CO2 emissions reductions. The September 2014 NOPR and
this final rule focus on a global measure of SCC. The issue of global
versus domestic measures of the SCC is discussed in appendix 14A of the
final rule TSD.
AHRI and Goodman also stated that DOE fails to take into
consideration EPA regulations on greenhouse gas emissions from power
plants, which would affect the SCC values. (AHRI, No. 35 at pp. 15-16;
Goodman, No. 31 at p. 7)
The SCC values are based on projections of global GHG emissions
over many decades. Such projections are influenced by many factors,
particularly economic growth rates and prices of different energy
sources. In the context of these projections, the proposed EPA
regulations of greenhouse gas emissions from new power plants are a
minor factor. In any case, it would not be appropriate for DOE to
account for regulations that are not currently in effect, because
whether such regulations will be adopted and their final form are
matters of speculation at this time.
M. Utility Impact Analysis
The utility impact analysis estimates several effects on the
electric power industry that would result from the adoption of new or
amended energy conservation standards. In the utility impact analysis,
DOE analyzes the changes in installed electrical capacity and
generation that would result for each trial standard level. The
analysis is based on published output from NEMS, which is updated
annually to produce the AEO Reference case, as well as a number of side
cases that estimate the economy-wide impacts of changes to energy
supply and demand. DOE uses published side cases that incorporate
efficiency-related policies to estimate the marginal impacts of reduced
energy demand on the utility sector. The output of this analysis is a
set of time-dependent coefficients that capture the change in
electricity generation, primary fuel consumption, installed capacity
and power sector emissions due to a unit reduction in demand for a
given end use. These coefficients are multiplied by the stream of
electricity savings calculated in the NIA to provide estimates of
selected utility impacts of new or amended energy conservation
standards. Chapter 15 of the final rule TSD describes the utility
impact analysis in further detail.
N. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a standard. Employment impacts from new or amended
energy conservation standards include both direct and indirect impacts.
Direct employment impacts are any changes in the number of employees of
manufacturers of the equipment subject to standards, their suppliers,
and related service firms. The MIA addresses those impacts. Indirect
employment impacts are changes in national employment that occur due to
the shift in expenditures and capital investment caused by the purchase
and operation of more-efficient appliances. Indirect employment impacts
from standards consist of the net jobs created or eliminated in the
national economy, other than in the manufacturing sector being
regulated, caused by: (1) Reduced spending by end users on energy; (2)
reduced spending on new energy supply by the utility industry; (3)
increased consumer spending on new equipment to which the new standards
apply; and (4) the effects of those three factors throughout the
economy.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sector
employment statistics developed by the Labor Department's Bureau of
Labor Statistics (BLS).\48\ BLS regularly publishes its estimates of
the number of jobs per million dollars of economic activity in
different sectors of the economy, as well as the jobs created elsewhere
in the economy by this same economic activity. Data from BLS indicate
that expenditures in the utility sector generally create fewer jobs
(both directly and indirectly) than expenditures in other sectors of
the economy.\49\ There are many reasons for these differences,
including wage differences and the fact that the utility sector is more
capital-intensive and less labor-intensive than other sectors. Energy
conservation standards have the effect of reducing consumer utility
bills. Because reduced consumer expenditures for energy likely lead to
increased expenditures in other sectors of the economy, the general
effect of efficiency standards is to shift economic activity from a
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, based
on the BLS data alone, DOE believes net national employment may
increase due to shifts in economic activity resulting from energy
conservation standards.
---------------------------------------------------------------------------
\48\ Data on industry employment, hours, labor compensation,
value of production, and the implicit price deflator for output for
these industries are available upon request by calling the Division
of Industry Productivity Studies (202-691-5618) or by sending a
request by email to [email protected].
\49\ See Bureau of Economic Analysis, Regional Multipliers: A
User Handbook for the Regional Input-Output Modeling System (RIMS
II), U.S. Department of Commerce (1992).
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this final rule using an input/output model of the
U.S. economy called Impact of Sector Energy Technologies version 3.1.1
(ImSET).\50\ ImSET is a special-purpose version of the ``U.S. Benchmark
National Input-Output'' (I-O) model, which was designed to estimate the
national employment and income effects of energy-saving technologies.
The ImSET software includes a computer-based I-O model having
structural coefficients that characterize economic flows among 187
sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\50\ J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact
of Sector Energy Technologies, PNNL-18412, Pacific Northwest
National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------
DOE notes that ImSET is not a general equilibrium forecasting
model, and understands the uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Because ImSET does not incorporate price changes, the
employment effects predicted by ImSET may over-estimate actual job
impacts over the long run for this rule. Therefore, DOE generated
results for near-term timeframes, where these uncertainties are
reduced. For more details on the employment impact analysis, see
chapter 16 of the final rule TSD.
V. Analytical Results
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for PTAC
and PTHP equipment. It addresses the TSLs examined by DOE and the
projected impacts of each of these levels if adopted as energy
conservation standards for PTAC and PTHP equipment. Additional details
regarding DOE's analyses are contained in the final rule TSD supporting
this document.
A. Trial Standard Levels
In the September 2014 NOPR, DOE selected five TSLs above the
baseline level for the PTAC and PTHP equipment
[[Page 43192]]
classes. 79 FR at 55573-73 The baseline level in this final rule
corresponds to the energy efficiency equations in ANSI/ASHRAE/IES
Standard 90.1-2013 for PTACs and PTHPs. The TSL 1, 2, 3, 4 efficiency
levels represent matched pairs of efficiency levels at 2.2%, 6.2%,
10.2%, and 14.2% above the baseline level. TSL 5, at 16.2% above the
baseline level, represents the maximum technologically feasible (``max
tech'') level for each class of equipment in DOE's analysis, as
discussed in section IV.C.5.
In developing the TSLs, DOE used the same EERs for PTAC and PTHP.
EEI supported setting PTAC and PTHP standards at the same level, and
said that approach will lead to economies of scale and will align with
the approach taken by ASHRAE and other DOE standards. (EEI, NOPR Public
Meeting Transcript, No. 37 at p. 206-7) AHRI commented that certain
PTACs and PTHPs may have unequal efficiency levels because the suction
gas reheat provided by the reversing valve for PTHPs enables gain of
evaporating capacity without added input power. (AHRI, No. 35 at p. 12)
On the other hand, the California IOUs commented that PTACs should be
held to higher standards than PTHPs for cooling efficiency, due to
inherent mechanical advantages resulting from not having a reverse
cycle valve. (CA IOUs, No. 33 at p. 3)
DOE notes that the pressure drop associated with the reversing
valve in a PTHP (and the associated lost energy that could have been
used for space conditioning), a component not present in a PTAC, makes
achieving high efficiency levels more challenging for a heat pump than
for an air conditioner. The AHRI comment indicates that suction heating
achieved in the reversing valve of a PTHP will improve efficiency;
however, in cooling mode, the refrigerant flows passing through the
reversing valve are the compressor discharge, which flows to the
outdoor coil, and the suction gas, which approaches the valve from the
indoor coil and passes to the compressor suction. AHRI's comment does
not explain how thermal exchange between compressor discharge and
suction flows can improve efficiency. The additional pressure drop of
the reversing valve reduces heat pump efficiency, and the potential
thermal exchange between the refrigerant flows passing through the
valve would also reduce efficiency. However, the operation of a heat
pump both in summer for cooling and in winter for heating leads to a
far greater number of operating hours for heat pumps as compared to air
conditioners. The greater operating hours mean that both energy use and
potential savings are higher for heat pumps. Consequently, higher
efficiency levels can often be more cost effective in heat pumps than
in air conditioners, since the higher purchase cost can be recovered
more rapidly in a heat pump. DOE considered both the technical and
economic factors in selecting the efficiency level differential between
PTACs and PTHPs, one which would suggest higher EER for PTHPs, the
other lower EER. Based on the selection of equal EERs for the different
equipment in addendum BK to ASHRAE 90.1-2010, much of which was adopted
in ASHRAE 90.1-2013, DOE considered equal EERs for these equipment
classes in the framework document. DOE sought comments on this issue,
and AHRI commented that if DOE raises the standards for PTACs, then
they should be equal to the efficiency level of PTHPs. (AHRI, Framework
Public Meeting Transcript, No. 7 at p. 50)
Table V.1 shows the mapping between TSLs and efficiency levels in
each TSL. DOE notes that the baseline level is 1.8 percent higher than
current Federal standards for PTAC equipment, but is equivalent to
current Federal standards for PTHP equipment.
Table V.1--Mapping Between TSLs and Efficiency Levels
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline (ANSI/
Equipment class ASHRAE/IES Standard TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Max-
90.1-2013) * Tech
--------------------------------------------------------------------------------------------------------------------------------------------------------
PTAC Efficiency Level....................................... EL1 EL2 EL3 EL4 EL5 EL6
PTHP Efficiency Level....................................... Current FedEL1l EL2 EL3 EL4 EL5
ECS
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is
required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) DOE notes that the Baseline level is 1.8%
higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the Baseline
level is also termed EL1.
Current Federal energy conservation standards and the efficiency
levels specified by ANSI/ASHRAE/IES Standard 90.1-2013 for PTACs and
PTHPs are a function of the equipment's cooling capacity. Both the
Federal energy conservation standards and the efficiency standards in
ANSI/ASHRAE/IES Standard 90.1-2013 are based on equations to calculate
the efficiency levels for PTACs and PTHPs with a cooling capacity
greater than or equal to 7,000 Btu/h and less than or equal to 15,000
Btu/h for each equipment class. To derive the standards (i.e.,
efficiency level as a function of cooling capacity), DOE plotted the
representative cooling capacities and the corresponding efficiency
levels for each TSL. DOE then calculated the equation of the line
passing through the EER values for 9,000 Btu/h and 15,000 Btu/h for
standard size PTACs and PTHPs. Table V.2 and Table V.3 identify the
energy efficiency equations for each TSL for standard size PTACs and
PTHPs.
Table V.2--Energy-Efficiency Equations (EER as a Function of Cooling
Capacity) by TSL for Standard Size PTACs
------------------------------------------------------------------------
Standard size ** PTACs Energy efficiency equation *
------------------------------------------------------------------------
Baseline *** (ANSI/ASHRAE/IES Standard EER = 14.0 - (0.300 x Cap
90.1-2013). [dagger]/1000).
TSL 1.................................. EER = 14.4 - (0.312 x Cap
[dagger]/1000).
TSL 2.................................. EER = 14.9 - (0.324 x Cap
[dagger]/1000).
TSL 3.................................. EER = 15.5 - (0.336 x Cap
[dagger]/1000).
[[Page 43193]]
TSL 4.................................. EER = 16.0 - (0.348 x Cap
[dagger]/1000).
TSL 5--MaxTech......................... EER = 16.3 - (0.354 x Cap
[dagger]/1000).
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER
values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-
cooled products and evaporatively-cooled products and at 85 [deg]F
entering water temperature for water cooled products.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
dimensions greater than or equal to 16 inches high, or greater than or
equal to 42 inches wide.
*** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum
for PTAC and PTHP equipment. This level is used as the Baseline since
DOE is required to, at a minimum, adopt the ASHRAE levels as the
Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)).
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-
bulb temperature.
Table V.3--Energy-Efficiency Equations (EER and COP as a Function of
Cooling Capacity) by TSL for Standard Size PTHPs
------------------------------------------------------------------------
Standard size ** PTHPs Energy efficiency equation *
------------------------------------------------------------------------
Baseline *** (ANSI/ASHRAE/IES Standard EER = 14.0 - (0.300 x Cap
90.1-2013). [dagger]/1000).
COP = 3.7 - (0.052 x Cap
[dagger]/1000).
TSL 1.................................. EER = 14.4 - (0.312 x Cap
[dagger]/1000).
COP = 3.8 - (0.058 x Cap
[dagger]/1000).
TSL 2.................................. EER = 14.9 - (0.324 x Cap
[dagger]/1000).
COP = 4.0 - (0.064 x Cap
[dagger]/1000).
TSL 3.................................. EER = 15.5 - (0.336 x Cap
[dagger]/1000).
COP = 4.1 - (0.068 x Cap
[dagger]/1000).
TSL 4.................................. EER = 16.0 - (0.348 x Cap
[dagger]/1000).
COP = 4.2 - (0.070 x Cap
[dagger]/1000).
TSL 5--MaxTech......................... EER = 16.3 - (0.354 x Cap
[dagger]/1000).
COP = 4.3 - (0.073 x Cap
[dagger]/1000).
------------------------------------------------------------------------
* For equipment rated according to the DOE test procedure, all EER
values must be rated at 95 [deg]F outdoor dry-bulb temperature for air-
cooled products and evaporatively-cooled products and at 85 [deg]F
entering water temperature for water cooled products. All COP values
must be rated at 47 [deg]F outdoor dry-bulb temperature for air-cooled
products, and at 70 [deg]F entering water temperature for water-source
heat pumps.
