[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Rules and Regulations]
[Pages 1786-1858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29992]
[[Page 1785]]
Vol. 82
Friday,
No. 4
January 6, 2017
Part II
Department of Energy
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10 CFR Part 430
Energy Conservation Program: Energy Conservation Standards for
Residential Central Air Conditioners and Heat Pumps; Final Rule
Federal Register / Vol. 82 , No. 4 / Friday, January 6, 2017 / Rules
and Regulations
[[Page 1786]]
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DEPARTMENT OF ENERGY
10 CFR Part 430
[Docket Number EERE-2014-BT-STD-0048]
RIN 1904-AD37
Energy Conservation Program: Energy Conservation Standards for
Residential Central Air Conditioners and Heat Pumps
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Direct final rule.
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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as
amended, prescribes energy conservation standards for various consumer
products and certain commercial and industrial equipment, including
residential central air conditioners and heat pumps. EPCA also requires
the U.S. Department of Energy (DOE) to periodically determine whether
more-stringent, amended standards would be technologically feasible and
economically justified, and would save a significant amount of energy.
In this direct final rule, DOE adopts amended energy conservation
standards for residential central air conditioners and heat pumps.
DATES: The effective date of this rule is May 8, 2017 unless adverse
comment is received by April 26, 2017. If adverse comments are received
that DOE determines may provide a reasonable basis for withdrawal of
the direct final rule, a timely withdrawal of this rule will be
published in the Federal Register. If no such adverse comments are
received, compliance with the amended standards in this final rule will
be required for central air conditioners and heat pumps as specified in
this final rule starting on January 1, 2023.
ADDRESSES: The docket, which includes Federal Register notices, public
meeting attendee lists and transcripts, comments, and other supporting
documents/materials, is available for review at www.regulations.gov.
All documents in the docket are listed in the www.regulations.gov
index. However, some documents listed in the index, such as those
containing information that is exempt from public disclosure, may not
be publicly available.
A link to the docket Web page for residential central air
conditioners and heat pumps can be found at: www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/72. The
www.regulations.gov Web page contains instructions on how to access all
documents, including public comments, in the docket.
For further information on how to submit a comment or review other
public comments and the docket, contact the Appliance and Equipment
Standards staff at (202) 586-6636 or by email:
[email protected].
FOR FURTHER INFORMATION CONTACT: Mr. Antonio Bouza, 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) 586-4563. Email:
[email protected].
Ms. Johanna Jochum, U.S. Department of Energy, Office of the
General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC
20585-0121. Telephone: (202) 287-6307. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Direct Final 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 the Current CAC/HP Rulemaking
3. 2015-2016 ASRAC Working Group Recommended Standard Levels
III. General Discussion
A. Regulatory Approach
B. Compliance Dates
C. Regional Standards
D. Alternative Refrigerants
E. Standby Mode and Off Mode
F. Test Procedure
G. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
H. Energy Savings
1. Determination of Savings
2. Significance of Savings
I. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology
A. Market and Technology Assessment
1. Definition and Scope of Coverage
2. Product Classes
3. Technology Options
B. Screening Analysis
C. Engineering Analysis
1. Representative Capacities
2. Efficiency Levels
3. Manufacturer Production Costs
4. Tabulated Results
D. Markups Analysis
E. Energy Use Analysis
1. General Approach
2. Split-System Central Air Conditioner: Blower-Coil to Coil-
Only Efficiency Adjustment
3. Split-System Central Air Conditioner: Coil-Only Efficiency
Adjustment
4. Split-System Central Air Conditioner: Coil-Only Installations
5. Fan Energy Use During Continuous Operation
6. Other Issues
F. Life-Cycle Cost and Payback Period Analysis
1. Inputs to Installed Cost
a. Equipment Cost
b. Installation Cost
2. Inputs to Operating Costs
a. Energy Consumption
b. Energy Prices
c. Maintenance and Repair Costs
d. Product Lifetime
e. Discount Rates
f. Product Efficiency in the No-New-Standards Case
3. Inputs to Payback Period Analysis
G. Shipments Analysis
1. Model Structure
2. Inputs and Method
H. National Impact Analysis
1. Efficiency Trends
2. Product Cost Trend
3. Accounting for Repaired Units
4. National Energy Savings
5. Net Present Value of Consumer Benefit
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model
