[Federal Register Volume 81, Number 16 (Tuesday, January 26, 2016)]
[Rules and Regulations]
[Pages 4368-4433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00324]
[[Page 4367]]
Vol. 81
Tuesday,
No. 16
January 26, 2016
Part II
Department of Energy
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10 CFR Parts 429 and 431
Energy Conservation Program: Energy Conservation Standards for Pumps;
Final Rule
Federal Register / Vol. 81 , No. 16 / Tuesday, January 26, 2016 /
Rules and Regulations
[[Page 4368]]
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DEPARTMENT OF ENERGY
10 CFR Parts 429 and 431
[Docket Number EERE-2011-BT-STD-0031]
RIN 1904-AC54
Energy Conservation Program: Energy Conservation Standards for
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, sets forth a variety of provisions designed to improve energy
efficiency. Part C of Title III establishes the ``Energy Conservation
Program for Certain Industrial Equipment.'' The covered equipment
includes pumps. In this final rule, the U.S. Department of Energy (DOE)
adopts new energy conservation standards for pumps. DOE has determined
that the new energy conservation standards for pumps would result in
significant conservation of energy, and are technologically feasible
and economically justified.
DATES: The effective date of this rule is March 28, 2016. Compliance
with the new standards established for pumps in this final rule is
required on and after January 27, 2020.
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 www.regulations.gov.
All documents in the docket are listed in the www.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: www.regulations.gov/#!docketDetail;D=EERE-2011-BT-STD-0031. The www.regulations.gov Web
page will contain 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:
John Cymbalsky, U.S. Department of Energy, Office of Energy
Efficiency and Renewable Energy, Building Technologies Office, EE-5B,
1000 Independence Avenue SW., Washington, DC, 20585-0121. Telephone:
(202) 287-1692. Email: [email protected].
Elizabeth Kohl, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC, 20585-
0121. Telephone: (202) 586-9507. Email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits
D. Conclusion
II. Introduction
A. Authority
B. Background
C. Relevant Industry Sectors
III. General Discussion
A. Definition of Covered Equipment
B. Scope of the Energy Conservation Standards in this Rulemaking
C. Test Procedure and Metric
1. PER of a Minimally Compliant Pump
D. Compliance Date
E. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared to Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Equipment Classes
2. Scope of Analysis and Data Availability
a. Radially Split, Multi-Stage, Vertical, In-Line Diffuser
Casing
b. Submersible Turbine, 1800 RPM
3. Technology Assessment
a. Applicability of Technology Options to Reduced Diameter
Impellers
b. Elimination of Technology Options Due to Low Energy Savings
Potential.
B. Screening Analysis
1. Screened Out Technologies
2. Remaining Technologies
C. Engineering Analysis
1. Representative Equipment for Analysis
a. Representative Configuration Selection
b. Baseline Configuration
2. Design Options
3. Available Energy Efficiency Improvements
4. Efficiency Levels Analyzed
a. Maximum Technologically Feasible Levels
5. Manufacturers Production Cost Assessment Methodology
a. Changes in MPC Associated with Hydraulic Redesign
b. Manufacturer Production Cost (MPC) Model
6. Product and Capital Conversion Costs
7. Manufacturer Markup Analysis
a. Industry-average markups
b. Individual manufacturer markup structures
c. Industry-wide markup structure
8. MSP-Efficiency Relationship
D. Markups Analysis
E. Energy Use Analysis
1. Duty Point
2. Pump Sizing
3. Operating Hours
4. Load Profiles
5. Equipment Losses
F. Life-Cycle Cost and Payback Period Analysis
1. Approach
2. Life-Cycle Cost Inputs
a. Equipment Prices
b. Installation Costs
c. Annual Energy Use
d. Electricity Prices
e. Maintenance Costs
f. Repair Costs
g. Equipment Lifetime
h. Discount Rates
3. Payback Period
4. Rebuttable-Presumption Payback Period
G. Shipments Analysis
H. National Impact Analysis
1. Approach
a. National Energy Savings
b. Net Present Value
2. No-New-Standards Case and Standards-Case Distribution of
Efficiencies
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. GRIM Analysis
a. GRIM Key Inputs
b. GRIM Scenarios
3. Discussion of MIA 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. Valuation of Other Emissions Reductions
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
1. Trial Standard Level Formulation Process and Criteria
2. Trial Standard Level Equations
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. Labeling Costs
c. Impacts on Direct Employment
d. Impacts on Manufacturing Capacity
e. Impacts on Subgroups of Manufacturers
[[Page 4369]]
f. 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. Conclusion
1. Benefits and Burdens of Trial Standard Levels Considered for
Pumps Standards
2. Summary of Annualized Benefits and Costs of the Adopted
Standards
VI. Labeling and Certification Requirements
A. Labeling
B. Certification Requirements
C. Representations
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
1. Description on Estimated Number of Small Entities Regulated
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
VIII. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
Title III of the Energy Policy and Conservation Act of 1975 (42
U.S.C. 6291, et seq.; ``EPCA''), Public Law 94-163, sets forth a
variety of provisions designed to improve energy efficiency. Part C of
Title III, which for editorial reasons was re-designated as Part A-1
upon incorporation into the U.S. Code (42 U.S.C. 6311-6317),
establishes the ``Energy Conservation Program for Certain Industrial
Equipment.'' Covered industrial equipment includes pumps, the subject
of this document. (42 U.S.C. 6311(1)(H)).\1\
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\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Efficiency Improvement Act of 2015,
Public Law 114-11 (Apr. 30, 2015).
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The standards for certain pumps set forth in this document reflect
the consensus of a stakeholder negotiation. A working group was
established under the Appliance Standards and Rulemaking Federal
Advisory Committee (ASRAC) in accordance with the Federal Advisory
Committee Act (FACA) and the Negotiated Rulemaking Act (NRA). (5 U.S.C.
App.; 5 U.S.C. 561-570) The purpose of the working group was to discuss
and, if possible, reach consensus on proposed standards for pump energy
efficiency. On June 19, 2014, the working group successfully reached
consensus on proposed energy conservation standards for specific
rotodynamic, clean water pumps used in a variety of commercial,
industrial, agricultural, and municipal applications. See section II.B
for further discussion of the working group, section II.C for the
industry sectors covered, and section III.C for a description of the
relevant pumps.
The new standards are expressed as a Pump Energy Index (PEI). PEIs
for each equipment class and the respective nominal design speed are
shown in Table I.1. These standards apply to all equipment classes
listed in Table I.1 and manufactured in, or imported into, the United
States on and after January 27, 2020.
Table I.1--New Energy Conservation Standards for Pumps
[Compliance starting January 27, 2020]
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Standard Efficiency
Equipment class * level ** PEI percentile C-Values
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ESCC.1800.CL.................................................... 1.00 25 128.47
ESCC.3600.CL.................................................... 1.00 25 130.42
ESCC.1800.VL.................................................... 1.00 25 128.47
ESCC.3600.VL.................................................... 1.00 25 130.42
ESFM.1800.CL.................................................... 1.00 25 128.85
ESFM.3600.CL.................................................... 1.00 25 130.99
ESFM.1800.VL.................................................... 1.00 25 128.85
ESFM.3600.VL.................................................... 1.00 25 130.99
IL.1800.CL...................................................... 1.00 25 129.30
IL.3600.CL...................................................... 1.00 25 133.84
IL.1800.VL...................................................... 1.00 25 129.30
IL.3600.VL...................................................... 1.00 25 133.84
RSV.1800.CL..................................................... 1.00 [dagger] 0 129.63
RSV.3600.CL..................................................... 1.00 [dagger] 0 133.20
RSV.1800.VL..................................................... 1.00 [dagger] 0 129.63
RSV.3600.VL..................................................... 1.00 [dagger] 0 133.20
VTS.1800.CL..................................................... 1.00 [dagger][dagge 138.78
r] 0
VTS.3600.CL..................................................... 1.00 25 134.85
VTS.1800.VL..................................................... 1.00 [dagger][dagge 138.78
r] 0
VTS.3600.VL..................................................... 1.00 25 134.85
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* Equipment class designations consist of a combination (in sequential order separated by periods) of: (1) An
equipment family (ESCC = end suction close-coupled, ESFM = end suction frame mounted/own bearing, IL = inline,
RSV = radially split, multi-stage, vertical, in-line diffuser casing, VTS = submersible turbine); (2) a
nominal design speed (1800 = 1800 revolutions per minute (rpm), 3600 = 3600 rpm); and (3) an operating mode
(CL = constant load, VL = variable load). For example, ``ESCC.1800.CL'' refers to the ``end suction close-
coupled, 1,800 rpm, constant load'' equipment class. See discussion in chapter 5 of the final rule technical
support document (TSD) for a more detailed explanation of the equipment class terminology.
** A pump model is compliant if its PEI rating is less than or equal to the adopted standard.
[dagger] The standard level for RSV was set at a level that harmonized with the current European Union energy
conservation standard level. See discussion in section IV.A.2.a for more detail regarding matters related to
harmonization.
[dagger][dagger] The standard level for VTS.1800 was set based on the baseline C-value for VTS.3600 pumps due to
limited data availability. See discussion in section IV.A.2.b for more detail.
[[Page 4370]]
Under the adopted standards, a pump model would be compliant if its
PEI rating is less than or equal to the adopted standard. PEI is
defined as the pump efficiency rating (PER) for a given pump model (at
full impeller diameter), divided by a calculated minimally compliant
PER for the given pump model. PER is defined as a weighted average of
the electric input power supplied to the pump over a specified load
profile, represented in units of horsepower (hp). A value of PEI
greater than 1.00 would indicate that the pump does not comply with
DOE's energy conservation standard, while a value less than 1.00 would
indicate that the pump is more efficient than the standard requires.
The minimally compliant PER is unique to each pump model and is a
function of specific speed (a dimensionless quantity describing the
geometry of the pump); flow at best efficiency point (BEP); and a
specified C-value. A C-value is the translational component of a three-
dimensional polynomial equation that describes the attainable hydraulic
efficiency of pumps as a function of flow at BEP, specific speed, and
C-value. Thus, when a C-value is used to define an efficiency level,
that efficiency level can be considered equally attainable across the
full scope of flow and specific speed encompassed by this final rule.
A certain percentage of pumps currently on the market will not meet
each efficiency level. That percentage can be referred to as the
efficiency percentile. For example, if 10% of the pumps on the market
do not meet a specified efficiency level, that efficiency level
represents the lower 10th percentile of efficiency. The efficiency
percentile is an effective descriptor of the impact of a selected
efficiency level (selected C-value) on the current market.
The C-values listed in Table I.1 correspond to the lower 25th
percentile of efficiency for the End Suction Close-Coupled (ESCC), End
Suction Frame Mounted/Own Bearings (ESFM), and In-line (IL) equipment
classes. For the Submersible Turbine (VTS) equipment classes,\2\ the C-
values of 3600 rpm speed pumps correspond to the lower 25th percentile
of efficiency, while those of 1800 rpm speed pumps correspond to the
baseline efficiency level. The C-values for the radially split, multi-
stage, vertical, in-line diffuser casing (RSV) equipment class
harmonize with the standards recently enacted in the European Union.\3\
Models in the RSV equipment class are known to be global platforms with
no differentiation between products sold into the United States and
European Union markets.\4\ Section III.C describes the PEI metric in
further detail.
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\2\ In the test procedure final rule (See EERE-2013-BT-TP-0055),
DOE changed the terminology for this equipment class from ``vertical
turbine submersible'' to ``submersible turbine'' for consistency
with the definition of this equipment class. DOE is adopting the
acronym ``ST'' in the regulatory text for long-term consistency with
the defined term but has retained the ``VTS'' abbreviation in the
preamble for consistency with the energy conservation standards NOPR
and all Working Group discussions and recommendations to date
(Docket No. EERE-2013-BT-NOC-0039).
\3\ Council of the European Union. 2012. Commission Regulation
(EU) No 547/2012 of 25 June 2012 implementing Directive 2009/125/EC
of the European Parliament and of the Council with regard to
ecodesign requirements for water pumps. Official Journal of the
European Union. L 165, 26 June 2012, pp. 28-36.
\4\ Market research, limited confidential manufacturer data, and
direct input from the CIP working group indicate that RSV models
sold in the United States market are global platforms with hydraulic
designs equivalent to those in the European market.
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A. Benefits and Costs to Consumers
Table I.2 presents DOE's evaluation of the economic impacts of the
adopted standards on consumers of pumps, as measured by the average
life-cycle cost (LCC) savings and the simple payback period (PBP).\5\
The average LCC savings are positive for all equipment classes for
which consumers would be impacted by the adopted standards \6\ and the
PBP is less than the average lifetime of pumps, which is estimated to
range between 11 and 23 years depending on equipment class, with an
average of 15 years (see section IV.F.2.g).
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\5\ The average LCC savings are measured relative to the no-new-
standards case efficiency distribution, which depicts the market in
the compliance year (see section IV.H.2). The simple PBP, which is
designed to compare specific pump efficiency levels, is measured
relative to the baseline model (see section IV.C.1.b).
\6\ DOE also calculates a distribution of LCC savings; the
percentage of consumers that would have negative LCC savings (net
cost) under the adopted standards is shown in section V.B.1.a.
Table I.2--Impacts of Adopted Energy Conservation Standards on Consumers
of Pumps
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Average LCC Simple payback
Equipment class savings period
(2014$) (years)
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ESCC.1800............................... 163 2.2
ESCC.3600............................... 92 1.0
ESFM.1800............................... 174 2.9
ESFM.3600............................... 549 0.8
IL.1800................................. 147 2.9
IL.3600................................. 138 2.0
RSV.1800................................ N/A N/A
RSV.3600................................ N/A N/A
VTS.1800................................ N/A N/A
VTS.3600................................ 17 3.1
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Notes: DOE relied on available data for bare pumps with no information
on configuration. Therefore, DOE conducted analysis at the level of
equipment type and nominal design speed only. DOE is adopting
identical standards for both CL and VL equipment classes.Economic
results are not presented for RSV.1800, RSV.3600, and VTS.1800 classes
because the adopted standard is at the baseline.
DOE's analysis of the impacts of the adopted standards on consumers
is described in section IV.F of this document.
B. Impact on Manufacturers
The industry net present value (INPV) is the sum of the discounted
cash flows to the industry from the base year through the end of the
analysis period (2015 to 2049). Using a real discount rate of 11.8
percent,\7\ DOE estimates that the (INPV) for manufacturers of pumps in
the case without new standards is $120.0 million in 2014$. Under the
[[Page 4371]]
standards adopted in this final rule, DOE expects INPV impacts to be
between a loss of 32.9 percent to an increase of 7.0 percent of INPV,
which is between approximately -$39.5 million and $8.4 million.
Additionally, based on DOE's interviews with pump manufacturers, DOE
does not expect significant impacts on manufacturing capacity or loss
of employment for the industry as a whole to result from the standards
for pumps. DOE expects the industry to incur $81.2 million in
conversion costs.
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\7\ DOE estimated draft financial metrics, including the
industry discount rate, based on data from Securities and Exchange
Commission (SEC) filings. DOE presented the draft financial metrics
to manufacturers in MIA interviews and adjusted those values based
on feedback from industry. The complete set of financial metrics and
more detail about the methodology can be found in section 12.4.3 of
TSD chapter 12.
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DOE's analysis of the impacts of the adopted standards on
manufacturers is described in section V.B.2 of this document.
C. National Benefits \8\
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\8\ All monetary values in this section are expressed in 2014
dollars and, where appropriate, are discounted to 2015 unless
explicitly stated otherwise. Energy savings in this section refer to
the full-fuel-cycle savings (see section IV.H for discussion).
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DOE's analyses indicate that the adopted energy conservation
standards for pumps would save a significant amount of energy. Relative
to the case without new standards, the lifetime energy savings for
pumps purchased in the 30-year period that begins in the anticipated
year of compliance with the new standards (2020-2049), amount to 0.29
quadrillion Btu (quads).\9\ This represents a savings of one percent
relative to the energy use of these products in the case without new
standards (referred to as the ``no-new-standards case'').
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\9\ A quad is equal to 10\15\ British thermal units (Btu). The
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy
savings 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. For more information on the FFC
metric, see section IV.H.1.
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The cumulative net present value (NPV) of total consumer costs and
savings of the standards for pumps ranges from $0.39 billion (at a 7-
percent discount rate) to $1.1 billion (at a 3-percent discount rate).
This NPV expresses the estimated total value of future operating-cost
savings minus the estimated increased equipment costs for pumps
purchased in 2020-2049.
In addition, the standards for pumps would have significant
environmental benefits. DOE estimates that the standards would result
in cumulative greenhouse gas emission reductions (over the same period
as for energy savings) of 17 million metric tons (Mt) \10\ of carbon
dioxide (CO2), 9.5 thousand tons of sulfur dioxide
(SO2), 31 tons of nitrogen oxides (NOX), 75
thousand tons of methane (CH4), 0.20 thousand tons of
nitrous oxide (N2O), and 0.035 tons of mercury (Hg).\11\ The
cumulative reduction in CO2 emissions through 2030 amounts
to 2.7 Mt, which is equivalent to the emissions resulting from the
annual electricity use of more than 0.37 million homes.
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\10\ A metric ton is equivalent to 1.1 short tons. Results for
NOX and Hg are presented in short tons.
\11\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy
Outlook 2015 (AEO 2015) Reference case, which generally represents
current legislation and environmental regulations for which
implementing regulations were available as of October 31, 2014.
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The value of the CO2 reductions is calculated using a
range of values per metric ton of CO2 (otherwise known as
the Social Cost of Carbon, or SCC) developed by a recent Federal
interagency process.\12\ The derivation of the SCC values is discussed
in section IV.L.1. Using discount rates appropriate for each set of SCC
values, DOE estimates that the net present monetary value of the
CO2 emissions reduction (not including CO2
equivalent emissions of other gases with global warming potential) is
between $0.11 billion and $1.6 billion, with a value of $0.52 billion
using the central SCC case represented by $40.0/t in 2015. DOE also
estimates that the net present monetary value of the NOX
emissions reduction to be $0.04 billion at a 7-percent discount rate,
and $0.09 billion at a 3-percent discount rate.\13\
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\12\ 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 July 2015) (Available at: www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
\13\ DOE estimated the monetized value of NOX
emissions reductions using benefit per ton estimates from the
Regulatory Impact Analysis titled, ``Proposed Carbon Pollution
Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants,'' published in June 2014 by
EPA's Office of Air Quality Planning and Standards. (Available at:
http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
discussion. Note that the agency is presenting a national benefit-
per-ton estimate for particulate matter emitted from the Electricity
Generating Unit sector based on an estimate of premature mortality
derived from the ACS study (Krewski et al., 2009). If the benefit-
per-ton estimates were based on the Six Cities study (Lepuele et
al., 2011), the values would be nearly two-and-a-half times larger.
Because of the sensitivity of the benefit-per-ton estimate to the
geographical considerations of sources and receptors of emissions,
DOE intends to investigate refinements to the agency's current
approach of one national estimate by assessing the regional approach
taken by EPA's Regulatory Impact Analysis for the Clean Power Plan
Final Rule. Note that DOE is currently investigating valuation of
avoided SO2 and Hg emissions.
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Table I.3 summarizes the national economic benefits and costs
expected to result from the adopted standards for pumps.
Table I.3--Summary of National Economic Benefits and Costs of Adopted
Energy Conservation Standards for Pumps *
------------------------------------------------------------------------
Present value Discount rate
Category Billion 2014$ (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings......... 0.5 7
1.4 3
------------------------------------------------------------------------
CO2 Reduction Value ($12.2/t case) **... 0.1 5
CO2 Reduction Value ($40.0/t case) **... 0.5 3
CO2 Reduction Value ($62.3/t case) **... 0.8 2.5
CO2 Reduction Value ($117/t case) **.... 1.6 3
NOX Reduction Monetized Value [dagger].. 0.04 7
0.09 3
Total Benefits [dagger][dagger]......... 1.1 7
2.0 3
[[Page 4372]]
Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs.... 0.2 7
0.3 3
------------------------------------------------------------------------
Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction 0.9 7
Monetized Value [dagger][dagger]....... 1.7 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with pumps
shipped in 2020-2049. These results include benefits to consumers
which accrue after 2049 from the products purchased in 2020-2049. The
costs account for the incremental variable and fixed costs incurred by
manufacturers due to the standard, some of which may be incurred in
preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
2014$, in 2015 under several scenarios of the updated SCC values. The
first three cases use the averages of SCC distributions calculated
using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
represents the 95th percentile of the SCC distribution calculated
using a 3% discount rate. The SCC time series incorporate an
escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2.
DOE estimated the monetized value of NOX emissions reductions using
benefit per ton estimates from the Regulatory Impact Analysis titled,
``Proposed Carbon Pollution Guidelines for Existing Power Plants and
Emission Standards for Modified and Reconstructed Power Plants,''
published in June 2014 by EPA's Office of Air Quality Planning and
Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
discussion. Note that the agency is presenting a national benefit-per-
ton estimate for particulate matter emitted from the Electricity
Generating Unit sector based on an estimate of premature mortality
derived from the ACS study (Krewski et al., 2009). If the benefit-per-
ton estimates were based on the Six Cities study (Lepuele et al.,
2011), the values would be nearly two-and-a-half times larger. Because
of the sensitivity of the benefit-per-ton estimate to the geographical
considerations of sources and receptors of emissions, DOE intends to
investigate refinements to the agency's current approach of one
national estimate by assessing the regional approach taken by EPA's
Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
using the series corresponding to average SCC with 3-percent discount
rate ($40.0/t case).
The benefits and costs of the adopted standards, for pumps sold in
2020-2049, can also be expressed in terms of annualized values. The
monetary values for the total annualized net benefits are the sum of
(1) the national economic value of the benefits in reduced operating
costs, minus (2) the increases in product purchase prices and
installation costs, plus (3) the value of the benefits of
CO2 and NOX emission reductions, all
annualized.\14\
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\14\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2015, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2020 or 2030), and then discounted the present value from
each year to 2015. The calculation uses discount rates of 3 and 7
percent for all costs and benefits except for the value of
CO2 reductions, for which DOE used case-specific discount
rates, as shown in Table I.3. Using the present value, DOE then
calculated the fixed annual payment over a 30-year period, starting
in the compliance year that yields the same present value.
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Although DOE believes that the value of operating cost savings and
CO2 emission reductions are both important, two issues are
relevant. First, the national operating cost savings are domestic U.S.
consumer monetary savings that occur as a result of market
transactions, whereas the value of CO2 reductions is based
on a global value. Second, the assessments of operating cost savings
and CO2 savings are performed with different methods that
use different time frames for analysis. The national operating cost
savings are measured for the lifetime of pumps shipped in 2020-2049.
Because CO2 emissions have a very long residence time in the
atmosphere,\15\ the SCC values in future years reflect future
CO2-emissions impacts that continue beyond 2100.
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\15\ The atmospheric lifetime of CO2 is estimated of
the order of 30-95 years. Jacobson, MZ (2005), ``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.
---------------------------------------------------------------------------
Estimates of annualized benefits and costs of the adopted standards
are shown in Table I.4. The results under the primary estimate are as
follows. Using a 7-percent discount rate for benefits and costs other
than CO2 reduction, (for which DOE used a 3-percent discount
rate along with the SCC series that has a value of $40.0/t in
2015),\16\ the estimated cost of the standards in this rule is $17
million per year in increased equipment costs, while the estimated
annual benefits are $58 million in reduced equipment operating costs,
$30 million in CO2 reductions, and $3.7 million in reduced
NOX emissions. In this case, the net benefit amounts to $74
million per year. Using a 3-percent discount rate for all benefits and
costs and the SCC series has a value of $40.0/t in 2015, the estimated
cost of the standards is $17 million per year in increased equipment
costs, while the estimated annual benefits are $78 million in reduced
operating costs, $30 million in CO2 reductions, and $5.4
million in reduced NOX emissions. In this case, the net
benefit amounts to $96 million per year.
---------------------------------------------------------------------------
\16\ DOE used a 3-percent discount rate because the SCC values
for the series used in the calculation were derived using a 3-
percent discount rate (see section IV.L.1).
[[Page 4373]]
Table I.4--Annualized Benefits and Costs of Adopted Energy Conservation Standards for Pumps *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2014$/year
-----------------------------------------------------------------------------------
Discount rate Low net benefits High net benefits
Primary estimate estimate estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7%.............................. 58........................ 52........................ 68.
3%.............................. 78........................ 70........................ 94.
CO2 Reduction Value ($12.2/t case) 5%.............................. 8.7....................... 8.1....................... 9.5.
**.
CO2 Reduction Value ($40.0/t case) 3%.............................. 30........................ 28........................ 33.
**.
CO2 Reduction Value ($62.3/t case) 2.5%............................ 44........................ 41........................ 48.
**.
CO2 Reduction Value ($117/t case) 3%.............................. 91........................ 84........................ 99.
**.
NOX Reduction Value [dagger]...... 7%.............................. 3.7....................... 3.5....................... 9.0.
3%.............................. 5.4....................... 5.0....................... 13.
Total Benefits [dagger][dagger]... 7% plus CO2 range............... 70 to 152................. 64 to 140................. 86 to 176.
7%.............................. 91........................ 83........................ 109.
3% plus CO2 range............... 92 to 174................. 83 to 159................. 116 to 206.
3%.............................. 113....................... 102....................... 139.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment 7%.............................. 17........................ 19........................ 17.
Costs. 3%.............................. 17........................ 20........................ 18.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............ 7% plus CO2 range............... 53 to 136................. 45 to 121................. 69 to 159.
7%.............................. 74........................ 65........................ 92.
3% plus CO2 range............... 75 to 157................. 63 to 139................. 99 to 189.
3%.............................. 96........................ 83........................ 122.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with pumps shipped in 2020-2049. These results include benefits to consumers which
accrue after 2049 from the pumps purchased from 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers
due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize
projections of energy prices and shipments from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In
addition, incremental equipment costs reflect constant real prices in the Primary Estimate, an increase in the Low Benefits Estimate, and a decrease
in the High Benefits Estimate. The methods used to derive projected price trends are explained in IV.F.2.a.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX emissions reductions using benefit per
ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further discussion. For DOE's Primary Estimate and Low Net
Benefits Estimate, the agency is presenting a national benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit
sector based on an estimate of premature mortality derived from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the
benefit-per-ton estimates were based on the Six Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the
ACS study. Because of the sensitivity of the benefit-per-ton estimate to the geographical considerations of sources and receptors of emission, DOE
intends to investigate refinements to the agency's current approach of one national estimate by assessing the regional approach taken by EPA's
Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
($40.0/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
labeled discount rate, and those values are added to the full range of CO2 values.
DOE's analysis of the national impacts of the adopted standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
Based on the analyses culminating in this final rule, DOE found the
benefits to the nation of the standards (energy savings, LCC savings
for most consumers, positive NPV of consumer benefit, and emission
reductions) outweigh the burdens (potential loss of INPV and LCC
increases for some users of these products). DOE has concluded that the
standards in this final rule represent the maximum improvement in
energy efficiency that is technologically feasible and economically
justified, and would result in significant conservation of energy.
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 pumps.
A. Authority
Title III of the Energy Policy and Conservation Act of 1975
``EPCA''), Public Law 94-163, codified at 42 U.S.C. 6291 et seq., sets
forth a variety of provisions designed to improve energy efficiency.
Part C of Title III, which for editorial reasons was re-designated as
Part A-1 upon incorporation into the U.S. Code (42 U.S.C. 6311 et
seq.), establishes the ``Energy Conservation Program for Certain
Industrial Equipment.'' The covered equipment includes pumps, the
subject of this rulemaking. (42 U.S.C. 6311(1)(A)) \17\ There are
currently no
[[Page 4374]]
energy conservation standards for pumps.
---------------------------------------------------------------------------
\17\ All references to EPCA in this document refer to the
statute as amended through the Energy Efficiency Improvement Act of
2015, Public Law 114-11 (Apr. 30, 2015).
---------------------------------------------------------------------------
Pursuant to EPCA, DOE's energy conservation program for covered
equipment consists essentially of four parts: (1) Testing; (2)
labeling; (3) the establishment of Federal energy conservation
standards; and (4) certification and enforcement procedures. Subject to
certain criteria and conditions, DOE is required to develop test
procedures to measure the energy efficiency, energy use, or estimated
annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A)
and 6316(a)) Manufacturers of covered products must use the prescribed
DOE test procedure as the basis for certifying to DOE that their
products comply with the applicable energy conservation standards
adopted under EPCA and when making representations to the public
regarding the energy use or efficiency of those equipment. (42 U.S.C.
6314(d)) Similarly, DOE must use these test procedures to determine
whether the equipment complies with standards adopted pursuant to EPCA.
Id. The DOE test procedures for pumps appear at title 10 of the Code of
Federal Regulations (CFR) part 431, subpart Y, appendix A.
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including pumps. Any new or
amended standard for a covered product must be designed to achieve the
maximum improvement in energy efficiency that is technologically
feasible and economically justified. (42 U.S.C. 6313(a)(6)(C), 6295(o),
and 6316(a)) Furthermore, DOE may not adopt any standard that would not
result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)
and 6316(a)) Moreover, DOE may not prescribe a standard: (1) For
certain products, including pumps, if no test procedure has been
established for the product, or (2) if DOE determines by rule that the
standard is not technologically feasible or economically justified. (42
U.S.C. 6295(o) and 6316(a)) In deciding whether a proposed standard is
economically justified, DOE must determine whether the benefits of the
standard exceed its burdens. DOE must make this determination after
receiving comments on the proposed standard, and by considering, to the
greatest extent practicable, the following seven statutory factors:
(1) The economic impact of the standard on manufacturers and
consumers of the equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
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 and water conservation; and
(7) Other factors the Secretary of Energy (Secretary) considers
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII) and 6316(a))
Further, EPCA, as codified, 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 savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) and
6316(a))
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any new standard that either increases the maximum allowable energy use
or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1)) and 6316(a)) 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 in 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. 6295(o)(4) and 6316(a))
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered equipment that has two or
more subcategories. DOE must specify a different standard level for a
group of equipment that has the same function or intended use if DOE
determines that equipment within such group: (A) Consume a different
kind of energy from that consumed by other covered equipment within
such type (or class); or (B) have a capacity or other performance-
related feature which other equipment within such type (or class) do
not have and such feature justifies a higher or lower standard. (42
U.S.C. 6295(q)(1)) and 6316(a)) In determining whether a performance-
related feature justifies a different standard for a group of
equipment, DOE must consider such factors as the utility to the
consumer of such a feature and other factors DOE deems appropriate. Id.
Any rule prescribing such a standard must include an explanation of the
basis on which such higher or lower level was established. (42 U.S.C.
6295(q)(2)) and 6316(a))
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) and 6316(a)) DOE may, however,
grant waivers of Federal preemption for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under 42 U.S.C. 6297(d).
B. Background
Prior to this final rule, DOE did not have energy conservation
standards for pumps. In considering whether to establish standards for
pumps, DOE issued a Request for Information (RFI) on June 13, 2011. 76
FR 34192. DOE received several comments in response to the RFI. In
December 2011, DOE received a letter from the Appliance Standards
Awareness Project (ASAP) and the Hydraulic Institute indicating that
efficiency advocates (including ASAP, American Council for an Energy-
Efficient Economy, Natural Resources Defense Council, and Northwest
Energy Efficiency Alliance) and pump manufacturers (as represented by
the Hydraulic Institute) had initiated discussions regarding potential
energy conservation standards for pumps. (EERE-2011-BT-STD-0031-0011.)
In subsequent letters in March and April 2012, and in a meeting with
DOE in May 2012, the stakeholders reported on a tentative path forward
on energy conservation standards for clean water pumps, inclusive of
the motor and controls, and certification and labeling. (EERE-2011-BT-
STD-0031-0010 and -0012.)
On February 1, 2013, DOE published a document in the Federal
Register that announced the availability of the ``Commercial and
Industrial Pumps Energy Conservation Standard Framework Document,''
solicited comment on the document, and invited all stakeholders to a
public meeting to
[[Page 4375]]
discuss the document. 78 FR 7304. The Framework Document described the
procedural and analytical approaches that DOE anticipated using to
evaluate energy conservation standards for pumps, addressed stakeholder
comments related to the RFI, and identified and solicited comment on
various issues to be resolved in the rulemaking. (EERE-2011-BT-STD-
0031-0013.)
DOE held the framework public meeting on February 20, 2013 and
received many comments that helped identify and resolve issues
pertaining to pumps relevant to this rulemaking.
As noted previously, DOE established a working group to negotiate
proposed energy conservation standards for pumps. Specifically, on July
23, 2013, DOE issued a notice of intent to establish a commercial and
industrial pumps working group (``CIP Working Group''). 78 FR 44036.
The working group was established under the Appliance Standards and
Rulemaking Federal Advisory Committee (ASRAC) in accordance with the
Federal Advisory Committee Act (FACA) and the Negotiated Rulemaking Act
(NRA). (5 U.S.C. App.; 5 U.S.C. 561-570) The purpose of the working
group was to discuss and, if possible, reach consensus on proposed
standard levels for the energy efficiency of pumps. The working group
was to consist of representatives of parties having a defined stake in
the outcome of the proposed standards, and the group would consult as
appropriate with a range of experts on technical issues.
DOE received 19 nominations for membership. Ultimately, the working
group consisted of 16 members, including one member from the ASRAC and
one DOE representative. (See Table II.1) The working group met in-
person during seven sets of meetings held December 18-19, 2013 and
January 30-31, March 4-5, March 26-27, April 29-30, May 28-29, and June
17-19, 2014.
Table II.1--ASRAC Pump Working Group Members and Affiliations
------------------------------------------------------------------------
Member Affiliation
------------------------------------------------------------------------
Lucas Adin........................ U.S. Department of Energy.
Tom Eckman........................ Northwest Power and Conservation
Council (ASRAC Member).
Robert Barbour.................... TACO, Inc.
Charles Cappelino................. ITT Industrial Process.
Greg Case......................... Pump Design, Development and
Diagnostics.
Gary Fernstrom.................... Pacific Gas & Electric Company, San
Diego Gas & Electric Company,
Southern California Edison, and
Southern California Gas Company.
Mark Handzel...................... Xylem Corporation.
Albert Huber...................... Patterson Pump Company.
Joanna Mauer...................... Appliance Standards Awareness
Project.
Doug Potts........................ American Water.
Charles Powers.................... Flowserve Corporation, Industrial
Pumps.
Howard Richardson................. Regal Beloit.
Steve Rosenstock.................. Edison Electric Institute.
Louis Starr....................... Northwest Energy Efficiency
Alliance.
Greg Towsley...................... Grundfos USA.
Meg Waltner....................... Natural Resources Defense Council.
------------------------------------------------------------------------
To facilitate the negotiations, DOE provided analytical support and
supplied the group with a variety of analyses and presentations, all of
which are available in the docket (www.regulations.gov/#!docketDetail;D=EERE-2013-BT-NOC-0039). These analyses and
presentations, developed with direct input from the working group
members, include preliminary versions of many of the analyses discussed
in this rulemaking, including a market and technology assessment;
screening analysis; engineering analysis; energy use analysis; markups
analysis; life cycle cost and payback period analysis; shipments
analysis; national impact analysis; and manufacturer impact analysis.
On June 19, 2014, the working group reached consensus on proposed
energy conservation standards for specific types of pumps. The working
group assembled their recommendations into a term sheet (See EERE-2013-
BT-NOC-0039-0092) that was presented to, and approved by the ASRAC on
July 7, 2014. DOE considered the approved term sheet, along with other
comments received during the rulemaking process, in developing the
proposed energy conservation standards. DOE published the notice of
proposed rulemaking (NOPR) on April 2, 2015 with proposed standards for
pumps. 80 FR 17826. DOE received multiple comments from interested
parties and 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.