** Standard size refers to PTAC or PTHP equipment with wall sleeve
dimensions greater than or equal to 16 inches high, or greater than or
equal to 42 inches wide.
*** This level represents the ANSI/ASHRAE/IES Standard 90.1-2013 minimum
for PTAC and PTHP equipment. This level is used as the Baseline since
DOE is required to, at a minimum, adopt the ASHRAE levels as the
Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I))
[dagger] Cap means cooling capacity in Btu/h at 95 [deg]F outdoor dry-
bulb temperature.
For PTACs and PTHPs with cooling capacity less than 7,000 Btu/h,
DOE determined the EERs using a cooling capacity of 7,000 Btu/h in the
efficiency-capacity equations. For PTACs and PTHPs with a cooling
capacity greater than 15,000 Btu/h cooling capacity, DOE determined the
EERs using a cooling capacity of 15,000 Btu/h in the efficiency-
capacity equations. This is the same method established in the Energy
Policy Act of 1992 and provided in ANSI/ASHRAE/IES Standard 90.1-2013
for calculating the EER and COP of equipment with cooling capacities
smaller than 7,000 Btu/h and larger than 15,000 Btu/h. (42 U.S.C.
6313(a)(3)(A))
In the September 2014 NOPR, DOE proposed the adoption of TSL 2,
which would have raised efficiency levels for PTAC and PTHP equipment
6.2% above the ANSI/ASHRAE/IES Standard 90.1-2013 baseline levels. 79
FR at 55589-90. Stakeholders had mixed comments regarding the
availability of models that meet the proposed TSL 2 across the range of
cooling capacities. ASAP et al. commented to state their support for
proposed standards and indicate that there are PTACs and PTHPs
available today across the range of cooling capacities with efficiency
levels that significantly exceed the proposed standard. (ASAP et al.,
No. 30 at p. 1-2) The CA IOUs commented that several products from a
variety of manufacturers and across the range of capacities (at
capacities of 7, 9, 12, and 14 kBtu/h) meet or comfortably exceed the
proposed standard levels. (CA IOUs, No. 33 at p. 1-2) Goodman commented
that some cooling capacities, such as 12,000 Btu/h, do not have product
offerings that meet TSL 2. (Goodman, NOPR Public Meeting Transcript,
No. 37 at p.55) AHRI commented that the cooling capacities of 9 kBtu/h
and 15 kBtu/h are the only PTAC capacities with models available now
that meet the proposed TSL 2, based on data from the AHRI Directory.
(AHRI, NOPR Public Meeting Transcript, No. 37 at p. 14) In this final
rule, DOE adopts the less stringent baseline level for PTAC and PTHP
equipment. DOE determined that 82% of the standard size PTAC models
listed in the AHRI Directory will meet the baseline efficiency level
for PTACs adopted in this rule.
B. Economic Justification and Energy Savings
As discussed in section II.A, EPCA provides seven factors to be
evaluated in determining whether a more stringent standard for PTACs
and PTHPs is economically justified. (42 U.S.C. 6313(a)(6)(B)(ii)) The
following sections generally discuss how DOE has addressed each of
those factors in this rulemaking.
1. Economic Impacts on Commercial Consumers
DOE analyzed the economic impacts on PTAC and PTHP equipment
consumers by looking at the effects that amended standards would have
on the LCC and PBP. DOE also examined the impacts of potential
standards on consumer subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency equipment affects consumers in two
ways: (1) Purchase price increases, and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e.,
[[Page 43194]]
equipment price plus installation costs), and operating costs (i.e.,
annual energy use, energy prices, energy price trends, repair costs,
and maintenance costs). The LCC calculation also uses equipment
lifetime and a discount rate. Chapter 8 of the final rule TSD provides
detailed information on the LCC and PBP analyses.
Table V.4 through Table V.7 show the LCC and PBP results for the
TSL efficiency levels considered for each PTAC and PTHP equipment
class. In the first of each pair of tables, the simple payback is
measured relative to the baseline equipment. In the second table, the
LCC savings are measured relative to the base-case efficiency
distribution in the compliance year (see section IV.F.8 of this
document).
Table V.4--Average LCC and PBP Results for Standard Size Equipment <12,000 Btu/h Cooling Capacity
[9,000 Btu/h cooling capacity]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Efficiency Efficiency ---------------------------------------------------------------- Simple Average
TSL level level First year's Lifetime payback lifetime
(PTAC) (PTHP) Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................... 2 1 $1,492 $253 $1,546 $3,038 5.0 8
2..................................... 3 2 1,509 251 1,534 3,043 5.6
3..................................... 4 3 1,528 249 1,523 3,050 6.0
4..................................... 5 4 1,548 247 1,511 3,059 6.3
5..................................... 6 5 1,558 246 1,506 3,064 6.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.5--LCC Savings Relative to the Base Case Efficiency Distribution for Standard Size Equipment <12,000 Btu/
h Cooling Capacity
[9,000 Btu/h cooling capacity]
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
--------------------------------------
Efficiency level Efficiency level Percentage of
TSL (PTAC) (PTHP) consumers that Average savings
experience net (2014$) *
cost **
----------------------------------------------------------------------------------------------------------------
1.................................. 2 1 27 $0.17
2.................................. 3 2 50 ($3.26)
3.................................. 4 3 78 ($9.85)
4.................................. 5 4 87 ($18.50)
5.................................. 6 5 88 ($23.50)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** The calculation includes consumers with zero LCC savings (no impact).
Table V.6--Average LCC and PBP Results for Standard Size Equipment >=12,000 Btu/h Cooling Capacity
[9,000 Btu/h cooling capacity]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Efficiency Efficiency ---------------------------------------------------------------- Simple Average
TSL level level First year's Lifetime payback lifetime
(PTAC) (PTHP) Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................... 2 1 $1,747 $316 $1,931 $3,678 6.0 8
2..................................... 3 2 1,770 314 1,915 3,685 6.6
3..................................... 4 3 1,800 311 1,899 3,700 7.5
4..................................... 5 4 1,837 309 1,884 3,721 8.5
5..................................... 6 5 1,858 307 1,877 3,735 9.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.7--Savings Relative to the Base Case Efficiency Distribution for Standard Size Equipment >=12,000 Btu/h
Cooling Capacity
[15,000 Btu/h cooling capacity]
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------------
Efficiency level Efficiency level Percentage of
TSL (PTAC) (PTHP) consumers that Average savings
experience net (2014$) *
cost **
----------------------------------------------------------------------------------------------------------------
1................................... 2 1 34 ($0.95)
2................................... 3 2 51 ($5.51)
3................................... 4 3 85 ($19.24)
4................................... 5 4 93 ($40.53)
5................................... 6 5 95 ($54.01)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** The calculation includes consumers with zero LCC savings (no impact).
[[Page 43195]]
For PTACs and PTHPs with a cooling capacity less than 7,000 Btu/h,
DOE established the proposed energy conservation standards using a
cooling capacity of 7,000 Btu/h in the proposed efficiency-capacity
equation. DOE believes the LCC and PBP impacts for equipment in this
category will be similar to the impacts of the 9,000 Btu/h units
because the MSP and usage characteristics are in a similar range.
Similarly, for PTACs and PTHPs with a cooling capacity greater than
15,000 Btu/h, DOE established the proposed energy conservation
standards using a cooling capacity of 15,000 Btu/h in the proposed
efficiency-capacity equation. DOE believes the impacts for equipment in
this category will be similar to units with a cooling capacity of
15,000 Btu/h.
b. Consumer Subgroup Analysis
As described in section IV.I of this document, DOE estimated the
impact of the considered TSLs on independently-operating lodging
businesses. Table V.8 shows the average LCC savings from potential
energy conservation standards, and Table V.9 shows the simple payback
period for this subgroup. In most cases, the average LCC savings and
PBP for the subgroup at the considered efficiency levels are not
substantially different from the average for all businesses. Chapter 11
of the final rule TSD presents the complete LCC and PBP results for the
subgroup.
Table V.8--Mean Life-Cycle Cost Savings for PTAC and PTHP Equipment Purchased by the Considered Subgroup
[2014$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment class (cooling capacity) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment <12,000 Btu/h Cooling Capacity ($0.14) ($4.12) ($11.46) ($20.89) ($26.28)
(9,000 Btu/h Cooling Capacity)..........................
Standard Size Equipment >=12,000 Btu/h Cooling Capacity ($1.14) ($6.38) ($21.10) ($43.42) ($57.41)
(15,000 Btu/h Cooling Capacity).........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: The LCC savings for each TSL are calculated relative to the base case efficiency distribution. The calculation includes consumers with zero LCC
savings (no impact).
Table V.9--Simple Payback Period for PTAC and PTHP Equipment Purchased by the Considered Subgroup
[Years]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment class (cooling capacity) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment <12,000 Btu/h Cooling Capacity 5.0 5.6 6.0 6.3 6.4
(9,000 Btu/h Cooling Capacity)..........................
Standard Size Equipment >=12,000 Btu/h Cooling Capacity 6.0 6.6 7.5 8.5 9.0
(15,000 Btu/h Cooling Capacity).........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The simple payback period is calculated only for affected establishments. Establishments with no impact have an undefined payback period, and are
therefore not included in calculating the median PBP.
For PTACs and PTHPs with a cooling capacity less than 7,000 Btu/h,
DOE believes that the subgroup LCC and PBP impacts will be similar to
the impacts of the 9,000 Btu/h units because the MSP and usage
characteristics are in a similar range. Similarly, for PTACs and PTHPs
with a cooling capacity greater than 15,000 Btu/h, DOE believes the
impacts will be similar to units with a cooling capacity of 15,000 Btu/
h.
c. Rebuttable Presumption Payback
As discussed above, EPCA establishes a rebuttable presumption that
an energy conservation standard is economically justified if the
increased purchase cost for equipment that meets the standard is less
than three times the value of the first-year energy savings resulting
from the standard. In calculating a rebuttable presumption payback
period for each of the considered TSLs, DOE used discrete values rather
than distributions for input values, and, as required by EPCA, based
the energy use calculation on the DOE test procedures for PTAC and PTHP
equipment. As a result, DOE calculated a single rebuttable presumption
payback value, and not a distribution of payback periods, for each
efficiency level. Table V.10 presents the rebuttable-presumption
payback periods for the considered TSLs. While DOE examined the
rebuttable-presumption criterion, it considered whether the standard
levels considered for this rule are economically justified through a
more detailed analysis of the economic impacts of those levels,
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range
of impacts to the consumer, manufacturer, nation, and environment. The
results of that analysis serve as the basis for DOE to evaluate the
economic justification for a potential standard level, thereby
supporting or rebutting the results of any preliminary determination of
economic justification. Table V.10 shows the rebuttable presumption
PBPs for the considered TSLs for PTAC and PTHP equipment.
[[Page 43196]]
Table V.10--Rebuttable-Presumption Payback Period (Years) for PTAC and PTHP Equipment
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Standard Size Equipment (9,000 5.0 5.6 6.0 6.3 6.4
Btu/h).........................
Standard Size Equipment (15,000 6.0 6.6 7.5 8.5 9.0
Btu/h).........................
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
DOE performed a manufacturer impact analysis (MIA) to estimate the
impact of amended energy conservation standards on PTAC and PTHP
manufacturers. The following section describes the expected impacts on
manufacturers at each considered TSL. Chapter 12 of the final rule TSD
explains the analysis in further detail.
a. Industry Cash Flow Analysis Results
Table V.11 depicts the estimated financial impacts (represented by
changes in industry net present value, or INPV) of amended energy
conservation standards on manufacturers of PTACs and PTHPs, as well as
the conversion costs that DOE expects manufacturers would incur for all
equipment classes at each TSL.
As discussed in section IV.J.2, DOE modeled two different markup
scenarios to evaluate the range of cash flow impacts on the PTAC and
PTHP industry: (1) The preservation of gross margin percentage markup
scenario; and (2) the preservation of per unit operating profit markup
scenario.
To assess the less severe end of the range of potential impacts,
DOE modeled a preservation of gross margin percentage markup scenario,
in which a uniform ``gross margin percentage'' markup is applied across
all potential efficiency levels. In this scenario, DOE assumed that a
manufacturer's absolute dollar markup would increase as production
costs increase in the standards case.
To assess the more severe end of the range of potential impacts,
DOE modeled the preservation of per unit operating profit markup
scenario, which reflects manufacturer concerns surrounding their
inability to maintain margins as manufacturing production costs
increase to meet more stringent efficiency levels. In this scenario, as
manufacturers make the necessary investments required to convert their
facilities to produce new standards-compliant equipment and incur
higher costs of goods sold, their percentage markup decreases.
