[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)]
[Proposed Rules]
[Pages 15836-15921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06588]
[[Page 15835]]
Vol. 81
Thursday,
No. 57
March 24, 2016
Part III
Department of Energy
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10 CFR Part 431
Energy Conservation Program: Energy Conservation Standards for
Commercial Packaged Boilers; Proposed Rule
Federal Register / Vol. 81 , No. 57 / Thursday, March 24, 2016 /
Proposed Rules
[[Page 15836]]
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2013-BT-STD-0030]
RIN 1904-AD01
Energy Conservation Program: Energy Conservation Standards for
Commercial Packaged Boilers
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking and announcement of public
meeting.
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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as
amended, prescribes energy conservation standards for various consumer
equipment and certain commercial and industrial equipment, including
commercial packaged boilers. EPCA also requires the U.S. Department of
Energy (DOE) to periodically determine whether more stringent standards
would be technologically feasible and economically justified, and would
save a significant amount of energy. DOE has tentatively concluded that
more stringent standards are technologically feasible and economically
justified, and would result in significant additional conservation of
energy. Therefore, DOE proposes amended energy conservation standards
for commercial packaged boilers. This document also announces a public
meeting to receive comment on the proposed standards and associated
analyses and results.
DATES: Meeting: DOE will hold a public meeting on Thursday, April 21,
2016, from 9:30 a.m. to 3 p.m., in Washington, DC. The meeting will
also be broadcast as a webinar. See section VII, Public Participation,
for webinar registration information, participant instructions, and
information about the capabilities available to webinar participants.
Comments: DOE will accept comments, data, and information regarding
this notice of proposed rulemaking (NOPR) before and after the public
meeting, but no later than May 23, 2016. See section VII, Public
Participation, for details.
Comments regarding the likely competitive impact of the proposed
standard should be sent to the Department of Justice contact listed in
the ADDRESSES section before April 25, 2016.
ADDRESSES: The public meeting will be held at the U.S. Department of
Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue SW.,
Washington, DC 20585. To register for the webinar and receive call-in
information, please use this link: https://attendee.gotowebinar.com/register/6872804566336170753.
Instructions: Any comments submitted must identify the NOPR on
Energy Conservation Standards for Commercial Packaged Boilers, and
provide docket number EERE-2013-BT-STD-0030 and/or regulatory
information number (RIN) number 1904-AD01. Comments may be submitted
using any of the following methods:
1. Federal eRulemaking Portal: www.regulations.gov. Follow the
instructions for submitting comments.
2. Email: [email protected]. Include the docket
number EERE-2013-BT-STD-0030 and/or RIN 1904-AD01 in the subject line
of the message. Submit electronic comments in WordPerfect, Microsoft
Word, PDF, or ASCII file format, and avoid the use of special
characters or any form of encryption.
3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy,
Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue
SW., Washington, DC 20585-0121. If possible, please submit all items on
a CD, in which case it is not necessary to include printed copies.
4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of
Energy, Building Technologies Office, 950 L'Enfant Plaza SW., Room
6094, Washington, DC 20024. Telephone: (202) 586-2945. If possible,
please submit all items on a compact disc (CD), in which case it is not
necessary to include printed copies.
Written comments regarding the burden-hour estimates or other
aspects of the collection-of-information requirements contained in this
proposed rule may be submitted to Office of Energy Efficiency and
Renewable Energy through the methods listed above and by email to
[email protected].
No telefacsimilies (faxes) will be accepted. For detailed
instructions on submitting comments and additional information on the
rulemaking process, see section VII of this document (Public
Participation).
EPCA requires the Attorney General to provide DOE a written
determination of whether the proposed standard is likely to lessen
competition. The U.S. Department of Justice Antitrust Division invites
input from market participants and other interested persons with views
on the likely competitive impact of the proposed standard. Interested
persons may contact the Division at [email protected] before
April 25, 2016. Please indicate in the ``subject'' line of your email
the title and Docket Number of this proposed rule.
Docket: The docket, which includes Federal Register notices, public
meeting attendee lists and transcripts, comments, and other supporting
documents/materials, is available at www.regulations.gov. All documents
in the docket are listed in the www.regulations.gov index. However,
some documents listed in the index may not be publicly available, such
as those containing information that is exempted from public
disclosure.
A link to the docket Web page can be found at http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=79. This Web page contains a link to the docket
for this document on the www.regulations.gov site. The
www.regulations.gov Web page contains simple instructions on how to
access all documents, including public comments, in the docket. See
section VII of this document for further information on how to submit
comments through www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Mr. James Raba, 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) 586-8654. Email: [email protected].
Mr. Peter Cochran, U.S. Department of Energy, Office of the General
Counsel, GC-33 1000 Independence Avenue SW., Washington, DC 20585-0121.
Telephone: (202) 586-9496. Email: [email protected].
For further information on how to submit a comment, review other
public comments and the docket, or participate in the public meeting,
contact Ms. Brenda Edwards at (202) 586-2945 or by email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Proposed Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for Commercial Packaged
Boilers
III. General Discussion
A. Compliance Dates
B. Test Procedure
C. Technological Feasibility
1. General
[[Page 15837]]
2. Maximum Technologically Feasible Levels
D. Energy Savings
1. Determination of Savings
2. Significance of Savings
E. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. General
2. Scope of Coverage and Equipment Classes
3. Technology Options
B. Screening Analysis
C. Engineering Analysis
1. Methodology
a. Overall Methodology and Extrapolation of Prices
b. Large CPB Analysis and Representative Fuel Input Rate
2. Data Collection and Categorization
3. Baseline Efficiency
4. Intermediate and Max-Tech Efficiency Levels
5. Incremental Price and Price-Efficiency Curves
D. Markups Analysis
E. Energy Use Analysis
1. Energy Use Characterization
2. Building Sample Selection and Sizing Methodology
3. Miscellaneous Energy Use
F. Life-Cycle Cost and Payback Period Analysis
1. Equipment Costs
2. Installation Costs
3. Annual Per-Unit Energy Consumption
4. Energy Prices and Energy Price Trends
5. Maintenance Costs
6. Repair Costs
7. Lifetime
8. Discount Rate
9. No-New-Standards-Case Market Efficiency Distribution
10. Payback Period Inputs
11. Rebuttable-Presumption Payback Period
G. Shipments Analysis
H. National Impact Analysis
1. Equipment Efficiency in the No-New-Standards Case and
Standards Cases
2. National Energy Savings
3. Net Present Value of Consumer Benefit
a. Total Annual Installed Cost
b. Total Annual Operating Cost Savings
c. Discount Rate
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Government Regulatory Impact Model
a. Government Regulatory Impact Model Key Inputs
b. Government Regulatory Impact Model Scenarios
2. Manufacturer Interviews
a. Testing Burden
b. Condensing Boilers Not Appropriate for Many Commercial
Applications
c. Not Many American Companies Produce Condensing Heat
Exchangers
d. Reduced Product Durability and Reliability
3. Discussion of Comments
a. Impacts on Condensing Technology
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 Approaches and Key Assumptions
2. Social Cost of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual 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. Impacts on Direct Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Utility or Performance
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
C. Conclusion
1. Benefits and Burdens of Trial Standard Levels Considered for
Commercial Packaged Boilers
2. Summary of Benefits and Costs (Annualized) of the Proposed
Standards
VI. 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
VII. Public Participation
A. Attendance at the Public Meeting
B. Procedure for Submitting Prepared General Statements For
Distribution
C. Conduct of the Public Meeting
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Synopsis of the Proposed Rule
Title III, Part C \1\ of the Energy Policy and Conservation Act of
1975 (42 U.S.C. 6291, et seq.; ``EPCA''), Public Law 94-163 (42 U.S.C.
6311-6317, as codified), added by Public Law 95-619, Title IV, section
441(a), establishes the Energy Conservation Program for Certain
Industrial Equipment.\2\ These include commercial packaged boilers
(``CPB''), the subject of this document. (42 U.S.C. 6311(1)(J))
Commercial packaged boilers are also covered under the American Society
of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)
Standard 90.1 (ASHRAE Standard 90.1), ``Energy Standard for Buildings
Except Low-Rise Residential Buildings.'' \3\
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part C was redesignated Part A-1.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Efficiency Improvement Act of 2015,
Public Law 114-11 (April 30, 2015).
\3\ ASHRAE Standard 90.1-2013 (i.e., the most recent version of
ASHRAE Standard 90.1) did not amend the efficiency levels for
commercial packaged boilers. Thus, DOE is undertaking this
rulemaking under the 6-year review requirement in 42 U.S.C.
6313(a)(6)(C), as opposed to the statutory provision regarding
ASHRAE equipment (42 U.S.C. 6313(a)(6)(A). For more information on
DOE's review of ASHRAE Standard 90.1-2013, see: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=108.
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EPCA requires DOE to conduct an evaluation of its standards for CPB
equipment every 6 years and to publish either a notice of determination
that such standards do not need to be amended or a NOPR including
proposed amended standards. (42 U.S.C. 6313(a)(6)(C)(i)) EPCA further
requires that any new or amended energy conservation standards that DOE
prescribes for covered equipment shall be designed to achieve the
maximum improvement in energy efficiency that is technologically
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II))
Furthermore, the new or amended standard must result in a significant
additional conservation of energy. Id. Under the applicable statutory
provisions, DOE must determine that there is clear and convincing
evidence supporting the adoption of more stringent energy conservation
standards than the ASHRAE level. Id. Once complete, this
[[Page 15838]]
rulemaking will satisfy DOE's statutory obligation under 42 U.S.C.
6313(a)(6)(C).
Pursuant to these and other statutory requirements discussed in
this document, DOE initiated this rulemaking to evaluate CPB energy
conservation standards and to determine whether new or amended
standards are warranted. DOE has examined the existing CPB standards
and has tentatively concluded that modifying and expanding the existing
10 CPB equipment classes to 12 equipment classes is warranted. As
discussed in detail in section IV.A.2 of this document, DOE proposes
to: (1) Discontinue the use of draft type as a criteria for equipment
classes; and (2) establish separate equipment classes for ``very
large'' commercial packaged boilers. Eliminating the use of draft type
as a distinguishing feature for equipment classes would consolidate the
4 existing draft-specific equipment classes into 2 non-draft-specific
equipment classes. Further, the proposed change to distinguish very
large CPB as separate equipment classes would result in an additional 4
equipment classes. As a result, the total number of equipment classes
would increase from 10 to 12. DOE has tentatively concluded that there
is clear and convincing evidence to support more stringent standards
for 8 of the 12 equipment classes proposed in this NOPR, which includes
all classes except for the newly proposed very large CPB classes. The
proposed standards, which prescribe minimum thermal efficiencies
(ET) or combustion efficiencies (EC), are shown
in Table I.1. These proposed standards, if adopted, would apply to the
applicable equipment classes listed in Table I.1 and manufactured in,
or imported into, the United States on and after the date 3 years after
the publication of the final rule.
Table I.1--Proposed Energy Conservation Standards for Commercial Packaged Boilers
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Proposed energy Compliance date
Equipment Size category (input) conservation standard * [dagger]
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Small Gas-Fired Hot Water Commercial >300,000 Btu/h and 85.0% ET................. [date 3 years after
Packaged Boilers. <=2,500,000 Btu/h. publication of final
rule].
Large Gas-Fired Hot Water Commercial >2,500,000 Btu/h and 85.0% EC................. [date 3 years after
Packaged Boilers. <=10,000,000 Btu/h. publication of final
rule].
Very Large Gas-Fired Hot Water >10,000,000 Btu/h...... 82.0% EC[dagger]......... March 2, 2012.
Commercial Packaged Boilers.
Small Oil-Fired Hot Water Commercial >300,000 Btu/h and 87.0% ET................. [date 3 years after
Packaged Boilers. <=2,500,000 Btu/h. publication of final
rule].
Large Oil-Fired Hot Water Commercial >2,500,000 Btu/h and 88.0% EC................. [date 3 years after
Packaged Boilers. <=10,000,000 Btu/h. publication of final
rule].
Very Large Oil-Fired Hot Water >10,000,000 Btu/h...... 84.0% EC[dagger]......... March 2, 2012.
Commercial Packaged Boilers.
Small Gas-Fired Steam Commercial >300,000 Btu/h and 81.0% ET................. [date 3 years after
Packaged Boilers. <=2,500,000 Btu/h. publication of final
rule].
Large Gas-Fired Steam Commercial >2,500,000 Btu/h and 82.0% ET................. [date 3 years after
Packaged Boilers. <=10,000,000 Btu/h. publication of final
rule].
Very Large Gas-Fired Steam >10,000,000 Btu/h...... 79.0% ET[dagger]......... March 2, 2012.
Commercial Packaged Boilers **.
Small Oil-Fired Steam Commercial >300,000 Btu/h and 84.0% ET................. [date 3 years after
Packaged Boilers. <=2,500,000 Btu/h. publication of final
rule].
Large Oil-Fired Steam Commercial >2,500,000 Btu/h and 85.0% ET................. [date 3 years after
Packaged Boilers. <=10,000,000 Btu/h. publication of final
rule].
Very Large Oil-Fired Steam >10,000,000 Btu/h...... 81.0% ET[dagger]......... March 2, 2012.
Commercial Packaged Boilers.
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* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''
** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum
thermal efficiency level of 77% is permitted and meets Federal commercial packaged boiler energy conservation
standards.
[dagger] For very large CPB equipment classes DOE proposes to retain the existing standards for such equipment,
which had a compliance date of March 2, 2012, as shown.
A. Benefits and Costs to Consumers
Table I.2 presents DOE's evaluation of the economic impacts of the
proposed energy conservation standards on consumers of commercial
packaged boilers, as measured by the average life-cycle cost (LCC)
savings and the simple payback period (PBP).\4\ The average LCC savings
are positive for all equipment classes, and the PBP is less than the
average lifetime of the equipment, which is estimated to be 24.8 years
for all equipment classes evaluated in this NOPR.
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\4\ The average LCC savings are measured relative to the no-new-
standards case efficiency distribution, which depicts the CPB market
in the compliance year in the absence of amended standard levels
(see section IV.F.9 of this document and chapter 8 of the NOPR
technical support document (TSD)). The simple PBP, which is designed
to compare specific efficiency levels for commercial packaged
boilers, is measured relative to the baseline CPB equipment (see
section IV.F.10 of this document and chapter 8 of the TSD).
Table I.2--Impacts of Proposed Energy Conservation Standards on
Consumers of Commercial Packaged Boilers
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Average LCC
Equipment class savings Simple payback
(2014$) period (years)
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Small Gas-Fired Hot Water............... $521 9.6
[[Page 15839]]
Large Gas-Fired Hot Water............... 3,647 11.0
Small Oil-Fired Hot Water............... 7,799 5.7
Large Oil-Fired Hot Water............... 30,834 4.7
Small Gas-Fired Steam................... 2,782 7.4
Large Gas-Fired Steam................... 16,802 4.7
Small Oil-Fired Steam................... 4,256 5.3
Large Oil-Fired Steam................... 36,128 2.8
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DOE's analysis of the impacts of the proposed standards on
consumers is described in section IV.F of this document and in chapter
8 of the NOPR TSD.
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 (2014 to 2048). Using a real discount rate of 9.5
percent, DOE estimates that the INPV for manufacturers of commercial
packaged boilers is $180.1 million in 2014$. Under the proposed
standards, DOE expects that INPV may reduce by $23.8 to $13.1 million,
which is approximately 13.2 to 7.3 percent respectively. Under today's
proposed standard, DOE expects the industry to incur $27.5 million in
conversion costs.
DOE's analysis of the impacts of the proposed standards on
manufacturers is described in section IV.J of this document.
C. National Benefits and Costs \5\
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\5\ All monetary values in this section are expressed in 2014
dollars and, where appropriate, are discounted to 2015.
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DOE's analyses indicate that the proposed standards would save a
significant amount of energy. The lifetime energy savings for
commercial packaged boilers purchased in the 30-year period that begins
in the anticipated first full year of compliance with amended standards
(2019-2048), relative to the case without amended standards (referred
to as the ``no-new-standards case''), amount to 0.39 quadrillion Btu
(quads).\6\ This represents a savings of 0.8 percent relative to the
energy use of this equipment in the no-new-standards case.\7\
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\6\ A quad is equal to 10\15\ British thermal units (Btu). The
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy
savings include the energy consumed in extracting, processing, and
transporting primary fuels (i.e., coal, natural gas, petroleum
fuels), and thus present a more complete picture of the impacts of
energy efficiency standards. For more information on the FFC metric,
see section IV.H.1 of this document.
\7\ The no-new-standards case assumptions are described in
section IV.F.9 of this document.
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The cumulative net present value (NPV) of total consumer costs and
savings of the proposed standards for commercial packaged boilers
ranges from $0.414 billion (at a 7-percent discount rate) to $1.687
billion (at a 3-percent discount rate). This NPV expresses the
estimated total value of future operating-cost savings minus the
estimated increased equipment and installation costs for commercial
packaged boilers purchased in 2019-2048.
In addition, the proposed CPB standards would have significant
environmental benefits. The energy savings described in this section
are estimated to result in cumulative emission reductions (over the
same period as for energy savings) of 22 million metric tons (Mt) \8\
of carbon dioxide (CO2), 233 thousand tons of methane
(CH4), 2.1 thousand tons of sulfur dioxide (SO2),
162 thousand tons of nitrogen oxides (NOX), 0.1 thousand
tons of nitrous oxide (N2O), and 0.0003 tons of mercury
(Hg).\9\ The cumulative reduction in CO2 emissions through
2030 amounts to 2.86 Mt, which is equivalent to the emissions resulting
from the annual electricity use of 0.393 million homes.
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\8\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons
(ton).
\9\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy
Outlook 2015 (AEO2015) Reference case. AEO2015 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.\10\ The derivation of the SCC values is discussed
in section IV.L of this document. Using discount rates appropriate for
each set of SCC values (see Table I.3), DOE estimates the present
monetary value of the CO2 emissions reduction is between
$0.14 billion and $2.0 billion, with a value of $0.66 billion using the
central SCC case represented by $40.0 per metric ton in 2015.\11\ DOE
also estimates the present monetary value of the NOX
emissions reduction is $0.16 billion at a 7-percent discount rate and
$0.45 billion at a 3-percent discount rate.\12\ More detailed results
can be found in chapter 14 of the NOPR TSD.
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\10\ Techincal 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).
\11\ The values only include CO2 emissions;
CO2 equivalent emissions from other greenhouse gases are
not included.
\12\ DOE estimated the monetized value of
NOXemissions reductions using benefits 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 Standards.
(Available at www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal10602.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 by
assessing the regional approach taken by EPA's Regulatory Impact
Analysis of the Clean Power Plan Final Rule. Note the 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 proposed standards for commercial packaged
boilers.
[[Page 15840]]
Table I.3--Summary of National Economic Benefits and Costs of Proposed
Energy Conservation Standards for Commercial Packaged Boilers (TSL 2 *)
------------------------------------------------------------------------
Present value
Category (million 2014$) Discount rate (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Operating Cost Savings............ 925 7
2,550 3
CO2 Reduction (using mean SCC at 136 5
5% discount rate) **.............
CO2 Reduction (using mean SCC at 655 3
3% discount rate) **.............
CO2 Reduction (using mean SCC at 1,054 2.5
2.5% discount rate) **...........
CO2 Reduction (using 95th 1,998 3
percentile SCC at 3% discount
rate) **.........................
------------------------------------------------------------------------
NOX Reduction [dagger]............ 158 7
447 3
------------------------------------------------------------------------
Total Benefits [dagger][dagger]... 1,738 7
3,653 3
------------------------------------------------------------------------
Costs
------------------------------------------------------------------------
Incremental Installed Costs....... 512 7
863 3
------------------------------------------------------------------------
Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction 1,227 7
Monetized Value [dagger][dagger].
2,789 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with commercial
packaged boilers shipped in 2019-2048. These results include benefits
to consumers that accrue after 2048 from the equipment purchased in
2019-2048. The incremental installed costs include incremental
equipment cost as well as installation costs. The CO2 reduction
benefits are global benefits due to actions that occur nationally.
** The interagency group selected four sets of SCC values for use in
regulatory analyses. Three sets of values are based on the average SCC
from the integrated assessment models, at discount rates of 5, 3, and
2.5 percent. For example, for 2015 emissions, these values are $12.2/
metric ton, $40.0/metric ton, and $62.3/metric ton, in 2014$,
respectively. The fourth set ($117 per metric ton in 2014$ for 2015
emissions), which represents the 95th percentile of the SCC
distribution calculated using 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 SCC values are emission year specific. See
section IV.L.1 for more details.
[dagger] The $/ton values used for NOX are described in section IV.L.
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 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 Electric
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-percent and 7-percent
cases are presented using only the average SCC with 3-percent discount
rate.
The benefits and costs of this NOPR's proposed energy conservation
standards, for covered commercial packaged boilers sold in 2019-2048,
can also be expressed in terms of annualized values. The monetary
values for the total annualized net benefits are the sum of: (1) The
annualized national economic value of the benefits from consumer
operation of the equipment that meets the proposed standards
(consisting primarily of reduced operating costs minus increases in
product purchase price and installation costs); and (2) the annualized
value of the benefits of CO2 and NOX emission
reductions.\13\
---------------------------------------------------------------------------
\13\ 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.4. 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.
---------------------------------------------------------------------------
The national operating savings are domestic private U.S. consumer
monetary savings that occur as a result of purchasing these equipment.
The national operating cost savings is measured for the lifetime of
commercial packaged boilers shipped in 2019-2048.
The CO2 reduction is a benefit that accrues globally due
to decreased domestic energy consumption that is expected to result
from this proposed rule. Because CO2 emissions have a very
long residence time in the atmosphere,\14\ the SCC values in future
years reflect future CO2-emissions impacts that continue
beyond 2100 through 2300.
---------------------------------------------------------------------------
\14\ The atmospheric lifetime of CO2 is estimated to
be on 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).
---------------------------------------------------------------------------
Estimates of annualized benefits and costs of the proposed
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 average SCC series that has a
value of $40.0 per metric ton in 2015, the cost of the standards
proposed in this rulemaking is $51 million per year in increased
equipment costs, while the benefits are $91 million per year in reduced
equipment operating costs, $37 million in CO2 reductions,
and $16 million in reduced NOX emissions. In
[[Page 15841]]
this case, the net benefit amounts to $93 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 per metric ton in 2015, the estimated
cost of the CPB standards proposed in this rulemaking is $48 million
per year in increased equipment costs, while the benefits are $142
million per year in reduced operating costs, $37 million in
CO2 reductions, and $25 million in reduced NOX
emissions. In this case, the net benefit amounts to $156 million per
year.
Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2014$/year
-----------------------------------------------------------------------------------
Discount rate Low net benefits estimate High net benefits
Primary estimate * * estimate *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *. 7%.............................. 91........................ 84........................ 101.
3%.............................. 142....................... 129....................... 160.
CO2 Reduction (using mean SCC at 5%.............................. 10........................ 10........................ 11.
5% discount rate) ***.
CO2 Reduction (using mean SCC at 3%.............................. 37........................ 34........................ 39.
3% discount rate) ***.
CO2 Reduction (using mean SCC at 2.5%............................ 54........................ 51........................ 58.
2.5% discount rate) ***.
CO2 Reduction (using 95th 3%.............................. 111....................... 104....................... 119.
percentile SCC at 3% discount
rate) ***.
NOX Reduction [dagger]............ 7%.............................. 16........................ 15........................ 37.
3%.............................. 25........................ 23........................ 59.
Total Benefits [dagger][dagger]... 7% plus CO2 range............... 117 to 218................ 108 to 203................ 149 to 258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
7%.............................. 143....................... 133....................... 177.
3% plus CO2 range............... 177 to 278................ 162 to 256................ 230 to 338.
3%.............................. 204....................... 186....................... 258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment 7%.............................. 51........................ 54........................ 47.
Costs.
3%.............................. 48........................ 52........................ 45.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]........ 7% plus CO2 range............... 67 to 168................. 54 to 149................. 102 to 210.
7%.............................. 93........................ 79........................ 130.
3% plus CO2 range............... 129 to 230................ 110 to 205................ 185 to 293.
3%.............................. 156....................... 135....................... 213.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2019-2048. These results include benefits
to consumers that accrue after 2048 from the equipment purchased in 2019-2048. The incremental installed costs include incremental equipment cost as
well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
Benefits Estimates utilize projections of building stock and energy prices from the AEO2015 Reference case, Low Economic Growth case, and High
Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1
of this document and chapter 8 of the NOPR technical support document (TSD).
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the
integrated assessment models, at discount rates of 5, 3, and 2.5 percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/
metric ton, and $62.3/metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), which represents the 95th
percentile of the SCC distribution calculated using 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 SCC values are emission year specific. See section
IV.L for more details.
[dagger] The $/ton values used for NOX are described in section IV.L. 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 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 Electric 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-percent and 7-percent cases are presented using only the average SCC with a 3-percent discount rate. 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 proposed standards is
described in sections IV.H, IV.K, and IV.L of this document.
D. Conclusion
Based on clear and convincing evidence, DOE has tentatively
concluded that the proposed standards represent the maximum improvement
in energy efficiency that is technologically feasible and economically
justified, and would result in the significant conservation of energy.
DOE further notes that equipment achieving these standard levels is
already commercially available for at least some, if not most,
equipment classes covered by this
[[Page 15842]]
proposal.\15\ Based on the analyses described above, DOE has
tentatively concluded that the benefits of the proposed standards to
the Nation (energy savings, positive NPV of consumer benefits, consumer
LCC savings, and emission reductions) would outweigh the burdens (loss
of INPV for manufacturers and LCC increases for some consumers).
---------------------------------------------------------------------------
\15\ See chapter 3 of the NOPR TSD for information about the
efficiency ratings of equipment currently available on the market.
---------------------------------------------------------------------------
DOE also considered more stringent energy efficiency levels as
potential standards, and is considering them in this rulemaking.
However, DOE has tentatively concluded that the potential burdens of
the more stringent energy efficiency levels would outweigh the
projected benefits. Based on consideration of the public comments that
DOE receives in response to this document and related information
collected and analyzed during the course of this rulemaking effort, DOE
may adopt energy efficiency levels presented in this document that are
either higher or lower than the proposed standards, or some combination
of level(s) that incorporate the proposed standards in part.
II. Introduction
The following section briefly discusses the statutory authority
underlying this proposal, as well as some of the relevant historical
background related to the establishment of standards for commercial
packaged boilers.
A. Authority
Title III, Part C \16\ of the Energy Policy and Conservation Act of
1975 (``EPCA'' or ``the Act''), Public Law 94-163 (42 U.S.C. 6311-6317,
as codified), added by Public Law 95-619, Title IV, section 441(a),
sets forth a variety of provisions designed to improve energy
efficiency.\17\ It established the ``Energy Conservation Program for
Certain Industrial Equipment,'' which includes commercial packaged
boilers that are the subject of this rulemaking. The energy
conservation standards for commercial packaged boilers are codified in
DOE's regulations under subpart E of Title 10 of the Code of Federal
Regulations (CFR), Part 431.
---------------------------------------------------------------------------
\16\ For editorial reasons, upon codification in the United
States Code (U.S.C.), Part C was re-designated Part A-1.
\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 (April 30, 2015).
---------------------------------------------------------------------------
The ASHRAE Standard 90.1, ``Energy Standard for Buildings Except
Low-Rise Residential Buildings,'' sets industry energy efficiency
levels for small, large, and very large commercial package air-
conditioning and heating equipment, packaged terminal air conditioners,
packaged terminal heat pumps, warm air furnaces, packaged boilers,
storage water heaters, instantaneous water heaters, and unfired hot
water storage tanks (collectively ``ASHRAE equipment'').\18\ EPCA
directs DOE to consider amending the existing Federal energy
conservation standard for each type of covered ASHRAE equipment
whenever ASHRAE amends the efficiency levels in Standard 90.1. (42
U.S.C. 6313(a)(6)(A)) For each type of listed equipment, EPCA directs
that if ASHRAE amends Standard 90.1, DOE must adopt amended standards
at the new ASHRAE efficiency level, unless clear and convincing
evidence supports a determination that adoption of a more stringent
level would produce significant additional energy savings and would be
technologically feasible and economically justified. (42 U.S.C.
6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the
efficiency levels specified in the amended ASHRAE Standard 90.1, DOE
must establish such standard not later than 18 months after publication
of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I))
However, if DOE determines that a more stringent standard is justified,
then it must establish such more stringent standard not later than 30
months after publication of the amended ASHRAE Standard 90.1. (42
U.S.C. 6313(a)(6)(B)(i))
---------------------------------------------------------------------------
\18\ For more information, see www.ashrae.org.
---------------------------------------------------------------------------
In the event that ASHRAE does not act to amend Standard 90.1, EPCA
provides an alternative statutory mechanism for initiating such review.
More specifically, EPCA requires that every six years, the Secretary of
Energy (Secretary) shall consider amending the energy conservation
standards for covered commercial equipment and shall publish either a
notice of determination that those standards do not need to be amended,
or a notice of proposed rulemaking for more stringent energy efficiency
standards. (42 U.S.C. 6313(a)(6)(C))
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) compliance certification and enforcement procedures.
Subject to certain criteria and conditions, DOE has authority, as
discussed above, to adopt amended energy conservation standards for
commercial packaged boilers. In addition, DOE is required to develop
test procedures to measure the energy efficiency, energy use, or
estimated annual operating cost of covered equipment. (42 U.S.C.
6314(a)(2)) Manufacturers of covered equipment must use the prescribed
DOE test procedure as the basis for certifying to DOE that their
equipment comply with the applicable energy conservation standards
adopted under EPCA and when making representations to the public
regarding the energy use or efficiency of such equipment. (42 U.S.C.
6314(d)(1)) Similarly, DOE must use these test procedures to determine
whether the equipment comply with standards adopted pursuant to EPCA.
The DOE test procedures for commercial packaged boilers currently
appear at 10 CFR 431.86.
When setting standards for the ASHRAE equipment addressed by this
document, EPCA, as amended, prescribes certain statutory criteria for
DOE to consider. See generally 42 U.S.C. 6313(a)(6)(A)-(D). Any amended
standard for covered equipment more stringent than the level contained
in ASHRAE Standard 90.1 must be designed to achieve significant
improvement in energy efficiency that is technologically feasible and
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i))
Furthermore, DOE may not adopt a more stringent standard that would not
result in the significant additional conservation of energy. Id. 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 maximum extent
practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and
consumers of products 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 equipment which are likely to result from
the standard;
(3) The total projected amount of energy savings likely to
result directly from the standard;
(4) Any lessening of the utility or the performance of the
covered product 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;
[[Page 15843]]
(6) The need for national energy conservation; and
(7) Other factors the Secretary of Energy considers relevant.
(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
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 covered equipment. (42 U.S.C.
6314) Specifically, EPCA requires that if a test procedure referenced
in ASHRAE Standard 90.1 is updated, DOE must update its test procedure
to be consistent with the amended test procedure in ASHRAE Standard
90.1, unless DOE determines that the amended test procedure is not
reasonably designed to produce test results that reflect the energy
efficiency, energy use, or estimated operating costs of the ASHRAE
equipment during a representative average use cycle. In addition, DOE
must determine that the amended test procedure is not unduly burdensome
to conduct. (42 U.S.C. 6314(a)(2) and (4)) Manufacturers of covered
equipment must use the prescribed DOE test procedure as the basis for
certifying to DOE that their equipment complies with the applicable
energy conservation standards adopted under EPCA and when making
representations to the public regarding the energy use or efficiency of
such 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. The DOE test procedure for commercial
packaged boilers currently appear at 10 CFR 431.86.
EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing
any amended standard that either increases the maximum allowable energy
use or decreases the minimum required energy efficiency of a covered
product. (42 U.S.C. 6313(a)(6)(B)(iii)(I) and (C)(i)) Furthermore, the
Secretary may not prescribe an amended or new standard if interested
persons have established by a preponderance of the evidence that the
standard is likely to result in the unavailability in the United States
of any covered product type (or class) of performance characteristics
(including reliability), features, sizes, capacities, and volumes that
are substantially the same as those generally available in the United
States at the time of the Secretary's finding. (42 U.S.C.
6313(a)(6)(B)(iii)(II)(aa) and (C)(i))
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 (and, as applicable, water) savings
during the first year that the consumer will receive as a result of the
standard, as calculated under the applicable test procedure. For this
rulemaking, DOE considered the criteria for rebuttable presumption as
part of its analysis.
Additionally, when a type or class of covered equipment has two or
more subcategories, DOE often specifies more than one standard level.
DOE generally will adopt a different standard level than that which
applies generally to such type or class of products for any group of
covered products that have the same function or intended use if DOE
determines that products within such group (A) consume a different kind
of energy from that consumed by other covered products within such type
(or class), or (B) have a capacity or other performance-related feature
that other products within such type (or class) do not have and which
justifies a higher or lower standard. In determining whether a
performance-related feature justifies a different standard for a group
of products, DOE generally considers such factors as the utility to the
consumer of the feature and other factors DOE deems appropriate. In a
rule prescribing such a standard, DOE includes an explanation of the
basis on which such higher or lower level was established. DOE
considered these criteria for this rulemaking.
Because ASHRAE did not update its efficiency levels for commercial
packaged boilers in any of its most recent updates to ASHRAE Standard
90.1 (i.e., ASHRAE Standard 90.1-2010 and ASHRAE Standard 90.1-2013),
DOE is analyzing amended standards consistent with the procedures
defined under 42 U.S.C. 6313(a)(6)(C). Specifically, pursuant to 42
U.S.C. 6313(a)(6)(C)(i)(II), DOE must use the procedures established
under subparagraph (B) when issuing a NOPR.
After carefully reviewing all commercial packaged boiler equipment
classes, DOE has tentatively concluded that there is clear and
convincing evidence that the proposed amended standards for eight of
the twelve proposed commercial packaged boiler equipment classes (i.e.,
all commercial packaged boilers with fuel input rate <=10,000 kBtu/h)
would result in significant additional conservation of energy and would
be technologically feasible and economically justified, as mandated by
42 U.S.C. 6313(a)(6).
For the remaining four equipment classes, (i.e., all commercial
packaged boilers with fuel input rate >10,000 kBtu/h) DOE proposes to
maintain the existing standards because there is not sufficient data to
provide clear and convincing evidence that more stringent standards
would be technologically feasible and economically justified, and would
result in significant additional energy savings.
B. Background
1. Current Standards
DOE amended its energy conservation standards for commercial
packaged boilers through a final rule published in the Federal Register
on July 22, 2009 (July 2009 final rule). 74 FR 36312. More
specifically, the July 2009 final rule updated the energy conservation
standards for commercial packaged boilers to correspond to the levels
in the 2007 revision of ASHRAE Standard 90.1 (i.e., ASHRAE Standard
90.1-2007). Compliance with the amended standards was required
beginning on March 2, 2012. These levels are shown in Table II.1. Also
in the July 2009 final rule, DOE again followed ASHRAE's approach in
Standard 90.1-2007 and adopted a second tier of energy conservation
standards for two classes of commercial packaged boilers, which are
shown in Table II.2. Compliance with the latter standards will be
required beginning on March 2, 2022.
Table II.1--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or after March
2, 2012
----------------------------------------------------------------------------------------------------------------
Size category Efficiency level--effective
Equipment type Subcategory (input) date: March 2, 2012 *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged Gas-fired............ >=300,000 Btu/h and 80.0% ET.
Boilers. <=2,500,000 Btu/h.
[[Page 15844]]
Hot Water Commercial Packaged Gas-fired............ >2,500,000 Btu/h.... 82.0% EC.
Boilers.
Hot Water Commercial Packaged Oil-fired............ >=300,000 Btu/h and 82.0% ET.
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Oil-fired............ >2,500,000 Btu/h.... 84.0% EC.
Boilers.
Steam Commercial Packaged Boilers. Gas-fired--All, >=300,000 Btu/h and 79.0% ET.
Except Natural Draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Gas-fired--All, >2,500,000 Btu/h.... 79.0% ET.
Except Natural Draft.
Steam Commercial Packaged Boilers. Gas-fired--Natural >=300,000 Btu/h and 77.0% ET.
Draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Gas-fired--Natural >2,500,000 Btu/h.... 77.0% ET.
Draft.
Steam Commercial Packaged Boilers. Oil-fired............ >=300,000 Btu/h and 81.0% ET.
<=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Oil-fired............ >2,500,000 Btu/h.... 81.0% ET.
----------------------------------------------------------------------------------------------------------------
* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''
Table II.2--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or after March
2, 2022
----------------------------------------------------------------------------------------------------------------
Size category Efficiency level--effective
Equipment type Subcategory (input) date: March 2, 2022
----------------------------------------------------------------------------------------------------------------
Steam Commercial Packaged Boilers. Gas-fired--Natural >=300,000 Btu/h and 79.0% ET.
Draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers. Gas-fired--Natural >2,500,000 Btu/h.... 79.0% ET.
Draft.
----------------------------------------------------------------------------------------------------------------
2. History of Standards Rulemaking for Commercial Packaged Boilers
DOE is conducting this rulemaking pursuant to 42 U.S.C.
6313(a)(6)(C), which requires that every six years, DOE must publish
either: (1) A notice of the determination that standards for the
equipment do not need to be amended, or (2) a NOPR including proposed
energy conservation standards. As noted above, DOE's last final rule
for commercial packaged boilers was published on July 22, 2009, so as a
result, DOE is required to act to publish one of the above two
documents within 6 years. Once completed, this rulemaking will satisfy
DOE's statutory obligation under 42 U.S.C. 6313(a)(6)(C). DOE must
publish a final rule not later than two years after this NOPR is
issued. (42 U.S.C. 6313(a)(6)(C)(iii)(I))
In initiating this rulemaking, DOE prepared a Framework document,
``Energy Conservation Standards Rulemaking Framework Document for
Commercial Packaged Boilers,'' which describes the procedural and
analytical approaches DOE anticipated using to evaluate energy
conservation standards for commercial packaged boilers. DOE published a
notice that announced both the availability of the Framework document
and a public meeting to discuss the proposed analytical framework for
the rulemaking. That notice also invited written comments from the
public. 78 FR 54197 (Sept. 3, 2013). The Framework document is
available at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
DOE held a public meeting on October 1, 2013, at which it described
the various analyses DOE would conduct as part of the rulemaking, such
as the engineering analysis, the life-cycle cost (LCC) and payback
period (PBP) analyses, and the national impact analysis (NIA).
Representatives of manufacturers, trade associations, environmental and
energy efficiency advocates, and other interested parties attended the
meeting. The participants discussed the following major topics, among
others: (1) The rulemaking scope (2) test procedures for commercial
packaged boilers; and (3) various issues related to the planned
analyses of amended energy conservation standards. Interested parties
also provided comments on the Framework document, which DOE considered
and responded to in chapter 2 of the preliminary analysis TSD.
On November 20, 2014, DOE published a second notice, ``Energy
Conservation Standards for Commercial Packaged Boilers: Public Meeting
and Availability of the Preliminary Technical Support Document'' in the
Federal Register to announce the availability of the preliminary
analysis technical support document. 79 FR 69066. The preliminary
analysis technical support document (TSD) provided preliminary results
of the analyses that DOE conducted in support of the energy
conservation standards rulemaking. DOE invited interested parties to
comment on the preliminary analysis, and requested public comments on
specific issues related to the TSD. These issues are listed in the
Executive Summary chapter of the preliminary TSD. The preliminary TSD
is available at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
On December 9, 2014, DOE held a public meeting, at which it
described the methodology and preliminary results of the various
analyses it conducted as part of the rulemaking, such as the
engineering analysis, the LCC and PBP analyses, and the NIA.
Representatives of manufacturers, trade associations, environmental and
energy efficiency advocates, and other interested parties attended the
meeting. The public meeting provided an opportunity for the attendees
to provide feedback and comments that would help improve DOE's analysis
and results for the NOPR stage. In addition, DOE also received several
written comments from interested parties and stakeholders, in response
to the preliminary analysis TSD. Parties providing comments are shown
in Table II.3. DOE considered the comments and feedback for the
updating the analysis in preparation of
[[Page 15845]]
this document. Relevant comments and DOE's responses are provided in
section III and section IV of this document.
Table II.3--Parties That Provided Comments on the Preliminary Analysis TSD
----------------------------------------------------------------------------------------------------------------
Name of party Abbreviation Source of comments Type *
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating and AHRI.................... Public Meeting, Written. TA
Refrigeration Institute.
American Boiler Manufacturers ABMA.................... Public Meeting, Written. TA
Association.
American Council for Energy Efficient ACEEE, ASAP & NRDC...... Written................. EA
Economy, Appliance Standards
Awareness Project, National Resource
Defense Council.
American Council for Energy Efficient ACEEE................... Public Meeting.......... EA
Economy.
Lochinvar, LLC....................... Lochinvar............... Public Meeting, Written. M
Raypak, Inc.......................... Raypak.................. Public Meeting, Written. M
PVI Industries....................... PVI..................... Public Meeting.......... M
Plumbing, Heating and Cooling PHCC.................... Public Meeting.......... C
Contractors.
Appliance Standards Awareness Project ASAP.................... Public Meeting.......... EA
Pacific Gas & Electric, Southern PGE & SCE............... Written................. U
California Edison.
----------------------------------------------------------------------------------------------------------------
* TA: Trade Association; EA: Efficiency/Environmental Advocate; M: Manufacturer; C: Contractor; U: Utility.
In parallel to the energy conservation standards rulemaking, DOE
published a notice of proposed determination on August 13, 2013 (August
2013 NOPD), which initiated a coverage determination to explicitly
clarify DOE's statutory authority under EPCA to cover natural draft
commercial packaged boilers. DOE initiated this coverage determination
because the existing definition of ``packaged boiler'' could have
allowed for differing interpretations as to whether natural draft
commercial packaged boilers are covered equipment. 78 FR 49202. In the
August 2013 NOPD, DOE proposed a definition for natural draft
commercial packaged boilers that would clarify its statutory authority
to cover such equipment. DOE sought public comments in response to its
proposed determination and definition for natural draft commercial
packaged boilers, and received several written comments from interested
parties. In addition, DOE also received several comments in response to
the preliminary analysis TSD that are relevant to the issue of coverage
determination of natural draft commercial packaged boilers.\19\ After
carefully reviewing all of the comments received on the issue of
coverage determination of natural draft commercial packaged boilers and
determining that the comments indicated a common and long-standing
understanding from interested parties that natural draft commercial
packaged boilers are and have been covered equipment under part A-1 of
Title III of EPCA, DOE decided to withdraw the August 2013 NOPD on
August 25, 2015 (August 2015 withdrawal notice). 80 FR 51487.
---------------------------------------------------------------------------
\19\ Comments with regards to the coverage determination of
natural draft CPB from both the 2013 NOPD and the preliminary
analysis TSD are discussed in detail in the 2015 withdrawal notice
(80 FR 51487).
---------------------------------------------------------------------------
Lastly, DOE is also currently conducting a separate test procedure
rulemaking to consider an amended test procedure for commercial
packaged boilers. On February 20, 2014, DOE published a request for
information (RFI) in the Federal Register that sought comments and
information from stakeholders on several issues pertaining to the CPB
test procedure. 79 FR 9643. On February 22, 2016, DOE issued a NOPR,
which proposed to update the test procedure for determining the
efficiency of commercial packaged boilers (February 2016 test procedure
NOPR).\20\ Through the proposed test procedure, DOE has sought to
addresses some of the issues raised by DOE in the RFI and by interested
parties in their comments. Section III.B of this document briefly
discusses the changes proposed to the current test procedure and the
potential impact on the energy conservation standards.\21\ The analyses
conducted for this NOPR reflect the changes proposed in the February
2016 test procedure NOPR.
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\20\ A link to the February 2016 test procedure NOPR issued by
DOE can be found at: http://energy.gov/eere/buildings/downloads/issuance-2016-02-22-energy-conservation-program-certain-commercial-and.
\21\ For detailed discussion on the test procedure including the
comments and DOE's response please see the docket no. EERE-2014-BT-
TP-0006. The docket can also be accessed using the following link:
http://www.regulations.gov/#!docketDetail;D=EERE-2014-BT-TP-0006.
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III. General Discussion
A. Compliance Dates
In 42 U.S.C. 6313(a), EPCA prescribes a number of compliance dates
for any resulting amended standards for commercial packaged boilers.
These compliance dates vary depending on specific statutory authority
under which DOE is conducting its review (i.e., whether DOE is
triggered by a revision to ASHRAE Standard 90.1 or whether DOE is
undertaking a 6-year review), and the action taken (i.e., whether DOE
is adopting ASHRAE Standard 90.1 levels or more stringent levels). The
discussion that follows explains the potential compliance dates as they
pertain to this rulemaking.
As discussed in section II.A of this document, EPCA requires that
at least once every 6 years, DOE must review standards for commercial
packaged boilers and publish either a notice of determination that
standards for this type of equipment do not need to be amended or a
NOPR for any equipment for which more than 6 years has elapsed since
the issuance of the most recent final rule. (42 U.S.C.
6313(a)(6)(C)(i)) EPCA requires that an amended standard prescribed
under 42 U.S.C. 6313(a)(6)(C) must apply to products manufactured after
the date that is the later of: (1) The date 3 years after publication
of the final rule establishing a new standard or (2) the date 6 years
after the effective date of the current standard for a covered product.
(42 U.S.C. 6313(a)(6)(C)(iv)). For commercial packaged boilers, the
final rule is scheduled to be published in 2016 and the current
standards went into effect in 2012. Thus, the date 3 years after the
publication of a final rule (2019) would be later than the date 6 years
after the effective date of the current standard (2018) for this round
of rulemaking. As a result, compliance with any amended energy
conservation standards promulgated in the final rule would be required
beginning on the date that is 3 years after the publication of the
final rule.
[[Page 15846]]
B. Test Procedure
The current test procedure for commercial packaged boilers is found
at 10 CFR 431.86, and incorporates by reference the Hydronics Institute
(HI) BTS-2000 (Rev 06.07) testing standard, Method to Determine
Efficiency of Commercial Space Heating Boilers. As stated previously,
on February 22, 2016, DOE issued a notice of proposed rulemaking that
proposes several amendments to the CPB test procedure. The changes that
are proposed in the new test procedure include: (1) Clarify the
coverage for field-constructed commercial packaged boilers and the
applicability of DOE's test procedure and standards for this category
of commercial packaged boilers, (2) provide an optional field test for
commercial packaged boilers with fuel input rate greater than 5,000,000
Btu/h, (3) provide a conversion method to calculate thermal efficiency
based on combustion efficiency testing for steam commercial packaged
boilers with fuel input rate greater than 5,000,000 Btu/h, (4) modify
the inlet and outlet water temperatures during tests of hot water
commercial packaged boilers, (5) establish limits on the ambient
temperature and relative humidity conditions during testing, (6) modify
setup and instrumentation requirements to remove ambiguity, and (7)
standardize terminology and provisions for ``fuel input rate.'' \22\
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\22\ In this notice and the NOPR TSD, DOE uses ``fuel input
rate,'' to refer to the maximum rate at which a commercial packaged
boiler uses energy, in order to be consistent with Test Procedure
definition and language. The industry also uses terms such as input
capacity, input ratings, capacity, and rating, and any such
instances should be considered synonymous with fuel input rate.