a. Government Regulatory Impact Model Key Inputs
b. Government Regulatory Impact Model Scenarios
K. Emissions Analysis
L. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
2. Social Cost of Other Air Pollutants
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
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 Period
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Direct Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
e. Cumulative Regulatory Burden
3. National Impact Analysis
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a. Significance of Energy Savings
b. Net Present Value of Consumer Costs and Benefits
c. Indirect Impacts on Employment
4. Impact on Product Utility or Performance
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
8. Summary of National Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Central Air
Conditioner and Heat Pump Standards
2. Summary of Benefits and Costs (Annualized) of the Amended
Standards
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary
I. Synopsis of the Direct Final Rule
Title III, Part B \1\ of the Energy Policy and Conservation Act of
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as
codified), established the Energy Conservation Program for Consumer
Products Other Than Automobiles.\2\ These products include central air
conditioners (CACs) and heat pumps (HPs), the subject of this
rulemaking. (42 U.S.C. 6292(a)(3))
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\1\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\2\ All references to EPCA in this document refer to the statute
as amended through the Energy Efficiency Improvement Act of 2015
(EEIA 2015), Public Law 114-11 (April 30, 2015).
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Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that is technologically feasible and economically justified.
(42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must
result in the significant conservation of energy. (42 U.S.C.
6295(o)(3)(B)) The statute also provides that not later than six years
after issuance of any final rule establishing or amending a standard,
DOE must publish either a notice of determination that standards for
the product do not need to be amended or a notice of proposed
rulemaking including new proposed energy conservation standards
(proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1))
Once complete, this rulemaking will satisfy these statutory
requirements.
In light of the above and under the authority provided by 42 U.S.C.
6295(p)(4), DOE is issuing this direct final rule amending the energy
conservation standards for residential central air conditioners and
heat pumps. The amendments outlined in this document reflect the
culmination of a DOE rulemaking that included the following notices and
stakeholder comments thereon: November 2014 request for information
(RFI) (79 FR 65603 (Nov. 5, 2014)); August 2015 notice of data
availability (NODA) (80 FR 52206 (August 28, 2015)); and the 2015-2016
Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC)
central air conditioners and heat pumps working group negotiations,
hereinafter referred to as ``the Negotiations'' (80 FR 40938 (July 14,
2015)). See section II.B.2 for a detailed history of the current
rulemaking.
The consensus reached by the CAC/HP ASRAC Working Group,
hereinafter referred to as ``the CAC/HP Working Group,'' on amended
energy conservation standards is outlined in the ASRAC Working Group
Term Sheet, hereinafter referred to as ``the Term Sheet.'' (ASRAC
Working Group Term Sheet, Docket No. EERE-2014-BT-STD-0048, No. 0076)
After carefully considering the Term Sheet, DOE determined that the
recommendations contained therein are compliant with 42 U.S.C. 6295(o),
as required by 42 U.S.C. 6295(p)(4)(A)(i) for the issuance of a direct
final rule. As required by 42 U.S.C. 6295(p)(4)(A)(i), DOE is
simultaneously publishing a NOPR proposing that the identical standard
levels contained in this direct final rule be adopted. Consistent with
the statute, DOE is providing a 110-day public comment period on the
direct final rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any
comments received provide a reasonable basis for withdrawal of the
direct final rule under 42 U.S.C. 6295(o), DOE will continue the
rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A
for more details on DOE's statutory authority.
This direct final rule documents DOE's analyses to objectively and
independently evaluate the energy savings potential, technological
feasibility, and economic justification of the standard levels
recommended in the Term Sheet, as per the requirements of 42 U.S.C.
6295(o).
DOE conducted separate test procedure rulemakings simultaneously
with the energy conservation standard rulemaking to amend the DOE
central air conditioners and heat pumps test procedure. The amended DOE
CAC/HP test procedure and associated rulemakings are discussed in
detail in section III.F. As per the request of the CAC/HP Working
Group, the analyses documented in this direct final rule are based on
the DOE test procedure at the time of the 2015-2016 Negotiations.