C. Relevant Industry Sectors
The energy conservation standards adopted in this final rule will
primarily affect the pump and pumping equipment manufacturing industry.
The North American Industry Classification System (NAICS) classifies
this industry under code 333911. DOE identified 86 manufacturers of
pumps covered under this adopted rule, with 56 of those being domestic
manufacturers. The leading U.S. industry association for the pumps
covered under this adopted rule is the Hydraulic Institute (HI).
III. General Discussion
DOE developed this final rule after considering comments, data, and
information from interested parties that represent a variety of
interests. The following discussion addresses issues raised by these
commenters.
In developing this final rule, DOE reviewed comments received on
the April 2015 energy conservation standards NOPR (herein referred to
as ``NOPR''). 80 FR 17826. Commenters included: The Hydraulic Institute
(HI); Wilo USA (Wilo); Pacific Gas and Electric Company, San Diego Gas
and Electric, Southern California Gas Company, and Southern California
Edison collectively, the CA IOUs); Edison Electric Institute (EEI); The
Appliance Standards Awareness Project (ASAP), Natural Resources Defense
Council (NRDC), the Northwest Energy Efficiency Alliance, and the
Northwest Power and Conservation Council (collectively, the Advocates);
the Cato Institute; and the U.S. Chamber of Commerce, the American
Chemistry Council, the American Forest & Paper
[[Page 4376]]
Association, the American Fuel & Petrochemical Manufacturers, the
American Petroleum Institute, the Brick Industry Association, 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
(collectively, ``the Associations''). DOE addressed all relevant
stakeholder comments and requests throughout this final rule.
DOE notes that they received two comments in support of the
proposed standards in general. Specifically, the Advocates and the CA
IOUs supported the proposed standards (which are consistent with TSL 2
in the final rule) and believed they reflect the negotiations of the
ASRAC working group. (Advocates, No. 49 at p. 1; \18\ CA IOUs, No. 50
at p. 1) The following sections describe the specifics of DOE's
proposed standard and all relevant comments from interested parties.
---------------------------------------------------------------------------
\18\ A notation in the form ``Advocates, No. 49 at p. 1''
identifies a written comment that DOE has received and has included
in the docket of this rulemaking (Docket No. EERE-2011-BT-STD-0031).
This particular notation refers to (1) a comment submitted by the
Advocates, (2) in document number 49 in the docket of this
rulemaking, and (3) appearing on page 1 of document number 49.
---------------------------------------------------------------------------
A. Definition of Covered Equipment
Although pumps are listed as covered equipment under 42 U.S.C.
6311(1)(A), the term ``pump'' is not defined in EPCA. In the test
procedure final rule (See EERE-2013-BT-TP-0055) DOE defined ``pump'' to
clarify what constitutes covered equipment. The definition reflects the
consensus reached by the CIP Working Group in its negotiations:
``Pump'' means equipment designed to move liquids (which may include
entrained gases, free solids, and totally dissolved solids) by physical
or mechanical action and includes a bare pump and, if included by the
manufacturer at the time of sale, mechanical equipment, driver and
controls. In the test procedure final rule, DOE also defined ``bare
pump,'' ``mechanical equipment,'' ``driver,'' and ``controls,'' as
recommended by the CIP Working Group.
B. Scope of the Energy Conservation Standards in this Rulemaking
The pumps for which DOE is setting energy conservation standards in
this rulemaking are consistent with the scope of applicability of the
test procedure final rule. (See EERE-2013-BT-TP-0055) This scope is
also consistent with the recommendations of the CIP Working Group and
includes the following five equipment categories, which are defined in
the test procedure final rule:
End suction close-coupled,
End suction frame mounted/own bearings,
In-line,
Radially split, multi-stage, vertical, in-line diffuser
casing, and
Submersible turbine.
As discussed in the test procedure final rule (See EERE-2013-BT-TP-
0055), DOE is further limiting the scope of this rulemaking to clean
water pumps. DOE defined ``clean water pump'' as a pump that is
designed for use in pumping water with a maximum non-absorbent free
solid content of 0.016 pounds per cubic foot, and with a maximum
dissolved solid content of 3.1 pounds per cubic foot, provided that the
total gas content of the water does not exceed the saturation volume,
and disregarding any additives necessary to prevent the water from
freezing at a minimum of 14[emsp14][deg]F.
In the test procedure final rule (See EERE-2013-BT-TP-0055), DOE
also specified several kinds of pumps that fall within one of the five
equipment categories and are clean water pumps, but will not be subject
to the test procedure, in accordance with CIP Working Group
recommendations. DOE has not adopted standards for these pumps in this
rule:
(a) Fire pumps;
(b) self-priming pumps;
(c) prime-assist pumps;
(d) magnet driven pumps;
(e) pumps designed to be used in a nuclear facility subject to 10
CFR part 50--Domestic Licensing of Production and Utilization
Facilities; and
(f) a pump meeting the design and construction requirements set
forth in Military Specification MIL-P-17639F, ``Pumps, Centrifugal,
Miscellaneous Service, Naval Shipboard Use'' (as amended); MIL-P-
17881D, ``Pumps, Centrifugal, Boiler Feed, (Multi-Stage)'' (as
amended); MIL-P-17840C, ``Pumps, Centrifugal, Close-Coupled, Navy
Standard (For Surface Ship Application)'' (as amended); MIL-P-18682D,
``Pump, Centrifugal, Main Condenser Circulating, Naval Shipboard'' (as
amended); MIL-P-18472G, ``Pumps, Centrifugal, Condensate, Feed Booster,
Waste Heat Boiler, And Distilling Plant'' (as amended). Military
specifications and standards are available for review at http://everyspec.com/MIL-SPECS.
In the test procedure final rule (See EERE-2013-BT-TP-0055), DOE
defined ``fire pump,'' ``self-priming pump,'' ``prime-assist pump,''
and ``magnet driven pump.'' DOE also limited the applicability of the
test procedure to those pumps with the following characteristics:
25 gallons/minute and greater (at BEP at full impeller
diameter);
459 feet of head maximum (at BEP at full impeller diameter
and the number of stages specified for testing);
Design temperature range from 14 to 248[emsp14][deg]F;
Pumps designed to operate with either: (1) a 2- or 4-pole
induction motor, or (2) a non-induction motor with a speed of rotation
operating range that includes speeds of rotation between 2,880 and
4,320 revolutions per minute and/or 1,440 and 2,160 revolutions per
minute, and in either case, the driver and impeller must rotate at the
same speed; \19\
---------------------------------------------------------------------------
\19\ The CIP Working Group recommendation specified pumps
designed for nominal 3600 or 1800 revolutions per minute (rpm)
driver speed. However, it was intended that this would include pumps
driven by non-induction motors as well. DOE believes that its
clarification accomplishes the same intent while excluding niche
pumps sold with non-induction motors that may not be able to be
tested according to the proposed test procedure. The test procedure
final rule contains additional details.
---------------------------------------------------------------------------
For VTS pumps, 6 inch or smaller bowl diameter; and
For ESCC and ESFM pumps, specific speed less than or equal
to 5000 when calculated using U.S. customary units.\20\
---------------------------------------------------------------------------
\20\ DOE notes that the NOPR included a scope limitation of 1 to
200 hp. In the test procedure final rule, these parameters have been
included in the equipment category definitions. Therefore, the
limitation is no longer listed separately.
---------------------------------------------------------------------------
In this final rule, DOE is not adopting standards for pumps that do
not have these characteristics. DOE responded to all comments on these
scope parameters in the test procedure final rule (See EERE-2013-BT-TP-
0055) including those from Wilo regarding horsepower, BEP flow, and
speed, provided in the energy conservation standards docket (See Wilo,
No. 44 at p. 1-2).
DOE also specified in the test procedure final rule (See EERE-2013-
BT-TP-0055) that all pump models must be rated and certified in a full
impeller configuration, as recommended by the CIP Working Group. (See
EERE-2013-BT-NOC-0039-0092, Recommendation No. 7).\21\ DOE also
[[Page 4377]]
specified a definition for full impeller in that rule.
---------------------------------------------------------------------------
\21\ The CIP Working Group made this recommendation because a
given pump may be distributed to a particular customer with its
impeller trimmed, and impeller trim has a direct impact on a pump's
performance characteristics. For any pump sold with a trimmed
impeller, it was recommended that the certification rating for that
pump model with a full diameter impeller would apply. This approach
would limit the overall burden when measuring the energy efficiency
of a given pump. In addition, a rating at full impeller diameter
will typically be the most consumptive rating for the pump.
---------------------------------------------------------------------------
C. Test Procedure and Metric
DOE established a uniform test procedure for determining the energy
consumption of certain pumps, as well as sampling plans for the
purposes of demonstrating compliance with the energy conservation
standards that DOE is adopting in this final rule. In the test
procedure final rule (See EERE-2013-BT-TP-0055), DOE prescribed test
methods for measuring the energy consumption of pumps, inclusive of
motors and/or controls, by measuring the produced hydraulic power and
measuring or calculating the shaft power and/or electric input power to
the motor or controls. Consistent with the recommendations of the CIP
Working Group, DOE specified that these methods be based on Hydraulic
Institute (HI) Standard 40.6-2014, ``Hydraulic Institute Standard for
Method for Rotodynamic Pump Efficiency Testing,'' hereinafter referred
to as ``HI 40.6-2014.'' (See EERE-2013-BT-NOC-0039-0092, Recommendation
No. 10.) DOE specified additions to HI 40.6-2014 to account for the
energy performance of motors and/or controls, which is not addressed in
HI 40.6-2014.
Wilo commented on several elements of the test procedure. Namely,
Wilo noted that there are no standard losses associated with VFDs; that
calculation-based methods in the test procedure should be eliminated;
and that the allowed fluctuations in power measure such as voltage and
frequency will cause error and discrepancy between tests conducted by
manufacturers and DOE. (Wilo, No. 44 at p. 3). DOE has addressed these
comments in the pumps test procedure final rule (See EERE-2013-BT-TP-
0055).
The test procedure final rule (See EERE-2013-BT-TP-0055) specifies
that the energy conservation standards for pumps be expressed in terms
of a constant load PEI (PEICL) for pumps sold without
continuous or non-continuous controls (i.e., either bare pumps or pumps
sold inclusive of motors but not continuous or non-continuous controls)
or a variable load PEI (PEIVL) for pumps sold with
continuous or non-continuous controls. The PEICL or
PEIVL, as applicable, describes the weighted average
performance of the rated pump, inclusive of any motor and/or controls,
at specific load points, normalized with respect to the performance of
a ``minimally compliant pump'' (as defined in section III.C.1) without
controls. The metrics are defined as follows:
[GRAPHIC] [TIFF OMITTED] TR26JA16.000
Where:
PERCL = the equally-weighted average electric input power
to the pump measured (or calculated) at the driver input over a
specified load profile, as tested in accordance with the DOE test
procedure. This metric applies only to pumps in a fixed speed
equipment class. For bare pumps, the test procedure specifies the
default motor loss values to use in the calculations of driver
input.
PERVL = the equally-weighted average electric input power
to the pump measured (or calculated) at the controller input over a
specified load profile as tested in accordance with the DOE test
procedure. This metric applies only to pumps in a variable speed
equipment class.
PERSTD = the PER rating of a minimally compliant pump (as
defined in section III.C.1). It can be described as the allowable
weighted average electric input power to the specific pump, as
calculated in the test procedure. This metric applies to all
equipment classes.
A value of PEI greater than 1.00 indicates that the pump consumes
more energy than allowed by DOE's energy conservation standard and thus
does not comply. A value less than 1.00 indicates that the pump
consumes less energy than the level required by the standard.
HI requested that DOE release a calculation tool for both
PEICL and PEIVL, to ensure that all manufacturers
are rating pumps in the same manner. (HI, No. 45 at pp. 2-3). Wilo also
commented that, in absence of such a calculation tool, parties could
potentially make errors in calculating PEI. (Wilo, No. 44 at p. 3). As
a convenience to interested parties, DOE has provided a draft Excel
spreadsheet designed to perform the calculations necessary to determine
PEI.\22\ DOE notes that interested parties should not rely on this
spreadsheet and should consult the final test procedure rule (See EERE-
2013-BT-TP-0055) for the formulas for calculating PEI. Ultimately, it
is the responsibility of any party certifying the performance of a
given pump to ensure the accuracy of calculation of PEI according to
the DOE test procedure.
---------------------------------------------------------------------------
\22\ The draft PEI calculator is available at: http://www.energy.gov/eere/buildings/downloads/draft-pei-calculator.
---------------------------------------------------------------------------
1. PER of a Minimally Compliant Pump
DOE is using a standardized, minimally compliant bare pump,
inclusive of a minimally compliant motor, as a reference pump for each
combination of flow at BEP and specific speed. The efficiency of a
minimally compliant pump is defined as a function of certain physical
properties of the bare pump, such as flow at BEP and specific speed
(Ns), as shown in equation 2:
[GRAPHIC] [TIFF OMITTED] TR26JA16.001
Where:
Q100%= BEP flow rate of the tested pump at full impeller diameter
and nominal speed of rotation (gpm),
Ns = specific speed of the tested pump at 60 Hz and calculated using
U.S. customary units, and
C = a constant that is set for the surface based on the speed of
rotation and equipment category of the pump model.
As noted in the test procedure final rule, DOE developed this
equation based on the equation used in the EU to develop its
regulations for clean water pumps, translated to 60 Hz electrical input
power and U.S. customary units.\23\
---------------------------------------------------------------------------
\23\ The equation to define the minimally compliant pump in the
EU is of the same form, but employs different coefficients to
reflect the fact that the flow will be reported in m3/h
at 50 Hz and the specific speed will also be reported in metric
units. Specific speed is a dimensionless quantity, but has a
different magnitude when calculated using metric versus U.S.
customary units. DOE notes that an exact translation from metric to
U.S. customary units is not possible due to the logarithmic
relationship of the terms.
---------------------------------------------------------------------------
The C-value is the translational component of the three-dimensional
polynomial equation that controls pump efficiency by a constant factor
across the
[[Page 4378]]
entire range of flow and specific speed. A positive or negative change
in C-value corresponds to a decrease or increase in the pump efficiency
of a minimally compliant pump, respectively. The efficiency of the
minimally compliant pump calculated from this function corresponds to
pump efficiency at BEP flow. This value is adjusted to determine the
minimally compliant pump efficiency at 75 percent and 110 percent of
BEP flow using the scaling values implemented in the EU regulations for
clean water pumps. Namely, the efficiency at 75 percent of BEP flow is
assumed to be 94.7 percent of that at 100 percent of BEP flow and the
pump efficiency at 110 percent of BEP flow is assumed to be 98.5
percent of that at 100 percent of BEP flow.
Using the efficiency of a minimally compliant pump, PER for a
minimally compliant pump is determined using equation 3:
[GRAPHIC] [TIFF OMITTED] TR26JA16.002
Where:
[omega]i = weighting at each load point i (equal
weighting or 0.3333 in this case);
Pu,i = the measured hydraulic output power at load point
i of the tested pump (hp);
[alpha]i = 0.947 for 75 percent of the BEP flow rate,
1.000 for 100 percent of the BEP flow rate, and 0.985 for 110
percent of the BEP flow rate;
[eta]pump,STD = the minimally compliant pump efficiency,
as determined in accordance with equation 2,
Li = the motor losses at load point i, as determined in
accordance with the procedure specified in the DOE test procedure,
and
i = load point corresponding to 75%, 100%, and 110% of BEP flow, as
determined in accordance with the DOE test procedure.
Equation 3 defines PER as a function of the average power input to
the pump motor at three load points, 75%, 100%, and 110% of BEP flow.
The input power to the motor at each load point comprises a shaft input
power term and a motor loss term. The shaft input power is computed as
the quotient of hydraulic output power divided by the minimally
compliant pump efficiency, where the pump hydraulic output power for
the minimally compliant pump is the same as that for the particular
pump being evaluated. As described in the test procedure final rule,
the corresponding motor loss term is calculated assuming a minimally
compliant motor that is sized for the calculated shaft input power at
120% BEP flow, as well as the default part-load loss curve. The
applicable minimum motor efficiency is determined as a function of
construction (i.e., open or enclosed), number of poles, and horsepower
as specified by DOE's energy conservation standards for electric motors
at 10 CFR 431.25. PERSTD is then determined as the weighted
average input power to the motor at each load point, as shown in
equation 3.
DOE selected several C-values to establish the efficiency levels
analyzed in this final rule. Each C-value and efficiency level accounts
for pump efficiency at all load points as well as motor losses, and
does so equivalently across the full scope of flow and specific speed
encompassed by this final rule. See section IV.C.4 for a complete
examination of the efficiency levels analyzed in this rulemaking.
D. Compliance Date
Pump manufacturers must comply with the energy conservation
standards established in this final rule as of January 27, 2020. The
compliance date is consistent with the recommendations of the CIP
Working Group. (See EERE-2013-BT-NOC-0039-0092, Recommendation No. 9)
In its analysis, DOE used an analysis period of 2020 through 2049.
E. Technological Feasibility
1. General
EPCA requires that any new or amended energy conservation standard
that DOE prescribes be designed to achieve the maximum improvement in
energy efficiency that DOE determines is technologically feasible. (42
U.S.C. 6295(o)(2)(A) and 6316(a).) In determining the maximum possible
improvement in energy efficiency, DOE conducts a screening analysis
based on all current technology options and working prototype designs
that could improve the efficiency of the products or equipment that are
the subject of the rulemaking. 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.
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 product 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 final rule discusses the
results of the
[[Page 4379]]
screening analysis for pumps, particularly the designs DOE considered,
those it screened out, and those that are the basis for the trial
standard levels (TSLs) in this rulemaking. For further details on the
screening analysis for this rulemaking, see chapter 4 of the final rule
TSD.
2. Maximum Technologically Feasible Levels
When DOE adopts a new or amended 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. (42 U.S.C. 6295(p)(1) and 6316(a)).
Accordingly, in the engineering analysis, DOE determined the maximum
technologically feasible (``max-tech'') improvements in energy
efficiency for pumps, using the design options that passed the
screening analysis.
F. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from the pumps that are
the subject of this rulemaking purchased in the 30-year period that
begins in the first full year of compliance with new standards (2020-
2049).\24\ The savings are measured over the entire lifetime of pumps
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 no-new-standards case.
The no-new-standards case represents a projection of energy consumption
that currently exists in the marketplace in the absence of mandatory
efficiency standards, and it considers market forces and policies that
affect demand for more efficient products. To estimate the no-new-
standards case, DOE used data provided by the CIP Working Group, as
discussed in section IV.H.2.
---------------------------------------------------------------------------
\24\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a nine-year period.
---------------------------------------------------------------------------
DOE used its national impact analysis (NIA) spreadsheet model to
estimate energy savings from potential new 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 products at
the locations where they are used. For electricity, DOE reports
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. To calculate this primary energy savings, DOE derives
annual conversion factors from the model used to prepare the Energy
Information Administration's (EIA) 2015 Annual Energy Outlook (AEO).
DOE also estimates full-fuel-cycle (FFC) energy savings, as
discussed in DOE's statement of policy and notice of policy amendment.
76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 (August 17,
2012). 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. DOE's approach is based on the
calculation of an FFC multiplier for each of the energy types used by
the covered equipment. For more information on FFC energy savings, see
section IV.H.1.a.
2. Significance of Savings
To adopt standards for a covered product, DOE must determine that
such action would result in ``significant'' energy savings. (42 U.S.C.
6295(o)(3)(B)) and 6316(a).) Although the term ``significant'' is not
defined in the Act, the U.S. Court of Appeals, for the District of
Columbia Circuit in Natural Resources Defense Council v. Herrington,
768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated opined that Congress
intended ``significant'' energy savings in the context of EPCA to be
savings that were not ``genuinely trivial.'' The energy savings for all
the TSLs considered in this rulemaking, including the adopted
standards, are nontrivial, and, therefore, DOE considers them
``significant'' within the meaning of section 325 of EPCA.
G. Economic Justification
1. Specific Criteria
As noted above, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(a).) 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 a potential new or 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: (1) Industry net
present value (INPV), which values the industry on the basis of
expected future cash flows; (2) cash flows by year; (3) changes in
revenue and income; and (4) 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
new 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 (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II) and 6316(a).) 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 cost (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. To account for uncertainty and variability in specific
inputs, such as product lifetime and discount rate, DOE uses a
distribution of
[[Page 4380]]
values, with probabilities attached to each value.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
standards. The LCC savings for the considered efficiency levels are
calculated relative to the case that reflects projected market trends
in the absence of new standards. DOE's LCC and PBP analysis is
discussed in further detail in section IV.F.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting 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. 6295(o)(2)(B)(i)(III) and
6316(a).) As discussed in section IV.H, DOE uses the NIA spreadsheet to
project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing classes of equipment, and in evaluating design
options and the impact of potential standard levels, DOE evaluates
potential new standards that would not lessen the utility or
performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)
and 6316(a).) Based on data available to DOE, the standards adopted in
the 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, as determined in writing by the Attorney General that is
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V) and
6316(a).) It also directs the 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. 6295(o)(2)(B)(ii))
and 6316(a).) 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. In a letter dated July 10,
2015, DOJ stated that it did not have sufficient information to
conclude that the proposed energy conservation standards or test
procedure likely will substantially lessen competition in any
particular product or geographic market. However, DOJ noted that the
possibility exists that the proposed energy conservation standards and
test procedure--which will apply to a broad range of pumps--may result
in anticompetitive effects in certain pump markets. Specifically in
relation to the proposed standards, DOJ expressed concern that ``by
design, the bottom quartile of pumps in each class of covered pumps
will not meet the new standards. The non-compliance of the bottom
quartile of pump models may result in some manufacturers stopping
production of pumps altogether and fewer firms producing models that
comply with the new standards. At this point, it is not possible to
determine the impact on any particular product or geographic market.''
Although the terminology in this rule is different from that
typically used in energy conservation standards rulemaking documents,
as requested by the Pumps Working Group, the options for non-compliant
models are no different from other rules. In all energy conservation
standards rulemakings that set new standards or amend standards, a
certain percentage of the market is affected by the standard. The
percentage of affected pumps is represented by any models below the
amended standard, which may have a distribution of efficiencies (i.e.,
some pump models will be closer to the new or amended standard level
than others). It is not unusual for a large fraction of models
(sometimes greater than 25%) to be at or near the baseline and thus be
impacted. As in all rulemakings, manufacturers have a choice between
re-designing a non-compliant model to meet the standard and
discontinuing it.
The ASRAC working group indicated that between 5 and 10% of models
requiring redesign may be dropped because current sales are very low.
(Docket No. EERE-2013-BT-NOC-0039, May 28 Pumps Working Group Meeting,
p. 61-63) Manufacturers indicated that additional models may be dropped
where they can be replaced by another existing equivalent model
currently made by the same manufacturer, often under an alternative
brand. (Docket No. EERE-2013-BT-NOC-0039, April 29 Pumps Working Group
Meeting, p. 100) In either case, the elimination of these models would
not have an adverse impact on the market or overall availability of
pumps to serve particular applications.
For these reasons, DOE has concluded that the standard levels
included in this final rule will not result in adverse impacts on
competition within the pump marketplace. The remaining concerns in the
DOJ letter regarding the test procedure have been addressed in the
parallel test procedure rulemaking (Docket No. EERE-2013-BT-TP-0055).
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. 6295(o)(2)(B)(i)(VI)) and 6316(a)) The energy
savings from the adopted 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.
The adopted standards also are 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 potential new standards
may affect these emissions, as discussed in section IV.K; the emissions
impacts are reported in section V.B.6 of this document. DOE also
estimates the economic value of emissions reductions resulting from the
considered TSLs, as discussed in section IV.L.
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 be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII))
and 6316(a).) 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.''
2. Rebuttable Presumption
EPCA creates a rebuttable presumption that an energy conservation
standard is economically
[[Page 4381]]
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. 42 U.S.C. 6295(o)(2)(B)(iii) and
6316(a) DOE's LCC and PBP analyses generate values used to calculate
the effect potential new or 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, as required
under 42 U.S.C. 6295(o)(2)(B)(i) and 6316(a). 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 results are
discussed in section V.B.1.c of this final rule.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE performed for this
rulemaking. Separate subsections address each component of DOE's
analyses.
DOE used four analytical tools to estimate the impact of the
standards adopted in this document. The first tool is a spreadsheet
that calculates LCC and PBP of potential new energy conservation
standards. The second tool is a spreadsheet that provides shipments
projections 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. These three spreadsheet tools
are available on the DOE Web site for this rulemaking: http://www.regulations.gov/#!docketDetail;D=EERE-2011-BT-STD-0031.
Additionally, DOE used output from the latest version of EIA's National
Energy Modeling System (NEMS) for the emissions and utility impact
analyses. NEMS is a public domain, multi-sector, partial equilibrium
model of the U.S. energy sector. EIA uses NEMS to prepare its Annual
Energy Outlook (AEO), a widely known energy forecast for the United
States.
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 subjects addressed in
the market and technology assessment for this rulemaking include: (1)
Quantities and types of equipment sold and offered for sale; (2) retail
market trends; (3) equipment covered by the rulemaking; (4) equipment
classes; (5) manufacturers; (6) regulatory requirements and non-
regulatory programs (such as rebate programs and tax credits); and (7)
technologies that could improve the energy efficiency of the equipment
under examination. DOE researched manufacturers of pumps and made a
particular effort to identify and characterize small business
manufacturers in this sector. See chapter 3 of the final rule TSD for
further discussion of the market and technology assessment.
1. Equipment Classes
When evaluating and establishing energy conservation standards, DOE
divides covered equipment into equipment classes by the type of energy
used, capacity, or other performance-related features that would
justify a different standard from that which would apply to other
equipment classes. In the NOPR, DOE proposed to divide pumps into
equipment classes based on the following three factors:
1. Basic pump equipment category,
2. Configuration, and
3. Nominal design speed.
In the NOPR, DOE also noted that some clean water pumps are sold
for use with engines or turbines rather than electric motors, and as
such, would use a different fuel type (i.e., fossil fuels rather than
electricity). However, because of the small market share of clean water
pumps using these fuel types, in the test procedure final rule, DOE
specifies that any pump sold with, or for use with, a driver other than
an electric motor would be rated as a bare pump.\25\ Therefore, in the
NOPR, DOE did not disaggregate equipment classes by fuel type.
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\25\ Such a rating would include the hydraulic efficiency of the
bare pump as well as the efficiency of a minimally-compliant
electric motor, as described in section III.C.1.
---------------------------------------------------------------------------
As discussed in section III.B, there were five pump equipment
categories considered in NOPR, each of which form the basis for the
individual equipment classes; these categories are:
End suction close coupled;
End suction frame mounted/own bearings;
In-line;
Radially split, multi-stage, vertical, in-line diffuser
casing; and
Submersible turbine.
In the NOPR, DOE proposed to define a pump's configuration by the
equipment with which it is sold. Pumps sold inclusive of motors and
continuous or non-continuous controls (as defined in the test
procedure), capable of operation at multiple driver shaft speeds are
defined as variable load (VL); pumps sold as bare pumps or with motors
without such controls, capable only of operation at a fixed shaft
speed, are defined as constant load (CL).
The CIP Working Group also recommended separate energy efficiency
standards for equipment categories at the nominal speeds for two- and
four-pole motors. (See EERE-2013-BT-NOC-0039-0092, p. 4, Recommendation
No. 9.) In its NOPR analysis, DOE found that across the market, pumps
at each nominal speed demonstrate distinctly different energy-related
performance. For the same load point (flow and head), 2-pole pumps were
typically found to be less efficient than 4-pole pumps. Their higher
operating speeds, however, allow a 2-pole pump serving the same load as
a 4-pole pump to be significantly smaller in size. The smaller size is
a consumer utility to consumers who face space constraints in their
installation location.
To account for the variability in efficiency between 2- and 4-pole
pumps, in the NOPR, DOE proposed that for both constant load and
variable load pumps, the equipment classes should also be
differentiated on the basis of nominal design speed. Therefore, within
the scope of the NOPR, pumps were to be defined as being designed for
either 3,600 or 1,800 rpm nominal driver speeds. Pumps defined as
having a 3,600 rpm nominal driver speed are designed to operate with a
2-pole induction motor or with a non-induction motor with a speed of
rotation operating range that includes speeds of rotation between 2,880
and 4,320 rpm. Pumps defined as having an 1,800 rpm nominal driver
speed are designed to operate with a 4-pole induction motor or with a
non-induction motor with a speed of rotation operating range that
includes speeds of rotation between
[[Page 4382]]
1,440 and 2,160 rpm. Throughout this document, a 3,600 rpm nominal
speed is abbreviated as 3600, and a 1,800 rpm nominal speed is
abbreviated as 1800.
Taking into account the basic pump equipment category, nominal
design speed, and configuration, DOE proposed the following twenty
equipment classes in the NOPR:
ESCC.1800.CL;
ESCC.3600.CL;
ESCC.1800.VL;
ESCC.3600.VL;
ESFM.1800.CL;
ESFM.3600.CL;
ESFM.1800.VL;
ESFM.3600.VL;
IL.1800.CL;
IL.3600.CL;
IL.1800.VL;
IL.3600.VL;
RSV.1800.CL;
RSV.3600.CL;
RSV.1800.VL;
RSV.3600.VL;
VTS.1800.CL;
VTS.3600.CL;
VTS.1800.VL; and
VTS.3600.VL.
DOE received no comments regarding their proposed equipment classes
and associated methodology; consequently, DOE has maintained these
equipment classes in this final rule. Chapter 3 of the final rule TSD
provides further detail on the definition of equipment classes.
As noted in section III.C and specified in the test procedure final
rule, CL equipment classes are rated with the PEICL metric,
and VL equipment classes are rated with the PEIVL metric. In
the NOPR, however, DOE relied on available data for bare pumps. DOE
received no comment regarding the use of bare pump data to represent
all equipment classes, as such, DOE's final rule analysis is based on
equipment category and nominal design speed only--reported results do
not use a ``.CL'' or ``.VL'' designation. Separate CL and VL equipment
classes are maintained because CL and VL pumps have distinctly
different utilities to the consumer (constant vs. variable load
systems) and as a result require different metric and testing methods.
2. Scope of Analysis and Data Availability
DOE collected data to conduct all final rule analyses for the
following equipment classes directly: \26\
---------------------------------------------------------------------------
\26\ DOE again notes that all analyses are based on data for
bare pumps. This data is broken out by equipment category and
nominal design speed only. As such the ``.CL'' or ``.VL''
designations are not listed.
---------------------------------------------------------------------------
ESCC.1800,
ESCC.3600,
ESFM.1800,
ESFM.3600,
IL.1800,
IL.3600, and
VTS.3600.
The following subsections summarize DOE's approach for the
remaining equipment classes:
RS-V.1800;
RS-V.3600; and
VT-S.1800.
a. Radially Split, Multi-Stage, Vertical, in-Line Diffuser Casing
In the NOPR, DOE used available information to identify baseline
and the maximum technologically feasible efficiency levels for this
class. DOE identified these efficiency levels based on a review of the
efficiency data for RSV pumps in a database generated using market
research and confidential manufacturer information, and that included
models offered for sale in the United States by three major
manufacturers of RSV pumps. DOE found no models less efficient than the
European Union's MEI 40 standard level, which took effect on January 1,
2015.\27\ Details of this analysis are presented in Chapter 5 of the
TSD. This analysis, in conjunction with confidential discussions with
manufacturers, led DOE to conclude that RSV models sold in the United
States market are global platforms with hydraulic designs equivalent to
those in the European market. DOE presented this conclusion to the CIP
Working Group for consideration, where it was supported and reaffirmed
on numerous occasions (See, e.g. EERE-2013-BT-NOC-0039-0109 at pp. 91-
97, EERE-2013-BT-NOC-0039-0105 at pp. 293-300, EERE-2013-BT-NOC-0039-
0106 at pp. 38-40, 62-67, 88-95; EERE-2013-BT-NOC-0039-0108 at pp.
119.) Additionally, both HI and Wilo commented in agreement with this
conclusion (HI, No. 45 at p. 3; Wilo, No. 44 at p. 4). As a result, in
this final rule, DOE is setting the baseline and max-tech levels
equivalent to those established in Europe. Specifically, the baseline
is the European minimum efficiency standard,\28\ and the max-tech level
is the European level referred to as ``the indicative benchmark for the
best available technology.'' \29\
---------------------------------------------------------------------------
\27\ Council of the European Union. 2012. Commission Regulation
(EU) No 547/2012 of 25 June 2012 implementing Directive 2009/125/EC
of the European Parliament and of the Council with regard to
ecodesign requirements for water pumps. Official Journal of the
European Union. L 165, 26 June 2012, pp. 28-36.
\28\ Note that this final rule and the European Union regulation
use different metrics to represent efficiency. DOE used available
data to establish harmonized baseline and max-tech efficiency levels
using the DOE metric.
\29\ Council of the European Union. 2012. Commission Regulation
(EU) No 547/2012 of 25 June 2012 implementing Directive 2009/125/EC
of the European Parliament and of the Council with regard to
ecodesign requirements for water pumps. Official Journal of the
European Union. L 165, 26 June 2012, pp. 28-36.
---------------------------------------------------------------------------
Available data did not support the development of a cost-efficiency
relationship or additional efficiency levels for RSV equipment. As a
result, in this final rule DOE is specifying a standard level for RSV
that is equivalent to the baseline, consistent with the recommendation
of the CIP Working Group. (See EERE-2013-BT-NOC-0039-0092, p. 4,
Recommendation No. 9). Based on the data available and recommendation
of the CIP Working Group, DOE concludes that this standard level is
representative of the typical minimum efficiency configuration sold in
this equipment class, and no significant impact is expected for either
the consumers or manufacturers. Chapter 5 of the final rule TSD
provides complete details on RSV data availability and the development
of the baseline efficiency level.
b. Submersible Turbine, 1800 RPM
In the NOPR DOE proposed to set the energy conservation standard
level for VTS.1800 at the same C-values as those for the VTS.3600
equipment based on a preliminary consensus of the CIP working group.
DOE and the working group pursued this approach due to limited
availability of performance data for the VTS.1800 equipment class; the
mechanical similarity between VTS.1800 and VTS.3600 equipment; and a
concern that because of the mechanical similarity, bare VTS.1800 pumps
(which are identical to bare VTS.3600 pumps) could be sold into the
market as unregulated equipment, if DOE set a standard only for
VTS.3600 equipment. However, at the time of consensus, working group
members were asked to perform research on their four-pole VTS product
lines and provide feedback on the proposed C-values. (See EERE-2013-BT-
NOC-0039-0105 at pp. 300-308; EERE-2013-BT-NOC-0039-0106 at pp. 38-40,
62-67) In the NOPR, DOE requested comment on whether any pump models
would meet the proposed standard at a nominal speed of 3600 but fail at
a nominal speed of 1800 if the same C-values were used for each
equipment class.
In response, Wilo commented that duplicated C-values could be
eliminated and DOE could use data from only 3600
[[Page 4383]]
rpm (2-pole) pumps, which would set the minimum standards at a slightly
lower efficiency. (Wilo, No. 44 at p. 4) Wilo's comment implies that
1800 rpm (4-pole) pumps, in general, are typically more efficient than
analogous 3600 rpm models; this implication agrees with the preliminary
consensus reached by the CIP Working Group.
HI commented that the submersible turbines as defined in this
regulation are designed for 2-pole speeds and that C-values derived for
submersible turbines in the April 2015 proposed rule are valid only for
those pumps with 2-pole motors, and not those with four-pole motors.
(HI, No. 45 at p. 3).
DOE considered HI and Wilo's comments in establishing an energy
conservation standard for VTS.1800 equipment. Per Wilo's comment, DOE
recognizes that in other analyzed equipment categories, pumps using 4-
pole motors are generally more efficient than an equivalent pump using
a 2-pole motor at a given flow and specific speed. However,
insufficient data exists to confirm that 4-pole VTS pumps are more
efficient than equivalent 2-pole versions. DOE also notes that it did
not use any data from four-pole pumps to establish the C-values for 2-
pole VTS pumps.