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In the comments received on the preliminary analysis TSD for the
energy conservation standards rulemaking, DOE received several comments
that are specifically related to the current test procedure for
commercial packaged boilers. Comments related to the technical aspects
of the test procedure development were considered and addressed in the
test procedure NOPR.
In addition, DOE received several comments related to the timing of
the test procedure and energy conservation standard. AHRI stated that
it appreciates DOE's effort to finalize the test procedure revisions in
advance of the standards revisions and that it is critical that the
revised test procedures be finalized so that the analysis for the
revised standard is based properly on the test procedures that will be
applied to products to establish their compliance with the revised
efficiency standard. AHRI also stated that there must be sufficient
time between the completion of the revised test procedure and the NOPR
for the efficiency standard to allow all parties to assess the effect
of test procedure revisions on potential increased efficiency
standards, and encouraged DOE to continue its efforts to minimize the
burden. (AHRI, No. 37 at p. 2) \23\ Raypak stated that it is concerned
about the lack of a finalized efficiency test procedure, and argued
that this will adversely affect the capability of DOE to properly
evaluate potential efficiency standard changes. (Raypak, No. 35 at p.
1) At the preliminary analysis public meeting, AHRI commented regarding
the need to finalize both the test procedure and the coverage
determination prior to the NOPR for the energy conservation standards
rulemaking. (AHRI, Public Meeting Transcript, No. 39 at p. 16 and pp.
209-211) In the meeting, ACEEE acknowledged the challenges in
compliance, certification, and enforcement for large commercial
packaged boilers and asked whether DOE is likely to have regulation
without enforcement or whether the Department is planning ahead now for
enforcement of large (e.g., 10 million Btu/h) commercial packaged
boilers. (ACEEE, Public Meeting Transcript, No. 39 at p. 21)
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\23\ A notation in this form provides a reference for
information that is in the docket of DOE's rulemaking to develop
energy conservation standards for commercial packaged boilers
(Docket No. EERE-2013-BT-STD-0030, which is maintained at http://www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0030). This
particular notation refers to a comment: (1) Submitted by AHRI; (2)
appearing in document number 0035; and (3) appearing on page 3 of
that document.
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As noted previously, the test procedure NOPR for commercial
packaged boilers was issued by DOE on February 22, 2016. Although the
test procedure has not yet been finalized, DOE believes the proposed
test method updates give enough insight as to the changes under
consideration that amended standard levels can reasonably be considered
in this rulemaking. DOE conducted analyses for this NOPR based on the
amended test procedure proposed in the February 2016 test procedure
NOPR. However, DOE notes its final rule analyses will be based on DOE's
most recently adopted CPB test procedure available at the time of the
analyses. EPCA requires that, at least once every 7 years, the
Secretary of Energy shall evaluate each type of covered equipment,
including packaged boilers, to determine whether amended test
procedures would more accurately or fully comply with the requirements
for the test procedures to be reasonably designed to produce test
results which reflect energy efficiency, energy use, and estimated
operating costs during a representative average use cycle; and would
not be unduly burdensome to conduct. (42 U.S.C. 6314(a)(1)-(2)) DOE
adopted its latest amendments to its CPB test procedure in a final rule
published on July 22, 2009. 74 FR 36312. Pursuant to EPCA's provision
at 42 U.S.C. 6314(a)(1)-(2), DOE is conducting a concurrent test
procedure rulemaking to evaluate its current CPB test procedure.
Regarding the effect of the amended test procedure on efficiency
ratings, DOE notes that it tested several commercial packaged boilers
with both the previous and the proposed test procedure to observe the
variation in efficiency ratings as a result of the amended test
procedure. As explained in the February 2016 test procedure NOPR, based
on the results of this testing, DOE has tentatively determined that the
proposed amendments, in aggregate, would not result in an overall
measurable impact on ratings.
C. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE conducts a
market and technology assessment that develops a list of technology
options for consideration in consultation with manufacturers, design
engineers, and other interested parties. DOE then determines which of
those means for improving efficiency are technologically feasible. DOE
considers technologies incorporated in commercially available products
or in working prototypes to be technologically feasible. 10 CFR part
430, subpart C, appendix A, section 4(a)(4)(i).
After DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on 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) through (iv). Additionally, DOE notes that these screening
criteria do not directly address the proprietary status of design
options. DOE only
[[Page 15847]]
considers efficiency levels achieved through the use of proprietary
designs in the engineering analysis if they are not part of a unique
path to achieve that efficiency level (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency). DOE
believes the proposed standards for the equipment covered in this
rulemaking would not mandate the use of any proprietary technologies,
and that all manufacturers would be able to achieve the proposed levels
through the use of non-proprietary designs. Section IV.B of this
document discusses the results of the screening analysis for commercial
packaged boilers, particularly the designs DOE considered, those it
screened out, and those that are the basis for the TSLs in this
rulemaking. For further details on the screening analysis for this
rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended standard for a type or class
of covered product, it must determine the maximum improvement in energy
efficiency or maximum reduction in energy use that is technologically
feasible for such equipment. Accordingly, in the engineering analysis,
DOE determined the maximum technologically feasible (``max-tech'')
improvements in energy efficiency for commercial packaged boilers,
using the design parameters for the most efficient equipment available
on the market or in working prototypes. The max-tech levels that DOE
determined for this rulemaking are described in section IV.C.4 of this
document and in chapter 5 of the NOPR TSD.
D. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from the commercial
packaged boilers that are the subject of this rulemaking purchased in
the 30-year period that begins in the year of compliance with amended
standards (2019-2048).\24\ The savings are measured over the entire
lifetime of commercial packaged boilers 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 in the absence of amended efficiency
standards, and it considers market forces and policies that may affect
future demand for more-efficient equipment.
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\24\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
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DOE uses its NIA spreadsheet models to estimate energy savings from
potential amended standards. The NIA spreadsheet model (described in
section IV.H of this document) calculates energy savings in site
energy, which is the energy directly consumed by equipment at the
locations where they are used. For electricity, DOE calculates national
energy savings in terms of primary energy savings, which is the savings
in the energy that is used to generate and transmit the site
electricity. For electricity and natural gas and oil, DOE also
calculates full-fuel-cycle (FFC) energy savings. As discussed in DOE's
statement of policy and notice of policy amendment, the FFC metric
includes the energy consumed in extracting, processing, and
transporting primary fuels (i.e., coal, natural gas, petroleum fuels),
and thus presents a more complete picture of the impacts of energy
efficiency standards. 76 FR 51281 (Aug. 18, 2011), as amended at 77 FR
49701 (Aug. 17, 2012).
To calculate primary energy savings, DOE derives annual conversion
factors from the model used to prepare the Energy Information
Administration's (EIA's) most recent Annual Energy Outlook. For FFC
energy savings, DOE's approach is based on the calculation of an FFC
multiplier for each of the energy types used by covered products or
equipment. For more information, see section IV.H.2 of this document.
2. Significance of Savings
To amend standards for commercial packaged boilers, DOE must
determine with clear and convincing evidence that the standards would
result in ``significant'' additional energy savings. (42 U.S.C.
6313(a)(6)(A)(ii)(II) and (C)(i)) 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), opined that Congress intended
``significant'' energy savings in the context of EPCA to be savings
that were not ``genuinely trivial.'' DOE has tentatively concluded the
energy savings for the proposed standards (presented in section V.B.3.a
of this document) are ``significant'' as required by 42 U.S.C.
6313(a)(6)(A)(ii)(II) and (C)(i).
E. Economic Justification
1. Specific Criteria
EPCA provides seven factors to be evaluated in determining whether
a potential energy conservation standard is economically justified. (42
U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i)) The following sections
discuss how DOE has addressed each of those seven factors in this
rulemaking.
a. Economic Impact on Manufacturers and Consumers
EPCA requires DOE to consider the economic impact of a standard on
manufacturers and the commercial consumers of the products subject to
the standard. (42 U.S.C. 6313(a)(6)(B)(I) and (C)(i)) In determining
the impacts of a potential amended standard on manufacturers, DOE
conducts a manufacturer impact analysis (MIA), as discussed in section
IV.J of this document. 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) INPV, which
values the industry based on 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 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 NPV of the economic
impacts applicable to a particular rulemaking. DOE also evaluates the
LCC impacts of potential standards on identifiable subgroups of
consumers that may be affected disproportionately by a national
standard.
[[Page 15848]]
b. Savings in Operating Costs Compared to Increase in Price
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered equipment 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 equipment
that are likely to result from an amended standard. (42 U.S.C.
6313(a)(6)(B)(ii)(II) and (C)(i)) DOE conducts this comparison in its
LCC and PBP analysis.
The LCC is the sum of the purchase price of the equipment
(including installation cost and sales tax) and the operating expense
(including energy, maintenance, and repair expenditures) discounted
over the lifetime of the equipment. The LCC analysis requires a variety
of inputs, such as equipment prices, equipment energy consumption,
energy prices, maintenance and repair costs, equipment lifetime, and
consumer discount rates. To account for uncertainty and variability in
specific inputs, such as equipment lifetime and discount rate, DOE uses
a distribution of values, with probabilities attached to each value.
For its analysis, DOE assumes that consumers will purchase the covered
equipment in the first year of compliance with amended standards.
The 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.
The LCC savings for the considered efficiency levels are calculated
relative to a no-new-standards-case that reflects projected market
trends in the absence of amended standards. DOE identifies the
percentage of consumers estimated to receive LCC savings or experience
an LCC increase, in addition to the average LCC savings associated with
a particular standard level. DOE's LCC and PBP analysis is discussed in
further detail in section IV.F of this document.
c. Energy Savings
EPCA requires DOE, in determining the economic justification of a
standard, to consider the total projected energy savings that are
expected to result directly from the standard. (42 U.S.C.
6313(a)(6)(B)(ii)(III) As discussed in section III.D.1 and section IV.E
of this document and chapter 10 of the NOPR TSD, DOE uses spreadsheet
models to project national energy savings.
d. Lessening of Utility or Performance of Equipment
In determining whether a proposed standard is economically
justified, DOE evaluates any lessening of the utilities or performance
of the considered equipment. (42 U.S.C. 6313(a)(6)(B)(ii)(IV) and
(C)(i)) Based on data available to DOE, the standards proposed in this
document 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 of the
United States that is likely to result from a proposed standard. (42
U.S.C. 6313(a)(6)(B)(ii)(V) and (C)(i)) DOE will transmit a copy of
this proposed rule to the Attorney General with a request that the
Department of Justice (DOJ) provide its determination on this issue.
DOE will publish and respond to the Attorney General's determination in
the final rule.
f. Need for National Energy Conservation
In considering new or amended energy conservation standards, EPCA
also directs DOE to consider the need for the national energy
conservation. (42 U.S.C. 6313(a)(6)(B)(ii)(VII) and (C)(i)) The
proposed standards are likely to improve 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 of this document.
The proposed 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 standards may affect
these emissions, as discussed in section IV.K of this document. DOE
reports the emissions impacts from each TSL it considered 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 of this document.
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether a
standard is economically justified, to consider any other factors that
the Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)
and (C)(i)) 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 justified if the additional cost to the
consumer of the equipment that meets the standard is less than three
times the value of the first year's energy savings resulting from the
standard, as calculated under the applicable DOE test procedure. DOE's
LCC and PBP analyses generate values used to calculate the effects that
proposed energy conservation standards would have on the PBP for
consumers. These analyses include, but are not limited to, the 3-year
PBP 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.
6313(a)(6)(B)(ii) and (C)(i). The results of this analysis serve as the
basis for DOE's evaluation of the economic justification for a
potential standard level (thereby supporting or rebutting the results
of any preliminary determination of economic justification). The
rebuttable presumption payback calculation is discussed in section
IV.F.11 of this document.
IV. Methodology and Discussion of Related Comments
DOE used three analytical tools to estimate the impact of the
proposed standards. The first tool is a spreadsheet that calculates
LCCs and PBPs of potential new energy conservation standards. The
second tool is a spreadsheet that calculates national energy savings
and net present value resulting from potential amended energy
conservation standards.\25\ The third spreadsheet tool, the Government
[[Page 15849]]
Regulatory Impact Model (GRIM), helped DOE to assess manufacturer
impacts of potential standards. These tools are available on the DOE
Web site for this rulemaking: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=79.
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\25\ The shipments model was developed as a Microsoft Excel
spreadsheet, which is integrated into the spreadsheet for the NIA.
The ``shipment forecast'' and ``historical shipments'' worksheets of
the NIA model present the scope of the shipment analysis and the
total shipments in units for the commercial packaged boilers in
scope.
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Additionally, DOE estimated the impacts of energy conservation
standards for commercial packaged boilers on utilities and the
environment. DOE used a version of EIA's National Energy Modeling
System (NEMS) for the utility and environmental analyses. The NEMS
model simulates the energy sector of the U.S. economy. EIA uses NEMS to
prepare its Annual Energy Outlook (AEO), a widely known energy forecast
for the United States. The version of NEMS used for appliance standards
analysis is called NEMS-BT and is based on the AEO version with minor
modifications.\26\ The NEMS-BT model offers a sophisticated picture of
the effect of standards, because it accounts for the interactions
between the various energy supply and demand sectors and the economy as
a whole.
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\26\ The EIA allows the use of the name ``NEMS'' to describe
only an AEO version of the model without any modification to code or
data. Because the present analysis entails some minor code
modifications and runs the model under various policy scenarios that
deviate from AEO assumptions, the name ``NEMS-BT'' refers to the
model as used here. For more information on NEMS, refer to The
National Energy Modeling System: An Overview, DOE/EIA-0581 (98)
(Feb.1998), available at: http://tonto.eia.doe.gov/FTPROOT/forecasting/058198.pdf.
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A. Market and Technology Assessment
1. General
For the market and technology assessment, DOE develops information
that provides an overall snapshot of the market for the equipment
considered, including the nature of the equipment, market
characteristics, industry structure, and technologies that improve
energy efficiency. The analysis carried out under this chapter is
broadly divided into two categories: (1) Market assessment and (2)
technology assessment. The purpose of the market assessment is to
develop a qualitative and quantitative characterization of the CPB
industry and market structure, based on information that is publicly
available and on data submitted by manufacturers and other interested
parties. Issues addressed include CPB characteristics, market share and
equipment classes; existing regulatory and non-regulatory efficiency
improvement initiatives; overview of historical equipment shipments and
lifetimes and trends in the equipment markets. The purpose of the
technology assessment is to investigate technologies that will improve
the energy efficiency of commercial packaged boilers, and results in a
preliminary list of technology options that can improve the thermal
and/or combustion efficiency of commercial packaged boilers. Chapter 3
of the NOPR TSD contains all the information related to the market and
technology assessment. The chapter also provides additional details on
the methodology used, information gathered and results. DOE typically
uses the information gathered in this chapter in the various downstream
analyses such as engineering analysis, shipment analysis, and
manufacturer impact analyses.
In this NOPR, DOE also explored the market to identify
manufacturers of commercial packaged boilers. As per the definition set
forth in 10 CFR 431.82, a manufacturer of a commercial packaged boiler
is any person who: (1) Manufactures, produces, assembles or imports a
commercial packaged boiler in its entirety; (2) manufactures, produces,
assembles or imports a commercial packaged boiler in part, and
specifies or approves the boiler's components, including burners or
other components produced by others, as for example by specifying such
components in a catalogue by make and model number or parts number; or
(3) is any vendor or installer who sells a commercial packaged boiler
that consists of a combination of components that is not specified or
approved by a person described in the two previous definitions.
Through extensive search of publicly available information,
including ABMA's and AHRI's Web sites, DOE identified 45 CPB
manufacturers that meet this definition. The complete list of
manufacturers can be found in chapter 3 of the NOPR TSD.
DOE requests comment on the number and names of manufacturers that
qualify as CPB manufacturers according to the list of manufacturers in
chapter 3 of the NOPR TSD.
2. Scope of Coverage and Equipment Classes
EPCA lists ``packaged boilers'' as a type of covered equipment. (42
U.S.C 6311(1)). EPCA defines the term ``packaged boiler'' as ``a boiler
that is shipped complete with heating equipment, mechanical draft
equipment, and automatic controls; usually shipped in one or more
sections.'' (42 U.S.C. 6311(11)(B)) In its regulations, DOE clarifies
the term ``packaged boiler'' to exclude a boiler that is ``custom
designed and field constructed,'' and it further provides that if the
boiler is shipped in more than one section, the sections may be
produced by more than one manufacturer and may be originated or shipped
at different times and from more than one location. 10 CFR 431.82.
DOE's regulations also define the term ``commercial packaged
boiler'' as ``a type of packaged low pressure boiler that is industrial
equipment with a capacity (rated maximum input) of 300,000 Btu per hour
(Btu/h) or more which, to any significant extent, is distributed in
commerce (1) for heating or space conditioning applications in
buildings; or (2) for service water heating in buildings but does not
meet the definition of `hot water supply boiler' in [10 CFR part
431].'' A ``packaged low pressure boiler'' means, ``a packaged boiler
that is (1) a steam boiler designed to operate below a steam pressure
of 15 psig; or (2) a hot water boiler designed to operate at or below a
water pressure of 160 psig and a temperature of 250[deg]F or (3) a
boiler that is designed to be capable of supplying either steam or hot
water, and designed to operate under the conditions in paragraphs (1)
and (2) of this definition.'' 10 CFR 431.82.
As noted above, the current definition of ``packaged boiler''
refers to a boiler that is shipped complete with heating equipment,
mechanical draft equipment, and automatic controls. The definition does
not explicitly include natural draft equipment. However, as discussed
in the August 2015 withdrawal notice, DOE interprets the definitions in
the statute to include natural draft commercial packaged boilers. After
considering written comments on the August 2013 NOPD and comments on
the preliminary analysis TSD related to the coverage of natural draft
equipment, DOE concluded that natural draft commercial packaged boilers
are and have been covered equipment subject to DOE's energy
conservation standards. Therefore, DOE concluded it was unnecessary to
publish a determination to clarify its statutory authority to cover
natural draft commercial packaged boilers. Accordingly, DOE has
included natural draft commercial packaged boilers under the scope of
the rulemaking.
In the preliminary analysis, DOE specifically sought public comment
on its tentative decision not to set an upper limit to the fuel input
rate for commercial packaged boilers. This issue was first raised in
the Framework document (Item 2-4 at page 12), where DOE requested
feedback on whether there were any size related issues that may render
energy conservation
[[Page 15850]]
standards infeasible for very large commercial packaged boilers. DOE
received several comments in response to the Framework document that
included suggestions of input capacities at which the scope of the
standards rulemaking could be capped. AHRI recommended that the scope
of the rulemaking should be capped at 5,000 kBtu/h. (AHRI, No.17 at pp.
1-2) ABMA, Burnham Holdings, and Cleaver Brooks suggested that the
scope should be capped at 2,500 kBtu/h, citing high testing costs and
practicability concerns. (ABMA, No. 14 at pp. 2-3; Cleaver-Brooks, No.
12 at p. 1; Burnham, No. 15 at p. 2) HTP recommended three commercial
packaged boiler classifications: ``small,'' with fuel input rates >=300
kBtu/h to <2,500 kBtu/h; ``medium,'' with fuel input rates >=2,500
kBtu/h and <5,000 kBtu/h; and ``large,'' with fuel input rates >=5,000
kBtu/h. (HTP, No. 18 at pp. 1-2) DOE provided responses to all these
comments in chapter 2 of the preliminary analysis TSD. In its response,
DOE acknowledged the difficulty of testing and rating very large
commercial packaged boilers. However, DOE pointed out that defining a
fuel input rate upper limit above which standards will not apply could
violate EPCA's anti-backsliding provision. As a result, in the
preliminary analysis TSD, DOE analyzed all equipment classes for
commercial packaged boilers that fit EPCA's definition and have a fuel
input rate of 300 kBtu/h or more with no upper limit. DOE also
requested further public comment from interested parties on its
tentative decision to not set an upper limit.
Several interested parties and stakeholders commented on this issue
in response to the preliminary analysis TSD. Lochinvar commented in
support of DOE's decision, stating that the inclusion of commercial
packaged boilers with very large fuel input rate is needed to ensure a
level playing field and accurate product ratings. Lochinvar further
commented that many concerns regarding the test burden are addressed by
the revised Alternative Efficiency Determination Methods (AEDM) rules.
(Lochinvar, No. 34 at p. 1) ABMA stated that DOE's decision not to set
an upper limit on input capacity for commercial packaged boilers is
causing significant concern among their member boiler manufacturers.
ABMA reported that boilers can approach capacities as high as 80,000
kBtu/h with the testing cost approaching one million dollars, which
imposes a prohibitively high financial burden on companies
manufacturing large institutional sized space heating boilers. ABMA
also argued that their member manufacturers have been offering
efficiency guarantees since the late 1970s on the large space heating
commercial and institutional packaged boilers and have been capable of
meeting current efficiency requirements since 1970. Further, ABMA
stated that there exists significant difference between smaller boilers
that are built in large quantities to a standard specification and
large custom engineered boilers manufactured to specifications for a
particular installation. ABMA recommended that DOE cap the efficiency
certification requirements for commercial packaged boilers at 2,500
kBtu/h. (ABMA, No. 33 at pp. 1-2) AHRI stated that the commercial
boilers that have input rates in the high millions of Btu/h are very
different products and that many factors that are considered in DOE's
analysis and the associated conclusions cannot be extrapolated up to
characterize very large commercial packaged boilers. (AHRI, No. 37 at
p. 1) AHRI also stated that when going from 3,000 kBtu/h to tens of
millions of Btu/h, a whole different price structure should be employed
and there may be an upper limit at which the price structure changes
completely. (AHRI, Public Meeting Transcript, No. 39 at p. 45) During
the public meeting, ABMA also expressed concern on how DOE would
extrapolate prices for an 80 million Btu/h boiler using a 3 million
Btu/h boiler as the representative unit. (ABMA, Public Meeting
Transcript, No. 39 at pp. 64-65)
DOE considered the comments received from interested parties.
Comments regarding testing large commercial packaged boilers were
addressed separately in the ongoing test procedure rulemaking
(discussed further in section III.B of this document). DOE also
acknowledges other issues with regards to the compliance burden of very
large commercial packaged boilers, particularly those that are
engineered-to-order. Some stakeholders suggested capping the scope of
the energy conservation standards as an option to resolve this issue.
However, as discussed previously, setting an upper limit to the scope
of DOE's energy conservation standards for commercial packaged boilers
could violate EPCA's anti-backsliding provision. Therefore, DOE has not
set an upper limit for fuel input rate above which the standards will
not be applicable. However, as discussed in further detail below, DOE
proposes a separate equipment class for ``very large'' commercial
packaged boilers with input capacities greater than 10 million Btu/h.
When evaluating and establishing energy conservation standards, DOE
typically divides covered equipment into equipment classes based on the
type of energy used, capacity, or performance-related features that
justify a different standard. In making a determination whether a
performance-related feature justifies a different standard, DOE
considers such factors as the utility to the consumer of the feature
and other factors DOE determines are appropriate.
The current regulations for commercial packaged boilers list 10
equipment classes with corresponding energy efficiency levels for
each.\27\ 10 CFR 431.87. These equipment classes are based on (1) size
(fuel input rate), (2) heating media (hot water or steam), and (3) type
of fuel used (oil or gas).\28\ The gas-fired steam commercial packaged
boilers are further classified according to draft type (thereby
creating two additional equipment classes). Table IV.1 shows equipment
classes that are set forth in the current regulations at 10 CFR 431.87.
---------------------------------------------------------------------------
\27\ These standard levels were adopted in the July 2009 final
rule.
\28\ Under subpart E of 10 CFR part 431, commercial packaged
boilers are divided into equipment classes based on fuel input rate
(i.e., size category). Throughout this document, DOE refers to units
with an fuel input rate of >=300,000 Btu/h and <=2,500,000 Btu/h as
``small'' and units with an fuel input rate >2,500,000 Btu/h as
``large.'' See 10 CFR 431.87.
Table IV.1--CPB Equipment Classes Set Forth in the Current Regulations at 10 CFR 431.87
----------------------------------------------------------------------------------------------------------------
Size category Energy efficiency
Equipment type Subcategory (input) Equipment class metric
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged Gas-fired......... >=300,000 Btu/h Small Gas Hot Thermal
Boilers. and <=2,500,000 Water. Efficiency.
Btu/h.
[[Page 15851]]
Hot Water Commercial Packaged Gas-fired......... >2,500,000 Btu/h.. Large Gas Hot Combustion
Boilers. Water. Efficiency.
Hot Water Commercial Packaged Oil-fired......... >=300,000 Btu/h Small Oil Hot Thermal
Boilers. and <=2,500,000 Water. Efficiency.
Btu/h.
Hot Water Commercial Packaged Oil-fired......... >2,500,000 Btu/h.. Large Oil Hot Combustion
Boilers. Water. Efficiency.
Steam Commercial Packaged Gas-fired--all >=300,000 Btu/h Small Gas Thermal
Boilers. except natural and <=2,500,000 Mechanical Draft Efficiency.
draft. Btu/h. Steam.
Steam Commercial Packaged Gas-fired--all >2,500,000 Btu/h.. Large Gas Thermal
Boilers. except natural Mechanical Draft Efficiency.
draft. Steam.
Steam Commercial Packaged Gas-fired--natural >=300,000 Btu/h Small Gas Natural Thermal
Boilers. draft. and <=2,500,000 Draft Steam. Efficiency.
Btu/h.
Steam Commercial Packaged Gas-fired--natural >2,500,000 Btu/h.. Large Gas Natural Thermal
Boilers. draft. Draft Steam. Efficiency.
Steam Commercial Packaged Oil-fired......... >=300,000 Btu/h Small Oil Steam... Thermal
Boilers. and <=2,500,000 Efficiency.
Btu/h.
Steam Commercial Packaged Oil-fired......... >2,500,000 Btu/h.. Large Oil Steam... Thermal
Boilers. Efficiency.
----------------------------------------------------------------------------------------------------------------
In the preliminary analysis, DOE divided commercial packaged
boilers into 16 equipment classes, based on size, fuel, heating medium,
and type of draft. DOE sought public comment on its tentative decision
to classify commercial packaged boilers into 16 equipment classes.
In response to the request, ACEEE, ASAP, and NRDC recommended that
DOE adopt a single equipment class for natural draft and mechanical
draft commercial packaged boilers, citing that natural draft commercial
packaged boilers are inherently less efficient and that this will
ensure maximum energy efficiency improvement. The commenters also
stated that they are unaware of any distinct utility that is offered by
natural draft commercial packaged boilers that is different from
mechanical draft commercial packaged boilers. (ACEEE, ASAP, and NRDC,
No. 36 at p. 2) PG&E and SCE noted that natural draft commercial
packaged boilers have much lower part-load efficiency and are rapidly
becoming obsolete due to changes in consumer buying behavior. The
commenters argued against the separation of the equipment classes,
specifically hot water commercial packaged boilers and stated that both
mechanical draft and natural draft systems have the same utility and,
therefore, should be considered in the same equipment class. (PG&E and
SCE, No. 38 at p. 3) Raypak recommended DOE to revert back to the 10
equipment classes that are set forth in the current energy conservation
standards at 10 CFR 431.87. (Raypak, No. 35 at p. 2) Raypak noted that
non-condensing boilers are still a significant part of the market and
offer several advantages such as simple operation and maintenance,
higher design water temperature, lower costs, and higher lifetimes, and
encouraged DOE to maintain the natural draft boiler equipment classes.
Raypak further encouraged DOE not to amend energy conservation
standards to a level that would not support natural draft commercial
packaged boilers. (Raypak, No. 35 at pp. 6-7) Lochinvar encouraged DOE
to maintain the 10 equipment classes that are set forth in the current
energy conservation standards at 10 CFR 431.87 and stated that the
division of the classes will lead to different minimum ratings for
natural draft and mechanical draft boilers and competitive inequality.
Lochinvar also cited commercial water heaters as an example, stating
that commercial water heaters are available with mechanical and natural
draft systems, but the energy conservation standards are applicable to
all types of equipment irrespective of the draft type (Lochinvar, No.
34 at p. 1) AHRI argued that natural draft commercial packaged boilers
are covered equipment subject to DOE's efficiency standards, but this
does not extend to creating separate equipment classes for such
products in the efficiency standards. AHRI further stated that the
current 10 equipment classes set forth in 10 CFR 431.87 are
appropriate. (AHRI, No. 37 at p. 2) AHRI also commented during the
preliminary analysis public meeting that the 16 equipment classes used
in the preliminary analysis were a good starting point, but that the
classes can be squeezed together. (AHRI, Public Meeting Transcript, No.
39 at p. 26) ASAP questioned DOE's rationale for adopting separate
equipment classes for mechanical and natural draft commercial packaged
boilers. (ASAP, Public Meeting Transcript, No. 39 at p. 39)
DOE agrees with comments stating that both natural draft and
mechanical draft commercial packaged boilers provide the same utility.
Based on DOE's understanding, there appears to be no distinct
performance related utility that is provided by natural draft
commercial packaged boilers that justifies a separate equipment class
for such equipment. Consequently, there appears to be no justification
to maintain separate equipment classes for natural draft commercial
packaged boilers. Therefore, in this document, DOE proposes to
consolidate CPB equipment classes that are currently divided by draft
type.\29\ Specifically, DOE proposes to combine the small (>=300,000
Btu/h and <=2,500,000 Btu/h), gas fired--all except natural draft,
steam and small (>=300,000 Btu/h and <=2,500,000 Btu/h), gas fired--
natural draft, steam classes; and the large (>2,500,000 Btu/h and
<=10,000,000 Btu/h), gas fired--all except natural draft, steam and
large (>=2,500,000 Btu/h and <=10,000,000 Btu/h), gas fired--natural
draft, steam classes.
---------------------------------------------------------------------------
\29\ Because DOE has not proposed amended standards for
commercial packaged boilers with input ratings above 10,000,000 Btu/
h, the standards for equipment in this class will remain unchanged.
Thus, although DOE is consolidating this equipment into a single
class, an allowance will still be made for natural draft units to
have a lower minimum efficiency until March 2, 2022, as is allowed
under the current standards.
---------------------------------------------------------------------------
In addition, based on the concerns expressed by interested parties
regarding the complexities of regulating very large commercial packaged
boilers discussed earlier in this section, DOE has tentatively decided
to propose
[[Page 15852]]
separate equipment classes for commercial packaged boilers with fuel
input rates above 10,000 kBtu/h. In order to determine the fuel input
rate at which to separate the proposed large CPB equipment classes
(i.e., equipment classes with a fuel input rate >2,500 kBtu/h) and the
proposed new equipment class for ``very large'' commercial packaged
boilers, DOE performed a calculation to estimate the energy savings
potential for very large CPB equipment classes at various minimum fuel
input rate thresholds. DOE estimated the potential for energy savings
for commercial packaged boilers with fuel input rates above 10,000
kBtu/h to be between 0.014 and 0.025 quads based on the range of TSLs
considered in the NOPR, by assigning the same efficiency level to the
very large equipment classes as was considered for the corresponding
large equipment classes. Further, DOE examined the price data collected
for the engineering analysis and noticed a smooth linear trend in
prices as they vary with fuel input rate, from 300 kBtu/h up to
approximately 9,500 kBtu/h. The smooth trend created by the data
appears to indicate that commercial packaged boilers below 10,000 kBtu/
h do not have a separate price structure; this linear price trend is
discussed further in the engineering analysis, section IV.C of this
document. Despite extensive efforts, DOE was unable to obtain pricing
data for commercial packaged boilers with fuel input rate above 10,000
kBtu/h. Based on these assessments, including the lack of available
data, DOE is proposing to classify commercial packaged boiler with fuel
input rate above 10,000 kBtu/h as very large equipment classes. As
commercial packaged boilers with fuel input rate above 10,000 kBtu/h
are currently covered equipment, the existing standards at 10 CFR
431.87 are still applicable. DOE proposes to maintain the existing
standards for commercial packaged boilers with fuel input rate above
10,000 kBtu/h (referred to as very large commercial package boilers in
this notice) because there is not sufficient data to provide clear and
convincing evidence that more stringent standards would be
technologically feasible and economically justified, and would result
in significant additional energy savings.
DOE requests data on manufacturer selling prices, shipments and
conversion costs of very large commercial packaged boilers with fuel
input rate above 10,000 kBtu/h that can be used to supplement the
analyses of such equipment in this rulemaking.
See section VII.E for a list of issues on which DOE seeks comment.
DOE also believes that creating separate equipment classes for very
large commercial packaged boilers would reduce the overall compliance
burden of manufacturers.
In summary, DOE proposes the following changes to the equipment
classes: (1) Separating the equipment classes for commercial packaged
boilers that have a fuel input rate above 10,000 kBtu/h, and (2)
consolidating the equipment classes for small and large gas-fired steam
boilers that are currently divided based on draft type into equipment
classes that are not draft specific. Thus, in total, DOE proposes 12
equipment classes \30\ for this NOPR. These classes are categorized
based on three performance parameters: (1) Size; (2) heating medium;
and (3) fuel type. Table IV.2 shows all of the proposed CPB equipment
classes, including the eight equipment classes for which DOE proposes
amended standards and four equipment classes for which DOE did not
propose to amend standards. In subsequent sections of this document,
DOE uses the designated name of equipment classes given in the first
column of Table IV.2 to explain various aspects of the rulemaking
analyses.
---------------------------------------------------------------------------
\30\ Consolidating the 4 draft-specific classes into 2 non-
draft-specific classes reduces the number of equipment classes from
10 to 8, and creating separate equipment classes for very large CPB
equipment adds 4 equipment classes. These changes result in a total
of 12 equipment classes.
Table IV.2--Proposed Equipment Classes for Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Propose amended
Equipment class Size Fuel Heating medium Acronym standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-fired Hot Water.......... >=300kBtu/h to Gas................... Hot Water............ SGHW................. Yes.
<=2,500kBtu/h.
Small Gas-fired Steam\*\........... >=300kBtu/h to Gas................... Steam................ SGST................. Yes.
<=2,500kBtu/h.
Small Oil-fired Hot Water.......... >=300kBtu/h to Oil................... Hot Water............ SOHW................. Yes.
<=2,500kBtu/h.
Small Oil-fired Steam.............. >=300kBtu/h to Oil................... Steam................ SOST................. Yes.
<=2,500kBtu/h.
Large Gas-fired Hot Water.......... >2,500kBtu/h to Gas................... Hot Water............ LGHW................. Yes.
<=10,000kBtu/h.
Large Gas-fired Steam\*\........... >2,500kBtu/h to Gas................... Steam................ LGST................. Yes.
<=10,000kBtu/h.
Large Oil-fired Hot Water.......... >2,500kBtu/h to Oil................... Hot Water............ LOHW................. Yes.
<=10,000kBtu/h.
Large Oil-fired Steam.............. >2,500kBtu/h to Oil................... Steam................ LOST................. Yes.
<=10,000kBtu/h.
Very Large Gas-fired Hot Water\**\. >10,000kBtu/h......... Gas................... Hot Water............ VLGHW................ No.
Very Large Gas-fired Steam\**\..... >10,000kBtu/h......... Gas................... Steam................ VLGST................ No.
Very Large Oil-fired Hot Water\**\. >10,000kBtu/h......... Oil................... Hot Water............ VLOHW................ No.
Very Large Oil-fired Steam\**\..... >10,000kBtu/h......... Oil................... Steam................ VLOST................ No
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The existing small, gas-fired, steam, natural draft equipment classes and small, gas-fired steam, all except natural draft equipment classes are
proposed to be consolidated into a single small gas-fired, steam equipment class. Similarly, the existing large, gas-fired, steam, natural draft
equipment classes and large, gas-fired steam, all except natural draft equipment classes are proposed to be consolidated into a single large, gas-
fired, steam equipment class.
** DOE proposes to establish separate equipment classes for CPB with fuel input rate above 10,000kBtu/h.
In addition to the two issues discussed previously in this section,
DOE received several comments in response to the preliminary analysis
related to standby mode and off mode energy consumption. In chapter 2
of the preliminary analysis TSD, DOE reported that standby mode and off
mode energy consumption is a negligible proportion of the total energy
consumption of the commercial packaged boiler (about 0.02 percent of
total energy used). Consequently, DOE decided in the preliminary
analysis not to analyze standards for commercial packaged boilers to
regulate their standby mode and off mode energy consumption. AHRI,
Raypak, and Lochinvar supported DOE's preliminary findings on the
standby mode and off mode energy consumption and discouraged DOE from
pursuing the development of standards for these modes of operation.
(AHRI, No. 37 at p. 2; Raypak, No. 35 at p. 2; Lochinvar, No. 34 at p.
2) Lochinvar stated that the data on standby mode and off mode is very
[[Page 15853]]
limited because its measurement is not required and based on
measurements conducted on their commercial hot water boilers, the
standby mode power consumption was found to be 0.007 percent of the
total power consumed by the boiler. (Lochinvar, No. 34 at p. 2) ABMA
urged DOE not to consider standby and off cycles or the energy consumed
in different operational modes, stating that there are multiple
variables related to system design, set-up, and operation for a one-
size fits all rule. (ABMA, No. 33 at p. 2) No interested parties
commented in support of standby mode and off mode standards, and DOE
did not receive any new standby loss or off mode energy consumption
data that would cause DOE to reverse its previous tentative conclusion.
Therefore, DOE has not conducted any further analysis of potential
standby mode and off mode energy conservation standards for commercial
packaged boilers.
3. Technology Options
As part of the rulemaking analysis, DOE identifies technology
options that are currently used in commercial packaged boilers at
different efficiency levels available on the market. This helps DOE to
assess the technology changes that would be required to increase the
efficiency of a commercial packaged boiler from baseline to other
higher efficiency levels. Initially, these technologies encompass all
those DOE believes are technologically feasible.
As a starting point, DOE typically uses information relating to
existing and past technology options as inputs to determine what
technologies manufacturers use to attain higher performance levels. DOE
also researches emerging technologies that have been demonstrated in
prototype designs. DOE developed its list of technologically feasible
design options for the considered equipment through consultation with
manufacturers, including manufacturers of components and systems, and
from trade publications and technical papers.
In the preliminary analysis, DOE presented a list of technologies
for improving the efficiency of commercial packaged boilers. Based on
comments received in response to the preliminary analysis (discussed in
detail in section IV.B of this document), DOE retained all the
technology options that were identified in the preliminary analysis.
However, for ``pulse combustion burners,'' DOE is now considering the
technology as a path to achieve condensing operation and categorizing
it as a condensing boiler design. Additionally, in research for the
NOPR, DOE identified a new technology option: oxygen trim system. The
technology options that DOE identified for this NOPR analysis are
listed in Table IV.3:
Table IV.3--Technology Options That Improve Combustion Efficiency or
Thermal Efficiency That are Considered in the Market and Technology
Assessment
------------------------------------------------------------------------
-------------------------------------------------------------------------
Jacket Insulation.
Heat Exchanger Improvements (Including Condensing Heat Exchanger).
Burner Derating.
Improved Burner Technology.
Combustion Air Preheaters.
Economizers.
Blowdown Waste Heat Recovery.
Oxygen Trim Systems.
Integrated, High-Efficiency Steam Boilers.
------------------------------------------------------------------------
B. Screening Analysis
After DOE identified the technologies that might improve the energy
efficiency of commercial packaged boilers, DOE conducted a screening
analysis. The goal of the screening analysis is to identify technology
options that will be considered further, and those that will be
eliminated from further consideration, in the rulemaking analyses. DOE
applied the following set of screening criteria to each of the
technologies identified in the technology assessment to determine which
technology options are unsuitable for further consideration in the
rulemaking:
Technological feasibility: DOE will consider
technologies incorporated in commercial products or in working
prototypes to be technologically feasible.
Practicability to manufacture, install, and service: If
mass production and reliable installation and servicing of a
technology in commercial products could be achieved on the scale
necessary to serve the relevant market at the time the standard
comes into effect, then DOE will consider that technology
practicable to manufacture, install, and service.
Adverse impacts on product utility or equipment
availability: If DOE determines a technology would have a
significant adverse impact on the utility of the product to
significant subgroups of consumers, or would result in the
unavailability of any covered product type with performance
characteristics (including reliability), features, sizes,
capacities, and volumes that are substantially the same as products
generally available in the United States at the time, it will not
consider this technology further.
Adverse impacts on health or safety: If DOE determines
that a technology will have significant adverse impacts on health or
safety, it will not consider this technology further.
(10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))
Additionally, DOE notes that these screening criteria do not
directly address the propriety status of design options. DOE only
considers efficiency levels achieved through the use of proprietary
designs in the engineering analysis if they are not part of a unique
path to achieve that efficiency level (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency).
In the preliminary analysis TSD, DOE applied the screening criteria
to the technology options that were considered in the market and
technology assessment and sought comments and feedback on the
technology options that passed the screening analysis.
DOE received several general comments on the options that passed
the screening analysis in the preliminary analysis TSD chapter.
Lochinvar agreed with technology options that passed the screening
test, noting that the options identified are technologically feasible.
(Lochinvar, No. 34 at p. 2) AHRI and Raypak agreed with the technology
options that successfully passed the screening analysis, with the
exception of pulse combustion (as discussed in further detail later in
this section). (AHRI, No. 37 at p. 3; Raypak No. 35 at p. 2)
ACEEE commented that the deficiencies in the current test procedure
have led to the exclusion of modulating gas burners as an efficiency
improving technology. (ACEEE, Public Meeting Transcript, No. 39 at p.
29)
Regarding modulating boilers, DOE notes that in the equipment
database it found several CPB models at baseline and near baseline
efficiency levels that utilize a modulating burner. As noted by ACEEE,
the test procedure currently does not provide an efficiency advantage
for modulating burners. DOE notes that the February 2016 test procedure
NOPR also does not provide an efficiency benefit for the inclusion of a
modulating burner for reasons explained further in that notice. As a
result, DOE did not consider modulating burners as a technology option
for improving the efficiency of commercial packaged boilers for this
NOPR.
The technology options that were identified in the market and
technology assessment are presented immediately below, along with
whether or not the technology was ultimately considered further in the
analysis.
Jacket Insulation
Optimizing jacket insulation thickness reduces the heat loss from
commercial packaged boiler to the
[[Page 15854]]
outside air. However, most manufacturers already use this technology
option and the potential benefits of using this option are a minimal
increase in thermal efficiency. Consequently, DOE did not consider this
technology option further.
Heat Exchanger Improvements (Including Condensing Heat Exchanger)
DOE considered several heat exchanger improvement options that can
increase thermal and combustion efficiencies of commercial packaged
boilers. These options include incorporation of baffles and
turbulators; improved fin designs such as micro-fins and louvered fins;
improved tube designs such as corrugated tubes and internally rifled
tubes; and addition of a condensing heat exchanger. In response to
these technology options, Lochinvar commented that options such as
increased heat exchanger surface area, baffles and creative pin/fin
arrangements are all viable options for natural draft boilers and have
been implemented by manufacturers for decades. Lochinvar also stated
that DOE needs to consider that design changes are complex and often
involve significant redesign to achieve efficiency targets without
sacrificing safety and reliability. (Lochinvar, No. 34 at p. 2) Raypak
commented that consideration of any additional restrictions of the heat
exchanger must be balanced with the need to ensure safe operation and
venting. (Raypak No. 35 at p. 2) AHRI commented that DOE must avoid
considering heat exchanger designs that are so restrictive that they
adversely affect safe operation and venting of the boiler. (AHRI, No.
37 at p. 3)
DOE reviewed the comments and examined whether the extent of heat
exchanger improvements considered are restrictive such that any of
these options would potentially adversely impact safe operation and
venting of the commercial packaged boiler. In considering improved heat
exchanger designs, DOE focused on technology options that are currently
being used by commercial packaged boilers available on the market, as a
vast array of heat exchanger designs and efficiencies was observed. DOE
examined product literature and operation manuals and is not aware of
potential safety concerns for commercial packaged boilers with heat
exchanger designs that achieve the efficiency levels analyzed in this
NOPR. Where upgraded venting is required for potential condensate
formation in the vent piping, DOE considered such cost in its analysis
of installation costs (see section IV.F.2 of this document).
Consequently, the technology option of heat exchanger improvements
passed the screening analysis and is considered as a design option to
improve CPB thermal or combustion efficiency.
Burner Derating
Burner derating increases the ratio of the heat transfer area to
fuel input by reducing the burner input rating while maintaining the
same heat exchanger, which can increase the thermal efficiency of
commercial packaged boilers. In the preliminary analysis public
meeting, AHRI commented that burner derating has already been used by
the industry to achieve the current efficiency standards, so there is
not much more potential for this option to further improve efficiency.
(AHRI, Public Meeting Transcript, No. 39 at pp. 25-26)
As in the preliminary analysis, DOE proposes to screen out burner
derating as it reduces the usable heat output, and would reduce
utility. Therefore, DOE did not consider this technology option further
in the analysis.
Improved Burner Technology
Burner technologies that were considered under this technology
option include pulse combustion, premix burners and low pressure, air
atomized oil burners. In the preliminary analysis TSD, all three burner
technology options passed the screening analysis and were considered as
options to improve thermal and combustion efficiency. In response to
the inclusion of the three burner technologies, AHRI and Raypak
commented that they do not consider pulse combustion as a technology
option. Raypak stated that it views pulse combustion more as a
fundamental aspect of the boiler design comparable to whether the
boiler is water tube or fire tube. (Raypak No. 35 at p. 2) AHRI also
stated pulse combustion is one way to create a boiler that condenses.
(AHRI, No. 37 at p. 3)
After considering the comments discussed above, DOE has re-
classified pulse combustion as a type of condensing boiler technology,
rather than a design option that would be applied to a less efficient
boiler to make it more efficient. In the screening analysis of the NOPR
TSD, DOE included pulse combustion under heat exchanger improvement
technology options and premix burners and low pressure air atomized oil
burners under improved burner technology options. All three technology
options passed the screening analysis.
Combustion Air Preheaters
Combustion air pre heaters use a gas to gas heat exchanger to
transfer heat from the flue gases to the incoming combustion air.