Efficiency levels selected on the basis of these analyses were then
translated to efficiency levels based on the amended test procedure.
This methodology was first advocated by Carrier/United Technologies
Corporation (UTC) and adopted by stakeholders during the Negotiations.
(ASRAC Public Meeting, No. 87 at p. 48) This methodology is also
reflected in the Term Sheet. Recommendation #8 of the Term Sheet
includes standard levels based on the test procedure at the time of the
2015-2016 Negotiations. (ASRAC Term Sheet, No. 76 at pp. 4-5) The
standard levels established by this direct final rule are translated
levels based on the test procedure established by the test procedure
final rule issued by DOE on November 30, 2016, hereinafter referred to
as the ``November 2016 test procedure final rule,'' (which is codified
in 10 CFR part 430, subpart B, appendix M1).\3\ (Docket No. EERE-2016-
BT-TP-0029)
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\3\ The test procedure final rule issued by DOE on November 30,
2016 is accessible via the DOE Web site at: http://energy.gov/eere/buildings/downloads/issuance-2016-11-30-energy-conservation-program-test-procedures-central-air.
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Ultimately, DOE found that the standard levels recommended in the
Term Sheet would result in significant energy savings and are
technologically feasible and economically justified. Table I-1
documents the amended standards for central air conditioners and heat
pumps based on the DOE test procedure at the time of the 2015-2016
Negotiations. The amended standards correspond to the recommended trial
standard level (TSL) (as described in section V.A) and are expressed in
terms of Seasonal Energy Efficiency Ratio (SEER), Energy Efficiency
Ratio (EER), and Heating Seasonal Performance Factor (HSPF). The
amended standards are the same as those recommended by the Working
Group. These amended standards apply to all central air conditioners
and heat pumps listed in Table I-1 and manufactured in, or imported
into, the United States starting on January 1, 2023. The amended
[[Page 1788]]
standards listed in the table below result in less energy consumption
than the current standards, which remain in effect until January 1,
2023.
Table I-1--Amended Energy Conservation Standards for Residential Central Air Conditioners and Heat Pumps Based
on the DOE Test Procedure at the Time of the 2015-2016 Negotiations (Recommended TSL)
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National Southeast * Southwest **
Product class -------------------------------------------------------------------
SEER HSPF SEER SEER EER
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Split-System Air Conditioners with a 14 ........... 15 15 * * * 12.2/
Certified Cooling Capacity <45,000 Btu/h... 10.2
Split-System Air Conditioners with a 14 ........... 14.5 14.5 * * * 11.7/
Certified Cooling Capacity >=45,000 Btu/h.. 10.2
Split-System Heat Pumps..................... 15 8.8 ........... ........... ..............
Single-Package Air Conditioners [dagger].... 14 ........... ........... ........... 11.0
Single-Package Heat Pumps [dagger].......... 14 8.0 ........... ........... ..............
Space-Constrained Air Conditioners [dagger]. 12 ........... ........... ........... ..............
Space-Constrained Heat Pumps [dagger]....... 12 7.4 ........... ........... ..............
Small-Duct High-Velocity Systems [dagger]... 12 7.2 ........... ........... ..............
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* Southeast includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana,
Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the
District of Columbia, and the U.S. territories.
** Southwest includes the states of Arizona, California, Nevada, and New Mexico.
*** The 10.2 EER amended energy conservation standard applies to split-system air conditioners with a seasonal
energy efficiency ratio greater than or equal to 16.
[dagger] The energy conservation standards for single-package, small-duct high-velocity and space-constrained
product classes remain unchanged from current levels.
DOE notes that the amended standard levels presented in Table I-1
are in terms of the test procedure that was in place at the time of the
CAC/HP Working Group Negotiations. That test procedure did not include
the amendments adopted in the November 2016 TP final rule, which are
outlined in section III.F. In section V.C, the amended standard levels
are translated to and presented in terms of the test procedure
established by the November 2016 test procedure final rule.
Accordingly, the standard levels included in the regulatory text of
this direct final rule are presented in terms of the test procedure
established by the November 2016 test procedure final rule.