DOE agrees with HI that submersible turbines in the scope of this
rulemaking are primarily designed for 2-pole speeds. In the NOPR, DOE
stated that every 4-pole based model is constructed from a bare pump
that was originally designed for use with a 2-pole motor. DOE also
acknowledged that total shipments for the VTS.1800 equipment are
estimated to be less than 1-percent of VTS.3600 equipment. While the C-
values were derived from pumps with 2-pole motors, as discussed
previously, the C-values were set equal for VTS.1800 and VTS.3600 due
to lack of data for VTS.1800 and concerns that bare VTS.1800 pumps
(which are identical to bare VTS.3600 pumps) could be sold into the
market as unregulated equipment, if DOE set a standard only for
VTS.3600.
Upon further review, DOE concludes that setting standards only for
pumps that have bowl diameters less than or equal to 6 inches limits
the possibility that manufacturers would design VTS pumps for use with
4-pole motors. Specifically, submersible pumps with 6 inch or less bowl
diameter are primarily designed for wells. Reducing the speed of the
motor would require additional bowl assemblies that would significantly
increase the cost of the pump.
For these reasons, DOE updated its analysis of the VTS.1800
equipment class. In this final rule, DOE maintained its approach in
identifying baseline and max-tech levels for VTS.1800, utilizing data
from VTS.3600 equipment. Specifically, DOE established the baseline and
max-tech levels for VTS.1800 at a C-value equivalent to the VTS.3600
baseline and max-tech levels. Available data did not support the
development of a cost-efficiency relationship, or additional efficiency
levels for VTS.1800 equipment. As a result, after consideration of
working group and additional stakeholder input, DOE is setting an
energy conservation standard for VTS.1800 pumps at the baseline level.
DOE will continue to monitor VTS products in the market and may
consider revisions in future rulemakings.
3. Technology Assessment
Throughout DOE's NOPR analyses, DOE considered technologies that
may improve pump efficiency. DOE received no comments regarding
additional technologies to consider; accordingly, DOE has made no
changes to its considered technologies for the final rule. Chapter 3 of
the final rule TSD details each of these technology options, which
include:
Improved hydraulic design;
Improved surface finish on wetted components;
Reduced running clearances;
Reduced mechanical friction in seals;
Reduction of other volumetric losses;
Addition of a variable speed drive (VSD);
Improvement of VSD efficiency; and
Reduced VSD standby and off mode power usage.
a. Applicability of Technology Options to Reduced Diameter Impellers
In the NOPR, DOE proposed setting energy conservation standards for
pump efficiency based on the pump's full impeller diameter
characteristics, which would require testing the pump at its full
impeller diameter. DOE did not receive any comments related to full
impeller diameter testing. As such, DOE's analyses of technology
options have been made with respect to the full diameter model. In
setting standards only on the full diameter, DOE considered that
improvements made to the full diameter pumps will also improve the
efficiency for all trimmed or reduced diameter variants.
b. Elimination of Technology Options Due to Low Energy Savings
Potential.
In the NOPR, DOE eliminated some technologies that were determined
to provide little or no potential for efficiency improvement for one of
the following additional reasons: (a) The technology does not
significantly improve efficiency; (b) the technology is not applicable
to the equipment for which standards are being considered or does not
significantly improve efficiency across the entire scope of each
equipment class; and (c) efficiency improvements from the technology
degrade quickly.
Furthermore, in the NOPR, DOE found that most of the considered
technology options have limited potential to improve the efficiency of
pumps. In addition, DOE found that several of the options also do not
pass the screening criteria listed in section III.B. DOE did not
receive any comments related to the elimination of technology options
due to low energy savings potential. DOE discusses the elimination of
all of these technologies in section III.B.
B. Screening Analysis
In the NOPR, DOE used four screening factors to determine which
technology options are suitable for further consideration in a
standards rulemaking. If a technology option failed to meet any one of
the factors, it was removed from consideration. The factors for
screening design options include:
(1) Technological feasibility. Technologies incorporated in
commercial products or in working prototypes will be considered
technologically feasible.
(2) Practicability to manufacture, install and service. If mass
production of a technology in commercial products and reliable
installation and servicing of the technology could be achieved on the
scale necessary to serve the relevant market at the time of the
effective date of the standard, then that technology will be considered
practicable to manufacture, install and service.
(3) Adverse impacts on product utility or product availability.
(4) Adverse impacts on health or safety. 10 CFR part 430, subpart
C, appendix A, sections (4)(a)(4) and (5)(b).
1. Screened Out Technologies
DOE did not receive any comments related to the technology options
that were screened out in the NOPR. As such, the conclusions of DOE's
screening analysis are unchanged from the NOPR. The following
subsections
[[Page 4384]]
outline DOE's screening methodology and conclusions.
Improved Surface Finish on Wetted Components
DOE observed through analysis that manual smoothing poses a number
of significant drawbacks--(1) the process is manually-intensive, which
makes it impractical to implement in a production environment, (2) the
efficiency improvements from this process degrade over a short period
of time, and (3) the relative magnitude of efficiency improvements are
small (e.g., approximately 20:1 for a baseline pump with a specific
speed of 2,500 rpms) when compared to other options, such as hydraulic
redesign. After considering these limitations and the relative benefits
that might be possible from including this particular option, DOE
concluded that manual smoothing operations would not be likely to
significantly improve the energy efficiency across the entire scope of
each equipment class in this rule. Consequently, DOE screened this
technology option out. Chapters 3 and 4 of final rule TSD provide
further details on the justification for screening out this technology.
In addition to smoothing operations, DOE also evaluated two
additional methods for improving surface finish; (1) surface coating or
plating, and (2) improved casting techniques. In addition to being
unable to significantly improve efficiency across the entire scope of
each equipment class, surface coatings and platings were also screened
out due to reliability and durability concerns, and improved casting
techniques were screened out because the efficiency improvements from
the technology degrade quickly. Chapters 3 and 4 of final rule TSD
provide further details on these methods for surface finish
improvement, and justification for screening out each one.
Reduced Running Clearances
Manufacturer interview responses indicate that clearances are
currently set as tight as possible, given the limitations of current
wear ring materials, machining tolerances, and pump assembly practices.
To tighten clearance any further without causing operational contact
between rotating and static components would require larger (stiffer)
shafts, and larger (stiffer) bearings. Without these stiffer
components, operational contact will lead to accelerated pump wear and
loosened clearances. Loosened clearances cause the initial efficiency
improvements to quickly degrade. Alternatively, the use of larger
components to improve the stiffness to appropriate levels results in
increased mechanical losses. These losses negate the potential
improvements gained from reduced clearances. Consequently, DOE
eliminated this technology option because of the concerns about
reliability and quick degradation of efficiency improvements. For
additional details on the screening of reduced running clearances, see
chapter 4 of the final rule TSD.
Reduced Mechanical Friction in Seals
DOE evaluated mechanical seal technologies that offered reduced
friction when compared to commonly used alternatives. DOE concluded
from this evaluation that the reduction in friction resulting from
improved mechanical seals would be too small to significantly improve
efficiency across the entire scope of each equipment class. For
additional details, see chapters 3 and 4 of the final rule TSD.
Reduction of Other Volumetric Losses
The most common causes of volumetric losses (other than previously
discussed technology options) are thrust balance holes. (Thrust balance
holes are holes located in the face of an impeller that act to balance
the axial loads on the impeller shaft and thus reduce wear on rub
surfaces and bearings). DOE found that removal of thrust balance holes
from existing impellers will reduce pump reliability. DOE notes that
manufacturers may be able to decrease volumetric losses by reducing the
number and/or diameter of thrust balance holes as a part of a full
hydraulic redesign. For additional details, see chapters 3 and 4 of the
final rule TSD.
Addition of a Variable Speed Drive (VSD)
Because there are many application types and load profiles that
would not benefit from a VSD, and many applications for which energy
use would increase with a VSD, DOE eliminated the use of VSDs from the
list of technology options. For additional details, see chapters 3 and
4 of the final rule TSD.
Improvement of VSD Efficiency
Because DOE has eliminated the use of VSDs as a technology option,
improvement of VSD efficiency was screened out as technology option.
For additional details, see chapters 3 and 4 of the final rule TSD.
Reduced VSD Standby and Off Mode Power Usage
Although improving VSD efficiency and standby/off mode power may
help improve overall pump efficiency, DOE concluded that not all pumps
for which DOE is considering standards in this rule would benefit from
the use of a VSD. As such, DOE screened out improved VSD efficiency and
reduced standby and off mode power usage as design options in the
engineering analysis. For additional details, see chapter 4 of the
final rule TSD.
2. Remaining Technologies
In the NOPR, DOE concluded that only improved hydraulic design met
all four screening criteria (i.e., practicable to manufacture, install,
and service and no adverse impacts on consumer utility, product
availability, health, or safety). Furthermore, DOE concluded that
improved hydraulic design is technologically feasible, as there is
equipment currently available in the market that has utilized this
technology option. As such, DOE considered improved hydraulic design as
a design option in the engineering analysis. 80 FR 17826, 17843 (April
2, 2015)
In response to DOE's conclusions, HI commented that hydraulic
redesign towards higher efficiency may impact suction performance,
which subsequently may cause issues with increased cavitation, as well
as reduced mechanical seal and bearing life. (HI, No. 45 at p. 6). In
response, DOE notes in the NOPR DOE established and analyzed market-
based efficiency levels. This means that for all analyzed efficiency
levels, a full range of equipment already exists in the market.
Specifically, the standard level proposed in the NOPR and established
in this final rule was selected by the CIP Working Group and determined
to be technologically feasible. Therefore, DOE concludes that improved
hydraulic design, as analyzed, does not have a negative impact on
utility. For additional details, see chapter 4 of the final rule TSD.
C. Engineering Analysis
The engineering analysis determines the manufacturing costs of
achieving increased efficiency or decreased energy consumption. DOE
historically has used the following three methodologies to generate the
manufacturing costs needed for its engineering analyses: (1) The
design-option approach, which provides the incremental costs of adding
to a baseline model design options that will improve its efficiency;
(2) the efficiency-level approach, which
[[Page 4385]]
provides the relative costs of achieving increases in energy efficiency
levels, without regard to the particular design options used to achieve
such increases; and (3) the cost-assessment (or reverse engineering)
approach, which provides ``bottom-up'' manufacturing cost assessments
for achieving various levels of increased efficiency, based on detailed
data as to costs for parts and material, labor, shipping/packaging, and
investment for models that operate at particular efficiency levels.
DOE conducted the engineering analyses for this rulemaking using a
design-option approach. The decision to use this approach was made due
to several factors, including the wide variety of equipment analyzed,
the lack of numerous levels of equipment efficiency currently available
in the market, and the limited design options available for the
equipment. More specifically, for the hydraulic redesign option, DOE
used industry research to determine changes in manufacturing costs and
associated increases in energy efficiency. DOE directly analyzed costs
for the equipment classes listed in section IV.A.2. Consistent with
HI's recommendation (HI, Framework Public Meeting Transcript at p. 329)
and available data, DOE concluded that it was infeasible to determine
the upfront costs (engineering time, tooling, new patterns,
qualification, etc.) associated with hydraulic redesign via reverse
engineering.
The following sections briefly discuss the methodology used in the
engineering analysis. Complete details of the engineering analysis are
available in chapter 5 of the final rule TSD.
1. Representative Equipment for Analysis
a. Representative Configuration Selection
For the NOPR engineering analysis, DOE directly analyzed the cost-
efficiency relationship for all equipment classes specified in in
section IV.C.8, over the full range of sizes, for all pumps falling
within the proposed scope. Within the engineering analysis, ``size'' is
defined by a pump's flow at BEP and specific speed. Analyzing over the
full size range allowed DOE to use representative configurations for
each equipment class, rather than an approach that analyzes a
representative unit from each class. A representative unit has a
defined size and defined features, while a representative configuration
defines only the features of the pump, allowing the cost-efficiency
analysis to consider a large range of data points that occur over the
full range of sizes.
In selecting representative configurations, DOE researched the
offerings of major manufacturers to select configurations generally
representative of the typical offerings produced within each equipment
class. Configurations and features were based on high-shipment-volume
designs prevalent in the market. The key features that define each
representative configuration include impeller material, impeller
production method, volute/casing material, volute/casing production
method, and seal type.
For the ESCC, ESFM, and IL equipment classes, the representative
configuration was defined as a pump fitted with a cast bronze impeller;
cast-iron volute; and mechanical seal. For the RSV and VTS equipment
classes, the representative configuration was defined as a pump fitted
with sheet metal-based fabricated stainless-steel impeller(s), and
sheet metal-based fabricated stainless-steel casing and internal static
components. 80 FR 17826, 17844 (April 2, 2015) DOE received no comments
regarding its approach to representative units; consequently, DOE
utilized the same representative unit configurations in this final
rule. Chapter 5 of the TSD provides further detail on representative
configurations.
b. Baseline Configuration
The baseline configuration defines the lowest efficiency equipment
in each analyzed equipment class. This configuration represents
equipment that utilizes the lowest efficiency technologies present in
the market. In the NOPR, DOE directly analyzed the cost-efficiency
relationship over the full range of pump sizes; as such, in the NOPR,
DOE defined a baseline configuration applicable across all sizes,
rather than a more specific baseline model. This baseline configuration
ultimately defines the energy consumption and associated cost for the
lowest efficiency equipment analyzed in each class. In the NOPR, DOE
established baseline configurations by reviewing available manufacturer
performance and sales data for equipment manufactured at the time of
the analysis. 80 FR 17826, 17844 (April 2, 2015) DOE received no
comments regarding baseline configurations; consequently, DOE has
maintained this methodology in this final rule. Chapter 5 of the final
rule TSD sets forth the process that DOE used to select the baseline
configuration for each equipment class and discusses the baseline in
greater detail.
2. Design Options
After conducting the screening analysis, DOE considered hydraulic
redesign as a design option in the final rule engineering analysis.
3. Available Energy Efficiency Improvements
In the NOPR, DOE assessed the available energy efficiency
improvements resulting from a hydraulic redesign for each equipment
class. This assessment was informed by manufacturer performance and
cost data, confidential manufacturer interview responses, general
industry research, and stakeholder input gathered at the CIP Working
Group public meetings. DOE concluded that a hydraulic redesign is
capable of improving the efficiency of a pump up to and including the
max-tech level (discussed in section IV.C.4.a). The efficiency gains
that a manufacturer realizes from a hydraulic redesign are expected to
be commensurate with the level of effort and capital a manufacturer
invests in redesign. 80 FR 17826, 17844 (April 2, 2015) DOE received no
comments regarding this assessment; consequently, DOE maintained this
methodology in this final rule. Section IV.C.6 discusses the
relationship between efficiency gains and conversion cost in more
detail.
4. Efficiency Levels Analyzed
In assessing the cost associated with hydraulic redesign, and
carrying through to all downstream analyses, DOE analyzed several
efficiency levels for the NOPR. Each level corresponds to a specific C-
value, as shown in Table IV.2. 80 FR 17826, 17844 (April 2, 2015)
[[Page 4386]]
Table IV.1--NOPR Efficiency Levels Analyzed With Corresponding C-Values
--------------------------------------------------------------------------------------------------------------------------------------------------------
EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
-----------------------------------------------------------------------------------------------------------------
Equipment class 70th efficiency
Baseline 10th efficiency 25th efficiency 40th efficiency 55th efficiency percentile/max
percentile percentile percentile percentile tech
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC.1800............................. 134.43 131.63 128.47 126.67 125.07 123.71
ESCC.3600............................. 135.94 134.60 130.42 128.92 127.35 125.29
ESFM.1800............................. 134.99 132.95 128.85 127.04 125.12 123.71
ESFM.3600............................. 136.59 134.98 130.99 129.26 127.77 126.07
IL.1800............................... 135.92 133.95 129.30 127.30 126.00 124.45
IL.3600............................... 141.01 138.86 133.84 131.04 129.38 127.35
RSV.1800 *............................ 129.63 N/A N/A N/A N/A 124.73
RSV.3600 *............................ 133.20 N/A N/A N/A N/A 129.10
VTS.1800.............................. 137.62 135.93 134.13 130.83 128.92 127.29
VTS.3600.............................. 137.62 135.93 134.13 130.83 128.92 127.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For RSV equipment, DOE established only baseline and max-tech efficiency levels due to limited data availability.
DOE did not receive any comments related to ESCC, ESFM, IL, or RSV
pumps and has maintained the same efficiency levels for these equipment
categories in this final rule. DOE received feedback related to VTS
pumps and has accordingly updated efficiency levels for the VTS.3600
and VTS.1800 equipment classes. DOE calculated new C-values for each
efficiency level based on updated data for submersible motors submitted
by HI. (See EERE-2013-BT-TP-0055-0008 at pp. 19-20) More detailed
discussion of this data can be found in the pumps test procedure final
rule. Additionally, based on feedback from HI suggesting that standards
for 2-pole VTS pumps (i.e. VTS.3600) should not apply to 4-pole VTS
pumps (i.e. VTS.1800), DOE analyzed baseline and max-tech efficiency
levels for the VTS.1800 equipment class. This feedback was previously
discussed in section IV.A.2.b. In the final rule, DOE updated
efficiency levels for VTS pumps based on stakeholder feedback. The
final rule efficiency levels and corresponding C-values are shown in
Table IV.2. (See section III.C for more information about C-values and
the related equations.)
Table IV.2--Final Rule Efficiency Levels Analyzed With Corresponding C-Values
--------------------------------------------------------------------------------------------------------------------------------------------------------
EL0 EL1 EL 2 EL 3 EL 4 EL 5
-----------------------------------------------------------------------------------------------------------------
Equipment class 70th efficiency
Baseline 10th efficiency 25th efficiency 40th efficiency 55th efficiency percentile/max
percentile percentile percentile percentile tech
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC.1800............................. 134.43 131.63 128.47 126.67 125.07 123.71
ESCC.3600............................. 135.94 134.60 130.42 128.92 127.35 125.29
ESFM.1800............................. 134.99 132.95 128.85 127.04 125.12 123.71
ESFM.3600............................. 136.59 134.98 130.99 129.26 127.77 126.07
IL.1800............................... 135.92 133.95 129.30 127.30 126.00 124.45
IL.3600............................... 141.01 138.86 133.84 131.04 129.38 127.35
RSV.1800 *............................ 129.63 N/A N/A N/A N/A 124.73
RSV.3600 *............................ 133.20 N/A N/A N/A N/A 129.10
VTS.1800 *............................ 138.78 N/A N/A N/A N/A 127.15
VTS.3600.............................. 138.78 136.92 134.85 131.92 129.25 127.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
* For RSV and VTS.1800 equipment, DOE established only baseline and max-tech efficiency levels due to limited data availability.
a. Maximum Technologically Feasible Levels
Efficiency level five (EL5), as shown in Table IV.2, represents the
maximum technologically feasible (``max-tech'') efficiency level for
the ESCC, ESFM, IL, RSV, and VTS equipment classes. To set the max-tech
level for the applicable equipment classes, DOE performed an analysis
to determine the maximum improvement in energy efficiency that is
technologically feasible for each equipment class.
DOE considers technologies to be technologically feasible if they
are incorporated in any currently available equipment or working
prototypes. A max-tech level results from the combination of design
options predicted to result in the highest efficiency level possible
for an equipment class.
DOE determined during the NOPR stage, based on available
information and consistent with the conclusions of the CIP Working
Group, that pumps are a mature technology, with all available design
options already existing in the marketplace.\30\ Therefore, DOE assumed
in its analysis that the max-tech efficiency level coincides with the
maximum available efficiency already offered in the marketplace. As a
result, DOE performed a market-based analysis to determine max-tech/
max-available levels. Based on this analysis, and as a result of the
wide range of pumps in each equipment class (1-200 hp), DOE established
a max-tech level for each equipment class at the 70th efficiency
percentile. This max-tech level was set so that there are existing
pumps available in the market that both meet this level and have
varying shaft input powers over the entire range of 1-200 hp. As a
result, for each equipment class, the max-tech level is representative
of the maximum efficiency achievable for pumps that is inclusive of the
entire horsepower range. A preliminary version of this analysis was
provided to the CIP
[[Page 4387]]
Working Group during the April 29-30, 2014 meetings, and DOE did not
receive feedback on any alternative max-tech efficiency levels. (EERE-
2013-BT-NOC-0039-0051, pp. 17-32) DOE incorporated the 70th efficiency
percentile as the highest TSL level evaluated in the NOPR (80 FR 17826,
17845 (April 2, 2015)) and received no further comments. DOE therefore
maintained these max-tech efficiency levels in this final rule. Chapter
5 of final rule TSD provides complete details on DOE's market-based
max-tech analysis and results.
---------------------------------------------------------------------------
\30\ See EERE-2013-BT-NOC-0039-0072, pp.103-105.
---------------------------------------------------------------------------
5. Manufacturers Production Cost Assessment Methodology
a. Changes in MPC Associated With Hydraulic Redesign
In the NOPR, DOE performed an analysis for each equipment class to
determine the change in manufacturer production cost (MPC), if any,
associated with a hydraulic redesign. 80 FR 17826, 17845 (April 2,
2015) For this analysis, DOE reviewed the manufacturer selling price
(MSP), component cost, performance, and efficiency data supplied by
both individual manufacturers and HI. DOE, with the support of the
majority of the CIP Working Group, concluded that for all equipment
classes, a hydraulic redesign is not expected to increase the MPC of
the representative pump configuration used for analysis.\31\
Specifically, a hydraulic redesign is not expected to increase
production or purchase cost of a pump's two primary components; the
impeller and the volute.
---------------------------------------------------------------------------
\31\ Refer to the following transcripts in which the conclusion
of no change in MPC with improved efficiency is presented to the
working group and discussed: EERE-2013-BT-NOC-0039-0072, pp. 114-130
and pp. 270-273; EERE-2013-BT-NOC-0039-0109, p. 264).
---------------------------------------------------------------------------
In the NOPR, DOE acknowledged that actual changes in MPC
experienced by individual manufacturers will vary, and that in some
cases redesigns may actually increase or decrease the cost of the
impeller and/or volute. However, available information indicates that
the flat MPC-versus-efficiency relationship best represents the
aggregated pump industry as a whole. DOE did not receive any comments
on changes in MPC. Consequently, in this final rule, DOE maintains its
conclusions that hydraulic redesign is not expected to increase the MPC
of the representative pump configuration used for analysis. Chapter 5
of the final rule TSD provides complete details on DOE's MPC-efficiency
analysis and results.
b. Manufacturer Production Cost (MPC) Model
In the NOPR, for each equipment class, DOE developed a scalable
cost model to estimate MPC across all pump sizes. Given a pump's
specific speed and BEP flow, the cost model outputs an estimated MPC.
Because hydraulic redesign is not expected to result in an increase in
MPC, the model is efficiency-independent and predicts the same MPC for
all pumps of the identical BEP flow, specific speed, and equipment
class, regardless of efficiency.
The NOPR MPC model was developed using data supplied by both HI and
individual manufacturers. 80 FR 17826, 17845 (April 2, 2015) This data
set includes information on the MSP, manufacturer markup, shipments
volumes, model performance and efficiency, and various other
parameters. DOE did not receive any comments on the MPC model.
Consequently, DOE utilized the same MPC model in this final rule.
Chapter 5 of the final rule TSD provides additional detail on the
development of the MPC model.
6. Product and Capital Conversion Costs
DOE expects that hydraulic redesigns will result in significant
conversion costs for manufacturers as they attempt to bring their pumps
into compliance with the proposed standard. 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 product designs comply with a
new or 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 product designs can
be fabricated and assembled.
In the NOPR, DOE used a bottom-up approach to evaluate the
magnitude of the product and capital conversion costs the pump industry
would incur to comply with new energy conservation standards. 80 FR
17826, 17845-17846 (April 2, 2015) For this approach, DOE first
determined the industry-average cost, per model, to redesign pumps of
varying sizes to meet each of the proposed efficiency levels. DOE then
modeled the distribution of unique pump models that would require
redesign at each efficiency level. For each efficiency level, DOE
multiplied each unique failing model by its associated cost to redesign
and summed the total to reach an estimate of the total product and
capital conversion cost for the industry.
Data supplied to DOE by HI was used as the basis for the industry-
average cost, per model, to redesign a failing pump model. HI, through
an independent third party, surveyed 15 manufacturers regarding the
product and conversion costs associated with redesigning one-, 50-, and
200-hp pumps from the 10th to the 40th percentile of market efficiency.
Specifically, HI's survey contained cost categories for the following:
Redesign; prototype and initial test; patterns and tooling; testing;
working capital; and marketing.
DOE validated the HI survey data with independent analysis and
comparable independently collected manufacturer interview data. In
addition, data from the EU pumps regulation preparatory study \32\ was
used to augment the HI survey data and scale costs to various
efficiency levels above and below the 40th percentile.
---------------------------------------------------------------------------
\32\ AEA Energy & Environment. 2008, Appendix 6: Lot 11--
`Circulators in buildings,' Report to European Commission.
---------------------------------------------------------------------------
DOE used a pump model database, containing various performance
parameters, to model the distribution of unique pump models that would
require redesign at each efficiency level. The database is comprised of
a combination of data supplied by HI and data that DOE collected
independently from manufacturers. For the ESCC, ESFM, IL, and VTS
equipment classes, the database is of suitable size to be
representative of the industry as a whole. Table IV.3 presents the
resulting product and capital conversion costs for each equipment
class, at each efficiency level.
DOE received comments that were consistent with the conversion
costs presented in the NOPR, as discussed in section IV.J.3.
Consequently, DOE is maintaining the same product and capital
conversion costs in this final rule. However, DOE adjusted conversion
costs for the VTS.1800 class, as DOE could not establish intermediate
efficiency levels due to lack of data, as discussed in section
IV.A.2.b. As a result, in Table IV.3, VTS.3600 and VTS.1800 are listed
separately, as different efficiency levels were established for each of
these equipment classes. Complete details on the calculation of
industry aggregate
[[Page 4388]]
product and capital conversion costs are found in chapter 5 of the
final rule TSD.
Table IV.3--Total Conversion Cost at Each Efficiency Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
All values in millions of 2014
dollars EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC/ESFM *...................... 0 12.6................ 50.1............... 112.2.............. 213.5.............. 349.8
IL............................... 0 5.1................. 20.3............... 46.0............... 89.5............... 146.1
VTS.3600 [dagger][dagger]........ 0 2.6................. 9.5................ 19.4............... 38.4............... 62.2
VTS.1800 [dagger][dagger]........ 0 N/A **.............. N/A **............. N/A **............. N/A **............. Data Not Available
[dagger]
RSV.............................. 0 N/A **.............. N/A **............. N/A **............. N/A **............. Data Not Available
[dagger]
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Due to commonality in design and components, DOE calculated the conversion costs for ESCC and ESFM in aggregate. These values were later
disaggregated, as appropriate, in downstream analyses.
** Intermediate efficiency levels were not established for VTS.1800 and RSV equipment classes. Please see section IV.A.2 for further detail.
[dagger] Although max-tech efficiency levels were established for VTS.1800 and RSV equipment classes, the available data was insufficient to establish a
cost-efficiency relationship at max-tech. Please see section IV.A.2 for further detail.
[dagger][dagger] VTS.3600 and VTS.1800 are listed separately as different efficiency levels have been established for each equipment class. Please see
section IV.A.2 for more details.
7. Manufacturer Markup Analysis
To account for manufacturers' non-production costs and profit
margin, DOE applies a non-production cost multiplier (the manufacturer
markup) to the full MPC. The resulting MSP is the price at which the
manufacturer can recover all production and non-production costs and
earn a profit. To meet the new energy conservation standards set forth
in this rule, DOE expects that manufacturers will hydraulically
redesign their product lines, which may result in new and increased
capital and equipment conversion costs. Depending on the competitive
environment for this equipment, some or all of the increased conversion
costs may be passed from manufacturers to retailers and eventually to
consumers in the form of higher purchase prices. The MSP should be high
enough to recover the full cost of the equipment (i.e., full production
and non-production costs) and overhead (including amortized product and
capital conversion costs), and still yield a profit. The manufacturer
markup has an important bearing on profitability. A high markup under a
standards scenario suggests manufacturers can readily pass along more
of the increased capital and equipment conversion costs to consumers. A
low markup suggests that manufacturers will not be able to recover as
much of the necessary investment in plant and equipment.
To support the downstream analyses, DOE investigated industry
markups in detail, characterizing industry-average markups, individual
manufacturer markup structures, and the industry-wide markup structure.
a. Industry-Average Markups
In the NOPR, industry-average manufacturer markups were developed
by weighting individual manufacturer markup estimates on a market share
basis, as manufacturers with larger market shares more significantly
affect the market average. 80 FR 17826, 17846 (April 2, 2015) DOE did
not receive any comments on these industry-average markups and used the
same markups in this final rule.
b. Individual Manufacturer Markup Structures
In the NOPR, DOE concluded that within an equipment class, each
manufacturer maintains a flat markup, based on data and information
gathered during the manufacturer interviews. This means that each
manufacturer targets a single markup value for models offered in an
equipment class, regardless of size, efficiency, or other design
features. Tiered product offerings and markups do not exist at the
individual manufacturer level. 80 FR 17827, 17846 (April 2, 2015) DOE
received no comments regarding these individual manufacturer markup
structure conclusions. Consequently, DOE has carried through these
conclusion into their final rule analysis.
c. Industry-Wide Markup Structure
DOE also used the markup data gathered during the manufacturer
interviews to assess the industry-wide markup structure. Although
tiered product offerings and markups do not exist at the individual
manufacturer level, DOE concluded in the NOPR that when analyzed as
whole, the industry exhibits a relationship between manufacturer markup
and efficiency. 80 FR 17827, 17846-17847 (April 2, 2015) DOE's analysis
showed that on the industry-wide scale, the lowest efficiency models
tend to garner lower markups than higher efficiency models, up to about
the 25th percentile of efficiency. Beyond the 25th percentile, the
relationship flattens out, and no correlation is seen between markup
and efficiency. The data suggest that this relationship is a result of
certain manufacturers positioning themselves with more or less
efficient product portfolios and charging markups commensurate with
their position in the marketplace. They also indicate (consistent with
the views of the CIP Working Group) that the market does not value
efficiency beyond the lower 25th percentile. (EERE-2013-BT-NOC-0039-
0072, pp. 269-278; EERE-2013-BT-NOC-0039-0054, pp. 67-69) In both
manufacturer interviews and working group comments, manufacturers
stated that efficiency is not currently the primary selling point or
cost driver for the majority of pumps within the scope of the proposed
rule. Rather, other factors, such as reliability, may influence price
significantly and are known to be more influential in the purchaser's
decision making process. (EERE-2013-BT-NOC-0039-0072, pp. 269-278)
DOE notes that in the NOPR analysis, the development of the markup-
efficiency relationship was based on data from the IL equipment class.
In the NOPR phase, DOE, with support of the CIP Working Group,
concluded that the markup structure of the IL equipment class is
representative of the ESCC, ESFM, and VTS equipment classes.\33\
---------------------------------------------------------------------------
\33\ Refer to the following transcript in which the conclusion
that the markup structure of the IL equipment class is
representative of the ESCC, ESFM, and VTS equipment classes is
presented to the working group and no negative feedback is received:
EERE-2013-BT-NOC-0039-0072, pp. 292-295.
---------------------------------------------------------------------------
Based on comments previously discussed in section IV.A.2.b, DOE has
concluded that available data do not support the development of a cost-
efficiency relationship for the VTS.1800 equipment class. Beyond the
removal of the VTS.1800 equipment class from the analysis, DOE did not
receive any additional comments on the IL markup-efficiency
relationship or the general
[[Page 4389]]
methodology presented in the NOPR. Consequently, in this final rule,
DOE applied the industry-wide IL markup-efficiency relationship to only
the ESCC, ESFM, and VTS.3600 equipment classes. Chapter 5 of the final
rule TSD provides complete details the markup-efficiency relationship
analysis and results.
8. MSP-Efficiency Relationship
Ultimately, the goal of the engineering analysis is to develop an
MSP-Efficiency relationship that can be used in downstream rulemaking
analyses such as the Life Cycle Cost (LCC) analysis, the Payback Period
(PBP) analysis, and the Manufacturer Impact Analysis (MIA).
For the NOPR downstream analyses, DOE evaluated the base case MSP-
Efficiency relationship as well as two separate MSP-Efficiency
relationship scenarios to represent the uncertainty regarding the
potential impacts on prices and profitability for manufacturers
following the implementation of new energy conservation standards. 80
FR 17827, 17847 (Apr. 2, 2015) The two scenarios are: (1) Flat pricing,
and (2) cost recovery pricing. These scenarios result in varying
revenue and cash flow impacts and were chosen to represent the lower
and upper bounds of potential revenues for manufacturers. DOE did not
received any additional comments on these two cost recovery scenarios.
Consequently, DOE has maintained its methodology and scenarios in the
analysis of this final rule. The scenarios are described in further
detail in the following paragraphs.
The base pricing scenario represents a snapshot of the pump market,
as it stands prior to this rulemaking. The base pricing scenario was
developed by applying the markup-efficiency relationship presented in
section IV.C.7.c to the MPC model presented in section IV.C.5.a. Both
the markup and MPC model are based on data supplied by individual
manufacturers. From these data, DOE created a scalable model that can
determine MSP as a function of efficiency, specific speed, and flow at
BEP.
Under the flat pricing standards case scenario, DOE maintains the
same pricing as in the base case, which resulted in no price changes at
a given efficiency level for the manufacturer's first consumer. Because
this pricing scenario assumes that manufacturers would not increase
their pricing as a result of standards, even as they incur conversion
costs, this scenario is considered a lower bound for revenues.
In the cost recovery pricing scenario, manufacturer pricing is set
so that manufacturers recover their conversion costs over the analysis
period. This cost recovery is enabled by an increase in mark-up, which
results in higher sales prices for pumps even as MPCs stay the same.
The cost recovery calculation assumes manufacturers raise prices on
models where a redesign is necessitated by the standard. The additional
revenue due to the increase in markup results in manufacturers
recovering 100 percent of their conversion costs over the 30-year
analysis period, taking into account the time-value of money. The final
MSP-efficiency relationship for this scenario is created by applying
the markup-efficiency relationship to the MPC cost model presented in
section IV.C.5.b., resulting in a scalable model that can determine MSP
as a function of efficiency, specific speed, and flow at BEP. In the
LCC and NIA analysis, DOE evaluated only the cost recovery pricing
scenario, as it would be the most conservative case for consumers,
resulting in the fewest benefits.\34\
---------------------------------------------------------------------------
\34\ The cost recovery pricing scenario is the most conservative
case (i.e., resulting in the fewest benefits) for consumers and the
most positive case for manufacturers (i.e., resulting in the fewest
negative impacts). In the MIA, DOE analyses this scenario and the
flat pricing scenario, which results in the most positive case for
consumer and the most conservative case for manufacturers.
---------------------------------------------------------------------------
D. Markups Analysis
DOE uses markups (e.g., manufacturer markups, distributor markups,
contractor markups) and sales taxes to convert the MSP estimates from
the engineering analysis to consumer prices, which are then used in the
LCC and PBP analysis and in the manufacturer impact analysis. The
markups are multipliers that represent increases above the MSP. DOE
develops 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.