Although this option can increase the operating efficiency of a
commercial packaged boiler in the field, this efficiency is not
measured by the current test procedure, because the current test
procedure requires inlet air to be within 5[deg]F of the
room ambient temperature. Therefore, DOE did not consider this
technology option further in its analysis.
Economizers
Economizers are gas to water heat exchangers that are used to
transfer residual heat in the flue gases to the inlet water to the
commercial packaged boiler. Unlike a condensing commercial packaged
boiler that operates on the same principle, economizers are used as an
add-on to the existing commercial packaged boilers and improve
efficiency by pre heating the incoming water before it enters the
primary heat exchanger. Although this technology option has the
potential to improve efficiency by reducing the fuel input required to
heat the water, the improvement in efficiency is not measured by the
current test procedure, because the current test procedure requires the
inlet water to have a set temperature before it enters the primary heat
exchanger of the commercial packaged boiler. Therefore, DOE did not
consider economizers as a technology option for improving commercial
packaged boiler efficiency ratings.
Blowdown Waste Heat Recovery
Some large commercial steam boilers require a blowdown operation to
remove dissolved solids and salts that are left behind after the
boiling process. These solids are usually dissolved in water that is
hot and can be utilized to pre heat incoming water before it enters the
primary heat exchanger of the commercial packaged boiler. Although this
option can improve operating efficiency, measurement of the improvement
in efficiency can only occur is there is sufficient deposit left behind
in the boiler after continuous boiler operation. The current DOE test
procedure is a laboratory based test that uses a commercial packaged
boiler that is not previously installed or commissioned. During the
test, the commercial packaged boiler will not be able to extract the
waste heat from a blowdown operation. Therefore, DOE did not consider
blowdown waste heat recovery further in the analysis.
[[Page 15855]]
Oxygen Trim Systems
DOE added this technology option in the market and technology
assessment chapter at the NOPR stage of the rulemaking. An oxygen
``trim'' system is a control strategy that can be used to minimize
excess combustion air and optimize the air-to-fuel ratio. These systems
can increase efficiencies by 1 to 2 percentage points. This option
passed the screening analysis.
For this NOPR the following technology options were found to have
an impact on the rated efficiency metric and passed the screening
analysis to be considered further in the downstream analyses: (1) Heat
exchanger improvements (including condensing heat exchanger), (2)
improvement in burner technology, and (3) oxygen trim systems.
C. Engineering Analysis
The engineering analysis establishes the relationship between
manufacturer selling prices (MSP) and energy-efficiency of commercial
packaged boilers. This price-efficiency relationship serves as a basis
for subsequent cost-benefit calculations for individual consumers,
manufacturers, and the nation.
To determine this price-efficiency relationship, DOE uses data from
the market and technology assessment, publicly available equipment
literature and research reports, and information from manufacturers,
distributors, and contractors. For this rulemaking, DOE first used
information from the market and technology assessment to identify
efficiency levels and representative equipment for analysis. In the
market assessment DOE compiled a set of data containing the rated
performance information and various characteristics of all CPB
equipment available on the market. In the engineering analysis DOE
refers to this as the ``equipment database''. The equipment database
contains all commercial packaged boilers that are listed in AHRI's
Directory of Certified Product Performance \31\ and commercial packaged
boilers that are manufactured by members of ABMA. In the engineering
analysis, DOE collected CPB prices primarily from manufacturers,
mechanical contractors, and equipment distributors. DOE tabulated all
of the price data in a separate database, which is referred to as the
``prices database.''
---------------------------------------------------------------------------
\31\ AHRI's Directory of Certified Product Performance can be
found at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------
1. Methodology
DOE has identified three basic methods for developing price-
efficiency curves: (1) The design-option approach, which provides the
incremental manufacturing costs of adding design options to a baseline
model that will improve its efficiency; (2) the efficiency-level
approach, which provides the incremental price of moving to higher
efficiency levels without regard to any particular design option; (3)
the reverse-engineering (or cost-assessment) approach, which provides
``bottom-up'' manufacturing cost assessments for achieving various
levels of increased efficiency based on teardown analyses (or physical
teardowns) providing detailed data on costs for parts and material,
labor, shipping/packaging, and investment for models that operate at
particular efficiency levels.\32\
---------------------------------------------------------------------------
\32\ The term `cost' refers to the manufacturing cost, while the
term `price' refers to the manufacturer selling price. In some of
the engineering analysis approaches DOE calculates the manufacturing
cost which is multiplied with the appropriate markups to get the
manufacturer selling price.
---------------------------------------------------------------------------
For this rulemaking, DOE has decided to use the efficiency-level
approach to conduct the engineering analysis. This methodology
generally involves calculating prices of commercial packaged boilers
for a given fuel input rate (representative fuel input rate) for each
manufacturer at different efficiency levels spanning from the minimum
allowable standard (i.e., baseline level) to the maximum
technologically feasible efficiency level. The primary output of the
analysis is a set of price-efficiency relationships that represent the
average change in manufacturer selling price for higher efficiency
equipment (i.e., ``incremental price''). In the subsequent markups
analysis (chapter 6 in the NOPR TSD), DOE determines customer prices by
applying additional distribution chain markups and sales tax to the
manufacturer selling prices developed in the engineering analysis.
After applying these markups, the data serve as inputs to the life-
cycle cost and payback period analyses (chapter 8 in the NOPR TSD).
In the preliminary analysis, as noted previously, DOE classified
commercial packaged boilers into sixteen equipment classes and analyzed
each class separately. DOE received CPB price information for several
mechanical draft equipment classes that was sufficient to develop a
price-efficiency trend. However, DOE was unable to collect sufficient
pricing data to develop a price-efficiency trend for the condensing
efficiency levels, and the large mechanical draft steam and all natural
draft equipment classes, and instead relied on alternate methodologies.
In the preliminary analysis for the classes that had sufficient
price data, DOE calculated the incremental increase in price at each
efficiency level analyzed for each manufacturer at the representative
fuel input rate, and then took an average of these price at each
efficiency level to get the final price efficiency curve for all
equipment classes. For the other equipment classes that did not have
adequate pricing information, DOE used alternate methods of calculating
incremental prices. These methods include extrapolation of price
efficiency curves or actual pricing data to other equipment classes.
DOE requested comments and feedback from interested parties on various
aspects of the engineering analysis performed for the preliminary
analysis, and specifically on the methodology and results. In response,
DOE received several comments, which are discussed further in the
following applicable sections.
For the NOPR, as discussed in section IV.C.2 of this document, DOE
was able to obtain more pricing information than it had for the
preliminary analysis. As a result, DOE updated its approach for several
equipment classes to include a direct analysis of that class using only
pricing data obtained for that class. DOE also improved its methodology
to account for the difference in equipment price as a function of
capacity.
In the NOPR analysis, for each price obtained, DOE first calculated
the ratio of the price of the commercial packaged boiler with respect
to its fuel input rate to obtain all prices on a per unit fuel input
rate basis (dollars per kBtu/h). DOE then used its equipment database
to determine and apply appropriate weights to individual prices (on a
per fuel input rate basis) based on the distribution of input
capacities on the market. The weight given to each CPB price per fuel
input rate represents the number of commercial packaged boilers of that
fuel input rate available in the market. Thus, price per fuel input
rate of models that are similar in capacity to higher numbers of models
on the market were weighted more heavily than price per fuel input rate
of models at a fuel input rate for which relatively few models are
available. DOE applied these weights to calculate the weighted average
price per fuel input rate and the weighted average fuel input rate for
each efficiency level analyzed.
Next, DOE scaled the weighted average price (on a per fuel input
rate basis) at each efficiency level from the weighted average fuel
input rate (at
[[Page 15856]]
which the price was calculated in the previous step) to the
representative fuel input rate for a given equipment class. To do this,
DOE plotted the price per input as a function of fuel input rate and
applied a non-linear regression model that best represented the trend.
In these plots, it is apparent that for lower input capacities the
price on a per input basis is higher, and as the fuel input rate
increases, the price per input decreases. In addition, the rate of
change of the price on a per-unit input basis with respect to fuel
input rate also decreases considerably as the fuel input rate
increases. The result is a scatter plot that appears to resemble a
decreasing exponential curve. DOE applied the regression equation to
determine the weighted average price per input at the representative
fuel input rate.
DOE performed a regression analysis on the weighted average price
per input results at the representative fuel input rate and the
efficiency levels to deduce the equation that best represents the
price-efficiency relationship. Using the regression equation, DOE
calculated the predicted weighted average price per input at the
representative fuel input rate for all efficiency levels that were
analyzed in each equipment class. DOE then multiplied the predicted
weighted average price per input at the representative fuel input rate
by the representative fuel input rate to get the manufacturer selling
price at each efficiency level. As a final step, DOE calculated the
incremental prices by subtracting the baseline price from the
manufacturer selling price of each efficiency level above the baseline.
Further details on the methodology and results are provided in the
chapter 5 of the NOPR TSD.
DOE requests feedback on the methodology used to analyze all
equipment classes and the results obtained. In particular DOE is
interested in comments on whether the results are appropriate and
representative of the current market prices for such type of equipment.
See section VII.E for a list of issues on which DOE seeks comment.
a. Overall Methodology and Extrapolation of Prices
DOE received several comments from interested parties in response
to DOE's preliminary analyses on the overall methodology that was used
to develop the price-efficiency relationships.
ACEEE, ASAP, and NRDC noted that in other rulemakings, DOE
typically constructs cost estimates by conducting teardowns and
generating a Bill of Materials (BOMs); however, for the current
rulemaking, DOE has not conducted any teardowns for commercial packaged
boilers. The commenters stated that in contractor-installed systems
such as commercial packaged boilers, prices are highly variable and may
be based on factors other than efficiency (e.g. labor costs). (ACEEE,
ASAP, and NRDC, No. 36 at p. 2) ASAP asked if DOE looked at the
incremental costs, as opposed to incremental prices and that in looking
at the incremental prices, the actual costs to improve efficiency are
overestimated. (ASAP, Public Meeting Transcript No. 39 at p. 60)
As discussed previously, DOE has decided to use the efficiency-
level approach to conduct the engineering analysis. In this approach
DOE collects prices at various efficiency levels and estimates the
incremental price for higher efficiency models as an average or
weighted average of the commercial packaged boilers available on the
market. Although DOE commonly uses a reverse-engineering approach, DOE
decided not to use this approach for commercial packaged boilers due to
practical concerns involved in tearing down commercial packaged
boilers, especially those belonging to large equipment classes.
Commercial packaged boilers exhibit a large variety of designs
depending on a number of factors including, size, efficiency, fuel
used, heating medium, draft type, heat exchanger design/material, and
whether it is fire-tube or water-tube. In the analysis for this
rulemaking, DOE collected pricing information for 584 commercial
packaged boilers, which covered a range of different types of CPB
equipment. Tearing down enough units to perform a reverse-engineering
analysis would be extremely time intensive given the large number of
CPB designs at each efficiency level and within each equipment class,
and the physical size of some commercial packaged boilers. In addition,
there are several practical issues involved with tearing down large
commercial packaged boilers, given the size and weight of this
equipment, which can require upgraded infrastructure for handling the
equipment. In view of these issues, DOE felt that a pricing survey to
collect information on actual CPB prices at various efficiency levels
for each equipment class is a more practical methodology for conducting
the engineering analysis for commercial packaged boilers.
ACEEE, ASAP, and NRDC also encouraged DOE to ensure that the
estimates of incremental prices only include the incremental price
associated with the technology options required to meet a given
efficiency level, and not the cost of auxiliary options that are often
associated with premium products but are not associated with
efficiency. (ACEEE, ASAP, and NRDC, No. 36 at pp. 3-4)
DOE shares the commenters' concerns regarding the incremental price
options being influence by auxiliary options that are not associated
with energy efficiency. To the extent possible, DOE normalized optional
features when gathering pricing by specifying the same options for all
CPB prices collected. For example, DOE noticed that in several CPB
series, prices of burner systems are listed separately and the price of
the burner system that is selected is added to the basic model trade
price for the total price for the commercial packaged boiler. For such
cases, DOE chose the same type of burner for all CPB models where a
choice is offered. While selecting the prices DOE also encountered
scenarios where (1) a feature that DOE has consistently selected for
all CPB models is not offered for a particular series; and (2) a
particular feature becomes inapplicable for commercial packaged boilers
of higher capacity within the same CPB series. In such cases DOE
selected a similar feature that would offer similar functionality. DOE
believes this approach helped to minimize the effects of optional
auxiliary components.
At the preliminary analysis public meeting ACEEE argued that the
level field for comparing purchase options would be output capacity,
and as a result it is time to migrate to output capacities, rather than
input capacities, that are comparable across classes. (ACEEE, Public
Meeting Transcript No. 39 at p. 44) DOE notes that in EPCA, commercial
packaged boilers are defined as having ``capacity (rated maximum
input)'' greater than or equal to 300 kBtu/h, and CPB equipment classes
are currently divided based on fuel input rate. DOE notes that in
adopting the existing equipment class divisions based on fuel input
rate, DOE followed the approach in ASHRAE Standard 90.1 for dividing
equipment based on fuel input rate. Moreover, while DOE agrees many
purchasers would consider output capacity when purchasing a replacement
commercial packaged boiler, DOE believes there is also a contingent of
CPB purchasers that may only look at the fuel input rate for comparison
purposes when choosing a new commercial packaged boiler, as both
ratings are featured prominently in product literature. Therefore, DOE
believes it appropriate to continue to use rated fuel input rate as the
performance parameter for carrying out the analyses.
[[Page 15857]]
b. Large CPB Analysis and Representative Fuel Input Rate
Another topic on which DOE received comments and feedback is
related to large CPB pricing and its representative fuel input rate for
analysis. AHRI commented that most of the analysis appears to be based
on information for models with input rates of 5,000,000 Btu/h or less,
and commercial packaged boilers that have input rates in the high
millions of Btu per hour are very different products. AHRI stated that
many factors that have been considered in the engineering analysis and
the associated conclusions cannot be simply extrapolated up to
characterize the particular factor as it applies to those very large
commercial packaged boiler. (AHRI, No. 37 at p. 1) AHRI also commented
that DOE should not assume a linear relationship between boiler size
and component costs and encouraged DOE to review the data it has
collected so far on the relationship and extrapolation between input
rate and price, or obtain additional data for the analysis. (AHRI, No.
37 at p. 3 and p. 5) Raypak stated that DOE should not assume a linear
relationship between commercial packaged boiler size and component
costs and that as a commercial packaged boiler gets larger in input the
cost of gas burner and blower components rises exponentially. (Raypak,
No. 35 at pp. 2-4) Raypak also provided comments during the preliminary
analysis public meeting stating that made-to-order units will be priced
higher due to the engineering work necessary to create a custom boiler.
(Raypak, Public Meeting Transcript, No. 39 at p. 49)
ABMA provided written comments on the methodology used for
analyzing large commercial packaged boilers. In particular, ABMA
expressed concern over the large commercial packaged boilers
representative fuel input rate being 3,000 kBtu/h. ABMA argued that the
representative fuel input rate of 3,000 kBtu/h is one of the smallest
size boilers manufactured by ABMA member manufacturers and that it does
not accurately represent the large boiler market. (ABMA, No. 33 at p.
2) ABMA advocated capping the scope of the analysis to 2.5 million Btu/
h. (ABMA, No. 33 at p. 2; ABMA, Public Meeting Transcript, No. 39 at p.
65)
PGE & SCE commented that the comparison of small and large sized
custom made boilers is not linear and DOE should look at methods for
estimating very large equipment other than simply extrapolation.
Further, PGE and SCE stated their concern that the methods used to
estimate energy use, equipment classes and prices for medium sized
commercial boilers are not appropriate for extrapolation to large
commercial custom engineered boilers. (PGE & SCE, No. 38 at p. 3)
As discussed in section IV.A.2, DOE has proposed to establish
separate equipment classes for very large commercial packaged boilers
with input capacities of greater than10,000 kBtu/h, and DOE is not
considering amended standards for the proposed very large equipment
classes in this rulemaking. Instead, DOE's current energy conservation
standards that are set forth at 10 CFR 431.87 for commercial packaged
boilers with a fuel input rate greater than 2,500 kBtu/h would continue
to apply to all commercial packaged boilers that have a fuel input rate
above 10,000 kBtu/h. DOE believes this addresses many concerns that the
analysis does not apply to very large commercial packaged boilers. As
discussed previously, DOE noticed a smooth increase in prices (devoid
of any inflection) from the low fuel input rate commercial packaged
boilers (i.e., near 300 kBtu/h) to the maximum fuel input rate
commercial packaged boiler for which prices are available (~9,500 kBtu/
h). DOE did not observe any sudden change in the price structure within
this range of fuel input rate and, based on this observation, believes
its analysis would be applicable for input capacities ranging from 300
kBtu/h to 10,000 kBtu/h.
DOE chose the representative fuel input rate in the preliminary
analysis as 3,000 kBtu/h by considering CPB models offered in the
market and information received during manufacturer interviews. Several
commenters suggested that a fuel input rate of 3,000 kBtu/h would not
be appropriate for representing very large commercial packaged boilers.
However, as discussed above, for this NOPR DOE proposes to consider
commercial packaged boilers with fuel input rate above 10,000 kBtu/h
separately from the commercial packaged boilers in the large (i.e., >
2,500 and <= 10,000 kBtu/h) equipment class (which would be represented
by the 3,000 kBtu/h fuel input rate). Further, the analysis of prices
included data points for prices of commercial packaged boilers with
input capacities up to 9,500 kBtu/h, and DOE did not observe any step
change in the price-efficiency trend up to that point. DOE did not
receive any new data that would justify choosing a different
representative fuel input rate for large equipment classes, and
therefore has maintained the 3,000 kBtu/h representative fuel input
rate for this NOPR analysis.
In the preliminary analysis, DOE used the price of two small
commercial packaged boilers at 1,500 kBtu/h as a proxy for the price of
one large 3,000 kBtu/h commercial packaged boiler, because DOE did not
have sufficient price data in certain large CPB equipment classes to
accurately establish the relationship between boiler size and price. In
response to the preliminary analysis, DOE received comments from ACEEE,
ASAP, and NRDC, questioning the accuracy of this approach. ACEEE, ASAP,
and NRDC encouraged DOE to collect additional data to validate its
assumption that the price of two 1,500 kBtu/h boilers is an accurate
proxy for the price of a 3,000 kBtu/h boiler. The commenters elaborated
that a large boiler will have only one burner, one heat exchanger, one
shell, and one set of controls, possibly reducing prices for large
boilers in comparison to two smaller boilers; however, there are far
fewer 3,000 kBtu/h boilers sold than 1,500 kBtu/h boilers, so the
allocation of design, testing, certification and other common costs
will be much higher. (ACEEE, ASAP, and NRDC, No. 36 at pp. 2-3) The
commenters also argued that DOE's methodology related to slope and
inflection points of the efficiency curves for small gas-fired
mechanical draft hot water boilers raises questions about the overall
accuracy of the analysis. (ACEEE, ASAP, and NRDC, No. 36 at p. 3)
For the NOPR analysis, as discussed in section IV.C.2, DOE was able
to collect an additional 258 CPB prices. Despite the additional data,
there were still certain efficiency levels for large CPB equipment
classes where DOE lacked enough data to perform a robust analysis.
Generally these were levels where there are few models available on the
market to begin with. In these cases, DOE again leveraged the pricing
collected for the small CPB equipment classes to estimate the price of
a large commercial packaged boiler. However, in the NOPR analysis, to
address the concerns expressed by stakeholders, DOE used a modified
approach to calculate the price of a large commercial packaged boiler
based on two or more smaller sized boilers. In this approach, DOE first
combined the price data of each small and large equipment classes that
have the same characteristics (e.g., small oil fired hot water and
large oil fired hot water classes). DOE then performed a regression
analysis of the entire dataset to find an equation that represents the
relationship between equipment price and fuel input rate for the given
type of equipment. DOE then
[[Page 15858]]
used the equation to estimate the price of a commercial packaged boiler
when its size is scaled up to 3,000 kBtu/h. DOE used this modified
approach for three equipment classes: (1) Large, oil-fired, hot water;
(2) large, oil-fired, steam and (3) large, gas-fired, steam. The
detailed methodology for the engineering analysis including the plots
that show the variation of CPB price with fuel input rate are included
in chapter 5 of the NOPR TSD. The new methodology adopted by DOE
addresses the concerns expressed by stakeholders in their comments as
it considers pricing data across a range of input capacities to
estimate the change in price as input increases.
2. Data Collection and Categorization
As part of the engineering analysis, DOE collected CPB prices from
manufacturers, wholesalers, distributors and contractors. In the
preliminary analysis, DOE collected pricing data, but as discussed
previously was able to conduct a direct analysis of only six equipment
classes: (1) Small, gas-fired, mechanical draft hot water; (2) large,
gas-fired, mechanical draft hot water; (3) small, oil-fired, mechanical
draft, hot water; (4) large, oil-fired, mechanical draft, hot water;
(5) small, gas-fired, mechanical draft, steam; and (6) small, oil-
fired, mechanical draft, steam. For the remaining classes, DOE did not
have enough data to analyze the equipment directly, and consequently
relied upon extrapolation of results from the equipment classes with
adequate pricing information. In response to the preliminary analysis,
DOE received several comments urging DOE to collect additional data for
the NOPR stage.
ACEEE, ASAP, and NRDC commented that the limited amount of price
data available for classes other than small, gas-fired, mechanical
draft boilers forces DOE to rely on very uncertain extrapolations. The
commenters encouraged DOE to collect additional price data to
supplement its analysis, as they are concerned that the price-
efficiency curves in the preliminary TSD were developed using a limited
data set that may yield inaccurate results. Further the commenters also
expressed concern that the analysis does not contain any information
about the number of individuals surveyed, number of useful results,
etc. (ACEEE, ASAP, and NRDC, No. 36 at p. 2) ACEEE, ASAP, and NRDC
encouraged DOE to collect additional price data through interviews with
and surveys of those who write specifications (consulting engineers and
others) and those who bid on projects (mechanical contractors). The
commenters also suggested DOE could obtain data on CPB purchases by the
Federal government. Finally, ACEEE, ASAP, and NRDC stated that DOE
should ensure that the data reflects the prices that consumers are
actually paying as opposed to the ``list'' price that are widely
discounted in actual bids (ACEEE, ASAP, and NRDC, No. 36 at p. 3) AHRI
and Raypak encouraged DOE to contact additional contractors and others
involved in selling and installing commercial packaged boilers to
obtain more prices for natural draft models. (AHRI, No. 37 at p. 3;
Raypak, No. 35 at p. 2) PGE and SCE recommended that DOE pursue other
options for obtaining sales and price figures for commercial boilers
that will generate more accurate results, and suggested the use of use
market surveys or working with industry to gain insight into costs for
larger boiler equipment. PGE and SCE also recommended that DOE explore
California's Database of Energy Efficiency Resources for incremental
costs of commercial boilers. (PGE & SCE, No. 38 at p. 3) ACEEE
commented during the public meeting that the Building Services Research
and Information Association (BSRIA) is a resource that has done cost
comparisons, including condensing boilers, and various commercial
sizes. ACEEE also suggested reviewing the comments from the transcripts
of negotiated rulemaking of 2013 on certification, compliance, and
enforcement (CCE) where many CPB manufacturers were represented.
(ACEEE, Public Meeting Transcript No. 39 at p. 54)
DOE explored the suggestions provided by stakeholders, and found
that the most reliable and complete price information was obtained
directly from manufacturers, contractors, and distributors. DOE was
able to collect a significant number of additional CPB prices in the
NOPR stage, which were used to conduct a direct analysis of each
equipment class. This eliminated the need to extrapolate price results
between two different equipment classes, addressing the concerns of
ACEEE, ASAP, and NRDC.
DOE agrees with ACEEE, ASAP, and NRDC that the list price is
different from the actual manufacturer selling price and that this
should be accounted for in the analysis. DOE accounted for this in both
the preliminary analysis and in this NOPR analysis. A distributor or
wholesaler is usually the first consumer in the distribution chain and
typically receives a discount compared to the list price when
purchasing equipment from the manufacturer. This discount varies by
manufacturer and also depends on the business relationship between the
manufacturer and the purchaser (i.e., the discount may vary depending
on the volume of units that a distributor or contractor purchases).
While collecting price data, DOE also obtained information on typical
discounts given from the list pricing, and applied the average discount
to list prices to obtain the actual manufacturer selling price. All
manufacturer selling prices used in the engineering analysis include
the appropriate discount to the list prices.
In the NOPR analysis, DOE used prices collected in the preliminary
analysis stage with additional CPB prices that were collected in the
NOPR stage.\33\ In total, DOE was able to obtain prices for a variety
of commercial packaged boilers. These commercial packaged boilers
included mechanical draft, natural (or atmospheric) draft, condensing
boilers and non-condensing boilers. And their input capacities ranged
from 300 kBtu/h to 9,500 kBtu/h. In aggregate, DOE used 584 CPB prices
for its analysis. The 584 prices include 326 CPB prices that were used
in the preliminary analysis stage and 258 that were collected in the
NOPR stage of the rulemaking. The Table IV.4 shows the number of CPB
prices that DOE used in the engineering analysis in each equipment
class.
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\33\ For the prices used from the preliminary analysis stage,
DOE first confirmed the models were still active and then updated
the price to account for inflation.
Table IV.4--Number of Prices Collected for Engineering Analysis
------------------------------------------------------------------------
Number of
Equipment class prices used in
analysis
------------------------------------------------------------------------
SGHW.................................................... 203
LGHW.................................................... 52
SHOW.................................................... 70
LOHW.................................................... 44
SGST.................................................... 72
LGST.................................................... 76
SOST.................................................... 24
LOST.................................................... 43
Total............................................... 584
------------------------------------------------------------------------
3. Baseline Efficiency
DOE selects baseline efficiency levels as reference points for each
equipment class, against which DOE calculates potential changes in
energy use, cost, and utility that could result from an amended energy
conservation standard. A baseline unit is one that meets, but does not
exceed, the required existing energy conservation standard, as
applicable, and provides basic consumer utility. A CPB model that has a
rated efficiency equal to its applicable
[[Page 15859]]
baseline efficiency is referred to as a ``baseline model.'' DOE uses
the baseline model for comparison in several phases of the analyses,
including the engineering analysis, life-cycle cost (LCC) analysis,
payback period (PBP) analysis and national impacts analysis (NIA). For
the engineering analysis, DOE used the current energy conservation
standards that are set forth in CFR 431.87 as baseline efficiency
levels.
As discussed previously in section IV.A.2 of this document, DOE has
proposed to modify the equipment classes for commercial packaged
boilers for this analysis. If the proposed equipment classes are
ultimately adopted in the final rule, then the equipment classes that
are set forth in the current regulations would be consolidated such
that the current draft-specific classes (i.e., those identified as
being ``natural draft'' and ``all except natural draft'') would be
merged into non-draft-specific classes. For the remaining equipment
classes, DOE retained the current standards in 10 CFR 431.87 as the
baseline efficiency levels in the engineering analysis. For the four
draft-specific classes, DOE used the natural draft equipment class
efficiency standard as the baseline efficiency level. The baseline
efficiency levels for each equipment class are presented in Table IV.5.
Table IV.5--Baseline Efficiencies Considered in the Engineering Analysis
------------------------------------------------------------------------
Baseline
Equipment class efficiency*
(%)
------------------------------------------------------------------------
Small Gas fired Hot Water............................... 80
Large Gas fired Hot Water............................... 82
Small Oil fired Hot Water............................... 82
Large Oil fired Hot Water............................... 84
Small Gas fired Steam................................... \**\ 77
Large Gas fired Steam................................... \**\ 77
Small Oil fired Steam................................... 81
Large Oil fired Steam................................... 81
------------------------------------------------------------------------
*Efficiency levels represent thermal efficiency for all equipment
classes except for Large Gas Hot Water and Large Oil Hot Water, for
which the efficiency levels are in terms of combustion efficiency.
**Mechanical draft equipment within this class currently has a minimum
standard of 79 percent thermal efficiency. (10 CFR 431.87) All
equipment analyzed below 79 percent is natural draft equipment.
4. Intermediate and Max-tech Efficiency Levels
As part of its engineering analysis, DOE determined the maximum
technologically feasible (``max-tech'') improvement in energy
efficiency for each equipment class of commercial packaged boilers. DOE
surveyed the CPB market and the research literature relevant to
commercial packaged boilers to determine the max-tech efficiency
levels. Additionally, for each equipment class, DOE generally
identifies several intermediate efficiency levels between the baseline
efficiency level and max-tech efficiency level. These efficiency levels
typically represent the most common efficiencies available on the
market or a major design change (e.g., switching to a condensing heat
exchanger). In the analysis, DOE uses the intermediate and max-tech
efficiency levels as target efficiencies for conducting the cost-
benefit analysis of achieving increased efficiency levels.
During the market assessment, DOE conducted an extensive review of
publicly available CPB equipment literature. DOE used the equipment
database compiled during the market assessment to identify intermediate
and max-tech efficiency levels for analysis. The efficiency levels for
each equipment class that DOE considered in the NOPR TSD are presented
in Table IV.6
Table IV.6--Baseline, Intermediate and Max Tech Efficiency Levels
Analyzed in the Engineering Analysis
------------------------------------------------------------------------
Efficiency* Efficiency level
Equipment class (%) identifier
------------------------------------------------------------------------
Small Gas Hot Water......... 80 EL-0 Baseline.
81 EL-1.
82 EL-2.
84 EL-3.
85 EL-4.
93 EL-5.
95 EL-6.
99 EL-7 Max Tech.
Large Gas Hot Water......... 82 EL-0 Baseline.
83 EL-1.
84 EL-2.
85 EL-3.
94 EL-4.
97 EL-5 Max Tech.
Small Oil Hot Water......... 82 EL-;0 Baseline.
83 EL-1.
84 EL-2.
85 EL-3.
87 EL-4.
88 EL-5.
97 EL-6 Max Tech.
Large Oil Hot Water......... 84 EL-0 Baseline.
86 EL-1.
88 EL-2.
89 EL-3.
97 EL-4 Max Tech.
Small Gas Steam............. 77 EL-0 Baseline.
78 EL-1.
79 EL-2.
80 EL-3.
81 EL-4.
83 EL-5 Max Tech.
Large Gas Steam............. 77 EL-0 Baseline.
78 EL-1.
[[Page 15860]]
79 EL-2.
80 EL-3.
81 EL-4.
82 EL-5.
84 EL-6 Max Tech.
Small Oil Steam............. 81 EL-0 Baseline.
83 EL-1.
84 EL-2.
86 EL-3 Max Tech.
Large Oil Steam............. 81 EL-0 Baseline.
83 EL-1.
85 EL-2.
87 EL-3 Max Tech.
------------------------------------------------------------------------
*Efficiency levels represent thermal efficiency for all equipment
classes except for Large Gas Hot Water and Large Oil Hot Water, for
which the efficiency levels are in terms of combustion efficiency.
In the preliminary analysis, DOE selected several efficiency levels
for consideration in the analysis, many of which were retained in this
NOPR. In response to the preliminary analysis, ACEEE, ASAP, and NRDC
encouraged DOE to evaluate at the least one additional condensing level
for the small, oil-fired, mechanical draft, hot water and the large,
oil-fired, mechanical draft, hot water equipment classes at a level
that could be considered ``baseline'' condensing equipment (i.e.,
efficiency levels at or just above 90%). (ACEEE, ASAP, and NRDC, No. 36
at p. 4) During the preliminary analysis public meeting, AHRI also
noted the absence of an interim point for some classes, particularly
referring to the small oil mechanical draft hot water class. However,
in continuation, AHRI also noted that making a condensing oil boiler
has many challenges. (AHRI, Public Meeting Transcript, No. 39 at p. 41)
In the public meeting ACEEE also commented that the inclusion of low-
level condensing product in the analysis will illustrate the challenges
faced in marketing such a product, at a cost-effective price and
encouraged DOE to explore additional intermediate levels for this
reason. (ACEEE, Public Meeting Transcript, No. 39 at p. 43) DOE notes
that in the preliminary analysis for small oil fired mechanical draft
hot water equipment class there was an eleven percentage point jump
between the efficiency level just below max-tech and max tech.
Similarly, for the large oil-fired mechanical draft hot water equipment
class, there was a 9 percentage point jump.
DOE considered these comments carefully and examined whether there
is a need to add interim condensing efficiency levels between max-tech
and the level below max tech in the oil-fired hot water CPB equipment
classes. While selecting intermediate efficiency levels for this
rulemaking, DOE examined the distribution of commercial packaged
boilers available in the market at all efficiency levels.\34\ DOE then,
selected several intermediate efficiency levels that have a substantial
representation of commercial packaged boilers in the market. In the
case of oil-fired hot water equipment classes, the large equipment
class has three commercial packaged boilers and the small equipment
class has one commercial packaged boiler that achieve efficiencies that
require condensing operation. The one small condensing boiler has a
thermal efficiency of 96.8% while the three large condensing boilers
have combustion efficiencies of 95.8%, 96.9% and 97%. Based on this
assessment, there appears to be no oil-fired hot water condensing
boilers in the market with efficiency less than 95% that could
potentially serve as a baseline for condensing efficiency levels. In
addition, DOE also agrees with the commenters that there are
significant challenges involved in designing and operating oil-fired
condensing boilers.
---------------------------------------------------------------------------
\34\ The efficiency levels refer to combustion efficiency for
large hot water equipment classes and thermal efficiency for all
other equipment classes.
---------------------------------------------------------------------------
Given the absence of such boilers available in the market and the
challenges and uncertainties inherent to analyzing a product that does
not exist, DOE has decided not to analyze additional interim condensing
efficiency levels below max-tech for the oil-fired hot water equipment
classes. DOE believes the consideration of the max-tech levels in these
classes, which include condensing technology, are adequate for
determining the cost-effectiveness of condensing designs.
DOE notes that for the small gas-fired hot water equipment class,
efficiency levels of 93 percent and 95 percent were included in the
analysis and represent interim condensing efficiency levels. Similarly,
for the large gas-fired hot water equipment class, DOE has analyzed 94
percent as an interim condensing efficiency level below the max-tech.
For these classes, the availability of commercial packaged boilers at
these efficiency levels in the dataset in sufficiently large numbers
justifies DOE's selection of intermediate efficiency levels.
5. Incremental Price and Price-Efficiency Curves
The final results of the engineering analysis are a set of price-
efficiency curves that represent the manufacturer selling price for
higher efficiency models. DOE uses these results as inputs to the
downstream analyses such as the life cycle cost analysis.
DOE received several comments on the incremental price results and
the price-efficiency curves published in the preliminary analysis TSD.
Lochinvar commented that the variation in manufacturing cost and the
markup at each stage of distribution makes an accurate projection of
incremental costs difficult, but that the methodology seems sound.
Lochinvar also stated that the projected cost to the consumer appears
to be a little high (5[hyphen]10%) across the board and suggested a
modest underestimation of markup as a reason. (Lochinvar, No. 34 at p.
2) ACEEE, ASAP, and NRDC commented that DOE's results for condensing
efficiency levels of small gas mechanical draft hot water equipment
class appear to be inconsistent with DOE's statements that
[[Page 15861]]
there is generally a step change in price from a non-condensing boiler
to a condensing boiler. (ACEEE, ASAP, and NRDC, No. 36 at p. 3).
DOE appreciates Lochinvar's comments comparing the results to their
own pricing, but also notes that the analysis performed covered a wide
variety of manufacturers and CPB models. Thus, DOE does not believe
that a 5- to 10-percent variation from Lochinvar's results would be
unexpected, as each individual manufacturer will set its prices
differently.
DOE also examined the issue regarding the step change in prices of
condensing boilers. More specifically, DOE investigated why there
exists a relatively flatter trend in the incremental prices when going
from non-condensing efficiency levels to condensing efficiency levels
given the step change in technology from non-condensing to condensing.
From the pricing data collected for small gas-fired hot water
commercial packaged boilers, it is evident that the price of a
commercial packaged boiler generally increases as it approaches the
highest non-condensing efficiency levels, then displays a relatively
flat trend to achieve lower condensing levels. The prices then increase
as the efficiency approaches the mid-condensing efficiency levels,
suggesting that achieving lower condensing levels is only slightly more
costly than achieving the highest non-condensing levels.
There could be several reasons for this trend. First, commercial
packaged boilers achieving efficiencies at the highest end of the non-
condensing range sometimes incorporate designs that anticipate
formation of condensate under certain conditions, such as high-grade
stainless steel vent connectors, which will increase the cost and price
of the commercial packaged boiler. DOE also notes from the market and
technology assessment that only about 5 percent of all the small gas
hot water boilers have a thermal efficiency that is greater than 86
percent and less than 90 percent. The comparatively lower production
volumes of these commercial packaged boilers could also contribute to
the higher prices. In this NOPR, DOE is analyzing the efficiency levels
93% and 95% for the small gas hot water equipment class. These
efficiency levels represent the mid-level condensing levels that are a
step higher than the other non-condensing and low condensing efficiency
levels. As explained in section IV.A.2 of this document, these levels
were chosen due to the high number of models already available on the
market at these efficiencies. The price-efficiency curves for all
equipment classes including small gas hot water are shown in chapter 5
of the NOPR TSD. Table IV.7 shows the incremental manufacturer selling
price results for all eight equipment classes along with the baseline
prices.
Table IV.7--Manufacturer Selling Price-Efficiency Results
----------------------------------------------------------------------------------------------------------------
Incremental
Equipment class Efficiency level (%) MSP Baseline MSP
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water.................. Baseline--80............................. $0 $6,928
81....................................... 472
82....................................... 977
84....................................... 2,759
85....................................... 3,561
93....................................... 10,027
95....................................... 10,494
Max Tech--99............................. 13,966
Large Gas Hot Water.................. Baseline--82............................. 0 21,244
83....................................... 2,534
84....................................... 5,370
85....................................... 8,544
94....................................... 32,796
Max Tech--97............................. 36,904
Small Oil Hot Water.................. Baseline--82............................. 0 8,404
83....................................... 634
84....................................... 1,315
85....................................... 2,048
87....................................... 3,683
88....................................... 4,594
Max Tech--97............................. 17,687
Large Oil Hot Water.................. Baseline--84............................. 0 18,915
86....................................... 4,785
88....................................... 10,781
89....................................... 14,326
Max Tech--97............................. 49,923
Small Gas Steam...................... Baseline--77............................. 0 6,659
78....................................... 540
79....................................... 1,124
80....................................... 1,756
81....................................... 2,439
Max Tech--83............................. 3,975
Large Gas Steam...................... Baseline--77............................. 0 19,122
78....................................... 1,097
79....................................... 2,256
80....................................... 3,483
81....................................... 4,779
82....................................... 6,150
Max Tech--84............................. 9,132
Small Oil Steam...................... Baseline--81............................. 0 7,294
83....................................... 1,722
84....................................... 2,730
[[Page 15862]]
Max Tech--86............................. 5,097
Large Oil Steam...................... Baseline--81............................. 0 18,702
83....................................... 3,017
85....................................... 6,521
Max Tech--87............................. 10,590
----------------------------------------------------------------------------------------------------------------
D. Markups Analysis
The markups analysis develops appropriate markups in the
distribution chain (e.g., retailer markups, distributer markups,
contractor markups, and sales taxes) to convert the estimates of
manufacturer selling price derived in the engineering analysis to
consumer prices (``consumer'' refers to purchasers of the equipment
being regulated), which are then used in the LCC and PBP analysis and
in the manufacturer impact analysis. DOE develops baseline and
incremental markups based on the equipment markups at each step in the
distribution chain. For this rulemaking, DOE developed distribution
chain markups in the form of multipliers that represent increases above
equipment purchase costs for key market participants, including CPB
wholesalers/distributors, and mechanical contractors and general
contractors working on behalf of CPB consumers. The baseline markup
relates the change in the manufacturer selling price of baseline models
to the change in the consumer purchase price. The incremental markup
relates the change in the manufacturer selling price of higher
efficiency models (the incremental cost increase) to the change in the
consumer purchase price.
Four different markets exist for commercial packaged boilers: (1)
New construction in the residential buildings sector, (2) new
construction in the commercial buildings sector, (3) replacements in
the residential buildings sector, and (4) replacements in the
commercial buildings sector. In the preliminary analyses, DOE
characterized eight distribution channels to address these four
markets.
For both the residential and commercial buildings sectors, DOE
characterizes the replacement distribution channels as follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical
Contractor [rarr] Consumer
Manufacturer [rarr] Manufacturer Representative [rarr]
Mechanical Contractor [rarr] Consumer
DOE characterizes the new construction distribution channels for
both the residential and commercial buildings sectors as follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical
Contractor [rarr] General Contractor [rarr] Consumer
Manufacturer [rarr] Manufacturer Representative [rarr]
Mechanical Contractor [rarr] General Contractor [rarr] Consumer
In addition to these distribution channels, there are scenarios in
which manufacturers sell commercial packaged boilers directly to a
consumer through a national account (assumed as 17.5% of sales in the
preliminary analysis; other distribution channels previously discussed
make up the remaining 82.5% market share). These scenarios occur in
both new construction and replacements markets and in both the
residential and commercial sectors. The relative shares for these are
dependent on product class and details may be found in chapter 6 of the
TSD. In these instances, installation is typically accomplished by site
personnel. These distribution channels are depicted as follows:
Manufacturer [rarr] Commercial Consumer (National Account)
To develop markups for the parties involved in the distribution of
the commercial packaged boilers, DOE utilized several sources,
including (1) the Heating, Air-Conditioning & Refrigeration
Distributors International (HARDI) 2013 Profit Report \35\ to develop
wholesaler markups, (2) the 2005 Air Conditioning Contractors of
America's (ACCA) financial analysis for the heating, ventilation, air-
conditioning, and refrigeration (HVACR) contracting industry \36\ to
develop mechanical contractor markups, and (3) U.S. Census Bureau's
2007 Economic Census data \37\ for the commercial and institutional
building construction industry to develop general contractor markups.
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.
---------------------------------------------------------------------------
\35\ Heating, Air Conditioning & Refrigeration Distributors
International 2013 Profit Report. Available at http://www.hardinet.org/Profit-Report.
\36\ Air Conditioning Contractors of America (ACCA). Financial
Analysis for the HVACR Contracting Industry: 2005. Available at
http://www.acca.org/store/.
\37\ Census Bureau, 2007 Economic Census Data (2007) (Available
at: http://www.census.gov/econ/)
\38\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along
with Combined Average City and County Rates, 2013 (Available at:
http://thestc.com/STrates.stm).
---------------------------------------------------------------------------
During the preliminary analysis public meeting and in written
comments responding to DOE's preliminary analyses, DOE received
feedback regarding distribution channels and market share of equipment
through different channels. Lochinvar, Plumbing-Heating-Cooling
Contractors National Association (PHCC), and Raypak commented that
DOE's considered distribution channels seem accurate. Lochinvar
estimates that commercial sales for all CPB sizes are primarily (80% or
more) through manufacturer's representatives. (Lochinvar, No. 34 at p.
2) PHCC noted that boilers below 4,000,000 Btu/h are likely to have
wholesaler presence, but anything larger would most likely be sold
through a manufacturer's representative. (PHCC, Public Meeting
Transcript, No. 39 at p. 79) Raypak stated that, due to complexity of
installation of commercial packaged boilers, sales are done primarily
through a manufacturer's representative that provides additional
equipment and expertise needed, and that wholesalers do not really
apply to commercial packaged boilers. (Raypak, Public Meeting
Transcript, No. 39 at p. 81)
DOE received contradictory comments from stakeholders regarding the
presence of wholesalers in the distribution chain for commercial
packaged boilers. However, for the NOPR analysis, consistent with the
preliminary analysis, the impact on markups from sales through
wholesalers and sales through manufacturer's representatives are
assumed to be equal. As a result, the distinction would not result in
any impact on the overall markups. For its NOPR analysis DOE retained
the distribution channels, and the assumed share of equipment
[[Page 15863]]
through these channels, as established in the preliminary analysis.
In addition, DOE received comments on the value of the markups, the
applicability of the markups to small businesses, and tax exemption for
commercial packaged boilers used for manufacturing purposes. Lochinvar
suggested that DOE's markups in the preliminary analysis were 5-10%
higher than they expected, resulting in overestimation of consumer
price of the same order. (Lochinvar, No. 34 at pp. 2-3) PVI Industries,
LLC (PVI) noted that the markups established from publicly traded
companies are not reflective of smaller manufacturers that may not
benefit from higher volume sales and economies of scale. (PVI, Public
Meeting Transcript, No. 39 at p. 82) PHCC noted that, in some states, a
tax exemption may exist for commercial packaged boilers if they are
used for manufacturing purposes, citing Indiana and Michigan as states
where such tax exemptions exist. (PHCC, Public Meeting Transcript, No.
39 at p. 77)
Based on these comments, DOE reexamined the markups and encountered
errors in its preliminary analysis calculations resulting in overly
high markups. DOE has corrected this issue in the NOPR markups
analysis. With respect to adequately representing markups for small
businesses that may not benefit from high volume sales, and thus
certain economies of scale, DOE is not generally privy to financial
data for non-publically traded firms and cannot assess the likely
impact, or magnitude of impact, on overall markups of smaller firms
with reduced sales. With respect to tax exemptions that may exist for
commercial packaged boilers used for manufacturing purposes, this
rulemaking does not cover process boilers that are not used for space
heating. In addition, based on the information available to DOE, DOE
did not identify any tax exemptions available for the commercial
packaged boilers covered in this rulemaking. As such, DOE did not
consider tax exemptions in its NOPR analyses for this rulemaking.
Chapter 6 of the NOPR TSD provides further detail on the estimation
of markups.
DOE requests information or insight that can better inform its
markups analysis.
See section VII.E for a list of issues on which DOE seeks comment.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of commercial packaged boilers in use in the United
States and assess the energy savings potential of increases in
efficiency (thermal efficiency (ET) or combustion efficiency
(EC)). In contrast to the CPB test procedure under title 10
of the Code of Federal Regulations part 431, which uses fixed operating
conditions in a laboratory setting, the energy use analysis for
commercial packaged boilers seeks to estimate the range of energy
consumption of the equipment in the field. DOE estimates the annual
energy consumption of commercial packaged boilers at specified energy
efficiency levels across a range of climate zones, building
characteristics, and space and water heating applications. The annual
energy consumption includes natural gas, liquid petroleum gas (LPG),
oil, and/or electricity use by the commercial packaged boiler for space
and water heating. The annual energy consumption of commercial packaged
boilers is used in subsequent analyses, including the LCC and PBP
analysis and the national impact analysis.