Operating profit does not change in absolute dollars but decreases as a
percentage of revenue.
Each of the modeled scenarios results in a unique set of cash flows
and corresponding industry values at each TSL. In the following
discussion, the INPV results refer to the difference in industry value
between the base case and each standards case that result from the sum
of discounted cash flows from the base year (2015) through the end of
the analysis period, which varies by equipment class and standard
level. To provide perspective on the short-run cash flow impact, DOE
includes in the discussion of results a comparison of free cash flow
between the base case and the standards case at each TSL in the year
before amended standards would take effect. This figure provides an
understanding of the magnitude of the required conversion costs
relative to the cash flow generated by the industry in the base case.
The tables below present results for both the preservation of gross
margin percentage markup scenario and the preservation of per-unit
operating profit markup scenario. As noted, the preservation of
operating profit scenario accounts for the more severe impacts
presented.
Table V.11--Manufacturer Impact Analysis Results for PTACs and PTHPs, Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units Base case ----------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$M....................... 62.2 61.1 63.1 61.9 63.1 60.3
Change in INPV............................. 2014$M....................... ........... (1.1) 0.8 (0.3) 0.8 (1.9)
% Change..................... ........... (1.8) 1.3 (0.5) 1.4 (3.1)
Product Conversion Costs................... 2014$M....................... ........... 2.2 4.8 7.3 8.6 13.7
Capital Conversion Costs................... 2014$M....................... ........... 2.3 2.9 7.2 7.2 7.5
Total Conversion Costs..................... 2014$M....................... ........... 4.5 7.7 14.5 15.8 21.2
Free Cash Flow **.......................... 2014$M....................... 3.9 2.3 1.4 (1.3) (1.7) (3.4)
% Change..................... ........... (40.6) (64.9) (133.2) (144.5) (188.5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates free cash flow
impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.
Table V.12--Manufacturer Impact Analysis Results for PTACs and PTHPs, Preservation of Operating Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units Base case ----------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$M....................... 62.2 60.7 61.8 59.3 58.9 55.6
Change in INPV............................. 2014$M....................... ........... (1.5) (0.5) (3.0) (3.4) (6.7)
% Change..................... ........... (2.4) (0.8) (4.8) (5.4) (10.7)
Product Conversion Costs................... 2014$M....................... ........... 2.2 4.8 7.3 8.6 13.7
[[Page 43197]]
Capital Conversion Costs................... 2014$M....................... ........... 2.3 2.9 7.2 7.2 7.5
Total Conversion Costs..................... 2014$M....................... ........... 4.5 7.7 14.5 15.8 21.2
Free Cash Flow............................. 2014$M....................... 3.9 2.3 1.3 (1.4) (1.9) (3.6)
% Change..................... ........... (41.1) (66.2) (135.6) (148.3) (192.8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates free cash flow
impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.
At TSL 1, DOE estimates the impacts on INPV to range from -$1.5
million to -$1.1 million, or a change of -2.4 percent to -1.8 percent.
Industry free cash flow is estimated to decrease by as much as $1.6
million, or a change of 41.1 percent compared to the base-case value of
$3.9 million in the year before the compliance date (2018). At TSL 1,
DOE estimates industry conversion costs of $4.5 million.
At TSL 2, DOE estimates impacts on INPV to range from -$0.5 million
to $0.8 million, or a change in INPV of -0.8 percent to 1.3 percent. At
this level, industry free cash flow is estimated to decrease by as much
as $2.6 million, or a change of 66.2 percent compared to the base-case
value of $3.9 million in the year before the compliance date (2018).
DOE expects conversion costs at this level to increase to $7.7 million,
reflecting the need for additional motor and control changes as well as
a more significant R&D and testing burden. The INPV impacts at TSL 2
are slightly less severe than those at TSL 1 due to the interplay of
conversion costs, manufacturer selling prices, and shipments.
Specifically, the anticipated increase in per-unit purchase price at
this level combined with steady shipments is expected to dampen the
effects of conversion costs on INPV.
At TSL 3, DOE estimates impacts on INPV to range from -$3.0 million
to -$0.3 million, or a change in INPV of -4.8 percent to -0.5 percent.
At this level, industry free cash flow is estimated to decrease by as
much as $5.2 million, or a change of 135.6 percent compared to the
base-case value of $3.9 million in the year before the compliance date
(2018). DOE estimates conversion costs at TSL 3 would increase to $14.5
million, nearly double the expected conversion costs at TSL 2.
Anticipated conversion costs at this level include investing in new
tooling and redesigning equipment to incorporate additional coils and/
or formed coils.
At TSL 4, DOE estimates impacts on INPV to range from -$3.4 million
to $0.8 million, or a change in INPV of -5.4 percent to 1.4 percent. At
this level, industry free cash flow is estimated to decrease by as much
as $5.7 million, or a change of 148.3 percent compared to the base-case
value of $3.9 million in the year before the compliance date (2018).
DOE estimates conversion costs at TSL 4 would increase to $15.8
million. At this level, however, DOE does not anticipate capital
conversion costs beyond those required at TSL 3. Rather, product
conversion costs account for the full increase. Similar to TSL 2, the
INPV impacts at TSL 4 are slightly less severe than those at TSL 3 due
to the interplay of conversion costs, manufacturer selling prices, and
shipments. The anticipated increase in per-unit purchase price at this
level combined with steady shipments is expected to dampen the effects
of conversion costs on INPV.
TSL 5 represents the use of max-tech design options for each
equipment class. At this level, DOE estimates impacts on INPV to range
from -$6.7 million to -$1.9 million, or a change in INPV of -10.7
percent to -3.1 percent. Industry free cash flow is estimated to
decrease by $7.5 million, or a change of 192.8 percent compared to the
base-case value of $3.9 million in the year before the compliance date
(2018). At this level, DOE estimates conversion costs would increase to
a $21.2 million.
b. Direct Impacts on Employment
To quantitatively assess the potential impacts of amended energy
conservation standards on direct employment, DOE used the GRIM to
estimate the domestic labor expenditures and number of direct employees
in the base case and at each TSL from 2015 through 2048. DOE used
statistical data from the U.S. Census Bureau's 2011 Annual Survey of
Manufacturers,\51\ the results of the engineering analysis, and
interviews with manufacturers to determine the inputs necessary to
calculate industry-wide labor expenditures and domestic direct
employment levels. Labor expenditures related to producing the
equipment are a function of the labor intensity of producing the
equipment, the sales volume, and an assumption that wages remain fixed
in real terms over time. The total labor expenditures in each year are
calculated by multiplying the MPCs by the labor percentage of MPCs. DOE
estimates that 50 percent of PTAC and PTHP units are produced
domestically.
---------------------------------------------------------------------------
\51\ ``Annual Survey of Manufacturers: General Statistics:
Statistics for Industry Groups and Industries,'' U.S. Census Bureau,
2011. Available at www.census.gov/manufacturing/asm/index.html.
---------------------------------------------------------------------------
The total labor expenditures in the GRIM were then converted to
domestic production employment levels by dividing production labor
expenditures by the annual payment per production worker (production
worker hours times the labor rate found in the U.S. Census Bureau's
2011 Annual Survey of Manufacturers). The production worker estimates
in this section only cover workers up to the line-supervisor level who
are directly involved in fabricating and assembling a product within an
OEM facility. Workers performing services that are closely associated
with production operations, such as materials handling tasks using
forklifts, are also included as production labor. DOE's estimates only
account for production workers who manufacture the specific equipment
covered by this rulemaking.
To estimate an upper bound to employment change, DOE assumes all
domestic manufacturers would choose to continue producing equipment in
the U.S. and would not move production to foreign countries. To
estimate a lower bound to employment, DOE estimates the maximum portion
of the industry that would choose to leave the industry or relocate
production overseas rather than make the necessary conversions at
[[Page 43198]]
domestic production facilities. A complete description of the
assumptions used to generate these upper and lower bounds can be found
in chapter 12 of the final rule TSD.
As noted above, DOE estimates that 50 percent of PTAC and PTHP
units sold in the United States are manufactured domestically. In the
absence of amended energy conservation standards, DOE estimates that
the PTAC and PTHP industry would employ 175 domestic production workers
in 2019.
Table V.13 shows the range of impacts of potential amended energy
conservation standards on U.S. production workers of PTACs and PTHPs.
The potential changes to direct employment in the standards case
suggest that the PTAC and PTHP industry could experience anything from
a slight gain in domestic direct employment to a loss of all domestic
direct employment. However, since this rule maintains the standard at
baseline (i.e., ASHRAE), DOE does not expect any loss in domestic
direct employment.
Table V.13--Potential Changes in the Total Number of Standard Size PTAC and PTHP Production Workers in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
-----------------------------------------------------------------------------------------------
Base case
[dagger] 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Changes in Domestic Production Workers in 2019 .............. (175) to 4 (175) to 10 (175) to 17 (175) to 22 (175) to 24
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[dagger] Base case assumes 175 domestic production workers in the PTAC and PTHP industry in 2019.
The upper end of the range estimates the maximum increase in the
number of production workers in the PTAC and PTHP industry after
implementation of an amended energy conservation standard. It assumes
manufacturers would continue to produce the same scope of covered
equipment within the United States and would require some additional
labor to produce more efficient equipment.
The lower end of the range represents the maximum decrease in total
number of U.S. production workers that could result from an amended
energy conservation standard. Throughout interviews, manufacturers
stated their concerns about increasing offshore competition entering
the market. If the cost of complying with amended standards
significantly erodes the profitability of domestic manufacturers
relative to their competitors who manufacture and/or import PTACs and
PTHPs from overseas, manufacturers with domestic production could
decide to exit the PTAC and PTHP market and/or shift their production
facilities offshore. The lower bound of direct employment impacts
therefore assumes domestic production of PTACs and PTHPs ceases, as
domestic manufacturers either exit the market or shift production
overseas in search of reduced manufacturing costs.
This conclusion is independent of any conclusions regarding
indirect employment impacts in the broader United States economy, which
are documented in chapter 15 of the final rule TSD.
c. Impacts on Manufacturing Capacity
According to PTAC and PTHP manufacturers interviewed, amended
energy conservation standards would not significantly constrain
manufacturing production capacity. Among manufacturers with production
assets, some indicated that more stringent energy conservation
standards could reduce sales volumes, thereby resulting in excess
capacity. Among importers and distributors, amended energy conservation
standards would not likely impact capacity. Since this rule maintains
the standard at baseline (i.e., ASHRAE), DOE does not expect any change
in production capacity as a result of this rule.
d. Impacts on Subgroups of Manufacturers
As discussed above, using average cost assumptions to develop an
industry cash flow estimate is not adequate for assessing differential
impacts among subgroups of manufacturers. Small manufacturers, niche
players, or manufacturers exhibiting a cost structure that differs
largely from the industry average could be affected differently. DOE
used the results of the industry characterization to group
manufacturers exhibiting similar characteristics. Specifically, DOE
identified two subgroups of manufacturers for separate impact analyses:
Manufacturers with production assets and small business manufacturers.
DOE initially identified 22 companies that sell PTAC and PTHP
equipment in the U.S. Among U.S. companies, few own production assets;
rather, they import and distribute PTACs and PTHPs manufactured
overseas, primarily in China. DOE identified a subgroup of three U.S.-
headquartered manufacturers that own production assets. These
manufacturers own tooling or manufacturing assets either in the U.S. or
in foreign countries. Together, these three manufacturers account for
approximately 80 percent of the domestic PTAC and PTHP market. Because
manufacturers with production assets will incur different conversion
costs to comply with amended energy conservation standards compared to
their competitors who do not own production assets, DOE conducted a
separate analysis to evaluate the potential impacts of an amended
standard on this subgroup.
As with the overall industry analysis, DOE modeled two different
markup scenarios to evaluate the range of cash flow impacts on
manufacturers with production assets: (1) The preservation of gross
margin percentage markup scenario; and (2) the preservation of per unit
operating profit markup scenario. See section IV.J.2 for a complete
description of markup scenarios.
Each of the modeled scenarios results in a unique set of cash flows
and corresponding INPV values at each TSL. In the following discussion,
the INPV results refer to the difference in value of manufacturers with
production assets between the base case and standards cases as
represented by the sum of discounted cash flows from the base year
(2015) through, the end of the analysis period, which varies by
equipment class and standard level. To provide perspective on the
short-run cash flow impact, DOE includes in the discussion of results a
comparison of free cash flow between the base case and the standards
case at each TSL in the year before amended standards would take
effect. This figure provides an understanding of the magnitude of the
required conversion costs relative to
[[Page 43199]]
the cash flow generated by manufacturers with production assets in the
base case.
The tables below present a range of results reflecting both the
preservation of gross margin percentage markup scenario and the
preservation of per unit operating profit markup scenario. As discussed
in section IV.J.B, the preservation of operating profit scenario
accounts for the more severe impacts presented. Estimated conversion
costs do not vary with the markup scenario.