Before developing markups, DOE defines key market participants and
identifies distribution channels. In the NOPR, DOE used the following
main distribution channels that describe how pumps pass from the
manufacturer to end-users: (1) Manufacturer to distributor to
contractor to end-users (70 percent of sales); (2) manufacturer to
distributor to end-users (17 percent of sales); (3) manufacturer to
original equipment manufacturer to end-users (8 percent of sales); (4)
manufacturer to end-users (2 percent of sales); and (5) manufacturer to
contractor to end-users (1 percent of sales). Other distribution
channels exist but are estimated to account for a minor share of pump
sales (combined 2 percent). 80 FR 17826, 17847 (April 2, 2015). In
response to the NOPR, Wilo agreed that the market distribution channels
included all appropriate intermediate steps, and the estimated market
share of each channel. (Wilo, No. 44 at p. 4) DOE received no
additional comments on this topic. Therefore, DOE maintained these
distribution channels for this final rule.
In the NOPR, to develop markups for the parties involved in the
distribution of the equipment, DOE utilized several sources, including:
(1) The U.S. Census Bureau 2007 Economic Census Manufacturing Industry
Series (NAICS 33 Series) \35\ to develop original equipment
manufacturer markups; (2) the U.S. Census Bureau 2012 Annual Wholesale
Trade Survey, Hardware, and Plumbing and Heating Equipment and Supplies
Merchant Wholesalers \36\ to develop distributor markups; and (3) 2013
RS Means Electrical Cost Data \37\ to develop mechanical contractor
markups. 80 FR 17826, 17847 (April 2, 2015).
---------------------------------------------------------------------------
\35\ U.S. Census Bureau (2007). Economic Census Manufacturing
Industry Series (NAICS 33 Series) www.census.gov/manufacturing/asm.
\36\ U.S. Census Bureau (2012). Annual Wholesale Trade Survey,
Hardware, and Plumbing and Heating Equipment and Supplies Merchant
Wholesalers (NAICS 4237). www.census.gov/wholesale/index.html.
\37\ RS Means (2013), Electrical Cost Data, 36th Annual Edition
(Available at: www.rsmeans.com).
---------------------------------------------------------------------------
In addition to the markups, DOE derived State and local taxes from
data provided by the Sales Tax Clearinghouse.\38\ These data represent
weighted-average taxes that include county and city rates. DOE derived
shipment-weighted-average tax values for each region considered in the
analysis. (Id.)
---------------------------------------------------------------------------
\38\ Sales Tax Clearinghouse, Inc. (last accessed on January 10,
2014), State sales tax rates along with combined average city and
county rates, http://thestc.com/STrates.stm.
---------------------------------------------------------------------------
DOE did not receive any comments on the markups or sales tax and
has maintained this approach for the final rule.
Chapter 6 of the final rule TSD provides details on DOE's
development of markups for pumps.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of pumps at different efficiency levels and to
assess the energy savings potential of increased pumps efficiency. The
energy use analysis estimates the range of energy
[[Page 4390]]
use of pumps in the field (i.e., as they are actually used by
consumers). The energy use analysis provides the basis for other
analyses DOE performed, particularly assessments of the energy savings
and the savings in consumer operating costs that could result from
adoption of amended or new standards.
DOE analyzed the energy use of pumps to estimate the savings in
energy costs that consumers would realize from more energy-efficient
pump equipment. Annual energy use depends on a number of factors that
depend on the utilization of the pump, particularly duty point (i.e.,
flow, head, and power required for a given application), pump sizing,
annual hours of operation, load profiles, and equipment losses. The
annual energy use is calculated as a weighted sum of input power
multiplied by the annual operating hours across all load points.
1. Duty Point
For the NOPR, DOE researched information on duty points for the
commercial, industrial, and agricultural sectors from a variety of
sources. DOE identified statistical samples only for the agricultural
sector. Therefore, DOE used manufacturer shipment data to estimate the
distribution of pumps in use by duty point. To account for the wide
range of pump duty points in the field, DOE placed pump models in bins
with varying power capacities using the shipment data provided by
individual manufacturers. DOE grouped all pump models into nine power
bins on a log-scale between 1 and 200 hp. Then, for each equipment
class, DOE grouped the pump models into nine flow bins on a log-scale
between minimum flow at BEP and maximum flow at BEP. Based on the power
and flow binning process, DOE defined a representative unit for each of
the combined power and flow bins. Within each bin, DOE defined the pump
performance data (power and flow at BEP, pump curve and efficiency
curve) as the shipment-weighted averages over all units in the bin. DOE
used these data to calculate the annual energy use for each of the
equipment classes. 80 FR 17826, 17848 (Apr. 2, 2015). DOE did not
receive any comments and has maintained this approach in the final
rule.
2. Pump Sizing
For the NOPR, DOE reviewed relevant guidelines and resources and
introduced a variable called the BEP offset to capture variations in
pump sizing practices in the field. The BEP offset is essentially the
relative distance between the consumer's duty point and the pump's BEP.
Pumps are often sized to operate within 75 percent to 110 percent of
their BEP flow. Therefore, for the NOPR analysis, the BEP offset was
assumed to be uniformly distributed between -0.25 (i.e., 25% less than
BEP flow) and 0.1 (10% more than BEP flow). 80 FR 17826, 17848 (April
2, 2015). DOE did not receive any comments on pump sizing and has
maintained this approach in the final rule.
3. Operating Hours
For the NOPR, DOE estimated average annual operating hours by
application based on inputs from a market expert and feedback from the
CIP Working Group.\39\ DOE developed statistical distributions to use
in its energy use analysis. 80 FR 17826, 17848 (April 2, 2015). In
response to the NOPR, Wilo commented that the average operating hours
for the different pump equipment classes and applications in the scope
of this rulemaking are based on assumptions and are not well documented
in engineering resources. (Wilo, No. 44 at p. 4) Because operating
hours are not well documented in engineering resources, DOE developed
statistical distributions in the NOPR. DOE maintained its estimate on
operating hours based on feedback from the CIP Working Group.
---------------------------------------------------------------------------
\39\ Refer to the following transcripts in which operating hours
are presented to the working group and no negative feedback is
received: EERE-2013-BT-NOC-0039-0072, pp. 353-355; EERE-2013-BT-NOC-
0039-0109, pp. 139-152.
---------------------------------------------------------------------------
4. Load Profiles
Considering the range of all applications of the pump equipment
classes for which DOE considered standards, in the NOPR DOE developed
four load profiles, characterized by different weights at 50 percent,
75 percent, 100 percent, and 110 percent of the flow at the duty point.
These load profiles represent different types of loading conditions in
the field: flat load at BEP, flat/over-sized load weighted evenly at 50
percent and 75 percent BEP, variable load over-sized, and variable load
under-sized. In the NOPR, based on discussion in the CIP Working Group,
DOE estimated that only 10 percent of consumers would use pumps with
the variable load/undersized load profile; the remaining load profiles
were estimated to apply to 30 percent of consumers each. 80 FR 17826,
17848 (April 2, 2015). In response to the NOPR, Wilo commented that
there are no established typical load profiles for pumps within U.S.
engineering standards. (Wilo, No. 44 at p. 5) HI recommended that the
equally weighted load profiles initially proposed during the CIP
Working Group negotiations be used in the consumer sample. (HI, No. 45
at p. 3) After considering comments from HI and Wilo, and in the
absence of established typical load profiles for pumps, DOE maintains
the four distinct load profiles and weights outlined in the NOPR to
define the range of applications available for pumps on the market.
To describe a pump's power requirements at points on the load
profile away from the BEP, DOE used the shipment-weighted average pump
curves, modeled as second-order polynomial functions, for each of the
representative units. 80 FR 17826, 17849 (April 2, 2015). DOE received
no comment on this approach and maintains it in this final rule.
5. Equipment Losses
Using the duty point, load profile, and operating hours, DOE
calculated the energy use required for the end-use (or the energy which
that is converted to useful hydraulic horsepower). However, the total
energy use by pumps also depends on pump losses, motor losses, and
control losses.
Pump losses account for the differences between pump shaft
horsepower and hydraulic horsepower due to friction and other factors.
In the NOPR, DOE took this into account using the efficiency
information available in the manufacturer shipment data for each pump.
To describe pump efficiency at points away from the BEP, DOE calculated
shipment-weighted average efficiency curves for each representative
unit, modeled as second-order polynomial functions. DOE used existing
minimum motor efficiency standards in calculating annual energy use as
well as the proposed default submersible motor efficiency values. DOE
did not consider VFDs in the LCC analysis. 80 FR 17826, 17849 (April 2,
2015).
DOE received no comments on the use of these equipment losses in
its energy use analysis. However, based on comments on the test
procedure NOPR, DOE revised the default submersible motor efficiency
values in the test procedure final rule. For the energy use analysis,
DOE updated its submersible motor efficiency values to reflect those
values.
DOE proposed in the test procedure NOPR that pumps sold with non-
electric drivers be rated as bare pumps. Any hydraulic improvements
made to the bare pump to comply with any applicable energy conservation
standards would also result in energy savings if the pump is used with
a non-electric driver. However, DOE
[[Page 4391]]
estimated, based on information from consultants and the working group,
that only 1-2% of pumps in scope are driven by non-electric drivers.
Therefore, in the NOPR, DOE accounted for the energy use of all pumps
as electricity use and did not account for fuel use in its analysis.
DOE requested comment on the percent of pumps in scope operated by each
fuel type other than electricity (e.g., diesel, gasoline, liquid
propane gas, or natural gas) and the efficiency or losses of each type
of non-electric driver, including transmission losses if any, that
would allow DOE to estimate the fuel use and savings of pumps sold with
non-electric drivers. 80 FR 17826, 17849 (April 2, 2015).
DOE did not receive any input that would allow it to conduct this
side analysis. HI agreed that non-electric drivers represent a very
small percentage of drivers used with pumps and does not believe
further evaluation on non-electric drivers is needed. (HI, No. 45 at p.
4) Consistent with HI's suggestion and lack of any additional input or
data during public review, DOE did not include energy savings from non-
electric drivers in the final rule. As in the NOPR, DOE accounted for
the energy use of all pumps, including those used in agricultural
applications with non-electric drivers, as electricity use.
Chapter 7 of the final rule TSD provides details on DOE's energy
use analysis for pumps.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducts the life-cycle cost (LCC) and payback period (PBP)
analysis to estimate the economic impacts of potential new standards on
individual consumers of pump equipment. The LCC calculation considers
total installed cost (equipment cost, sales taxes, distribution chain
markups, and installation cost), operating expenses (energy, repair,
and maintenance costs), equipment lifetime, and discount rate. DOE
calculated the LCC for all consumers as if each would purchase a pump
in the year that compliance is required with the standard. DOE presumes
that the purchase year for all pump equipment for purposes of the LCC
calculation is 2020, the first full year following the expected
compliance date of late 2019. To compute LCCs, DOE discounted future
operating costs to the time of purchase and summed them over the
lifetime of the equipment.
DOE analyzed the effect of changes in installed costs and operating
expenses by calculating the PBP of potential new standards relative to
baseline efficiency levels. The PBP estimates the amount of time it
would take the consumer to recover the incremental increase in the
purchase price of more-efficient equipment through lower operating
costs. In other words, the PBP is the change in purchase price divided
by the change in annual operating cost that results from the energy
conservation standard. DOE expresses this period in years. Similar to
the LCC, the PBP is based on the total installed cost and operating
expenses. However, unlike the LCC, DOE only considers the first year's
operating expenses in the PBP calculation. Because the PBP does not
account for changes in operating expense over time or the time value of
money, it is also referred to as a simple PBP.
DOE's LCC and PBP analyses are presented in the form of a
spreadsheet model, available on DOE's Web site for pumps.\40\ DOE
accounts for variability in energy use and prices, discount rates by
doing individual LCC calculations for a large sample of pumps (10,000
for each equipment class) that are assigned different installation
conditions. Installation conditions include consumer attributes such as
sector and application, and usage attributes such as duty point and
annual hours of operation. Each pump installation in the sample is
equally weighted. The simple average over the sample is used to
generate national LCC savings by efficiency level. The results of DOE's
LCC and PBP analysis are summarized in section V.B.1.a and described in
detail in chapter 8 of the final rule TSD.
---------------------------------------------------------------------------
\40\ See www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/14.
---------------------------------------------------------------------------
1. Approach
DOE conducted the LCC analysis by developing a large sample of
10,000 pump installations, which represent the general population of
pumps that would be affected by adopted energy conservation standards.
Separate LCC analyses are conducted for each equipment class.
Conceptually, the LCC distinguishes between the pump installation and
the pump itself. The pump installation is characterized by a
combination of consumer attributes (sector, application, electricity
price, discount rate) and usage attributes (duty point, BEP offset,
load profile, annual hours of operation, mechanical lifetime) that do
not change among the considered efficiency levels. The pump itself is
the regulated equipment, so its efficiency and selling price change in
the analysis.
In the no-new-standards case, which represents the market in the
absence of new energy efficiency standards, DOE assigns a specific
representative pump to each pump installation. These pumps are chosen
from the set of representative units described in the energy use
analysis. The relative weighting of different representative units in
the LCC sample is determined based on 2012 shipments data supplied by
the manufacturers.
The no-new-standards case also includes an estimate of the
distribution of equipment efficiencies. In the NOPR, DOE developed a
no-new-standards case distribution of efficiency levels for pumps using
the shipments data mentioned above. DOE assumed that this distribution
would remain constant over time and applied the 2012 distribution in
2020. 80 FR 17826, 17850 (April 2, 2015). DOE received no comment on
these assumptions and has maintained them for this final rule. Out of
this distribution, DOE assigns a pump efficiency based on the relative
weighting of different efficiencies. Chapter 8 of the final rule TSD
contains details regarding the no-new-standards case efficiency
distribution.
At each efficiency level, the pump assigned in the no-new-standards
case has a PEI rating that either would or would not meet a standard
set at that efficiency level. If the pump would meet the standard at a
given efficiency level, the installation is left unchanged. For that
installation, the LCC at the given TSL is the same as the LCC in the
no-new-standards case and the standard does not impact that user. If
the pump would not meet the standard at a given efficiency level, the
no-new-standards case pump is replaced with a compliant unit (i.e., a
redesigned pump) having a higher selling price and higher efficiency,
and the LCC is recalculated. The LCC savings at that efficiency level
are defined as the difference between the LCC in the no-new-standards
case and the LCC for the more efficient pump. The LCC is calculated for
each pump installation at each efficiency level.
In the engineering analysis, DOE determines the total conversion
costs required to bring the entire population of pump models up to a
given efficiency level. DOE uses these conversion costs to calculate
the selling price of a redesigned pump within each of the combined
power and flow bins that define a representative unit. DOE assumes that
all consumers whose no-new-standards case pump would not meet the
standard at a given efficiency level will purchase the new redesigned
pump at the new selling price, and that manufacturers recover the total
conversion costs at each efficiency level. DOE allocates conversion
costs to each
[[Page 4392]]
representative unit based on the proportion of total revenues generated
by that unit in the no-new-standards case.
DOE calculates the selling price in two stages. In the first stage,
for each equipment class and efficiency level, DOE calculates the total
revenue generated from all failing units, adds the total conversion
costs to the revenues from failing units to generate the new revenue
requirement, and defines a markup as the ratio of the new revenue
requirement to the no-new-standards case revenue from failing units.
This approach ensures that (1) the conversion costs are recovered from
the sale of redesigned units and (2) the conversion costs are
distributed across the different representative units in proportion to
the amount of revenue each representative unit generates in the no-new-
standards case.
In the second stage, DOE calculates a new selling price for each
redesigned representative unit, i.e., for each of the combined power
and flow bins. In the no-new-standards case, each bin contains a set of
pumps with varying efficiencies and varying prices. However, all pumps
that fail at an efficiency level are given the same new price. Hence,
the markup defined in stage one of the calculation cannot be applied
directly to the selling price of a failing unit. Instead, DOE
calculates revenues associates with all failing units in the bin, and
applies the markup to this total to get the new revenue requirement for
that bin. Then DOE defines the new selling price as the new revenue
requirement divided by the number of failing units in the bin.
In general, the economic inputs to the LCC, (e.g., discount rate
and electricity price) depend on the sector, while the usage criteria
(e.g., hours of operation) may depend on the application. For the pumps
analysis, DOE considered four sectors: industrial, commercial
buildings, agricultural and municipal water utilities. DOE assigns
electricity prices and discount rates based on the sector. DOE
considered several applications, based on a review of available data,
and determined that there is some correlation between application and
operating hours. DOE did not find any information relating either the
BEP offset (a pump sizing factor) or load profile to either sector or
application, so DOE assigned these values randomly.
As noted above, DOE determines the distribution of representative
units in the pump installation sample from the shipments data. Each
representative unit can be thought of as a pump that operates at a
representative duty point. To assign the consumer attributes (sector,
application, etc.) to duty points, DOE reviewed several data sources to
incorporate correlations between sector, application, equipment class
and the distribution of duty points into the analysis. Specifically,
DOE used a database of various industrial applications collected from
several case studies and field studies, and a database on pump tests
provided by the Pacific Gas & Electric Company, to construct the
distribution of pumps by sector, application and speed as a function of
power bin and equipment class. DOE used these distributions to
determine the relative weighting of different sectors and applications
in the LCC sample for each equipment class.
2. Life-Cycle Cost Inputs
For each efficiency level DOE analyzed, the LCC analysis required
input data for the total installed cost of the equipment, its operating
cost, and the discount rate. Table IV.4 summarizes the inputs and key
assumptions DOE used to calculate the consumer economic impacts of all
energy efficiency levels analyzed in this rulemaking. A more detailed
discussion of the inputs follows.
Table IV.4--Summary of Inputs and Key Assumptions Used in the LCC and PBP Analyses*
----------------------------------------------------------------------------------------------------------------
Inputs Description
----------------------------------------------------------------------------------------------------------------
Affecting Installed Costs
----------------------------------------------------------------------------------------------------------------
Equipment Price.................................................. Equipment price derived by multiplying
manufacturer sales price or MSP (calculated
in the engineering analysis) by distribution
channel markups, as needed, plus sales tax
from the markups analysis.
----------------------------------------------------------------------------------------------------------------
Installation Cost................................................ Installation cost assumed to not change with
efficiency level, and therefore is not
included in this analysis.
----------------------------------------------------------------------------------------------------------------
Affecting Operating Costs
----------------------------------------------------------------------------------------------------------------
Annual Energy Use................................................ Annual unit energy consumption for each class
of equipment at each efficiency level
estimated by sector and application using
simulation models.
----------------------------------------------------------------------------------------------------------------
Electricity Prices............................................... DOE developed average electricity prices and
projections of future electricity prices
based on Annual Energy Outlook 2015 (AEO
2015).\41\
----------------------------------------------------------------------------------------------------------------
Maintenance Cost................................................. Maintenance cost assumed to not change with
efficiency level, and therefore is not
included in this analysis.
Repair Cost...................................................... Repair cost assumed to not change with
efficiency level, and therefore is not
included in this analysis.
----------------------------------------------------------------------------------------------------------------
Affecting Present Value of Annual Operating Cost Savings
----------------------------------------------------------------------------------------------------------------
Equipment Lifetime............................................... Pump equipment lifetimes estimated to range
between 4 and 40 years, with an average
lifespan of 15 years across all equipment
classes, based on estimates from market
experts and input from the CIP Working
Group.
----------------------------------------------------------------------------------------------------------------
Discount Rate.................................................... Mean real discount rates for all sectors that
purchase pumps range from 3.4 percent for
municipal sector to 5.9 percent for
industrial sector.
Analysis Start Year.............................................. Start year for LCC is 2020, which is the
first full year following the estimated
compliance date of late 2019.
[[Page 4393]]
Analyzed Efficiency Levels
----------------------------------------------------------------------------------------------------------------
Analyzed Efficiency Levels....................................... DOE analyzed the baseline efficiency levels
and five higher efficiency levels for each
equipment class. See the engineering
analysis for additional details on
selections of efficiency levels and cost.
----------------------------------------------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided in the sections following the table or in
chapter 8 of the final rule TSD.
\41\ U.S. Energy Information Administration. Annual Energy Outlook 2015 (2015) DOE/EIA-0383(2015). (Last
Accessed August 30, 2015) (Available at: www.eia.gov/forecasts/aeo/.)
DOE analyzed the baseline efficiency levels (reflecting the lowest
efficiency levels currently on the market) and five higher efficiency
levels for each equipment class analyzed. Chapter 5 of the final rule
TSD provides additional details on the selection of efficiency levels
and cost.
a. Equipment Prices
The price of pump equipment reflects the application of
distribution channel markups and sales tax to the manufacturer sales
price (MSP), which is the cost established in the engineering analysis.
For each equipment class, DOE generated MSPs for the baseline equipment
and five higher equipment efficiencies in the engineering analysis. As
described in section IV.D, DOE determined distribution channel costs
and markups for pump equipment.
The markup is the percentage increase in price as the pump
equipment passes through distribution channels. As explained in section
IV.D, DOE assumed that pumps are delivered by the manufacturer through
one of five distribution channels. The overall markups used in LCC
analyses are weighted averages of all of the relevant distribution
channel markups.
To project an equipment price trend for the NOPR, DOE derived an
inflation-adjusted index of the Producer Price Index for pumps and
pumping equipment over the period 1984-2013.\42\ These data show a
general price index increase from 1987 through 2009. Since 2009, there
has been no clear trend in the price index. Given the relatively slow
global economic activity in 2009 through 2013, the extent to which the
future trend can be predicted based on the last two decades is
uncertain and the observed data do not provide a firm basis for
projecting future cost trends for pump equipment. Therefore, DOE used a
constant price assumption as the default trend to project future pump
prices in 2020. Thus, prices projected for the LCC and PBP analysis
were equal to the 2012 values for each efficiency level in each
equipment class. 80 FR 17826, 17851 (April 2, 2015).
---------------------------------------------------------------------------
\42\ Series ID PCU333911333911; www.bls.gov/ppi/.
---------------------------------------------------------------------------
Wilo commented that a more appropriate inflation-adjusted pump
price trend for existing products would exceed the inflation rate by
0.5 percent. (Wilo, No. 44 at p. 5) HI commented that the additional
costs to re-design more efficient pumps cannot be passed along to the
market, based on practices evidenced from the EU regulations, therefore
marked up prices are not reflected in the current pump price trend.
(HI, No. 45 at p.4.) DOE notes that Wilo did not provide any data or
evidence supporting its assertions regarding the expected inflation-
adjusted pump price trend, and DOE has not identified any data beyond
the PPI series that it reviewed in the NOPR. In response to HI, DOE
notes that the equipment prices developed in the NOPR and also used as
the basis for this final rule reflect manufacturer cost-recovery as a
worst-case scenario for consumers. Therefore, although DOE used a
constant price trend, the prices in the LCC year (2020) reflect an
increase over the pump prices in 2012. For these reasons, DOE has not
changed its assumption of a constant price trend for this final rule.
Appendix 8A of the final rule TSD describes the historical data that
were considered in developing the trend.
b. Installation Costs
In the NOPR, due to the absence of data to indicate at what
efficiency level DOE may need to consider an increase in installation
costs, DOE did not estimate installation costs for the LCC. 80 FR
17826, 17851 (April 2, 2015). In response to the NOPR, Wilo and HI both
agreed that consumers will experience an increase in installation costs
that scale with efficiency. Specifically, HI commented that in driving
for higher efficiency, suction performance could be impacted resulting
in higher NPSH required and lower margins of safety. Piping system
design and foundation changes may be required for reliable operation.
(HI, No. 45 at p.4) Wilo commented that if a constant-speed efficiency
requirement becomes extensive, consumers would experience a 30 percent
increase in installation costs, and added that some submersible turbine
pumps would require a larger diameter size, therefore leading to
increased installation costs. (Wilo, No. 44 at p. 5) Wilo also
commented that pump configurations that do not meet the standard and
require a VFD will experience an additional 30 percent increase in
installation costs, supplementary to the cost of the VFD. (Id.)
In response to HI, DOE requested specific data to help inform any
estimates of at what point an increase in efficiency would decrease
suction performance. Without actual data, DOE cannot implement a
scaling of costs with efficiency (NOPR public meeting transcript, No.
51 at p. 38-39) Commenters did not provide data regarding increases in
cost with efficiency, what would drive the increased installation costs
for pumps other than submersible turbines, or at what efficiency level
such increases might occur. In addition, for submersible turbines
(which are designed to fit in boreholes), commenters did not identify
the efficiency level at which diameter size would be expected to
increase. Finally, DOE notes that the efficiency levels were all
analyzed using hydraulic redesign. Therefore, none of the considered
levels, including the proposed levels, would require use of a VFD.
While manufacturers may opt to sell pumps with VFDs instead of
improving their hydraulic efficiency, DOE did not consider the use of
VFDs as a design option and therefore did not account for the
associated increase in installation costs in its analysis. In other
words, DOE only incorporated installation costs associated to the
design options considered when establishing the efficiency levels.
Given that available data do not support increases in installation
costs at specific efficiency levels for any pump category due to
hydraulic redesign, DOE continues to assume in this final rule
[[Page 4394]]
that installation costs would not increase as a function of efficiency
level and has not taken installation costs into account in the final
rule.
c. Annual Energy Use
In the NOPR, DOE estimated the annual electricity consumed by each
class of pump equipment, by efficiency level, based on the energy use
analysis described in section IV.E and in chapter 7 of the final rule
TSD. 80 FR 17826, 17852 (April 2, 2015). DOE did not receive any
comments on annual energy use, so it has maintained this approach in
the final rule.
d. Electricity Prices
Electricity prices are used to convert changes in the electric
consumption from higher-efficiency equipment into energy cost savings.
For the NOPR, DOE used average national commercial and industrial
electricity prices from the AEO 2014 reference case. DOE applied the
commercial price to pump installations in the commercial sector and the
industrial price to installations in the industrial, agricultural, and
municipal sectors. To establish prices beyond 2040 (the last year in
the AEO 2014 projection, DOE extrapolated the trend in prices from 2030
to 2040 for both the commercial and industrial sectors. 80 FR 17826,
17852 (April 2, 2015). DOE did not receive any comments on electricity
prices. For the final rule, DOE has maintained the same approach but
has updated the prices and price trends to AEO 2015.
e. Maintenance Costs
As discussed in the NOPR, DOE assumed that maintenance costs would
not change with efficiency level and did not estimate a maintenance
cost for this analysis. 80 FR 17826, 17852 (April 2, 2015). DOE did not
receive any comments on maintenance costs and has maintained this
approach for the final rule.
f. Repair Costs
As discussed in the NOPR, DOE assumed that repair costs are not
expected to change with efficiency level and did not estimate a repair
cost for this analysis. 80 FR 17826, 17852 (April 2, 2015). DOE did not
receive any comments on repair costs and has maintained this approach
for the final rule.
g. Equipment Lifetime
DOE defines ``equipment lifetime'' as the age when a given
commercial or industrial pump is retired from service. In the NOPR, DOE
developed distributions of lifetimes that vary by equipment class. The
average across all equipment classes was 15 years. DOE also used a
distribution of mechanical lifetime in hours to allow a negative
correlation between annual operating hours and lifetime in years--pumps
with more annual operating hours tend to have shorter lifetimes. In
addition, based on discussions in the CIP Working Group meetings,\43\
DOE introduced lifetime variation by pump speed--pumps running faster
tend to have a shorter lifetime. 80 FR 17826, 17852 (April 2, 2015).
DOE did not receive any comments on equipment lifetime, and therefore
maintained this approach in the final rule.
---------------------------------------------------------------------------
\43\ See, e.g., Docket No. EERE-2013-BT-NOC-0039-0073, p. 153.
---------------------------------------------------------------------------
Chapter 8 of the final rule TSD contains a detailed discussion of
equipment lifetimes.
h. Discount Rates
The discount rate is the rate at which future expenditures are
discounted to estimate their present value. The cost of capital is
commonly 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. In
the NOPR, for all but the municipal sector, DOE used the capital asset
pricing model to calculate the equity capital component, and financial
data sources, primarily the Damodaran Online Web site,\44\ to calculate
the cost of debt financing. DOE derived the discount rates by
estimating the cost of capital of companies that purchase pumping
equipment. 80 FR 17826, 17852 (April 2, 2015).
---------------------------------------------------------------------------
\44\ Damodaran financial data used for determining cost of
capital are available at: http://pages.stern.nyu.edu/~adamodar/ for
commercial businesses (Last accessed February 12, 2014).
---------------------------------------------------------------------------
For the municipal sector, DOE calculated the real average interest
rate on state and local bonds over the period of 1983-2012 by adjusting
the Federal Reserve Board nominal rates to account for inflation. This
30-year average is assumed to be representative of the cost of capital
relevant to municipal end users over the analysis period. (Id.)
DOE did not receive any comments on the proposed discount rates,
and therefore maintained its approach in the final rule. More details
regarding DOE's estimates of consumer discount rates are provided in
chapter 8 of the final rule TSD.
3. Payback Period
The PBP measures the amount of time it takes the commercial
consumer to recover the assumed higher purchase expense of more-
efficient equipment through lower operating costs. Similar to the LCC,
the PBP is based on the total installed cost and the operating expenses
for each application and sector, weighted by the probability of
shipments to each market. Because the simple PBP does not take into
account changes in operating expense over time or the time value of
money, DOE considered only the first year's operating expenses to
calculate the PBP, unlike the LCC, which is calculated over the
lifetime of the equipment. Chapter 8 of the final rule TSD provides
additional details about the PBP calculation.
4. 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
average energy price forecast for the year in which compliance with the
new standards would be required.
G. Shipments Analysis
In its shipments analysis, DOE developed shipment projections for
pumps and, in turn, calculated equipment stock over the course of the
analysis period. DOE used the shipments projection and the equipment
stock to determine the NES. The shipments portion of the spreadsheet
model projects pump shipments from 2020 through 2049.
In the NOPR, to develop the shipments model, DOE started with the
2012 shipment estimates by equipment type from HI (EERE-2013-BT-NOC-
0039-0068). For the initial year, DOE distributed total shipments into
the four sectors using estimates from the LCC, as discussed in section
IV.F.1. To project shipments of pumps, DOE relied primarily on AEO 2014
forecasts of various indicators for each sector: (1) Commercial floor
space; (2) value of manufacturing shipments; (3) value of agriculture,
mining, and construction
[[Page 4395]]
shipments; and (4) population (for the municipal sector).
DOE used the 2012 total industry shipments by equipment class
estimated by HI to distribute total shipments in each year into the
five equipment types. DOE then used 2012 shipment data collected
directly from manufacturers to distribute shipments into the further
disaggregated equipment classes accounting for nominal speeds. The
distribution of sectors changes over time as a result of each sector's
differing forecast in AEO, while the distribution of equipment classes
remains constant over time.
DOE estimated that standards would have a negligible impact on pump
shipments. Under most pricing scenarios, it is likely that following a
standard, a consumer would be able to buy a more efficient pump for the
same price as the less efficient pump they would have purchased before
or without a standard. Therefore, rather than foregoing a pump purchase
under a standards case, a consumer might simply switch brands or pumps
to purchase a cheaper one that did not have to be redesigned. As a
result, DOE used the same shipments projections in the standards case
as in the no-new-standards case. 80 FR 17826, 17852 (April 2, 2015).
In response to the NOPR, HI agreed that total shipments will not
change significantly with the proposed standards but commented that
consumers may decide to repair rather than replace pumps. (HI, No. 45
at p. 4) Wilo commented that there will likely be some minor impacts to
shipments, specifically, a slight decline in complete pump sales, and
an increase in replacement parts to repair pumps. (Wilo, No. 44 at p.
5-6) Given that HI and Wilo expect the impacts to be minor and that no
data are available to support changes in total shipments estimates and
annual repair estimates, DOE maintained its approach to the shipments
analysis in the final rule. DOE updated its projections based on the
forecasts of various indicators for each sector in AEO 2015. Chapter 9
of the final rule TSD contains more details.
H. National Impact Analysis
The national impact analysis (NIA) evaluates the effects of energy
conservation standards from a national perspective. This analysis
assesses the net present value (NPV) (future amounts discounted to the
present) and the national energy savings (NES) of total commercial
consumer costs and savings expected to result from new standards at
specific efficiency levels.\45\
---------------------------------------------------------------------------
\45\ The NIA accounts for impacts in the 50 States and the U.S.
territories.
---------------------------------------------------------------------------
The NES refers to cumulative energy savings for the lifetime of
pumps shipped from 2020 through 2049. DOE calculated energy savings in
each year relative to a no-new-standards case, defined by the current
market. DOE calculated net monetary savings in each year relative to
the no-new-standards case as the difference between total operating
cost savings and increases in total installed cost. DOE accounted for
operating cost savings until the year when the equipment installed in
2049 should be retired. Cumulative savings are the sum of the annual
NPV over the specified period.
1. Approach
The NES and NPV are a function of the total number of units in use
and their efficiencies. Both the NES and NPV depend on annual shipments
and equipment lifetime. Both calculations start by using the shipments
estimate and the quantity of units in service derived from the
shipments model.
DOE used a spreadsheet tool, available on DOE's Web site for
pumps,\46\ to calculate the energy savings and the national monetary
costs and savings from potential new standards. Interested parties can
review DOE's analyses by changing various input quantities within the
spreadsheet.
---------------------------------------------------------------------------
\46\ DOE's Web page on pumps can be found at:
www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/14.
---------------------------------------------------------------------------
Unlike the LCC analysis, the NES spreadsheet does not use
distributions for inputs or outputs, but relies on national average
equipment costs and energy costs developed from the LCC analysis. DOE
projected the energy savings, energy cost savings, equipment costs, and
NPV of benefits for equipment sold in each pump class from 2020 through
2049.
a. National Energy Savings
DOE calculated the NES based on the difference between the per-unit
energy use under a standards-case scenario and the per-unit energy use
in the no-new-standards case. The average energy per unit used by the
pumps in service gradually decreases in the standards case relative to
the no-new-standards case because more-efficient pumps are expected to
gradually replace less-efficient ones.
Unit energy consumption values for each equipment class are taken
from the LCC spreadsheet for each efficiency level and weighted based
on market efficiency distributions. To estimate the total energy
savings for each efficiency level, DOE first calculated the delta unit
energy consumption (i.e., the difference between the energy directly
consumed by a unit of equipment in operation in the no-new-standards
case and the standards case) for each class of pumps for each year of
the analysis period. The analysis period begins with the first full
year following the estimated compliance date of any new energy
conservation standards (i.e., 2020). Second, DOE determined the annual
site energy savings by multiplying the stock of each equipment class by
vintage (i.e., year of shipment) by the delta unit energy consumption
for each vintage (from step one). Third, DOE converted the annual site
electricity savings into the annual amount of energy saved at the
source of electricity generation (primary energy) using a time series
of conversion factors derived from the AEO 2015 version of EIA's
National Energy Modeling System (NEMS). Finally, DOE summed the annual
primary energy savings for the lifetime of units shipped over a 30-year
period to calculate the total NES. DOE performed these calculations for
each efficiency level considered for pumps in this rulemaking.
DOE has historically presented NES in terms of primary energy
savings. On August 18, 2011, DOE published a final statement of policy
in the Federal Register announcing 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. After
evaluating the approaches discussed in the August 18, 2011 statement,
DOE published a statement of amended policy in the Federal Register in
which DOE explained its determination that 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). Therefore, DOE used the NEMS
model to conduct the FFC analysis. The approach used for this
rulemaking, and the FFC multipliers that were applied, are described in
appendix 10B of the final rule TSD.
To properly account for national impacts, DOE adjusted the energy
use and energy costs developed from the LCC spreadsheet. Specifically,
in the LCC, DOE does not account for pumps sold with trimmed impellers
or pumps used with VSDs, both of which may reduce the energy savings
resulting from pump efficiency improvements.
For the NOPR, DOE reviewed studies on VSD penetration and used an
initial
[[Page 4396]]
penetration of 3.2 percent in 1998 \47\ with a 5 percent annual
increase.\48\ Although these studies are not specific to VFDs, DOE
assumed all VSD use was attributable to VFD use, as VFDs are the most
common type of VSD in the pumps market.\49\ Based on DOE's analysis of
VFD users in the consumer subgroup analysis (see section IV.I), DOE
assumed VFDs would reduce energy use by 39 percent on average, which
also reduces the potential energy savings from higher efficiency.