In its preliminary analyses, DOE estimated the energy consumption
of commercial packaged boilers in commercial buildings and multi-family
housing units by developing building samples for each of eight
equipment classes examined based on the Energy Information
Administration's (EIA) 2003 Commercial Building Energy Consumption
Survey \39\ (CBECS 2003) and EIA's 2009 Residential Energy Consumption
Survey (RECS 2009), respectively. In their written comments in response
to DOE's preliminary analyses, Raypak and AHRI expressed concern
regarding the use of 2003 CBECS data, noting that it would not properly
reflect the energy use of commercial packaged boilers being installed
in 2019 and beyond, and urged DOE to await the release of CBECS 2012.
(Raypak, No. 35 at p. 1; AHRI, No. 37 at p. 2)
---------------------------------------------------------------------------
\39\ U.S. Energy Information Administration (EIA). 2003
Commercial Building Energy Consumption Survey (CBECS) Data. 2003.
Available at http://www.eia.gov/consumption/commercial/data/2003/.
---------------------------------------------------------------------------
DOE acknowledges there is benefit to the use of more recent CBECS
data. However, EIA, so far, has released only a single microdata file
(``Building Characteristics Public Use Microdata,'' June 25, 2015)
covering the ``building characteristics'' portion of the 2012 CBECS
survey sample results.\40\ In its NOPR analysis, DOE used this data for
updating the equipment class distributions in the analysis period, the
shipment analysis, and the national impact analysis. To use the CBECS
sample data for the LCC analysis, DOE requires the microdata file
covering consumption and expenditure data. Since CBECS 2003 is the
latest survey, with complete microdata available for the purpose of
DOE's energy use analysis, DOE continued to use CBECS 2003 in the LCC
analysis.
---------------------------------------------------------------------------
\40\ U.S. Energy Information Administration (EIA). 2012
Commercial Building Energy Consumption Survey (CBECS) Data. 2012.
Available at http://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=microdata.
---------------------------------------------------------------------------
1. Energy Use Characterization
DOE's energy characterization modeling approach calculates CPB
energy use based on rated thermal efficiency and building heat load
(BHL), accounting for the conversion from combustion efficiency to
thermal efficiency when applicable, part-load operation (in the case of
multi-stage equipment), and cycling losses (for single-stage
equipment), as well as return water temperature (RWT) and climate
zones. In the preliminary analyses, DOE analyzed CPB annual energy use
based on the building sample, equipment efficiency characteristics, and
equipment performance at part-load conditions.
In the preliminary analyses, in determining building heat load, DOE
adjusted the building heat load to reflect the expectation that
buildings in 2019 would have a somewhat different building heat load
than buildings in the CBECS 2003 and RECS 2009 building sample. The
adjustment involved multiplying the calculated BHL for each CBECS 2003
or RECS 2009 building by the building shell efficiency index from
AEO2014. This factor differs for commercial and residential buildings
as well as new construction and replacement buildings. Additionally,
DOE also adjusted the building heat load reported in CBECS 2003 and
RECS 2009 for each building using the ratio of the historical National
Oceanic and Atmospheric Administration (NOAA) average heating degree
day data for the specific region each CBECS or RECS building sampled is
in to the 2003 or 2009 heating degree days value, respectively, for the
same region, to reflect the heating load under historical average
climate conditions.
DOE requests feedback on the methodology and assumptions used for
the building heat load adjustment.
See section VII.E for a list of issues on which DOE seeks comment.
For its preliminary analyses, DOE adjusted the rated thermal
efficiency of evaluated commercial packaged boilers based on RWT,
cycling losses, and part-load operation. High RWT is applied to all
non-condensing boiler installations. For condensing boiler
installations, low
[[Page 15864]]
RWT is applied to all commercial packaged boilers in the new
construction market, 25 percent of replacement boilers in buildings
built after 1990, and 5 percent of replacement boilers in buildings
built before 1990. DOE assumed that all other condensing boiler
installations are high RWT applications. The efficiency adjustment for
low and high RWT is dependent on climate, with low RWT values resulting
in the condensing CPB equipment operating in condensing mode, on
average, and high RWT values resulting in the condensing CPB equipment
operating in non-condensing mode, on average. See appendix 7B of the
NOPR TSD for the adjustment factors used for RWT, part-load operation,
and cycling by climate zone. For commercial packaged boilers rated in
combustion efficiency, DOE converted combustion efficiency to thermal
efficiency. DOE used combustion and thermal efficiency data from the
AHRI database to create a conversion factor that is representative of
the range of commercial packaged boilers on the market.
DOE received comments on the preliminary analysis regarding the
energy modeling approach. Regarding DOE's approach to converting
combustion efficiency to thermal efficiency, Lochinvar suggested that,
in order to avoid confusion, DOE should not convert one to the other.
(Lochinvar, No. 34 at p. 7) Relative to adjusting rated thermal
efficiency of commercial packaged boilers using return water
temperature, Lochinvar urged DOE not to attempt correcting the
efficiency of hot water commercial packaged boilers based on expected
return water temperature conditions, noting that certain aspects of the
BTS-2000 test procedure are being overlooked, such as the use of a
recirculating loop used in some instances allowing for higher return
water temperature into the boiler. Lochinvar also noted that efficiency
curves over a wide range of return water temperatures used to derive
conversion factors in the analysis are not based on BTS-2000
methodology, and using data created without a consistent test procedure
is certain to introduce errors. (Lochinvar, No. 34 at p. 3) Similarly,
AHRI expressed concerns regarding DOE's decision to try to adjust rated
thermal efficiency and annual energy consumption estimates of
commercial packaged boilers to account for differences in return and
supply water temperatures, noting the lack of field data and the use of
outdoor reset in many installations, a field condition variable that
adjusts return water temperature based on building heating load and
ambient air temperature. AHRI furthered stated that such efficiency
adjustment would be an estimate not supported by adequate field data.
(AHRI, No. 37 at p. 4) Raypak noted that return water temperature is
unique to every boiler application, building design, and engineering
plans for building operation. Raypak stated that there is no
representative profile of return water temperature in the field.
(Raypak, No. 35 at p. 3)
AHRI commented that, given the trends toward multiple boilers, the
energy use calculations in buildings where multiple boilers are
installed should be considered in DOE's energy use analysis. (AHRI,
Public Meeting Transcript, No. 39 at pp. 95-96) DOE's analysis of non-
condensing boilers considers cycling loss curves that reflect staging
with multiple boilers, where multiple boilers exist, reducing the
cycling adjustment factor based on the modulation capability of
multiple-boiler systems. For condensing boilers, the part-load curves
do not consider effects of multiple boilers but instead consider impact
on efficiency due to modulation.
With respect to the adjustments made to CPB efficiencies and annual
energy use based on return water temperature conditions, DOE
understands that field conditions may be variable but recognizes that
one of the key drivers impacting CPB efficiency is return water
temperature. In its analysis, DOE sought to estimate the energy use of
equipment in the field and, as such, considered factors that may impact
CPB efficiency, including return water temperature conditions. DOE's
energy use analysis has been designed to reflect conditions in the
field, considering the expectations for existing buildings and the
potential in new construction, as well as the proposed testing
conditions in DOE's concurrent test procedure rulemaking.\41\
---------------------------------------------------------------------------
\41\ A link to the February 2016 test procedure NOPR issued by
DOE can be found at: http://energy.gov/eere/buildings/downloads/issuance-2016-02-22-energy-conservation-program-certain-commercial-and.
---------------------------------------------------------------------------
Regarding DOE's approach to converting combustion efficiency to
thermal efficiency, Lochinvar stated that DOE's conversion factor where
every 1 percent increase in combustion efficiency equates to a 1.0867
percent increase in thermal efficiency could be misleading when
reversing the conversion factor to prescribe new minimum combustion
standards. Lochinvar believes such reversed conversions would require
DOE to justify a greater energy savings for large commercial packaged
boilers in order to justify an increase in combustion efficiency.
Lochinvar suggested that, in order to avoid confusion, DOE should not
convert one to the other. (Lochinvar, No. 34 at p. 7)
DOE disagrees that its method of converting combustion efficiency
to thermal efficiency for applicable large commercial packaged boilers
is misleading. As detailed in chapter 7 of the NOPR TSD, DOE calculated
annual energy use of covered commercial packaged boilers based on the
thermal efficiency of the equipment while accounting for cycling loss,
part load operating conditions, and return water temperature. For
equipment classes rated in combustion efficiency, DOE converted the
combustion efficiency levels defined in the engineering analysis to
thermal efficiency levels in order to appropriately characterize the
energy use of the equipment. However, DOE did not reverse the
conversion when establishing standard levels in combustion efficiency.
Rather, DOE identified combustion efficiency levels through its
engineering analysis by evaluating technologically feasible options.
DOE then calculated energy use and associated operating cost savings
through converting combustion efficiency to thermal efficiency when
determining economic justification of each identified combustion
efficiency level. As such, DOE disagrees with Lochinvar's point that
the conversion from combustion efficiency to thermal efficiency is
misleading or will create confusion. DOE did review the conversion
factor that DOE developed in the preliminary analysis and adjusted it
to ensure the NOPR analysis does not result in a conversion where the
thermal efficiency value is higher than the combustion efficiency. DOE
applied the same methodology to convert combustion efficiency to
thermal efficiency to determine energy use of equipment rated in
combustion efficiency in its energy analysis for the NOPR.
DOE also received comments related to system considerations that
may impact return water temperature conditions, and the resulting
impact on the expected performance of condensing units that replace
non-condensing commercial packaged boilers. ABMA commented that unless
the boiler sizing closely follows the seasonal load profile, and the
control system is capable of selecting the correct boiler for the
prevailing load, the efficiency savings will not be maximized. (ABMA,
No. 33 at p. 3) Raypak similarly commented that DOE should be aware of
the distribution system considerations for ensuring proper operation
with lower boiler water temperatures, as needed for
[[Page 15865]]
a condensing system to yield the maximum energy savings, and that it is
aware of many condensing boiler installations that have not realized
the desired savings due to system considerations that prevent
condensation from taking place. (Raypak, No. 35 at p. 4) Raypak and PVI
commented that installing a high efficiency condensing commercial
packaged boiler in a system that operates with return water
temperatures that do not allow for high efficiency operation will yield
little or no cost/energy savings. (Raypak, No. 35 at p. 4; PVI, Public
Meeting Transcript, No. 39 at p. 183) PVI further noted that the
analysis assumes that a high efficiency condensing commercial packaged
boiler operates at high efficiency all the time but that, anecdotally,
the vast majority of buildings in the United States today have return
water temperatures of between 140 and 160 degrees that do not allow for
condensing, and that a system redesign would be required to allow for
condensing to take place. (PVI, Public Meeting Transcript, No. 39 at
pp. 182-183) AHRI and Raypak stated that the costs associated with a
system retrofit in such cases should be considered in the model.
(Raypak, Public Meeting Transcript, No. 39 at p. 186; AHRI, Public
Meeting Transcript, No. 39 at pp. 119-120) PHCC inquired as to the
fraction of commercial packaged boilers that the preliminary analysis
assumed are condensing boilers operating in condensing mode and noted
that water temperature requirements for a system are more a function of
system conditions than sizing of the boiler and that a minimum water
temperature may be required to transfer heat from the emitter to the
space being heated. (PHCC, Public Meeting Transcript, No. 39 at pp. 121
and 133) PHCC commented that in new installations, it is important to
note that when using high-efficiency products, a system must be
designed such that you obtain lower return water temperatures to
operate in the effective part of the boiler efficiency curve. (PHCC,
Public Meeting Transcript, No. 39 at p. 98) ACEEE, however, noted that
field experience has demonstrated system conversions to high efficiency
commercial packaged boilers to be feasible, despite assertions to the
contrary based on designed-in system temperatures. (ACEEE, Public
Meeting Transcript, No. 39 at pp. 183-184) ACEEE commented on the
potential impact that oversizing practices in the field may have on
system efficiencies, stating that it expects substantial oversizing for
the actual peak draws that would be expected in a facility, and
inquired as to how this may impact the amount of time a condensing
boiler spends in condensing mode. (ACEEE, Public Meeting Transcript,
No. 39 at pp. 93-94 and 132-133) ACEEE also commented that the DOE is
focusing too much on the CPB costs and not enough on other system
costs, recommending Vermont Efficiency Community as a source of
information and interactions with design engineers to obtain a better
understanding of design considerations and to obtain relevant case
studies. (ACEEE, Public Meeting Transcript, No. 39 at p. 127) PVI also
commented that interacting with the engineering community is essential
to understanding what is involved in converting a system designed for
high water temperature to use low water temperature. (PVI, Public
Meeting Transcript, No. 39 at p. 126-127) AHRI and Lochinvar identified
the Centre of Energy Efficiency at Minneapolis (MNCEE) as a possible
source of useful information and suggested that DOE should contact
them. (AHRI No. 37 at p. 4; Lochinvar No. 34 at p. 3) DOE reviewed
relevant published literature from the MNCEE Web site, and after
contacting them learned about an ongoing study on ``Condensing Boiler
Optimization in Commercial Buildings.''
DOE acknowledges that there are system considerations that can
negatively impact the performance of a condensing commercial packaged
boiler, resulting in less than optimum CPB efficiency. The analysis
considered the return water temperature's effect on condensing boiler
efficiency and took into account climate zone data to account for
expected differences in operation and performance between different
climates. DOE's analysis developed a heating load-weighted average
return water temperature for two scenarios. In one scenario, a low
return water temperature is provided for commercial packaged boilers
that are installed in a system that would allow for condensation to
occur. In a second scenario, a high return water temperature is
provided for commercial packaged boilers that are installed in a system
that does not allow for condensation to occur. For buildings in new
construction, DOE assumed that all buildings will be designed to allow
for condensing boilers to condense for a significant part of the
heating season and therefore used low return water temperatures for its
analysis. For buildings built after 1990, DOE assumed that 25% of
buildings will be capable of low return water temperatures to allow
condensing during part of the heating season. For buildings built
before 1990, DOE assumed that 5% of buildings will be capable of low
return water temperatures to allow condensing during part of the
heating season. For the remainder of buildings, DOE's analysis used the
average high return water temperature scenario. DOE tentatively
concluded that it has appropriately considered the building hot water
and steam distribution systems to appropriately account for the
performance impact on commercial packaged boilers resulting from return
water temperature conditions in the field.
DOE received feedback from Lochinvar, AHRI, ABMA, and PHCC relative
to the various control options for commercial packaged boilers,
particularly those used in multiple-boiler installations. Some of these
controls may include fixed thermostats, fixed lead/lag thermostats with
rotation on lead, individual thermistors with modulation, individual
modulation with rotating lead, and group modulation. Lochinvar notes
that some of the control options may be integral or external to the
CPB, a point also echoed by AHRI, which commented on the variety of
control systems and that some (e.g., building energy management
systems) are independent of the control system provided on the boiler.
PHCC further noted that contractors specializing in building management
systems may be used to install and integrate such control systems. PHCC
also noted that multiple-boiler staging may be accomplished with
aftermarket products that are designed to communicate with boilers or
between boilers, and that a contractor may perform the installation but
a different control contractor may integrate the boiler control to a
building management program. (Lochinvar, No. 34 at p. 4; AHRI, No. 37
at p. 4; PHCC, Public Meeting Transcript, No. 39 at pp. 99-101) AHRI
noted that in CPB installations with mixed efficiency levels, the
control system usually calls on the secondary (i.e., less efficient)
boiler to operate only in increased load situations. AHRI also noted
that it would be useful to understand how many commercial boiler
installations include a system control panel that adds sophistication
to controlling the boiler and system. (AHRI, No. 37 at p. 4; AHRI,
Public Meeting Transcript, No. 39 at p. 100) AHRI also notes that
ASHRAE Standard 90 requires load-sensing controls for boiler-based
heating systems. (AHRI, Public Meeting Transcript, No. 39 at pp. 32-33)
ABMA
[[Page 15866]]
noted that unless the boiler sizing closely follows the seasonal load
profile, and the control system is capable of selecting the correct
boiler for the prevailing load, the efficiency savings will not be
maximized. In consideration of these comments, DOE notes that while the
analysis does not specifically apply any individual controls for
multiple-boiler situations, it does consider the impact on the
efficiency of a boiler on a multiple-boiler installation (through
providing for differing part load/cycling adjustment where staging of
multiple-boilers is possible). The analysis does not consider multiple-
boiler installations where commercial packaged boilers of different
fuel input rate are used; nor does it consider hybrid systems that may
use condensing and non-condensing boilers together and controlled in
sequence as part of its no-new-standards case. For more information on
this part of the analysis, refer to chapter 7 and appendix 7B of the
TSD.
For the NOPR, DOE modified the energy use characterization
conducted in the preliminary analysis to improve the modeling of
equipment performance. The modifications that DOE performed included
changes to the cycling loss factors for individual commercial packaged
boilers, improved accounting for estimating performance of multiple-
boiler installations, and improving the return water temperature
efficiency adjustment factors.
A more detailed description of the energy use characterization
approach can be found in appendix 7B of the NOPR TSD.
2. Building Sample Selection and Sizing Methodology
In its energy analysis for this NOPR, DOE's estimation of the
annual energy savings of commercial packaged boilers from higher
efficiency equipment alternatives relies on building sample data from
CBECS 2003, RECS 2009, and CBECS 2012.\42\ CBECS 2003 includes energy
consumption and building characteristic data for 5,215 commercial
buildings representing 4.9 million commercial buildings. RECS 2009
includes similar data from 12,083 housing units that represent almost
113.6 million residential households.
---------------------------------------------------------------------------
\42\ EIA released only building characteristic micro-data tables
for CBECS 2012 in June 2015. These buildings could not be used as
sample buildings for this rulemaking because they did not have
energy consumption details. However this partial set of data in
CBECS 2012 was used to determine useful trends for developing the
final sample distribution across various equipment classes during
the analysis period.
---------------------------------------------------------------------------
The subset of CBECS 2003 and RECS 2009 building records used in the
analysis met the following criteria. The CPB application
used commercial packaged boiler(s) as one of the main
heating equipment components in the building,
used a heating fuel that is natural gas (including propane
and LPG) or fuel oil or a dual fuel combination of natural gas and fuel
oil,
served a building with estimated design condition building
heating load exceeding the lower limit of CPB qualifying size (300,000
Btu/hr), and
had a non-trivial consumption of heating fuel allocable to
the commercial packaged boiler.
DOE analyzed commercial packaged boilers in the qualifying building
samples. DOE disaggregated the selected sample set of commercial
packaged boilers into subsets based on the fuel types (gas or oil),
fuel input rate (small or large), heating medium (steam or hot water).
DOE then used these CPB subsets to group the sample buildings equipped
with the same class of equipment evaluated in its NOPR analysis. In the
LCC analysis, DOE used the ratio of the weighted floor space of the
groups of commercial and residential building samples associated with
each equipment class to determine the respective sample weights for the
commercial and residential sectors. In absence of the newer sample data
from CBECS 2012, DOE's new construction sample was based on the same
selection algorithms as the replacement sample but included only
buildings built after 1990, which DOE tentatively concluded would have
building characteristics more similar to the new construction buildings
in the start of the analysis period in 2019 (e.g., building insulation,
regional distribution of the buildings, etc.).
To disaggregate a selected set of commercial packaged boilers into
large and small equipment classes, DOE uses a sizing methodology to
determine the sizes of the commercial packaged boilers installed in the
building. In the preliminary analysis, DOE used a rule-based sizing
methodology (i.e., predetermined number of commercial packaged boilers
for a building with a given sizing heating load) with key threshold
size parameters estimated from the AHRI directory model counts. In the
NOPR analysis, DOE used a statistical sizing approach described in this
section.
First, the total sizing of the heating equipment is determined from
the heated square footage of the building, the percentage of area
heated, a uniform heating load requirement of 30 Btu/h per square foot
of heated area, and an assumed equipment efficiency mapped to the
construction year. DOE's sizing methodology also takes outdoor design
conditions into consideration. The outdoor design condition for the
building is based on the specific weather location of the building. The
estimated total CPB sizing (MMBtu/h) is the aggregate heating equipment
sizing prorated using the area fraction heated by the commercial
packaged boilers and multiplied by an oversize factor of 1.1. For the
sample of residential multi-family buildings, the heating equipment
sizing methodology for commercial buildings is modified to calculate
the heating load for each residential unit of the multi-family
buildings and this value is multiplied by the number of units, assuming
each unit to have identical area and design heating load. The modified
methodology for residential multi-family buildings further assumes that
a centrally located single or a multiple-boiler installation would meet
the entire design heating load of the building.
DOE computed the size of each commercial packaged boiler in each
sample building by dividing the aggregate CPB sizing heating load
(MMBtu/hr) by an estimated number of boilers of equal capacity. To
estimate the number of commercial packaged boilers in a given sample
building, DOE established a CPB count distribution for a given sizing
load range in a set of sample buildings from CBECS data of 1979 and
1983--the only two CBECS surveys where the CPB count data were
available for the sample buildings. DOE assigned the number of
commercial packaged boilers to all the qualified sample buildings of
2003 CBECS based on this distribution. The number of commercial
packaged boilers in each sample building was multiplied by the
respective building sample weights in CBECS to obtain an estimate of
the overall CPB population and their respective capacities. The CPB
size distributions obtained by this method were compared with the size
distribution of the space heating boilers obtained in an EPA database
\43\ having size information of over 120,000 space heating boilers. The
comparison from these two different datasets did not reveal any
significant differences. Minor tweaks were made to the statistical
assignment of the number of commercial packaged boilers so as to
maximize the utility of the sampled buildings used for the NOPR
analysis;
[[Page 15867]]
i.e., the number of commercial packaged boilers assigned to very large
buildings in cold climates with large design sizing loads were high
enough to ensure that the capacity of a single unit of the multiple-
boiler installation was lower than 10 MMBtu/h, the maximum CPB size for
the equipment classes analyzed. At the lower end of the heating load
spectrum, the number of commercial packaged boilers assigned to the
installation were matched to ensure that any commercial packaged boiler
in the installation has a capacity higher than 300,000 Btu/h--the
minimum size for a covered commercial packaged boiler.
---------------------------------------------------------------------------
\43\ Environmental Protection Agency. 13 State Boiler Inspector
Inventory Database with Projections (Area Sources). EPA-HQ-OAR-2006-
0790-0013 (April 2010) (Available at http://www.epa.gov/ttnatw01/boiler/boilerpg.html).
---------------------------------------------------------------------------
DOE received several comments pertaining to its sizing methodology
used in the preliminary analyses--i.e., its use of a rule-based sizing
methodology, oversize factors used in the aggregate sizing calculation,
and number of commercial packaged boilers used to meet a given design
load. Raypak commented that there is no such thing as typical CPB
sizing practice and that engineers and architects are responsible for
creating the buildings the way the owner wants it. (Raypak, No. 35 at
p. 3) PHCC commented that the design heating load is not the only
criterion for sizing, but ``connected load'' is an important
determinant of the sizing practice, especially for steam systems.
(PHCC, Public Meeting Transcript, No. 39 at p. 97) Sizes of individual
commercial packaged boilers in any installation depend on the aggregate
design condition heating load and the number of commercial packaged
boilers in the installation. DOE recognizes that the number of
commercial packaged boilers assigned to meet the system heating load of
a given building and to create some degree of redundancy varies in
current HVAC system design practice. DOE's approach to sizing is based
on CPB counts distributions from previous CBECS surveys and statistics
gathered from the EPA database of space heating boilers. This
methodology does not use a set number of commercial packaged boilers
for a given design heating load but assigns the number of commercial
packaged boilers within a range of counts based on previous
observations from CBECS surveys. Regarding PHCC's comment on impact of
connected load on CPB sizing, since DOE is not aware of any currently
available data on the heat distribution equipment in commercial
buildings, it was unable to make reasonable assumptions that could be
incorporated in its sizing methodology. DOE welcomes comments on
improving this sizing methodology and any other data that may assist
DOE to establish a correlation between a given building heating load
and the number of commercial packaged boilers in the installation.
The CBECS 2003 and RECS 2009 weightings for each building sample
indicate how frequently each commercial building or household unit
occurs on the national level in 2003 and 2009, respectively. DOE used
these weightings from CBECS 2003 and RECS 2009 buildings for estimation
of individual equipment class sample weights. Appendix 7A of the NOPR
TSD presents the variables included and their definitions, as well as
further information about the derivation of the building samples, the
adjustments to the CPB weights, and sampling fractions for each of the
four samples: Commercial and residential, each divided between new
construction and retrofit.
DOE received multiple comments regarding the sizing methodology and
other assumptions used in estimation of the equipment sample weights.
PHCC pointed out that in the retrofit situation, though there are
contractors who just replace the boilers on ``like for like'' basis,
most contractors look at the overall system load and then size the
installation appropriately considering the design heating load,
particularly when a higher efficiency system is being considered.
(PHCC, Public Meeting Transcript, No. 39 at p. 98) AHRI noted that it
is not unusual to have a backup boiler in installations of some
building types, creating some redundancy, in particular where absence
of heating is unacceptable. (AHRI, Public Meeting Transcript, No. 39 at
p. 94-95) AHRI further observed that this has been a historical
practice, and current design practice mostly provides for multiple-
boiler installations. ACEEE commented that installations needing 100-
percent backup may use a second large boiler, or some may opt for
having various small boilers that together cover 130 or 120 percent of
the peak load. (ACEEE, Public Meeting Transcript, No. 39 at pp. 101-
103). DOE's use of data-driven boiler count distributions to estimate
the number of boilers in a given installation obviates the need for
assumptions on the percent of the sample buildings requiring redundancy
in the boiler installation and the extent of redundancy. For example,
DOE estimated that 30% of the sample buildings having design heating
loads between 570,000 and 865,000 Btu/hr would have two commercial
packaged boilers, the rest being single boiler installations. While the
capacity of the single commercial packaged boiler is based on an
oversize factor of 110%, in the two-boiler situation each commercial
packaged boiler has half the capacity of the single large commercial
packaged boiler. The two-boiler situation creates redundancy only to
the extent of 55% of the design load but has no provision for 100%
redundancy under design heating condition. In the NOPR analysis, the
maximum number of commercial packaged boilers assigned to any sample
building is eight, implying redundancy of 96% of the design heating
load. PHCC commented that fully redundant boilers are less frequent now
than it has been in the past. (PHCC, Public Meeting Transcript, No. 39
at pp. 103-104) PHCC further noted that reasonable degree of redundancy
can be created even when only 100% of the design load is shared by
multiple boilers in an installation. PHCC observed that presently
building owners are unwilling to spend a significant amount of
additional funds to ensure redundancy as there are acceptable and safe
alternatives. (PHCC, Public Meeting Transcript, No. 39 at p. 104) DOE's
NOPR analysis assumes an average oversize factor of 110%, which appear
reasonable.
The issues of redundant, modular, and multiple-boiler use in a
given installation are intertwined, and DOE received several comments
in this area. AHRI, Lochinvar, and Raypak noted that ASHRAE Standard
90.1-2013 requires a 3:1 turndown ratio for boiler systems with an
input rate of 1 MMBtu/hr or more (accomplished with a modulating boiler
or multiple boilers) to provide some measure of load following. (AHRI,
No. 37 at p. 4; Lochinvar, No. 34 at p. 4; Raypak, No. 35 at p. 3).
Raypak commented that trends show that more buildings, new and
existing, are being provided with multiple smaller boilers instead of a
single large boiler, and that buildings such as hospitals, hotels,
colleges, and prisons are examples where redundant equipment may be
used, though not necessarily providing 100% coverage. ACEEE also
commented that there is some shift away from larger boilers to multiple
smaller boilers. (ACEEE No. 39 at p. 33)
DOE notes that one of the key drivers of the trend toward
installation of multiple or modular commercial packaged boilers in any
installation would be ASHRAE standard 90.1-2013, \44\ which requires
CPB systems with an input rate of 1 MMBtu/hour or more to have a
turndown ratios of 3:1 or more. As this can be achieved either by
staging of multiple smaller
[[Page 15868]]
commercial packaged boilers or having large commercial packed boilers
with modular heat exchangers and turndown capability, greater usage of
multiple boilers or modular boilers are mutually offsetting. In the
NOPR analysis, DOE has considered that commercial packaged boilers at
the high end of the efficiency spectrum do have built-in turndown
capability. Further in its NOPR analysis, DOE assumed that all
commercial packaged boilers installed in new buildings will be part of
a system with at least 3:1 turndown ratio and calculated the adjusted
thermal efficiency of commercial packaged boilers in such systems
accordingly. DOE could not quantify a definitive impact of ASHRAE
standard 90.1-2013 on future CPB sizing practices because the standard
is yet to be incorporated in most state building codes. However it
modified future sizing methodology in the analysis period (2019-2048)
to have a minimum count of at least two commercial packaged boilers of
the same size for design heating loads exceeding 1 MM Btu/hr for new
constructions.
---------------------------------------------------------------------------
\44\ ANSI/ASHRAE/IESNA Standard 90.1-2013, Energy Standard for
Buildings Except Low-Rise Residential Buildings, American Society of
Heating, Refrigerating and Air-conditioning Engineers, Inc.,
Atlanta, GA 30329.
---------------------------------------------------------------------------
Raypak noted that DOE's assumption in the preliminary analysis that
all multiple boilers are of the same size and type when installed in
the same building is incorrect. Raypak stated that it is seeing more
``hybrid'' systems that include both condensing and non-condensing
boilers on the same system, with some of these hybrid systems having
the ability to monitor the return water temperature and initiate
condensing boiler operation. (Raypak, No. 35 at p. 3) PHCC commented
that use of one low-efficiency and one high-efficiency boiler in a new
installation could be rare but may happen in retrofit scenarios. (PHCC,
Public Meeting Transcript, No. 39 at p. 104) DOE agrees with PHCC that
hybrid installations are possible in retrofit situations where new
condensing boiler(s) operating in the ``base load mode'' combine with
the pre-existing non-condensing boilers to meet the design load. In new
construction, DOE's analysis can be limited only to single efficiency
levels for all commercial packaged boilers as any mandated efficiency
standards stipulate a single minimum efficiency level only. It is
likely that operation in the hybrid configuration may improve the
economics of the ``condensing boiler'' efficiency option in DOE's NOPR
analysis because of higher utilization of the condensing boilers in the
hybrid retrofitted systems vis-[agrave]-vis utilizations currently
estimated in the sample buildings under a ``uniform configuration.''
However to quantify this impact, DOE needs to develop a reasonable
baseline assumption regarding the current degree of adoption of the
hybrid configuration practice in retrofit situations.
DOE requests information on what constitutes a reasonable baseline
assumption about the current degree of adoption of hybrid boiler
configurations in retrofit situations and on other related parameters
such as percentage of total installed capacity typically assigned to
the new condensing boilers, climate zones where it may be more
prevalent and any other supporting documentation.
See section VII.E for a list of issues on which DOE seeks comment.
Building sampling methodology is detailed in NOPR TSD appendix 7A.
3. Miscellaneous Energy Use
The annual energy used by commercial packaged boilers, in some
cases, may include energy used for non-space heating use such as water
heating. In the preliminary analysis, DOE assumed that if the CBECS
data indicates that the CPB fuel is the same as the fuel used for water
heating then in 50% of the sample buildings, the same commercial
packaged boiler is also used for water heating. Several stakeholders
commented on the reasonableness and validity of this assumption. AHRI
stated that in the collective opinion of its members, the fraction of
boilers used for both space heating and hot water in commercial
building is far less than the 50% assumed in the preliminary analysis.
(AHRI, No. 37 at p. 5) Raypak agreed with AHRI's comment and further
pointed out that this practice, though common in Europe for condensing
boilers in residential applications, is not commonly observed in
commercial buildings in the United States. (Raypak, No. 35 at p. 4)
Lochinvar expressed that possibly a greater percentage of residential
boilers are used for both space and water heating than boilers in
commercial buildings. ACEEE pointed out that using packaged boilers
also for hot water heating is a wasteful practice because of the
presence of long recirculating loops, which are restricted in the new
building codes. (ACEEE, Public Meeting Transcript, No. 39 at p. 113)
ACEEE further pointed out that the current system design practice is
moving away from having dual-use installations in commercial buildings.
DOE agrees with the previous comments and consequently limited the
fraction of occurrence of dual-use boilers to 20% of the samples in the
NOPR analysis compared to the previously considered level of 50%.
Other associated energy consumption is due to electricity use by
electrical components of commercial packaged boilers including
circulating pump, draft inducer, igniter, and other auxiliary equipment
such as condensate pumps. In evaluating electricity use, DOE considered
electricity consumed by commercial packaged boilers both in active mode
as well as in standby and off modes in the preliminary analysis.
DOE received several comments regarding energy use by pumps. AHRI
noted that there has been significant progress on ASHRAE 90.1 in
requiring or specifying more efficient mode of pumps for the
circulating pumps and that there is a parallel rulemaking on commercial
industrial pumps, and the impact of such rulemaking should be
considered in this analysis and rulemaking as it relates to pumps used
in commercial packaged boilers. (AHRI, Public Meeting Transcript, No.
39 at pp. 108-109 and 114) PHCC noted that the analysis should be clear
as to whether pump power refers to a system pump, boiler pump, or both,
and commented that small boilers are probably all provided with a
system circulating pump, but, as systems get larger, the pumps may be
field selected, and coming up with an average efficiency would be
complicated given the various pump options available out there. (PHCC,
Public Meeting Transcript, No. 39 at pp. 109-110 and 112-113)
Similarly, Raypak noted that boiler pumps may not be included with the
commercial packaged boiler but rather be a purchase decision made by
the manufacturer's representative or contractor to meet the CPB flow
and head requirements, and that care should be taken when taking this
energy consumption into consideration. (Raypak, Public Meeting
Transcript, No. 39 at pp. 115-116) ACEEE noted that care must be taken
in the analysis to include only energy use for pumps integral to the
operation of the boiler and not for those that are used for
distribution to the system. (ACEEE, Public Meeting Transcript, No. 39
at p. 111)
With respect to the electricity use of pumps, DOE wishes to clarify
that the current analysis only considered the electricity use of pumps
needed for proper operation of the commercial packaged boiler, but not
the electricity use of additional pumps that may be necessary used for
distributing water throughout a system since the circulating pumps are
not part of the commercial packaged boiler itself and inclusion of its
energy consumption would not be appropriate to the development of the
standard.
[[Page 15869]]
In its NOPR analysis, DOE maintained the electricity use analysis
method used for the preliminary analysis.
F. Life-Cycle Cost and Payback Period Analysis
The purpose of the LCC and PBP analysis is to analyze the effects
of potential amended energy conservation standards on consumers of
commercial packaged boilers by determining how a potential amended
standard affects their operating expenses (usually decreased) and their
total installed costs (usually increased).
The LCC is the total consumer cost of owning and operating an
appliance or equipment, generally over its lifetime. The LCC
calculation includes total installed cost (equipment manufacturer
selling price, distribution chain markups, sales tax, and installation
costs), operating costs (energy, repair, and maintenance costs),
equipment lifetime, and discount rate. Future operating costs are
discounted to the time of purchase and summed over the lifetime of the
appliance or equipment. The PBP is the amount of time (in years) it
takes consumers to recover the assumed higher purchase price of more
energy-efficient equipment through reduced operating costs. DOE
calculates the PBP by dividing the change in total installed cost
(normally higher) due to a standard by the change in annual operating
cost (normally lower) that result from the standard.
For any given efficiency level, DOE measures the PBP and the change
in LCC relative to an estimate of the no-new-standards efficiency
distribution. The no-new-standards estimate reflects the market in the
absence of amended energy conservation standards, including market
trends for equipment that exceed the current energy conservation
standards.
DOE analyzed the net effect of potential amended CPB standards on
consumers by calculating the LCC and PBP for each efficiency level of
each sample building using the engineering performance data, the
energy-use data, and the markups. DOE performed the LCC and PBP
analyses using a spreadsheet model combined with Crystal Ball (a
commercially available software program used to conduct stochastic
analysis using Monte Carlo simulation and probability distributions) to
account for uncertainty and variability among the input variables
(e.g., energy prices, installation cost, and repair and maintenance
costs). The spreadsheet model uses weighting factors to account for
distributions of shipments to different building types and different
states to generate LCC savings by efficiency level. Each Monte Carlo
simulation consists of 10,000 LCC and PBP calculations using input
values that are either sampled from probability distributions and
building samples or characterized with single point values. The
analytical results include a distribution of 10,000 data points showing
the range of LCC savings and PBPs for a given efficiency level relative
to the no-new-standards case efficiency forecast. In performing an
iteration of the Monte Carlo simulation for a given consumer, product
efficiency is chosen based on its probability. If the chosen product
efficiency is greater than or equal to the efficiency of the standard
level under consideration, the LCC and PBP calculation reveals that a
consumer is not impacted by the standard level. By accounting for
consumers that already purchase more-efficient products, DOE avoids
overstating the potential benefits from increasing product efficiency.
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. 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 then multiplying
that amount by the average energy price forecast for the year in which
compliance with the amended standards would be required.
DOE calculated the LCC and PBP for all consumers of commercial
packaged boilers as if each were to purchase new equipment in the year
that compliance with amended standards is required. The projected
compliance date for amended standards is early 2019. Therefore, for
purposes of its analysis, DOE used January 1, 2019 as the beginning of
compliance with potential amended energy standards for commercial
packaged boilers.
As noted in this section, DOE's LCC and PBP analysis generates
values that calculate the payback period for consumers of potential
energy conservation standards, which includes, but is not limited to,
the 3-year payback period contemplated under the rebuttable presumption
test. However, DOE routinely conducts a full economic analysis that
considers the full range of impacts, including those to the consumer,
manufacturer, Nation, and environment. The results of the full economic
analysis serve as the basis for DOE to definitively evaluate the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification).
Inputs to the LCC and PBP analysis are categorized as (1) inputs
for establishing the purchase cost, otherwise known as the total
installed cost, and (2) inputs for calculating the operating cost
(i.e., energy, maintenance, and repair costs). The following sections
contain brief discussions of comments on the inputs and key assumptions
of DOE's LCC and PBP analysis and explain how DOE took these comments
into consideration.
1. Equipment Costs
For each distribution channel, DOE derives the consumer equipment
cost for the baseline equipment by multiplying the baseline equipment
manufacturer production cost and the baseline overall markup (including
any applicable sales tax). For each efficiency level above the
baseline, DOE derives the consumer equipment cost by adding baseline
equipment consumer cost to the product of incremental manufacturer cost
and the appropriate incremental overall markup (including any
applicable sales tax). This consumer equipment cost is reflective of
the representative equipment size analyzed for each equipment class in
the engineering analysis. Since the LCC analysis considers consumers
whose CPB capacities vary from the representative equipment size, the
consumer equipment cost is adjusted to account for this.
DOE examined whether CPB equipment prices changed over time. DOE
tentatively determined that there is no clear historical price trend
for CPB equipment and used costs established in the engineering
analysis directly for determining 2019 equipment prices for the LCC and
PBP analysis.
2. Installation Costs
The installation cost is the cost incurred by the consumer for
installing the commercial packaged boiler. The cost of installation
covers all labor and material costs associated with the replacement of
an existing commercial packaged boiler for replacements or the
installation of a commercial packaged boiler in a new building, removal
of the existing boiler, and any applicable permit fees. DOE estimates
the
[[Page 15870]]
installation costs at each considered efficiency level using a variety
of sources, including RS Means 2015 facilities construction cost data,
manufacturer literature, and information from expert consultants.\45\
Appendix 8D of the NOPR TSD contains a detailed discussion of the
development of installation costs.
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\45\ RS Means, Facilities Maintenance & Repair Cost Data 2015,
73rd ed. (2014).
---------------------------------------------------------------------------
DOE received feedback regarding installation costs for commercial
packaged boilers, including comments related to installation locations
within buildings, venting materials and sizes, and common venting. AHRI
commented that boilers located within buildings are usually in the
basement or penthouse, and in high-rise buildings, they are often
located in intermediate floors, and that vertical vent termination is
most common. (AHRI, No. 37 at p. 6) Raypak commented that there is no
``typical'' boiler installation, and that boilers may be located in
basements, mechanical rooms, penthouses, or outdoors and, in high-rise
buildings, boilers are often located in intermediate floors due to
other system limitations. (Raypak, No. 35 at p. 6) PHCC also noted that
likely places for boiler installations are boiler rooms, equipment
rooms, basements of hotels, and powerhouses in hospitals. Venting in
these installations could be through sidewalls, roofs, masonry,
chimneys, or stainless steel vents. (PHCC, No. 39 at p. 138) Lochinvar
noted that they do not have specific information but speculate that
less than 10% of installations will require significant additional
installation expenses, and that most likely this expense would occur
for condensing boilers with long vent runs that require custom-designed
common vent systems with modulating draft control systems. (Lochinvar,
No. 34 at p. 5) ACEEE suggested getting in touch with ASHRAE technical
committees to obtain more specific information on design practices, and
engaging the engineering community, system designers, and contractors
to get a better handle on installation costs. (ACEEE, No. 39 at pp. 105
and 128) PHCC suggested that information on this topic may be more
succinctly gathered from a survey sent to contractors, engineers, and
manufacturers. (PHCC, No. 39 at p. 135)
Regarding costs associated with venting, AHRI, Lochinvar, and
Raypak noted that venting material selection is a function of system
design, but generally vents 8 inches and larger are metal, 4 inches and
smaller are PVC/CPVC/PP,\46\ and that 6-inch vents may be either, with
Raypak also noting that plastic vent materials that are ULC S636
certified are not readily available in larger sizes. (AHRI, No. 37 at
p. 5; Lochinvar, No. 34 at p. 5; Raypak, No. 35 at p. 5) PHCC's comment
agreed with the general trend identified as PHCC commented that plastic
venting is more common in small-capacity installations, but stainless
steel is more typical in larger boilers with an input of 1 MM Btu/h
sizes and higher. (PHCC, No. 39 at p. 130) AHRI further noted that
stainless steel is rarely used in existing CPB installations with
efficiencies in the low 80 percent range. (AHRI, No. 37 at p. 6)
However, Raypak noted that the same boiler, when designed to use a
Category I vent in a vertical vent situation, may be required to use a
Category III stainless steel vent if vented horizontally, but noted
that manufacturers have limited knowledge of the final installation and
whether a particular boiler will be vented horizontally or
vertically.\47\ (Raypak, No. 39 at p. 136 and No. 35 at p. 5) PHCC
proposed that most of the time condensing boilers are direct vented but
noted that they have no specific data to support that opinion. (PHCC,
No. 39 at p. 130) Lochinvar commented that almost all condensing
commercial packaged boilers have the option of direct venting, and that
the majority of non-condensing commercial packaged boilers sold do not
have the direct vent option. They further noted that there is a small
fraction of near condensing commercial packaged boilers that require
stainless steel venting, but almost all are designed for either non-
condensing conventional venting or condensing with PVC or stainless
steel venting, noting the selection of PVC versus stainless steel being
based on size rather than efficiency. (Lochinvar, No. 34 at p. 5)
Lochinvar commented that vent termination has historically been
vertical, but that direct venting options have caused a trend toward
side wall venting, and in some instances that has resulted in
functional problems. The trend is currently reverting to vertical
venting for all products, with side wall venting currently applied in
less than 20% of cases and this percentage is declining. (Lochinvar,
No. 34 at p. 5) Raypak stated that direct venting has nothing to do
with boiler efficiency, and that many mechanical draft boilers and some
natural draft boilers are designed to accommodate standard venting or
direct venting, depending on the installation requirements. Raypak
commented that stainless steel venting is rarely used in existing
installations of commercial packaged boilers with efficiencies below
condensing, and that stainless steel venting is much more costly than
standard ``B-vent'' which is used for most non-condensing boilers
vented in Category I venting configurations. Raypak also commented that
venting configuration for outdoor installations is not addressed by the
DOE analysis. (Raypak, No. 35 at p. 5) In the public meeting, AHRI
commented that venting approaches may differ between small and large
boilers, and that DOE's analysis focuses on fairly small boilers. AHRI
offered to discuss this perspective with their members and provide
additional information. (AHRI, No. 39 at p. 132)
---------------------------------------------------------------------------
\46\ Plastic polymers: Polyvinyl chloride (PVC), chlorinated
polyvinyl chloride (CPVC), polypropylene (PP).
\47\ DOE interprets the referenced Category III venting
requirement to relate to the lack of flue gas buoyancy in
horizontally vented equipment, and that venting designed to maintain
a positive internal pressure is therefore utilized in these
installations.
---------------------------------------------------------------------------
With respect to common venting, Lochinvar commented that multiple-
boiler installations are often commonly vented (10% and growing), but
that common venting commercial packaged boilers with water heaters is
rare, and they advise against mixing unlike product types when venting.
(Lochinvar, No. 34 at p. 6) AHRI noted that the National Fuel Gas Code
(NFGC) requires condensing boilers to be separately vented, and that it
is customary to commonly vent non-condensing boilers, but that
commercial water heaters are usually not commonly vented with
commercial packaged boilers. (AHRI, No. 37 at p. 6) AHRI further
elaborated on this point during the public meeting, stating that common
venting may become problematic for the water heater when the boiler is
not firing and the vent size is very large. (AHRI, No. 39 at p. 141)
Raypak, in their comments submitted in response to the public meeting,
also noted that the NFGC addresses common venting of non-condensing
Category I equipment, but when it comes to common venting of condensing
boilers or other category boilers, the NFGC calls for ``Engineered Vent
Systems,'' resulting in additional costs for the design, including a
Registered Professional Engineer's stamp (approving the venting system
design), and equipment over and above the cost of the vent materials
alone. (Raypak, No. 35 at p. 6) Similarly, PVI noted that non-
condensing boilers are commonly vented together; condensing boilers are
most commonly vented individually, but some (research) projects are
investigating what it would
[[Page 15871]]
take to common vent condensing boilers. (PVI, No. 39 at p. 140) Raypak
further notes that boilers designed for Category III, if vented
horizontally, would use stainless steel to comply with categorization
requirements for boilers. (Raypak, No. 35 at p. 6)
DOE acknowledges that the number of possible variations in venting
arrangements is significant and has utilized this input in a logic
sequence based upon probability distribution of venting conditions to
provide representative venting costs for the range of products
analyzed. See chapter 8 and appendix 8D of the NOPR TSD for details on
DOE's analysis of installation costs including venting costs.
DOE seeks input on its characterization and development of
representative installation costs, including venting costs, in new and
replacement commercial package boiler installations, including data to
support assumptions on vent sizing, vent length distributions, and vent
materials.
See section VII.E for a list of issues on which DOE seeks comment.