Table V.14--Manufacturer Impact Analysis Results for the Subgroup of PTAC and PTHP Manufacturers With Production Assets, Gross Margin Percentage Markup
Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units Base case ----------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$M....................... 49.8 48.7 49.9 48.1 48.9 46.0
Change in INPV............................. 2014$M....................... ........... (1.1) 0.1 (1.7) (0.9) (3.8)
% Change..................... ........... (2.1) 0.3 (3.4) (1.8) (7.5)
Product Conversion Costs................... 2014$M....................... ........... 1.4 4.0 6.5 7.8 12.8
Capital Conversion Costs................... 2014$M....................... ........... 2.3 2.9 7.2 7.2 7.5
Total Conversion Costs..................... 2014$M....................... ........... 3.7 6.9 13.7 15.0 20.4
Free Cash Flow **.......................... 2014$M....................... 3.1 1.7 0.8 (1.9) (2.3) (4.0)
% Change..................... ........... (43.7) (74.7) (160.1) (173.8) (228.3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in section
IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and the standards case
is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.
Table V.15--Manufacturer Impact Analysis Results for the Subgroup of PTAC and PTHP Manufacturers With Production Assets, Preservation of Operating
Profit Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units Base case ----------------------------------------------------------------
1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$M....................... 49.8 48.5 48.9 46.0 45.5 42.3
Change in INPV............................. 2014$M....................... ........... (1.3) (0.9) (3.8) (4.3) (7.5)
% Change..................... ........... (2.7) (1.8) (7.7) (8.6) (15.1)
Product Conversion Costs................... 2014$M....................... ........... 1.4 4.0 6.5 7.8 12.8
Capital Conversion Costs................... 2014$M....................... ........... 2.3 2.9 7.2 7.2 7.5
Total Conversion Costs..................... 2014$M....................... ........... 3.7 6.9 13.7 15.0 20.4
Free Cash Flow **.......................... 2014$M....................... 3.1 1.7 0.7 (1.9) (2.4) (4.1)
% Change..................... ........... (44.2) (76.0) (162.6) (177.7) (232.6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in section
IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and the standards case
is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here.
In the standards case, manufacturers with production assets
experience financial impacts more negative than those facing the
industry as a whole, discussed in section V.B.2.a. These impacts derive
primarily from the conversion costs manufacturers with production
assets would incur to comply with an amended standard. In particular,
manufacturers with production assets would face capital conversion
costs not shared by their competitors who import and distribute PTACs
and PTHPs and do not require tooling investments. In interviews,
manufacturers with production assets indicated that more stringent
standards could require significant investment in new tooling to
support new coil designs. In addition, manufacturers with production
assets would face product conversion costs in the form of design
engineering, product development, testing, certification, marketing,
and related costs. Because this rule maintains the standard at baseline
(i.e., ASHRAE), DOE's modeling does not show any negative financial
impacts on industry, including manufacturers with production assets, as
a direct result of the standard.
For the small business subgroup analysis, DOE applied the small
business size standards published by the Small Business Administration
(SBA) to determine whether a company is considered a small business. 65
FR 30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 53544
(September 5, 2000) and codified at 13 CFR part 121. To be categorized
as a small business under North American Industry Classification System
(NAICS) code 333415, ``Air-Conditioning and Warm Air Heating Equipment
and Commercial and Industrial Refrigeration Equipment Manufacturing,''
a PTAC and PTHP manufacturer and its affiliates may employ a maximum of
750 employees. The 750-employee threshold includes all employees in a
business's parent company and any other subsidiaries. Based on this
classification, DOE identified 12 manufacturers that qualify as small
businesses. The PTAC and PTHP small business subgroup analysis is
discussed in chapter 12 of the final rule TSD and in section VI.B of
this document.
e. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several impending regulations
may have serious consequences for some manufacturers, groups of
manufacturers, or an entire industry. Assessing the impact of a single
regulation may
[[Page 43200]]
overlook this cumulative regulatory burden. Multiple regulations
affecting the same manufacturer can strain profits and can lead
companies to abandon product lines or markets with lower expected
future returns than competing products. For these reasons, DOE conducts
an analysis of cumulative regulatory burden as part of its rulemakings
pertaining to appliance efficiency.
For the cumulative regulatory burden analysis, DOE looks at other
regulations that could affect PTAC and PTHP manufacturers that will
take effect approximately three years before or after the 2017
compliance date of this final rule. In interviews, manufacturers cited
federal regulations on equipment other than PTACs and PTHPs that
contribute to their cumulative regulatory burden. The compliance years
and expected industry conversion costs of relevant amended energy
conservation standards are indicated in the table below:
Table V.16--Compliance Dates and Expected Conversion Expenses of Federal
Energy Conservation Standards Affecting PTAC and PTHP Manufacturers
------------------------------------------------------------------------
Approximate Estimated total
Federal energy conservation compliance industry conversion
standards date expense
------------------------------------------------------------------------
2011 Room Air Conditioners:
76 FR 22454 (April 21, 2011); 2014 $171M (2009$)
76 FR 52854 (August 24,
2011).
2007 Residential Furnaces &
Boilers:
72 FR 65136 (November 19, 2015 $88M (2006$) *
2007).
2011 Residential Furnaces:
76 FR 37408 (June 27, 2011); 2015 $2.5M (2009$) **
76 FR 67037 (October 31,
2011).
2011 Residential Central Air
Conditioners and Heat Pumps:
76 FR 37408 (June 27, 2011); 2015 $26.0M (2009$) **
76 FR 67037 (October 31,
2011).
2010 Gas Fired and Electric
Storage Water Heaters:
75 FR 20112 (April 16, 2010). 2015 $95.4M (2009$)
Dishwashers ***.................. 2018 TBD
Commercial Packaged Air-
Conditioning and Heating
Equipment: ***
79 FR 58948 (September 30, 2018 $226.4M (2013$)
2014).
Commercial Warm-Air Furnaces ***. 2018 $19.9M (2013$)
Furnace Fans:
79 FR 38129 (July 3, 2014)... 2019 $40.6M (2013$)
Miscellaneous Residential 2019 TBD
Refrigeration ***.
Single Packaged Vertical Units:
79 FR 78614 (December 30, 2019 $16.1M (2013$)
2014).
Commercial Water Heaters ***..... 2019 TBD
Commercial Packaged Boilers ***.. 2020 TBD
------------------------------------------------------------------------
* Conversion expenses for manufacturers of oil-fired furnaces and gas-
fired and oil-fired boilers associated with the November 2007 final
rule for residential furnaces and boilers are excluded from this
figure. The 2011 direct final rule for residential furnaces sets a
higher standard and earlier compliance date for oil-fired furnaces
than the 2007 final rule. As a result, manufacturers will be required
to design to the 2011 direct final rule standard. The conversion costs
associated with the 2011 direct final rule are listed separately in
this table. EISA 2007 legislated more stringent standards and earlier
compliance dates for residential boilers than were required by the
November 2007 final rule. As a result, gas-fired and oil-fired boiler
manufacturers were required to design to the EISA 2007 standard
beginning in 2012. The conversion costs listed for residential gas-
fired and oil-fired boilers in the November 2007 residential furnaces
and boilers final rule analysis are not included in this figure.
** Estimated industry conversion expense and approximate compliance date
reflect a court-ordered April 24, 2014 remand of the residential non-
weatherized and mobile home gas furnaces standards set in the 2011
Energy Conservation Standards for Residential Furnaces and Residential
Central Air Conditioners and Heat Pumps. The costs associated with
this rule reflect implementation of the amended standards for the
remaining furnace product classes (i.e., oil-fired furnaces).
*** The final rule for this energy conservation standard has not been
published. The compliance date and analysis of conversion costs have
not been finalized at this time. (If a value is provided for total
industry conversion expense, this value represents an estimate from
the September 2014 NOPR.)
Additionally, manufacturers cited increasing ENERGY STAR \52\
standards for room air conditioners and ductless heating and cooling
systems as a source of regulatory burden. However, DOE does not
consider ENERGY STAR in its presentation of cumulative regulatory
burden, because ENERGY STAR is a voluntary program and is not federally
mandated.
---------------------------------------------------------------------------
\52\ ENERGY STAR is a U.S. EPA voluntary program designed to
identify and promote energy-efficient products to reduce greenhouse
gas emissions. For more information on the ENERGY STAR program,
please visit www.energystar.gov.
---------------------------------------------------------------------------
Manufacturers also cited the U.S. EPA SNAP Program as a source of
regulatory burden. The SNAP Program evaluates and regulates substitutes
for ozone-depleting chemicals (such as air conditioning refrigerants)
that are being phased out under the stratospheric ozone protection
provisions of the CAA. On July 9, 2014, the EPA issued a notice of
proposed rulemaking proposing to list three flammable refrigerants
(HFC-32 (R-32), Propane (R-290), and R-441A) as new acceptable
substitutes, subject to use conditions, for refrigerant in the
Household and Light Commercial Air Conditioning class of equipment. 79
FR 38811 (July 9, 2014). On April 10, 2015, the EPA published its final
rule that allows the use of R-32, R-290, and R-441A in limited amounts
in PTAC and PTHP applications. 80 FR 19454 (April 10, 2015) EIAI
commented that R-410A is a candidate for delisting in some sectors
under the EPA's SNAP program. (EIAI, No. 32 at p. 3) SCS commented
that, with the anti-backsliding rule, it is critical to not set a
standard level so high that it may not be technically possible to meet
the standard in the future with a change such as delisting
refrigerants. (SCS, NOPR Public Meeting Transcript, No. 37 at p. 42)
DOE notes that the EPA did not delist R-410A for use in new production
in the Household and Light Commercial Air Conditioning class of
equipment (which includes PTAC and PTHP equipment). DOE also notes that
the use of alternate refrigerants by manufacturers of PTACs and PTHPs
would not be required as a direct result of this rule. As a result,
alternate
[[Page 43201]]
refrigerants were not considered in this analysis.
3. National Impact Analysis
a. Significance of Energy Savings
For each TSL, DOE projected energy savings for PTAC and PTHP
equipment purchased in the respective 30-year period that begins in the
year of anticipated compliance with amended standards. The savings are
measured over the entire lifetime of equipment purchased in the 30-year
period. DOE quantified the energy savings attributable to each TSL as
the difference in energy consumption between each standards case and
the base case represented by ANSI/ASHRAE/IES Standard 90.1-2013. DOE
also determined energy savings for PTAC equipment with the ANSI/ASHRAE/
IES Standard 90.1-2013 minimum efficiency level by comparing with the
energy consumption of PTAC equipment meeting the Federal minimum
efficiency level. Table V.17 shows the estimated primary energy savings
for PTACs and PTHPs at each of the TSLs, and Table V.18 presents the
estimated full-fuel-cycle energy savings for each TSL. The approach for
estimating national energy savings is further described in section
IV.H.
Table V.17--Cumulative Primary Energy Savings for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Trial standard level
Standard 90.1- -------------------------------------------------------------------------------
2013 * 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
(quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h.................... 0.000 0.000 0.002 0.004 0.006 0.006
Standard Size Equipment, 9,000 Btu/h.................... 0.000 0.012 0.044 0.087 0.110 0.113
Standard Size Equipment, 15,000 Btu/h................... 0.001 0.001 0.005 0.009 0.011 0.011
-----------------------------------------------------------------------------------------------
Total All Classes................................... 0.001 0.013 0.052 0.100 0.127 0.130
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.
Table V.18--Cumulative Full-Fuel-Cycle Energy Savings for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Trial standard level
Standard 90.1- -------------------------------------------------------------------------------
2013 * 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
(quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h.................... 0.000 0.000 0.002 0.005 0.006 0.006
Standard Size Equipment, 9,000 Btu/h.................... 0.000 0.012 0.045 0.088 0.112 0.115
Standard Size Equipment, 15,000 Btu/h................... 0.001 0.001 0.005 0.009 0.011 0.011
-----------------------------------------------------------------------------------------------
Total All Classes................................... 0.001 0.014 0.052 0.102 0.129 0.133
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.
Each TSL that is more stringent than the corresponding levels in
ANSI/ASHRAE/IES Standard 90.1-2013 results in additional energy
savings.
OMB Circular A-4 \53\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE also undertook a sensitivity analysis using nine rather than 30
years of equipment shipments. The choice of a nine-year period is a
proxy for the timeline in EPCA for the review of certain energy
conservation standards and potential revision of and compliance with
such revised standards.\54\ The review timeframe established in EPCA is
generally not synchronized with the equipment lifetime, equipment
manufacturing cycles, or other factors specific to PTACs and PTHPs.
Thus, such results are presented for informational purposes only and
are not indicative of any change in DOE's analytical methodology. The
NES results based on a 9-year analytical period are presented in Table
V.19.