However, DOE assumed based on the difficulties with VFD installation
and operation,\50\ that the full amount of potential savings would not
be realized for all consumers. DOE assumed an ``effectiveness rate'' of
75 percent; in other words DOE assumed that consumers would achieve on
average only 75 percent of the 39 percent estimated savings (i.e., 29
percent savings) because of improper installation, operation
inconsistent with intended use, or other equipment problems. 80 FR
17826, 17853 (April 2, 2015).
---------------------------------------------------------------------------
\47\ United States Industrial Electric Motor Systems Market
Opportunities Assessment. Tech. Washington DC: U.S. Department of
Energy's (DOE) Office of Energy Efficiency and Renewable Energy
(EERE), 1998. Print.
\48\ Almeida, A., Chretien, B., Falkner, H., Reichert, J., West,
M., Nielsen, S., and Both, D. VSDs for Electric Motor Systems. Tech.
N.p.: European Commission Directorate-General for Transport and
Energy, SAVE II Programme 2000, n.d. Print.
\49\ See for example: Energy Tips--Motor. Tech. Washington DC:
U.S. Department of Energy's (DOE) Office of Energy Efficiency and
Renewable Energy (EERE), 2008, Motor Tip Sheet #11, Print, p. 1.
Variable Frequency Drives. Tech. Northwest Energy Efficiency
Alliance, 2000, Report #00-054, Print, Exhibit 2.1.
\50\ See for example: Variable speed drives: Introducing energy
saving opportunities for business. London: Carbon Trust, 2011.
---------------------------------------------------------------------------
For the NOPR, DOE assumed that for all equipment classes except
VTS, 50 percent of pumps not sold with VFDs are sold with impellers
trimmed to 85 percent of full impeller. According to the pump affinity
laws, which are a set of relationships that can be used to predict the
performance of a pump when its speed or impeller diameter is changed,
such an impeller trim uses 61 percent of the power of full trim.
Accordingly, DOE reduced the energy use for those consumers by 39
percent. For the VTS equipment class, DOE assumed that pumps were not
sold with trimmed impellers. A large percentage of these pumps are
pressed stainless steel and will never be trimmed; the remainder of
these pumps will be significantly less likely to be trimmed than other
pump types because variability in the number of stages would be used in
place of trimming the impellers. (Id.)
DOE used the penetration rate and power reduction values for VFDs
and trimmed impellers, as well as the effectiveness rate for VFDs, to
create an energy use adjustment factor time series in the NES
spreadsheet. (Id.)
In response to the NOPR, Wilo commented that the energy savings
relative to ``business-as-usual'' are overstated due to the adoption of
new technologies, including pumps with VFDs (Wilo, No. 44 at p. 1), and
that power reductions associated with VFDs are dependent on the pump
application. (Wilo, No. 44 at p. 6) HI stated that maintaining maximum
diameter and using continuous controls would result in higher energy
savings. (HI, No. 45 at p. 6) Wilo commented that pumps shipped with
VFDs do not have a trimmed impeller. (Wilo, No. 44 p. 6)
As stated previously, DOE used a 5 percent annual increase for VFD
penetration to account for market adoption of these technologies.
Available data do not indicate that DOE's assumption on the VFD
penetration growth rate is incorrect. Therefore, DOE has maintained
this growth rate in the final rule. DOE acknowledges that power
reductions associated with VFDs are dependent on pump application. In
the NIA, however, DOE has attempted to capture the national average
power reduction. Modeling variability in power reduction across
applications is not expected to significantly impact the average
assumed reduction.
DOE believes that HI and Wilo's comments regarding maximum diameter
and trimmed impellers validate DOE's approach to assuming only trimmed
impellers for non-VFD shipments. Therefore, DOE maintains this approach
in the final rule.
For more information on VFD penetration, see chapter 9 of the final
rule TSD.
In the NOPR, DOE considered whether a rebound effect applies to
pumps. A rebound effect occurs when an increase in equipment efficiency
leads to increased demand for its service. For example, when a consumer
realizes that a more-efficient pump used for cooling will lower the
electricity bill, that person may opt for increased comfort in the
building by using the equipment more, thereby negating a portion of the
energy savings. In commercial buildings, however, the person owning the
equipment (i.e., the building owner) is usually not the person
operating the equipment (i.e., the renter). Because the operator
usually does not own the equipment, that person will not have the
operating cost information necessary to influence their operation of
the equipment. Therefore, DOE believes that a rebound effect is
unlikely to occur in commercial buildings. In the industrial and
agricultural sectors, DOE believes that pumps are likely to be operated
whenever needed for the required process or irrigation demand, so a
rebound effect is also unlikely to occur in the industrial and
agricultural sectors. 80 FR 17826, 17853 (April 2, 2015).
In response to the NOPR, HI agreed that a rebound effect is
unlikely to occur and does not believe it should be included in the
determination of annual energy savings. (HI, No. 45 at p. 5) Consistent
with this suggestion, DOE maintained its position and did not
incorporate the impact of a rebound effect in the final rule.
b. Net Present Value
To estimate the NPV, DOE calculated the net impact as the
difference between total operating cost savings and increases in total
installed costs. DOE calculated the NPV of each considered standard
level over the life of the equipment using the following three steps.
First, DOE determined the difference between the equipment costs
under the standard-level case and the no-new-standards case to obtain
the net equipment cost increase resulting from the higher standard
level. In the NOPR, DOE used a constant price assumption as the default
price forecast. In addition, DOE considered two alternative price
trends to investigate the sensitivity of the results to different
assumptions regarding equipment price trends. One of these used an
exponential fit on the deflated Producer Price Index (PPI) for pump and
puming equipment manufacturing, and the other is based on the
``deflator--industrial equipment'' forecast for AEO 2014. 80 FR 17826,
17854 (April 2, 2015) Comments on this approach are discussed in
section IV.F.2.a, and DOE has maintained the same approach for the
final rule with minor updates described in appendix 10B of the final
rule TSD.
Second, DOE determined the difference between the no-new-standards
case operating costs and the standard-level operating costs to obtain
the net operating cost savings from each higher efficiency level.
Third, DOE determined the difference between the net operating cost
savings and the net equipment cost increase to obtain the net savings
(or expense) for each year. DOE then discounted the annual net savings
(or expenses) to 2015 and summed the discounted values to
[[Page 4397]]
provide the NPV for a standard at each efficiency level.
In accordance with the Office of Management and Budget's (OMB's)
guidelines on regulatory analysis,\51\ DOE calculated NPV using both a
7-percent and a 3-percent real discount rate. The 7-percent rate is an
estimate of the average before-tax rate of return on private capital in
the U.S. economy. DOE used this discount rate to approximate the
opportunity cost of capital in the private sector, because recent OMB
analysis has found the average rate of return on capital to be near
this rate. DOE used the 3-percent rate to capture the potential effects
of standards on private consumption (e.g., through higher prices for
equipment and reduced purchases of energy). This rate represents the
rate at which society discounts future consumption flows to their
present value. This rate can be approximated by the real rate of return
on long-term government debt (i.e., yield on United States Treasury
notes minus annual rate of change in the Consumer Price Index), which
has averaged about 3 percent on a pre-tax basis for the past 30 years.
---------------------------------------------------------------------------
\51\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at:
www.whitehouse.gov/omb/circulars_a004_a-4.)
---------------------------------------------------------------------------
2. No-New-Standards Case and Standards-Case Distribution of
Efficiencies
As described in the NOPR, DOE developed a no-new-standards case
distribution of efficiency levels for pumps using performance data
provided by manufacturers. Because the available evidence suggested
that there is no trend toward greater interest in higher pump
efficiency, DOE assumed that the no-new-standards case distribution
would remain constant over time. Furthermore, DOE had no reason to
believe that implementation of standards would lead to an increased
demand for more efficient equipment than the minimum available, and
therefore did not use an efficiency trend in the standards-case
scenarios.
For each efficiency level analyzed, DOE used a ``roll-up'' scenario
to establish the market shares by efficiency level for the year that
compliance would be required with new standards (i.e., 2020). DOE
concluded that equipment efficiencies in the no-new-standards case that
were above the standard level under consideration would not be
affected. Information from certain manufacturers indicated that for
pumps not meeting a potential standard at some of the lower efficiency
levels, redesign would likely target an efficiency level higher than
the minimum given the level of investment required for a redesign, and
the relatively more modest change in investment to design a given pump
to a higher level once redesign is already taking place. However, DOE
had no data that clearly indicate what percentage of failing pumps
would likely be redesigned to a level higher than the minimum, or how
high that level would be. In the absence of such data, DOE did not
assume that manufacturers would design to a level higher than required,
to avoid overestimating the energy savings that would result from the
rulemaking. 80 FR 17826, 17855 (April 2, 2015) DOE did not receive
comment on this approach and has maintained it for the final rule. The
no-new-standards case efficiency distributions for each equipment class
are presented in chapter 10 of the final rule TSD.
I. Consumer Subgroup Analysis
For the consumer subgroup analysis, DOE estimated the impacts of
the TSLs on the subgroup of consumers who operate their pumps with
VFDs.\52\ DOE analyzed this subgroup because the lower power typically
drawn by operating pumps at reduced speed may reduce the energy and
operating cost savings to the consumer that would result from improved
efficiency of the pump itself. DOE estimated the average LCC savings
and simple PBP for the subgroup compared with the results from the full
sample of pump consumers, which did not account for VFD use.
---------------------------------------------------------------------------
\52\ In this analysis, DOE is not counting energy savings of
switching from throttling a pump to using a VFD, as this is not a
design option. DOE is simply analyzing the life-cycle costs of
customers that use VFDs with their pumps.
---------------------------------------------------------------------------
J. Manufacturer Impact Analysis
1. Overview
DOE performed a manufacturer impact analysis (MIA) to calculate the
financial impact of energy conservation standards on manufacturers of
pumps and to estimate the potential impact of such standards on direct
employment and manufacturing capacity.
The MIA has both quantitative and qualitative aspects. The
quantitative portion of the MIA primarily relies on the Government
Regulatory Impact Model (GRIM), an industry cash-flow model customized
for this rulemaking. The key GRIM inputs are data on the industry cost
structure, equipment costs, shipments, markups, and conversion
expenditures. The key output is the industry net present value (INPV).
Different sets of assumptions will produce different results. The
qualitative portion of the MIA addresses factors such as equipment
characteristics, as well as industry and market trends. Chapter 12 of
the TSD describes the complete MIA.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the pumps industry that
includes a top-down cost analysis of manufacturers that DOE used to
derive preliminary financial inputs for the GRIM (e.g., sales, general,
and administration (SG&A) expenses; research and development (R&D)
expenses; and tax rates). DOE used public sources of information,
including the Securities and Exchange Commission (SEC) 10-K filings;
\53\ corporate annual reports; the U.S. Census Bureau's Annual Survey
of Manufacturers; \54\ and Hoovers reports.\55\
---------------------------------------------------------------------------
\53\ Filings & Forms, Securities and Exchange Commission (2013)
(Available at: http://www.sec.gov/edgar.shtml) (Last accessed July
2013).
\54\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Groups and Industries (2010)
(Available at: <http://www.census.gov/manufacturing/asm/index.html>)
(Last accessed July, 2013).
\55\ Hoovers [verbar] Company Information [verbar] Industry
Information [verbar] Lists, D&B (2013) (Available at: http://www.hoovers.com/) (Last accessed July 2013).
---------------------------------------------------------------------------
In phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of an energy conservation standard.
In general, new or amended 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.
In phase 3 of the MIA, DOE conducted detailed interviews with a
representative cross-section of manufacturers. During these interviews,
DOE discussed engineering, manufacturing, procurement, and financial
topics to validate assumptions used in the GRIM and to identify key
issues or concerns.
Additionally, in phase 3, DOE evaluates subgroups of manufacturers
that may be disproportionately impacted by standards or that may not be
accurately represented 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. For this final rule, DOE analyzed small manufacturers as a
subgroup.
The Small Business Administration (SBA) defines a small business
under
[[Page 4398]]
North American Industry Classification System (NAICS) code 333911,
``Pump and Pumping Equipment Manufacturing,'' as one having no more
than 500 employees. During its research, DOE identified 25 domestic
companies that manufacture equipment covered by this rulemaking and
qualify as small businesses under the SBA definition. Consistent with
the requirements of the Regulatory Flexibility Act, DOE's analysis of
the small business subgroup is discussed in section VII.B of this
document and chapter 12 of the TSD.
2. GRIM Analysis
As discussed previously, DOE uses the GRIM to quantify the changes
in cash flow that result in a higher or lower industry value due to
energy conservation standards. The GRIM analysis uses a discounted
cash-flow methodology that incorporates manufacturer costs, markups,
shipments, and industry financial information as inputs. The GRIM model
changes in MPCs, distributions of shipments, investments, and
manufacturer margins that could result from new energy conservation
standards. The GRIM spreadsheet uses the inputs to arrive at a series
of annual cash flows, beginning in 2015 (the base year of the MIA) and
continuing to 2049. DOE calculated INPVs by summing the stream of
annual discounted cash flows during this period. DOE applied a discount
rate of 11.8 percent, derived from industry financials and then
modified according to feedback received during manufacturer interviews.
In the GRIM, DOE calculates cash flows using standard accounting
principles and compares changes in INPV between the no-new-standards
case and each TSL (the standards case). The difference in INPV between
the no-new-standards case and a standards case represents the financial
impact of the energy conservation standard on manufacturers. Additional
details about the GRIM, the discount rate, and other financial
parameters can be found in chapter 12 of the TSD.
a. GRIM Key Inputs
Manufacturer Production Costs
Manufacturer production costs (MPCs) are the cost to the
manufacturer to produce a covered pump. The cost includes raw materials
and purchased components, production labor, factory overhead, and
production equipment depreciation. The changes, if any, in the MPC of
the analyzed products can affect revenues, gross margins, and cash flow
of the industry. In the MIA, DOE used the MPCs for each efficiency
level calculated in the engineering analysis, as described in section
IV.C.5 and further detailed in chapter 5 of the TSD. In addition, DOE
used information from manufacturer interviews to disaggregate the MPCs
into material, labor, and overhead costs.
Shipments Forecast
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of shipments by equipment
class. For the no-new-standards case analysis, the GRIM uses the NIA
no-new-standards case shipments forecasts from 2015 (the base year for
the MIA analysis) to 2049 (the last year of the analysis period). In
the shipments analysis, DOE estimates the distribution of efficiencies
in the no-new-standards case for all equipment classes. See section
IV.G for additional details.
For the standards-case shipment forecast, the GRIM uses the NIA
standards-case shipment forecasts. The NIA assumes that equipment
efficiencies in the no-new-standards case that do not meet the energy
conservation standard in the standards case ``roll up'' to meet the
standard after the compliance date. See section IV.G for additional
details.
Product and Capital Conversion Costs
Energy conservation standards can cause manufacturers to incur
conversion costs to make necessary changes to their production
facilities and bring product 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
purpose of 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, and marketing, focused on making product designs
comply with the energy conservation standard. Capital conversion costs
are investments in property, plant, and equipment to adapt or change
existing production facilities so that compliant equipment designs can
be fabricated and assembled.
In the NOPR, DOE used a bottom-up approach to evaluate the
magnitude of the product and capital conversion costs the pump industry
would incur to comply with new energy conservation standards. 80 FR
17826, 17845-17846 (April 2, 2015) For this approach, DOE first
determined the industry-average cost, per model, to redesign pumps of
varying sizes to meet each of the candidate efficiency levels. DOE then
modeled the distribution of unique pump models that would require
redesign at each efficiency level. For each efficiency level, DOE
multiplied each unique failing model by its associated cost to redesign
it to comply with the applicable efficiency level and summed the total
to reach an estimate of the total product and capital conversion cost
for the industry. DOE maintained this approach in this final rule. A
more detailed description of this methodology can be found in
engineering section IV.C.6.
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 standard. The investment
figures used in the GRIM can be found in section V.V.B.2 of this
document. For additional information on the estimated product
conversion and capital conversion costs, see chapters 5 and 12 of the
TSD.
b. GRIM Scenarios
Markup Scenarios
As discussed above, MSPs include direct manufacturing production
costs (i.e., labor, material, and overhead estimated in DOE's MPCs),
all non-production costs (i.e., SG&A, R&D, and interest), and profit.
To account for manufacturers' non-production costs and profit margin,
DOE applies a non-production cost multiplier (the manufacturer markup)
to the full MPC. The resulting MSP is the price at which the
manufacturer can recover all production and non-production costs and
earn a profit. Modifying these markups in the standards case yields
different sets of impacts on manufacturers.
To meet new energy conservation standards, manufacturers must often
invest in design changes that result in changes to equipment design and
production lines, which can result in changes to MPC and changes to
working capital, as well as change to capital expenditures. Depending
on the competitive pressures, some or all of the increased costs may be
passed from manufacturers to the manufacturers' first consumer
(typically a distributor) and eventually to consumers in the form of
higher purchase prices. The MSP should be high enough to recover the
full cost of the produced equipment (i.e., full production and non-
production costs) and yield a profit. The manufacturer markup impacts
profitability. A high markup under a standards scenario suggests
manufacturers can readily pass along
[[Page 4399]]
increases in variable costs and some of the capital and product
conversion costs (the one-time expenditures) to consumers. A low markup
suggests that manufacturers will not be able to recover as much of the
necessary investment in plant and equipment.
In the NOPR, industry-average, no-new-standards case manufacturer
markups were developed by weighting individual manufacturer markup
estimates on a market share basis, as manufacturers with larger market
shares more significantly affect the market average. 80 FR 17826, 17846
(April 2, 2015) DOE did not receive any comments on these industry-
average markups and used the same markups in this final rule.
In the NOPR, 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 new
energy conservation standards: (1) A flat markup scenario; and (2) a
cost recovery markup scenario. 80 FR 17827, 17847 (April 2, 2015) These
scenarios lead to different markup values that, when applied to the
MPCs, result in varying revenue and cash flow impacts. DOE used these
values to represent the lower and upper bounds of potential markups for
manufacturers. DOE did not receive any additional comments on these two
cost recovery scenarios. Consequently, DOE has maintained its
methodology scenarios, and resulting markups, in the analysis of this
final rule. The scenarios are described in further detail in the
following paragraphs.
Under the flat markup scenario, DOE maintains the same markup in
the no-new-standards case and standards case. This results in no price
changes at a given efficiency level for the manufacturer's first
consumer. Based on the MSP, component cost, performance, and efficiency
data supplied by both individual manufacturers and HI, DOE concluded
the non-production cost markup (which includes SG&A expenses, R&D
expenses, interest, and profit) to vary by efficiency level. DOE
calculated the flat markups as follows:
Table IV.5--Industry Average Flat Manufacturer Markups
----------------------------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
ESCC.............................. 1.37 1.38 1.39 1.39 1.39 1.39
ESFM.............................. 1.33 1.37 1.38 1.39 1.39 1.39
IL................................ 1.43 1.46 1.47 1.47 1.47 1.47
VT-S.............................. 1.37 1.37 1.40 1.40 1.40 1.40
----------------------------------------------------------------------------------------------------------------
Because this markup scenario assumes that manufacturers would not
increase their pricing for a given efficiency level as a result of a
standard even as they incur conversion costs, this markup scenario is
considered a lower bound.
In the cost recovery markup scenario, manufacturer markups are set
so that manufacturers recover their conversion costs, which are
investments necessary to comply with the new energy conservation
standard, over the analysis period. That cost recovery is enabled by an
increase in mark-up, which results in higher manufacturer sales prices
for pumps even as manufacturer product costs stay the same. The cost
recovery calculation assumes manufacturers raise prices only on models
where a redesign is necessitated by the standard. The additional
revenue due to the increase in markup results in manufacturers
recovering 100% of their conversion costs over the 30-year analysis
period, taking into account the time-value of money. DOE's calculated
cost recovery markups are as follows:
Table IV.6--Industry Average Cost Recovery Manufacturer Markups
----------------------------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
ESCC.............................. 1.37 1.57 1.68 1.74 1.92 2.13
ESFM.............................. 1.33 1.45 1.51 1.54 1.61 1.70
IL................................ 1.43 1.53 1.62 1.73 1.88 2.02
VT-S.............................. 1.37 1.49 1.47 1.54 1.65 1.77
----------------------------------------------------------------------------------------------------------------
Because this markup scenario models the maximum level to which
manufacturers would increase their pricing as a result of the given
standard, this markup scenario is considered an upper bound to markups.
Depending on the equipment class and the standard level being
analyzed, the cost-recovery markup results in a simple payback period
of 7 to 8 years for the industry. This means the total additional
revenues due to a higher markup equal the industry conversion cost
within seven to eight years, not taking into account the time value of
money. The simple payback period varies at each TSL due to differences
in the number of models requiring redesign, the total conversion costs,
and the number of units over which costs can be recouped. The simple
payback timeframes are as follows:
Table IV.7--Manufacturer Simple Payback Period
----------------------------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Years....................... 0 8 7 7 7 7
----------------------------------------------------------------------------------------------------------------
[[Page 4400]]
The payback period is greatest at TSL 1 due to the relatively high
numbers of models that require redesign as compared to the number of
units sold at that level. These payback periods are unchanged from the
NOPR analysis.
3. Discussion of MIA Comments
During the NOPR public comment period, interested parties commented
on assumptions and results described in the NOPR document and
accompanying TSD, addressing several topics related to manufacturer
impacts. These include: Conversion costs; industry direct employment;
cumulative regulatory burden; and small business impacts.
Conversion Costs
Several commenters requested information about DOE's conversion
costs for the pump industry. In response to DOE's request for comment
on conversion costs, HI requested further clarification of the sources
of DOE's conversion cost data. (HI, No.45 at p.5) Wilo commented that
conversion costs at their company would total $125,000 to $300,000 per
pump model to reach ``high efficiency''. Wilo also noted that testing
could require operational expenditures of $750,000 for their business.
(Wilo, No. 44 at p.6-7)
DOE's conversion costs were based on industry survey data provided
to the Department by HI, as noted in section IV.C.5 of this document.
The industry feedback, which included data from 15 different
manufacturers, suggested industry-average conversion costs of
approximately $200,000 per model. DOE believes the data provided by HI
to be the best dataset available for estimating industry conversion
costs. Wilo's range of $125,000 to $300,000 is consistent with DOE's
estimates, though DOE recognizes that any single manufacturer's
conversion cost may differ from the average. In Wilo's written
comments, the company also noted a cost of $750,000 to retest 15,000
unique products. DOE believes that grouping of products into basic
models for the purposes of CC&E testing may allow the company to
mitigate these costs, as not each unique product requires testing. In
response to Wilo's concern, DOE updated its financial models for the
final rule to include an expense to industry for testing all basic
models. The final pumps test procedure estimated the total cost of
testing a pump, including setup, tests, and takedown to range between
$161.61 and $430.96 per model. 80 FR 17586 (April 1, 2015). DOE used
the upper end estimate of $430.96 per test to develop a conservative
expense to industry. Assuming two tests per model and 3,332 basic
models in the industry, DOE estimates the cost to test all products in
accordance with the DOE test procedure expense will result in an
expense of $2.9 million to the industry in both the no-standards case
and the standards cases. Additional information about DOE's conversion
cost methodology can be found in section IV.C.6 of this document and in
Chapter 12 of the TSD.
Direct Employment
HI stated that it disagreed with the statement that ``DOE estimates
that in the absence of energy conservation standards, there would be
415 domestic production workers for covered pumps'', and requests to
know what data was used to determine this value. HI also believes that
the impact will be greater than what is stated by the DOE. HI also
believes it is important for DOE to analyze and report the impact on
employment throughout the supply and distribution chain. (HI, No.45 at
p.5)
In the manufacturer impact analysis, DOE analyzes the impacts on
regulated pump manufacturers. DOE's production worker employment
estimate includes only workers directly involved in fabricating and
assembling the covered product and their line supervisors within the
manufacturing 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
production worker estimate relies on the domestic pump shipments
estimated in the shipments analysis, the labor content per pump
estimated using the engineering analysis, and typical production worker
wages estimated using labor rate data in the US Census. The complete
methodology is explained in detail in section 12.7 of the TSD. DOE's
production worker estimate does not include workers in the supply or
distribution chain. These workers are accounted for in DOE's analysis
of the indirect employment impact, which estimates impacts on the
broader economy. These impacts can be found in section V.B.3.c.
Cumulative Regulatory Burden
HI noted that pending regulations on dedicated purpose pool pumps
and any additional pump regulations will further tax the limited
resources available for redesign, manufacturing, and testing of new
products. (HI, No.45 at p. 6) DOE does not list the pool pump
rulemaking in its list of cumulative regulations because the rulemaking
is in the preliminary stages. Until the rule reaches the NOPR stage,
DOE does not have enough detail on the scope of coverage, the effective
date, and potential conversion costs. DOE will consider whether to
include the regulatory burden of these pump standards in any subsequent
analysis of the cumulative regulatory burden of potential standards for
dedicated purpose pool pumps.
Small Businesses Impacts
DOE requested comment on the number of small business in the
industry. Wilo commented that the number of businesses affected by this
rule numbers in the hundreds, including distributors, installers,
design-builders, manufacturers and engineers. (Wilo, No.44 at p.8)
Consistent with the requirements of the Regulatory Flexibility Act (5
U.S.C. 601, et seq.), as amended, the Department analyzes the expected
impacts of an energy conservation standard on pump manufacturers
directly regulated by DOE's standards. Distributors, installers,
design-builders, manufacturers, and engineers that are not pump
manufacturers are excluded from analysis.
K. Emissions Analysis
The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO2, NOX, SO2, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH4 and
N2O, as well as the reductions to emissions of all species
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion. The associated emissions are referred
to as upstream emissions.
The analysis of power sector emissions uses marginal emissions
factors that were derived from data in AEO 2015, as described in
section IV.M. The methodology is described in chapter 13 and 15 of the
final rule TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA, GHG
Emissions Factors Hub.\56\ The FFC upstream emissions are estimated
based on the methodology described in chapter 15 of the final rule TSD.
The upstream emissions include both emissions from fuel combustion
during extraction, processing, and transportation of fuel, and
``fugitive''
[[Page 4401]]
emissions (direct leakage to the atmosphere) of CH4 and
CO2.
---------------------------------------------------------------------------
\56\ Available at: http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------
The emissions intensity factors are expressed in terms of physical
units per MWh or MMBtu of site energy savings. Total emissions
reductions are estimated using the energy savings calculated in the
national impact analysis.
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,\57\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------
\57\ 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.
---------------------------------------------------------------------------
The AEO incorporates the projected impacts of existing air quality
regulations on emissions. AEO 2015 generally represents current
legislation and environmental regulations, including recent government
actions, for which implementing regulations were available as of
October 31, 2014. DOE's estimation of impacts accounts for the presence
of the emissions control programs discussed in the following
paragraphs.
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.\58\ 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,\59\ 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.\60\ On October 23, 2014, the D.C. Circuit lifted the
stay of CSAPR.\61\ Pursuant to this action, CSAPR went into effect (and
CAIR ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------
\58\ 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).
\59\ 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).
\60\ 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.
\61\ See Georgia v. EPA, Order (D.C. Cir. filed October 23,
2014) (No. 11-1302).
---------------------------------------------------------------------------
EIA was not able to incorporate CSAPR into AEO 2015, so it assumes
implementation of CAIR. Although DOE's analysis used emissions factors
that assume that CAIR, not CSAPR, is the regulation in force, 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
2015 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.\62\ Therefore, DOE believes that energy conservation standards
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------
\62\ DOE notes that the Supreme Court recently remanded EPA's
2012 rule regarding national emission standards for hazardous air
pollutants from certain electric utility steam generating units. See
Michigan v. EPA (Case No. 14-46, 2015). DOE has tentatively
determined that the remand of the MATS rule does not change the
assumptions regarding the impact of energy efficiency standards on
SO2 emissions. Further, while the remand of the MATS rule
may have an impact on the overall amount of mercury emitted by power
plants, it does not change the impact of the energy efficiency
standards on mercury emissions. DOE will continue to monitor
developments related to this case and respond to them as
appropriate.
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CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia.\63\ 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 from other
facilities. 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.
---------------------------------------------------------------------------
\63\ 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 2015, which
incorporates the MATS.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this rulemaking, DOE considered the
estimated monetary benefits from the reduced emissions of
CO2 and NOX that are expected to result from each
of the considered efficiency levels. To make
[[Page 4402]]
this calculation similar 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
efficiency level. This section summarizes the basis for the monetary
values used for CO2 and NOX emissions and
presents the values considered in this rulemaking.
For this final rule, DOE is relying on a set of values for the
social cost of carbon (SCC) that was developed by an interagency
process. A summary of the basis for those values is provided in the
following subsection, 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 carbon dioxide. A domestic SCC value is
meant to reflect the value of damages in the United States resulting
from a unit change in carbon dioxide emissions, while a global SCC
value is meant to reflect the value of damages worldwide.
Under section 1(b)(6) 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 the 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
carbon dioxide emissions, the analyst faces a number of challenges. A
recent report from the National Research Council points out that any
assessment will suffer from uncertainty, speculation, and lack of
information about: (1) Future emissions of greenhouse gases; (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.
Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
carbon dioxide emissions. The agency can estimate the benefits from
reduced emissions in any future year by multiplying the change in
emissions in that year by the SCC value appropriate for that year. The
net present value of the benefits can then be calculated by multiplying
the 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 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.
Specifically, 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. 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 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.
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 three integrated assessment models, at discount rates of 2.5
percent, 3 percent,
[[Page 4403]]
and 5 percent. The fourth set, which represents the 95th-percentile SCC
estimate across all three models at a 3-percent discount rate, is
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, although
preference is given to consideration of the global benefits of reducing
CO2 emissions. Table IV.8 presents the values in the 2010
interagency group report,\64\ which is reproduced in appendix 14A of
the final rule TSD.
---------------------------------------------------------------------------
\64\ 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.8--Annual SCC Values from 2010 Interagency Report, 2010-2050
[In 2007 dollars 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, as described in the
2013 update from the interagency working group (revised July 2015).\65\
(See appendix 14B of the final rule TSD for further information.) Table
IV.9 shows the updated sets of SCC estimates in five year increments
from 2010 to 2050. Appendix 14B of the final rule TSD provides the full
set of SCC estimates. 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.
---------------------------------------------------------------------------
\65\ 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 July 2015) (Available at: www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
Table IV.9--Annual SCC Values from 2013 Interagency Update [Revised July 2015, 2010-2050
[In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount Rate %
----------------------------------------------------------
Year 5 3 2.5 3
----------------------------------------------------------
Average Average Average 95th Percentile
----------------------------------------------------------------------------------------------------------------
2010................................................. 10 31 50 86
2015................................................. 11 36 56 105
2020................................................. 12 42 62 123
2025................................................. 14 46 68 138
2030................................................. 16 50 73 152
2035................................................. 18 55 78 168
2040................................................. 21 60 84 183
2045................................................. 23 64 89 197
2050................................................. 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable since 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 above 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.
[[Page 4404]]
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report (revised July 2015), adjusted to 2014$ using
the Gross Domestic Product price deflator. For each of the four cases
specified, the values used for emissions in 2015 were $12.2, $40.0,
$62.3, and $117 per metric ton avoided (values expressed in 2014$). 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.
In response to the NOPR, the Cato Institute commented that the
integrated assessment model (IAM) on which the SCC values are based
does not provide reliable guidance and does not signal the order of
magnitude of the actual social cost of carbon. Furthermore, the Cato
Institute commented that the values are discordant with leading
scientific literature on important SCC parameters. (Cato Institute, No.
48 at p. 1) The Associations object to DOE's use of the SCC in the
cost-benefit analysis performed in the NOPR and believes that the SCC
should not be used in any rulemaking or policymaking until it undergoes
a more rigorous notice, review, and comment process. (The Associations,
No. 47 at p. 4)
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 used in this final rule 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. In July 2015 OMB published a detailed summary and formal
response to the many comments that were received.\66\ It also stated
its intention to seek independent expert advice on opportunities to
improve the estimates, including many of the approaches suggested by
commenters. 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.
---------------------------------------------------------------------------
\66\ https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions.
---------------------------------------------------------------------------
2. Valuation of Other Emissions Reductions
As noted previously, DOE has estimated how the 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 NOX emissions
reductions using benefit per ton estimates from the Regulatory Impact
Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing
Power Plants and Emission Standards for Modified and Reconstructed
Power Plants,'' published in June 2014 by EPA's Office of Air Quality
Planning and Standards.\67\ The report includes high and low values for
NOX (as PM2.5) for 2020, 2025, and 2030
discounted at 3 percent and 7 percent,\68\ which are presented in
chapter 14 of the final rule TSD. DOE assigned values for 2021-2024 and
2026-2029 using, respectively, the values for 2020 and 2025. DOE
assigned values after 2030 using the value for 2030.
---------------------------------------------------------------------------
\67\ http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf. See Tables 4-7, 4-8, and 4-9 in the
report.
\68\ For the monetized NOx benefits associated with
PM2.5, the related benefits (derived from benefit-per-ton
values) are based on an estimate of premature mortality derived from
the ACS study (Krewski et al., 2009), which is the lower of the two
EPA central tendencies. Using the lower value is more conservative
when making the policy decision concerning whether a particular
standard level is economically justified so using the higher value
would also be justified. If the benefit-per-ton estimates were based
on the Six Cities study (Lepuele et al., 2012), the values would be
nearly two-and-a-half times larger. (See chapter 14 of the final
rule TSD for further description of the studies mentioned above.)
---------------------------------------------------------------------------
DOE multiplied the emissions reduction (tons) in each year by the
associated $/ton values, and then discounted each series using discount
rates of 3-percent and 7-percent as appropriate. DOE will continue to
evaluate the monetization of avoided NOx emissions and will make any
appropriate updates in energy conservation standards rulemakings.
DOE is evaluating appropriate monetization of avoided
SO2 and Hg emissions in energy conservation standards
rulemakings. It has not included such monetization in the current
analysis.
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. The utility impact analysis
estimates the changes in installed electrical capacity and generation
that would result for each TSL. The analysis is based on published
output from the NEMS associated with AEO 2015. NEMS produces 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 to estimate the marginal impacts of reduced energy
demand on the utility sector. These marginal factors are estimated
based on the changes to electricity sector generation, installed
capacity, fuel consumption and emissions in the AEO Reference case and
various side cases. Details of the methodology are provided in the
appendices to chapters 13 and 15 of the final rule TSD.
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.
N. Employment Impact Analysis
Employment impacts include direct and indirect impacts. Direct
[[Page 4405]]
employment impacts are any changes in the number of employees of
manufacturers of the equipment subject to standards; 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
equipment. Indirect employment impacts from standards consist of the
jobs created or eliminated in the national economy due to: (1) Reduced
spending by end users on energy; (2) reduced spending on new energy
supply by the utility industry; (3) increased consumer spending on the
purchase of new products; 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).\69\ 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.\70\ 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, net national employment may increase because of shifts
in economic activity resulting from new energy conservation standards
for pumps.
---------------------------------------------------------------------------
\69\ 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].
\70\ 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).
---------------------------------------------------------------------------
For the standard levels considered in this final rule, DOE
estimated indirect national employment impacts using an input/output
model of the U.S. economy called Impact of Sector Energy Technologies
version 3.1.1 (ImSET).\71\ 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 the 187 sectors. ImSET's national economic I-O
structure is based on a 2002 U.S. benchmark table, specially aggregated
to the 187 sectors most relevant to industrial, commercial, and
residential building energy use. 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 the final rule, DOE used
ImSET only to estimate short-term (through 2024) employment impacts.
---------------------------------------------------------------------------
\71\ M. J. Scott, O. V. Livingston, P. J. Balducci, J. M. Roop,
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).