3. Annual Per-Unit Energy Consumption
DOE estimated annual natural gas, fuel oil, and electricity
consumed by each class of CPB equipment, at each considered efficiency
level, based on the energy use analysis described in section IV.E of
this document and in chapter 7 of the NOPR TSD.
DOE conducted a literature review on the direct rebound effect in
commercial buildings, and found very few studies, especially with
regard to space heating and cooling. In a paper from 1993, Nadel
describes several studies on takeback in the wake of utility lighting
efficiency programs in the commercial and industrial sectors.\48\ The
findings suggest that in general the rebound associated with lighting
efficiency programs in the commercial and industrial sectors is very
small. In a 1995 paper, Eto et al.\49\ state that changes in energy
service levels after efficiency programs have been implemented have not
been studied systematically for the commercial sector. They state that
while pre-/post-billing analyses can implicitly pick up the energy use
impacts of amenity changes resulting from program participation, the
effect is usually impossible to isolate. A number of programs attempted
to identify changes in energy service levels through customer surveys.
Five concluded that there was no evidence of takeback, while two
estimated small amounts of takeback for specific end uses, usually less
than 10-percent. A recent paper by Qiu,\50\ which describes a model of
technology adoption and subsequent energy demand in the commercial
building sector, does not present specific rebound percentages, but the
author notes that compared with the residential sector, rebound effects
are smaller in the commercial building sector. An important reason for
this is that in contrast to residential heating and cooling, HVAC
operation adjustment in commercial buildings is driven primarily by
building managers or owners. The comfort conditions are already
established in order to satisfy the occupants, and they are unlikely to
change due to installation of higher-efficiency equipment. While it is
possible that a small degree of rebound could occur for higher-
efficiency CPBs, e.g., building managers may choose to increase the
operation time of these heating units, there is no basis to select a
specific value. Because the available information suggests that any
rebound would be small to negligible, DOE did not include a rebound
effect for this proposed rule.
---------------------------------------------------------------------------
\48\ S. Nadel (1993). The Takeback Effect: Fact or Fiction?
Conference paper: American Council for an Energy-Efficient Economy.
\49\ Eto et al. (1995). Where Did the Money Go? The Cost and
Performance of the Largest Commercial Sector DSM Programs. LBL-3820.
Lawrence Berkeley National Laboratory, Berkeley, CA.
\50\ Qui, Y. (2014). Energy Efficiency and Rebound Effects: An
Econometric Analysis of Energy Demand in the Commercial Building
Sector. Environmental and Resource Economics, 59(2): 295-335.
---------------------------------------------------------------------------
EIA includes a rebound effect for several end-uses in the
commercial sector, including heating and cooling, as well as
improvements in building shell efficiency in its AEO reports.\51\ The
DOE analysis presented here does not include either the rebound effect
for building shell efficiency or the rebound effect for equipment
efficiency as is included in the AEO, and therefore cannot definitively
assess what the impact of including the rebound effect would have on
this analysis. For example, if the building shell efficiency
improvements included in the AEO reduced heating and cooling load by 10
percent and the rebound effect on building shell efficiency was assumed
to be 10 percent, the total impact would be to reduce heating and
cooling loads by 9 percent. The DOE analysis presented here includes
only the building shell improvements from the AEO but not the rebound
effect on the building shell efficiency improvements. For illustrative
purposes, DOE estimates that a rebound effect of 10 percent on CPB
efficiency for heating improvements could reduce the energy savings by
0.04 quads (10 percent) over the analysis period. However, this ignores
that the proposed rule would have saved more than 0.39 quads if the
building shell efficiency rebound effect included in the AEO was also
included in DOE's analysis.
---------------------------------------------------------------------------
\51\ Energy Information Administration, Commercial Demand Module
of the National Energy Modeling System: Model Documentation 2013,
Washington, DC, November 2013, page 57. The building shell
efficiency improvement index in the AEO accounts for reductions in
heating and cooling load due to building code enhancements and other
improvements that could reduce the buildings need for heating and
cooling.
---------------------------------------------------------------------------
DOE requests comment and seeks data on the assumption that a
rebound effect is unlikely to occur for these commercial applications.
See section VII.E for a list of issues on which DOE seeks comment.
4. Energy Prices and Energy Price Trends
DOE derives average monthly energy prices for a number of
geographic areas in the United States using the latest data from EIA
and monthly energy price factors that it develops. The process then
assigns an appropriate energy price to each commercial building and
household in the sample, depending on its type (commercial or
residential), and its location. DOE derives 2014 annual electricity
prices from EIA Form 826 data.\52\ DOE obtains the data for natural gas
prices from EIA's Natural Gas Navigator, which includes monthly natural
gas prices by state for residential, commercial, and industrial
commercial consumers.\53\ DOE collects 2013 average commercial fuel oil
prices from EIA's State Energy Consumption, Price, and Expenditure
Estimates (SEDS) and adjusts it using CPI inflation factors to reflect
2014 prices.\54\
---------------------------------------------------------------------------
\52\ U.S. Energy Information Administration. Form EIA-826
Monthly Electric Utility Sales and Revenue Report with State
Distributions (EIA-826 Sales and Revenue Spreadsheets) (Available at
http://www.eia.gov/electricity/data/eia826/).
\53\ U.S. Energy Information Administration, Natural Gas Prices
(Available at: http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm).
\54\ Source: CPI factors derived from U.S. Department of Labor,
Bureau of Labor Statistics, Consumer Price Index (CPI) (Available
at: www.bls.gov/cpi/cpifiles/cpiai.txt).
---------------------------------------------------------------------------
To arrive at prices in future years, DOE multiplies the prices by
the forecasts of annual average price changes in AEO2015. To estimate
the trend after 2040, DOE uses the average rate of change during 2030-
2040. Appendix 8C of the NOPR TSD includes more details on energy
prices and trends.
[[Page 15872]]
5. Maintenance Costs
The maintenance cost is the routine cost incurred by the consumer
for maintaining equipment operation. The maintenance cost depends on
CPB capacity and heating medium (hot water or steam). DOE used the most
recent ``RS Means Facility Maintenance and Repair Cost Data'' to
determine labor and materials costs and maintenance frequency
associated with each maintenance task for each CPB equipment class
analyzed.\55\ Within an equipment class, DOE assumed that the
maintenance cost is the same at all non-condensing efficiency levels,
and that the maintenance cost at condensing efficiency levels is
slightly higher.
---------------------------------------------------------------------------
\55\ RS Means, 2015 Facilities Maintenance & Repair Cost Data
(Available at: http://rsmeans.com).
---------------------------------------------------------------------------
DOE requested comments regarding the frequency and typical cost of
maintenance of minimum- and high-efficiency commercial packaged
boilers. ABMA commented that the maintenance costs shown in the
analysis seem low and more along the lines of residential maintenance
costs. (ABMA, Public Meeting Transcript, No. 39 at p. 65) Similarly,
Raypak believes that DOE should not assume that there is a linear
relationship between the size of the boiler and the cost of its
components. (Raypak, No. 35 at p. 4) Additionally, Raypak commented
that the frequency and cost of maintenance, major repairs, etc.
presented in the analysis is representative of older technology
boilers, but newer technology boilers have a higher cost of service/
repair since they require a higher level of expertise from technicians
and specialized equipment. Raypak also added that, although they do not
have specific data, Raypak believes that the vast majority of
maintenance/service is performed by manufacturer factory-trained
personnel due to the specialized equipment and expertise required to
properly diagnose and repair current commercial packaged boilers.
However, Raypak noted there may be some general maintenance items such
as checking for blockages in vent/air intake, looking at burner flame,
and maintaining or adjusting water quality that may be accomplished by
on-site staff. (Raypak, No. 35 at p. 5) AHRI similarly noted that the
industry trend for boiler maintenance is toward using external
contractors who specialize in servicing advance design boilers or
boiler systems. (AHRI, No. 37 at p. 5) PHCC, on the contrary, noted
that maintenance estimates seem adequate. (PHCC, Public Meeting
Transcript, No. 39 at p. 146) PHCC also noted that hospitals, larger
apartment buildings, and other sites with competent maintenance staff
are likely to use on-site staff for general boiler maintenance but
resort to external contractors for repair work. Large boiler
installations are likely to use external contractors for maintenance
and repairs. (PHCC, Public Meeting Transcript, No. 39 at p. 147)
Two stakeholders proposed that DOE implement additional data
collection techniques. ACEEE encouraged DOE to look at international
experience/comparisons relative to maintenance, maintenance contracts,
incremental costs, and lifetime estimates, especially where it related
to condensing technology where other regions have more history of
condensing technology use. (ACEEE, Public Meeting Transcript, No. 39 at
p. 209) PVI suggested that surveying boiler service companies regarding
maintenance and frequency of repairs, as well as self-service versus
external, may help provide some answers for the analysis. (PVI, No. 39
at p. 153) DOE appreciates the recommendations made by commenters.
However, DOE considers the information it was able to collect and
examine through publically available sources to be sufficient to
perform the NOPR analyses.
With respect to adherence to a maintenance schedule on commercial
packaged boilers, Lochinvar noted that CPB manufacturers recommend
annual maintenance, but evidence supports that it is often neglected.
(Lochinvar, No. 34 at p. 4) Raypak also noted the lack of maintenance
requirements on boilers and the impact that lack of maintenance can
have on boiler lifetime. (Raypak, Public Meeting Transcript, No. 39 at
p. 208)
DOE appreciates the stakeholder comments received regarding CPB
equipment maintenance frequency and costs. DOE notes that for the NOPR,
DOE is not changing the maintenance cost calculation methodology used
in the preliminary analysis as it risks oversimplifying the maintenance
cost estimating methodology, which may result in costs that are not
reflective of the recommended preventive maintenance tasks performed in
the facilities and boiler plants, and not significantly different from
one equipment class to another.
The cost estimates used in the analysis are specific to preventive
maintenance tasks performed by the in-plant engineer/technician. DOE
notes that RS Means is a representative, well-documented, and widely
accepted data resource specifically developed for cost estimating
purposes depicting typical preventive maintenance tasks and associated
costs at different CPB capacities, which is the requirement for the
purposes of the LCC analysis. Furthermore, the version of RS Means used
for the LCC purposes specifically looked at facilities that used CPB
plants and larger commercial packaged boilers to ensure that the costs
used are appropriate.
6. Repair Costs
The repair cost is the cost to the commercial consumer for
replacing or repairing components that have failed in the commercial
packaged boiler (such as the ignition, controls, heat exchanger,
mechanical vent damper, or power vent blower). In its preliminary
analysis, DOE used the latest version of the ``RS Means Facility
Maintenance and Repair Cost Data'' to determine labor and materials
costs associated with repairing each CPB equipment class analyzed.
DOE received comments regarding repair costs for commercial
packaged boilers. AHRI commented that DOE should not assume a linear
relationship between boiler size and component costs, and both AHRI and
Raypak noted that repair costs shown in the analysis may be
representative of historical models, but newer commercial models
require more specialized equipment and technicians, resulting in an
underestimation of repair costs in the analysis for higher efficiency
equipment. (AHRI, No. 37 at p. 5; Raypak, No. 35 at p. 4) With respect
to heat exchanger repairs, Raypak notes that a replacement heat
exchanger would show up simply in replacement parts orders and a
replacement boiler would show up as a boiler shipment, but it has no
knowledge of the instances of heat exchanger replacements versus boiler
replacements in repair/replace decisions. (Raypak, No. 35 at p. 5)
Lochinvar comments that in cases where they are involved in the
decision to repair or replace a heat exchanger, about 80% of the times
the heat exchanger is replaced, and that it is consistent for
condensing and non-condensing commercial packaged boilers they
manufacture. Lochinvar has no data on repair or replacement percentages
for cases in which they are not involved in the decision-making
process. (Lochinvar, No. 34 at p. 5) Lochinvar further notes that the
type of boiler impacts whether heat exchanger failure will result in
replacement rather than repair. (Lochinvar, No. 34 at p. 4) PHCC opines
that for smaller boilers, it is likely that the entire boiler would be
replaced if there is a heat exchanger failure, but for larger boilers,
it is more likely that the heat exchanger would be
[[Page 15873]]
repaired or replaced. (PHCC, Public Meeting Transcript, No. 39 at p.
148)
DOE appreciates the comments it received regarding repair costs for
commercial packaged boilers. Regarding the comments noting an
underestimation of repair costs, DOE notes that it used ``RS Means
Facility Maintenance and Repair Cost Data'' \56\ to determine repair
costs, a well-documented and widely accepted data resource specifically
developed for cost estimating purposes. With respect to heat exchanger
repairs, DOE considered comments it received and adjusted the repair
methodology to allow for noncondensing and condensing heat exchangers
to be treated separately in the analysis to account for the impacts of
condensation on heat exchanger surfaces.
---------------------------------------------------------------------------
\56\ RS Means, 2015 Facilities Maintenance & Repair Cost Data
(Available at: http://rsmeans.com/60305.aspx).
---------------------------------------------------------------------------
In the NOPR, DOE used the latest ``RS Means Facility Maintenance
and Repair Cost Data'' to determine labor and materials costs
associated with repairing each CPB equipment class analyzed. DOE
assumes that all commercial packaged boilers have a 1-year warranty for
parts and labor and a 10-year warranty on the heat exchanger. For a
detailed discussion of the development of repair costs, see appendix 8E
of the NOPR TSD.
DOE requests comments on the representativeness of using 1-year as
warranty for parts and labor, and 10-years as warranty for the heat
exchanger.
See section VII.E for a list of issues on which DOE seeks comment.
7. Lifetime
Equipment lifetime is defined as the age at which equipment is
retired from service. DOE uses national survey data, published studies,
and projections based on manufacturer shipment data to calculate the
distribution of CPB lifetimes. DOE based equipment lifetime on a
retirement function, which was based on the use of a Weibull
probability distribution, with a resulting mean lifetime of 24.8 years.
DOE assumed that the lifetime of a commercial packaged boiler is the
same across the different equipment classes and efficiency levels. For
a detailed discussion of CPB lifetime, see appendix 8F of the NOPR TSD.
In the Framework and preliminary analysis documents, DOE sought comment
on how it characterized equipment lifetime. DOE also requested any data
or information regarding the accuracy of its 24.8-year lifetime and
whether equipment lifetime varies based on equipment class.
DOE received various comments regarding CPB lifetime. ABMA, AHRI,
and Raypak commented that the average life assumption developed by DOE
in the analysis for both condensing and non-condensing boilers is
incorrect, noting that condensing boilers have only been on the market
for about 15 years, so using an average life of 24.8 years for them in
the analysis is unwarranted. ABMA further notes that the preliminary
analysis TSD Table 8-F.2.1 shows condensing boilers listed as having
10-15 year life, but the analysis sets lifetime as 24.8 years
regardless of CPB technology. ABMA, and Raypak believe the average life
of condensing boilers to be in the neighborhood of 15 years, and
Lochinvar suggested that condensing product life should be in the range
of 19 to 20 years. (ABMA, Public Meeting Transcript, No. 39 at p. 152;
Lochinvar, No. 34 at p. 6; Raypak, No. 35 at p. 6; Raypak, Public
Meeting Transcript, No. 39 at p. 208) PHCC stated that 25 year lifetime
is high for condensing technology. (PHCC, Public Meeting Transcript,
No. 39 at p. 149) Lochinvar commented that non-condensing product
lifetime estimates are consistent with their experience, but that
lifetime calculations must not aggregate condensing and non-condensing
products for average lifetime cost calculations. (Lochinvar, No. 34 at
p. 6) ACEEE commented that the material the heat exchanger is made of
is likely to be as relevant as the condensing versus non-condensing
operation of the boiler. (ACEEE, No. 39 at p. 154) AHRI also suggested
that lifetime for condensing commercial packaged boilers be determined
differently based on their limited history. (AHRI, No. 37 at p. 6) PVI
agreed that there is insufficient historical data on condensing boilers
to confirm that their lifetime is similar to traditional boilers, but
that early evidence suggests they have shorter lives. (PVI, Public
Meeting Transcript, No. 39 at p. 151) ABMA and PVI suggested that the
life-cycle cost of a condensing boiler installation should consider
accelerated replacement of commercial packaged boilers, with ABMA
noting that calculations using this proposed lifetime is highly suspect
unless the life cycle cost of a condensing boiler installation includes
the cost of two condensing boilers, rather than one. (ABMA, No. 33 at
p. 2)
In response, DOE notes that in developing the residential Boilers
Specification Version 3.0 for the ENERGY STAR[supreg] program in 2013,
the Environmental Protection Agency (EPA) held numerous discussions
with manufacturers and technical experts to explore the concern that
condensing boilers may have a shorter lifetime. In the absence of data
showing otherwise, EPA concluded that if condensing boilers are
properly installed and maintained, the life expectancy should be
similar to noncondensing boilers.\57\
---------------------------------------------------------------------------
\57\ Stakeholder Comments on Draft 1 Version 3.0 Boilers
Specification (August 5, 2013) (Available at http://www.energystar.gov/products/spec/boilers_specification_version_3_0_pd.).
---------------------------------------------------------------------------
EPA also discussed boiler life expectancy with the Department for
Environment, Food & Rural Affairs (DEFRA) in the United Kingdom, and
stated that DEFRA has no data which contradict EPA's conclusion that
with proper maintenance, condensing and non-condensing modern boilers
have similar life expectancy.\58\ Regarding the preliminary analysis
TSD Table 8-F.2.1 showing condensing boilers listed as having 10-15
year life, DOE agrees with commenters that it is difficult to estimate
lifetime of a technology that has only been broadly available on the
market for about 15 years, and DOE believes that the values captured in
those survey results may be more representative of early experience
based on new technology or installation issues. DOE expects that, as
condensing boiler technology matures and installers become better
trained at installing and maintaining condensing boilers, lifetime of
condensing commercial packaged boilers sold and installed in 2019 and
beyond would be expected to be similar to their noncondensing
counterparts. While commenters opined on a shorter life for condensing
products, no commenters provided definitive data that illustrate a
shorter life for condensing boilers relative to their noncondensing
counterparts. For the NOPR, DOE did not apply different lifetimes for
non-condensing and condensing commercial packaged boilers. However, as
noted in the discussion of repair costs in section IV.F.6 of this
document, commenters noted the option for and higher likelihood of heat
exchanger replacements for commercial packaged boilers instead of
boiler replacement. DOE did consider the potential impact of condensate
on heat exchangers in commercial packaged boilers that operate in
condensing mode and established a higher likelihood and sooner time-to-
failure for CPB heat
[[Page 15874]]
exchangers that are exposed to such condensate.
---------------------------------------------------------------------------
\58\ Energy Efficiency Best Practice in Housing, Domestic
Condensing Boilers--`The Benefits and the Myths' (2003) (Available
at http://www.west-norfolk.gov.uk/pdf/CE52.pdf.).
---------------------------------------------------------------------------
Details on how DOE adjusted the repair costs for heat exchangers
may be found in appendix 8E of the NOPR TSD. For more details on how
DOE derived the CPB lifetime, see appendix 8F of the NOPR TSD.
8. Discount Rate
The discount rate is the rate at which future expenditures and
savings are discounted to establish their present value. DOE estimates
discount rates separately for commercial and residential end users. For
commercial end users, DOE calculates commercial discount rates as the
weighted average cost of capital (WACC), using the Capital Asset
Pricing Model (CAPM). For residential end users, DOE calculates
discount rates as the weighted average real interest rate across
consumer debt and equity holdings.
DOE derived the discount rates by estimating the cost of capital of
companies that purchase commercial packaged boilers. Damodaran Online
is a widely used source of information about company debt and equity
financing for most types of firms, and was the primary source of data
for the commercial discount rate analysis.\59\ To derive discount rates
for residential applications, DOE used publicly available data (the
Federal Reserve Board's ``Survey of Consumer Finances'') to estimate a
consumer's opportunity cost of funds related to appliance energy cost
savings and maintenance costs.\60\ More details regarding DOE's
estimates of consumer discount rates are provided in chapter 8 of the
NOPR TSD.
---------------------------------------------------------------------------
\59\ Damodaran Online, The Data Page: Cost of Capital by
Industry Sector, (2004-2013) (Available at: http://
pages.stern.nyu.edu/~adamodar/).
\60\ The Federal Reserve Board, Survey of Consumer Finances,
(1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010) (Available at:
http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html).
---------------------------------------------------------------------------
9. No-New-Standards-Case Market Efficiency Distribution
For the LCC analysis, DOE analyzes the considered efficiency levels
relative to a no-new-standards-case (i.e., the case without amended
energy efficiency standards). This analysis requires an estimate of the
distribution of equipment efficiencies in the no-new-standards-case
(i.e., what consumers would have purchased in the compliance year in
the absence of amended standards). DOE refers to this distribution of
equipment energy efficiencies as the no-new-standards-case efficiency
distribution.
In its preliminary analysis, DOE used the AHRI directory to analyze
trends in product classes and efficiency levels from 2007 to 2014 to
determine the anticipated no-new-standards-case efficiency distribution
in 2019, the assumed compliance year for amended standards. The trends
show the market moving toward higher efficiency commercial packaged
boilers, and DOE accounted for the trend in its no-new-standards-case
projection.
In the preliminary analysis, DOE requested data on current CPB
efficiency market shares (of shipments) by equipment class, and also
similar historical data. DOE also requested information on expected
trends in efficiency over the next five years.
DOE received various comments regarding the data contained in the
AHRI database and its use in the analysis. PVI commented that there is
no link between the number of listings in the AHRI directory and sales
volumes of any particular product type. (PVI, Public Meeting
Transcript, No. 39 at pp. 158-159) Raypak noted that the trend toward
condensing technologies for some product classes is evident in the
number of series of boilers now in their catalog that are condensing,
compared to 10 years ago when only one single system was available.
(Raypak, No. 35 at p. 4) AHRI similarly noted the continuing growth in
condensing boilers and improvements in overall efficiencies and offered
to provide additional data related to distribution of equipment by
efficiencies. (AHRI, Public Meeting Transcript, No. 39 at p. 158)
Relative to trends in condensing oil boilers, AHRI commented that oil
condensing products are rare and there may not be a big enough sample
to establish any trends in the technology. (AHRI, Public Meeting
Transcript, No. 39 at pp. 176-177)
DOE recognizes that the AHRI directory of commercial packaged
boilers is not an indicator of shipments in the industry, but it does
reflect the general trends taken by manufacturers to meet their
consumer's needs. Due to the lack of any other data source documenting
the historical trend for product efficiency and condensing technology,
the NOPR analysis used the AHRI directory to analyze trends in product
classes and efficiency levels from 2007 to 2015 to determine the
anticipated no-new-standards-case efficiency distribution in 2019, the
assumed compliance year for amended standards. The trends show the
market moving toward higher efficiency commercial packaged boilers, and
DOE accounted for the trend in its no-new-standards-case projection. As
it relates to condensing oil boilers, DOE observed, as a result of
incorporating 2015 AHRI directory data, that for a second year in a row
(in 2014 and 2015), the number of condensing oil boilers in the AHRI
directory was lower than in previous years. As a result, DOE adjusted
the condensing boiler trends for small and large oil commercial
packaged boilers. DOE considered alternatives to estimate sales, and
the shipments methodology has been updated to not depend on the AHRI
directory. An overview of the shipments methodology is provided in
section IV.G of this document.
Table IV.8 presents the estimated no-new-standards-case efficiency
market shares for each analyzed CPB equipment class in 2019.
Table IV.8--Estimated No-New-Standards Case Boiler Efficiency Distribution * of Analyzed Commercial Packaged Boiler Equipment Classes ** in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Efficiency SGHW (%) LGHW (%) SOHW (%) LOHW (%) SGST (%) LGST (%) SOST (%) LOST (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
77.............................................. ........... ........... ........... ........... 47 13 ........... ...........
78.............................................. ........... ........... ........... ........... 7 31 ........... ...........
79.............................................. ........... ........... ........... ........... 16 13 ........... ...........
80.............................................. 7 ........... ........... ........... 16 21 ........... ...........
81.............................................. 8 ........... ........... ........... 10 5 34 41
82.............................................. 12 17 35 ........... ........... 11 ........... ...........
83.............................................. ........... 21 24 ........... 4 ........... 51 39
84.............................................. 11 6 9 44 ........... 7 10 ...........
85.............................................. 22 16 16 ........... ........... ........... ........... 19
[[Page 15875]]
86.............................................. ........... ........... ........... 42 ........... ........... 5 ...........
87.............................................. ........... ........... 11 ........... ........... ........... ........... [dagger] 0
88.............................................. ........... ........... 3 9 ........... ........... ........... ...........
89.............................................. ........... ........... ........... 1 ........... ........... ........... ...........
90.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
91.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
92.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
93.............................................. 19 ........... ........... ........... ........... ........... ........... ...........
94.............................................. ........... 37 ........... ........... ........... ........... ........... ...........
95.............................................. 19 ........... ........... ........... ........... ........... ........... ...........
96.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
97.............................................. ........... 3 3 4 ........... ........... ........... ...........
98.............................................. ........... ........... ........... ........... ........... ........... ........... ...........
99.............................................. 3 ........... ........... ........... ........... ........... ........... ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Results may not add up to 100% due to rounding.
** SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.
[dagger] Result is zero due to rounding.
DOE calculated the LCC and PBP for all consumers as if each were to
purchase new equipment in the year that compliance with amended
standards is required. EPCA directs DOE to publish a final rule
amending the standard for the equipment covered by this NOPR not later
than 2 years after a notice of proposed rulemaking is issued. (42
U.S.C. 6313(a)(6)(C)(iii)) As discussed previously in section III.A of
this document, for purposes of its analysis, DOE used 2019 as the first
year of compliance with amended standards.
10. Payback Period Inputs
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more-efficient equipment,
compared to baseline equipment, through energy cost savings. Payback
periods are expressed in years. Payback periods that exceed the life of
the equipment mean that the increased total installed cost is not
recovered in reduced operating expenses.
The inputs to the PBP calculation are the total installed cost of
the equipment to the consumer for each efficiency level and the average
annual operating expenditures for each efficiency level. The PBP
calculation uses the same inputs as the LCC analysis, except that
discount rates are not needed.
11. 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 equipment 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. 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 amended standards would be required. The rebuttable
presumption criteria of less than 3-year payback was not achieved for
any of the equipment classes analyzed for this rulemaking. More details
on this may be found in Table V.27.
G. Shipments Analysis
In its shipments analysis, DOE developed shipment projections for
commercial packaged boilers and, in turn, calculated equipment stock
over the course of the analysis period. DOE uses the shipments
projection and the equipment stock to calculate the national impacts of
potential amended energy conservation standards on energy use, NPV, and
future manufacturer cash flows. DOE develops shipment projections based
on estimated historical shipment and an analysis of key market drivers
for each kind of equipment.
In the preliminary analysis, DOE estimated historical shipments of
commercial packaged boilers based on historical shipments of
residential boilers and percent share of equipment classes in the AHRI
model directory. During the preliminary public meeting and in written
comments in response to DOE's preliminary analysis, the stakeholders
questioned the data sources DOE used in its shipment analysis. PVI
commented that the number of listings in the AHRI model directory and
sales volumes of any particular equipment class are not correlated.
(PVI, Public Meeting Transcript, No. 39 at pp. 158-159)
DOE recognizes that the AHRI directory of commercial packaged
boilers is not an indicator of shipments in the industry and DOE
modified its analysis approach to project shipments from 2014 through
the end of the thirty year analysis period 2018-2047. DOE estimated
historical shipments in its NOPR analysis from stock estimates based on
the CBECS data series from 1979 to 2012. Since no CBECS survey was
conducted prior to 1979, DOE used the trends in historical shipment
data for residential boilers to estimate the historical shipments for
the 1960-1978 time period. For estimation of stocks of gas and oil
boilers, DOE used the data on growth of commercial building floor space
for nine building types from AEO reports, percent floor space heated by
CPB data from CBECS for these building types, and estimated saturations
of commercial packaged boilers in these building types. From these
stock estimates, DOE derived the shipments of gas-fired and oil-fired
commercial packaged boilers using separate correlations between stock
and shipment for gas and oil boilers. As noted in section IV.E.2 of
this document, to obtain individual equipment class shipments from the
aggregate values, DOE used the steam to
[[Page 15876]]
hot water and oil to gas shift trends DOE derived from the EPA database
for space heating boilers. The equipment class shipments were further
disaggregated between shipment to new construction and replacement/
switch shipments.
To project equipment class shipments for new construction, DOE
relied on building stock and floor space data obtained from the
AEO2015. DOE assumes that CPB equipment is used in both commercial and
residential multi-family dwellings. DOE estimated a total saturation
rate for each equipment class based on prior CBECS data and size
distribution of space heating boilers in an EPA database. For
estimation of saturation rates in the new construction, DOE compared
the area heated by boilers in commercial buildings for two different
nine year periods (i.e., 2000-2012 covered in CBECS 2012 and 1995-2003
covered in CBECS 2003). The new construction saturation rates were
derived from the calculated saturation rate averaged over the 1995-2003
period and adjusted for the trends in the area heated by boilers, as
well as oil to gas shift trends in CBECS 2012. The new construction
saturation rates were projected into the future considering currently
observed trends from CBECS 2012 and AEO2015 (for oil to gas shifts).
For residential multi-family units, DOE used RECS 2009 data and
considered multi-family buildings constructed in the 9 year period from
2001 to 2009 as new construction for calculating the new construction
saturation. DOE assumed that the new construction saturation trend in
multi-family buildings for the period of analysis is identical to that
for commercial buildings. DOE applied these new construction saturation
rates to new building additions in each year over the analysis period
(2018-2049), yielding shipments to new buildings. The building stock
and additions projections from the AEO2015 are shown in Table IV.9.
In addition, DOE received several comments on results of the
preliminary shipment analysis. Lochinvar commented that the flat
shipment projection from 2020 shown in the preliminary analysis is
unrealistic under the growing national economy. (Lochinvar, No.34 at p.
6) Lochinvar further commented that the rapid decline of natural draft
boilers assumed in the preliminary shipment analysis is highly
overstated and the impact of any proposed efficiency standard on
shipment of non-condensing, natural draft and steam boilers would be
insignificant under less stringent efficiency standards, but could be
significant under very stringent standards. (Lochinvar, No.34 at pp. 6
and 7) In the NOPR analysis, DOE analyzed eight equipment classes that
are no longer separated by different draft types. Consequently, DOE's
shipment projections were made on an aggregate basis including both
natural draft and mechanical draft equipment for each equipment class
examined. As to the impact of the stringency of standards on shipments
of lower efficiency boilers like natural draft and steam boilers, DOE
notes that its method of analysis takes how consumers and manufacturers
are impacted by the proposed standards into full consideration.
AHRI commented that DOE should make an effort to determine the
trend for numbers of boilers installed in new building construction in
order to improve the shipments projection. (AHRI, Public Meeting
Transcript, No. 39 at p. 168-169) In the NOPR shipment analysis, DOE
used a different methodology that takes into consideration the current
trends of usage of commercial packaged boilers for heating in
commercial buildings as evidenced in CBECS 2012. This analysis could be
refined further as more data from CBECS 2012 become available. AHRI
also indicated that it is in discussions with its members to estimate
shipments in different efficiency bins and historical shipment weighted
efficiency levels. (AHRI, Public Meeting Transcript No. 39 at p. 96)
DOE has not received this data from AHRI. ACEEE commented that it would
like to see capacity class shipment estimates. (ACEEE, No. 39 at p. 50)
DOE estimated percent share of different capacity bins across the
equipment classes as detailed in the TSD chapter 9 of this document.
Table IV.9--Building Stock Projections
----------------------------------------------------------------------------------------------------------------
Commercial building
Year Total commercial floorspace Total residential Residential
building floorspace additions building stock building additions
million sq. ft. million sq. ft. millions of units millions of units
----------------------------------------------------------------------------------------------------------------
2014........................ 81,879 1,546 114.80 1.06
2019........................ 85,888 2,077 119.41 1.67
2020........................ 86,938 2,089 120.51 1.69
2025........................ 92,037 2,027 125.82 1.70
2030........................ 96,380 1,987 131.09 1.66
2035........................ 100,920 2,302 136.04 1.62
2040........................ 106,649 2,408 140.96 1.62
2045........................ 112,186 2,651 146.22 1.73
2048........................ 115,646 2,808 149.48 1.77
----------------------------------------------------------------------------------------------------------------
Source: EIA AEO2015.
DOE seeks feedback on the assumptions used to develop historical
and projected shipments of commercial packaged boilers and the
representativeness of its estimates of projected shipments. DOE also
requests information on historical shipments of commercial packaged
boilers including shipments by equipment class for small, large, and
very large commercial packaged boilers.
See section VII.E for a list of issues on which DOE seeks comment.
Commercial consumer purchase decisions are influenced by the
purchase price and operating cost of the equipment, and therefore may
be different across standards levels. To estimate the impact of the
increase in relative price from a particular standard level on CPB
shipments, DOE assumes that a portion of affected commercial consumers
are more price-sensitive and would repair equipment purchased prior to
enactment of the standard (in 2019) rather than replace it, extending
the life of the equipment by 6 years. DOE models this impact using a
relative price elasticity approach. When the extended repaired units
fail after 6 more years, DOE assumes they will be replaced with new
ones. A detailed description of the extended repair
[[Page 15877]]
calculations is provided in chapter 9 of the NOPR TSD.
In response to the extrapolation of a residential product price
elasticity to commercial packaged boilers used in the preliminary
analyses, interested parties noted concerns regarding the application
of residential data to commercial equipment. Specifically, AHRI noted
that residential and commercial boiler consumers have a different
pricing structure and consumer relationship, and expressed concern over
the use of residential data for commercial packaged boilers. (AHRI,
Public Meeting Transcript, No. 39 at p. 169-170)
AHRI also noted that, because of the higher installation costs and
time involved, commercial boiler owners would be more likely to repair
an existing boiler than to replace it. (AHRI, No. 37 at p. 6)
Similarly, ACEEE expressed concerns regarding price sensitivity and the
application of a residential price elasticity to a commercial equipment
and how the resulting numbers will be interpreted in downstream
analyses. (ACEEE, Public Meeting Transcript, No. 39 at p. 172-173) Both
AHRI and Raypak remarked that while an incremental increase in the cost
associated with a new standard would not be expected to have a
significant effect on shipments, larger increases associated with the
cost of the standard would result in lower shipments as existing
consumers would be more likely to repair an existing boiler rather than
replace it. (AHRI, No. 37 at p. 7; Raypak, No. 35 at p. 7)
Given the AHRI and Raypak comments regarding the impact of
increased repairs on shipments, DOE determined that use of price
elasticity to model the extended repair option should be maintained for
the NOPR analysis. In response to the AHRI and ACEEE comments, DOE
revised the price elasticity from a residential product study to use
sales and price data for commercial unitary air conditioners \61\ to
more closely approximate an elasticity for commercial equipment (data
specific to commercial packaged boilers were not available). DOE notes
that it performed two sensitivity analyses--one without the use of the
price elasticity, and one in which the price elasticity was increased
ten-fold. The results of the sensitivity analyses are presented in
appendix 10D of the NOPR TSD.
---------------------------------------------------------------------------
\61\ U.S. Department of Energy, Technical Support Document:
Energy Efficiency Program for Consumer Products and Commercial and
Industrial Equipment: Distribution Transformers, Chapter 9 Shipments
Analysis (April 2013).
---------------------------------------------------------------------------
The resulting shipment projection is shown in Table IV.10.
Table IV.10--Shipments of Commercial Packaged Boiler Equipment
[Thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year SGHW CPB * LGHW CPB SOHW CPB LOHW CPB SGST CPB LGST CPB SOST CPB LOST CPB
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014............................................ 14,270 2,282 792 114 1,933 251 416 97
2019............................................ 16,907 2,707 868 119 1,854 240 399 93
2020............................................ 17,201 2,754 877 121 1,838 238 396 92
2025............................................ 18,512 2,963 910 125 1,663 216 380 88
2030............................................ 19,066 3,052 932 129 1,406 182 364 85
2035............................................ 21,025 3,365 969 133 1,135 147 349 81
2040............................................ 22,953 3,674 1,014 139 846 110 335 78
2045............................................ 24,363 3,900 1,053 144 522 68 321 75
2048............................................ 25,409 4,067 1,076 147 312 40 313 73
--------------------------------------------------------------------------------------------------------------------------------------------------------
* SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.
Because the estimated energy usage of CPB equipment differs by
commercial and residential setting, the NIA employs the same fractions
of shipments (or sales) to commercial and to residential commercial
consumers as is used in the LCC analysis. The fraction of shipments by
type of commercial consumer is shown in Table IV.11.
Table IV.11--Shipment Shares by Type of Commercial Consumer
------------------------------------------------------------------------
Residential
Equipment class Commercial (%) (%)
------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial 85 15
Packaged Boiler........................
Large Gas-Fired Hot Water Commercial 85 15
Packaged Boiler........................
Small Oil-Fired Hot Water Commercial 85 15
Packaged Boiler........................
Large Oil-Fired Hot Water Commercial 85 15
Packaged Boiler........................
Small Gas-Fired Steam Commercial 85 15
Packaged Boiler........................
Large Gas-Fired Steam Commercial 85 15
Packaged Boiler........................
Small Oil-Fired Steam Commercial 85 15
Packaged Boiler........................
Large Oil-Fired Steam Commercial 85 15
Packaged Boiler........................
------------------------------------------------------------------------
DOE requests feedback on the assumptions used to estimate the
impact of relative price increases on commercial packaged boiler
shipments due to proposed standards.
See section VII.E for a list of issues on which DOE seeks comment.
H. National Impact Analysis
The national impact analysis (NIA) analyzes the effects of a
potential energy conservation standard from a national perspective. The
NIA assesses the national energy savings (NES) and the national NPV of
total consumer costs and savings that would be expected to result from
amended standards at specific efficiency levels. The NES and NPV are
analyzed at specific efficiency levels (i.e., TSLs) for each equipment
class of CPB equipment. DOE calculates the NES and NPV based on
projections
[[Page 15878]]
of annual equipment shipments, along with the annual energy consumption
and total installed cost data from the LCC analysis. For the NOPR
analysis, DOE forecasted the energy savings, operating cost savings,
equipment costs, and NPV of commercial consumer benefits for equipment
sold from 2019 through 2048--the year in which the last standards-
compliant equipment would be shipped during the 30-year analysis
period.
To make the analysis more accessible and transparent to all
interested parties, DOE uses a computer spreadsheet model to calculate
the energy savings and the national consumer costs and savings from
each TSL.\62\ Chapter 10 and appendix 10A of the NOPR TSD explain the
models and how to use them, and interested parties can review DOE's
analyses by interacting with these spreadsheets. The models and
documentation are available on DOE's Web site.\63\ The NIA calculations
are based on the annual energy consumption and total installed cost
data from the energy use analysis and the LCC analysis. DOE forecasted
the lifetime energy savings, energy cost savings, equipment costs, and
NPV of consumer benefits for each equipment class for equipment sold
from 2019 through 2048--the year in which the last standards-compliant
equipment would be shipped during the 30-year analysis period.
---------------------------------------------------------------------------
\62\ DOE understands that MS Excel is the most widely used
spreadsheet calculation tool in the United States and there is
general familiarity with its basic features. Thus, DOE's use of MS
Excel as the basis for the spreadsheet models provides interested
parties with access to the models within a familiar context.
\63\ DOE's Web page on commercial packaged boiler equipment is
available at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/74.
---------------------------------------------------------------------------
DOE evaluated the impacts of potential new and amended standards
for commercial packaged boilers by comparing no-new-standards-case
projections with standards-case projections. The no-new-standards-case
projections characterize energy use and consumer costs for each
equipment class in the absence of new and amended energy conservation
standards. DOE compared these projections with those characterizing the
market for each equipment class if DOE were to adopt amended standards
at specific energy efficiency levels (i.e., the standards cases) for
that class. For the standards cases, DOE assumed a ``roll-up'' scenario
in which equipment at efficiency levels that do not meet the standard
level under consideration would ``roll up'' to the efficiency level
that just meets the proposed standard level, and equipment already
being purchased at efficiency levels at or above the proposed standard
level would remain unaffected.
Unlike the LCC analysis, the NES analysis does not use
distributions for inputs or outputs, but relies on national average
equipment costs and energy costs. DOE used the NES spreadsheet to
perform calculations of energy savings and NPV using the annual energy
consumption, maintenance and repair costs, and total installed cost
data from the LCC analysis. The NIA also uses projections of energy
prices and building stock and additions from the AEO2015 Reference
case. Additionally, DOE analyzed scenarios that used inputs from the
AEO2015 Low Economic Growth and High Economic Growth cases. These cases
have lower and higher energy price trends, respectively, compared to
the reference case. NIA results based on these cases are presented in
appendix 10D of the NOPR TSD.
A detailed description of the procedure to calculate NES and NPV
and inputs for this analysis are provided in chapter 10 of the NOPR
TSD. Table IV.12 summarizes the inputs and methods DOE used for the NIA
analysis.
Table IV.12--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments......................... Annual shipments from shipments
model.
First Year of Analysis Period..... 2019.
No-New-Standards Case Forecasted Efficiency distributions are
Efficiencies. forecasted based on historical
efficiency data.
Standards Case Forecasted Used a ``roll-up'' scenario.
Efficiencies.
Annual Energy Consumption per Unit Annual weighted-average values are a
function of energy use at each TSL.
Total Installed Cost per Unit..... Annual weighted-average values are a
function of cost at each TSL.
Incorporates forecast of future
product prices based on historical
data.
Annual Energy Cost per Unit....... Annual weighted-average values as a
function of the annual energy
consumption per unit, and energy
prices.
Energy Prices..................... AEO2015 forecasts (to 2040) and
extrapolation through 2110.
Energy Site-to-Source Conversion Varies yearly and is generated by
Factors. NEMS-BT.
Discount Rate..................... 3 and 7 percent real.
Present Year...................... Future expenses discounted to 2015,
when the NOPR will be published.
------------------------------------------------------------------------
1. Equipment Efficiency in the No-New-Standards Case and Standards
Cases
As described in section IV.F.9 of this document, DOE uses a no-new-
standards-case distribution of efficiency levels to project what the
CPB equipment market would look like in the absence of amended
standards. DOE applied the percentages of models within each efficiency
range to the total unit shipments for a given equipment class to
estimate the distribution of shipments for the no-new-standards case.
Then, from those market shares and projections of shipments by
equipment class, DOE extrapolated future equipment efficiency trends
both for a no-new-standards-case scenario and for 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 amended standards. The analysis
starts with the no-new-standards-case distributions wherein shipments
are assumed to be distributed across efficiency levels. When potential
standard levels above the base level are analyzed, as the name implies,
the shipments in the no-new-standards case that did not meet the
efficiency standard level being considered would roll up to meet the
amended standard level. This information also suggests that equipment
efficiencies in the no-new-standards case that were above the standard
level under consideration would not be affected.
[[Page 15879]]
The estimated efficiency trends in the no-new-standards-case and
standards cases are described in chapter 10 of the NOPR TSD.
2. National Energy Savings
For each year in the forecast period, DOE calculates the national
energy savings for each standard level by multiplying the shipments of
commercial packaged boilers by the per-unit annual energy savings.
Cumulative energy savings are the sum of the annual energy savings over
the lifetime of all equipment shipped during 2019-2048.
The inputs for determining the NES are (1) annual energy
consumption per unit, (2) shipments, (3) equipment stock, and (4) site-
to-source and full-fuel-cycle conversion factors.
DOE calculated the NES associated with 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 CPB equipment stock gradually decreases in the standards
case relative to the no-new-standards case as more-efficient CPB units
gradually replaces less-efficient units.
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 per-unit
energy reduction (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 CPB equipment for each
year of the analysis period. The analysis period begins with the
expected compliance date of amended energy conservation standards
(i.e., 2019, or 3 years after the publication of a final rule issued as
a result of this rulemaking). 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 per-unit energy reduction 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 (the source or primary energy), using
a time series of conversion factors derived from the latest 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 CPB equipment in
this rulemaking.
DOE has historically presented NES in terms of primary energy
savings. In the case of electricity use and savings, primary energy
savings includes the energy lost in the power system in the form of
losses as well as the energy input required at the electric generation
station in order to convert and deliver the energy required at the site
of consumption. DOE uses a multiplicative factor called ``site-to-
source conversion factor'' to convert site energy consumption to
primary energy consumption. In response to the recommendations of a
committee on ``Point-of-Use and Full- Fuel-Cycle Measurement Approaches
to Energy Efficiency Standards'' appointed by the National Academy of
Sciences, DOE announced its intention to use full-fuel-cycle (FFC)
measures of energy use and greenhouse gas and other emissions in the
national impact analyses and emissions analyses included in future
energy conservation standards rulemakings. 76 FR 51281 (August 18,
2011). While DOE stated in that notice that it intended to use the
Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation
(GREET) model to conduct the analysis, it also said it would review
alternative methods, including the use of EIA's NEMS. After evaluating
both models and the approaches discussed in the August 18, 2011 notice,
DOE published a statement of amended policy in the Federal Register, in
which DOE explained its determination that NEMS is a more appropriate
tool for its FFC analysis as well as its intention to use NEMS for that
purpose. 77 FR 49701 (August 17, 2012). DOE received one comment, which
was supportive of the use of NEMS for DOE's FFC analysis.\64\ The
approach used for this NOPR analysis, the site-to-source ratios, and
the FFC multipliers that were applied, are described in appendix 10B of
the NOPR TSD. NES results are presented in both primary and FFC savings
in section V.B.3 of this document.
---------------------------------------------------------------------------
\64\ Docket ID: EERE-2010-BT-NOA-0028-0048, comment by Kirk
Lundblade. Available at http://www.regulations.gov/#!docketDetail;D=EERE-2010-BT-NOA-0028.
---------------------------------------------------------------------------
3. Net Present Value of Consumer Benefit
The inputs for determining the NPV of the total costs and benefits
experienced by consumers of the considered equipment are (1) total
annual installed cost, (2) total annual savings in operating costs, and
(3) a discount factor. DOE calculates the lifetime net savings for
equipment shipped each year as the difference between total operating
cost savings and increases in total installed costs. DOE calculates
lifetime operating cost savings over the life of each commercial
packaged boiler shipped during the forecast period.
a. Total Annual Installed Cost
DOE determined the difference between the equipment costs under the
standard-level case and the no-new-standards case in order to obtain
the net equipment cost increase resulting from the higher standard
level. As noted in section IV.F.1 of this document, DOE used a constant
real price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor
decreases over time.
b. Total Annual Operating Cost Savings
DOE determined the difference between the no-new-standards-case
operating costs and the standard-level operating costs in order to
obtain the net operating cost savings from each higher efficiency
level. DOE determined the difference between the net operating cost
savings and the net equipment cost increase in order to obtain the net
savings (or expense) for each year.
c. Discount Rate
DOE discounted the annual net savings (or expenses) to 2015 for CPB
equipment bought on or after 2019 and summed the discounted values to
provide the NPV for an efficiency level.