DOE is not amending the off mode standards for central air
conditioners and heat pumps at this time. The June 2011 direct final
rule included the first standards for off mode electric power
consumption, with a compliance date of January 1, 2015. 76 FR 37408
(June 27, 2011); 10 CFR 430.32(c)(5). However, DOE subsequently issued
an enforcement policy statement on July 8, 2014 regarding off mode
standards for central air conditioners and heat pumps specifying that
DOE would not assert its civil penalty authority for violation of the
off mode standard until 180 days following publication of a final rule
establishing a test method for measuring off mode electrical power
consumption.\4\ DOE established this test method in a final rule
published on June 8, 2016 (``June 2016 test procedure final rule''). 81
FR 36992. As a result, the standards for off mode will be enforceable
beginning on December 5, 2016. DOE finds it is not feasible to consider
amending standards for which compliance has yet to begin.
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\4\ Available at: http://energy.gov/sites/prod/files/2014/07/f17/EnforcementPolicyStatement-cacoffmode.pdf (Last accessed July 1,
2016).
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A. Benefits and Costs to Consumers
Table I-2 presents DOE's evaluation of the economic impacts of the
energy conservation standards on consumers of central air conditioners
and heat pumps, as measured by the average life-cycle cost (LCC)
savings and the simple payback period (PBP).\5\ The average LCC savings
are positive for all product classes. The PBP for each product class
falls well below the average lifetime of the product, which is
estimated to be 21 years for central air conditioners and 15 years for
heat pumps (see section IV.G of this document).
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\5\ The average LCC savings are measured relative to the
estimated efficiency distribution in the no-new-standards case,
which depicts the market in the compliance year in the absence of
amended standards (see section IV.F.3.f). The simple PBP, which is
designed to compare specific efficiency levels, is measured relative
to the baseline model (see section IV.C.2).
Table I-2--Impacts of Amended Energy Conservation Standards on Consumers
of Residential Central Air Conditioners and Heat Pumps (Recommended TSL)
------------------------------------------------------------------------
Average LCC Simple payback
Product class savings (2015$) period (years)
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Split-System Air Conditioners *. N: $43............ N: 10.5.
HD: $150.......... HD: 7.6.
HH: $39........... HH: 7.7.
Split-System Heat Pumps......... $131.............. 4.9.
Packaged Air Conditioners **.... N/A............... N/A.
Packaged Heat Pumps **.......... N/A............... N/A.
Space-Constrained Air N/A............... N/A.
Conditioners **.
Small-Duct High-Velocity Air N/A............... N/A.
Conditioners **.
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* N = Northern region; HD = Hot-dry region; HH = Hot-humid region.
** The standard levels for Packaged Air Conditioners, Packaged Heat
Pumps, Space-Constrained Air Conditioners, and Small-Duct High-
Velocity Air Conditioners are at the baseline level in the Recommended
TSL, so there is no impact on consumers.
[[Page 1789]]
DOE's analysis of the impacts of the amended standards on consumers
is described in further detail in section IV.F of this document.
B. Impact on Manufacturers
The industry net present value (INPV) is the sum of the discounted
cash flows to the industry from the base year through the end of the
30-year analysis period.\6\ Using a real discount rate of 11.0
percent,\7\ DOE estimates that the INPV for manufacturers of
residential central air conditioners and heat pumps is $4,496.1 million
in 2015$. Under the amended standards, DOE expects the change in INPV
to range from approximately -15.4 percent to -2.5 percent, which
corresponds to approximately -$692.3 million to -$114.2 million (in
2015$). In order to bring products into compliance with proposed
standards, DOE expects the industry to incur $342.6 million in
conversion costs.
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\6\ In contrast to the NIA, which uses an end date of 2050 for
TSLs 1, 3 and 4, and an end date of 2052 for TSL 2, the MIA
maintains the same end date (2050) for all TSLs. This is done to
enable clear comparison of INPV impacts across TSLs. See chapter 12
of the direct final rule TSD for a more detailed discussion of this
assumption.