---------------------------------------------------------------------------
\53\ ``Circular A-4: Regulatory Analysis,'' U.S. Office of
Management and Budget, September, 2003. Available at:
www.whitehouse.gov/omb/circulars_a004_a-4/.
\54\ EPCA requires DOE to review its standards at least once
every 6 years, and requires, for certain equipment, a 3-year period
after any new standard is promulgated before compliance is required,
except that in no case may any new standards be required within 6
years of the compliance date of the previous standards. (42 U.S.C.
6313(a)(6)(C)(i)) While adding a 6-year review to the 3-year
compliance period adds up to 9 years, DOE notes that it may
undertake reviews at any time within the 6 year period and that the
3-year compliance date may yield to the 6-year backstop.
[[Page 43202]]
Table V.19--Cumulative Primary Energy Savings for PTAC Sold in 2019-2027 and PTHP Sold in 2018-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE Trial standard level
Standard 90.1- -------------------------------------------------------------------------------
2013 * 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
(quads)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard Size Equipment, 7,000 Btu/h.................... 0.000 0.000 0.001 0.001 0.002 0.002
Standard Size Equipment, 9,000 Btu/h.................... 0.000 0.004 0.013 0.026 0.040 0.043
Standard Size Equipment, 15,000 Btu/h................... 0.000 0.000 0.001 0.003 0.004 0.004
-----------------------------------------------------------------------------------------------
Total All Classes................................... 0.000 0.004 0.015 0.030 0.046 0.049
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
minimum efficiency level.
Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding.
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the TSLs considered for PTAC and PTHP
equipment. In accordance with OMB's guidelines on regulatory
analysis,\55\ DOE calculated the NPV using both a 7-percent and a 3-
percent real discount rate.
---------------------------------------------------------------------------
\55\ ``OMB Circular A-4, section E,'' U.S. Office of Management
and Budget, September, 2003. Available online at http://www.whitehouse.gov/omb/circulars_a004_a-4.
---------------------------------------------------------------------------
Table V.20 shows the NPV results for each TSL considered for PTAC
and PTHP equipment.
Table V.20--Net Present Value of Consumer Benefits for PTAC Sold in 2019-2048 and PTHP Sold in 2018-2047
----------------------------------------------------------------------------------------------------------------
Trial standard level * (millions 2014$)
Equipment class Discount ----------------------------------------------------------------
rate 1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h...................... 3% 0.1 (1.7) (5.4) (8.3) (8.8)
7,000-15,000 Btu/h 6.4 0.9 (20.6) (43.0) (47.6)
>15,000 Btu/h (0.6) (5.2) (13.7) (20.2) (21.4)
-----------------------------------------------------------------------------
Total--All Classes............ ........... 5.9 (6.0) (39.7) (71.5) (77.7)
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h...................... 7% (0.1) (1.5) (4.1) (6.4) (6.9)
7,000-15,000 Btu/h 0.6 (12.0) (36.3) (60.1) (65.3)
>15,000 Btu/h (0.6) (3.9) (9.7) (14.9) (16.0)
-----------------------------------------------------------------------------
Total--All Classes............ ........... (0.1) (17.3) (50.2) (81.4) (88.1)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to
total due to rounding.
The NPV results based on the aforementioned nine-year analytical
period are presented in Table V.21. As mentioned previously, this
information is presented for informational purposes only and is not
indicative of any change in DOE's analytical methodology or decision
criteria.
Table V.21--Net Present Value of Consumer Benefits for PTAC Sold in 2019-2027and PTHP Sold in 2018-2026
----------------------------------------------------------------------------------------------------------------
Trial standard level * (millions 2013$)
Equipment class Discount ----------------------------------------------------------------
rate 1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h...................... 3% 0.1 (0.3) (1.5) (3.0) (3.5)
7,000-15,000 Btu/h 6.1 6.8 1.8 (9.2) (13.7)
>15,000 Btu/h 0.1 (0.4) (2.6) (6.7) (7.8)
-----------------------------------------------------------------------------
Total-All Classes............. ........... 6.3 6.2 (2.4) (18.9) (25.1)
----------------------------------------------------------------------------------------------------------------
<7,000 Btu/h...................... 7% 0.0 (0.5) (1.8) (3.2) (3.6)
7,000-15,000 Btu/h 2.3 (2.2) (12.4) (27.2) (32.4)
>15,000 Btu/h (0.1) (1.0) (3.4) (7.0) (8.1)
-----------------------------------------------------------------------------
Total--All Classes................ ........... 2.2 (3.7) (17.6) (37.4) (44.1)
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to
total due to rounding.
[[Page 43203]]
c. Indirect Impacts on Employment
As described in section IV.N, DOE used an input/output model of the
U.S. economy to estimate indirect employment impacts of the TSLs that
DOE considered in this rulemaking. DOE understands that there are
uncertainties involved in projecting employment impacts, especially
changes in the later years of the analysis. Therefore, DOE generated
results for near-term time frames (2019-2024), where these
uncertainties are reduced.
The results suggest that the adopted standards are likely to have
negligible impact on the net demand for labor in the economy. The net
change in jobs is so small that it would be imperceptible in national
labor statistics and might be offset by other, unanticipated effects on
employment. Chapter 16 of the final rule TSD presents detailed results
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Equipment
In performing the engineering analysis, DOE considered efficiency
levels that may be achieved using design options that would not lessen
the utility or performance of the individual classes of equipment. (42
U.S.C. 6313(a)(6)(B)(ii)(IV)) As presented in section III.C of this
document, DOE concluded that the efficiency levels proposed for
standard size equipment in this document are technologically feasible
and would not reduce the utility or performance of PTACs and PTHPs.
PTAC and PTHP manufacturers currently offer equipment that meet or
exceed the amended standard levels.
5. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition that is
likely to result from standards. It also directs the Attorney General
of the United States (Attorney General) to determine the impact, if
any, of any lessening of competition likely to result from a proposed
standard and to transmit such determination in writing to the Secretary
within 60 days of the publication of a proposed rule, together with an
analysis of the nature and extent of the impact.
To assist the Attorney General in making such determination, DOE
provided the Department of Justice (DOJ) with copies of the September
2014 NOPR and the accompanying TSD for review. In its assessment letter
responding to DOE, DOJ concluded that the proposed energy conservation
standards for PTAC and PTHP equipment are unlikely to have a
significant adverse impact on competition. DOE is publishing the
Attorney General's assessment at the end of this final rule.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the nation's energy security, strengthens the economy, and reduces the
environmental impacts or costs of energy production. Reduced
electricity demand due to energy conservation standards is also likely
to reduce the cost of maintaining the reliability of the electricity
system, particularly during peak-load periods. As a measure of this
reduced demand, chapter 15 of the final rule TSD presents the estimated
reduction in generating capacity for the TSLs that DOE considered in
this rulemaking.
Energy savings from amended standards for PTAC and PTHP equipment
may yield environmental benefits in the form of reduced emissions of
air pollutants and greenhouse gases. Table V.22 provides DOE's estimate
of cumulative emissions reductions expected to result from the TSLs
considered in this rulemaking. The table includes both power sector
emissions and upstream emissions. The emissions were calculated using
the multipliers discussed in section IV.K. DOE reports annual emissions
reductions for each TSL in chapter 13 of the final rule TSD.
Table V.22--Summary of Emissions Reductions for PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
-----------------------------------------------------------------------------------------------
ASHRAE ** 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Power Sector Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............................... 0.05 0.79 3.04 5.90 7.57 7.80
SO2 (thousand tons)..................................... 0.04 0.65 2.50 4.85 6.28 6.50
NOX (thousand tons)..................................... 0.04 0.61 2.34 4.53 5.84 6.03
Hg (tons)............................................... 0.00 0.00 0.01 0.01 0.02 0.02
N2O (thousand tons)..................................... 0.00 0.01 0.04 0.08 0.10 0.11
CH4 (thousand tons)..................................... 0.00 0.08 0.30 0.58 0.73 0.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............................... 0.00 0.04 0.17 0.34 0.42 0.44
SO2 (thousand tons)..................................... 0.00 0.01 0.03 0.06 0.08 0.08
NOX (thousand tons)..................................... 0.04 0.64 2.47 4.79 6.04 6.20
Hg (tons)............................................... 0.00 0.00 0.00 0.00 0.00 0.00
N2O (thousand tons)..................................... 0.00 0.00 0.00 0.00 0.00 0.00
CH4 (thousand tons)..................................... 0.22 3.70 14.39 27.88 35.17 36.09
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total FFC Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)............................... 0.05 0.83 3.21 6.24 7.99 8.24
SO2 (thousand tons)..................................... 0.04 0.66 2.53 4.91 6.36 6.58
NOX (thousand tons)..................................... 0.08 1.24 4.81 9.32 11.87 12.23
Hg (tons)............................................... 0.00 0.00 0.01 0.02 0.02 0.02
[[Page 43204]]
N2O (thousand tons)..................................... 0.00 0.01 0.04 0.09 0.11 0.11
N2O (thousand tons CO2eq) *............................. 0.18 3.01 11.66 22.61 28.71 29.52
CH4 (thousand tons)..................................... 0.23 3.78 14.69 28.46 35.90 36.84
CH4 (million tons CO2eq) *.............................. 6.42 105.87 411.21 796.84 1005.20 1031.56
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission.
** Emissions reductions determined from comparing PTAC emissions at the ANSI/ASHRAE/IES Standard 90.1-2013 efficiency level to that at the Federal
minimum efficiency level.
Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding.
As part of the analysis for this rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX that DOE estimated for each of the considered TSLs
for PTAC and PTHP equipment. As discussed in section IV.L of this
document, for CO2, DOE used the most recent values for the
SCC developed by an interagency process. The four sets of SCC values
for CO2 emissions reductions in 2015 resulting from that
process (expressed in 2014$) are represented by $12.2/metric ton (the
average value from a distribution that uses a 5-percent discount rate),
$41.2/metric ton (the average value from a distribution that uses a 3-
percent discount rate), $63.4/metric ton (the average value from a
distribution that uses a 2.5-percent discount rate), and $121/metric
ton (the 95th-percentile value from a distribution that uses a 3-
percent discount rate). The values for later years are higher due to
increasing damages (public health, economic and environmental) as the
projected magnitude of climate change increases.
Table V.23 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate as was used in the studies upon which the dollar-per-ton values
are based. DOE calculated domestic values as a range from 7 percent to
23 percent of the global values, and these results are presented in
chapter 14 of the final rule TSD.
Table V.23--Estimates of Global Present Value of CO2 Emissions Reduction Under PTAC and PTHP Trial Standard
Levels
----------------------------------------------------------------------------------------------------------------
SCC Case * (million 2014$)
---------------------------------------------------------------------------
TSL 5% Discount rate, 3% Discount rate, 2.5% Discount 3% Discount rate,
average * average * rate, average * 95th percentile *
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1................................... 5.60 25.65 40.71 79.28
2................................... 21.36 98.34 156.20 304.08
3................................... 41.70 191.50 304.04 592.22
4................................... 55.18 249.89 395.67 771.97
5................................... 57.33 258.78 409.48 799.04
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1................................... 0.31 1.43 2.28 4.44
2................................... 1.19 5.54 8.81 17.14
3................................... 2.32 10.77 17.13 33.34
4................................... 3.02 13.84 21.95 42.80
5................................... 3.12 14.25 22.60 44.08
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1................................... 5.91 27.09 42.99 83.71
2................................... 22.55 103.87 165.01 321.22
3................................... 44.02 202.27 321.17 625.56
4................................... 58.20 263.72 417.62 814.77
5................................... 60.46 273.03 432.09 843.12
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4, and $121
per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
world economy continues to evolve rapidly. Thus, any value placed on
reduced CO2 emissions in this rulemaking is subject to
change. DOE, together with other Federal agencies, will continue to
review various methodologies for estimating the monetary value of
reductions in CO2 and other GHG emissions. This ongoing
review will consider the comments on this subject that are part of the
public record for this and other rulemakings, as well as other
methodological
[[Page 43205]]
assumptions and issues. However, consistent with DOE's legal
obligations, and taking into account the uncertainty involved with this
particular issue, DOE has included in this rule the most recent values
and analyses resulting from the interagency review process.
DOE also estimated the cumulative monetary value of the economic
benefits associated with NOX emissions reductions
anticipated to result from amended standards for PTACs and PTHPs. The
dollar-per-ton values that DOE used are discussed in section IV.L.1.
Table V.24 presents the cumulative present values for NOX
emissions for each TSL calculated using the average dollar-per-ton
value and 7-percent and 3-percent discount rates.