In accordance with the OMB's guidelines on regulatory analysis,\65\
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 products 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
[[Page 15880]]
Consumer Price Index), which has averaged about 3 percent on a pre-tax
basis for the past 30 years.
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\65\ Office of Management and Budget, section E in OMB Circular
A-4 (Sept. 17, 2003) (Available at: www.whitehouse.gov/omb/circulars_a004_a-4).
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I. Consumer Subgroup Analysis
In analyzing the potential impacts of new or amended standards, DOE
evaluates impacts on identifiable groups (i.e., subgroups) that may be
disproportionately affected by a national energy conservation standard.
DOE received comments from manufacturers regarding identification of
subgroups. Lochinvar and AHRI suggested that DOE talk to mechanical
contractors, design engineers, and the Association of Facilities
Engineers to determine appropriate consumer subgroups. (Lochinvar, No.
34 at p. 7; AHRI, No. 37 at p. 7) For the NOPR analysis, DOE identified
`low-income households for residential and small businesses for
commercial sectors as subgroups and evaluated impacts using the LCC
spreadsheet model. The consumer subgroup analysis is discussed in
detail in chapter 11 of the NOPR TSD.
J. Manufacturer Impact Analysis
DOE performed an MIA to determine the financial impact of amended
energy conservation standards on manufacturers of commercial packaged
boilers and to estimate the potential impact of such standards on
employment and manufacturing capacity. The MIA has both quantitative
and qualitative aspects. The quantitative part of the MIA primarily
relies on the Government Regulatory Impact Model (GRIM), an industry
cash-flow model with inputs specific to this rulemaking. The key GRIM
inputs are industry cost structure data, shipment data, product costs,
and assumptions about markups and conversion costs. The key output is
the industry net present value (INPV). DOE used the GRIM to calculate
cash flows using standard accounting principles and to compare changes
in INPV between a no-new-standards case and various TSLs (the standards
case). The difference in INPV between the no-new-standards case and
standards cases represents the financial impact of amended energy
conservation standards on CPB manufacturers. DOE used different sets of
assumptions (markup scenarios) to represent the uncertainty surrounding
potential impacts on prices and manufacturer profitability as a result
of amended standards. These different assumptions produce a range of
INPV results. The qualitative part of the MIA addresses the proposed
standard's potential impacts on manufacturing capacity and industry
competition, as well as any differential impacts the proposed standard
may have on any particular subgroup of manufacturers. The qualitative
aspect of the analysis also addresses product characteristics, as well
as any significant market or product trends. The complete MIA is
outlined in chapter 12 of the NOPR TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared an industry characterization based on the
market and technology assessment, preliminary manufacturer interviews,
and publicly available information. As part of its profile of the
residential boilers industry, DOE also conducted a top-down cost
analysis of manufacturers in order 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 company SEC 10-K
filings,\66\ corporate annual reports, the U.S. Census Bureau's
Economic Census,\67\ and Hoover's reports \68\ to conduct this
analysis.
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\66\ U.S. Securities and Exchange Commission, Annual 10-K
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html).
\67\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Groups and Industries (2013)
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
\68\ Hoovers Inc. Company Profiles, Various Companies (Available
at: http://www.hoovers.com).
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In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of amended energy conservation
standards. In general, energy conservation standards can affect
manufacturer cash flow in three distinct ways. These include: (1)
Creating a need for increased investment; (2) raising production costs
per unit; and (3) altering revenue due to higher per-unit prices and
possible changes in sales volumes. DOE estimated industry cash flows in
the GRIM at various potential standard levels using industry financial
parameters derived in Phase 1.
In Phase 3 of the MIA, DOE conducted structured, detailed
interviews with a variety of manufacturers that represent approximately
40 percent of domestic CPB product offerings covered by this
rulemaking. During these interviews, DOE discussed engineering,
manufacturing, procurement, and financial topics to validate
assumptions used in the GRIM. DOE also solicited information about
manufacturers' views of the industry as a whole and their key concerns
regarding this rulemaking. See section IV.J.3 for a description of the
key issues manufacturers raised during the interviews.
Additionally, in Phase 3, DOE also evaluated subgroups of
manufacturers that may be disproportionately impacted by amended
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 by amended energy
conservation standards. DOE identified one subgroup (small
manufacturers) for a separate impact analysis.
To identify small businesses for this analysis, DOE applied the
small business size standards published by the Small Business
Administration (SBA) to determine whether a company is considered a
small business. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR
53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. To be
categorized as a small business under North American Industry
Classification System (NAICS) code 333414, ``Heating Equipment (except
Warm Air Furnaces) Manufacturing,'' a residential boiler manufacturer
and its affiliates may employ a maximum of 500 employees. The 500-
employee threshold includes all employees in a business's parent
company and any other subsidiaries. Based on this classification, DOE
identified 34 CPB companies that qualify as small businesses. The CPB
small manufacturer subgroup is discussed in section 0 of this document
and in chapter 12 of the NOPR TSD.
1. Government Regulatory Impact Model
DOE uses the GRIM to analyze the financial impacts of amended
energy conservation standards on the CPB industry. Standards will
potentially require additional investments, raise production costs, and
affect revenue through higher prices and, possibly, lower sales. The
GRIM is designed to take into account several factors as it calculates
a series of annual cash flows for the year standards take effect and
for several years after implementation. These factors include annual
expected revenues, costs of sales, increases in labor and assembly
expenditures, selling and general administration costs, and taxes, as
well as capital expenditures, depreciation and maintenance related to
new standards. Inputs to the GRIM include manufacturing costs,
shipments forecasts, and price forecasts developed in other analyses.
DOE also uses
[[Page 15881]]
industry financial parameters as inputs for the GRIM analysis, which it
develops by collecting and analyzing publically available industry
financial information. The GRIM spreadsheet uses the inputs to arrive
at a series of annual cash flows, beginning in 2014 (the base year of
the analysis) and continuing to 2048 (the end of the analysis period).
DOE calculated INPVs by summing the stream of annual discounted cash
flows during this period. For CPB manufacturers, DOE used a real
discount rate of 9.5 percent, which was derived from industry
financials and then modified according to feedback received during
manufacturer interviews. DOE also used the GRIM to model changes in
costs, shipments, investments, and manufacturer margins that could
result from amended energy conservation standards.
After calculating industry cash flows and INPV, DOE compared
changes in INPV between the no new standards case and each standard
level. The difference in INPV between the no new standards case and a
standards case represents the financial impact of the amended energy
conservation standard on manufacturers at a particular TSL. As
discussed previously, DOE collected this information on GRIM inputs
from a number of sources, including publically-available data and
confidential interviews with a number of manufacturers. GRIM inputs are
discussed in more detail in the next section. The GRIM results are
discussed in section V.B.2. Additional details about the GRIM, discount
rate, and other financial parameters can be found in chapter 12 of the
NOPR TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
Manufacturing a higher-efficiency product is typically more
expensive than manufacturing a baseline product due to the use of more
complex components, which are typically more costly than baseline
components. The changes in the manufacturer production cost (MPC) of
the analyzed products can affect the revenues, gross margins, and cash
flow of the industry, making these product cost data key GRIM inputs
for DOE's analysis.
In the MIA, DOE used the MPCs for each considered efficiency level
that were calculated using product pricing found in the engineering
analysis, as described in section IV.C and further detailed in chapter
5 of the NOPR TSD. In addition, DOE used information from its teardown
analysis (described in chapter 5 of the TSD) to disaggregate the MPCs
into material, labor, and overhead costs. To determine the industry
manufacturer selling price-efficiency relationship, DOE used data from
the market and technology assessment, publicly available equipment
literature and research reports, and information from manufacturers,
distributors, and contractors. Using these resources, DOE calculated
manufacturer selling prices of commercial packaged boilers for a given
fuel input rate (representative fuel input rate) for each manufacturer
at different efficiency levels spanning from the minimum allowable
standard (i.e., baseline level) to the maximum technologically feasible
efficiency level. DOE then used product markups along with the product
pricing to determine MPCs for each efficiency level. These cost
breakdowns and product markups were validated and revised with input
from manufacturers during manufacturer interviews.
Shipments Forecast
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of these values by efficiency
level. Changes in sales volumes and efficiency mix over time can
significantly affect manufacturer finances. For this analysis, the GRIM
uses the NIA's annual shipment forecasts derived from the shipments
analysis from 2015 (the base year) to 2048 (the end year of the
analysis period). The shipments model divides the shipments of
commercial packaged boilers into specific market segments. The model
starts from a historical base year and calculates retirements and
shipments by market segment for each year of the analysis period. This
approach produces an estimate of the total product stock, broken down
by age or vintage, in each year of the analysis period. In addition,
the product stock efficiency distribution is calculated for the no-new-
standards case and for each standards case for each product class. The
NIA shipments forecasts are, in part, based on a roll-up scenario. The
forecast assumes that a product in the no-new-standards case that does
not meet the standard under consideration would ``roll up'' to meet the
amended standard beginning in the compliance year of 2019. See section
IV.G of this document and chapter 9 of the NOPR TSD for additional
details.
Equipment and Capital Conversion Costs
Amended energy conservation standards would cause manufacturers to
incur one-time conversion costs to bring their production facilities
and 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 product class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
Capital conversion costs; and (2) product conversion costs. Capital
conversion costs are one-time investments in property, plant, and
equipment necessary to adapt or change existing production facilities
such that new compliant product designs can be fabricated and
assembled. Product conversion costs are one-time investments in
research, development, testing, marketing, and other non-capitalized
costs necessary to make product designs comply with amended energy
conservation standards.
To evaluate the level of capital conversion expenditures,
manufacturers would likely incur to comply with amended energy
conservation standards, DOE used manufacturer interviews to gather data
on the anticipated level of capital investment that would be required
at each efficiency level. Based on equipment listings provided by AHRI
and ABMA, DOE developed a market-share-weighted manufacturer average
capital expenditure which it then scaled up and applied to the entire
industry. DOE supplemented manufacturer comments and tailored its
analyses with information obtained during engineering analysis
described in chapter 5 of the TSD.
DOE assessed the product conversion costs at each considered
efficiency level by integrating data from quantitative and qualitative
sources. DOE considered market-share-weighted feedback regarding the
potential costs of each efficiency level from multiple manufacturers to
estimate product conversion costs (e.g., R&D expenditures,
certification costs). DOE combined this information with product
listings to estimate how much manufacturers would have to spend on
product development and product testing at each efficiency level.
Manufacturer data was aggregated to better reflect the industry as a
whole and to protect confidential information.
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 amended standards. The
conversion cost figures used in the GRIM can be found in section V.B.2
of this notice. For additional information on the estimated product and
capital conversion costs, see chapter 12 of the NOPR TSD.
[[Page 15882]]
DOE received limited information on the conversion costs for oil-
fired products in interviews. Using product listing counts, DOE scaled
the feedback on gas-fired equipment to estimate the conversion cost for
oil-fired equipment.
DOE requests additional information from manufacturers regarding
conversion costs for oil-fired products. Specifically, DOE is
interested in estimates of capital conversion costs at each TSL and the
change in manufacturing equipment associated with those costs.
See section VII.E for a list of issues on which DOE seeks comment.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
As discussed in the previous section, MSPs include direct
manufacturing production costs (i.e., labor, materials, and overhead
estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D,
and interest), along with profit. To calculate the MSPs in the GRIM,
DOE applied non-production cost markups to the MPCs estimated in the
engineering analysis for each product class and efficiency level.
Modifying these markups in the standards case yields different sets of
impacts on manufacturers. For the MIA, DOE modeled two standards-case
markup scenarios to represent the uncertainty regarding the potential
impacts on prices and profitability for manufacturers following the
implementation of amended energy conservation standards: (1) A
preservation of gross margin percentage markup scenario; and (2) a
preservation of per-unit operating profit markup scenario. These
scenarios lead to different markup values that, when applied to the
inputted MPCs, result in varying revenue and cash-flow impacts.
Under the preservation of gross margin percentage markup scenario,
DOE applied a single uniform ``gross margin percentage'' markup across
all efficiency levels, which assumes that following amended standards,
manufacturers would be able to maintain the same amount of profit as a
percentage of revenue at all efficiency levels within a product class.
As production costs increase with efficiency, this scenario implies
that the absolute dollar markup will increase as well. Based on
publicly-available financial information for manufacturers of
commercial packaged boilers, as well as comments from manufacturer
interviews, DOE assumed the average non-production cost markup--which
includes SG&A expenses, R&D expenses, interest, and profit--to be 1.41
for small gas-fired hot water, small gas-fired steam boilers, large
gas-fired hot water boilers, and large oil-fired hot water boilers;
1.40 for small oil-fired hot water boilers; 1.38 for small oil-fired
steam boilers; and 1.37 for large gas-fired and oil-fired steam
boilers. This markup scenario represents the upper bound of the CPB
industry's profitability in the standards case because manufacturers
are able to fully pass through additional costs due to standards to
consumers.
DOE decided to include the preservation of per-unit operating
profit scenario in its analysis because manufacturers stated that they
do not expect to be able to mark up the full cost of production in the
standards case, given the highly competitive nature of the CPB market.
In this scenario, manufacturer markups are set so that operating profit
one year after the compliance date of amended energy conservation
standards is the same as in the no-new-standards case on a per-unit
basis. In other words, manufacturers are not able to garner additional
operating profit from the higher production costs and the investments
that are required to comply with the amended standards; however, they
are able to maintain the same operating profit in the standards case
that was earned in the no-new-standards case. Therefore, operating
margin in percentage terms is reduced between the no-new-standards case
and standards case. DOE adjusted the manufacturer markups in the GRIM
at each TSL to yield approximately the same earnings before interest
and taxes in the standards case as in the no-new-standards case. The
preservation of per-unit operating profit markup scenario represents
the lower bound of industry profitability in the standards case. This
is because manufacturers are not able to fully pass through to
consumers the additional costs necessitated by CPB standards, as they
are able to do in the preservation of gross margin percentage markup
scenario.
2. Manufacturer Interviews
DOE interviewed manufacturers representing approximately 95 percent
of the CPB market by revenue. DOE contractors endeavor to conduct
interviews with a representative cross section of manufacturers
(including large and small manufacturers, covering all equipment
classes and product offerings). DOE contractors reached out to all the
small business manufacturers that were identified as part of the
analysis, as well as larger manufacturers that have significant market
share in the CPB market. These interviews were in addition to those DOE
conducted as part of the engineering analysis. The information gathered
during these interviews enabled DOE to tailor the GRIM to reflect the
unique financial characteristics of the CPB industry. The information
gathered during these interviews enabled DOE to tailor the GRIM to
reflect the unique financial characteristics of the CPB industry. All
interviews provided information that DOE used to evaluate the impacts
of potential amended energy conservation standards on manufacturer cash
flows, manufacturing capacities, and employment levels.
In interviews, DOE asked manufacturers to describe their major
concerns with potential standards arising from a rulemaking involving
commercial packaged boilers. Manufacturer interviews are conducted
under non-disclosure agreements (NDAs), so DOE does not document these
discussions in the same way that it does public comments in the comment
summaries and DOE's responses throughout the rest of this notice. The
following sections highlight the most significant manufacturers'
statements that helped shape DOE's understanding of potential impacts
of an amended standard on the industry. Manufacturers raised a range of
general issues for DOE to consider, including a diminished ability to
serve the replacement market, concerns that condensing boilers may not
perform as rated without heating system modifications, and concerns
about reduced product durability. Below, DOE summarizes these issues,
which were raised in manufacturer interviews, in order to obtain public
comment and related data.
a. Testing Burden
Several manufacturers expressed concern regarding the testing
burden associated with amended energy conservation standards.
Manufacturers noted that amended standards and an altered test
procedure will result in them having to retest all of their equipment,
which they pointed out is a costly and logistically challenging process
due to the large size of the equipment and the fact that a lot of
commercial packaged boilers are customized for particular customers.
Manufacturers stated that retesting all of their models would put a
strain on their lab resources and would be financially burdensome.
b. Condensing Boilers Not Appropriate for Many Commercial Applications
Several manufacturers expressed concern that they would only be
able to
[[Page 15883]]
meet certain efficiency levels with condensing technology in gas-fired
hot water equipment. They argued that this technology would not be
effective in many commercial applications. Several manufacturers
pointed out that that condensing boilers will not operate in condensing
mode in larger applications and they will not realize any efficiency
gains when buildings and heat distribution systems are not designed
around condensing technology. Manufacturers noted that it is very
difficult to sell condensing boilers in the replacement market (which,
according to manufacturers, comprises about 90% of boiler sales)
because customers would have to make expensive retrofit changes to
venting and distribution systems.
Manufacturers also pointed out that condensing boilers may not save
energy in commercial applications, even if they were to operate in
condensing mode. Several manufacturers argued that condensing equipment
requires higher pump force power and higher horsepower blower motors,
and thus they consume more electricity. They noted that even if the
boiler were operating in condensing mode, the fuel savings could be
partially offset by higher electricity use.
c. Not Many American Companies Produce Condensing Heat Exchangers
Several manufacturers expressed concern that if DOE were to mandate
efficiency levels that could only be achieved with condensing
technology for gas-fired hot water equipment, companies would likely
face high conversion costs. While many companies in the U.S. currently
produce condensing equipment, most condensing heat exchangers are
sourced from European or Asian companies. American companies would have
to decide whether to develop their own condensing heat exchanger
production capacity or assemble a baseline product around a condensing
heat exchanger. Developing condensing heat exchanger production
capacity would require large capital investments in new production
lines and new equipment to handle the different metals that are
required. Companies that are currently heavily invested in lower-
efficiency products may not be able to make these investments. The
other option would be for companies to drop their noncondensing
equipment and assemble equipment around a sourced heat exchanger. In
this scenario, companies would lose a significant piece of the value
chain.
d. Reduced Product Durability and Reliability
Several manufacturers commented that higher-efficiency condensing
boilers on the market have not demonstrated the same level of
durability and reliability as lower-efficiency products. Manufacturers
stated that condensing products require more upkeep and maintenance and
generally do not last as long as non-condensing products. Several
manufacturers pointed out that they generally incur large after-sale
costs with their condensing products because of additional warranty
claims. Maintenance calls for these boilers require more skilled
technicians and occur more frequently than they do with non-condensing
boilers.
3. Discussion of Comments
During the preliminary analysis public meeting, interested parties
commented on the assumptions and results of the preliminary analysis.
Oral and written comments addressed several topics, including concerns
regarding the impact condensing technology has on the industry.
a. Impacts on Condensing Technology
In written comments, Lochinvar expressed concern that setting a
stringent standard, specifically at condensing levels, will cause
significant impacts to the CPB industry. If a condensing level is
adopted by DOE, it is possible that natural draft boilers and steam
boilers will become obsolete in the CPB industry. To limit
significantly negative industry impacts on manufacturers and product
offerings, Lochinvar recommends that DOE does not set a standard that
requires condensing technology. (Lochinvar, No. 31 at p. 6)
Additionally, Lochinvar states that a majority of heat exchangers
for condensing technology are imported. Lochinvar believes overhead and
equipment used to produce non-condensing heat exchangers may become
obsolete if condensing technology is effectively mandated. (Lochinvar,
Public Meeting Transcript, No. 39 at p. 205)
While DOE acknowledges that a stringent standard, specifically
condensing technology, may negatively impact INPV and limit industry
product offerings, the proposed standards in this document do not
mandate condensing technology. Moreover, EPCA requires DOE to set forth
energy conservation standards that are technologically feasible and
economically justified and would result in significant additional
energy conservation, supported by clear and convincing evidence. 42
U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i). In determining whether a
standard is economically justified, DOE considers, to the greatest
extent practicable, the following factors: (1) The economic impact of
the standard on the manufacturers and on the consumers of the products
subject to such 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, or in the initial charges
for, or maintenance expenses of the covered products which are likely
to result from the imposition of the standard; (3) the total projected
amount of energy (or as applicable, water) savings likely to result
directly from the imposition of the standard; (4) any lessening of the
utility or performance of the covered products likely to result
directly from the imposition of the standard; (5) the impact of any
lessening competition, as determined in the writing by the Attorney
General, that is likely to result from the imposition of the standard;
(6) the need for national energy and water conservation; and (7) other
factors the Secretary considers relevant.
As such, DOE assesses impacts on competition, manufacturing
capacity, employment, cumulative regulatory burden and impacts on INPV
in the Manufacturer Impact Analysis, which is discussed in greater
detail in chapter 12 of the CPB NOPR TSD.
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 AEO2015, as described in section
IV.M of this document. The analysis of power sector emissions uses
marginal emissions factors that were derived from data in AEO2015, as
described in section IV.M of this document. The
[[Page 15884]]
methodology is described in chapter 13 and chapter 15 of the NOPR TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA, GHG
Emissions Factors Hub.\69\ The FFC upstream emissions are estimated
based on the methodology described in appendix 10D of the NOPR TSD. The
upstream emissions include both emissions from fuel combustion during
extraction, processing, and transportation of fuel, and ``fugitive''
emissions (direct leakage to the atmosphere) of CH4 and
CO2.
---------------------------------------------------------------------------
\69\ 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,\70\ DOE used
GWP values of 28 for CH4 and 265 for N2O.
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\70\ Intergovernmental Panel on Climate Change. Anthropogenic
and Natural Radiative Forcing. Chapter 8 in 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, Editors.
2013. Cambridge University Press: Cambridge, United Kingdom and New
York, NY, USA.
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Because the on-site operation of commercial packaged boilers
requires use of fossil fuels and results in emissions of
CO2, NOX, and SO2 at the sites where
these appliances are used, DOE also accounted for the reduction in
these site emissions and the associated upstream emissions due to
potential standards. Site emissions were estimated using emissions
intensity factors from an EPA publication.\71\
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\71\ U.S. Environmental Protection Agency, Compilation of Air
Pollutant Emission Factors, AP-42, Fifth Edition, Volume I:
Stationary Point and Area Sources (1998). Available at: http://www.epa.gov/ttn/chief/ap42/index.html).
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The AEO incorporates the projected impacts of existing air quality
regulations on emissions. AEO2015 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 DC Circuit, but it remained in effect.\72\ 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 DC
Circuit issued a decision to vacate CSAPR,\73\ and the court ordered
EPA to continue administering CAIR. On April 29, 2014, the U.S. Supreme
Court reversed the judgment of the DC Circuit and remanded the case for
further proceedings consistent with the Supreme Court's opinion.\74\ On
October 23, 2014, the DC Circuit lifted the stay of CSAPR.\75\ Pursuant
to this action, CSAPR went into effect (and CAIR ceased to be in
effect) as of January 1, 2015. On July 28, 2015, the DC Circuit issued
its opinion regarding CSAPR on remand from the Supreme Court. The court
largely upheld CSAPR, but remanded to EPA without vacateur certain
states' emissions budgets for reconsideration.\76\
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\72\ 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).
\73\ 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).
\74\ 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.
\75\ See Georgia v. EPA, Order (D. C. Cir. filed October 23,
2014) (No. 11-1302).
\76\ See EME Homer City Generation, LP v. EPA 795 F.3d 118 (D.C.
Cir. 2015).
---------------------------------------------------------------------------
EIA was not able to incorporate CSAPR into AEO2015, so DOE's
analysis used emissions factors that assume that CAIR, not CSAPR, is
the regulation in force. However, the difference between CAIR and CSAPR
is not significant 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. AEO2015
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.\77\ Therefore, DOE believes that energy conservation standards
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------
\77\ DOE notes that the Supreme Court 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 (see chapter 13 of the NOPR TSD for further
discussion). 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.
---------------------------------------------------------------------------
[[Page 15885]]
CAIR established a cap on NOX emissions in 28 eastern
states and the District of Columbia.\78\ 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 document for these states.
---------------------------------------------------------------------------
\78\ 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 AEO2015, which
incorporates the MATS.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this proposed rule, DOE considered
the estimated monetary benefits from the reduced emissions of
CO2 and NOX that are expected to result from each
of the TSLs considered. In order to make this calculation analogous to
the calculation of the NPV of consumer benefit, DOE considered the
reduced emissions expected to result over the lifetime of products
shipped in the forecast period for each TSL. This section summarizes
the basis for the monetary values used for each of these emissions and
presents the values considered in this document.
1. Social Cost of Carbon
The SCC is an estimate of the monetized damages associated with an
incremental increase in carbon emissions in a given year. It is
intended to include (but is not limited to) changes in net agricultural
productivity, human health, property damages from increased flood risk,
and the value of ecosystem services. Estimates of the SCC are provided
in dollars per metric ton of CO2. A domestic SCC value is
meant to reflect the value of damages in the United States resulting
from a unit change in CO2 emissions, while a global SCC
value is meant to reflect the value of damages worldwide.
Under section 1(b)(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
CO2 emissions, the analyst faces a number of challenges. A
recent report from the National Research Council \79\ 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.
---------------------------------------------------------------------------
\79\ National Research Council, Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use, National Academies Press:
Washington, DC (2009).
---------------------------------------------------------------------------
Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
CO2 emissions. The agency can estimate the benefits from
reduced (or costs from increased) emissions in any future year by
multiplying the change in emissions in that year by the SCC 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 CO2 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 Approaches 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
[[Page 15886]]
were used in the last assessment of the Intergovernmental Panel on
Climate Change (IPCC). Each model was given equal weight in the SCC
values that were developed.
Each model takes a slightly different approach to model how changes
in emissions result in changes in economic damages. A key objective of
the interagency process was to enable a consistent exploration of the
three models while respecting the different approaches to quantifying
damages taken by the key modelers in the field. An extensive review of
the literature was conducted to select three sets of input parameters
for these models--climate sensitivity, socio-economic and emissions
trajectories, and discount rates. A probability distribution for
climate sensitivity was specified as an input into all three models. In
addition, the interagency group used a range of scenarios for the
socio-economic parameters and a range of values for the discount rate.
All other model features were left unchanged, relying on the model
developers' best estimates and judgments.
In 2010, the interagency group selected four sets of SCC values for
use in regulatory analyses. Three sets of values are based on the
average SCC from 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 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,\80\ although preference is given to
consideration of the global benefits of reducing CO2
emissions. Table IV.13 presents the values in the 2010 interagency
group report,\81\ which is reproduced in appendix 14A of the NOPR TSD.
---------------------------------------------------------------------------
\80\ It is recognized that this caculation for domestic values
is approximate, provisional, and highly speculative. There is no a
priori reason why domestic benefits should be a constant fraction of
net global damages over time.
\81\ Interagency Working Group on Social Cost of Carbon, United
States Government, Social Cost of Carbon for Regulatory Impact
Analysis Under Executive Order 12866 (February 2010) (Available at:
http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).
Table IV.13--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------
5% 3% 2.5% 3%
Year ---------------------------------------------------------------
95th
Average Average Average 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 NOPR analysis 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).\82\
---------------------------------------------------------------------------
\82\ 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: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
---------------------------------------------------------------------------
Table IV.14 shows the updated sets of SCC estimates from the latest
interagency update in five-year increments from 2010 to 2050. Appendix
14B of the NOPR TSD provides the full set of values and a discussion of
the revisions made in 2015. The central value that emerges is the
average SCC across models at a 3-percent discount rate. However, for
purposes of capturing the uncertainties involved in regulatory impact
analysis, the interagency group emphasizes the importance of including
all four sets of SCC values.
Table IV.14--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------
5% 3% 2.5% 3%
Year ---------------------------------------------------------------
95th
Average Average Average 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
[[Page 15887]]
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 analytic 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. Although uncertainties remain, the
revised estimates used for this NOPR 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, and with
input from the public. In November 2013, OMB announced a new
opportunity for public comments on the interagency technical support
document underlying the revised SCC estimates. 78 FR 70586 (Nov. 26,
2013). In July 2015, OMB published a detailed summary and formal
response to the many comments that were received.\83\ 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.
---------------------------------------------------------------------------
\83\ Available at: https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions.
---------------------------------------------------------------------------
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions resulting from this proposed
rule, DOE used the values from the 2013 interagency report, adjusted to
2014$ using the implicit price deflator for gross domestic product
(GDP) from the Bureau of Economic Analysis. For each of the four SCC
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.
2. Social Cost of Other Air Pollutants
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. The report includes
high and low values for NOX (as PM2.5) for 2020,
2025, and 2030 discounted at 3 percent and 7 percent (see chapter 14 of
the NOPR TSD).\84\ DOE assigned values for 2021-2024 and 2026-2029
using, respectively, the values for 2020 and 2025. DOE assigned values
after 2030 using the 2030 value. DOE multiplied the emissions reduction
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 appropriate updates of the
current analysis for the final rulemaking. DOE is evaluating
appropriate monetization of avoided SO2 and Hg emissions in
energy conservation standards rulemakings. DOE has not included
monetization of those emissions in the current analysis.
---------------------------------------------------------------------------
\84\ U.S. Environmental Protection Agency, Sector-based
PM2.5 Benefit Per Ton Estimates (Available at: http://www2.epa.gov/benmap/sector-based-pm25-benefit-ton-estimates.
---------------------------------------------------------------------------
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 AEO2015. 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.
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. See chapter 15 of the NOPR TSD for
further details regarding the utility impact analysis.
N. Employment Impact Analysis
Employment impacts from new or amended energy conservation
standards include direct and indirect impacts. Direct employment
impacts are any changes in the number of employees of manufacturers of
the equipment subject
[[Page 15888]]
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, other than in the manufacturing sector being regulated, 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 equipment, 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). 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. 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 (e.g., the utility sector) to more labor
intensive sectors (e.g., the retail and service sectors). Thus, based
on the BLS data alone, DOE believes net national employment may
increase because of shifts in economic activity resulting from amended
standards.
For the standard levels considered in this document, 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). 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 NOPR analysis, DOE used ImSET only
to estimate short-term employment impacts.
For more details on the employment impact analysis, see chapter 16
of the NOPR TSD.
V. Analytical Results
The following sections address the results from DOE's analyses with
respect to potential amended energy conservation standards for the CPB
equipment that is the subject of this rulemaking. They address the TSLs
examined by DOE, the projected impacts of each of these levels if
adopted as energy conservation standards for CPB equipment, and the
standard levels that DOE is proposing in this NOPR. Additional details
regarding DOE's analyses are contained in the relevant TSD chapters
supporting this NOPR.
A. Trial Standard Levels
At the NOPR stage, DOE develops trial standard levels (TSLs) for
consideration. DOE established TSLs for this document by grouping
different efficiency levels, which are potential standard levels for
each equipment class. DOE analyzed the benefits and burdens of the TSLs
developed for this proposed rule. DOE examined five TSLs for commercial
packaged boilers.
Table V.1 and Table V.2 present the TSLs analyzed and the
corresponding efficiency levels for each equipment class. The
efficiency levels in each TSL can be characterized as follows:
TSL 5 corresponds to the max-tech efficiency level for
each equipment class.
TSL 4 is composed of the efficiency levels corresponding
to the maximum NPV at a 7% discount rate for each equipment class.
TSL 3 is composed of a mixture of condensing and non-
condensing efficiency levels.
TSL 2 and TSL 1 are each composed of a mixture of non-
condensing efficiency levels only.
A more detailed description of TSLs may be found in appendix 10C of
the TSD.
Table V.1--Trial Standard Levels for Commercial Packaged Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------------------
Equipment class 1 2 3 4 5
-------------------------------------------------------------------------------
EL EL EL EL EL
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 3 4 6 7 7
Commercial Packaged Boilers....
Large Gas-Fired Hot Water 2 3 3 5 5
Commercial Packaged Boilers....
Small Oil-Fired Hot Water 4 4 4 5 6
Commercial Packaged Boilers....
Large Oil-Fired Hot Water 1 2 2 3 4
Commercial Packaged Boilers....
Small Gas-Fired Steam Commercial 3 4 4 5 5
Packaged Boilers...............
Large Gas-Fired Steam Commercial 4 5 5 6 6
Packaged Boilers...............
Small Oil-Fired Steam Commercial 1 2 2 3 3
Packaged Boilers...............
Large Oil-Fired Steam Commercial 1 2 2 3 3
Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------
[[Page 15889]]
Table V.2--Trial Standard Levels for Commercial Packaged Boilers by Thermal Efficiency and Combustion Efficiency
----------------------------------------------------------------------------------------------------------------
Trial standard level *
-------------------------------------------------------------------------------
Equipment class 1 2 3 4 5
-------------------------------------------------------------------------------
ET EC ET EC ET EC ET EC ET EC
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 84% n/a 85% n/a 95% n/a 99% n/a 99% n/a
Commercial Packaged Boilers....
Large Gas-Fired Hot Water n/a 84% n/a 85% n/a 85% n/a 97% n/a 97%
Commercial Packaged Boilers....
Small Oil-Fired Hot Water 87% n/a 87% n/a 87% n/a 88% n/a 97% n/a
Commercial Packaged Boilers....
Large Oil-Fired Hot Water n/a 86% n/a 88% n/a 88% n/a 89% n/a 97%
Commercial Packaged Boilers....
Small Gas-Fired Steam Commercial 80% n/a 81% n/a 81% n/a 83% n/a 83% n/a
Packaged Boilers...............
Large Gas-Fired Steam Commercial 81% n/a 82% n/a 82% n/a 84% n/a 84% n/a
Packaged Boilers...............
Small Oil-Fired Steam Commercial 83% n/a 84% n/a 84% n/a 86% n/a 86% n/a
Packaged Boilers...............
Large Oil-Fired Steam Commercial 83% n/a 85% n/a 85% n/a 87% n/a 87% n/a
Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------
* ET stands for thermal efficiency, and EC stands for combustion efficiency.
B. Economic Justification and Energy Savings
As discussed in section II.A of this document, EPCA provides seven
factors to be evaluated in determining whether a more stringent
standard for commercial packaged boilers is economically justified. (42
U.S.C. 6313(a)(6)(B)(ii) and (C)(i)) The following sections generally
discuss how DOE is addressing each of those factors in this rulemaking.
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on CPB consumers by looking at
the effects standards would have on the LCC and PBP. DOE also examined
the impacts of potential standards on consumer subgroups. These
analyses are discussed below.
a. Life-Cycle Cost and Payback Period
To evaluate the net economic impact of proposed standards on CPB
consumers, DOE conducted LCC and PBP analyses for each TSL. In general,
higher-efficiency equipment would affect consumers in two ways: (1)
Annual operating expense would decrease, and (2) purchase price would
increase. LCC and PBP include total installed costs (i.e., product
price plus installation costs), and operating costs (i.e., annual
energy cost, repair costs, and maintenance costs). The LCC calculation
also uses product lifetime and a discount rate. Chapter 8 of the NOPR
TSD and section IV.F of this document discuss the detailed information
on the LCC and PBP analysis.
DOE's LCC and PBP analyses provided key outputs for each efficiency
level above the baseline for each equipment class, as reported in Table
V.3 to Table V.18. Two tables are presented for each equipment class.
The first table presents the results of the LCC analysis by efficiency
levels and TSLs and shows installed costs, first year's operating cost,
lifetime operating cost, and mean LCC, as well as simple PBP. The
second table presents the percentage of consumers who experience a net
cost, as well as the mean LCC savings for all commercial consumers.
Table V.3--Average LCC and Simple PBP Results by Efficiency Level for Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $25,571 $12,551 $218,155 $243,727 ..............
1 26,427 12,420 215,863 242,290 6.5
2 27,350 12,292 213,627 240,977 6.9
1....................................................... 3 30,302 12,046 209,326 239,627 9.4
2....................................................... 4 31,573 11,927 207,252 238,826 9.6
5 40,896 11,587 202,027 242,924 15.9
3....................................................... 6 41,637 11,371 198,263 239,901 13.6
4, 5.................................................... 7 47,145 10,969 191,355 238,500 13.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
baseline equipment.
[[Page 15890]]
Table V.4--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Gas-Fired
Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal % of
TSL efficiency commercial Average life-
(ET) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1 2 $106
2 4 318
1............................................................... 3 20 223
2............................................................... 4 23 521
5 46 -2,031
3............................................................... 6 42 302
4, 5............................................................ 7 56 1,656
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.5--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Combustion ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(EC) level Installed operating operating LCC period years
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $94,053 $49,620 $842,932 $936,985 ..............
1 99,700 49,025 832,857 932,556 9.5
1....................................................... 2 106,020 48,445 823,055 929,074 10.2
2, 3.................................................... 3 113,093 47,881 813,516 926,609 11.0
4 169,571 45,655 779,745 949,315 19.0
4, 5.................................................... 5 178,725 44,197 755,202 933,927 15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.6--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-Fired
Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Combustion % of
TSL efficiency commercial Average life-
(EC) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1 10 $924
1............................................................... 2 21 2,419
2, 3............................................................ 3 27 3,647
4 57 -13,074
4, 5............................................................ 5 56 2,062
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.7--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $27,566 $17,797 $323,016 $350,583 ..............
1 28,457 17,607 319,481 347,938 4.7
2 29,414 17,422 316,032 345,447 4.9
3 30,444 17,242 312,666 343,110 5.2
[[Page 15891]]
1, 2, 3................................................. 4 32,742 16,893 306,170 338,912 5.7
4....................................................... 5 34,666 16,724 303,036 337,701 6.6
5....................................................... 6 51,938 16,087 292,517 344,455 14.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.8--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-Fired
Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
% of
Thermal commercial Average life-
TSL efficiency consumers cycle cost
(ET) level that savings *
experience a (2014$)
net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1 8 $1,040
2 13 2,544
3 16 4,208
1, 2, 3......................................................... 4 20 7,799
4............................................................... 5 26 8,939
5............................................................... 6 56 2,333
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.9--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Combustion ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(EC) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $66,053 $101,507 $1,804,595 $1,870,649 ..............
1....................................................... 1 74,942 99,348 1,766,049 1,840,992 4.1
2, 3.................................................... 2 86,080 97,281 1,729,192 1,815,272 4.7
4....................................................... 3 92,980 96,281 1,711,365 1,804,345 5.2
5....................................................... 4 159,031 93,901 1,670,295 1,829,325 12.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.10--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
Fired Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
% of
Combustion commercial Average life-
TSL efficiency consumers cycle cost
(EC) level that savings *
experience a (2014$)
net cost
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1............................................................... 1 1 $10,108
2, 3............................................................ 2 5 30,834
4............................................................... 3 7 40,983
[[Page 15892]]
5............................................................... 4 46 17,076
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.11--Average LCC and PBP Results by Efficiency Level for Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $22,540 $12,354 $212,456 $234,996 ..............
1 23,330 12,228 210,244 233,574 6.3
2 24,183 12,106 208,090 232,274 6.6
1....................................................... 3 25,107 11,987 205,992 231,098 7.0
2, 3.................................................... 4 26,105 11,871 203,946 230,051 7.4
4, 5.................................................... 5 28,350 11,647 200,010 228,360 8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.12--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Gas-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal % of
TSL efficiency commercial Average life-
(ET) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1 10 $600
2 12 1,205
1............................................................... 3 18 1,933
2, 3............................................................ 4 26 2,782
4, 5............................................................ 5 34 4,383
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.13--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2014$)
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $82,527 $53,362 $926,128 $1,008,655 ..............
1 84,898 52,735 915,193 1,000,091 3.8
2 87,405 52,125 904,540 991,946 3.9
3 90,056 51,529 894,159 984,215 4.1
1....................................................... 4 92,859 50,949 884,039 976,898 4.3
2, 3.................................................... 5 96,563 50,383 874,171 970,734 4.7
[[Page 15893]]
4, 5.................................................... 6 103,011 49,292 855,155 958,165 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.14--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal % of
TSL efficiency commercial Average life-
(ET) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1 1 880
2 5 3,528
3 7 7,059
1............................................................... 4 12 12,255
2, 3............................................................ 5 15 16,802
4, 5............................................................ 6 19 28,295
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
Table V.15--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs 2014$
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $21,965 $20,964 $375,253 $397,218 ..............
1....................................................... 1 24,212 20,513 366,987 391,199 5.0
2, 3.................................................... 2 25,527 20,296 363,005 388,532 5.3
4, 5.................................................... 3 28,615 19,876 355,328 383,942 6.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.16--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal % of
TSL efficiency commercial Average life-
(ET) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1............................................................... 1 4 1,985
2, 3............................................................ 2 12 4,256
4, 5............................................................ 3 16 8,637
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
[[Page 15894]]
Table V.17--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs 2014$
Thermal ---------------------------------------------------------------- Simple
TSL efficiency First year's Lifetime payback
(ET) level Installed operating operating LCC period (years)
cost cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0....................................................... 0 $67,991 $99,776 $1,738,018 $1,806,009 ..............
1....................................................... 1 73,849 97,444 1,697,166 1,771,014 2.5
2, 3.................................................... 2 80,651 95,223 1,658,263 1,738,914 2.8
4, 5.................................................... 3 88,551 93,105 1,621,176 1,709,727 3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
baseline equipment.
Table V.18--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
-------------------------------
Thermal % of
TSL efficiency commercial Average life-
(ET) level consumers that cycle cost
experience a savings *
net cost (2014$)
----------------------------------------------------------------------------------------------------------------
0............................................................... 0 0 ..............
1............................................................... 1 0 13,243
2, 3............................................................ 2 1 36,128
4, 5............................................................ 3 1 65,128
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impacts of the
considered TSLs on low-income residential and small business consumers.
Given the magnitude of the installation and operating expenditures in
question for each equipment class, the LCC savings and corresponding
payback periods for low-income residential and small business consumers
are generally similar to the impacts for all consumers, with the
residential low-income subgroup showing somewhat higher than average
benefits and the small business consumers showing slightly lower
benefits when compared to the overall CPB consumer population. DOE
estimated the average LCC savings and PBP for the low-income
residential subgroup compared with average CPB consumers, as shown in
Table V.19 through Table V.26. DOE also estimated LCC savings and PBP
for small businesses, and presented the results in Table V.19 through
Table V.26. Chapter 11 of the NOPR TSD presents detailed results of the
consumer subgroup analysis.
Table V.19--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $185 $86 $106 4.2 6.9 6.5
2 549 252 318 4.4 7.2 6.9
1....................................... 3 1,126 -27 223 6.2 9.8 9.4
2....................................... 4 1,839 152 521 6.3 10.1 9.6
5 1,011 -2,933 -2,031 11.0 16.6 15.9
3....................................... 6 4,554 -960 302 9.2 14.3 13.6
4, 5.................................... 7 9,657 -532 1,656 9.0 14.3 13.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[[Page 15895]]
Table V.20--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Combustion -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(EC) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $1,634 $671 $924 7.9 9.5 9.5
1....................................... 2 4,456 1,639 2,419 8.5 10.2 10.2
2, 3.................................... 3 7,172 2,265 3,647 9.1 11.0 11.0
4 -2,683 -17,455 -13,074 17.1 19.1 19.0
4, 5.................................... 5 18,622 -5,178 2,062 13.6 15.7 15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.21--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $2,045 $562 $1,040 2.7 6.5 4.7
2 5,065 1,355 2,544 2.8 6.8 4.9
3 8,466 2,189 4,208 3.0 7.2 5.2
1, 2, 3................................. 4 16,048 3,832 7,799 3.3 7.9 5.7
4....................................... 5 18,773 4,172 8,939 4.2 8.8 6.6
5....................................... 6 22,248 -7,130 2,333 8.4 19.3 14.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.22--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Combustion -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(EC) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $16,193 $8,602 $10,108 2.9 4.3 4.1
2, 3.................................... 2 50,146 25,900 30,834 3.3 4.9 4.7
4....................................... 3 67,827 34,104 40,983 3.6 5.3 5.2
5....................................... 4 49,517 6,596 17,076 9.5 12.5 12.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.23--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $930 $503 $600 4.5 6.5 6.3
2 1,897 1,004 1,205 4.8 6.8 6.6
1....................................... 3 3,084 1,597 1,933 5.0 7.2 7.0
2, 3.................................... 4 4,556 2,277 2,782 5.3 7.6 7.4
4, 5.................................... 5 7,591 3,507 4,383 5.9 8.4 8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[[Page 15896]]
Table V.24--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 $877 $795 $880 3.6 3.8 3.8
2 3,433 3,161 3,528 3.8 3.9 3.9
3 6,930 6,308 7,059 3.9 4.1 4.1
1....................................... 4 12,169 10,892 12,255 4.1 4.3 4.3
2, 3.................................... 5 16,849 14,792 16,802 4.5 4.7 4.7
4, 5.................................... 6 28,667 24,796 28,295 4.8 5.0 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.25--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $3,135 $1,687 $1,985 3.7 5.2 5.0
2, 3.................................... 2 6,704 3,577 4,256 4.0 5.5 5.3
4, 5.................................... 3 13,943 7,123 8,637 4.5 6.3 6.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
Table V.26--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings (2014$) * Simple payback period (years)
Thermal -----------------------------------------------------------------------------------------------
TSL efficiency Residential Commercial Residential Commercial
(ET) level low-income small business All low-income small business All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................... 1 $19,961 $11,806 $13,243 1.7 2.5 2.5
2, 3.................................... 2 54,869 32,079 36,128 1.9 2.8 2.8
4, 5.................................... 3 100,020 57,562 65,128 2.1 3.1 3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
c. Rebuttable Presumption Payback
As discussed in section III.E.2 of this document, EPCA provides a
rebuttable presumption that an energy conservation standard is
economically justified if the increased purchase cost for equipment
that meets the standard is less than three times the value of the
first-year energy savings resulting from the standard. DOE calculated a
rebuttable-presumption PBP for each TSL to determine whether DOE could
presume that a standard at that level is economically justified.
DOE calculated a rebuttable presumption payback period for each TSL
using average installed cost to the commercial consumers and first year
energy savings. As a result, DOE calculated a single rebuttable-
presumption payback value, and not a distribution of PBPs, for each
TSL. Table V.27 shows the rebuttable-presumption PBPs for the
considered TSLs. The rebuttable presumption is fulfilled in those cases
where the PBP is three years or less. However, DOE routinely conducts
an economic analysis that considers the full range of impacts to the
consumer, manufacturer, Nation, and environment, as required by EPCA.
The results of that analysis serve as the basis for DOE to definitively
evaluate the economic justification for a potential standard level
(thereby supporting or rebutting the results of any three-year PBP
analysis). Section V.C of this document addresses how DOE considered
the range of impacts to select the proposed standards.
Table V.27--Rebuttable Presumption Payback Periods for Commercial Packaged Boiler Equipment Classes
----------------------------------------------------------------------------------------------------------------
Rebuttable presumption payback (years)
Equipment class -------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 8.0 8.2 11.4 11.5 11.5
Commercial Packaged Boilers....