---------------------------------------------------------------------------
For more details on the employment impact analysis, see chapter 16
of the final rule TSD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for pumps.
It addresses the TSLs examined by DOE, the projected impacts of each of
these levels if adopted as energy conservation standards for pumps, and
the standards levels that DOE is adopting in this final rule.
Additional details regarding DOE's analyses are contained in the final
rule TSD supporting this document.
A. Trial Standard Levels
1. Trial Standard Level Formulation Process and Criteria
DOE developed six efficiency levels, including a baseline level,
for each equipment class analyzed in the LCC, NIA, and MIA. TSL 5 was
selected at the max-tech level for these equipment classes, and also
represented the highest energy savings, NPV, and net benefit to the
nation scenario. TSL 1, TSL 2, TSL 3, and TSL 4 provide intermediate
efficiency levels between the baseline efficiency level and TSL 5 and
allow for an evaluation of manufacturer impact at each level. As
discussed in section IV.A.2.a, for the RSV equipment classes, DOE set
the baseline and max-tech levels equal to those established in Europe,
but did not develop intermediate efficiency levels or TSLs due to lack
of available cost data for this equipment. Moreover, as discussed in
section IV.A.2.b, DOE set the baseline and max-tech levels for the
VTS.1800 equipment class equal to those for VTS.3600, but did not
develop intermediate efficiency levels or TSLs, again due to lack of
available data. As a result, for the RSV and VTS.1800 equipment
classes, TSLs 1 through 4 map to the baseline efficiency level, EL 0,
and TSL 5 maps to the max-tech level, EL 5. Table V.1 shows the mapping
between TSLs and efficiency levels for all equipment classes.
Table V.1--Mapping Between TSLs and Efficiency Levels
----------------------------------------------------------------------------------------------------------------
Equipment Class Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
ESCC.1800......................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
ESCC.3600......................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
ESFM.1800......................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
ESFM.3600......................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
IL.1800........................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
IL.3600........................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
RSV.1800*......................... EL 0 EL 0 EL 0 EL 0 EL 0 EL 5
RSV.3600*......................... EL 0 EL 0 EL 0 EL 0 EL 0 EL 5
VTS.1800*......................... EL 0 EL 0 EL 0 EL 0 EL 0 EL 5
[[Page 4406]]
VTS.3600.......................... EL 0 EL 1 EL 2 EL 3 EL 4 EL 5
----------------------------------------------------------------------------------------------------------------
* Equipment classes not analyzed due to lack of available data (in the case of RSV) or lack of market share (in
the case of VTS.1800).
2. Trial Standard Level Equations
Because the efficiency metric, PEI, is a normalized metric targeted
to create a standard level of 1.00, DOE has expressed its efficiency
levels in terms of C-values. Each C-value represents a normalized
efficiency for all size pumps, across the entire equipment class. (See
section III.C.1 for more information about C-values and the related
equations.) Table V.2 shows the appropriate C-values for each equipment
class, at each TSL.
Table V.2 C--Values at Each TSL
----------------------------------------------------------------------------------------------------------------
Equipment Class Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
ESCC.1800......................... 134.43 131.63 128.47 126.67 125.07 123.71
ESCC.3600......................... 135.94 134.60 130.42 128.92 127.35 125.29
ESFM.1800......................... 134.99 132.95 128.85 127.04 125.12 123.71
ESFM.3600......................... 136.59 134.98 130.99 129.26 127.77 126.07
IL.1800........................... 135.92 133.95 129.30 127.30 126.00 124.45
IL.3600........................... 141.01 138.86 133.84 131.04 129.38 127.35
RSV.1800*......................... 129.63 129.63 129.63 129.63 129.63 124.73
RSV.3600*......................... 133.20 133.20 133.20 133.20 133.20 129.10
VTS.1800*......................... 138.78 138.78 138.78 138.78 138.78 127.15
VTS.3600.......................... 138.78 136.92 134.85 131.92 129.25 127.15
----------------------------------------------------------------------------------------------------------------
* Equipment classes not analyzed due to lack of available data (in the case of RSV) or lack of market share (in
the case of VTS.1800).
B. Economic Justification and Energy Savings
1. Economic Impacts on Commercial Consumers
DOE analyzed the economic impacts on pump consumers by looking at
the effects potential new standards would have on the LCC and PBP, when
compared to the no-new-standards case described in section IV.F.1. DOE
also examined the impacts of potential new standards on consumer
subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency equipment would affect consumers in
two ways: (1) Purchase price would increase over the price of less
efficient equipment currently in the market, and (2) annual operating
costs would decrease as a result of increased energy savings. Inputs
used for calculating the LCC and PBP include total installed costs
(i.e., equipment price plus installation costs), and operating costs
(i.e., annual energy savings, 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.3 through Table V.16 show the LCC and PBP results for all
efficiency levels considered for all analyzed equipment classes. The
average costs at each TSL are calculated considering the full sample of
consumers that have levels of efficiency in the no-new-standards case
equal to or above the given TSL (who are not affected by a standard at
that TSL), as well as consumers who had non-compliant pumps in the no-
new-standards case and purchase more expensive and efficient redesigned
pumps in the standards case. The simple payback and LCC savings are
measured relative to the no-new-standards case efficiency distribution
in the compliance year (see section IV.F.1 for a description of the no-
new-standards case).
Table V.3--Average LCC and PBP Results by Efficiency Level for ESCC.1800
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Efficiency ---------------------------------------------------------------- Simple Average
TSL level First year's Lifetime payback lifetime
Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $1,661 $2,224 $17,558 $19,219 .............. 13
1....................................... 1 1,695 2,234 17,482 19,176 3.4 13
2....................................... 2 1,728 2,214 17,328 19,056 2.2 13
3....................................... 3 1,792 2,196 17,188 18,981 2.7 13
4....................................... 4 1,889 2,172 17,008 18,897 3.2 13
5....................................... 5 2,054 2,147 16,807 18,861 4.0 13
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards case.
[[Page 4407]]
Table V.4--Average LCC Savings Relative to the No-New-Standards Case for ESCC.1800
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings* experience
(2014$) net cost
----------------------------------------------------------------------------------------------------------------
1............................................................... 1 $43 12
2............................................................... 2 163 11
3............................................................... 3 238 24
4............................................................... 4 322 30
5............................................................... 5 357 43
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.5--Average LCC and PBP Results by Efficiency Level for ESCC.3600
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs 2014$
Efficiency ---------------------------------------------------------------- Simple Average
TSL level First year's Lifetime payback lifetime
Installed cost operating cost operating cost LCC (years) (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $1,108 $1,574 $9,800 $10,908 -- 11
1....................................... 1 1,113 1,570 9,777 10,890 1.5 11
2....................................... 2 1,126 1,556 9,689 10,816 1.0 11
3....................................... 3 1,157 1,546 9,630 10,787 1.8 11
4....................................... 4 1,186 1,533 9,544 10,730 1.9 11
5....................................... 5 1,233 1,510 9,400 10,633 2.0 11
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards case.
Table V.6--Average LCC Savings Relative to the No-New-Standards Case for ESCC.3600
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings* experience
(2014$) net cost
----------------------------------------------------------------------------------------------------------------
1............................................................... 1 $17 0.68
2............................................................... 2 92 1.8
3............................................................... 3 121 14
4............................................................... 4 178 14
5............................................................... 5 275 13
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.7--Average LCC and PBP Results by Efficiency Level for ESFM.1800
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Efficiency ---------------------------------------------------------------- Simple Average
TSL level First year's Lifetime payback years lifetime years
Installed cost operating cost operating cost LCC
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $1,917 $3,384 $41,409 $43,326 -- 23
1....................................... 1 1,920 3,383 41,398 43,318 2.5 23
2....................................... 2 1,970 3,365 41,182 43,152 2.9 23
3....................................... 3 2,032 3,344 40,919 42,950 2.9 23
4....................................... 4 2,181 3,302 40,403 42,584 3.2 23
5....................................... 5 2,347 3,262 39,908 42,254 3.5 23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards-case.
Table V.8--Average LCC Savings Relative to the No-New-Standards Case for ESFM.1800
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings* (2014$) experience net
cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 1 $8.0 0.27
2......................................................... 2 174 6.6
3......................................................... 3 376 15
4......................................................... 4 742 24
[[Page 4408]]
5......................................................... 5 1,072 26
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.9--Average LCC and PBP Results by Efficiency Level for ESFM.3600
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL Efficiency First year's Lifetime payback lifetime
level Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $1,367 $5,215 $51,540 $52,907 .............. 20
1....................................... 1 1,375 5,208 51,473 52,848 1.3 20
2....................................... 2 1,415 5,155 50,943 52,358 0.8 20
3....................................... 3 1,460 5,109 50,481 51,941 0.9 20
4....................................... 4 1,549 5,055 49,940 51,489 1.1 20
5....................................... 5 1,670 4,976 49,150 50,820 1.3 20
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards-case.
Table V.10--Average LCC Savings Relative to the No-New-Standards Case for ESFM.3600
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings * (2014$) experience net
cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 1 $58 0.30
2......................................................... 2 549 1.9
3......................................................... 3 966 4.8
4......................................................... 4 1,418 7.2
5......................................................... 5 2,087 8.6
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.11--Average LCC and PBP Results by Efficiency Level for IL.1800
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL Efficiency First year's Lifetime payback lifetime
level Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $2,157 $1,869 $16,817 $18,974 .............. 16
1....................................... 1 2,175 1,861 16,748 18,923 2.4 16
2....................................... 2 2,225 1,846 16,602 18,827 2.9 16
3....................................... 3 2,312 1,831 16,465 18,777 4.1 16
4....................................... 4 2,466 1,814 16,311 18,776 5.6 16
5....................................... 5 2,650 1,790 16,096 18,747 6.2 16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards-case.
Table V.12--Average LCC Savings Relative to the No-New-Standards Case for IL.1800
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings * (2014$) experience net
cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 1 $51 1.9
2......................................................... 2 147 7.3
3......................................................... 3 197 15
4......................................................... 4 198 26
5......................................................... 5 227 36
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
[[Page 4409]]
Table V.13--Average LCC and PBP Results by Efficiency Level for IL.3600
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL Efficiency First year's Lifetime payback lifetime
level Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $1,494 $2,021 $14,198 $15,692 .............. 13
1....................................... 1 1,504 2,013 14,142 15,646 1.4 13
2....................................... 2 1,546 1,994 14,008 15,554 2.0 13
3....................................... 3 1,600 1,972 13,852 15,452 2.2 13
4....................................... 4 1,673 1,955 13,734 15,407 2.8 13
5....................................... 5 1,822 1,922 13,497 15,320 3.3 13
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards-case.
Table V.14--Average LCC Savings Relative to the No-New-Standards Case for IL.3600
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings * (2014$) experience net
cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 1 $45 2.1
2......................................................... 2 138 13
3......................................................... 3 239 11
4......................................................... 4 285 14
5......................................................... 5 372 20
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.15--Average LCC and PBP Results by Efficiency Level for VTS.3600
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
---------------------------------------------------------------- Simple Average
TSL Efficiency First year's Lifetime payback lifetime
level Installed cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
--...................................... 0 $706 $1,084 $6,255 $6,961 .............. 11
1....................................... 1 712 1,080 6,231 6,943 1.3 11
2....................................... 2 727 1,077 6,218 6,944 3.1 11
3....................................... 3 747 1,061 6,128 6,875 1.8 11
4....................................... 4 787 1,044 6,029 6,817 2.0 11
5....................................... 5 838 1,028 5,937 6,775 2.4 11
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated considering all consumers. The PBP is measured relative to the no-new-standards-case.
Table V.16--Average LCC Savings Relative to the No-New-Standards Case for VTS.3600
----------------------------------------------------------------------------------------------------------------
Percent of
Efficiency Average LCC consumers that
TSL level savings * (2014$) experience net
cost
----------------------------------------------------------------------------------------------------------------
1......................................................... 1 $18 0.51
2......................................................... 2 17 27
3......................................................... 3 86 7.4
4......................................................... 4 144 10
5......................................................... 5 186 13
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
b. Consumer Subgroup Analysis
As shown in Table V.17 through Table V.23, the results of the life-
cycle cost subgroup analysis indicate that for all equipment classes
analyzed, the VFD subgroup fared slightly worse than the average
consumer, with the VFD subgroup being expected to have lower LCC
savings and longer payback periods than average. This occurs mainly
because with power reduction through use of a VFD, consumers use and
save less energy from pump efficiency improvements than do consumers
who do not use VFDs and so would benefit less from the energy
savings.\72\ Chapter 11 of the final rule TSD provides more detailed
discussion on the LCC subgroup analysis and results.
---------------------------------------------------------------------------
\72\ In this analysis, DOE does not count energy savings of
switching from throttling a pump to using a VFD, as this is not a
design option. Instead, DOE analyzes the life-cycle costs of
consumers who use VFDs with their pumps.
[[Page 4410]]
Table V.17--Comparison of Impacts for VFD Users With Non-VFD Users, ESCC.1800
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$) * Simple payback period (years)
TSL efficiency ----------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
-------------------------------------------------------------------------------------------------------------
1........................... 1 $9.3 $43 6.0 3.4
2........................... 2 64 163 3.9 2.2
3........................... 3 80 238 4.7 2.7
4........................... 4 88 322 5.5 3.2
5........................... 5 40 357 7.0 4.0
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.18--Comparison of Impacts for VFD Users With Non-VFD Users, ESCC.3600
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$) * Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $8.0 $17 2.5 1.5
2............................... 2 48 92 1.7 1.0
3............................... 3 53 121 3.0 1.8
4............................... 4 76 178 3.2 1.9
5............................... 5 116 275 3.3 2.0
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.19--Comparison of Impacts for VFD Users With Non-VFD Users, ESFM.1800
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$)* Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $4.0 $8.0 4.2 2.5
2............................... 2 81 175 4.9 2.9
3............................... 3 175 376 4.9 2.9
4............................... 4 334 742 5.5 3.2
5............................... 5 462 1072 6.0 3.5
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.20--Comparison of Impacts for VFD Users With Non-VFD Users, ESFM.3600
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$)* Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $32 $58 2.1 1.3
2............................... 2 306 549 1.4 0.8
3............................... 3 533 966 1.5 0.9
4............................... 4 764 1,418 1.9 1.1
5............................... 5 1,110 2,087 2.1 1.3
----------------------------------------------------------------------------------------------------------------
*Parentheses indicate negative values.
Table V.21--Comparison of Impacts for VFD Users with Non-VFD Users, IL.1800
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$)* Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $23 $51 3.9 2.4
2............................... 2 61 147 4.8 2.9
3............................... 3 53 197 6.8 4.1
4............................... 4 (11) 198 9.5 5.6
5............................... 5 (71) 227 11 6.2
----------------------------------------------------------------------------------------------------------------
*Parentheses indicate negative values.
[[Page 4411]]
Table V.22--Comparison of Impacts for VFD Users with Non-VFD Users, IL.3600
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$)* Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $23 $45 2.4 1.4
2............................... 2 61 138 3.3 2.0
3............................... 3 100 239 3.7 2.2
4............................... 4 97 285 4.6 2.8
5............................... 5 88 372 5.6 3.3
----------------------------------------------------------------------------------------------------------------
*Parentheses indicate negative values.
Table V.23--Comparison of Impacts for VFD Users with Non-VFD Users, VTS.3600
----------------------------------------------------------------------------------------------------------------
Energy LCC savings (2014$)* Simple payback period (years)
TSL efficiency ---------------------------------------------------------------
level VFD-users Non-VFD users VFD-users Non-VFD users
----------------------------------------------------------------------------------------------------------------
1............................... 1 $9.7 $18 1.9 1.3
2............................... 2 3.8 17 4.7 3.1
3............................... 3 41 86 2.8 1.8
4............................... 4 62 144 3.2 2.0
5............................... 5 69 186 3.7 2.4
----------------------------------------------------------------------------------------------------------------
*Parentheses indicate negative values.
c. Rebuttable Presumption Payback
As discussed in section III.G.2, EPCA provides a rebuttable
presumption that, in essence, an energy conservation standard is
economically justified if the increased purchase cost for a product
that meets the standard is less than three times the value of the
first-year energy savings resulting from the standard. However, DOE
routinely conducts a full economic analysis that considers the full
range of impacts, including those to the consumer, manufacturer,
nation, and environment, as required under 42 U.S.C. 6295(o)(2)(B)(i)
and 6316(a). The results of this 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. For comparison with the more
detailed analytical results, DOE calculated a rebuttable presumption
payback period for each TSL. Table V.24 shows the rebuttable
presumption payback periods for the pump equipment classes.
Table V.24--Rebuttable Presumption Payback Periods for Pump Equipment Classes
----------------------------------------------------------------------------------------------------------------
Rebuttable presumption payback (years)
Equipment class -------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
ESCC.1800....................... 3.5 2.2 2.7 3.2 4.0
ESCC.3600....................... 1.5 1.0 1.8 1.9 1.9
ESFM.1800....................... 2.5 2.8 2.9 3.2 3.5
ESFM.3600....................... 1.3 0.8 0.9 1.1 1.3
IL.1800......................... 2.3 2.9 4.1 5.6 6.2
IL.3600......................... 1.4 2.0 2.2 2.7 3.3
VTS.3600........................ 1.3 3.1 1.9 2.1 2.4
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
As noted above, DOE performed an MIA to estimate the impact of
energy conservation standards on manufacturers of pumps. The following
section summarizes 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.25 and Table V.26 depict the financial impacts (represented
by changes in INPV) of energy standards on manufacturers of pumps, as
well as the conversion costs that DOE expects manufacturers would incur
for all equipment classes at each TSL. To evaluate the range of cash
flow impacts on the CIP industry, DOE modeled two different mark-up
scenarios using different assumptions that correspond to the range of
anticipated market responses to energy conservation standards: (1) The
flat markup scenario; and (2) the cost recovery markup scenario. Each
of these scenarios is discussed immediately below.
Under the flat markup scenario, DOE maintains the same markup in
the no-new-standards case and standards case. This results in no price
change at a given efficiency level for the manufacturer's first
consumer. Because this markup scenario assumes that manufacturers would
not increase their pricing as a result of a standard even as they incur
conversion costs, this markup scenario is the most negative
[[Page 4412]]
and results in the most negative impacts on INPV.
In the cost recovery markup scenario, manufacturer markups are set
so that manufacturers recover their conversion costs over the analysis
period. That cost recovery is enabled by an increase in mark-up, which
results in higher sales prices for pumps even as manufacturer product
costs stay the same. The cost recovery calculation assumes
manufacturers raise prices on models where a redesign is necessitates
by the standard. This cost recovery scenario results in more positive
results than the flat markup scenario.
The set of results below shows potential INPV impacts for pump
manufacturers; Table V.25 reflects the lower bound of impacts (i.e.,
the flat markup scenario), and Table V.26 represents the upper bound
(the cost recovery markup scenario).
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 no-new-standards case and each standards case that results
from the sum of discounted cash flows from the base year 2015 through
2049, the end of the analysis period.
To provide perspective on the short-run cash flow impact, DOE
includes in the discussion of the results below a comparison of free
cash flow between the no-new-standards case and the standards case at
each TSL in the year before new 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 no-new-standards case.
Table V.25--Manufacturer Impact Analysis for Pumps--Flat Markup Scenario*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
Units No-new- -------------------------------------------------------------------------------
standards case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................... $M 120.0 110.3 80.5 20.9 (86.1) (229.0)
Change in INPV.......................... $M .............. (9.7) (39.5) (99.1) (206.1) (349.0)
% .............. (8.1) (32.9) (82.6) (171.8) (290.9)
Total Conversion Costs.................. $M .............. 22.8 81.2 177.2 337.9 550.6
Free Cash Flow (2018)................... $M 11.8 4.9 (16.6) (58.3) (128.2) (220.6)
Free Cash Flow (2018)................... % Decrease .............. 58.7 241.1 594.5 1186.7 1970.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values.
Table V.26--Manufacturer Impact Analysis for Pumps--Cost Recovery Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards -------------------------------------------------------------------------------
case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.................................... $M 120.0 120.4 128.3 124.5 113.0 93.5
Change in INPV.......................... $M .............. 0.5 8.4 4.6 (6.9) (26.5)
% .............. 0.4 7.0 3.8 (5.8) (22.1)
Total Conversion Costs.................. $M .............. 22.8 81.2 177.2 337.9 550.6
Free Cash Flow (2018)................... $M 11.8 4.9 (16.6) (58.3) (128.2) (220.6)
Free Cash Flow (2018)................... % Decrease .............. 58.7 241.1 594.5 1186.7 1970.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values.
TSL 1 represents EL 1 for all equipment classes except for
RSV.1800, RSV.3600 and VTS.1800 classes, which are set at EL 0. At TSL
1, DOE estimates impacts on INPV for pump manufacturers to range from -
8.1 percent to 0.4 percent, or a change in INPV of -$9.7 million to
$0.5 million. At this potential standard level, industry free cash flow
is estimated to decrease by approximately 58.7 percent to $4.9 million,
compared to the no-new-standards case value of $11.8 million in the
year before the compliance date (2019). The industry would need to
either drop product lines or engage in redesign of approximately 10% of
their models. DOE estimates that manufacturers would incur conversion
costs totaling $22.8 million, driven by hydraulic redesigns.
TSL 2 represents EL 2 across all equipment classes except for
RSV.1800, RSV.3600 and VTS.1800 classes, which are set at EL 0. At TSL
2, DOE estimates impacts on INPV for pump manufacturers to range from -
39.5 percent to 8.4 percent, or a change in INPV of -$32.9 million to
$7.0 million. At this potential standard level, industry free cash flow
is estimated to decrease by approximately 241.1 percent to -$16.6
million, compared to the no-new-standards case value of $11.8 million
in the year before the compliance date (2019). Conversion costs for an
estimated 25% of model offerings would be approximately $81.2 million
for the industry. At TSL 2, the industry's annual free cash flow is
estimated to drop below zero in 2018 and 2019, the years where
conversion investments are the greatest. The negative free cash flow
indicates that at least some manufacturers in the industry would need
to access cash reserves or borrow money from capital markets to cover
conversion costs.
TSL 3 represents EL 3 for all equipment classes except for
RSV.1800, RSV.3600 and VTS.1800 classes, which are set at EL 0. At TSL
3, DOE estimates impacts on INPV for pump manufacturers to range from -
82.6 percent to 3.8 percent, or a change in INPV of -$99.1 million to
$4.6 million. At TSL 3, industry conversion costs for an estimated 40%
of model offerings would be approximately $177.2 million. As conversion
costs increase, free cash flow continues to drop in the years before
the standard year. This increases the likelihood that manufacturers
will need to seek outside capital to support their conversion efforts.
Furthermore, as more models require redesign, technical resources for
hydraulic redesign could become an industry-wide constraint.
Participants in the CIP Working Group noted that the industry as a
whole relies on a limited pool of hydraulic redesign engineers and
consultants. These
[[Page 4413]]
specialists can support only a limited number of redesigns per year.
Industry representatives stated that TSL 3 could be an upper bound to
the number of redesigns possible in the four years between announcement
and effective year of the final rule.
TSL 4 represents EL4 across all equipment classes except for
RSV.1800, RSV.3600 and VTS.1800 classes, which are set at EL 0. At TSL
4, DOE estimates impacts on INPV for pump manufacturers to range from -
171.8 percent to -5.8 percent, or a change in INPV of -$206.1 million
to -$6.9 million. At this potential standard level, industry free cash
flow is estimated to decrease by approximately 1186.7 percent relative
to the no-new-standards case value of $11.8 million in the year before
the compliance date (2019). The total industry conversion costs for an
estimated 55% of model offerings would be approximately $337.9 million.
The 1186.7% drop in free cash flow in 2019 indicates that the
conversion costs are a very large investment relative to typical
industry operations. As noted above, at TSL 2 and TSL 3, manufacturers
may need to access cash reserves or outside capital to finance
conversion efforts. Additionally, the industry may not be able to
convert all necessary models before the compliance date of the
standard.
TSL 5 represents max-tech across all equipment classes. The
following economic results reflect all equipment classes except for
RSV.1800, RSV.3600 and VTS.1800 classes, for which DOE had insufficient
data to conduct the analysis. At TSL 5, DOE estimates impacts on INPV
for pump manufacturers to range from -290.9 percent to -22.1 percent,
or a change in INPV of -$349.0 million to -$26.5 million. At this
potential standard level, industry free cash flow is estimated to
decrease by approximately 1970.3 percent relative to the no-new-
standards case value of $11.8 million in the year before the compliance
date (2019). At max-tech, DOE estimates total industry conversion costs
for an estimated 70% of model offerings, would be approximately $550.6
million. The negative impacts related to cash availability, need for
outside capital, and technical resources constraints at TSLs 2, 3, and
4 would increase at TSL 5.
In section VI.A, DOE adopts labeling requirements recommended by
the CIP Working Group. DOE recognizes that such requirements may result
in costs to manufacturers. Costs of updating marketing materials for
redesigned pumps in each standards case were included in the conversion
costs for the industry and are accounted for in the industry cash-flow
analysis results and industry valuation figures presented in this
section.
b. Labeling Costs
Section VI.A of this rule discusses the labeling requirements for
pumps. Manufacturers would need to update labels and literature that
make representations of energy use (PEI) for all covered pumps,
including both pumps that are redesigned to meet the standard and pumps
that do not require redesign. For pumps that require redesign, the
industry provided estimates of the cost to produce all-new marketing
materials and labels as a part of their conversion costs feedback.
Conversion costs were accounted for in DOE's financial modeling of the
industry. For pumps that will not need to be redesigned, a much smaller
effort is needed to update literature to include the PEI metric when
making representations of energy use. DOE did not receive information
on the cost to update labels and literature for equipment models that
are already compliant with the energy conservation standard. As a
result, these costs are not explicitly included in the analysis. DOE
believes the labeling costs for compliant pumps to be significantly
less than the certification costs and that those costs would not
significantly impact the financial modeling results.
c. Impacts on Direct Employment
To quantitatively assess the impacts of energy conservation
standards on direct employment in the pumps industry, DOE used the GRIM
to estimate the domestic labor expenditures and number of employees in
the no-new-standards case and at each TSL from 2015 through 2049. DOE
used statistical data from the U.S. Census Bureau's 2011 Annual Survey
of Manufacturers (ASM),\73\ the results of the engineering analysis,
and interviews with manufacturers to determine the inputs necessary to
calculate industry-wide labor expenditures and domestic employment
levels. Labor expenditures related to manufacturing of the product are
a function of the labor intensity of the product, 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. Based on feedback from
manufacturers, DOE believes that 99% of the covered pumps are produced
in the U.S. Therefore, 99% of the total labor expenditures contribute
to domestic production employment.
---------------------------------------------------------------------------
\73\ ``Annual Survey of Manufactures (ASM),'' U.S. Census Bureau
(2011) (Available at: www.census.gov/manufacturing/asm/).
---------------------------------------------------------------------------
The total domestic 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 multiplied by the labor rate found in
the U.S. Census Bureau's 2011 ASM). The estimates of production workers
in this section cover workers, including line-supervisors directly
involved in fabricating and assembling a product within the
manufacturing 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
products covered by this rulemaking. DOE estimates that in the absence
of energy conservation standards, there would be 415 domestic
production workers for covered pumps.
In the standards case, DOE estimates an upper and lower bound to
the potential changes in employment that result from the standard.
Table V.27 shows the range of the impacts of potential energy
conservation standards on U.S. production workers of pumps.
[[Page 4414]]
Table V.27--Potential Changes in the Total Number of Pump Production Workers in 2020 *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level
--------------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- standards case 1 2 3 4 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Changes in Domestic ......................... (41) to 0................ (104) to 0............... (166) to 0.............. (228) to 0.............. (290) to 0.
Production Workers in 2020
(relative to a no-new-standards
case employment of 415).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Based on the engineering analysis, MPCs and labor expenditures do
not vary with efficiency and increasing TSLs. Additionally, the
shipments analysis models consistent shipments at all TSLs. As a
result, the GRIM predicts no change in employment in the standards
case. DOE considers this to be the upper bound for change in
employment. For a lower bound, DOE assumes a loss of employment that is
directly proportional to the portion of pumps being eliminated from the
market. Additional detail can be found in chapter 12 of the final rule
TSD.
DOE notes that the direct employment impacts discussed here are
independent of the indirect employment impacts to the broader U.S.
economy, which are documented in chapter 15 of the final rule TSD.
d. Impacts on Manufacturing Capacity
Based on the engineering analysis, DOE concludes that higher
efficiency pumps require similar production facilities, tooling, and
labor as baseline efficiency pumps. Based on the engineering analysis
and interviews with manufacturers, a new energy conservation standard
is unlikely to create production capacity constraints.
However, industry representatives, in interviews and in the CIP
Working Group meetings, expressed concern about the industry's ability
to complete the necessary number of hydraulic redesigns required to
comply with a new standard. (EERE-2013-BT-NOC-0039-0109, pp. 280-283)
In the industry, not all companies have the in-house capacity to
redesign pumps. Many companies rely on outside consultants for a
portion or all of their hydraulic design projects. Manufacturers were
concerned that a new standard would create more demand for hydraulic
design technical resources than are available in the industry.
The number of pumps that require redesign is directly tied to the
adopted standard level. The level adopted today is based on a level
that the CIP Working Group considered feasible for the industry.
e. Impacts on Subgroups of Manufacturers
Small manufacturers, niche equipment manufacturers, and
manufacturers exhibiting a cost structure substantially different from
the industry average could be affected disproportionately. Using
average cost assumptions developed for an industry cash-flow estimate
is inadequate to assess differential impacts among manufacturer
subgroups.
For the CIP industry, DOE identified and evaluated the impact of
energy conservation standards on one subgroup--small manufacturers. The
SBA defines a ``small business'' as having 500 employees or less for
NAICS 333911, ``Pump and Pumping Equipment Manufacturing.'' Based on
this definition, DOE identified 39 manufacturers in the CIP industry
that qualify as small businesses. For a discussion of the impacts on
the small manufacturer subgroup, see the regulatory flexibility
analysis in section VII.B of this document and chapter 12 of the final
rule TSD.
f. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of recent or impending regulations
may have serious consequences for some manufacturers, groups of
manufacturers, or an entire industry. Assessing the impact of a single
regulation may overlook this cumulative regulatory burden. In addition
to energy conservation standards, other regulations can significantly
affect manufacturers' financial operations. Multiple regulations
affecting the same manufacturer can strain profits and 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
product-specific Federal regulations that could affect pumps
manufacturers and with which compliance is required approximately three
years before or after the 2019 compliance date of standard adopted in
this document. The Department was not able to identify any additional
regulatory burdens that met these criteria.
3. National Impact Analysis
a. Significance of Energy Savings
For each TSL, DOE projected energy savings for pumps purchased in
the 30-year period that begins in the year of compliance with new
standards (2020-2049). 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 no-new-standards case
described in section IV.H.2.
Table V.28 presents the estimated primary energy savings and FFC
energy savings for each considered TSL. The approach is further
described in section IV.H.1.
[[Page 4415]]
Table V.28--Cumulative National Energy Savings for Pump Trial Standard Levels for Units Sold in 2020-2049
----------------------------------------------------------------------------------------------------------------
Trial standard level (quads)
All equipment classes -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Primary energy.................. 0.074 0.28 0.53 0.88 1.28
FFC energy...................... 0.077 0.29 0.55 0.91 1.34
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.
OMB Circular A-4 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.\74\ Circular A-4 also
directs agencies to consider the variability of key elements underlying
the estimates of benefits and costs. For this rulemaking, DOE 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.\75\
The review timeframe established in EPCA is generally not synchronized
with the equipment lifetime, product manufacturing cycles, or other
factors specific to pumps. 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 nine-year
analytical period are presented in Table V.29. The impacts are counted
over the lifetime of equipment purchased in 2020-2028.
---------------------------------------------------------------------------
\74\ U.S. Office of Management and Budget, ``Circular A-4:
Regulatory Analysis'' (Sept. 17, 2003) (Available at:
www.whitehouse.gov/omb/circulars_a004_a-4/).
\75\ EPCA requires DOE to review its standards at least once
every six years, and requires, for certain products, a three-year
period after any new standard is promulgated before compliance is
required, except that in no case may any new standards be required
within six years of the compliance date of the previous standards.
(42 U.S.C. 6295(m) and 6313(a)(6)(C)). While adding a six-year
review to the three-year compliance period adds up to nine years,
DOE notes that it may undertake reviews at any time within the six-
year period and that the three-year compliance date may yield to the
six-year backstop. A nine-year analysis period may not be
appropriate given the variability that occurs in the timing of
standards reviews and the fact that for some consumer products, the
compliance period is five years rather than three years.
Table V.29--Cumulative National Primary Energy Savings for Pump Trial Standard Levels for Units Sold in 2020-
2028
----------------------------------------------------------------------------------------------------------------
Trial standard level (quads)
Equipment class -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Primary energy.................. 0.020 0.074 0.14 0.24 0.35
FFC energy...................... 0.021 0.078 0.15 0.25 0.36
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total 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 pumps. In
accordance with OMB's guidelines on regulatory analysis,\76\ DOE
calculated NPV using both a 7-percent and a 3-percent real discount
rate. Table V.30 shows the consumer NPV results for each TSL considered
for pumps. In each case, the impacts cover the lifetime of equipment
purchased in 2020-2049.
---------------------------------------------------------------------------
\76\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at:
www.whitehouse.gov/omb/circulars_a004_a-4).
Table V.30--Cumulative Net Present Value of Consumer Benefit for Pump Trial Standard Levels for Units Sold in
2020-2049
----------------------------------------------------------------------------------------------------------------
Trial standard level (billion 2014$*)
Discount rate -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
3 percent....................... 0.29 1.1 1.9 3.0 4.2
7 percent....................... 0.11 0.39 0.69 1.1 1.4
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV.
Note: Components may not sum to total due to rounding.
The NPV results based on the aforementioned nine-year analytical
period are presented in Table V.31. The impacts are counted over the
lifetime of equipment purchased in 2020-2028. 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.
[[Page 4416]]
Table V.31--Cumulative Net Present Value of Consumer Benefit for Pump Trial Standard Levels for Units Sold in
2020-2028
----------------------------------------------------------------------------------------------------------------
Trial standard level (billion 2014$*)
Discount rate -------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
3 percent....................... 0.094 0.35 0.63 0.99 1.4
7 percent....................... 0.049 0.18 0.31 0.48 0.64
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV.
Note: Components may not sum to total due to rounding.
The results presented in this section reflect an assumption of no
change in pump prices over the forecast period. In addition, DOE
conducted sensitivity analyses using alternative price trends: one in
which prices decline over time, and one in which prices increase. These
price trends, and the associated NPV results, are described in appendix
10B of the final rule TSD.
c. Indirect Impacts on Employment
DOE expects energy conservation standards for pumps to reduce
energy costs for equipment owners, with the resulting net savings being
redirected to other forms of economic activity. Those shifts in
spending and economic activity could affect the demand for labor. 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 (2020-2024), where these
uncertainties are reduced.
The results suggest that these adopted standards would be likely to
have negligible impact on the net demand for labor in the economy. The
projected 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 more detailed results about anticipated indirect employment
impacts.
4. Impact on Utility or Performance of Equipment
Any technology option expected to lessen the utility or performance
of pumps was removed from consideration in the screening analysis. As a
result, DOE considered only one design option in this final rule,
hydraulic redesign. This design option does not involve geometry
changes affecting installation of the pump (i.e., the flanges that
connect it to external piping)--hence, there is no utility difference
that might affect use of the more-efficient pumps for replacement
applications. Further, the design option would not reduce the
acceptable performance envelope of the pump (e.g., the combinations of
pressure and flow for which the pump can be operated, restrictions to
less corrosive environments, restrictions on acceptable operating
temperature range). The hydraulic redesign would affect only the
required power input, making no change to pump utility or performance.