Table V.24--Estimates of Present Value of NOX Emissions Reduction for
PTAC Sold From 2019 to 2048 and PTHP Sold From 2018 to 2047
------------------------------------------------------------------------
(Million 2014$)
-------------------------
TSL 3% Discount 7% Discount
rate rate
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1 0.87 0.43
2 3.30 1.58
3 6.45 3.11
4 8.63 4.34
5 9.01 4.60
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1 0.87 0.40
2 3.34 1.51
3 6.53 2.97
4 8.56 4.07
5 8.87 4.27
------------------------------------------------------------------------
Total FFC Emissions
------------------------------------------------------------------------
1 1.74 0.83
2 6.64 3.10
3 12.97 6.08
4 17.20 8.42
5 17.88 8.87
------------------------------------------------------------------------
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No
other factors were considered in this analysis.
8. Summary of National Economic Impacts
The NPV of the monetized benefits associated with emissions
reductions can be viewed as a complement to the NPV of the consumer
savings calculated for each TSL considered in this rulemaking. Table
V.25 presents the NPV values that result from adding the estimates of
the potential economic benefits resulting from reduced CO2
and NOX emissions in each of four valuation scenarios to the
NPV of consumer savings calculated for each TSL considered in this
rulemaking, at both a 7-percent and 3-percent discount rate. The
CO2 values used in the columns of each table correspond to
the four sets of SCC values discussed above.
Table V.25--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
million 2014$
------------------------------------------------------------------------
SCC
Case
$121/
TSL SCC Case $12.2/ SCC Case $41.2/ SCC Case $63.4/ SCC Case $121/ metric
metric ton and metric ton and metric ton and metric ton and ton
medium NOX medium NOX medium NOX medium NOX and
value value value value medium
NOX
value
---------------------------------------------------------------------------------------------------------- --------
Consumer NPV at 3% Discount Rate added
with:
1..................................... 13.5 34.7 50.6 91.4
2..................................... 23.2 104.5 165.7 321.9
3..................................... 17.3 175.6 294.5 598.8
4..................................... 3.9 209.4 363.3 760.4
5..................................... 0.6 213.2 372.2 783.3
Consumer NPV at 7% Discount Rate added
with:
1..................................... 6.7 27.8 43.7 84.5
2..................................... 8.3 89.6 150.8 307.0
3..................................... (0.1) 158.2 277.1 581.5
4..................................... (14.8) 190.7 344.6 741.8
5..................................... (18.8) 193.8 352.8 763.9
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2014$.
Although adding the value of consumer savings to the values of
emission reductions provides a valuable perspective, two issues should
be considered. First, the national operating cost savings are domestic
U.S. monetary savings that occur as a result of market transactions,
while the value of CO2 reductions is based on a global
value. Second, the assessments of operating cost savings and the SCC
are performed with different methods that use different time frames for
analysis. The national operating cost savings is measured for the
lifetime of equipment shipped in 2019 to 2048. Because CO2
emissions have a very long residence time in the atmosphere,\56\ the
SCC values in future years reflect future climate-related impacts
resulting from the emission of CO2 that continue beyond
2100.
---------------------------------------------------------------------------
\56\ The atmospheric lifetime of CO2 is estimated of
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of
fossil-fuel particulate black carbon and organic matter, possibly
the most effective method of slowing global warming,''' J. Geophys.
Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------
C. Conclusions
Any new or amended energy conservation standard for any class of
PTAC and PTHP equipment must demonstrate that adoption of a uniform
national standard more stringent than the amended ASHRAE/IES Standard
90.1 for PTAC and PTHP equipment
[[Page 43206]]
would result in significant additional conservation of energy, is
technologically feasible and economically justified, and is supported
by clear and convincing evidence. (42 U.S.C. 6313(a)(6)(A)(i)(II)) In
determining whether a standard is economically justified, the Secretary
must determine whether the benefits of the standard exceed its burdens,
considering, to the greatest extent practicable, the seven statutory
factors discussed previously. (42 U.S.C. 6313(a)(6)(B)(ii))
DOE considered the impacts of potential standards at each TSL,
beginning with the maximum technologically feasible level, to determine
whether that level met the evaluation criteria. If the max-tech level
was not justified, DOE then considered the next most-efficient level
and undertook the same evaluation until it reached the highest
efficiency level that is both technologically feasible and economically
justified, results in significant additional conservation of energy,
and is supported by clear and convincing evidence.
To aid the reader in understanding the benefits and/or burdens of
each TSL, Table V.26 and Table V.27 summarize the quantitative impacts
estimated for each TSL for PTAC and PTHP equipment, based on the
assumptions and methodology discussed herein. The national impacts are
measured over the lifetime of PTAC and PTHP equipment purchased in the
30-year period that begins in the anticipated year of compliance with
amended standards. The energy savings, emissions reductions, and value
of emissions reductions refer to full-fuel-cycle results. The
efficiency levels contained in each TSL are described in section V.A.
In addition to the quantitative results presented in the tables, DOE
also considers other burdens and benefits that affect economic
justification. These include the impacts on identifiable subgroups of
consumers that may be disproportionately affected by a national
standard (see section V.B.1.b), and impacts on employment. DOE
discusses the impacts on employment in PTAC and PTHP manufacturing in
section V.B.2, and discusses the indirect employment impacts in section
V.B.3.c.
Table V.26--Summary of Analytical Results for PTAC and PTHP Equipment: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
ASHRAE
Category [dagger] TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative National FFC Energy Savings (quads).......... 0.001 0.014 0.052 0.102 0.129 0.133
NPV of Consumer Costs and Benefits *** (2014$ million):
3% discount rate.................................... .............. 5.9 (6.0) (39.7) (71.5) (77.7)
7% discount rate.................................... .............. (0.1) (17.3) (50.2) (81.4) (88.1)
Cumulative Emissions Reduction (Total FFC Emissions):
CO2 million metric tons............................. 0.05 0.83 3.21 6.24 7.99 8.24
SO2 thousand tons................................... 0.04 0.66 2.53 4.91 6.36 6.58
NOX thousand tons................................... 0.08 1.24 4.81 9.32 11.87 12.23
Hg tons............................................. 0.00 0.00 0.01 0.02 0.02 0.02
N2O thousand tons................................... 0.00 0.01 0.04 0.09 0.11 0.11
N2O thousand tons CO2eq *........................... 0.18 3.01 11.66 22.61 28.71 29.52
CH4 thousand tons................................... 0.23 3.78 14.69 28.46 35.90 36.84
CH4 thousand tons CO2eq *........................... 6.42 105.87 411.21 796.84 1005.20 1031.56
Value of Emissions Reduction (Total FFC Emissions):
CO2 2014$ million **................................ .............. 5.9 to 83.7 22.5 to 321.2 44.0 to 625.6 58.2 to 814.8 60.5 to 843.1
NOX--3% discount rate 2014$ million................. .............. 1.74 6.64 12.97 17.20 17.88
NOX--7% discount rate 2014$ million................. .............. 0.83 3.10 6.08 8.42 8.87
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission.
** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
*** Parentheses indicate negative values.
[dagger] Energy and emissions savings determined from comparing PTAC energy consumption and emissions at the ANSI/ASHRAE/IES Standard 90.1-2013
efficiency level to that at the Federal minimum efficiency level.
Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding.
Table V.27--Summary of Analytical Results for PTAC and PTHP Equipment: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Industry Impacts ***
Change in Industry NPV (1.5) to (1.1) (0.5) to 0.8 (3.0) to (0.3) (3.4) to 0.8 (6.7) to (1.9)
(2013$M)...................
Industry NPV (% Change)..... (2.4) to (1.8) (0.8) to 1.3 (4.8) to (0.5) (5.4) to 1.4 (10.7) to
(3.1)
Consumer Mean LCC Savings ***
(2014$)
Standard Size Equipment, 0.17 (3.26) (9.85) (18.50) (23.50)
9,000 Btu/h................
Standard Size Equipment, (0.95) (5.51) (19.24) (40.53) (54.02)
15,000 Btu/h...............
Weighted Average *.......... 0.09 (3.43) (10.52) (20.08) (25.69)
Consumer Median PBP (years)
Standard Size Equipment, 7.67 8.84 9.84 10.53 10.87
9,000 Btu/h................
Standard Size Equipment, 9.69 10.49 12.30 14.07 14.98
15,000 Btu/h...............
Weighted Average *.......... 7.62 8.65 9.19 0.00 0.00
Standard Size Equipment 9,000
Btu/h **
Consumers with Net Cost %... 27 50 78 87 88
[[Page 43207]]
Consumers with No Impact %.. 52 34 7 0 0
Consumers with Net Benefit % 21 16 15 13 12
Standard Size Equipment 15,000
Btu/h **
Consumers with Net Cost %... 34 51 85 93 95
Consumers with No Impact %.. 58 39 7 2 0
Consumers with Net Benefit % 8 10 9 5 4
Weighted Average **
Consumers with Net Cost %... 28 50 79 87 89
Consumers with No Impact %.. 9 2 1 1 1
Consumers with Net Benefit % 17 21 37 46 65
----------------------------------------------------------------------------------------------------------------
* Weighted by shares of each equipment class in total projected shipments in 2019 for PTAC and 2018 for PTHP.
** Rounding may cause some items to not total 100 percent.
*** Parentheses indicate negative values.
DOE first considered TSL 5, which represents the max-tech
efficiency levels. TSL 5 would save 0.13 quads of energy, an amount DOE
considers significant. Under TSL 5, the NPV of consumer benefit would
be negative $88.1 million using a discount rate of 7 percent, and
negative $77.7 million using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 5 are 8.2 Mt of
CO2, 6.6 thousand tons of SO2, 12.2 thousand tons
of NOX, 36.8 thousand tons of CH4, and 0.1
thousand tons of N2O. The estimated monetary value of the
CO2 emissions reduction at TSL 5 ranges from $61 million to
$843 million.
At TSL 5, the weighted-average LCC impact is an expenditure (i.e.,
negative savings) of $25.68 for purchasers of PTAC and PTHP equipment.
For these purchasers, the simple payback period is 6.6 years. The
fraction of consumers experiencing a net LCC cost is 89 percent.
At TSL 5, the projected change in INPV ranges from a decrease of
$6.7 million to a decrease of $1.9 million, which correspond to
decreases of 10.7 percent and 3.1 percent, respectively. Currently,
there is only one PTHP equipment line being manufactured at TSL 5
efficiency levels. Available information indicates that PTAC and PTHP
manufacturers would be able to design and produce equipment at TSL 5,
based on the existence of a unit that achieves TSL 5 levels without the
use of proprietary technologies.
The Secretary concluded that at TSL 5 for PTAC and PTHP equipment,
the benefits of energy savings, emission reductions, and the estimated
monetary value of the emissions reductions would be outweighed by the
negative NPV of consumer benefits, the economic burden on many
consumers, and the impacts on manufacturers, including the conversion
costs and profit margin impacts that could result in a large reduction
in INPV. Consequently, the Secretary has concluded that TSL 5 is not
economically justified.
DOE then considered TSL 4, which would save an estimated 0.13 quads
of energy, an amount DOE considers significant. Under TSL 4, the NPV of
consumer benefit would be negative $81.4 million using a discount rate
of 7 percent, and negative $71.5 million using a discount rate of 3
percent.
The cumulative emissions reductions at TSL 4 are 8.0 Mt of
CO2, 6.4 thousand tons of SO2, 11.9 thousand tons
of NOX, 35.9 thousand tons of CH4, and 0.1
thousand tons of N2O. The estimated monetary value of the
CO2 emissions reduction at TSL 4 ranges from $58 million to
$815 million.
At TSL 4, the weighted-average LCC impact is an expenditure of
$20.07 for purchasers of PTAC and PTHP equipment. For these purchasers,
the simple payback period is 6.4 years. The fraction of consumers
experiencing a net LCC cost is 87 percent.
At TSL 4, the projected change in INPV ranges from a decrease of
$3.4 million to an increase of $0.8 million, which represent a decrease
of 5.4 percent and an increase of 1.4 percent, respectively.
The Secretary concluded that at TSL 4 for PTAC and PTHP equipment,
the benefits of energy savings, emission reductions, and the estimated
monetary value of the emissions reductions would be outweighed by the
negative NPV of consumer benefits, economic burden on many consumers,
and the impacts on manufacturers, including the conversion costs and
profit margin impacts that could result in a large reduction in INPV.
Consequently, the Secretary has concluded that TSL 4 is not
economically justified.
DOE then considered TSL 3, which would save an estimated 0.10 quads
of energy, an amount DOE considers significant. Under TSL 3, the NPV of
consumer benefit would be negative $50.2 million using a discount rate
of 7 percent, and negative $39.7 million using a discount rate of 3
percent.
The cumulative emissions reductions at TSL 3 are 6.2 Mt of
CO2, 4.9 thousand tons of SO2, 9.3 thousand tons
of NOX, 28.5 thousand tons of CH4, and 0.1
thousand tons of N2O. The estimated monetary value of the
CO2 emissions reduction at TSL 3 ranges from $44 million to
$626 million.