\7\ DOE estimated preliminary financial metrics, including the
industry discount rate, based on publicly available financial
information, including Securities and Exchange Commission (``SEC'')
filings and S&P bond ratings. DOE presented the preliminary
financial metrics to manufacturers in MIA interviews. DOE adjusted
those values based on feedback from manufacturers. The complete set
of financial metrics and more detail about the methodology can be
found in chapter 12 of the final rule TSD. Additionally, DOE
provides a sensitivity analysis based on an alternative discount
rate in chapter 12 of the TSD. Using an 8% discount rate, the change
in INPV ranges from -16.6 to -1.3 percent at the adopted level.
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DOE's analysis of the impacts of the amended standards on
manufacturers is described in further detail in sections IV.J and V.B.2
of this direct final rule.
C. National Benefits and Costs \8\
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\8\ All monetary values in this document are expressed in 2015
dollars and, where appropriate, are discounted to 2016 unless
explicitly stated otherwise.
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DOE's analyses indicate that the energy conservation standards
being adopted in this direct final rule for central air conditioners
and heat pumps would save a significant amount of energy. Relative to
the case without amended standards (referred to as the ``no-new-
standards case''), the lifetime energy savings for central air
conditioners and heat pumps purchased in the 30-year period that begins
in the anticipated first full year of compliance with the amended
standards (2023-2052) amount to 3.2 quadrillion British thermal units
(Btu), or ``quads.'' \9\ This represents a savings of 2.6 percent
relative to the energy use of these products in the no-new-standards
case.
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\9\ The quantity refers to full-fuel-cycle (FFC) energy savings.
FFC energy savings includes the energy consumed in extracting,
processing, and transporting primary fuels (i.e., coal, natural gas,
petroleum fuels), and, thus, presents a more complete picture of the
impacts of energy efficiency standards. For more information on the
FFC metric, see section IV.H.4.
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The cumulative national net present value (NPV) of total consumer
costs and savings for the amended standards for central air
conditioners and heat pumps ranges from $2.5 billion (at a 7-percent
discount rate) to $12.2 billion (at a 3-percent discount rate). This
NPV expresses the estimated total value of future operating-cost
savings minus the estimated increased product and installation costs
for central air conditioners and heat pumps purchased in 2023-2052.
In addition, the standards for central air conditioners and heat
pumps that are being adopted in this direct final rule are expected to
yield significant environmental benefits. DOE estimates the standards
to result in cumulative emission reductions (over the same period as
for energy savings) of 188.3 million metric tons (Mt) \10\ of carbon
dioxide (CO2), 100.8 thousand tons of sulfur dioxide
(SO2), 350.3 thousand tons of nitrogen oxides
(NOX), 842.4 thousand tons of methane (CH4),
2.114 thousand tons of nitrous oxide (N2O), and 0.372 tons
of mercury (Hg).\11\ The cumulative reduction in CO2
emissions through 2030 amounts to 13.3 Mt, which is equivalent to the
emissions resulting from the annual electricity use of 1.2 million
homes.
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\10\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons.
\11\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy
Outlook 2015 (AEO 2015) Reference case. AEO 2015 generally
represents current legislation and environmental regulations for
which implementing regulations were available as of October 31,
2014.
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The value of the CO2 reductions is calculated using a
range of values per metric ton of CO2 (otherwise known as
the Social Cost of Carbon, or SCC) developed by a recent Federal
interagency process.\12\ The derivation of the SCC values is discussed
in section IV.L. 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 (not including
CO2-equivalent emissions of other gases with global warming
potential) is between $1.1 billion and $16.9 billion with a value of
$5.5 billion using the central SCC case represented by $40.6/t in 2015.
DOE also estimates the present monetary value of the NOX
emissions reduction to be $0.2 billion at a 7-percent discount rate and
$0.5 billion at a 3-percent discount rate.\13\ DOE is investigating
appropriate valuation of the reduction in other emissions, and did not
include any such values in this rulemaking.