5. Impact of Any Lessening of Competition
DOE has also considered any lessening of competition that is likely
to result from new standards. The Attorney General determines the
impact, if any, of any lessening of competition likely to result from a
proposed standard, and transmits such determination in writing to the
Secretary, together with an analysis of the nature and extent of such
impact. (42 U.S.C. 6313(a)(6)(B)(ii)(V) and 6316(a).) 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.
In a letter dated July 10, 2015, DOJ stated that it did not have
sufficient information to conclude that the proposed energy
conservation standards or test procedure likely will substantially
lessen competition in any particular product or geographic market.
However, DOJ noted that the possibility exists that the proposed energy
conservation standards and test procedure may result in anticompetitive
effects in certain pump markets. Specifically in relation to the
proposed standards, DOJ expressed concern that ``by design, the bottom
quartile of pumps in each class of covered pumps will not meet the new
standards. The non-compliance of the bottom quartile of pump models may
result in some manufacturers stopping production of pumps altogether
and fewer firms producing models that comply with the new standards. At
this point, it is not possible to determine the impact on any
particular product or geographic market.''
As stated in section III.G.1.e, in all energy conservation
standards rulemakings that set new standards or amend standards, a
certain percentage of the market is affected by the standard. The
percentage of affected pumps is represented by any models below the
amended standard, which may have a distribution of efficiencies (i.e.,
some pump models will be closer to the new or amended standard level
than others). It is not unusual for a large fraction of models
(sometimes greater than 25%) to be at or near the baseline. As in all
rulemakings, manufacturers have a choice between re-designing a non-
compliant model to meet the standard and discontinuing it.
The ASRAC working group indicated that between 5 and 10% of models
requiring redesign may be dropped because current sales are very low.
(Docket No. EERE-2013-BT-NOC-0039, May 28 Pumps Working Group Meeting,
p.61-63) Manufacturers indicated that additional models may be dropped
where they can be replaced by another existing equivalent model
currently made by the same manufacturer, often under an alternative
brand. (Docket No. EERE-2013-BT-NOC-0039, April 29 Pumps Working Group
Meeting, p.100) In either case, the elimination of these models would
not have an adverse impact on the market or overall availability of
pumps to serve particular applications.
For these reasons, DOE concludes that the standard levels included
in this final rule will not result in adverse impacts on competition
within the pump marketplace. The remaining concerns in the DOJ letter
regarding the test procedure have been addressed in the parallel test
procedure rulemaking (Docket No. EERE-2013-BT-TP-0055). The Attorney
General's assessment is available at http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-STD-0031-0053.
[[Page 4417]]
6. Need of the Nation To Conserve Energy
An improvement in the energy efficiency of the equipment subject to
this rule is likely to improve the security of the nation's energy
system by reducing the overall demand for energy. Reduced electricity
demand may also improve the reliability of the electricity system.
Reductions in national electric generating capacity estimated for each
considered TSL are reported in chapter 15 of the final rule TSD.
Energy savings from new standards for the pump equipment classes
covered in this rulemaking could also produce environmental benefits in
the form of reduced emissions of air pollutants and greenhouse gases
associated with electricity production. Table V.32 provides DOE's
estimate of cumulative emissions reductions projected to result from
the TSLs considered in this rulemaking. The table includes both power
sector emissions and upstream emissions. The upstream emissions were
calculated using the multipliers discussed in section IV.K. DOE reports
annual CO2, NOX, and Hg emissions reductions for
each TSL in chapter 13 of the final rule TSD. As discussed in section
IV.L, DOE did not include NOX emissions reduction from power
plants in States subject to CAIR, because an energy conservation
standard would not affect the overall level of NOX emissions
in those States due to the emissions caps mandated by CSAPR.
Table V.32--Cumulative Emissions Reduction for Pumps Shipped in 2020-2049
----------------------------------------------------------------------------------------------------------------
TSL
-------------------------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 4.4 16 31 52 75
SO2 (thousand tons)............. 2.5 9.3 18 30 43
NOX (thousand tons)............. 4.9 18 35 57 84
Hg (tons)....................... 0.009 0.035 0.066 0.11 0.16
CH4 (thousand tons)............. 0.36 1.35 2.58 4.28 6.26
N2O (thousand tons)............. 0.051 0.19 0.36 0.60 0.88
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 0.25 0.93 1.78 2.95 4.33
SO2 (thousand tons)............. 0.05 0.17 0.33 0.55 0.80
NOX (thousand tons)............. 3.6 13 25 42 62
Hg (tons)....................... 0.0001 0.0004 0.0007 0.0012 0.0017
CH4 (thousand tons)............. 20 74 141 234 343
N2O (thousand tons)............. 0.002 0.008 0.016 0.027 0.040
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....... 4.6 17 33 54 80
SO2 (thousand tons)............. 2.6 9.5 18 30 44
NOX (thousand tons)............. 8.4 31 60 100 146
Hg (tons)....................... 0.009 0.035 0.067 0.11 0.16
CH4 (thousand tons)............. 20 75 143 238 349
N2O (thousand tons)............. 0.054 0.20 0.38 0.63 0.92
----------------------------------------------------------------------------------------------------------------
As part of the analysis for this rulemaking, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX estimated for each of the TSLs considered for pumps.
As discussed in section IV.L, for CO2, DOE used values for
the SCC developed by an interagency process. The interagency group
selected four sets of SCC values for use in regulatory analyses. Three
sets are based on the average SCC from three integrated assessment
models, at discount rates of 2.5 percent, 3 percent, and 5 percent. The
fourth set, which represents the 95th-percentile SCC estimate across
all three models at a 3-percent discount rate, is included to represent
higher-than-expected impacts from temperature change further out in the
tails of the SCC distribution. 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), $40.0/
metric ton (the average value from a distribution that uses a 3-percent
discount rate), $62.3/metric ton (the average value from a distribution
that uses a 2.5-percent discount rate), and $117/metric ton (the 95th-
percentile value from a distribution that uses a 3-percent discount
rate). The values for later years are higher due to increasing damages
(public health, economic and environmental) as the projected magnitude
of climate change increases.
Table V.33 presents the global value of CO2 emissions
reductions at each TSL. DOE calculated domestic values as a range from
7 percent to 23 percent of the global values, and these results are
presented in chapter 14 of the final rule TSD. See Section IV.L. for
further details.
[[Page 4418]]
Table V.33--Estimates of Global Present Value of CO2 Emissions Reduction for Pumps Shipped in 2020-2049
----------------------------------------------------------------------------------------------------------------
SCC Scenario * (million 2014$)
---------------------------------------------------------------
TSL 3% discount
5% discount 3% discount 2.5% discount rate, 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 29 134 214 410
2............................................... 104 492 787 1501
3............................................... 199 942 1506 2872
4............................................... 329 1559 2494 4753
5............................................... 482 2282 3651 6957
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 1.6 7.6 12 23
2............................................... 5.9 28 45 85
3............................................... 11 53 86 163
4............................................... 19 89 142 270
5............................................... 27 130 208 395
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 30 142 227 433
2............................................... 110 520 832 1586
3............................................... 211 995 1592 3035
4............................................... 348 1647 2636 5023
5............................................... 509 2411 3858 7353
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3 and $117
per metric ton (2014$).
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other greenhouse gas (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 in this rulemaking on reducing CO2 emissions 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 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 rulemaking the
most recent values and analyses resulting from the interagency review
process.
DOE also estimated a range for the cumulative monetary value of the
economic benefits associated with NOX emissions reductions
anticipated to result from new standards for the pump equipment that is
the subject of this rulemaking. The dollar-per-ton values that DOE used
are discussed in section IV.L. Table V.34 presents the cumulative
present value ranges for NOX emissions reductions for each
TSL calculated using seven-percent and three-percent discount rates.
This table presents values that use the low dollar-per-ton values.
Results that reflect the range of NOX dollar-per-ton values
are presented in Table V.36.
Table V.34--Estimates of Present Value of NOX Emissions Reduction for
Pumps Shipped in 2020-2049
------------------------------------------------------------------------
Million 2014$
-------------------------
TSL 3% discount 7% discount
rate rate
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1............................................. 15 5.8
2............................................. 55 21
3............................................. 104 40
4............................................. 172 65
5............................................. 252 95
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1............................................. 11 4.1
2............................................. 40 15
3............................................. 76 28
4............................................. 125 46
5............................................. 183 67
------------------------------------------------------------------------
Total FFC Emissions
------------------------------------------------------------------------
1............................................. 26 9.9
2............................................. 94 35
3............................................. 180 67
4............................................. 297 111
5............................................. 435 162
------------------------------------------------------------------------
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. 6295(o)(2)(B)(i)(VI) and
6316(a).) In developing the proposed standard, DOE considered the term
sheet of recommendations voted on by the CIP Working Group and approved
by the ASRAC. (See EERE-2013-BT-NOC-0039-0092.) DOE weighed the value
of such negotiation in establishing the standards proposed in in the
NOPR. DOE encouraged the negotiation of proposed standard levels, in
accordance with the FACA and the NRA, as a means for interested
parties, representing diverse points of view, to analyze and recommend
energy conservation standards to DOE. Such negotiations
[[Page 4419]]
may often expedite the rulemaking process. In addition, standard levels
recommended through a negotiation may increase the likelihood for
regulatory compliance, while decreasing the risk of litigation. The
standards adopted in this final rule reflect the proposed standards and
therefore the term sheet of recommendations voted on by the CIP Working
Group and approved by the ASRAC.
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.35 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 seven-percent and a three-percent discount rate.
The CO2 values used in the columns of each table correspond
to the four scenarios for the valuation of CO2 emission
reductions discussed above.
Table V.35--Net Present Value of Consumer Savings Combined With Net Present Value of Monetized Benefits From CO2
and NOX Emissions Reductions
[Billion 2014$]
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% Discount Rate added with:
---------------------------------------------------------------
SCC Value of SCC Value of SCC Value of SCC Value of
TSL $12.2/metric $40.0/metric $62.3/metric $117/metric
ton CO2 and 3% ton CO2 and 3% ton CO2 and 3% ton CO2 and 3%
Low Value for Low Value for Low Value for Low Value for
NOX NOX NOX NOX
----------------------------------------------------------------------------------------------------------------
1............................................... 0.3 0.5 0.5 0.7
2............................................... 1.3 1.7 2.0 2.7
3............................................... 2.3 3.1 3.7 5.2
4............................................... 3.7 5.0 6.0 8.4
5............................................... 5.2 7.1 8.5 12
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% Discount Rate added with:
---------------------------------------------------------------
TSL SCC Value of SCC Value of SCC Value of SCC Value of
$12.2/metric $40.0/metric $62.3/metric $117/metric
ton CO2 and 7% ton CO2 and 7% ton CO2 and 7% ton CO2 and 7%
Low Value for Low Value for Low Value for Low Value for
NOX NOX NOX NOX
----------------------------------------------------------------------------------------------------------------
1............................................... 0.1 0.3 0.3 0.6
2............................................... 0.5 0.9 1.3 2.0
3............................................... 1.0 1.8 2.3 3.8
4............................................... 1.5 2.8 3.8 6.2
5............................................... 2.1 4.0 5.4 8.9
----------------------------------------------------------------------------------------------------------------
Note: These label values represent the global SCC in 2015, in 2014$.
In considering the above results, two issues are relevant. 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
products shipped in 2020 to 2049. Because CO2 emissions have
a very long residence time in the atmosphere,\77\ the SCC values in
future years reflect future climate-related impacts that continue
beyond 2100.
---------------------------------------------------------------------------
\77\ 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. Conclusion
When considering standards, the new or amended energy conservation
standard that DOE adopts for any type (or class) of covered equipment
shall be designed to achieve the maximum improvement in energy
efficiency that the Secretary of Energy determines is technologically
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and
6316(a)). 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.
6295(o)(2)(B)(i) and 6316(a)). The new or amended standard must also
``result in significant conservation of energy.'' (42 U.S.C.
6295(o)(3)(B) and 6316(a)).
For this final rule, DOE considered the impacts of new standards
for pumps at each TSL, beginning with the maximum technologically
feasible level, to determine whether that level was economically
justified. Where 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 and saves a
significant amount of energy.
To aid the reader in understanding the benefits and/or burdens of
each TSL, tables in this section summarize the quantitative analytical
results for each TSL, based on the assumptions and methodology
discussed herein. The efficiency levels contained in each TSL are
described in section I.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 who may be disproportionately
affected by a national
[[Page 4420]]
standard, and impacts on employment. Section V.B.1.b presents the
estimated impacts of each TSL for these subgroups. DOE discusses the
impacts on direct employment in pump manufacturing in section 0, and
the indirect employment impacts in section V.B.3.c.
1. Benefits and Burdens of Trial Standard Levels Considered for Pumps
Standards
Table V.36 and Table V.37 summarize the quantitative impacts
estimated for each TSL for pumps. The national impacts are measured
over the lifetime of pumps purchased in the 30-year period that begins
in the year of compliance with new standards (2020-2049). The energy
savings, emissions reductions, and value of emissions reductions refer
to full-fuel-cycle results.
Table V.36--Summary of Analytical Results for Pumps: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
National FFC Energy Savings 0.077.................. 0.29................... 0.55.................. 0.91.................. 1.34.
quads.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Benefits (2014$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate.............. 0.29................... 1.1.................... 1.9................... 3.0................... 4.2.
7% discount rate.............. 0.11................... 0.39................... 0.69.................. 1.1................... 1.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)..... 4.6.................... 17..................... 33.................... 54.................... 80.
SO2 (thousand tons)........... 2.6.................... 9.5.................... 18.................... 30.................... 44.
NOX (thousand tons)........... 8.4.................... 31..................... 60.................... 100................... 146.
Hg (tons)..................... 0.009.................. 0.035.................. 0.067................. 0.11.................. 0.16.
CH4 (thousand tons)........... 20..................... 75..................... 143................... 238................... 349.
N2O (thousand tons)........... 0.054.................. 0.20................... 0.38.................. 0.63.................. 0.92.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ million) *......... 30 to 433.............. 110 to 1586............ 211 to 3035........... 348 to 5023........... 509 to 7353.
NOX--3% discount rate (2014$ 26 to 57............... 94 to 208.............. 180 to 398............ 297 to 658............ 435 to 963.
million).
NOX--7% discount rate (2014$ 10 to 22............... 35 to 79............... 67 to 151............. 111 to 248............ 162 to 362.
million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Note: Parentheses indicate negative values.
Table V.37--Summary of Analytical Results for Pumps: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV relative to a no- 110.3 to 120.4......... 80.5 to 128.3.......... 20.9 to 124.5......... (86.1) to 113.0....... (229.0) to 93.5
new-standards case value of
120.0 (2014$ million).
Industry NPV (% change)....... (8.1) to 0.4........... (32.9) to 7.0.......... (82.6) to 3.8......... (171.8) to (5.8)...... (290.9) to (22.1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Mean LCC Savings (2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC.1800..................... $43.................... $163................... $238.................. $322.................. $357
ESCC.3600..................... $17.................... $92.................... $121.................. $178.................. $275
ESFM.1800..................... $8.0................... $174................... $376.................. $742.................. $1,072
ESFM.3600..................... $58.................... $549................... $966.................. $1,418................ $2,087
IL.1800....................... $51.................... $147................... $197.................. $198.................. $227
IL.3600....................... $45.................... $138................... $239.................. $285.................. $372
VTS.3600...................... $18.................... $17.................... $86................... $144.................. $186
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC.1800..................... 3.4.................... 2.2.................... 2.7................... 3.2................... 4.0
ESCC.3600..................... 1.5.................... 1.0.................... 1.8................... 1.9................... 2.0
ESFM.1800..................... 2.5.................... 2.9.................... 2.9................... 3.2................... 3.5
ESFM.3600..................... 1.3.................... 0.8.................... 0.9................... 1.1................... 1.3
IL.1800....................... 2.4.................... 2.9.................... 4.1................... 5.6................... 6.2
IL.3600....................... 1.4.................... 2.0.................... 2.2................... 2.8................... 3.3
VTS.3600...................... 1.3.................... 3.1.................... 1.8................... 2.0................... 2.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent Consumers with Net Cost (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ESCC.1800..................... 12..................... 11..................... 24.................... 30.................... 43
ESCC.3600..................... 0.68................... 1.8.................... 14.................... 14.................... 13
ESFM.1800..................... 0.27................... 6.6.................... 15.................... 24.................... 26
ESFM.3600..................... 0.30................... 1.9.................... 4.8................... 7.2................... 8.6
IL.1800....................... 1.9.................... 7.3.................... 15.................... 26.................... 36
IL.3600....................... 2.1.................... 13..................... 11.................... 14.................... 20
[[Page 4421]]
VTS.3600...................... 0.51................... 27..................... 7.4................... 10.................... 13
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.
First, DOE considered TSL 5, which would save an estimated total of
1.34 quads of energy, an amount DOE considers significant. TSL 5 has an
estimated NPV of consumer benefit of $1.4 billion using a 7-percent
discount rate, and $4.2 billion using a 3-percent discount rate. The
cumulative emissions reductions at TSL 5 are 80 million metric tons of
CO2, 146 thousand tons of NOX, and 0.16 tons of
Hg. The estimated monetary value of the CO2 emissions
reductions at TSL 5 ranges from $509 million to $7,353 million. At TSL
5, the average LCC savings ranges from $186 to $2,087 depending on
equipment class. The fraction of consumers with negative LCC impacts
ranges from 8.6 percent to 43 percent depending on equipment class. At
TSL 5, the projected change in INPV ranges from a decrease of $349.0
million to a decrease of $26.5 million. At TSL 5, DOE recognizes the
risk of negative impacts if manufacturers' expectations concerning
reduced profit margins are realized. If the lower bound of the range of
impacts is reached, TSL 5 could result in a net loss of up to 290.9
percent in INPV for manufacturers.
Accordingly, the Secretary concludes that, at TSL 5 for pumps, the
benefits of energy savings, national net present value of consumer
benefit, LCC savings, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would be outweighed by
the fraction of consumers with negative LCC impacts and the significant
burden on the industry. Consequently, DOE has concluded that TSL 5 is
not economically justified.
Next, DOE considered TSL 4, which would save an estimated total of
0.91 quads of energy, an amount DOE considers significant. TSL 4 has an
estimated NPV of consumer benefit of $1.1 billion using a 7-percent
discount rate, and $3.0 billion using a 3-percent discount rate. The
cumulative emissions reductions at TSL 4 are 54 million metric tons of
CO2, 100 thousand tons of NOX, and 0.11 tons of
Hg. The estimated monetary value of the CO2 emissions
reductions at TSL 4 ranges from $348 million to $5,023 million. At TSL
4, the average LCC savings ranges from $144 to $1,418 depending on
equipment class. The fraction of consumers with negative LCC impacts
ranges from 7.2 percent to 30 percent depending on equipment class. At
TSL 4, the projected change in INPV ranges from a decrease of $206.1
million to a decrease of $6.9 million. At TSL 4, DOE recognizes the
risk of negative impacts if manufacturers' expectations concerning
reduced profit margins are realized. If the lower bound of the range of
impacts is reached, TSL 4 could result in a net loss of up to 171.8
percent in INPV for manufacturers.
Accordingly, the Secretary concludes that at TSL 4 for pumps, the
benefits of energy savings, national net present value of consumer
benefit, LCC savings, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would be outweighed by
the fraction of consumers with negative LCC impacts and the significant
burden on the industry. Consequently, DOE has concluded that TSL 4 is
not economically justified.
Next, DOE considered TSL 3, which would save an estimated total of
0.55 quads of energy, an amount DOE considers significant. TSL 3 has an
estimated NPV of consumer benefit of $0.69 billion using a 7-percent
discount rate, and $1.9 billion using a 3-percent discount rate. The
cumulative emissions reductions at TSL 3 are 33 million metric tons of
CO2, 60 thousand tons of NOX, and 0.07 tons of
Hg. The estimated monetary value of the CO2 emissions
reductions at TSL 3 ranges from $211 million to $3,035 million. At TSL
3, the average LCC savings range from $86 to $966 depending on
equipment class. The fraction of consumers with negative LCC impacts
ranges from 4.8 percent to 24 percent depending on equipment class. At
TSL 3, the projected change in INPV ranges from a decrease of $99.1
million to an increase of $4.6 million. If the lower bound of the range
of impacts is reached, TSL 3 could result in a net loss of up to 82.6
percent in INPV for manufacturers.
Accordingly, the Secretary concludes that at TSL 3 for pumps, the
benefits of energy savings, national net present value of consumer
benefit, LCC savings, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would be outweighed by
the fraction of consumers with negative LCC impacts and the significant
burden on the industry. Consequently, DOE has concluded that TSL 3 is
not economically justified.
Next, DOE considered TSL 2, which would save an estimated total of
0.29 quads of energy, an amount DOE considers significant. TSL 2 has an
estimated NPV of consumer benefit of $0.39 billion using a 7-percent
discount rate, and $1.1 billion using a 3-percent discount rate. The
cumulative emissions reductions at TSL 2 are 17 million metric tons of
CO2, 31 thousand tons of NOX, and 0.035 tons of
Hg. The estimated monetary value of the CO2 emissions
reductions at TSL 3 ranges from $110 million to $1,586 million. At TSL
2, the average LCC savings range from $17 to $549 depending on
equipment class. The fraction of consumers with negative LCC impacts
ranges from 1.8 percent to 27 percent depending on equipment class. At
TSL 2, the projected change in INPV ranges from a decrease of $39.5
million to an increase of $8.4 million. If the lower bound of the range
of impacts is reached, TSL 2 could result in a net loss of up to 32.9
percent in INPV for manufacturers.
After considering the analysis and weighing the benefits and the
burdens, DOE has concluded that at TSL 2 for pumps, the benefits of
energy savings, positive NPV of consumer benefit, positive average
consumer LCC savings, emission reductions, and the estimated monetary
value of the emissions reductions would outweigh the fraction of
consumers with negative LCC impacts and the potential reduction in INPV
for manufacturers.
In addition, TSL 2 is consistent with the recommendations voted on
by the CIP Working Group and approved by the ASRAC. (See EERE-2013-BT-
NOC-0039-0092.) DOE has encouraged the negotiation of new standard
levels, in accordance with the FACA and the NRA, as a means for
interested parties, representing diverse points of view, to analyze and
recommend energy conservation standards to DOE. Such negotiations may
often expedite the rulemaking process. In addition, standard levels
recommended through a negotiation may increase the likelihood for
regulatory compliance, while decreasing the risk of litigation.
The Secretary of Energy has concluded that TSL 2 would save a
significant amount of energy and is
[[Page 4422]]
technologically feasible and economically justified. Therefore, DOE
adopts the energy conservation standards for pumps at TSL 2. Table V.38
presents the new energy conservation standards for pumps.
Table V.38--New Energy Conservation Standards for Pumps
------------------------------------------------------------------------
Adopted
Equipment class standard Adopted C-
level * value
------------------------------------------------------------------------
ESCC.1800.CL.................................. 1.00 128.47
ESCC.3600.CL.................................. 1.00 130.42
ESCC.1800.VL.................................. 1.00 128.47
ESCC.3600.VL.................................. 1.00 130.42
ESFM.1800.CL.................................. 1.00 128.85
ESFM.3600.CL.................................. 1.00 130.99
ESFM.1800.VL.................................. 1.00 128.85
ESFM.3600.VL.................................. 1.00 130.99
IL.1800.CL.................................... 1.00 129.30
IL.3600.CL.................................... 1.00 133.84
IL.1800.VL.................................... 1.00 129.30
IL.3600.VL.................................... 1.00 133.84
RSV.1800.CL................................... 1.00 129.63
RSV.3600.CL................................... 1.00 133.20
RSV.1800.VL................................... 1.00 129.63
RSV.3600.VL................................... 1.00 133.20
VTS.1800.CL................................... 1.00 138.78
VTS.3600.CL................................... 1.00 134.85
VTS.1800.VL................................... 1.00 138.78
VTS.3600.VL................................... 1.00 134.85
------------------------------------------------------------------------
* A pump model is compliant if its PEI rating is less than or equal to
the adopted standard.
2. Summary of Annualized Benefits and Costs of the Adopted Standards
The benefits and costs of these adopted standards can also be
expressed in terms of annualized values. The annualized monetary values
are the sum of: (1) The annualized national economic value, expressed
in 2014$, of the benefits from operating equipment that meets the
adopted standards (consisting primarily of operating cost savings from
using less energy, minus increases in equipment purchase costs, which
is another way of representing consumer NPV), and (2) the monetary
value of the benefits of emission reductions, including CO2
emission reductions.\78\ The value of the CO2 reductions
(i.e., SCC), is calculated using a range of values per metric ton of
CO2 developed by a recent interagency process. See section
IV.L.
---------------------------------------------------------------------------
\78\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2014, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(2020, 2030, etc.), and then discounted the present value from each
year to 2015. The calculation uses discount rates of 3 and 7 percent
for all costs and benefits except for the value of CO2
reductions, for which DOE used case-specific discount rates. Using
the present value, DOE then calculated the fixed annual payment over
a 30-year period, starting in the compliance year that yields the
same present value.
---------------------------------------------------------------------------
Although combining the values of operating savings and
CO2 reductions provides a useful perspective, two issues
should be considered. First, the national operating savings are
domestic U.S. consumer 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 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 2020-2049. The SCC
values, on the other hand, reflect the present value of future climate-
related impacts resulting from the emission of one metric ton of
CO2 in each year. These impacts continue well beyond 2100.
Table V.39 shows the annualized values for the adopted standards
for pumps. The results under the primary estimate are as follows. Using
a 7-percent discount rate for benefits and costs other than
CO2 reduction, for which DOE used a 3-percent discount rate
along with the average SCC series that has a value of $40.0/t in 2015,
the cost of the standards adopted in this rule is $17 million per year
in increased equipment costs, while the benefits are $58 million per
year in reduced equipment operating costs, $30 million in
CO2 reductions, and $3.7 million in reduced NOX
emissions. In this case, the net benefit amounts to $74 million per
year. Using a 3-percent discount rate for all benefits and costs and
the average SCC series that has a value of $40.0/t in 2015, the cost of
the standards adopted in this rule is $17 million per year in increased
equipment costs, while the benefits are $78 million per year in reduced
operating costs, $30 million in CO2 reductions, and $5.4
million in reduced NOX emissions. In this case, the net
benefit amounts to $96 million per year.
Table V.39--Annualized Benefits and Costs of Adopted Energy Conservation Standards for Pumps *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2014$/year
Discount rate -----------------------------------------------------------------------------------
Primary estimate Low net benefits estimate High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7%.............................. 58........................ 52........................ 68.
3%.............................. 78........................ 70........................ 94.
CO2 Reduction Value ($12.2/t case) 5%.............................. 8.7....................... 8.1....................... 9.5.
**.
CO2 Reduction Value ($40.0/t case) 3%.............................. 30........................ 28........................ 33.
**.
CO2 Reduction Value ($62.3/t case) 2.5%............................ 44........................ 41........................ 48.
**.
CO2 Reduction Value ($117/t case) 3%.............................. 91........................ 84........................ 99.
**.
NOX Reduction Value [dagger]...... 7%.............................. 3.7....................... 3.5....................... 9.0.
3%.............................. 5.4....................... 5.0....................... 13.
Total Benefits [dagger][dagger]... 7% plus CO2 range............... 70 to 152................. 64 to 140................. 86 to 176.
7%.............................. 91........................ 83........................ 109.
3% plus CO2 range............... 92 to 174................. 83 to 159................. 116 to 206.
3%.............................. 113....................... 102....................... 139.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment 7%.............................. 17........................ 19........................ 17.
Costs.
3%.............................. 17........................ 20........................ 18.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............ 7% plus CO2 range............... 53 to 136................. 45 to 121................. 69 to 159.
[[Page 4423]]
7%.............................. 74........................ 65........................ 92.
3% plus CO2 range............... 75 to 157................. 63 to 139................. 99 to 189.
3%.............................. 96........................ 83........................ 122.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with pumps shipped in 2020-2049. These results include benefits to consumers which
accrue after 2049 from the pumps purchased from 2020-2049. The results account for the incremental variable and fixed costs incurred by manufacturers
due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits Estimates utilize
projections of energy prices and shipments from the AEO 2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In
addition, incremental equipment costs reflect constant real prices in the Primary Estimate, an increase in the Low Benefits Estimate, and a decrease
in the High Benefits Estimate. The methods used to derive projected price trends are explained in IV.F.2.a.
** The CO2 values represent global monetized values of the SCC, in 2014$, in 2015 under several scenarios of the updated SCC values. The first three
cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th
percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series incorporate an escalation factor.
[dagger] The $/ton values used for NOX are described in section IV.L.2. DOE estimated the monetized value of NOX emissions reductions using benefit per
ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further discussion. For DOE's Primary Estimate and Low Net
Benefits Estimate, the agency is presenting a national benefit-per-ton estimate for particulate matter emitted from the Electric Generating Unit
sector based on an estimate of premature mortality derived from the ACS study (Krewski et al., 2009). For DOE's High Net Benefits Estimate, the
benefit-per-ton estimates were based on the Six Cities study (Lepuele et al., 2011), which are nearly two-and-a-half times larger than those from the
ACS study. Because of the sensitivity of the benefit-per-ton estimate to the geographical considerations of sources and receptors of emission, DOE
intends to investigate refinements to the agency's current approach of one national estimate by assessing the regional approach taken by EPA's
Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with 3-percent discount rate
($40.0/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the
labeled discount rate, and those values are added to the full range of CO2 values.
VI. Labeling and Certification Requirements
A. Labeling
EPCA includes provisions for labeling. (42 U.S.C. 6315). EPCA
authorizes DOE to establish labeling requirements only if certain
criteria are met. Specifically, DOE must determine that: (1) Labeling
in accordance with section 6315 is technologically and economically
feasible with respect to any particular equipment class; (2)
significant energy savings will likely result from such labeling; and
(3) labeling in accordance with section 6315 is likely to assist
consumers in making purchasing decisions. (42 U.S.C. 6315(h)).
If these criteria are met, EPCA specifies certain aspects of
equipment labeling that DOE must consider in any rulemaking
establishing labeling requirements for covered equipment. At a minimum,
such labels must include the energy efficiency of the affected
equipment, as tested under the prescribed DOE test procedure. The
labeling provisions may also consider the addition of other
requirements, including: Directions for the display of the label; a
requirement to display on the label additional information related to
energy efficiency or energy consumption, which may include instructions
for maintenance and repair of the covered equipment, as necessary to
provide adequate information to purchasers; and requirements that
printed matter displayed or distributed with the equipment at the point
of sale also include the information required to be placed on the
label. (42 U.S.C. 6315(b) and 42 U.S.C. 6315(c)).
The CIP Working Group recommended labeling requirements in the term
sheet. (See EERE-2013-BT-NOC-0039-0092, recommendation #12.)
Specifically, the working group recommended that pumps be labeled based
on the configuration in which they are sold. Table VI.1 shows the
information that the CIP Working Group recommended be included on a
pump nameplate. (See EERE-2013-BT-NOC-0039-0092, recommendation #12.)
Table VI.1--Labeling Requirements for Pump Nameplate
------------------------------------------------------------------------
Bare pump + motor
Bare pump Bare pump + motor + controls
------------------------------------------------------------------------
PEICL........................... PEICL............. PEIVL
Model number.................... Model number...... Model number
Impeller diameter for each unit. Impeller diameter Impeller diameter
for each unit. for each unit
------------------------------------------------------------------------
Note: The impeller diameter referenced is the actual diameter of each
unit as sold, not the full impeller diameter at which the pump is
rated.
DOE reviewed the recommendations of the working group with respect
to the three requirements that must be met for DOE to promulgate
labeling rules. (42 U.S.C. 6315(h)). In the NOPR, DOE determined that
all three criteria had been met and proposed the labeling requirements
as recommended by the working group. 80 FR 17826, 17882 (April 2, 2015)
In response to the NOPR, HI agreed with the labeling requirements
proposed. (HI, No. 45 at p. 6). The Advocates and the CA IOUs agreed
that requiring labels may increase demand for more efficient pumps and
facilitate comparison of expected performance of bare pumps and pumps
with controls for consumers. (The Advocates, No. 49 at p. 1; CA IOUs,
No. 50 at p. 1-2)
The changes made in this final rule, as described in the
methodology sections, did not significantly impact DOE's analysis of
the labeling proposals.
[[Page 4424]]
For these reasons, DOE is adopting the labeling requirements
recommended by the CIP Working Group, and proposed in the NOPR, as
shown in Table VI.1. Additionally, DOE requires the same labeling
requirements for marketing materials as for the pump nameplate. See 42
U.S.C. 6315(c)(3).
DOE adopts the following requirements for display of information:
All orientation, spacing, type sizes, typefaces, and line widths to
display this required information must be the same as or similar to the
display of the other performance data on the pump's permanent
nameplate. The PEICL or PEIVL, as appropriate to
a given pump model, must be identified in the form ``PEICL
[certified value of PEICL]'' or ``PEIVL
[certified value of PEIVL].'' The model number shall be in
one of the following forms: ``Model [model number]'' or ``Model number
[model number]'' or ``Model No. [model number].'' The unit's impeller
diameter must be in the form either ``Imp. Dia. [actual diameter]
(in.).'' or ``Imp. Dia.__ (in.)'' as discussed below.
DOE is aware that when pump manufacturers sell a bare pump to a
distributor, the distributor may trim the impeller prior to selling the
pump to a customer. In response to the NOPR, Wilo commented that the
labeling of the impeller diameter should be filled in by the final
distributor. (Wilo, No. 44 at pp. 7-8) Similarly, HI commented that the
impeller diameter field should be left blank and filled in by the final
distributor or manufacturer. (HI, No. 45 at p. 6; NOPR public meeting
transcript, Mark Handzel, on behalf of HI, No. 51 at pp. 52-55) HI's
comments indicate that in some cases the pump manufacturer will act as
the ``final distributor,'' and sell directly to the end-user. DOE
agrees with HI's indication that most, but not all, pumps are sold
through distributors. Consequently, in this final rule, DOE adopts the
requirement that manufacturers must mark each pump's actual impeller
diameter on the label, if distributed in commerce directly to end-user;
otherwise this field must be left blank. DOE has concluded that this
requirement meets the original intent of the CIP working group, while
also addressing the concerns voiced HI and Wilo.
B. Certification Requirements
In the NOPR, DOE proposed to adopt the reporting requirements in a
new Sec. 429.59 within subpart B of 10 CFR part 429. This section also
includes sampling requirements, which are discussed in the test
procedure final rule. Consistent with other types of covered products
and equipment, the proposed section (10 CFR 429.59) would specify that
the general certification report requirements contained in 10 CFR
429.12 apply to pumps. The additional requirements proposed in 10 CFR
429.59 would require manufacturers to supply certain additional
information to DOE in certification reports for pumps to demonstrate
compliance with any energy conservation standards established as a
result of this rulemaking.
The CIP Working Group recommended that the following data be
included in the certification reports:
Manufacturer name;
Model number(s);
Equipment class;
PEICL or PEIVL as applicable;
BEP flow rate and head;
Rated speed;
Number of stages tested;
Full impeller diameter (in.);
Whether the PEICL or PEIVL is
calculated or tested; and
Input power to the pump at each load point i (P
ini).
(See EERE-2013-BT-NOC-0039-0092, recommendation No. 13.)