At TSL 3, the weighted-average LCC impact is an expenditure of
$10.52 for purchasers of PTAC and PTHP equipment. For these purchasers,
the simple payback period is 6.1 years. The fraction of consumers
experiencing a net LCC cost is 79 percent.
At TSL 3, the projected change in INPV ranges from a decrease of
$3.0 million to a decrease of $0.3 million, which represent decreases
of 4.8 percent and 0.5 percent, respectively.
The Secretary concluded that at TSL 3 for PTAC and PTHP equipment,
the benefits of energy savings, emission reductions, and the estimated
monetary value of the emissions reductions would be outweighed by the
negative NPV of consumer benefits, economic burden on many consumers,
and the impacts on manufacturers, including the conversion costs and
profit margin impacts that could result in a large reduction in INPV.
Consequently, the Secretary has concluded that TSL 3 is not
economically justified.
DOE then considered TSL 2, which would save an estimated 0.05 quads
of energy, an amount DOE considers significant. Under TSL 2, the NPV of
consumer benefit would be negative $17.3 million using a discount rate
of 7 percent, and negative $6.0 million using a discount rate of 3
percent.
The cumulative emissions reductions at TSL 2 are 3.2 Mt of
CO2, 2.5 thousand tons of SO2, 4.8 thousand tons
of NOX, and 14.7 thousand tons of CH4. The
[[Page 43208]]
estimated monetary value of the CO2 emissions reduction at
TSL 2 ranges from $23 million to $321 million.
At TSL 2, the weighted-average LCC impact is an expenditure of
$3.43 for purchasers of PTAC and PTHP equipment. For these purchasers,
the simple payback period is 5.7 years. The fraction of consumers
experiencing a net LCC cost is 50 percent.
At TSL 2, the projected change in INPV ranges from a decrease of
$0.5 million to an increase of $0.8 million, which represent a decrease
of 0.8 percent and an increase of 1.3 percent, respectively.
The Secretary concluded that at TSL 2 for PTAC and PTHP equipment,
the benefits of energy savings, emission reductions, and the estimated
monetary value of the emissions reductions would be outweighed by the
negative NPV of consumer benefits, economic burden on some consumers,
and the impacts on manufacturers, including the conversion costs and
profit margin impacts that could result in a large reduction in INPV.
Consequently, the Secretary has concluded that TSL 2 is not
economically justified.
DOE then considered TSL 1, which would save an estimated 0.01 quads
of energy, an amount DOE considers significant. Under TSL 1, the NPV of
consumer benefit would be negative $0.1 million using a discount rate
of 7 percent, and $5.9 million using a discount rate of 3 percent.
The cumulative emissions reductions at TSL 1 are 0.8 Mt of
CO2, 0.7 thousand tons of SO2, 1.2 thousand tons
of NOX, and 3.8 thousand tons of CH4. The
estimated monetary value of the CO2 emissions reduction at
TSL 1 ranges from $6 million to $84 million.
At TSL 1, the weighted-average LCC impact is a savings of $0.09 for
purchasers of PTAC and PTHP equipment. For these purchasers, the simple
payback period is 5.1 years. The fraction of consumers experiencing a
net LCC cost is 28 percent.
At TSL 1, the projected change in INPV ranges from a decrease of
$1.1 million to a decrease of $1.5 million, which represent decreases
of 1.8 percent and 2.4 percent, respectively.
The Secretary concluded that at TSL 1 for PTAC and PTHP equipment,
the benefits of energy savings, emission reductions, estimated monetary
value of the emissions reductions, and the economic benefit for some
consumers would be outweighed by the negative NPV of consumer benefits
at 7-percent discount rate, the negative average LCC savings for
standard size equipment, 15,000 Btu/h, and the negative impacts on
manufacturers, including the conversion costs and profit margin impacts
that could result in a large reduction in INPV. Consequently, the
Secretary has concluded that TSL 1 is not economically justified.
Therefore, based on the above considerations, DOE is not able to
show with clear and convincing evidence that energy conservation
standards for PTAC and PTHP equipment based on any of the considered
TSLs are economically justified. Therefore, pursuant to 42 U.S.C.
6313(6)(A)(ii)(I), which states that unless adoption of a uniform
national standard more stringent than the amended ASHRAE/IES Standard
90.1 for the equipment would result in significant additional
conservation of energy and is technologically feasible and economically
justified and is supported by clear and convincing evidence, DOE is
establishing amended energy efficiency standards for PTAC equipment at
the minimum efficiency level specified in the ANSI/ASHRAE/IES Standard
90.1-2013 for PTAC equipment. The amended energy conservation standards
for PTAC equipment are shown in Table V.28. The standards for PTHP
equipment remain unchanged.
Table V.28--Amended Energy Conservation Standards for Standard Size PTAC Equipment
----------------------------------------------------------------------------------------------------------------
Compliance date:
Equipment type Cooling capacity Efficiency level Products manufactured
on and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC................................. <7,000 Btu/h........... EER = 11.9............. January 1, 2017.
>=7,000 Btu/h and EER = 14.0 - (0.3 x Cap
<=15,000 Btu/h. \1\).
>15,000 Btu/h.......... EER = 9.5
----------------------------------------------------------------------------------------------------------------
\1\ Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 [deg]F outdoor dry-bulb
temperature.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify
the problem that it intends to address, including, where applicable,
the failures of private markets or public institutions that warrant new
agency action, as well as to assess the significance of that problem.
This final rule addresses the following problems:
(1) Insufficient information and the high costs of gathering and
analyzing relevant information leads some consumers to miss
opportunities to make cost-effective investments in energy efficiency.
(2) In some cases the benefits of more efficient equipment are not
realized due to misaligned incentives between purchasers and users. An
example of such a case is when the equipment purchase decision is made
by a building contractor or building owner who does not pay the energy
costs.
(3) There are external benefits resulting from improved energy
efficiency of equipment that are not captured by the users of such
equipment. These benefits include externalities related to public
health, environmental protection and national energy security that are
not reflected in energy prices, such as reduced emissions of air
pollutants and greenhouse gases that impact human health and global
warming. DOE attempts to qualify some of the external benefits through
use of social cost of carbon values.
In addition, DOE has determined that this regulatory action is not
a ``significant regulatory action'' under section 3(f) of Executive
Order 12866. Section 6(a)(3)(A) of the Executive Order states that
absent a material change in the development of the planned regulatory
action, regulatory action not designated as significant will not be
subject to review under the aforementioned section unless, within 10
working days of receipt of DOE's list of planned regulatory actions,
the Administrator of OIRA notifies the agency that OIRA has determined
that a planned regulation is a significant regulatory action within the
meaning of the Executive order.
DOE has also reviewed this regulation pursuant to Executive Order
13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). EO 13563
is supplemental to and explicitly reaffirms the principles, structures,
and definitions governing regulatory review
[[Page 43209]]
established in Executive Order 12866. To the extent permitted by law,
agencies are required by Executive Order 13563 to: (1) Propose or adopt
a regulation only upon a reasoned determination that its benefits
justify its costs (recognizing that some benefits and costs are
difficult to quantify); (2) tailor regulations to impose the least
burden on society, consistent with obtaining regulatory objectives,
taking into account, among other things, and to the extent practicable,
the costs of cumulative regulations; (3) select, in choosing among
alternative regulatory approaches, those approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages; distributive impacts; and equity);
(4) to the extent feasible, specify performance objectives, rather than
specifying the behavior or manner of compliance that regulated entities
must adopt; and (5) identify and assess available alternatives to
direct regulation, including providing economic incentives to encourage
the desired behavior, such as user fees or marketable permits, or
providing information upon which choices can be made by the public.
DOE emphasizes as well that Executive Order 13563 requires agencies
to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible. In its
guidance, OIRA has emphasized that such techniques may include
identifying changing future compliance costs that might result from
technological innovation or anticipated behavioral changes. For the
reasons stated in the preamble, DOE believes that this final rule is
consistent with these principles, including the requirement that, to
the extent permitted by law, benefits justify costs and that net
benefits are maximized.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of a regulatory flexibility analysis for any rule that by
law must be proposed for public comment, unless the agency certifies
that the rule, if promulgated, will not have a significant economic
impact on a substantial number of small entities. As required by
Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process. 68 FR 7990. DOE has made its
procedures and policies available on the Office of the General
Counsel's Web site (http://energy.gov/gc/office-general-counsel).
1. Description and Estimated Number of Small Entities Regulated
a. Methodology for Estimating the Number of Small Entities
For manufacturers of PTACs and PTHPs, the Small Business
Administration (SBA) has set a size threshold, which defines those
entities classified as ``small businesses'' for the purposes of the
statute. DOE used the SBA's small business size standards to determine
whether any small entities would be subject to the requirements of the
rule. See 13 CFR part 121. The size standards are listed by North
American Industry Classification System (NAICS) code and industry
description and are available at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. PTAC and PTHP manufacturing is
classified under NAICS 333415, ``Air-Conditioning and Warm Air Heating
Equipment and Commercial and Industrial Refrigeration Equipment
Manufacturing.'' The SBA sets a threshold of 750 employees or less for
an entity to be considered as a small business for this category.
DOE reviewed the potential standard levels considered in this final
rule under the provisions of the Regulatory Flexibility Act and the
procedures and policies published on February 19, 2003. DOE conducted a
market survey to determine whether any companies could be small
business manufacturers of equipment covered by this rulemaking. DOE
used available public information to identify potential small
manufacturers. DOE's research involved industry trade association
membership directories (e.g., AHRI), information from previous
rulemakings, individual company Web sites, and market research tools
(e.g., Hoover's reports) to create a list of companies that manufacture
or sell PTAC and PTHP equipment covered by this rulemaking. DOE also
asked stakeholders and industry representatives if they were aware of
any additional small manufacturers during manufacturer interviews and
at DOE public meetings. DOE reviewed publicly available data and
contacted various companies on its list of manufacturers, as necessary,
to determine whether they met the SBA's definition of a small business
manufacturer. DOE screened out companies that do not offer equipment
impacted by this rulemaking, do not meet the definition of a ``small
business,'' or are foreign owned and operated.
DOE initially identified 22 companies that sell PTAC and PTHP
equipment that would be affected by this proposal. Of these 22
companies, DOE identified 12 as small businesses.
b. Manufacturer Participation
DOE contacted the identified small businesses to invite them to
take part in a manufacturer impact analysis interview. Of the 12 small
businesses contacted, DOE was able to reach and discuss potential
standards with two. DOE also obtained information about small
businesses and potential impacts on small businesses while interviewing
large manufacturers.
c. PTAC and PTHP Industry Structure and Nature of Competition
Three major manufacturers supply approximately 80 percent of the
U.S. market for standard-size PTACs and PTHPs. DOE estimates that the
remaining 20 percent of the market is served by a combination of small
businesses and large businesses that are foreign owned and operated.
None of the major manufacturers of PTACs and PTHPs affected by this
rulemaking is a domestic small business.
Further, the small businesses identified are not original equipment
manufacturers of standard-size PTACs and PTHPs affected by this
rulemaking. Rather, they import, rebrand, and distribute PTACs and
PTHPs manufactured overseas by foreign companies. Some small businesses
identified are original equipment manufacturers of non-standard size
PTACs and PTHPs. However, energy conservation standards for non-
standard units are not being amended by this rulemaking. As a result,
manufacturers of non-standard equipment are not considered in this
small business analysis.
2. Description and Estimate of Compliance Requirements
In this rule, DOE is adopting amended energy conservation standards
for PTAC equipment that are equivalent to the standards set forth in
ANSI/ASHRAE/IES Standard 90.1-2013. In line with ANSI/ASHRAE/IES
Standard 90.1-2013, DOE is not amending energy conservation standards
for PTHP equipment. DOE is required to adopt minimum efficiency
standards either equivalent to or more stringent than those set forth
by ASHRAE.
Since this rule adopts the baseline as the standards level, DOE's
modeling does not show any negative financial impacts on industry,
including small
[[Page 43210]]
manufacturers, as a direct result of the standard.
3. Duplication, Overlap, and Conflict With Other Rules and Regulations
DOE is not aware of any rules or regulations that duplicate,
overlap, or conflict with this final rule.
4. Significant Alternatives to the Rule
The discussion above analyzes impacts on small businesses that
would result from DOE's rule adopting the ASHRAE levels. EPCA requires
DOE to adopt the levels adopted by ASHRAE unless clear and convincing
evidence supports adopting a higher standard. Therefore, in reviewing
alternatives to the proposed rule, DOE considered the ASHRAE levels and
levels above those adopted by ASHRAE. After considering comments on the
proposal, DOE determined that it did not have clear and convincing
evidence that levels above those adopted by ASHRAE were economically
justified, and so DOE is adopting the ASHRAE levels in this final rule.