Large Gas-Fired Hot Water 8.3 9.0 9.0 12.7 12.7
Commercial Packaged Boilers....
Small Oil-Fired Hot Water 11.2 11.2 11.2 12.9 27.4
Commercial Packaged Boilers....
Large Oil-Fired Hot Water 7.6 8.8 8.8 9.5 22.7
Commercial Packaged Boilers....
[[Page 15897]]
Small Gas-Fired Steam Commercial 6.0 6.3 6.3 7.1 7.1
Packaged Boilers...............
Large Gas-Fired Steam Commercial 3.6 3.9 3.9 4.2 4.2
Packaged Boilers...............
Small Oil-Fired Steam Commercial 9.2 9.8 9.8 11.3 11.3
Packaged Boilers...............
Large Oil-Fired Steam Commercial 4.6 5.1 5.1 5.6 5.6
Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------
2. Economic Impacts on Manufacturers
As noted above, DOE performed an MIA to estimate the impact of
amended energy conservation standards on manufacturers of commercial
packaged boilers. The following section describes the expected impacts
on manufacturers at each considered TSL. Chapter 12 of the NOPR TSD
explains the analysis in further detail.
a. Industry Cash-Flow Analysis Results
Table V.28 and Table V.29 depict the estimated financial impacts
(represented by changes in INPV) of amended energy conservation
standards on manufacturers of commercial packaged boilers, as well as
the conversion costs that DOE expects manufacturers would incur for all
product classes at each TSL. To evaluate the range of cash-flow impacts
on the CPB industry, DOE modeled two different markup scenarios using
different assumptions that correspond to the range of anticipated
market responses to amended energy conservation standards: (1) The
preservation of gross margin percentage scenario; and (2) the
preservation of per-unit operating profit scenario. Each of these
scenarios is discussed immediately below.
To assess the upper (less severe) bound of the range of potential
impacts, DOE modeled a preservation of gross margin percentage markup
scenario, in which a uniform ``gross margin percentage'' markup is
applied across all potential efficiency levels. In this scenario, DOE
assumed that a manufacturer's absolute dollar markup would increase as
production costs increase in the standards case.
To assess the lower (more severe) bound of the range of potential
impacts, DOE modeled the preservation of operating profit markup
scenario, which assumes that manufacturers would not be able to
generate greater operating profit on a per-unit basis in the standards
case as compared to the no-new-standards case. Rather, as manufacturers
make the necessary investments required to convert their facilities to
produce new standards-compliant products and incur higher costs of
goods sold, their percentage markup decreases. Operating profit does
not change in absolute dollars and decreases as a percentage of
revenue.
As noted in the MIA methodology discussion (see IV.J.1), in
addition to markup scenarios, the MPC, shipments, and conversion cost
assumptions also affect INPV results.
The results in Table V.28 and Table V.29 show potential INPV
impacts for CPB manufacturers, Table V.28 reflects the upper bound of
impacts, and Table V.29 represents the lower bound.
Each of the modeled scenarios in the analysis 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 2014 through 2048, the end of the analysis period.
To provide perspective on the short-run cash flow impact, DOE
discusses the change in 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. These figures provide an understanding of
the magnitude of the required conversion costs at each TSL relative to
the cash flow generated by the industry in the no-new-standards case.
Table V.28--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Gross Margin Percentage Markup Scenario*
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards ----------------------------------------------------------------
case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$ millions............... 180.1 173.7 167.0 157.7 145.9 146.7
Change in INPV............................. 2014$ millions............... ........... (6.4) (13.1) (22.4) (34.3) (33.4)
%............................ ........... (3.6) (7.3) (12.4) (19.0) (18.6)
Product Conversion Costs................... 2014$ millions............... ........... 10.7 18.2 19.3 20.8 21.4
Capital Conversion Costs................... 2014$ millions............... ........... 4.8 9.3 20.8 33.9 35.2
Total Conversion Costs..................... 2014$ millions............... ........... 15.5 27.5 40.1 54.7 56.6
Free Cash Flow (no-new-standards case = 2014$ millions............... 12.8 7.2 2.7 (2.8) (9.2) (9.9)
2019).
Decrease in Free Cash Flow (change from no- 2014$ millions............... ........... 5.6 10.1 15.6 22.0 22.8
new-standards case).
%............................ ........... 43.9 78.7 121.7 171.5 177.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
[[Page 15898]]
Table V.29--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new- Trial standard level
Units standards ----------------------------------------------------------------
case 1 2 3 4 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV....................................... 2014$ millions............... 180.1 166.8 156.3 116.2 56.1 51.2
Change in INPV............................. 2014$ millions............... ........... (13.4) (23.8) (64.0) (124.1) (128.9)
%............................ ........... (7.4) (13.2) (35.5) (68.9) (71.6)
Product Conversion Costs................... 2014$ millions............... ........... 10.7 18.2 19.3 20.8 21.4
Capital Conversion Costs................... 2014$ millions............... ........... 4.8 9.3 20.8 33.9 35.2
Total Conversion Costs..................... 2014$ millions............... ........... 15.5 27.5 40.1 54.7 56.6
Free Cash Flow (2018)...................... 2014$ millions............... 12.8 7.2 2.7 (2.8) (9.2) (9.9)
Decrease in Free Cash Flow (2018).......... 2014$ millions............... ........... 5.6 10.1 15.6 22.0 22.8
%............................ ........... 43.9 78.7 121.7 171.5 177.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.
TSL 1 represents EL 3 (84%) for small gas-fired hot water boilers,
EL 2 (84%) for large gas-fired hot water boilers, EL 4 (87%) for small
oil-fired hot water boilers, EL 1 (86%) for large oil-fired hot water
boilers, EL 3 (80%) for small gas-fired steam boilers, EL 4 (81%) for
large gas-fired steam boilers, EL 1 (83%) for small oil-fired steam
boilers, and EL 1 (83%) for large oil-fired steam boilers. At TSL 1,
DOE estimates impacts on INPV for CPB manufacturers to range from -7.4
percent to -3.6 percent, or a change in INPV of -$13.4 million to -$6.4
million. At this potential standard level, industry free cash flow
would be estimated to decrease by approximately 43.9 percent to $7.2
million, compared to the no-new-standards case value of $12.8 million
in 2018, the year before the compliance date. Overall, DOE expects
industry to incur product conversion costs of $10.7 million and capital
conversion costs of $4.8 million to reach this standard level.
TSL 2 sets the efficiency level at EL 4 (85%) for small gas-fired
hot water boilers, EL 3 (85%) for large gas-fired hot water boilers, EL
4 (87%) for small oil-fired hot water boilers, EL 2 (88%) for large
oil-fired hot water, EL 4 (81%) for small gas-fired steam boilers, EL 5
(82%) for large gas-fired steam boilers, EL 2 (84%) for small oil-fired
steam boilers, and EL 2 (85%) for large oil-fired steam boilers. At TSL
2, DOE estimates impacts on INPV for commercial packaged boilers
manufacturers to range from -13.2 percent to -7.3 percent, or a change
in INPV of -$23.8 million to -$13.1 million. At this potential standard
level, industry free cash flow would be estimated to decrease by
approximately 78.7 percent to $2.7 million, compared to the no-new-
standards case value of $12.8 million in 2018, the year before the
compliance date. Overall, DOE estimates manufactures would incur
product conversion costs of $18.2 million and capital conversion costs
of $9.3 million at this standard level.
TSL 3 represents EL 6 (95%) for small gas-fired hot water boilers,
EL 5 (85%) for large gas-fired hot water boilers, EL 4 (87%) for small
oil-fired hot water boilers, EL 2 (88%) for large oil-fired hot water
boilers, EL 4 (81%) for small gas-fired steam boilers, EL 5 (82%) for
large gas-fired steam boilers, EL 2 (84%) for small oil-fired steam
boilers, and EL 2 (85%) for large oil-fired steam boilers. At TSL 3,
DOE estimates impacts on INPV for CPB manufacturers to range from -35.5
percent to -12.4 percent, or a change in INPV of -$64.0 million to -
$22.4 million. At this potential standard level, industry free cash
flow would be estimated to decrease by approximately 121.7 percent in
2018, the year before compliance to -$2.8 million compared to the no-
new-standards case value of $12.8 million. DOE estimates manufactures
would incur product conversion costs of $19.3 million and capital
conversion costs of 20.8 million to reach this standard level.
TSL 4 represents EL 7 (99%) for small gas-fired hot water boilers,
EL 5 (97%) for large gas-fired hot water boilers, EL 5 (88%) for small
oil-fired hot water boilers, EL 3 (89%) for large oil-fired hot water
boilers, EL 5 (83%) for small gas-fired steam boilers, EL 6 (84%) for
large gas-fired steam boilers, EL 3 (86%) for small oil-fired steam
boilers, and EL 3 (87%) for large oil-fired steam boilers. At TSL 4,
DOE estimates impacts on INPV for CPB manufacturers to range from -68.9
percent to -19.0 percent, or a change in INPV of -$124.1 million to -
$34.3 million. At this potential standard level, industry free cash
flow would be estimated to decrease by approximately 171.5 percent in
the year before compliance (2018) to -$9.2 million relative to the no-
new-standards case value of $12.8 million. DOE estimates that
manufacturers would incur product conversion costs of $20.8 million and
capital conversion costs of $33.9 million to reach this standard level.
TSL 5 represents EL 7 (99%) for small gas-fired hot water boilers,
EL 5 (97%) for large gas-fired hot water boilers, EL 6 (97%) for small
oil-fired hot water boilers, EL 4 (97%) for large oil-fired hot water
boilers, EL 5 (83%) for small gas-fired steam boilers, EL 6 (84%) for
large gas-fired steam boilers, EL 3 (86%) for small oil-fired steam
boilers, and EL 3 (87%) for large oil-fired steam boilers. TSL 5
represents max-tech for all product classes. At TSL 5, DOE estimates
impacts on INPV for CPB manufacturers to range from -71.6 percent to -
18.6 percent, or a change in INPV of -$128.9 million to -$33.4 million.
At this potential standard level, industry free cash flow would be
estimated to decrease by approximately 177.4 percent in the year before
compliance (2018) to -$9.9 million relative to the no-new-standards
case value of $12.8 million. DOE estimates manufacturers would incur
product conversion costs of $21.4 million and capital conversion costs
of $35.2 million to reach this standard level.
b. Impacts on Direct Employment
To quantitatively assess the impacts of energy conservation
standards on direct employment in the CPB 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 in 2019. DOE used statistical
data from the U.S. Census Bureau's 2013 Annual Survey of Manufacturers
(ASM) \85\, the results of the engineering analysis, and interviews
with manufacturers to determine the inputs necessary to calculate
industry-
[[Page 15899]]
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.
---------------------------------------------------------------------------
\85\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Groups and Industries (2013)
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
---------------------------------------------------------------------------
The total labor expenditures in the GRIM are converted to domestic
production employment levels by dividing production labor expenditures
by the annual payment per production worker (production worker hours
times the labor rate found in the U.S. Census Bureau's 2013 ASM). The
estimates of production workers in this section cover workers,
including line-supervisors who are 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. The total direct employment impacts calculated in the
GRIM are the sum of the changes in the number of production workers
resulting from the amended energy conservation standards for commercial
packaged boilers, as compared to the no-new-standards case. In general,
more-efficient commercial packaged boilers are more complex and more
labor intensive and require specialized knowledge about control
systems, electronics, and the different metals needed for the heat
exchanger. Per-unit labor requirements and production time requirements
increase with higher energy conservation standards. As a result, the
total labor calculations described in this paragraph (which are
generated by the GRIM) are considered an upper bound to direct
employment forecasts.
DOE estimates that in the absence of amended energy conservation
standards, there would be 464 domestic production workers in the CPB
industry in 2019, the year of compliance. DOE estimates that 80 percent
of commercial packaged boilers sold in the United States are
manufactured domestically. Table V.30 shows the range of the impacts of
potential amended energy conservation standards on U.S. production
workers of commercial packaged boilers.
Table V.30--Potential Changes in the Total Number of Commercial Packaged Boilers Production Workers in 2019
----------------------------------------------------------------------------------------------------------------
No-new- Trial standard level\*\
standards ----------------------------------------------------------------
case 1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Total Number of Domestic 464 371 292 232 130 32
Production Workers in 2019 to to to to to
(without changes in production 495 516 522 608 629
locations).......................
Potential Changes in Domestic ........... (93) (172) (232) to (334) (431)
Production Workers in 2019....... to to 58 to to
31 52 144 165
----------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.
At the upper end of the range, all examined TSLs show positive
impacts on domestic employment levels. Producing more-efficient
commercial packaged boilers tends to require more labor, and DOE
estimates that if CPB manufacturers chose to keep their current
production in the U.S., domestic employment could increase at each TSL.
In interviews, some manufacturers who produce high-efficiency boiler
products stated that a standard that went to condensing levels could
cause them to hire more employees to increase their production
capacity.
To establish a lower bound end of production worker employment, DOE
assumes no manufacturer chooses to invest in redesign of products that
do not meet the proposed standard. Production worker employment drops
in proportion with the percentage of products which are retired. Since
this is a lower bound, DOE does not account for additional production
labor needed for higher efficiency products. Several manufacturers
expressed that they could lose a significant number of employees at TSL
3, TSL 4 and TSL 5, due to the fact that these TSLs contain condensing
efficiency levels for the gas-fired hot water boiler product classes
and oil-fired hot water boiler product classes. These manufacturers
have employees who work on production lines that produce cast iron
sections and carbon steel or copper heat exchangers for lower to mid-
efficiency products. If amended energy conservation standards were to
require condensing efficiency levels, these employees would no longer
be needed for that function, and manufacturers would have to decide
whether to develop their own condensing heat exchanger production,
source heat exchangers from Asia or Europe and assemble higher-
efficiency products, or leave the market entirely.
DOE notes that the 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 NOPR TSD.
c. Impacts on Manufacturing Capacity
Most CPB manufacturers stated that their current production is only
running at 50-percent to 75-percent capacity and that any standard that
does not propose efficiency levels where manufacturers would use
condensing technology for hot water boilers would not have a large
effect on capacity. The impacts of a potential condensing standard on
manufacturer capacity are difficult to quantify. Some manufacturers who
are already making condensing products with a sourced heat exchanger
said they would likely be able to increase production using the
equipment they already have by utilizing a second shift. Others said a
condensing standard would idle a large portion of their business,
causing stranded assets and decreased capacity. These manufacturers
would have to determine how to best increase their condensing boiler
production capacity. DOE believes that some larger domestic
manufacturers may choose to add production capacity for a condensing
heat exchanger production line.
Manufacturers stated that in a scenario where a potential standard
would require efficiency levels at which manufacturers would use
condensing
[[Page 15900]]
technology, there is concern about the level of technical resources
required to redesign and test all products. The engineering analysis
shows that increasingly complex components and control strategies are
required as standard levels increase. Manufacturers commented in
interviews that the industry would need to add electrical engineering
and control systems engineering talent beyond current staffing to meet
the redesign requirements of higher TSLs. Additional training might be
needed for manufacturing engineers, laboratory technicians, and service
personnel if condensing products were broadly adopted. However, because
TSL 2 (the proposed level) would not require condensing standards, DOE
does not expect manufacturers to face long-term capacity constraints
due to the standard levels proposed in this notice.
d. 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 CPB industry, DOE identified and evaluated the impact of
amended energy conservation standards on one subgroup--small
manufacturers. The SBA defines a ``small business'' as having 500
employees or less for NAICS 333414, ``Heating Equipment (except Warm
Air Furnaces) Manufacturing.'' Based on this definition, DOE identified
34 manufacturers in the CPB industry that qualify as small businesses.
For a discussion of the impacts on the small manufacturer subgroup, see
the regulatory flexibility analysis in section 0 of this document and
chapter 12 of the NOPR TSD.
e. 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
equipment efficiency.
For the cumulative regulatory burden analysis, DOE looks at other
regulations that could affect CPB manufacturers that will take effect
approximately three years before or after the 2019 compliance date of
amended energy conservation standards for these products. In
interviews, manufacturers cited Federal regulations on equipment other
than commercial packaged boilers that contribute to their cumulative
regulatory burden. The compliance years and expected industry
conversion costs of relevant amended energy conservation standards are
indicated in Table V.31. Included in the table are Federal regulations
that have compliance dates beyond the six year range of DOE's analysis.
Table V.31--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Commercial Packaged Boilers
Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Comm. Air Res. Central
Conditioners/ Comm. Warm Res. Comm. Water Res. Res. Air Res. Water Res. Pool
Regulation * Heat Pumps Air Furnace Heaters Boilers Furnaces Conditioners/ Heaters Heaters
(Air-Cooled) Furnaces Fans Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Approximate Compliance Date.. 2018 2018 2019 2019 2020 2021 2021 2021 2021
Industry Conversion Costs 226.4 ** 19.9 ** 40.6 TBD 4.3 ........... .............. ........... ...........
($M)........................
Ace Heating Solutions LLC.... .............. ........... ........... x ........... ........... .............. ........... ...........
ACV International NV .............. ........... ........... x x ........... .............. x ...........
(Triangle Tube/Phase III
Co.)........................
AESYS Technologies, LLC......
AO Smith (Lochinvar)......... .............. ........... ........... x x ........... .............. x x
Axeman-Anderson.............. .............. ........... ........... ........... x ........... .............. x ...........
Bradford White (Laars Heating .............. ........... ........... x x ........... .............. x ...........
Systems)....................
Burnham Holdings............. .............. x x x x x x x ...........
Camus Hydronics.............. .............. ........... ........... x x ........... .............. x ...........
Dennison Holdings Ltd (NY .............. ........... ........... ........... x ........... .............. ........... ...........
Thermal)....................
ECR International............ .............. ........... x x x x x x ...........
E-Z Rect Manufacturing .............. ........... ........... ........... x ........... .............. ........... ...........
(Allied Engineering Company)
Fulton Heating Solutions.....
Gasmaster Industries......... .............. ........... ........... x ........... ........... .............. ........... ...........
Hamilton Engineering......... .............. ........... ........... x x ........... .............. ........... ...........
Harbour Group Industries
(Cleaver-Brooks)............
Harsco Industrial, Patterson-
Kelley......................
HTP, Inc..................... .............. ........... ........... x x ........... .............. ........... ...........
Hurst Boiler & Welding
Company.....................
IBC Technologies, Inc........ .............. ........... ........... ........... x ........... .............. ........... ...........
Lanair Holdings, LLC (Clean .............. ........... ........... ........... x ........... .............. x ...........
Burn, LLC)..................
Mestek....................... .............. ........... ........... ........... x ........... x x ...........
National Combustion Co, Inc.. .............. ........... ........... x ........... ........... .............. ........... ...........
Paloma Co, Ltd (Raypak, Inc). x x x x ........... x x x x
Parker Boiler Company........ .............. ........... ........... x ........... ........... .............. ........... ...........
Peerless Boilers (PB Heat .............. ........... ........... ........... x ........... .............. x ...........
LLC)........................
Rite Engineering &
Manufacturing Corp (Rite
Boiler).....................
Robert Bosch (Bosch .............. ........... ........... x x ........... .............. ........... ...........
Thermotechnology Corp)......
SIME (SIME North America).... .............. ........... ........... ........... x ........... .............. x ...........
Slant/Fin Corporation........ .............. ........... ........... ........... x ........... .............. x ...........
SPX.......................... .............. ........... ........... ........... x ........... .............. x ...........
Stichting Aandelen Remeha .............. ........... ........... ........... x ........... .............. ........... ...........
(Baxi S.P.A.)...............
Superior Holdings, Inc.......
Tennessee Valley Ventures LP
(Precision Boiler)..........
Unilux Advanced Manufacturing
Vari Corp.................... .............. ........... ........... ........... x ........... .............. x ...........
Watts Water Technologies, Inc .............. ........... ........... x ........... ........... .............. ........... ...........
(AERCO International, Inc)..
Williams & Davis Boilers.....
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The final rule for this energy conversation standard has not been published. The compliance date and analysis of conversion costs have not been
finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the NOPR.)
[[Page 15901]]
In addition to Federal energy conservation standards, DOE
identified other regulatory burdens that would affect manufacturers of
commercial packaged boilers:
DOE Certification, Compliance, and Enforcement (CC&E) Rule
Any amended standard that DOE establishes would also impose
accompanying CC&E requirements for manufacturers of commercial packaged
boilers. DOE conducted a rulemaking to expand AEDM coverage to
commercial HVAC, including commercial packaged boilers, and issued a
final rule on December 31, 2013. (78 FR 79579) An AEDM is a computer
modeling or mathematical tool that predicts the performance of non-
tested basic models. In the final rule, DOE is allowing manufacturers
of commercial packaged boilers to rate basic models using AEDMs,
reducing the need for sample units and reducing burden on
manufacturers. The final rule establishes revised verification
tolerances CPB manufacturers. More information can be found at http://www1.eere.energy.gov/buildings/appliance_standards/implement_cert_and_enforce.html.
3. National Impact Analysis
a. Significance of Energy Savings
For each TSL, DOE projected energy savings for commercial packaged
boilers purchased in the 30-year period that begins in the year of
anticipated compliance with amended standards (2019-2048). 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. Table V.32 presents the estimated primary
energy savings for each considered TSL, and Table V.33 presents the
estimated FFC energy savings for each TSL. Table V.34 shows cumulative
primary national energy savings by TSL as a percentage of the no-new-
standards-case primary energy usage. The approach for estimating
national energy savings is further described in section IV.H of this
document.
Table V.32--Cumulative National Primary Energy Savings for Commercial Packaged Boilers Purchased in 2019-2048
[Quads]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.138 0.199 0.708 1.332 1.332
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.043 0.075 0.075 0.617 0.617
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.019 0.019 0.019 0.023 0.043
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.004 0.012 0.012 0.017 0.029
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.009 0.018 0.018 0.038 0.038
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.009 0.014 0.014 0.026 0.026
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.002 0.004 0.004 0.010 0.010
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.003 0.008 0.008 0.014 0.014
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.226 0.349 0.859 2.077 2.108
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
Table V.33--Cumulative National Full-Fuel-Cycle Energy Savings for Commercial Packaged Boilers Purchased in 2019-
2048
[Quads]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.155 0.223 0.797 1.497 1.497
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.049 0.085 0.085 0.693 0.693
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.022 0.022 0.022 0.027 0.050
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.004 0.015 0.015 0.020 0.033
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.010 0.020 0.020 0.042 0.042
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.010 0.016 0.016 0.029 0.029
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.002 0.005 0.005 0.011 0.011
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.003 0.009 0.009 0.017 0.017
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.255 0.394 0.967 2.336 2.373
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
[[Page 15902]]
Table V.34--Cumulative Primary National Energy Savings by TSL as a Percentage of Cumulative No-New-Standards-
Case Energy Usage of Commercial Packaged Boilers Purchased in 2019-2048
----------------------------------------------------------------------------------------------------------------
No-new- TSL savings as percent of no-new-standards-case usage *
standards- ----------------------------------------------------------------
Equipment class case energy
usage TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
quads
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water 21.053 0.7 0.9 3.4 6.3 6.3
Commercial Packaged Boilers......
Large Gas-Fired Hot Water 15.097 0.3 0.5 0.5 4.1 4.1
Commercial Packaged Boilers......
Small Oil-Fired Hot Water 0.807 2.3 2.3 2.3 2.9 5.4
Commercial Packaged Boilers......
Large Oil-Fired Hot Water 0.782 0.5 1.6 1.6 2.2 3.7
Commercial Packaged Boilers......
Small Gas-Fired Steam Commercial 1.633 0.5 1.1 1.1 2.3 2.3
Packaged Boilers.................
Large Gas-Fired Steam Commercial 1.035 0.8 1.3 1.3 2.5 2.5
Packaged Boilers.................
Small Oil-Fired Steam Commercial 0.453 0.4 1.0 1.0 2.2 2.2
Packaged Boilers.................
Large Oil-Fired Steam Commercial 0.551 0.5 1.4 1.4 2.6 2.6
Packaged Boilers.................
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Total......................... 41.411 0.5 0.8 2.1 5.0 5.1
----------------------------------------------------------------------------------------------------------------
* Components may not sum to total due to rounding.
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.\86\ 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 9 years rather than 30 years of equipment
shipments. The choice of a 9-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.\87\
The review timeframe established in EPCA is generally not synchronized
with the equipment lifetime, equipment manufacturing cycles, or other
factors specific to commercial packaged boilers. Thus, such results are
presented for informational purposes only and are not indicative of any
change in DOE's analytical methodology. The estimated national primary
and full-fuel-cycle energy savings results based on a nine-year
analytical period are presented in Table V.35 and Table V.36,
respectively. The impacts are counted over the lifetime of equipment
purchased in 2019-2027.
---------------------------------------------------------------------------
\86\ U.S. Office of Management and Budget, ``Circular A-4:
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
\87\ EPCA requires DOE to review its standards at least once
every 6 years, and requires, for certain equipment, a 3-year period
after any new standard is promulgated before compliance is required,
except that in no case may any new standards be required within 6
years of the compliance date of the previous standards. (42 U.S.C.
6313(a)(6)(C)) While adding a 6-year review to the 3-year compliance
period adds up to 9 years, DOE notes that it may undertake reviews
at any time within the 6-year period and that the 3-year compliance
date may yield to the 6-year backstop. A 9-year analysis period may
not be appropriate given the variability that occurs in the timing
of standards reviews and the fact that for some commercial
equipment, the compliance period is 5 years rather than 3 years.
Table V.35--Cumulative National Primary Energy Savings for Commercial Packaged Boiler Equipment Purchased in
2019-2027
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
quads
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Small Gas-Fired Hot Water Commercial Packaged 0.045 0.065 0.223 0.392 0.392
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.022 0.038 0.038 0.226 0.226
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.005 0.005 0.005 0.007 0.013
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.001 0.003 0.003 0.005 0.008
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.005 0.009 0.009 0.018 0.018
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.004 0.006 0.006 0.012 0.012
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.001 0.001 0.001 0.003 0.003
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.001 0.003 0.003 0.005 0.005
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.084 0.131 0.289 0.667 0.676
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
[[Page 15903]]
Table V.36--Cumulative Full-Fuel-Cycle National Energy Savings for Commercial Packaged Boiler Equipment
Purchased in 2019-2027
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
quads
----------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.050 0.073 0.251 0.441 0.441
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.025 0.043 0.043 0.254 0.254
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.006 0.006 0.006 0.008 0.015
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.001 0.004 0.004 0.006 0.010
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.005 0.010 0.010 0.020 0.020
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.005 0.007 0.007 0.013 0.013
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.001 0.002 0.002 0.004 0.004
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.001 0.003 0.003 0.005 0.005
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.094 0.148 0.326 0.750 0.761
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, 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 commercial
packaged boilers. In accordance with OMB's guidelines on regulatory
analysis,\88\ DOE calculated the 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, and reflects the returns on real estate and small business
capital as well as corporate capital. This discount rate approximates
the opportunity cost of capital in the private sector (OMB analysis has
found the average rate of return on capital to be near this rate). The
3-percent rate reflects 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. It can be
approximated by the real rate of return on long-term government debt
(i.e., yield on United States Treasury notes), which has averaged about
3 percent for the past 30 years.
---------------------------------------------------------------------------
\88\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at:
www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------
Table V.37 and Table V.38 show the consumer NPV results at 3-
percent and 7-percent discount rates respectively for each TSL
considered for commercial packaged boilers covered in this rulemaking.
In each case, the impacts cover the lifetime of equipment purchased in
2019-2048.
Table V.37--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 3-Percent
Discount Rate for Equipment Purchased in 2019-2048
[Billion 2014$]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.463 0.665 1.570 3.187 3.187
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.129 0.208 0.208 1.446 1.446
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.278 0.278 0.278 0.337 0.372
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.063 0.199 0.199 0.271 0.331
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.038 0.074 0.074 0.145 0.145
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.039 0.060 0.060 0.110 0.110
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.032 0.070 0.070 0.148 0.148
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.048 0.134 0.134 0.244 0.244
Boilers.......................................
----------------------------------------------------------------
Total...................................... 1.090 1.687 2.593 5.888 5.982
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
Table V.38--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 7-Percent
Discount Rate for Equipment Purchased in 2019-2048
[Billion 2014$]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.092 0.132 0.052 0.209 0.209
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.027 0.036 0.036 0.089 0.089
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.080 0.080 0.080 0.093 0.040
Boilers.......................................
[[Page 15904]]
Large Oil-Fired Hot Water Commercial Packaged 0.019 0.059 0.059 0.080 0.067
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.012 0.022 0.022 0.038 0.038
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.013 0.020 0.020 0.035 0.035
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.010 0.021 0.021 0.044 0.044
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.016 0.044 0.044 0.079 0.079
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.269 0.414 0.334 0.668 0.603
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
The NPV results based on the aforementioned nine-year analytical
period are presented in Table V.39 and Table V.40. The impacts are
counted over the lifetime of commercial packaged boilers purchased in
2019-2027. As mentioned previously, this information is presented for
informational purposes only and is not indicative of any change in
DOE's analytical methodology or decision criteria.
Table V.39--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 3-Percent
Discount Rate for Equipment Purchased in 2019-2027
[Billion 2014$]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.153 0.220 0.417 0.829 0.829
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.066 0.105 0.105 0.375 0.375
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.082 0.082 0.082 0.099 0.096
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.018 0.057 0.057 0.078 0.089
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.022 0.038 0.038 0.071 0.071
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.020 0.029 0.029 0.053 0.053
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.011 0.024 0.024 0.050 0.050
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.017 0.046 0.046 0.084 0.084
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.389 0.602 0.799 1.639 1.647
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
Table V.40--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 7-Percent
Discount Rate for Equipment Purchased in 2019-2027
[Billion 2014$]
----------------------------------------------------------------------------------------------------------------
Trial standard level *
Equipment class ----------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 0.038 0.054 -0.044 -0.020 -0.020
Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged 0.015 0.020 0.020 -0.058 -0.058
Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged 0.032 0.032 0.032 0.038 0.006
Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged 0.008 0.024 0.024 0.032 0.023
Boilers.......................................
Small Gas-Fired Steam Commercial Packaged 0.008 0.014 0.014 0.023 0.023
Boilers.......................................
Large Gas-Fired Steam Commercial Packaged 0.008 0.012 0.012 0.021 0.021
Boilers.......................................
Small Oil-Fired Steam Commercial Packaged 0.005 0.010 0.010 0.020 0.020
Boilers.......................................
Large Oil-Fired Steam Commercial Packaged 0.007 0.021 0.021 0.037 0.037
Boilers.......................................
----------------------------------------------------------------
Total...................................... 0.122 0.186 0.089 0.093 0.052
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.
c. Indirect Impacts on Employment
DOE expects energy conservation standards for commercial packaged
boilers to reduce energy costs for equipment owners, and the resulting
net savings to be 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 of this document, DOE used an
input/output model of the U.S. economy to estimate indirect employment
impacts of the TSLs that DOE considered in this rulemaking. DOE
understands that there are uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Therefore, DOE generated results for near-term time frames
(2019-
[[Page 15905]]
2025), where these uncertainties are reduced.
The results suggest that the proposed standards are likely to have
negligible impact on the net demand for labor in the economy. The net
change in jobs is so small that it would be imperceptible in national
labor statistics and might be offset by other, unanticipated effects on
employment. Chapter 16 of the NOPR TSD presents detailed results.
4. Impact on Utility or Performance
DOE has tentatively concluded that the standards it is proposing in
this document would not lessen the utility or performance of commercial
packaged boilers.
5. Impact of Any Lessening of Competition
DOE considers any lessening of competition that is likely to result
from amended 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 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 (C)(i))
To assist the Attorney General in making such determination, DOE
has provided DOJ with copies of this document and the TSD for review.
DOE will consider DOJ's comments on the proposed rule in preparing the
final rule, and DOE will publish and respond to DOJ's comments in that
document.
6. Need of the Nation to Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Reduced electricity
demand due to energy conservation standards is also likely to reduce
the cost of maintaining the reliability of the electricity system,
particularly during peak-load periods. As a measure of this reduced
demand, chapter 15 in the NOPR TSD presents the estimated reduction in
generating capacity, relative to the no-new-standards case, for the
TSLs that DOE considered in this rulemaking.
Potential energy savings from the proposed amended standards for
the considered CPB equipment classes could also produce environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases. Table V.41 provides DOE's estimate of cumulative
emissions reductions expected to result from the TSLs considered in
this rulemaking. The table includes both power sector emissions and
upstream emissions. The upstream emissions were calculated using the
multipliers discussed in section IV.K of this document. DOE reports
annual CO2, NOX, and Hg emissions reductions for
each TSL in chapter 13 of the NOPR TSD.
Table V.41--Cumulative Emissions Reduction for Potential Standards of Commercial Packaged Boilers Shipped in
2019-2048
----------------------------------------------------------------------------------------------------------------
TSL
----------------------------------------------------------------
1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 12.66 19.61 46.61 111.89 114.33
NOX (thousand tons)............................ 74.66 118.07 156.81 294.40 366.68
Hg (tons)...................................... 0.0002 0.0002 (0.002) (0.002) (0.002)
N2O (thousand tons)............................ 0.07 0.11 0.15 0.32 0.37
CH4 (thousand tons)............................ 0.29 0.45 0.95 2.34 2.41
SO2 (thousand tons)............................ 1.24 1.96 1.49 2.87 4.18
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 1.84 2.85 6.84 16.28 16.66
NOX (thousand tons)............................ 28.43 43.99 108.03 258.23 263.07
Hg (tons)...................................... 0.00003 0.0001 0.00003 0.0001 0.0001
N2O (thousand tons)............................ 0.01 0.01 0.02 0.03 0.04
CH4 (thousand tons)............................ 150.66 232.21 616.94 1,502.56 1,507.48
SO2 (thousand tons)............................ 0.08 0.13 0.14 0.25 0.34
----------------------------------------------------------------------------------------------------------------
Total Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...................... 14.50 22.46 53.45 128.17 130.99
NOX (thousand tons)............................ 103.09 162.06 264.84 552.63 629.75
Hg (tons)...................................... 0.0002 0.0003 (0.002) (0.002) (0.002)
N2O (thousand tons)............................ 0.07 0.12 0.17 0.36 0.41
N2O (thousand tons CO2eq) *.................... 19.42 30.55 44.39 94.37 109.42
CH4 (thousand tons)............................ 150.95 232.66 617.89 1,504.90 1,509.89
CH4 (thousand tons CO 2eq) *................... 4,226.55 6,514.58 17,300.87 42,137.12 42,276.97
SO2 (thousand tons)............................ 1.32 2.10 1.63 3.12 4.53
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
Note: Parentheses indicate negative values.
As part of the analysis for this NOPR, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX estimated for each of the TSLs considered for
commercial packaged boilers. As discussed in section IV.L of this
document, 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. The four SCC values for
CO2 emissions reductions in 2015, expressed in 2014$, are
$12.2 per metric ton (the average value from a distribution that uses a
5-percent discount rate), $40.0 per metric ton (the average value from
a distribution that uses a 3-percent
[[Page 15906]]
discount rate), $62.3 per metric ton (the average value from a
distribution that uses a 2.5-percent discount rate), and $117 per
metric ton (the 95th-percentile value from a distribution that uses a
3-percent discount rate). The fourth set, which represents the 95th-
percentile SCC estimate across all three models at a 3-percent discount
rate, is included to represent higher-than-expected impacts from
temperature change further out in the tails of the SCC distribution.
The values for later years are higher due to increasing emissions-
related costs as the magnitude of projected climate change increases.
Table V.42 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate as was used in the studies upon which the dollar-per-ton values
are based. DOE calculated domestic values as a range from 7 percent to
23 percent of the global values, and these results are presented in
chapter 14 of the NOPR TSD.
Table V.42--Estimate of Global Present Value of CO2 Emissions Reduction for Potential Standards of Commercial
Packaged Boilers Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
SCC Scenario\*\ million 2014$
---------------------------------------------------
2.5%
TSL 5% discount 3% discount discount 3% discount
rate, rate, rate, rate, 95th
average average average percentile
----------------------------------------------------------------------------------------------------------------
Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
1........................................................... 76 369 594 1,125
2........................................................... 118 572 920 1,744
3........................................................... 275 1,343 2,165 4,096
4........................................................... 655 3,208 5,175 9,784
5........................................................... 670 3,278 5,287 9,996
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1........................................................... 11 54 86 163
2........................................................... 17 83 134 254
3........................................................... 40 197 318 602
4........................................................... 95 467 753 1,424
5........................................................... 98 478 770 1,457
----------------------------------------------------------------------------------------------------------------
Total Emissions
----------------------------------------------------------------------------------------------------------------
1........................................................... 87 423 680 1,288
2........................................................... 136 655 1,054 1,998
3........................................................... 316 1,540 2,483 4,697
4........................................................... 751 3,675 5,928 11,208
5........................................................... 767 3,755 6,057 11,452
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3 and $117
per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
DOE is well aware that scientific and economic knowledge continues
to evolve rapidly regarding 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. 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 NOPR the most recent values and analyses resulting
from the interagency review process.
DOE also estimated the cumulative monetary value of the economic
benefits associated with NOX emissions reductions
anticipated to result from the considered TSLs for commercial packaged
boilers. The dollar-per-ton values that DOE used are discussed in
section IV.L of this document. Table V.43 presents the cumulative
present value for NOX emissions for each TSL calculated
using 7-percent and 3-percent discount rates. This table presents
values that use the low dollar-per-ton values, which reflect DOE's
primary estimate. Results that reflect the range of NOX
dollar-per-ton values are presented in Table V.45. Detailed discussions
on NOX emissions reductions are available in chapter 14 of
the NOPR TSD.
[[Page 15907]]
Table V.43--Present Value of NOX Emissions Reduction for Potential
Standards for Commercial Packaged Boilers
------------------------------------------------------------------------
3% 7%
TSL Discount Discount
rate rate
------------------------------------------------------------------------
million 2014$
------------------------------------------------------------------------
Power Sector and Site Emissions
------------------------------------------------------------------------
1............................................. 203 71
2............................................. 322 112
3............................................. 428 149
4............................................. 802 279
5............................................. 997 346
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1............................................. 80 29
2............................................. 125 46
3............................................. 299 106
4............................................. 708 248
5............................................. 721 253
------------------------------------------------------------------------
Total Emissions
------------------------------------------------------------------------
1............................................. 284 100
2............................................. 447 158
3............................................. 727 255
4............................................. 1,510 527
5............................................. 1,718 599
------------------------------------------------------------------------
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.44 presents the NPV values that result from adding the estimates of
the potential economic benefits resulting from reduced CO2
and NOX emissions in each of four valuation scenarios to the NPV of
consumer savings calculated for each TSL considered in this rulemaking,
at both a 7-percent and 3-percent discount rate. The CO2
values used in the columns correspond to the four sets of SCC values
discussed in section IV.L.1 of this document.
Table V.44--Commercial Packaged Boilers TSLs: Net Present Value of Consumer Savings Combined With Net Present
Value of Monetized Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% Discount Rate added with:
---------------------------------------------------------------
95th
SCC at 5% SCC at 3% SCC at 2.5% percentile SCC
TSL discount rate* discount rate* discount rate* at 3% discount
and 3% low NOX and 3% low NOX and 3% low NOX rate* and 3%
value value value low NOX value
----------------------------------------------------------------------------------------------------------------
(billion 2014$)
----------------------------------------------------------------------------------------------------------------
1............................................... 1.461 1.797 2.054 2.662
2............................................... 2.269 2.789 3.188 4.132
3............................................... 3.635 4.860 5.802 8.017
4............................................... 8.148 11.073 13.325 18.605
5............................................... 8.467 11.455 13.757 19.152
----------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% Discount Rate added with:
---------------------------------------------------------------
95th
SCC at 5% SCC at 3% SCC at 2.5% percentile SCC
TSL discount rate* discount rate* discount rate* at 3% discount
and 7% low NOX and 7% low NOX and 7% low NOX rate * and 7%
value value value low NOX value
----------------------------------------------------------------------------------------------------------------
(billion 2014$)
----------------------------------------------------------------------------------------------------------------
1............................................... 0.456 0.792 1.049 1.658
2............................................... 0.707 1.227 1.625 2.569
3............................................... 0.905 2.129 3.072 5.286
4............................................... 1.946 4.870 7.123 12.403
[[Page 15908]]
5............................................... 1.969 4.957 7.259 12.654
----------------------------------------------------------------------------------------------------------------
* The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values
are based on the average SCC from the integrated assessment models, at discount rates of 5, 3, and 2.5
percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/metric ton, and $62.3/
metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), 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 SCC values are emission year specific.
In considering the above results, two issues are relevant. First,
the national operating cost savings are domestic U.S. commercial
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
the SCC are performed with different methods that use quite different
time frames for analysis. The national operating cost savings is
measured for the lifetime of products shipped in 2019-2048. Because
CO2 emissions have a very long residence time in the
atmosphere,\89\ the SCC values in future years reflect future
CO2 emissions impacts that continue beyond 2100.
---------------------------------------------------------------------------
\89\ 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).
---------------------------------------------------------------------------
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No
other factors were considered in this analysis.
C. Conclusion
To adopt national standards more stringent than the current
standards for commercial packaged boilers, DOE must determine that such
action would result in significant additional conservation of energy
and is technologically feasible and economically justified. (42 U.S.C.
6313(a)(6)(A)(ii) and (C)(i)) In determining whether a standard is
economically justified, the Secretary must determine whether the
benefits of the standard exceed its burdens by, to the greatest extent
practicable, considering the seven statutory factors discussed
previously. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i))
For this NOPR, DOE considered the impacts of amended standards for
commercial packaged boilers 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 present a summary of the results of
DOE's quantitative analysis for each TSL. 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 standard.
1. Benefits and Burdens of Trial Standard Levels Considered for
Commercial Packaged Boilers
Table V.45, Table V.46, and Table V.47 summarize the quantitative
impacts estimated for each TSL for commercial packaged boilers. The
national impacts are measured over the lifetime of commercial packaged
boilers purchased in the 30-year period that begins in the year of
compliance with amended standards (2019-2048). The energy savings,
emissions reductions, and value of emissions reductions refer to full-
fuel-cycle results.
Table V.45--Summary of Analytical Results for Commercial Packaged Boilers: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
National FFC Energy Savings 0.25................... 0.39.................. 0.97.................. 2.34.................. 2.37.
(quads).
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Commercial consumer Benefits (billion 2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate............... 1.09................... 1.69.................. 2.59.................. 5.89.................. 5.98.
7% discount rate............... 0.27................... 0.41.................. 0.33.................. 0.67.................. 0.60.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million)... 166.8 to 173.7......... 156.3 to 167.0........ 116.2 to 157.7........ 56.1 to 145.9......... 51.2 to 146.7.
Change in Industry NPV (%)..... (7.4) to (3.6)......... (13.2) to (7.3)....... (35.5) to (12.4)...... (68.9) to (19.0)...... (71.6) to (18.6).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...... 15..................... 22.................... 53.................... 128................... 131
[[Page 15909]]
NOX (thousand tons)............ 103.................... 162................... 265................... 553................... 630
Hg (tons)...................... 0.0002................. 0.0003................ (0.002)............... (0.002)............... (0.002)
N2O (thousand tons)............ 0.07................... 0.12.................. 0.17.................. 0.36.................. 0.41
N2O (thousand tons CO2eq)...... 19..................... 31.................... 44.................... 94.................... 109
CH4 (thousand tons)............ 151.................... 233................... 618................... 1,505................. 1,510
CH4 (thousand tons CO2eq)...... 4,227.................. 6,515................. 17,301................ 42,137................ 42,277
SO2 (thousand tons)............ 1.3.................... 2.1................... 1.6................... 3.1................... 4.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ million)\*\......... 87 to 1,288............ 136 to 1,998.......... 316 to 4,697.......... 751 to 11,208......... 767 to 11,452
NOX--3% discount rate (2014$ 284 to 627............. 447 to 988............ 727 to 1,605.......... 1,510 to 3,335........ 1,718 to 3,794
million).
NOX--7% discount rate (2014$ 100 to 223............. 158 to 353............ 255 to 570............ 527 to 1,177.......... 599 to 1,338.
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.46--NPV of Commercial Consumer Benefits by Equipment Class
----------------------------------------------------------------------------------------------------------------
Trial standard level (billion 2014$)
Equipment class Discount -----------------------------------------------------------
rate % 1 2 3 4 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial 3 0.463 0.665 1.570 3.187 3.187
Packaged Boilers.......................
7 0.092 0.132 0.052 0.209 0.209
Large Gas-Fired Hot Water Commercial 3 0.129 0.208 0.208 1.446 1.446
Packaged Boilers.......................
7 0.027 0.036 0.036 0.089 0.089
Small Oil-Fired Hot Water Commercial 3 0.278 0.278 0.278 0.337 0.372
Packaged Boilers.......................
7 0.080 0.080 0.080 0.093 0.040
Large Oil-Fired Hot Water Commercial 3 0.063 0.199 0.199 0.271 0.331
Packaged Boilers.......................
7 0.019 0.059 0.059 0.080 0.067
Small Gas-Fired Steam Commercial 3 0.038 0.074 0.074 0.145 0.145
Packaged Boilers.......................
7 0.012 0.022 0.022 0.038 0.038
Large Gas-Fired Steam Commercial 3 0.039 0.060 0.060 0.110 0.110
Packaged Boilers.......................
7 0.013 0.020 0.020 0.035 0.035
Small Oil-Fired Steam Commercial 3 0.032 0.070 0.070 0.148 0.148
Packaged Boilers.......................
7 0.010 0.021 0.021 0.044 0.044
Large Oil-Fired Steam Commercial 3 0.048 0.134 0.134 0.244 0.244
Packaged Boilers.......................
7 0.016 0.044 0.044 0.079 0.079
Total--All Classes.................. 3 1.090 1.687 2.593 5.888 5.982
7 0.269 0.414 0.334 0.668 0.603
----------------------------------------------------------------------------------------------------------------
Table V.47--Summary of Analytical Results for CPB Consumer Impacts
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5
----------------------------------------------------------------------------------------------------------------
Commercial Consumer Mean LCC Savings 2014$
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged $223 $521 $302 $1,656 $1,656
Boilers............................................
Large Gas-Fired Hot Water Commercial Packaged 2,419 3,647 3,647 2,062 2,062
Boilers............................................
Small Oil-Fired Hot Water Commercial Packaged 7,799 7,799 7,799 8,939 2,333
Boilers............................................
Large Oil-Fired Hot Water Commercial Packaged 10,108 30,834 30,834 40,983 17,076
Boilers............................................