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\12\ United States Government-Interagency Working Group on
Social Cost of Carbon, Technical Support Document: Technical Update
of the Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866 (May 2013; Revised July 2015) (Available at:
https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
\13\ DOE estimated the monetized value of NOX
emissions reductions using benefit-per-ton estimates from the
Regulatory Impact Analysis for the Clean Power Plan Final Rule,
published in August 2015 by EPA's Office of Air Quality Planning and
Standards. (Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section
IV.L.2 for further discussion. The U.S. Supreme Court has stayed the
rule implementing the Clean Power Plan until the current litigation
against it concludes. Chamber of Commerce, et al. v. EPA, et al.,
Order in Pending Case, 577 U.S. ___((2016). However, the benefit-
per-ton estimates established in the Regulatory Impact Analysis for
the Clean Power Plan are based on scientific studies that remain
valid irrespective of the legal status of the Clean Power Plan. DOE
is primarily using a national benefit-per-ton estimate for
NOX 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.
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Table I-3 summarizes the economic benefits and costs expected to
result from the amended energy conservation standards for central air
conditioners and heat pumps.
Table I-3--Summary of Economic Benefits and Costs of Amended Energy
Conservation Standards for Central Air Conditioners and Heat Pumps
(Recommended TSL) *
------------------------------------------------------------------------
Present value
Category (billion 2015$) Discount rate (%)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings... 8.6 7
[[Page 1790]]
24.4 3
CO2 Reduction (using mean SCC at 1.1 5
5% discount rate) **.............
CO2 Reduction (using mean SCC at 5.5 3
3% discount rate) **.............
CO2 Reduction (using mean SCC at 8.9 2.5
2.5% discount rate) **...........
CO2 Reduction (using 95th- 16.9 3
percentile SCC at 3% discount
rate) **.........................
NOX Reduction [dagger]............ 0.2 7
0.5 3
Total Benefits [dagger][dagger]... 14.3 7
30.5 3
------------------------------------------------------------------------
Costs
------------------------------------------------------------------------
Consumer Incremental Installed 6.1 7
Costs............................
12.3 3
------------------------------------------------------------------------
Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Emissions 8.2 7
Reduction Monetized Value
[dagger][dagger].................
18.2 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with central air
conditioners and heat pumps shipped in 2023-2052. These results
include benefits to consumers which accrue after 2052 from the
products purchased in 2023-2052. 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%. For example, for 2015 emissions, these values are $12.4/t,
$40.6/t, and $63.2/t, in 2015$, respectively. The fourth set ($118/t
in 2015$ for 2015 emissions), which represents the 95th percentile of
the SCC distribution calculated using a 3% 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 of this document for more
details.
[dagger] DOE estimated the monetized value of NOX emissions reductions
using benefit-per-ton estimates from the Regulatory Impact Analysis
for the Clean Power Plan Final Rule, published in August 2015 by EPA's
Office of Air Quality Planning and Standards. (Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L.2 for further discussion. DOE is
primarily using a national benefit-per-ton estimate for NOX 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.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are derived
using the series corresponding to average SCC with a 3-percent
discount rate ($40.6/t in 2015).
The benefits and costs of the amended energy conservation
standards, for central air conditioners and heat pumps sold in 2023-
2052, can also be expressed in terms of annualized values. The monetary
values for the total annualized net benefits are the sum of: (1) The
national economic value of the benefits in reduced operating costs,
minus (2) the increases in product purchase and installation costs,
plus (3) the value of the benefits of CO2 and NOX
emission reductions, all annualized.\14\
---------------------------------------------------------------------------
\14\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2016, 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 2016. 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 the covered
products. The national operating cost savings is measured for the
lifetime of central air conditioners and heat pumps shipped in 2023-
2052. The CO2 reduction is a benefit that accrues globally
due to decreased domestic energy consumption that is expected to result
from this 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 well
beyond 2100 through 2300.
Estimates of annualized benefits and costs of the amended 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 uses a 3-percent discount
rate ($40.6/t in 2015)),\15\ the estimated cost of the central air
conditioners and heat pumps standards adopted in this rule is $741
million per year in increased equipment costs, while the estimated
benefits are $1,041 million per year in reduced equipment operating
costs, $337 million per year in CO2 reductions, and $22
million per year in reduced NOX emissions. In this case, the
net benefit amounts to $659 million per year. Using a 3-percent
discount rate for all benefits and costs and the average SCC series
that uses a 3-percent discount rate ($40.6/t in 2015), the estimated
cost of the central air conditioners and heat pumps standards being
adopted in this rule is $747 million per year in increased equipment
costs, while the estimated benefits are $1,488 million per year in
reduced equipment operating costs, $337 million per year in
CO2 reductions, and $32 million per year in reduced
NOX emissions. In this case, the net benefit would amount to
$1,110 million per year.