In addition to the other TSLs being considered, the final rule TSD
includes a regulatory impact analysis (RIA). For PTAC and PTHP
equipment, the RIA discusses the following policy alternatives: (1) No
change in standard; (2) consumer rebates; (3) consumer tax credits; (4)
manufacturer tax credits; (5) voluntary energy efficiency targets; and
(6) bulk government purchases. While these alternatives may mitigate to
some varying extent the economic impacts on small entities compared to
the adopted standards, DOE does not intend to consider these
alternatives further because in several cases, they would not be
feasible to implement without authority and funding from Congress, and
in all cases, DOE has determined that the energy savings of these
alternatives are significantly smaller than those that would be
expected to result from adoption of the standards (ranging from
approximately 1 percent to 22 percent of the energy savings from the
adopted standards). Accordingly, DOE is declining to adopt any of these
alternatives and is adopting the standards set forth in this
rulemaking. (See chapter 17 of the final rule TSD for further detail on
the policy alternatives DOE considered.)
Additional compliance flexibilities may be available through other
means. EPCA provides that a manufacturer whose annual gross revenue
from all of its operations does not exceed $8,000,000 may apply for an
exemption from all or part of an energy conservation standard for a
period not longer than 24 months after the effective date of a final
rule establishing the standard. Additionally, Section 504 of the
Department of Energy Organization Act, 42 U.S.C. 7194, provides
authority for the Secretary to adjust a rule issued under EPCA in order
to prevent ``special hardship, inequity, or unfair distribution of
burdens'' that may be imposed on that manufacturer as a result of such
rule.
C. Review Under the Paperwork Reduction Act
Manufacturers of PTACs and PTHPs must certify to DOE that their
equipment complies with any applicable energy conservation standards.
In certifying compliance, manufacturers must test their equipment
according to the DOE test procedures for PTACs and PTHPs, including any
amendments adopted for those test procedures. DOE has established
regulations for the certification and recordkeeping requirements for
all covered consumer products and commercial equipment, including PTACs
and PTHPs. See generally 10 CFR part 429. The collection-of-information
requirement for the certification and recordkeeping is subject to
review and approval by OMB under the Paperwork Reduction Act (PRA).
This requirement has been approved by OMB under OMB control number
1910-1400. Public reporting burden for the certification is estimated
to average 30 hours per response, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act (NEPA) of 1969,
DOE has determined that the rule fits within the category of actions
included in Categorical Exclusion (CX) B5.1 and otherwise meets the
requirements for application of a CX. See 10 CFR part 1021, appendix B,
B5.1(b); 1021.410(b) and appendix B, B(1)-(5). The rule fits within the
category of actions because it is a rulemaking that establishes energy
conservation standards for consumer products or industrial equipment,
and for which none of the exceptions identified in CX B5.1(b) apply.
Therefore, DOE has made a CX determination for this rulemaking, and DOE
does not need to prepare an Environmental Assessment or Environmental
Impact Statement for this rule. DOE's CX determination for this rule is
available at http://cxnepa.energy.gov/.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism.'' 64 FR 43255 (August 10,
1999) imposes certain requirements on Federal agencies formulating and
implementing policies or regulations that preempt State law or that
have Federalism implications. The Executive Order requires agencies to
examine the constitutional and statutory authority supporting any
action that would limit the policymaking discretion of the States and
to carefully assess the necessity for such actions. The Executive Order
also requires agencies to have an accountable process to ensure
meaningful and timely input by State and local officials in the
development of regulatory policies that have Federalism implications.
On March 14, 2000, DOE published a statement of policy describing the
intergovernmental consultation process it will follow in the
development of such regulations. 65 FR 13735. DOE has examined this
rule and has determined that it would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. EPCA governs
and prescribes Federal preemption of State regulations as to energy
conservation for the equipment that are the subject of this final rule.
States can petition DOE for exemption from such preemption to the
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297)
Therefore, no further action is required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' imposes on Federal agencies the general duty
to adhere to the following requirements: (1) Eliminate drafting errors
and ambiguity; (2) write regulations to minimize litigation; (3)
provide a clear legal standard for affected conduct rather than a
general standard; and (4) promote simplification and burden reduction.
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section
3(a), section 3(b) of Executive
[[Page 43211]]
Order 12988 specifically requires that Executive agencies make every
reasonable effort to ensure that the regulation: (1) Clearly specifies
the preemptive effect, if any; (2) clearly specifies any effect on
existing Federal law or regulation; (3) provides a clear legal standard
for affected conduct while promoting simplification and burden
reduction; (4) specifies the retroactive effect, if any; (5) adequately
defines key terms; and (6) addresses other important issues affecting
clarity and general draftsmanship under any guidelines issued by the
Attorney General. Section 3(c) of Executive Order 12988 requires
Executive agencies to review regulations in light of applicable
standards in section 3(a) and section 3(b) to determine whether they
are met or it is unreasonable to meet one or more of them. DOE has
completed the required review and determined that, to the extent
permitted by law, this final rule meets the relevant standards of
Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them. On March 18, 1997, DOE published
a statement of policy on its process for intergovernmental consultation
under UMRA. 62 FR 12820. DOE's policy statement is also available at
http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
DOE has concluded that this final rule is not expected to require
expenditures of $100 million or more on the private sector. As a
result, the analytical requirements of UMRA described above are not
applicable.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
Pursuant to Executive Order 12630, ``Governmental Actions and
Interference with Constitutionally Protected Property Rights'' 53 FR
8859 (March 18, 1988), DOE has determined that this rule would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
information quality guidelines established by each agency pursuant to
general guidelines issued by OMB. OMB's guidelines were published at 67
FR 8452 (February 22, 2002), and DOE's guidelines were published at 67
FR 62446 (October 7, 2002). DOE has reviewed this final rule under the
OMB and DOE guidelines and has concluded that it is consistent with
applicable policies in those guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' 66 FR 28355
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA
at OMB, a Statement of Energy Effects for any significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgates or is expected to lead to promulgation of a
final rule, and that: (1) Is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any significant energy action, the
agency must give a detailed statement of any adverse effects on energy
supply, distribution, or use should the proposal be implemented, and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use.
DOE has concluded that this regulatory action, which sets forth
amended energy conservation standards for PTAC and PTHP equipment, is
not a significant energy action because the standards are not likely to
have a significant adverse effect on the supply, distribution, or use
of energy, nor has it been designated as such by the Administrator at
OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects
on this final rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (OSTP), issued its Final Information
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (January
14, 2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' Id. at FR 2667.
In response to OMB's Bulletin, DOE conducted formal in-progress
peer reviews of the energy conservation standards development process
and analyses and has prepared a Peer Review Report pertaining to the
energy conservation standards rulemaking analyses. Generation of this
report involved a rigorous, formal, and documented evaluation using
objective criteria and qualified and independent reviewers to make a
judgment as to the technical/scientific/business merit, the actual or
anticipated results, and the productivity and management effectiveness
of programs and/or projects. The ``Energy Conservation Standards
Rulemaking Peer Review Report'' dated February 2007 has been
disseminated and is available at the following Web site:
[[Page 43212]]
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2).
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects in 10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
Small businesses.
Issued in Washington, DC, on June 30, 2015.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.
For the reasons set forth in the preamble, DOE amends part 431 of
chapter II, subchapter D, of title 10 of the Code of Federal
Regulations as set forth below:
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
2. Amend Sec. 431.97 by revising paragraph (c) to read as follows:
Sec. 431.97 Energy efficiency standards and their compliance dates.
* * * * *
(c) Each non-standard size packaged terminal air conditioner (PTAC)
and packaged terminal heat pump (PTHP) manufactured on or after October
7, 2010 must meet the applicable minimum energy efficiency standard
level(s) set forth in Table 4 of this section. Each standard size PTAC
manufactured on or after October 8, 2012, and before January 1, 2017
must meet the applicable minimum energy efficiency standard level(s)
set forth in Table 4 of this section. Each standard size PTHP
manufactured on or after October 8, 2012 must meet the applicable
minimum energy efficiency standard level(s) set forth in Table 4 of
this section. Each standard size PTAC manufactured on or after January
1, 2017 must meet the applicable minimum energy efficiency standard
level(s) set forth in Table 5 of this section.
Table 4 to Sec. 431.97--Minimum Efficiency Standards for PTAC and PTHP
----------------------------------------------------------------------------------------------------------------
Compliance date:
products
Equipment type Category Cooling capacity Efficiency level manufactured on
and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC............................ Standard Size..... <7,000 Btu/h...... EER = 11.7........ October 8,
2012.\2\
>=7,000 Btu/h and EER = 13.8 - (0.3 October 8,
<=15,000 Btu/h. x Cap \1\). 2012.\2\
>15,000 Btu/h..... EER = 9.3......... October 8,
2012.\2\
Non-Standard Size. <7,000 Btu/h...... EER = 9.4......... October 7, 2010.
>=7,000 Btu/h and EER = 10.9 - October 7, 2010.
<=15,000 Btu/h. (0.213 x Cap \1\).
>15,000 Btu/h..... EER = 7.7......... October 7, 2010.
PTHP............................ Standard Size..... <7,000 Btu/h...... EER = 11.9........ October 8, 2012.
COP = 3.3.........
>=7,000 Btu/h and EER = 14.0 - (0.3 October 8, 2012.
<=15,000 Btu/h. x Cap \1\).
COP = 3.7 - (0.052
x Cap \1\).
>15,000 Btu/h..... EER = 9.5......... October 8, 2012.
COP = 2.9.........
Non-Standard Size. <7,000 Btu/h...... EER = 9.3......... October 7, 2010.
COP = 2.7.........
>=7,000 Btu/h and EER = 10.8 - October 7, 2010.
<=15,000 Btu/h. (0.213 x Cap \1\).
COP = 2.9 - (0.026
x Cap \1\).
>15,000 Btu/h..... EER = 7.6......... October 7, 2010.
COP = 2.5.........
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95[emsp14][deg]F outdoor dry-bulb temperature.
\2\ And manufactured before January 1, 2017. See Table 5 of this section for updated efficiency standards that
apply to this category of equipment manufactured on and after January 1, 2017.
Table 5 to Sec. 431.97--Updated Minimum Efficiency Standards for PTAC
----------------------------------------------------------------------------------------------------------------
Compliance date:
products
Equipment type Category Cooling capacity Efficiency level manufactured on
and after . . .
----------------------------------------------------------------------------------------------------------------
PTAC............................ Standard Size..... <7,000 Btu/h...... EER = 11.9........ January 1, 2017.
>=7,000 Btu/h and EER = 14.0 - (0.3 January 1, 2017.
<=15,000 Btu/h. x Cap \1\).
>15,000 Btu/h..... EER = 9.5......... January 1, 2017.
----------------------------------------------------------------------------------------------------------------
\1\ ``Cap'' means cooling capacity in thousand Btu/h at 95 [deg]F outdoor dry-bulb temperature.
* * * * *
Note: The following letter will not appear in the Code of Federal
Regulations.
May 15, 2015
Anne Harkavy
Deputy General Counsel
[[Page 43213]]
For Litigation, Regulation and Enforcement Department of Energy
Washington, DC 20585
Dear Deputy General Counsel Harkavy:
I am responding to your letter of March seeking the views of the
Attorney General about the potential impact on competition of
proposed amended energy conservation standards for standard-size
packaged terminal air conditioners and standard-size packaged
terminal heat pumps. Your request was submitted under Section
(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as
amended (EPCA), 42 U.S.C. 6295(o)(2)(B)(i)(V), which requires the
Attorney General to make a determination of the impact of any
lessening of competition that is likely to result from the
imposition of proposed energy conservation standards. The Attorney
General's responsibility for responding to requests from other
departments about the effect of a program on competition has been
delegated to the Assistant Attorney General for the Antitrust
Division in 28 CFR 0.40(g).
In conducting its analysis, the Antitrust Division examines
whether a proposed standard may lessen competition, for example, by
substantially limiting consumer choice or increasing industry
concentration. A lessening of competition could result in higher
Prices to manufacturers and consumers.
We have reviewed the proposed standards contained in the Notice
of Proposed Rulemaking published in the Federal Register (79 FR at
55538-55601, September 2014) (NOPR). We have also reviewed
supplementary information submitted to the Attorney General by the
Department of Energy, including the Technical Support Document, and
reviewed industry source material. Based on this review, our
conclusion is that the proposed amended energy conservation
standards set forth in the NOPR for standard-size packaged terminal
air conditioners and standard-size packaged terminal heat pumps are
unlikely to have a significant adverse impact on competition.
Sincerely,
William J. Baer
[FR Doc. 2015-16897 Filed 7-20-15; 8:45 am]
BILLING CODE 6450-01-P