In the NOPR, DOE proposed some modifications and additions to the
certification report for clarity and to assist with verification. The
proposed items included:
Manufacturer name;
Model number(s);
Equipment class;
PEICL or PEIVL as applicable;
BEP flow rate in gallons per minute (gpm) and head in feet
when operating at nominal speed;
Rated (tested) speed in revolutions per minute (rpm) at
the BEP of the pump;
Number of stages tested;
Full impeller diameter (in.);
Whether the PEICL or PEIVL is
calculated or tested;
Driver power input at each required load point i
(Pini), corrected to nominal speed, in horsepower (hp);
Nominal speed for certification in revolutions per minute
(rpm);
The configuration in which the pump is being rated (i.e.,
bare pump, a pump sold with a motor, or a pump sold with a motor and
continuous or non-continuous controls);
For pumps sold with electric motors regulated by DOE's
energy conservation standards for electric motors at Sec. 431.25 other
single-phase induction motors (with or without controls): Motor
horsepower (hp) and nominal motor efficiency, in percent (%);
PERCL or PERVL, as applicable;
Pump efficiency at BEP; and
For VTS pumps, the bowl diameter in inches (in.).
(80 FR 17826, 17891 (April 2, 2015))
In reviewing the certification report requirements for the final
rule, DOE has determined that the requirements of Sec. 429.12(b)
already require reporting of manufacturer name, model number(s), and
equipment class for all covered products and equipment. For these
reasons, DOE is withdrawing its proposal to include these requirements
in Sec. 429.59. With respect to the certification requirements, the
equipment class reported refers to those listed in the table in Sec.
431.465(b); e.g., ESCC.1800.CL, ESCC.1800.VL, IL.1800.CL, etc.
With respect to reporting model number(s), a certification report
must include a basic model number and the manufacturer's (individual)
model number(s). A manufacturer's model number (individual model
number) is the identifier used by a manufacturer to uniquely identify
what is commonly considered a ``model'' in industry--all units of a
particular design. The manufacturer's (individual) model number
typically appears on the product nameplate, in product catalogs and in
other product advertising literature. In contrast, the basic model
number is a number used by the manufacturer to indicate to DOE how the
manufacturer has grouped its individual models for the purposes of
testing and rating; many manufacturers choose to use a model number
that is similar to the individual model numbers in the basic model, but
that is not required. The manufacturer's individual model number(s) in
each basic model must reference not only the bare pump, but also any
motor and controls with which the pump is being rated. This may be
accomplished in one of two ways, depending on the manufacturer's normal
business practices. Specifically: (1) Pumps distributed in commerce as
a bare pump require the bare pump individual model number reported; (2)
pumps distributed in commerce as a bare pump with driver require the
bare pump and driver individual model numbers reported; and (3) pumps
distributed in commerce as a bare pump with driver and controls require
the bare pump, driver, and controls individual model numbers reported.
Alternatively, the manufacturer may specify a single manufacturer
individual model number for the bare pump with driver and/or controls
if the manufacturer routinely uses that model number in marketing
materials and on the product to indicate a particular combination of
bare pump and driver or bare pump, driver and controls. For example,
one manufacturer
[[Page 4425]]
may certify basic model ABC as including individual model ABC + EZB12 +
AC2, where ABC is the bare pump model number, EZB12 is the driver model
number, and AC2 is the control model number. Another manufacturer may
certify basic model DEF as including individual model number
DEF12DQ45Z, which is the model number the manufacturer routinely uses
to indicate the bare pump DEF with a particular driver and set of
controls.
After further review, DOE has also determined that the use of the
term ``rated speed'' in the CIP working group term sheet was ambiguous.
In the NOPR, DOE interpreted this to mean tested speed, and also added
an additional requirement for nominal speed, as discussed previously.
After reviewing the transcripts of the working group meetings, DOE has
determined that it is unclear whether the CIP Working Group actually
intended to refer to tested or nominal speed of the pump. DOE has
determined that reporting tested speed is not necessary as no two pumps
in a sample are likely to be tested at exactly the same speed.
Therefore, DOE does not require reporting of ``rated (tested) speed''.
However, DOE does require reporting of nominal speed.
In response to the NOPR, HI and Wilo commented against the
inclusion of pump efficiency at BEP in certification reports. (HI, No.
45 at p. 7; Wilo, No. 44 at p. 8) HI agreed with only the certification
reporting requirements agreed to by the ASRAC CIP working group.
Conversely, EEI requested additional data, such as watts per gpm or
annual kWh per gpm, to help the public better understand the relative
efficiencies of pumps. (EEI, No. 46 ] at p. 2)
DOE notes that in the NOPR, six requirements were added beyond
those agreed to by the CIP working group. Of these, four were added in
order for DOE to conduct verification (i.e., nominal speed;
configuration; electric motor information; and for VTS pumps, bowl
diameter). As noted previously, DOE has determined that nominal speed
was a duplicative requirement and has withdrawn that proposal. However,
DOE does require configuration, electric motor information, and bowl
diameter to conduct verification. DOE maintains these three
requirements in the final rule; however, DOE will not post this
information on its Web site.
In response to HI and Wilo's comments, DOE is adopting a reporting
option for PER and pump efficiency at BEP, the two reporting
requirements that are not required for DOE to conduct enforcement
testing and were not recommended by the CIP Working Group. DOE does not
add the information requested by EEI, because consumers of pumps in the
scope of this rulemaking typically rely on more sophisticated
information, and the suggested metrics may be more relevant to
commodity-type pumps in the residential sector.
In summary, DOE is modifying required data for certification
reports in this final rule based on feedback from interested parties
and review of its requirements. The following data is required for
certification reports and will be made public on DOE's Web site:
PEICL or PEIVL as applicable;
Number of stages tested;
Full impeller diameter (in);
Whether the PEICL or PEIVL is
calculated or tested;
BEP flow rate in gallons per minute (gpm) and head in feet
when operating at nominal speed;
Nominal speed of rotation in revolutions per minute (rpm);
and
Driver power input at each required load point i
(P\in\i), corrected to nominal speed, in horsepower (hp).
The following data will be required, but will not be posted on
DOE's Web site:
The configuration in which the pump is being rated (i.e.,
bare pump, a pump sold with a motor, or a pump sold with a motor and
continuous or non-continuous controls);
For pumps sold with electric motors regulated by DOE's
energy conservation standards for electric motors at Sec. 431.25 (with
or without controls): Motor horsepower (hp) and nominal motor
efficiency, in percent (%);
For pumps sold with submersible motors (with or without
controls): Motor horsepower (hp); and
For VTS pumps, bowl diameter in inches (in.).
Additionally, the following data will be optional for inclusion in
certification reports, and if provided, will be public:
PERCL or PERVL, as applicable; and
Pump efficiency at BEP.
In response to the NOPR, the Advocates and the CA IOUs requested
that DOE set up the certification database early for voluntary
certification in order for utilities to gather data and incentivize
high efficiency pumps. (Advocates, No. 49 at p. 1-2; CA IOUs, No. 50 at
p. 2) DOE typically provides templates for certification early and
allows for early voluntary certification.
C. Representations
In response to the NOPR, HI expressed concern with the general
language around 42 U.S.C. 6314(d) prohibited representation. HI
suggested that pump manufacturers be allowed to continue using pre-
existing efficiency curves and sizing software that is used directly by
end users and distributors to purchase pumps. HI requested that DOE
clearly state in the final rule that prohibited representation only
applies to PEI and PER representation. (HI, No. 45 at p. 2) As
representations are explicitly discussed in the pumps test procedure
rulemaking, DOE has addressed these comments in the test procedure
final rule. (See EERE-2013-BT-TP-0055)
VII. 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.
The problems that the adopted standards for pumps address are as
follows:
(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
the use of social cost of carbon values.
The Administrator of the Office of Information and Regulatory
Affairs (OIRA) in the OMB has determined that the proposed regulatory
action is a significant regulatory action under section (3)(f) of
Executive Order 12866.
[[Page 4426]]
Accordingly, pursuant to section 6(a)(3)(B) of the Order, DOE has
provided to OIRA: (i) The text of the draft regulatory action, together
with a reasonably detailed description of the need for the regulatory
action and an explanation of how the regulatory action will meet that
need; and (ii) an assessment of the potential costs and benefits of the
regulatory action, including an explanation of the manner in which the
regulatory action is consistent with a statutory mandate. DOE has
included these documents in the rulemaking record.
In addition, the Administrator of OIRA has determined that the
proposed regulatory action is an ``economically'' significant
regulatory action under section (3)(f)(1) of Executive Order 12866.
Accordingly, pursuant to section 6(a)(3)(C) of the Order, DOE has
provided to OIRA an assessment, including the underlying analysis, of
benefits and costs anticipated from the regulatory action, together
with, to the extent feasible, a quantification of those costs; and an
assessment, including the underlying analysis, of costs and benefits of
potentially effective and reasonably feasible alternatives to the
planned regulation, and an explanation why the planned regulatory
action is preferable to the identified potential alternatives. These
assessments can be found in the technical support document for this
rulemaking.
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 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 final regulatory flexibility analysis (FRFA) 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). DOE
has prepared the following FRFA for the products that are the subject
of this rulemaking.
For manufacturers of pumps, 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 www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Manufacturing of pumps is classified under
NAICS 333911, ``Pump and Pumping Equipment Manufacturing.'' The SBA
sets a threshold of 500 employees or less for an entity to be
considered as a small business for this category.
1. Description on Estimated Number of Small Entities Regulated
To estimate the number of small business manufacturers of equipment
covered by this rulemaking, DOE conducted a market survey using
available public information to identify potential small manufacturers.
DOE's research involved industry trade association membership
directories (including HI), industry conference exhibitor lists,
individual company and buyer guide Web sites, and market research tools
(e.g., Hoovers reports) to create a list of companies that manufacture
products covered by this rulemaking. DOE presented its list to
manufacturers in MIA interviews and asked industry representatives if
they were aware of any other small manufacturers during manufacturer
interviews and at DOE public meetings. DOE reviewed publicly-available
data and contacted select companies on its list, as necessary, to
determine whether they met the SBA's definition of a small business
manufacturer of pumps that would be regulated by the adopted standards.
DOE screened out companies that do not offer products covered by this
rulemaking, do not meet the definition of a ``small business,'' or are
foreign-owned and operated.
DOE identified 86 manufacturers of covered pump products sold in
the U.S. Thirty-eight of these manufacturers met the 500-employee
threshold defined by the SBA to qualify as a small business, but only
25 were domestic companies. DOE notes that manufacturers interviewed
stated that there are potentially a large number of small pumps
manufacturers that serve small regional markets. These unidentified
small manufacturers are not members of HI and typically have a limited
marketing presence. The interviewed manufacturers and CIP Working Group
participants were not able to name these smaller players, and no
commenters to the proposed rule provided information on any other
potential small manufacturers.
Two small business manufacturers of pumps responded to DOE's
request for an interview prior to publication of the proposed standard.
These manufacturers provided extensive data on product availability,
product efficiency, and product pricing. This content was critical to
the modeling of the industry and was used to estimate impacts on small
businesses.
[[Page 4427]]
DOE also obtained qualitative information about small business
impacts while interviewing large manufacturers. Specifically, DOE
discussed with large manufacturers the extent to which new standards
might require small businesses to acquire new equipment or cause
manufacturing process changes that could destabilize their business.
Responses and information provided by small and large manufacturers
informed DOE's description and estimate of compliance requirements,
which are presented in section VII.B.2.
DOE's final standards reflect the recommendation of the CIP Working
Group, which consisted of 16 members, including one small manufacturer.
DOE selected the 16 members of the working group after issuing a notice
of intent to establish a CIP Working Group (78 FR 44036) and receiving
19 nominations for membership. DOE notes that the three nominated
parties who were not selected for the working group did not represent
small businesses. Prior to the formation of the CIP Working Group, DOE
issued an RFI (76 FR 34192), a Framework Document (78 FR 7304), and
held a public meeting on February 20, 2013, to discuss the Framework
Document in detail--all of which publicly laid out DOE's efforts to set
out standards for pumps. The leading industry trade association, HI,
was engaged in each of these stages and helped spread awareness of the
rulemaking process to all of its members, which includes both small and
large manufacturers.\79\
---------------------------------------------------------------------------
\79\ Though as noted above, some small businesses may not be
members of HI, HI membership includes 48 manufacturers of product
within the scope of this rulemaking, of which 10 are small domestic
manufacturers.
---------------------------------------------------------------------------
DOE made key assumptions about the market share and product
offerings of small manufacturers in its analysis and requested comment
in the NOPR. Specifically, DOE estimated that small manufacturers
accounted for approximately 36% of the total industry model offerings.
The Department did not receive feedback on this assumption, which was
based on product listing data.
2. Description and Estimate of Compliance Requirements
At TSL 2, the level adopted in this document, DOE estimates total
conversion costs of $0.8 million for an average small manufacturer,
compared to total conversion costs of $1.4 million for an average large
manufacturer. DOE notes that it estimates a lower total conversion cost
for small manufacturers, because of the previous assumption that small
manufacturers offer fewer models than their larger competitors, which
means small manufacturers would likely have fewer product models to
redesign. DOE's conversion cost estimates were based on industry data
collected by HI (see section IV.C.5 for more information on the
derivation of industry conversion costs). DOE applied the same per-
model product conversion costs for both large and small manufacturers.
Table VII.1 below shows the relative impacts of conversion costs on
small manufacturers relative to large manufacturers over the four-year
conversion period between the announcement year and the effective year
of the adopted standard.
Table VII.1--Impacts of Conversion Costs on a Manufacturers at the Adopted Standard
----------------------------------------------------------------------------------------------------------------
Product conversion
Capital conversion cost/conversion Total conversion Total conversion
cost/conversion period R&D cost/conversion cost/conversion
period CapEx expense period revenue (%) period EBIT (%)
----------------------------------------------------------------------------------------------------------------
Average large manufacturer...... 76 405 8 149
----------------------------------------------------------------------------------------------------------------
Average small Manufacturer...... 94 260 6 118
----------------------------------------------------------------------------------------------------------------
The total conversion costs are approximately 6% of revenue and 118%
of earnings before interest and tax (EBIT) for a small manufacturer
over the four year conversion period. For large manufacturers, the
total conversion costs are approximately 8% of revenue and 149% of EBIT
over the conversion period. These initial findings indicate that small
manufacturers face conversion costs that are proportionate relative to
larger competitors.
However, as noted in section V.B.2.a, the GRIM free cash flow
results in 2019 indicated that some manufacturers may need to access
the capital markets in order to fund conversion costs directly related
to the adopted standard. Given that small manufacturers have a greater
difficulty securing outside capital \80\ and that the necessary
conversion costs are not insignificant to the size of a small business,
it is possible the small manufacturers will be forced to retire a
greater portion of product models than large competitors. Also, smaller
companies often have a higher cost of borrowing due to higher risk on
the part of investors, largely attributed to lower cash flows and lower
per unit profitability. In these cases, small manufacturers may observe
higher costs of debt than larger manufacturers.
---------------------------------------------------------------------------
\80\ Simon, Ruth, and Angus Loten, ``Small-Business Lending Is
Slow to Recover,'' Wall Street Journal, August 14, 2014. Accessed
August 2014, available at http://online.wsj.com/articles/small-business-lending-is-slow-to-recover-1408329562.
---------------------------------------------------------------------------
Though conversion costs are similar in magnitude for small and
large manufacturers, small manufacturers may not have the same
resources to make the required conversions. For example, some small
pump manufacturers may not have the technical expertise to perform
hydraulic redesigns in-house. These small manufacturers would need to
hire outside consultants to support their re-design efforts. This could
be a disadvantage relative to companies that have internal resources
and personnel for the redesign process.
3. Duplication, Overlap, and Conflict With Other Rules and Regulations
DOE is unaware of any rules or regulations that duplicate, overlap,
or conflict with the rule being considered today.
4. Significant Alternatives to the Rule
The discussion in the previous section analyzes impacts on small
businesses that would result from DOE's proposed rule, TSL 2. In
reviewing alternatives to the proposed rule, DOE examined energy
conservation standards set at a lower efficiency level. While TSL 1
would reduce the impacts on small business manufacturers, it would come
at the expense of a reduction in energy savings. TSL 1 achieves 73
percent lower energy
[[Page 4428]]
savings compared to the energy savings at TSL 2.
DOE believes that establishing standards at TSL 2 balances the
benefits of the energy savings at TSL 2 with the potential burdens
placed on pumps manufacturers, including small business manufacturers.
Accordingly, DOE is declining to adopt one of the other TSLs considered
in the analysis, or the other policy alternatives detailed as part of
the regulatory impacts analysis included in chapter 17 of the final
rule TSD.
Additional compliance flexibilities may be available through other
means. For example, individual manufacturers may petition for a waiver
of the applicable test procedure (see 10 CFR 431.401). Further, EPCA
provides that a manufacturer whose annual gross revenue from all of its
operations does not exceed $8 million 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. Manufacturers
should refer to 10 CFR part 430, subpart E, and part 1003 for
additional details.
C. Review Under the Paperwork Reduction Act
Pump manufacturers must certify to DOE that their products comply
with any applicable energy conservation standards as of the compliance
date for standards. In certifying compliance, manufacturers must test
their products according to the applicable DOE test procedures for
pumps that DOE adopts to measure the energy efficiency of this
equipment, 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 pumps. 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 for pumps 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, app. B,
B5.1(b); Sec. 1021.410(b) and app. B, B(1)-(5). The rule fits within
this 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://energy.gov/nepa/categorical-exclusion-cx-determinations-cx.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism.'' 64 FR 43255 (Aug. 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 products 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 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
[[Page 4429]]
(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.
This final rule does not contain a Federal intergovernmental
mandate, nor is it expected to require expenditures of $100 million or
more in any one year on the private sector. (Such expenditures may
include: (1) Investment in research and development and in capital
expenditures by manufacturers in the years between the final rule and
the compliance date for the new standards, and (2) incremental
additional expenditures by consumers to purchase higher-efficiency
equipment.) As a result, the analytical requirements of UMRA do not
apply.
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
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.
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 new
energy conservation standards for pumps, 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 (Jan. 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:
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 a ``major rule'' as
defined by 5 U.S.C. 804(2).
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects
10 CFR Part 429
Administrative practice and procedure, Confidential business
information, Energy conservation, Imports, Intergovernmental relations,
Small businesses.
10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation, Imports, Intergovernmental relations,
Small businesses.
[[Page 4430]]
Issued in Washington, DC, on December 31, 2015.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.
For the reasons set forth in the preamble, DOE amends parts 429 and
431 of chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, as set forth below:
PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 429 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
2. Section 429.12 is amended by revising paragraphs (b)(13) and (d) to
read as follows:
Sec. 429.12 General requirements applicable to certification reports.
* * * * *
(b) * * *
(13) Product specific information listed in Sec. Sec. 429.14
through 429.60 of this chapter.
* * * * *
(d) Annual filing. All data required by paragraphs (a) through (c)
of this section shall be submitted to DOE annually, on or before the
following dates:
------------------------------------------------------------------------
Deadline for data
Product category submission
------------------------------------------------------------------------
Fluorescent lamp ballasts, Medium base Mar. 1.
compact fluorescent lamps, Incandescent
reflector lamps, General service
fluorescent lamps, General service
incandescent lamps, Intermediate base
incandescent lamps, Candelabra base
incandescent lamps, Residential ceiling
fans, Residential ceiling fan light kits,
Residential showerheads, Residential
faucets, Residential water closets, and
Residential urinals.
Residential water heater, Residential May 1.
furnaces, Residential boilers, Residential
pool heaters, Commercial water heaters,
Commercial hot water supply boilers,
Commercial unfired hot water storage tanks,
Commercial packaged boilers, Commercial
warm air furnaces, Commercial unit heaters
and Residential furnace fans.
Residential dishwashers, Commercial prerinse June 1.
spray valves, Illuminated exit signs,
Traffic signal modules, Pedestrian modules,
and Distribution transformers.
Room air conditioners, Residential central July 1.
air conditioners, Residential central heat
pumps, Small duct high velocity system,
Space constrained products, Commercial
package air-conditioning and heating
equipment, Packaged terminal air
conditioners, Packaged terminal heat pumps,
and Single package vertical units.
Residential refrigerators, Residential Aug. 1.
refrigerators-freezers, Residential
freezers, Commercial refrigerator, freezer,
and refrigerator-freezer, Automatic
commercial automatic ice makers,
Refrigerated bottled or canned beverage
vending machine, Walk-in coolers, and Walk-
in freezers.
Torchieres, Residential dehumidifiers, Metal Sept. 1.
halide lamp fixtures, External power
supplies, and Pumps.
Residential clothes washers, Residential Oct. 1.
clothes dryers, Residential direct heating
equipment, Residential cooking products,
and Commercial clothes washers.
------------------------------------------------------------------------
* * * * *
0
3. Section 429.59 is amended by adding paragraphs (b) and (c) to read
as follows:
Sec. 429.59 Pumps.
* * * * *
(b) Certification reports. (1) The requirements of Sec. 429.12 are
applicable to pumps; and
(2) Pursuant to Sec. 429.12(b)(13), a certification report must
include the following public product-specific information:
(i) For a pump subject to the test methods prescribed in section
III of appendix A to subpart Y of part 431 of this chapter:
PEICL; pump total head in feet (ft.) at BEP and nominal
speed; volume per unit time (flow rate) in gallons per minute (gpm) at
BEP and nominal speed; the nominal speed of rotation in revolutions per
minute (rpm); calculated driver power input at each load point i
(Pini), corrected to nominal speed, in horsepower (hp); full impeller
diameter in inches (in.); and for RSV and ST pumps, the number of
stages tested.
(ii) For a pump subject to the test methods prescribed in section
IV or V of appendix A to subpart Y of part 431 of this chapter:
PEICL; pump total head in feet (ft.) at BEP and nominal
speed; volume per unit time (flow rate) in gallons per minute (gpm) at
BEP and nominal speed; the nominal speed of rotation in revolutions per
minute (rpm); driver power input at each load point i (Pini), corrected
to nominal speed, in horsepower (hp); full impeller diameter in inches
(in.); whether the PEICL is calculated or tested; and for
RSV and ST pumps, number of stages tested.
(iii) For a pump subject to the test methods prescribed in section
VI or VII of appendix A to subpart Y of part 431 of this chapter:
PEIVL; pump total head in feet (ft.) at BEP and nominal
speed; volume per unit time (flow rate) in gallons per minute (gpm) at
BEP and nominal speed; the nominal speed of rotation in revolutions per
minute (rpm); driver power input (measured as the input power to the
driver and controls) at each load point i (Pini), corrected to nominal
speed, in horsepower (hp); full impeller diameter in inches (in.);
whether the PEIVL is calculated or tested; and for RSV and
ST pumps, the number of stages tested.
(3) Pursuant to Sec. 429.12(b)(13), a certification report may
include the following public product-specific information:
(i) For a pump subject to the test methods prescribed in section
III of appendix A to subpart Y of part 431 of this chapter: Pump
efficiency at BEP in percent (%) and PERCL.
(ii) For a pump subject to the test methods prescribed in section
IV or V of appendix A to subpart Y of part 431 of this chapter: Pump
efficiency at BEP in percent (%) and PERCL.
(iii) For a pump subject to the test methods prescribed in section
VI or VII of appendix A to subpart Y of part 431 of this chapter: Pump
efficiency at BEP in percent (%) and PERVL.
(4) Pursuant to Sec. 429.12(b)(13), a certification report will
include the following product-specific information:
(i) For a pump subject to the test methods prescribed in section
III of appendix A to subpart Y of part 431 of this chapter: The pump
configuration (i.e., bare pump); and for ST pumps, the bowl diameter in
inches (in.).
(ii) For a pump subject to the test methods prescribed in section
IV or V of appendix A to subpart Y of part 431 of this chapter: The
pump configuration (i.e., pump sold with an electric motor); for pumps
sold with electric motors regulated by DOE's energy conservation
standards for electric motors at Sec. 431.25, the nominal motor
efficiency in percent (%) and the motor horsepower (hp) for the motor
with which the pump is being
[[Page 4431]]
rated; and for ST pumps, the bowl diameter in inches (in.).
(iii) For a pump subject to the test methods prescribed in section
VI or VII of appendix A to subpart Y of part 431 of this chapter: The
pump configuration (i.e., pump sold with a motor and continuous or non-
continuous controls); for pumps sold with electric motors regulated by
DOE's energy conservation standards for electric motors at Sec.
431.25, the nominal motor efficiency in percent (%) and the motor
horsepower (hp) for the motor with which the pump is being rated; and
for ST pumps, the bowl diameter in inches (in.).
(c) Individual model numbers. (1) Each individual model number
required to be reported pursuant to Sec. 429.12(b)(6) must consist of
the following:
----------------------------------------------------------------------------------------------------------------
Individual model number(s)
Equipment configuration (as Basic model --------------------------------------------------------------
distributed in commerce) number 1 2 3
----------------------------------------------------------------------------------------------------------------
Bare pump..................... Number unique to Bare Pump.......... N/A................ N/A.
the basic model.
Bare pump with driver......... Number unique to Bare Pump.......... Driver............. N/A.
the basic model.
Bare pump with driver and Number unique to Bare Pump.......... Driver............. Controls.
controls. the basic model.
----------------------------------------------------------------------------------------------------------------
(2) Or must otherwise provide sufficient information to identify
the specific driver model and/or controls model(s) with which a bare
pump is distributed.
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
4. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
5. Section 431.465 is added to read as follows:
Sec. 431.465 Pumps energy conservation standards and their compliance
dates.
(a) For the purposes of paragraph (b) of this section,
``PEICL'' means the constant load pump energy index and
``PEIVL'' means the variable load pump energy index, both as
determined in accordance with the test procedure in Sec. 431.464. For
the purposes of paragraph (c) of this section, ``BEP'' means the best
efficiency point as determined in accordance with the test procedure in
Sec. 431.464.
(b) Each pump that is manufactured starting on January 27, 2020 and
that:
(1) Is in one of the equipment classes listed in the table in
paragraph (b)(4) of this section;
(2) Meets the definition of a clean water pump in Sec. 431.462;
(3) Is not listed in paragraph (c) of this section; and
(4) Conforms to the characteristics listed in paragraph (d) of this
section must have a PEICL or PEIVL rating of not
more than 1.00 using the appropriate C-value in the table in this
paragraph (b)(4):
------------------------------------------------------------------------
Maximum PEI
Equipment class \1\ \2\ C-value \3\
------------------------------------------------------------------------
ESCC.1800.CL............................ 1.00 128.47
ESCC.3600.CL............................ 1.00 130.42
ESCC.1800.VL............................ 1.00 128.47
ESCC.3600.VL............................ 1.00 130.42
ESFM.1800.CL............................ 1.00 128.85
ESFM.3600.CL............................ 1.00 130.99
ESFM.1800.VL............................ 1.00 128.85
ESFM.3600.VL............................ 1.00 130.99
IL.1800.CL.............................. 1.00 129.30
IL.3600.CL.............................. 1.00 133.84
IL.1800.VL.............................. 1.00 129.30
IL.3600.VL.............................. 1.00 133.84
RSV.1800.CL............................. 1.00 129.63
RSV.3600.CL............................. 1.00 133.20
RSV.1800.VL............................. 1.00 129.63
RSV.3600.VL............................. 1.00 133.20
ST.1800.CL.............................. 1.00 138.78
ST.3600.CL.............................. 1.00 134.85
ST.1800.VL.............................. 1.00 138.78
ST.3600.VL.............................. 1.00 134.85
------------------------------------------------------------------------
\1\ Equipment class designations consist of a combination (in sequential
order separated by periods) of: (1) An equipment family (ESCC = end
suction close-coupled, ESFM = end suction frame mounted/own bearing,
IL = in-line, RSV = radially split, multi-stage, vertical, in-line
diffuser casing, ST = submersible turbine; all as defined in Sec.
431.462); (2) nominal speed of rotation (1800 = 1800 rpm, 3600 = 3600
rpm); and (3) an operating mode (CL = constant load, VL = variable
load). Determination of the operating mode is determined using the
test procedure in appendix A to this subpart.
\2\ For equipment classes ending in .CL, the relevant PEI is PEICL. For
equipment classes ending in .VL, the relevant PEI is PEIVL.
\3\ The C-values shown in this table must be used in the equation for
PERSTD when calculating PEICL or PEIVL, as described in section II.B
of appendix A to this subpart.
(c) The energy efficiency standards in paragraph (b) of this
section do not apply to the following pumps:
(1) Fire pumps;
(2) Self-priming pumps;
(3) Prime-assist pumps;
(4) Magnet driven pumps;
(5) Pumps designed to be used in a nuclear facility subject to 10
CFR part 50, ``Domestic Licensing of Production and Utilization
Facilities'';
(6) Pumps meeting the design and construction requirements set
forth in Military Specification MIL-P-17639F, ``Pumps, Centrifugal,
Miscellaneous Service, Naval Shipboard Use'' (as amended); MIL-P-
17881D, ``Pumps,
[[Page 4432]]
Centrifugal, Boiler Feed, (Multi-Stage)'' (as amended); MIL-P-17840C,
``Pumps, Centrifugal, Close-Coupled, Navy Standard (For Surface Ship
Application)'' (as amended); MIL-P-18682D, ``Pump, Centrifugal, Main
Condenser Circulating, Naval Shipboard'' (as amended); MIL-P-18472G,
``Pumps, Centrifugal, Condensate, Feed Booster, Waste Heat Boiler, And
Distilling Plant'' (as amended). Military specifications and standards
are available for review at http://everyspec.com/MIL-SPECS.
(d) The energy conservation standards in paragraph (b) of this
section apply only to pumps that have the following characteristics:
(1) Flow rate of 25 gpm or greater at BEP at full impeller
diameter;
(2) Maximum head of 459 feet at BEP at full impeller diameter and
the number of stages required for testing;
(3) Design temperature range from 14 to 248 [deg]F;
(4) Designed to operate with either:
(i) A 2- or 4-pole induction motor; or
(ii) A non-induction motor with a speed of rotation operating range
that includes speeds of rotation between 2,880 and 4,320 revolutions
per minute and/or 1,440 and 2,160 revolutions per minute; and
(iii) In either case, the driver and impeller must rotate at the
same speed;
(5) For ST pumps, a 6-inch or smaller bowl diameter; and
(6) For ESCC and ESFM pumps, specific speed less than or equal to
5,000 when calculated using U.S. customary units.
0
6. Section 431.466 is added to read as follows:
Sec. 431.466 Pumps labeling requirements.
(a) Pump nameplate--(1) Required information. The permanent
nameplate of a pump for which standards are prescribed in Sec. 431.465
must be marked clearly with the following information:
(i) For bare pumps and pumps sold with electric motors but not
continuous or non-continuous controls, the rated pump energy index--
constant load (PEICL), and for pumps sold with motors and
continuous or non-continuous controls, the rated pump energy index--
variable load (PEIVL);
(ii) The bare pump model number; and
(iii) If transferred directly to an end-user, the unit's impeller
diameter, as distributed in commerce. Otherwise, a space must be
provided for the impeller diameter to be filled in.
(2) Display of required information. All orientation, spacing, type
sizes, typefaces, and line widths to display this required information
must be the same as or similar to the display of the other performance
data on the pump's permanent nameplate. The PEICL or
PEIVL, as appropriate to a given pump model, must be
identified in the form ``PEICL ____'' or ``PEIVL
____.'' The model number must be in one of the following forms: ``Model
____'' or ``Model number ____'' or ``Model No. ____.'' The unit's
impeller diameter must be in the form ``Imp. Dia. ____(in.).''
(b) Disclosure of efficiency information in marketing materials.
(1) The same information that must appear on a pump's permanent
nameplate pursuant to paragraph (a)(1) of this section, must also be
prominently displayed:
(i) On each page of a catalog that lists the pump; and
(ii) In other materials used to market the pump.
(2) [Reserved]
Note: The following letter will not appear in the Code of
Federal Regulations.
U.S. Department of Justice
Antitrust Division
William J. Baer
Assistant Attorney General
RFK Main Justice Building
950 Pennsylvania Ave., NW
Washington, DC 20530-0001
(202)514-2401/(202)616-2645 (Fax)
July 10, 2015
Anne Harkavy
Deputy General Counsel for Litigation, Regulation and Enforcement
U.S. Department of Energy
1000 Independence Ave, S.W.
Washington, DC 20585
Dear Deputy General Counsel Harkavy:
I am responding to your April 2, 2015 letters seeking the views of
the Attorney General about the potential impact on competition of
proposed energy conservation standards for pumps and a test procedure
to be utilized in connection with the new standards.
Your request relating to the proposed energy conservation standards
was submitted under Section 325(o)(2)(B)(i)(V) of the Energy Policy and
Conservation Act, as amended (ECPA), 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. Your request
relating to the test procedure was submitted under Section 32(c) of the
Federal Energy Administration Act of 1974, as amended by the Federal
Energy Administration Authorization Act of 1977, and codified at 15
U.S.C. 788(c), which requires DOE to consult with the Attorney General
concerning the impact of proposed test procedures on competition. 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 Sec. 0.40(g).
In conducting its analysis, the Antitrust Division examines whether
a proposed standard or test procedure 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 energy conservation standards
contained in the Notice of Proposed Rulemaking (80 Fed. Reg. 17825,
April 2, 2015) and the related Technical Support Document as well as
the proposed test procedure contained in the Notice of Proposed
Rulemaking (80 Fed. Reg. 17585, April 1, 2015). We have also
interviewed industry participants, reviewed information provided by
industry participants, and attended the public meetings held on the
proposed standards and test procedure on April 29, 2015. We further
reviewed additional information provided by the Department of Energy.
Based on our review, we do not have sufficient information to
conclude that the proposed energy conservation standards or test
procedure likely will substantially lessen competition in any
particular product or geographic market. However, the possibility
exists that the proposed energy conservation standards and test
procedure--which will apply to a broad range of pumps--may result in
anticompetitive effects in certain pump markets. As explained below,
the standards and test procedure could cause some manufacturers to halt
production, reduce the number of manufacturers of pumps covered by the
new standards, and deter companies who do not currently manufacture
pumps covered by the new standards from entering the market.
Regarding the proposed standards, by design, the bottom quartile of
pumps in each class of covered pumps will not meet the new standards.
The non-compliance of the bottom quartile of pump models may result in
some manufacturers stopping production of pumps altogether and fewer
firms producing models that comply with the new standards. At this
point, it is not possible to determine the impact on any particular
product or geographic market.
[[Page 4433]]
As for the proposed test procedure, we are concerned about the
possibility of anticompetitive effects resulting from the burden and
expense of compliance. The Department of Energy has estimated it will
cost manufacturers as much as $277,000 to construct a facility capable
of performing the test procedure for all covered classes of pumps. Some
industry participants have estimated that their actual costs of
building such a facility will be significantly higher, largely due to
the test procedure's requirements related to data collection and power
supply characteristics.
The Department of Energy has suggested that manufacturers can test
their pumps at third-party facilities at lower expense rather than
constructing their own facilities. However, pump manufacturers are
concerned that third-party facilities do not currently meet the
proposed test procedure requirements, and they question whether, when,
and how many third-party facilities will meet the requirements. It is
also uncertain whether third-party facilities that meet the test
procedure requirements will test all--or only some--of the pumps
covered by the proposed standards. Thus, the proposed test procedure
could cause a significant number of manufacturers of covered pumps to
exit the business or stop producing certain models of pumps and deter
companies who do not currently manufacture pumps covered by the
proposed standards from making such pumps. At this point, we cannot
determine whether pump manufacturers can expect vigorous competition,
and affordable prices, for third-party testing services.
By the time the proposed test procedure is required, manufacturers
may be able to test at least some pumps covered by the proposed
standards at third-party facilities. Additionally, the Department of
Energy stated at the April 29, 2015 public meetings that it may
reconsider certain requirements of the proposed test procedure to ease
the burden on pump manufacturers who choose to test their products
themselves. If the burden and expense of constructing a facility
capable of performing the test procedure was reduced by changing the
requirements related to data collection and power supply
characteristics, or if using third-party test facilities proved to be a
feasible alternative, our concerns would be lessened.
We ask that the Department of Energy take these concerns into
account in determining its final energy conservation standards and test
procedure.
Sincerely,
William J. Baer
[FR Doc. 2016-00324 Filed 1-25-16; 8:45 am]
BILLING CODE 6450-01-P