Small Gas-Fired Steam Commercial Packaged Boilers... 1,933 2,782 2,782 4,383 4,383
Large Gas-Fired Steam Commercial Packaged Boilers... 12,255 16,802 16,802 28,295 28,295
Small Oil-Fired Steam Commercial Packaged Boilers... 1,985 4,256 4,256 8,637 8,637
Large Oil-Fired Steam Commercial Packaged Boilers... 13,243 36,128 36,128 65,128 65,128
----------------------------------------------------------------------------------------------------------------
Commercial Consumer Simple PBP Years
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 9.4 9.6 13.6 13.6 13.6
Boilers............................................
Large Gas-Fired Hot Water Commercial Packaged 10.2 11.0 11.0 15.6 15.6
Boilers............................................
Small Oil-Fired Hot Water Commercial Packaged 5.7 5.7 5.7 6.6 14.3
Boilers............................................
Large Oil-Fired Hot Water Commercial Packaged 4.1 4.7 4.7 5.2 12.2
Boilers............................................
Small Gas-Fired Steam Commercial Packaged Boilers... 7.0 7.4 7.4 8.2 8.2
Large Gas-Fired Steam Commercial Packaged Boilers... 4.3 4.7 4.7 5.0 5.0
Small Oil-Fired Steam Commercial Packaged Boilers... 5.0 5.3 5.3 6.1 6.1
Large Oil-Fired Steam Commercial Packaged Boilers... 2.5 2.8 2.8 3.1 3.1
----------------------------------------------------------------------------------------------------------------
[[Page 15910]]
Distribution of Commercial Consumer LCC Impacts
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged 20% 23% 42% 56% 56%
Boilers Net Cost (%)
Large Gas-Fired Hot Water Commercial Packaged 21% 27% 27% 56% 56%
Boilers Net Cost (%)...............................
Small Oil-Fired Hot Water Commercial Packaged 20% 20% 20% 26% 56%
Boilers Net Cost (%)...............................
Large Oil-Fired Hot Water Commercial Packaged 1% 5% 5% 7% 46%
Boilers Net Cost (%)...............................
Small Gas-Fired Steam Commercial Packaged Boilers 18% 26% 26% 34% 34%
Net Cost (%).......................................
Large Gas-Fired Steam Commercial Packaged Boilers 12% 15% 15% 19% 19%
Net Cost (%).......................................
Small Oil-Fired Steam Commercial Packaged Boilers 4% 12% 12% 16% 16%
Net Cost (%).......................................
Large Oil-Fired Steam Commercial Packaged Boilers 0% 1% 1% 1% 1%
Net Cost (%).......................................
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.
TSL 5 corresponds to the max-tech level for all the equipment
classes and offers the potential for the highest cumulative energy
savings through the analysis period from 2019 through 2048. The
estimated energy savings from TSL 5 are 2.37 quads of energy. TSL 5 has
an estimated NPV of consumer benefit of $0.60 billion using a 7-percent
discount rate, and $6.0 billion using a 3-percent discount rate.
The cumulative emissions reductions at TSL 5 are 131 million metric
tons of CO2, 4.53 thousand tons of SO2, 630
thousand tons of NOX, 1,510 thousand tons of CH4,
and 0.41 thousand tons of N2O, and an emissions increase of
0.002 tons of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 5 ranges from $767 million to $11,452
million.
At TSL 5, the average LCC savings range from $1,656 to $65,128
depending on equipment class. The fraction of consumers incurring a net
cost range from 1 percent for large oil-fired steam CPB equipment class
to 56 percent for small gas-fired hot water CPB equipment class.
At TSL 5, the projected change in INPV ranges from a decrease of
$128.9 million to a decrease of $33.4 million, which corresponds to a
change in INPV of -71.6 percent to -18.6 percent, respectively. The
industry is expected to incur $56.6 million in total conversion costs
at this level. Approximately 98.7 percent of industry equipment
listings would require additional engineering expertise and production
lines, or possibly source parts from other manufacturers.
Accordingly, the Secretary tentatively concludes that at TSL 5 for
commercial packaged boilers, the benefits of energy savings, NPV of
consumer benefits, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would be outweighed by
the very large negative change in INPV for manufacturers. Consequently,
DOE has tentatively concluded that TSL 5 is not economically justified.
TSL 4 corresponds to the efficiency level within each equipment
class that provides the highest consumer NPV at a 7% discount rate over
the analysis period from 2019 through 2048. The estimated energy
savings from TSL 4 are 2.34 quads of energy. TSL 4 has an estimated NPV
of consumer benefit of $0.67 billion using a 7-percent discount rate,
and $5.9 billion using a 3-percent discount rate.
The cumulative emissions reductions at TSL 4 are 128 million metric
tons of CO2, 3.1 thousand tons of SO2, 553
thousand tons of NOX, 1,505 thousand tons of CH4,
and 0.36 thousand tons of N2O, and an emissions increase of
0.002 tons of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 4 ranges from $751 million to $11,208
million.
At TSL 4, the average LCC savings range from $1,656 to $65,128
depending on equipment class. The fraction of consumers incurring a net
cost range from 1 percent for large oil-fired steam CPB equipment class
to 56 percent for small gas-fired hot water CPB equipment class.
At TSL 4, the projected change in INPV ranges from a decrease of
$124.1 million to a decrease in $34.3 million, which corresponds to a
change of -68.9 percent to -19.0 percent, respectively. The industry is
expected to incur $54.7 million in total conversion costs at this
level. Approximately 98.4 percent of industry equipment listings
require redesign to meet this standard level today.
Accordingly, the Secretary tentatively concludes that at TSL 4 for
commercial packaged boilers, the benefits of energy savings, NPV of
consumer benefits, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would be outweighed by
the negative change in INPV for manufacturers. Consequently, DOE has
tentatively concluded that TSL 4 is not economically justified.
TSL 3 corresponds to the intermediate level with both condensing
and high efficiency noncondensing standard levels, depending on
equipment class, and offers the potential for significant cumulative
energy savings over the analysis period from 2019 through 2048. The
estimated energy savings from TSL 3 are 0.97 quads of energy. TSL 3 has
an estimated NPV of consumer benefit of $0.33 billion using a 7-percent
discount rate, and $2.6 billion using a 3-percent discount rate.
The cumulative emissions reductions at TSL 3 are 53 million metric
tons of CO2, 1.63 thousand tons of SO2, 265
thousand tons of NOX, 618 thousand tons of CH4,
and 0.17 thousand tons of N2O, and an emissions increase of
0.002 tons of Hg. The estimated monetary value of the CO2
emissions reductions at TSL 3 ranges from $316 million to $4,698
million.
At TSL 3, the average LCC savings range from $302 to $36,128
depending on equipment class. The fraction of consumers incurring a net
cost range from 1 percent for large oil-fired steam CPB equipment class
to 42 percent for small gas-fired hot water CPB equipment class.
At TSL 3, the projected INPV ranges from a decrease of $64.0
million to a decrease of $22.4 million, which corresponds to a change
of -35.5 percent to -12.4 percent, respectively. The industry is
expected to incur $40.1 million in total conversion costs at this
level. Approximately 73.8 percent of industry equipment listings
require redesign to meet this standard level today.
The Secretary carefully considered proposing TSL 3. However, in
weighing the benefits of energy savings, NPV of consumer benefits,
emission reductions, and the estimated monetary value of the
CO2 emissions reductions against the negative change in INPV
for manufacturers, DOE has tentatively concluded that TSL 3 is not
economically justified. DOE may
[[Page 15911]]
reexamine this decision based on the public comments received in
response to this NOPR.
TSL 2 corresponds to the highest noncondensing efficiency level
analyzed for the gas-fired hot water equipment classes and efficiency
levels for oil-fired hot water equipment classes that are 2 or 3
percentage points above the equivalent size gas-fired hot water
equipment classes, depending on equipment class, and one level below
max tech for all steam CPB equipment classes and offers the potential
for significant energy savings through the analysis period from 2019
through 2048. The estimated energy savings from TSL 2 are 0.39 quads of
energy. TSL 2 has an estimated NPV of consumer benefit of $0.41 billion
using a 7-percent discount rate, and $1.69 billion using a 3-percent
discount rate.
The cumulative emissions reductions at TSL 2 are 22 million metric
tons of CO2, 2.1 thousand tons of SO2, 162
thousand tons of NOX, 0.0003 tons of Hg, 233 thousand tons
of CH4, and 0.12 thousand tons of N2O. The
estimated monetary value of the CO2 emissions reductions at
TSL 2 ranges from $136 million to $1,998 million.
At TSL 2, the average LCC savings range from $521 to $36,128
depending on equipment class. The fraction of consumers incurring a net
cost range from 1 percent for large oil-fired steam CPB equipment class
to 27 percent for large gas-fired hot water CPB equipment class.
At TSL 2, the projected INPV ranges from a decrease of $23.8
million to a decrease of $13.1 million, which corresponds to a change
of -13.2 percent to -7.3 percent, respectively. The industry is
expected to incur $27.5 million in total conversion costs at this
level. Approximately 52.5 percent of industry equipment listings
require redesign to meet this standard level today.
Accordingly, the Secretary tentatively concludes that at TSL 2 for
commercial packaged boilers, the benefits of energy savings, NPV of
consumer benefits, emission reductions, and the estimated monetary
value of the CO2 emissions reductions would outweigh the
negative change in INPV for manufacturers. Consequently, DOE has
tentatively concluded that TSL 2 is economically justified.
After carefully considering the analysis results and weighing the
benefits and burdens of TSL 2, DOE believes that setting the standards
for commercial packaged boilers at TSL 2 represents the maximum
improvement in energy efficiency that is technologically feasible and
economically justified. TSL 2 is technologically feasible because the
technologies required to achieve these levels already exist in the
current market and are available from multiple manufacturers. TSL 2 is
economically justified because the benefits to the nation in the form
of energy savings, consumer NPV at 3 percent and at 7 percent, and
emissions reductions outweigh the costs associated with reduced INPV.
Therefore, DOE proposes to adopt amended energy conservation standards
for commercial packaged boilers at the levels established by TSL 2 and
presented in
However, the only difference between TSL 2 and TSL 3 is in the
small gas-fired hot water CPB equipment class. TSL 3 includes the 95%
TE level while TSL 2 includes the 85% TE level for that equipment
class. TSL 3 results in energy savings that are 250 percent greater
than TSL 2. Approximately 72 percent of small gas-fired hot water CPB
equipment manufacturers offer at least one product that meets TSL 3.
DOE requests comment on whether DOE should adopt TSL 3.
See section VII.E for a list of issues on which DOE seeks comment.
Table V.48.
However, the only difference between TSL 2 and TSL 3 is in the
small gas-fired hot water CPB equipment class. TSL 3 includes the 95%
TE level while TSL 2 includes the 85% TE level for that equipment
class. TSL 3 results in energy savings that are 250 percent greater
than TSL 2. Approximately 72 percent of small gas-fired hot water CPB
equipment manufacturers offer at least one product that meets TSL 3.
DOE requests comment on whether DOE should adopt TSL 3.
See section VII.E for a list of issues on which DOE seeks comment.
Table V.48--Proposed Energy Conservation Standards for Commercial
Packaged Boilers Evaluated in This NOPR
[Compliance required starting (date three years after publication of
final rule)]
------------------------------------------------------------------------
Energy conservation standards
-------------------------------
Minimum Minimum
Equipment thermal combustion
efficiency efficiency
(%) (%)
------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial 85 n/a
Packaged Boilers.......................
Large Gas-Fired Hot Water Commercial n/a 85
Packaged Boilers.......................
Small Oil-Fired Hot Water Commercial 87 n/a
Packaged Boilers.......................
Large Oil-Fired Hot Water Commercial n/a 88
Packaged Boilers.......................
Small Gas-Fired Steam Commercial 81 n/a
Packaged Boilers.......................
Large Gas-Fired Steam Commercial 82 n/a
Packaged Boilers.......................
Small Oil-Fired Steam Commercial 84 n/a
Packaged Boilers.......................
Large Oil-Fired Steam Commercial 85 n/a
Packaged Boilers.......................
------------------------------------------------------------------------
2. Summary of Benefits and Costs (Annualized) of the Proposed Standards
The benefits and costs of this NOPR's proposed energy conservation
standards, for covered commercial packaged boilers sold in 2019-2048,
can also be expressed in terms of annualized values. The monetary
values for the total annualized net benefits are the sum of: (1) The
annualized national economic value (expressed in 2014$) of the benefits
from consumer operation of equipment that meets the proposed standards
(consisting primarily of operating cost savings from using less energy,
minus increases in equipment purchase and installation costs), and (2)
the annualized value of the benefits of CO2 and
NOX emission reductions.\90\
---------------------------------------------------------------------------
\90\ 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
(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.
---------------------------------------------------------------------------
[[Page 15912]]
The national operating savings are domestic private U.S. consumer
monetary savings that occur as a result of purchasing these equipment.
The national operating cost savings is measured for the lifetime of
commercial packaged boilers shipped in 2019-2048.
The CO2 reduction is a benefit that accrues globally due
to decreased domestic energy consumption that is expected to result
from this proposed rule. Because CO2 emissions have a very
long residence time in the atmosphere, the SCC values in future years
reflect future CO2-emissions impacts that continue beyond
2100 through 2300.
Estimates of annualized benefits and costs of the proposed
standards for commercial packaged boilers under TSL 2 are shown in
Table V.49. 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 uses a 3-percent discount rate,
the cost of the standards proposed in this rulemaking is $51 million
per year in increased equipment costs; while the estimated benefits are
$91 million per year in reduced equipment operating costs, $37 million
in CO2 reductions, and $16 million in reduced NOX
emissions. In this case, the net benefit would amount to $93 million
per year. Using a 3-percent discount rate for all benefits and costs
and the average SCC series, the estimated cost of the standards
proposed in this rulemaking is $48 million per year in increased
equipment costs; while the estimated benefits are $142 million per year
in reduced operating costs, $37 million in CO2 reductions,
and $25 million in reduced NOX emissions. In this case, the
net benefit would amount to approximately $156 million per year.
Table V.49--Annualized Benefits and Costs of Proposed Standards (TSL 2) for Commercial Packaged Boilers *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Million 2014$/year
Discount rate -----------------------------------------------------------------------------------
Primary estimate Low net benefits estimate High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *. 7%.............................. 91........................ 84........................ 101.
3%.............................. 142....................... 129....................... 160.
CO2 Reduction (using mean SCC at 5%.............................. 10........................ 10........................ 11.
5% discount rate) * **.
CO2 Reduction (using mean SCC at 3%.............................. 37........................ 34........................ 39.
3% discount rate) * **.
CO2 Reduction (using mean SCC at 2.5%............................ 54........................ 51........................ 58.
2.5% discount rate) * **.
CO2 Reduction (using 95th 3%.............................. 111....................... 104....................... 119.
percentile SCC at 3% discount
rate) * **.
NOX Reduction [dagger]............ 7%.............................. 16........................ 15........................ 37.
3%.............................. 25........................ 23........................ 59.
---------------------------------------------------------------------------------------------------------------------
Total Benefits 7% plus CO2 range............... 117 to 218................ 108 to 203................ 149 to 258.
[dagger][dagger].
7%.............................. 143....................... 133....................... 177.
3% plus CO2 range............... 177 to 278................ 162 to 256................ 230 to 338.
3%.............................. 204....................... 186....................... 258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment 7%.............................. 51........................ 54........................ 47.
Costs.
3%.............................. 48........................ 52........................ 45.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]........ 7% plus CO2 range............... 67 to 168................. 54 to 149................. 102 to 210.
7%.............................. 93........................ 79........................ 130.
3% plus CO2 range............... 129 to 230................ 110 to 205................ 185 to 293.
3%.............................. 156....................... 135....................... 213.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2019-2048. These results include benefits
to consumers which accrue after 2048 from the equipment purchased in 2019-2048. The incremental installed costs include incremental equipment cost as
well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
Benefits Estimates utilize projections of building stock and energy prices from the AEO2015 Reference case, Low Economic Growth case, and High
Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1
of this document and chapter 8 of the NOPR TSD.
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the
integrated assessment models, at discount rates of 5, 3, and 2.5 percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/
metric ton, and $62.3/metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), which represents the 95th
percentile of the SCC distribution calculated using 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 SCC values are emission year specific.
[[Page 15913]]
[dagger] The $/ton values used for NOX are described in section IV.L. 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 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 Electric 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-percent and 7-percent cases are presented using only the average SCC with a 3-percent discount rate. 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. 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 this standards 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 appliances that are not captured by the users of such
equipment. These benefits include externalities related to public
health, environmental protection, and national 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.
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 Executive Order 12866.
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. 76 FR 3281 (Jan. 21, 2011). Executive Order 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, the 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 NOPR 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 an initial regulatory flexibility analysis (IRFA) 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 IRFA for the products that are the subject
of this rulemaking. DOE will transmit a copy of the IRFA to the Chief
Counsel for Advocacy of the Small Business
[[Page 15914]]
Administration (SBA) for review under 5 U.S.C 605(b).
The Small Business Administration (SBA) considers a business entity
to be a small business, if, together with its affiliates, it employs
less than a threshold number of workers specified in 13 CFR part 121.
These size standards and codes are established by the North American
Industry Classification System (NAICS). The threshold number for NAICS
classification code 333414, which applies to ``heating equipment
(except warm air furnaces) manufacturing'' and includes commercial
packaged boilers, is 500 employees.
1. Statement of the Need for, Objectives of, and Legal Basis for, the
Rule
A statement of the need for, objectives of, and legal basis for,
the proposed rule is stated elsewhere in the preamble and not repeated
here.
2. Description on Estimated Number of Small Entities Regulated
To estimate the number of companies that could be small business
manufacturers of products covered by this rulemaking, DOE conducted a
market survey using publically-available information to identify
potential small manufacturers. DOE's research involved industry trade
association membership directories (including AHRI), public databases
(e.g., AHRI Directory,\91\ ABMA Directory \92\), individual company Web
sites, and market research tools (e.g., Hoovers reports) to create a
list of companies that manufacture or sell products covered by this
rulemaking. DOE also asked stakeholders and 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 companies on its list, as necessary, to determine
whether they met the SBA's definition of a small business manufacturer
of covered commercial packaged boilers. 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.
---------------------------------------------------------------------------
\91\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
\92\ See http://www.abma.com/.
---------------------------------------------------------------------------
DOE initially identified 45 potential manufacturers of commercial
packaged boilers sold in the U.S. DOE then determined that 15 are large
manufacturers, manufacturers that are foreign owned and operated. DOE
was able to determine that 30 manufacturers meet the SBA's definition
of a ``small business.'' Of these 30 small businesses, DOE estimates
that 23 domestically manufacture commercial packaged boilers covered by
this rulemaking.
Before issuing this NOPR, DOE attempted to contact all the small
business manufacturers of commercial packaged boilers it had
identified. Six small businesses agreed to take part in an MIA
interview. DOE also obtained information about small business impacts
while interviewing large manufacturers.
3. Description and Estimate of Compliance Requirements
In the engineering analysis, DOE compiled an equipment database
based on equipment listing information provided by the AHRI and ABMA
trade associations. However, DOE notes that it does not have product
listings data for 11 of the identified 30 small manufacturers since
they are not AHRI or ABMA trade association members. The following
discussion reflects the available data provided by AHRI and ABMA and
assumes the distribution of equipment efficiencies data to be
representative of the industry. Additionally, despite extensive
interviews with small and large companies, DOE was not able to obtain
sufficient financial or sales data to determine typical small
manufacturer revenue, operating profit and market share. The small
manufacturers provided insufficient data to determine the effect these
standards will have on small business revenue or operating profit.
However, in an effort to gauge the relative impacts of this
rulemaking on small manufacturers, DOE has conducted a detailed product
availability analysis. The analysis investigates the portion of small
manufacturers that are currently able to meet the proposed standard.
Additionally, it looks that number of equipment models small
manufacturers must redesign or eliminate relative to the industry-at-
large.
DOE identified 18 small manufacturers and 13 large manufactures
that produce gas-fired equipment covered by this rulemaking based on
companies included in DOE's equipment database. Roughly 56% of gas-
fired equipment listings in the database already meet the proposed
standard at TSL 2. This would suggest that TSL 2 already has a strong
market presence. DOE's engineering analysis concludes that no
proprietary technology is required to meet today's proposed standard
level. Manufacturers would likely need to adopt one or a combination of
different technology options: (1) Switch from natural or atmospheric
draft systems to mechanical draft boilers; (2) improve heat exchanger
design using tabulators, fins and multi-pass designs; (3) use high
efficiency burner technology such as pulse combustion; or (4) increase
jacket insulation (e.g. 3-4 inches of fiberglass wool).
Assuming the equipment database used in the engineering analysis is
representative of the industry as a whole, small manufacturers have
similar portions of product listings at TSL 2 as their larger
competitors in the gas-fired sector. Industry conversion costs for gas-
fired product at TSL 2 total $18.3 million. This results in an average
conversion cost of approximately $0.42 million per manufacturer.\93\
---------------------------------------------------------------------------
\93\ This estimate was derived by taking total conversion costs
for gas-fired equipment divided by total gas-fired equipment
manufacturers.
---------------------------------------------------------------------------
Table VI.1 and Table VI.2 looks at the differential impacts of the
standard on small manufacturers versus the industry at large. Table
VI.1 estimates the percent of small manufacturers and their listings
that currently comply with TSL 2. Table VI.2 estimates the percent of
all manufacturers, both large and small, and their listings that
currently comply with TSL 2.
[[Page 15915]]
Table VI.1--Small Gas-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
Small
manufacturers: Small Small
manufacturers Small manufacturers: manufacturers:
Product class with products manufacturers: listings listings
compliant at total listings compliant at compliant at
TSL 2 (%) TSL 2 TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water..................... 100 433 348 80
Large Gas Hot Water..................... 67 220 120 55
Small Gas Steam......................... 50 106 26 25
Large Gas Steam......................... 71 127 46 36
----------------------------------------------------------------------------------------------------------------
Table VI.2--Industry Gas-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
Small
manufacturers: Small Small
manufacturers Small manufacturers: manufacturers:
Product class with products manufacturers: listings listings
compliant at total listings compliant at compliant at
TSL 2 (%) TSL 2 TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water..................... 97 1,149 712 62
Large Gas Hot Water..................... 78 373 188 50
Small Gas Steam......................... 67 252 72 29
Large Gas Steam......................... 82 186 80 43
----------------------------------------------------------------------------------------------------------------
Using product listings as representative market data, DOE estimates
average conversion costs of $0.63 million for large manufacturers and
$0.31 million for small manufacturers of gas-fired equipment. Since
this is a relatively low volume market where most products are built-
to-order, DOE assumes that capital conversion costs do not vary
significantly between large and small manufacturers.\94\
---------------------------------------------------------------------------
\94\ The amount of engineering effort is proportional to the
number of models that require redesign. For this estimate, DOE used
its product database to determine what portion of industry models
would need to be redesigned for large and small manufacturers to
determine the values for each. DOE used the number of models
requiring redesign to scale large versus small product conversion
costs. For gas-fired equipment, DOE used gas-fired model listings.
---------------------------------------------------------------------------
In the market for oil-fired equipment, DOE identified seven small
manufacturers and six large manufacturers producing equipment covered
by this rulemaking based on the equipment database. Combined, they sell
roughly 1,000 units per year, or 5% of the total annual market for CPB
equipment. Due to the small size of the oil-fired market, DOE expects
that the manufacturing processes and production costs to be similar for
both small and large manufacturers. DOE notes that the market for oil-
fired commercial packaged boilers is shrinking. Some manufacturers,
both small and large, may choose not to invest in product redesign
given the small market size and projected decline in shipments. For
manufacturers that do stay in the oil-fired market, DOE's analysis
indicates that there are no proprietary technologies required to meet
TSL 2. Manufacturers would likely need to adopt one or a combination of
different technology options: (1) Integrate oxygen trimmers; (2)
improve heat exchanger design; (3) use high efficiency burner
technology such as pulse combustion; or (4) increase jacket insulation.
Thus, DOE would expect similar conversion costs for small and large
manufacturers on a per product basis.
Table VI.3 estimates the percent of small manufacturers and their
listings that currently comply with TSL 2.
Table VI.4 estimates the percent of all manufacturers, both large
and small, and their listings that currently comply with TSL 2.
Table VI.3--Small Oil-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
Small
manufacturers: Small Small
manufacturers Small manufacturers: manufacturers:
Product class with products manufacturers: listings listings
compliant at total listings compliant at compliant at
TSL 2 (%) TSL 2 TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Oil Hot Water..................... 33 31 1 3
Large Oil Hot Water..................... 25 24 3 13
Small Oil Steam......................... 25 49 5 10
Large Oil Steam......................... 17 45 6 13
----------------------------------------------------------------------------------------------------------------
[[Page 15916]]
Table VI.4--Industry Oil-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
Small
manufacturers: Small Small
manufacturers Small manufacturers: manufacturers:
Product class with products manufacturers: listings listings
compliant at total listings compliant at compliant at
TSL 2 (%) TSL 2 TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Oil Hot Water..................... 36 124 17 14
Large Oil Hot Water..................... 20 83 5 6
Small Oil Steam......................... 44 127 32 25
Large Oil Steam......................... 40 109 36 33
----------------------------------------------------------------------------------------------------------------
Using product listings as representative market data, DOE estimates
average conversion costs of $0.90 million for large manufacturers and
$0.28 million for small manufacturers of oil-fired equipment. Since
this is a relatively low volume market where most products are built-
to-order, DOE assumes that capital conversion costs do not vary
significantly between large and small manufacturers.\95\
---------------------------------------------------------------------------
\95\ The amount of engineering effort is proportional to the
number of models that require redesign. For this estimate, DOE used
its product database to determine what portion of industry models
would need to be redesigned for large and small manufacturers to
determine the values for each. DOE used the number of models
requiring redesign to scale large versus small product conversion
costs. For oil-fired equipment, DOE used oil-fired model listings to
scale product conversion costs.
---------------------------------------------------------------------------
DOE assumed the data for small manufacturer's products in the AHRI
and ABMA databases are representative of all small manufacturers.
DOE requests comment on the appropriateness of the Manufacturer
Impact Analysis' assumption that the AHRI and ABMA equipment databases
are representative of all small manufacturers.
DOE also requests product listing data from small manufacturers
that are not AHRI or ABMA trade association members--including model
numbers, capacity, and efficiency ratings.
DOE also continues to seek financial, sales, and market share data
from small manufacturers to better understand and analyze the impact of
these proposed standards and conversion costs on the revenue and
operating profit of a small business.
See section VII.E for a list of issues on which DOE seeks comment.
4. Duplication, Overlap, and Conflict With Other Rules and Regulations
DOE is not aware of any rules or regulations that duplicate,
overlap, or conflict with the rulemaking being proposed today.
5. Significant Alternatives to the Rule
The discussion above analyzes impacts on small businesses that
would result from DOE's proposed rule. In addition to considering other
TSLs in this rulemaking, DOE considered several policy alternatives in
lieu of standards that could potentially result in energy savings while
reducing burdens on small businesses. DOE considered the following
policy alternatives: (1) No change in standard; (2) consumer rebates;
(3) consumer tax credits; (4) voluntary energy efficiency targets; and
(5) bulk government purchases. While these alternatives may mitigate to
some varying extent the economic impacts on small entities compared to
the standards, DOE determined that the energy savings of these
alternatives are significantly smaller than those that would be
expected to result from adoption of the proposed standard levels.
Accordingly, DOE is declining to adopt any of these alternatives and is
proposing the standards set forth in this rulemaking. (See chapter 17
of the NOPR TSD for further detail on the policy alternatives DOE
considered.)
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
Manufacturers of commercial packaged boilers must certify to DOE
that their equipment comply with any applicable energy conservation
standards. In certifying compliance, manufacturers must test their
equipment according to the DOE test procedures for commercial packaged
boilers, including any amendments adopted for those test procedures.
DOE has established regulations for the certification and recordkeeping
requirements for all covered consumer equipment and commercial
equipment, including commercial packaged boilers. 76 FR 12422 (March 7,
2011). The collection-of-information requirement for the certification
and recordkeeping is subject to review and approval by OMB under the
Paperwork Reduction Act (PRA). This requirement has been approved by
OMB under OMB control number 1910-1400. DOE requested OMB approval of
an extension of this information collection for three years,
specifically including the collection of information proposed in the
present rulemaking, and estimated that the annual number of burden
hours under this extension is 30 hours per company. In response to
DOE's request, OMB approved DOE's information collection requirements
covered under OMB control number 1910-1400 through November 30, 2017.
80 FR 5099 (January 30, 2015).
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
[[Page 15917]]
1969, DOE has determined that the proposed 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); 1021.410(b) and Appendix B, B(1)-(5). The
proposed rule fits within the category of actions because it is a
rulemaking that establishes energy conservation standards for consumer
equipment 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
proposed rule. DOE's CX determination for this proposed rule is
available at http://cxnepa.energy.gov/.
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
proposed rule and has tentatively determined that it would not have a
substantial direct effect on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government. EPCA
governs and prescribes Federal preemption of State regulations as to
energy conservation for the equipment that are the subject of this
proposed 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) 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, and (3)
provide a clear legal standard for affected conduct rather than a
general standard and promote simplification and burden reduction. 61 FR
4729 (Feb. 7, 1996). 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 proposed 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. Pub. L. 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a proposed regulatory action likely to result in a rule that may
cause the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector of $100 million or more in any one
year (adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a proposed ``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 small governments. 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/gc/office-general-counsel.
Although this proposed rule does not contain a Federal
intergovernmental mandate, it may require expenditures of $100 million
or more on the private sector. Specifically, the proposed rule will
likely result in a final rule that could require expenditures of $100
million or more. Such expenditures may include (1) investment in
research and development and in capital expenditures by commercial
packaged boilers 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
commercial packaged boilers, starting at the compliance date for the
applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the proposed rule. 2 U.S.C. 1532(c). The content
requirements of section 202(b) of UMRA relevant to a private sector
mandate substantially overlap the economic analysis requirements that
apply under section 325(o) of EPCA and Executive Order 12866. The
SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory
Impact Analysis'' section of the TSD for this proposed rule respond to
those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. 2 U.S.C. 1535(a). DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the proposed rule unless DOE publishes
an explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. As required by 42 U.S.C. 6313(a),
this proposed rule would establish energy conservation standards for
commercial packaged boilers that are designed to achieve the maximum
improvement in energy efficiency that DOE has determined to be both
technologically feasible and economically justified. A full discussion
of the alternatives considered by DOE is presented in the ``Regulatory
Impact Analysis'' section of the TSD for this proposed rule.
[[Page 15918]]
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 proposed 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
DOE has determined, under Executive Order 12630, ``Governmental
Actions and Interference with Constitutionally Protected Property
Rights'' 53 FR 8859 (Mar. 15, 1988), that this regulation would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to
review most disseminations of information to the public under
guidelines established by each agency pursuant to general guidelines
issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22,
2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7,
2002). DOE has reviewed this NOPR under the OMB and DOE guidelines and
has concluded that it is consistent with applicable policies in those
guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' 66 FR 28355
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA
at OMB, a Statement of Energy Effects for any proposed 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 proposed 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 tentatively concluded that this regulatory action, which
sets forth energy conservation standards for commercial packaged
boilers, is not a significant energy action because the proposed
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 the proposed 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. 70 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: http://energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report.
VII. Public Participation
A. Attendance at the Public Meeting
The time, date, and location of the public meeting are listed in
the DATES and ADDRESSES sections at the beginning of this document. If
you plan to attend the public meeting, please notify Ms. Brenda Edwards
at (202) 586-2945 or [email protected].
Please note that foreign nationals participating in the public
meeting are subject to advance security screening procedures which
require advance notice prior to attendance at the public meeting. If a
foreign national wishes to participate in the public meeting, please
inform DOE as soon as possible by contacting Ms. Regina Washington at
(202) 586-1214 or by email: [email protected] so that the
necessary procedures can be completed.
DOE requires visitors to have laptops and other devices, such as
tablets, checked upon entry into the building. Any person wishing to
bring these devices into the Forrestal Building will be required to
obtain a property pass. Visitors should avoid bringing these devices,
or allow an extra 45 minutes to check in. Please report to the
visitor's desk to have devices checked before proceeding through
security.
Due to the REAL ID Act implemented by the Department of Homeland
Security (DHS), there have been recent changes regarding ID
requirements for individuals wishing to enter Federal buildings from
specific states and U.S. territories. Driver's licenses from the
following states or territory will not be accepted for building entry
and one of the alternate forms of ID listed below will be required. DHS
has determined that regular driver's licenses (and ID cards) from the
following jurisdictions are not acceptable for entry into DOE
facilities: Alaska, American Samoa, Arizona, Louisiana, Maine,
Massachusetts, Minnesota, New York, Oklahoma, and Washington.
Acceptable alternate forms of Photo-ID include: U.S. Passport or
Passport Card; an Enhanced Driver's License or Enhanced ID-Card issued
by the states of Minnesota, New York or Washington (Enhanced licenses
issued by these states are clearly marked Enhanced or Enhanced Driver's
License); a military ID or other Federal government issued Photo-ID
card.
In addition, you can attend the public meeting via webinar. Webinar
registration information, participant instructions, and information
about the capabilities available to webinar
[[Page 15919]]
participants will be published on DOE's Web site at: https://attendee.gotowebinar.com/register/6872804566336170753.
Participants are responsible for ensuring their systems are
compatible with the webinar software.
B. Procedure for Submitting Prepared General Statements for
Distribution
Any person who has plans to present a prepared general statement
may request that copies of his or her statement be made available at
the public meeting. Such persons may submit requests, along with an
advance electronic copy of their statement in PDF (preferred),
Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to
the appropriate address shown in the ADDRESSES section at the beginning
of this document. The request and advance copy of statements must be
received at least one week before the public meeting and may be
emailed, hand-delivered, or sent by mail. DOE prefers to receive
requests and advance copies via email. Please include a telephone
number to enable DOE staff to make follow-up contact, if needed.
C. Conduct of the Public Meeting
DOE will designate a DOE official to preside at the public meeting
and may also use a professional facilitator to aid discussion. The
meeting will not be a judicial or evidentiary-type public hearing, but
DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C.
6306). A court reporter will be present to record the proceedings and
prepare a transcript. DOE reserves the right to schedule the order of
presentations and to establish the procedures governing the conduct of
the public meeting. After the public meeting, interested parties may
submit further comments on the proceedings as well as on any aspect of
the rulemaking until the end of the comment period.
The public meeting will be conducted in an informal, conference
style. DOE will present summaries of comments received before the
public meeting, allow time for prepared general statements by
participants, and encourage all interested parties to share their views
on issues affecting this rulemaking. Each participant will be allowed
to make a general statement (within time limits determined by DOE),
before the discussion of specific topics. DOE will allow, as time
permits, other participants to comment briefly on any general
statements.
At the end of all prepared statements on a topic, DOE will permit
participants to clarify their statements briefly and comment on
statements made by others. Participants should be prepared to answer
questions by DOE and by other participants concerning these issues. DOE
representatives may also ask questions of participants concerning other
matters relevant to this rulemaking. The official conducting the public
meeting will accept additional comments or questions from those
attending, as time permits. The presiding official will announce any
further procedural rules or modification of the above procedures that
may be needed for the proper conduct of the public meeting.
A transcript of the public meeting will be included in the docket,
which can be viewed as described in the Docket section at the beginning
of this document. In addition, any person may buy a copy of the
transcript from the transcribing reporter.
D. Submission of Comments
DOE will accept comments, data, and information regarding this
proposed rule before or after the public meeting, but no later than the
date provided in the DATES section at the beginning of this proposed
rule. Interested parties may submit comments, data, and other
information using any of the methods described in the ADDRESSES section
at the beginning of this document.
Submitting comments via www.regulations.gov. The
www.regulations.gov Web page will require you to provide your name and
contact information. Your contact information will be viewable to DOE
Building Technologies staff only. Your contact information will not be
publicly viewable except for your first and last names, organization
name (if any), and submitter representative name (if any). If your
comment is not processed properly because of technical difficulties,
DOE will use this information to contact you. If DOE cannot read your
comment due to technical difficulties and cannot contact you for
clarification, DOE may not be able to consider your comment.
However, your contact information will be publicly viewable if you
include it in the comment itself or in any documents attached to your
comment. Any information that you do not want to be publicly viewable
should not be included in your comment, nor in any document attached to
your comment. Otherwise, persons viewing comments will see only first
and last names, organization names, correspondence containing comments,
and any documents submitted with the comments.
Do not submit to www.regulations.gov information for which
disclosure is restricted by statute, such as trade secrets and
commercial or financial information (hereinafter referred to as
Confidential Business Information (CBI)). Comments submitted through
www.regulations.gov cannot be claimed as CBI. Comments received through
the Web site will waive any CBI claims for the information submitted.
For information on submitting CBI, see the Confidential Business
Information section below.
DOE processes submissions made through www.regulations.gov before
posting. Normally, comments will be posted within a few days of being
submitted. However, if large volumes of comments are being processed
simultaneously, your comment may not be viewable for up to several
weeks. Please keep the comment tracking number that regulations.gov
provides after you have successfully uploaded your comment.
Submitting comments via email, hand delivery/courier, or mail.
Comments and documents submitted via email, hand delivery, or mail also
will be posted to www.regulations.gov. If you do not want your personal
contact information to be publicly viewable, do not include it in your
comment or any accompanying documents. Instead, provide your contact
information in a cover letter. Include your first and last names, email
address, telephone number, and optional mailing address. The cover
letter will not be publicly viewable as long as it does not include any
comments.
Include contact information each time you submit comments, data,
documents, and other information to DOE. If you submit via mail or hand
delivery/courier, please provide all items on a CD, if feasible, in
which case it is not necessary to submit printed copies. No
telefacsimiles (faxes) will be accepted.
Comments, data, and other information submitted to DOE
electronically should be provided in PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file format. Provide documents that
are not secured, that are written in English, and that are free of any
defects or viruses. Documents should not contain special characters or
any form of encryption and, if possible, they should carry the
electronic signature of the author.
Campaign form letters. Please submit campaign form letters by the
originating organization in batches of between 50 to 500 form letters
per PDF or as one form letter with a list of supporters' names compiled
into one or more PDFs. This reduces comment processing and posting
time.
[[Page 15920]]
Confidential Business Information. According to 10 CFR 1004.11, any
person submitting information that he or she believes to be
confidential and exempt by law from public disclosure should submit via
email, postal mail, or hand delivery/courier two well-marked copies:
One copy of the document marked confidential including all the
information believed to be confidential, and one copy of the document
marked non-confidential with the information believed to be
confidential deleted. Submit these documents via email or on a CD, if
feasible. DOE will make its own determination about the confidential
status of the information and treat it according to its determination.
Factors of interest to DOE when evaluating requests to treat
submitted information as confidential include: (1) A description of the
items; (2) whether and why such items are customarily treated as
confidential within the industry; (3) whether the information is
generally known by or available from other sources; (4) whether the
information has previously been made available to others without
obligation concerning its confidentiality; (5) an explanation of the
competitive injury to the submitting person which would result from
public disclosure; (6) when such information might lose its
confidential character due to the passage of time; and (7) why
disclosure of the information would be contrary to the public interest.
It is DOE's policy that all comments may be included in the public
docket, without change and as received, including any personal
information provided in the comments (except information deemed to be
exempt from public disclosure).
E. Issues on Which DOE Seeks Comment
Although DOE welcomes comments on any aspect of this proposal, DOE
is particularly interested in receiving comments and views of
interested parties concerning the following issues:
(1) DOE requests data on manufacturer selling prices, shipments and
conversion costs of very large commercial packaged boilers with fuel
input rate above 10,000 kBtu/h that can be used to supplement the
analyses of such equipment in this rulemaking.
(2) DOE requests feedback on the methodology used to analyze all
equipment classes and the results obtained. In particular DOE is
interested in comments on whether the results are appropriate and
representative of the current market prices for such type of equipment.
(3) DOE requests information or insight that can better inform its
markups analysis.
(4) DOE requests feedback on the methodology and assumptions used
for the building heat load adjustment.
(5) DOE requests information on what constitutes a reasonable
baseline assumption about the current degree of adoption of hybrid
boiler configurations in retrofit situations and on other related
parameters such as percentage of total installed capacity typically
assigned to the new condensing boilers, climate zones where it may be
more prevalent and any other supporting documentation.
(6) DOE seeks input on its characterization and development of
representative installation costs, including venting costs, in new and
replacement commercial package boiler installations, including data to
support assumptions on vent sizing, vent length distributions, and vent
materials.
(7) DOE requests comment and seeks data on the assumption that a
rebound effect is unlikely to occur for these commercial applications.
(8) DOE requests comments on the representativeness of using 1-year
as warranty for parts and labor, and 10-years as warranty for the heat
exchanger.
(9) DOE seeks feedback on the assumptions used to develop
historical and projected shipments of commercial packaged boilers and
the representativeness of its estimates of projected shipments. DOE
also requests information on historical shipments of commercial
packaged boilers including shipments by equipment class for small,
large, and very large commercial packaged boilers.
(10) DOE requests feedback on the assumptions used to estimate the
impact of relative price increases on commercial packaged boiler
shipments due to proposed standards.
(11) DOE requests additional information from manufacturers
regarding conversion costs for oil-fired products. Specifically, DOE is
interested in estimates of capital conversion costs at each TSL and the
change in manufacturing equipment associated with those costs.
(12) DOE requests comment on whether DOE should adopt TSL 3.
(13) DOE requests comment on the appropriateness of the
Manufacturer Impact Analysis' assumption that the AHRI and ABMA
equipment databases are representative of all small manufacturers.
(14) DOE also requests product listing data from small
manufacturers that are not AHRI or ABMA trade association members--
including model numbers, capacity, and efficiency ratings.
(15) DOE also continues to seek financial, sales, and market share
data from small manufacturers to better understand and analyze the
impact of these proposed standards and conversion costs on the revenue
and operating profit of a small business.
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this proposed
rule.
List of Subjects in 10 CFR Part 431
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
and Small businesses.
Issued in Washington, DC, on March 11, 2016.
David Friedman,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable
Energy.
For the reasons set forth in the preamble, DOE proposes to amend
part 431 of chapter II, subchapter D, of title 10 of the Code of
Federal Regulations, as set forth below:
PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND
INDUSTRIAL EQUIPMENT
0
1. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 6291-6317.
0
3. Section 431.87 is revised to read as follows:
Sec. 431.87 Energy conservation standards and their effective dates.
(a) Each commercial packaged boilers listed in Table 1 to Sec.
431.87 and manufactured on or after March 2, 2012 and prior to [DATE 3
YEARS AFTER PUBLICATION IN THE FEDERAL REGISTER OF THE FINAL RULE
ESTABLISHING AMENDED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL
PACKAGED BOILERS], must meet the applicable energy conservation
standard levels in Table 1.
[[Page 15921]]
Table 1 to Sec. 431.87--Commercial Packaged Boiler Energy Conservations Standards
----------------------------------------------------------------------------------------------------------------
Size category (fuel Energy conservation
Equipment Subcategory input rate) standard *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged Gas-fired.............. >=300,000 Btu/h and 80.0% ET
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Gas-fired.............. >2,500,000 Btu/h....... 82.0% EC
Boilers.
Hot Water Commercial Packaged Oil-fired.............. >=300,000 Btu/h and 82.0% ET
Boilers. <=2,500,000 Btu/h.
Hot Water Commercial Packaged Oil-fired.............. >2,500,000 Btu/h....... 84.0% EC
Boilers.
Steam Commercial Packaged Boilers... Gas-fired--all, except >=300,000 Btu/h and 79.0% ET
natural draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers... Gas-fired--all, except >2,500,000 Btu/h....... 79.0% ET
natural draft.
Steam Commercial Packaged Boilers... Gas-fired--natural >=300,000 Btu/h and 77.0% ET
draft. <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers... Gas-fired--natural >2,500,000 Btu/h....... 77.0% ET
draft.
Steam Commercial Packaged Boilers... Oil-fired.............. >=300,000 Btu/h and 81.0% ET
<=2,500,000 Btu/h.
Steam Commercial Packaged Boilers... Oil-fired.............. >2,500,000 Btu/h....... 81.0% ET
----------------------------------------------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion efficiency'' as defined in 10 CFR 431.82
(b) Each commercial packaged boilers listed in Table 2 to Sec.
431.87 and manufactured on or after [DATE 3 YEARS AFTER PUBLICATION IN
THE FEDERAL REGISTER OF THE FINAL RULE ESTABLISHING AMENDED ENERGY
CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS], must meet the
applicable energy conservation standard levels in Table 2.
Table 2 to Sec. 431.87--Commercial Packaged Boiler Energy
Conservations Standards
------------------------------------------------------------------------
Size category Energy conservation
Equipment (fuel input rate) standard *
------------------------------------------------------------------------
Small Gas-Fired Hot Water >300,000 Btu/h and 85.0% ET
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Gas-Fired Hot Water >2,500,000 Btu/h 85.0% EC
Commercial Packaged Boilers. and <=10,000,000
Btu/h.
Very Large Gas-Fired Hot Water >10,000,000 Btu/h. 82.0% EC
Commercial Packaged Boilers.
Small Oil-Fired Hot Water >300,000 Btu/h and 87.0% ET
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Oil-Fired Hot Water >2,500,000 Btu/h 88.0% EC
Commercial Packaged Boilers. and <=10,000,000
Btu/h.
Very Large Oil-Fired Hot Water >10,000,000 Btu/h. 84.0% EC
Commercial Packaged Boilers.
Small Gas-Fired Steam >300,000 Btu/h and 81.0% ET
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Gas-Fired Steam >2,500,000 Btu/h 82.0% ET
Commercial Packaged Boilers. and <=10,000,000
Btu/h.
Very Large Gas-Fired Steam >10,000,000 Btu/h. 79.0% ET
Commercial Packaged Boilers **.
Small Oil-Fired Steam >300,000 Btu/h and 84.0% ET
Commercial Packaged Boilers. <=2,500,000 Btu/h.
Large Oil-Fired Steam >2,500,000 Btu/h 85.0% ET
Commercial Packaged Boilers. and <=10,000,000
Btu/h.
Very Large Oil-Fired Steam >10,000,000 Btu/h. 81.0% ET
Commercial Packaged Boilers.
------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion
efficiency'' as defined in 10 CFR 431.82
** Prior to March 2, 2022, for natural draft very large gas-fired steam
commercial packaged boilers, a minimum thermal efficiency level of 77%
is permitted and meets Federal commercial packaged boiler energy
conservation standards.
[FR Doc. 2016-06588 Filed 3-23-16; 8:45 am]
BILLING CODE 6450-01-P