---------------------------------------------------------------------------
\15\ DOE used a 3-percent discount rate because the SCC values
for the series used in the calculation were derived using a 3-
percent discount rate (see section IV.L).
[[Page 1791]]
Table I-4--Annualized Benefits and Costs of Amended Energy Conservation Standards for Central Air Conditioners
and Heat Pumps (Recommended TSL)
----------------------------------------------------------------------------------------------------------------
Primary estimate Low-net-benefits High-net-benefits
Discount rate (%) * estimate * estimate *
----------------------------------------------------------------------------------------------------------------
(million 2015$/year)
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings. 7................. 1,041............. 1,005............. 1,147.
3................. 1,488............. 1,425............. 1,653.
CO2 Reduction (using mean SCC at 5................. 100............... 100............... 100.
5% discount rate) **.
CO2 Reduction (using mean SCC at 3................. 337............... 337............... 337.
3% discount rate) **.
CO2 Reduction (using mean SCC at 2.5............... 494............... 494............... 494.
2.5% discount rate) **.
CO2 Reduction (using 95th- 3................. 1,027............. 1,027............. 1,027.
percentile SCC at 3% discount
rate ) **.
NOX Reduction [dagger].......... 7................. 22................ 22................ 49.
3................. 32................ 32................ 73.
-------------------------------------------------------------------------------
Total Benefits 7 plus CO2 range.. 1,163 to 2,090.... 1,127 to 2,054.... 1,296 to 2,223.
[dagger][dagger].
7................. 1,400............. 1,364............. 1,533.
3 plus CO2 range.. 1,620 to 2,547.... 1,557 to 2,484.... 1,826 to 2,753.
3................. 1,857............. 1,794............. 2,063.
----------------------------------------------------------------------------------------------------------------
Costs
----------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed 7................. 741............... 784............... 723.
Costs.
3................. 747............... 799............... 725.
----------------------------------------------------------------------------------------------------------------
Net Benefits
----------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]...... 7 plus CO2 range.. 422 to 1,349...... 342 to 1,269...... 573 to 1,500.
7................. 659............... 580............... 810.
3 plus CO2 range.. 873 to 1,800...... 757 to 1,684...... 1,100 to 2,028.
3................. 1,110............. 994............... 1,338.
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with central air conditioners and heat pumps
shipped in 2023-2052. These results include benefits to consumers which accrue after 2052 from the products
purchased in 2023-2052. 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-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from the AEO
2015 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
incremental product costs reflect a modest decline rate for projected product prices in the Primary Estimate,
a constant rate in the Low-Net-Benefits Estimate, and a higher decline rate in the High-Net-Benefits Estimate.
The methods used to derive projected price trends are explained in section IV.F.1. Note that the Benefits and
Costs may not sum to the Net Benefits due to rounding.
** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the
average SCC calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth represents the 95th
percentile of the SCC distribution calculated using a 3% discount rate. The SCC values are emission year
specific. See section IV.L.1 for more details
[dagger] DOE estimated the monetized value of NOX emissions reductions using benefit-per-ton estimates from the
Regulatory Impact Analysis for the Clean Power Plan Final Rule, published in August 2015 by EPA's Office of
Air Quality Planning and Standards. (Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L.2 for further discussion. For the Primary Estimate and Low-
Net-Benefits Estimate, DOE used a national benefit-per-ton estimate for NOX emitted from the Electric
Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al.,
2009). For the High-Net-Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study
(Lepuele et al., 2011); these are nearly two-and-a-half times larger than those from the ACS study.
[dagger][dagger] Total Benefits for both the 3% and 7% 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 adopted standards is
described in further detail in section IV.H of this direct final rule.
D. Conclusion
DOE has determined that the statement containing recommendations
with respect to energy conservation standards for central air
conditioners and heat pumps was submitted jointly by interested persons
that are fairly representative of relevant points of view, in
accordance with 42 U.S.C. 6295(p)(4)(A). After considering the analysis
and weighing the benefits and burdens, DOE has determined that the
recommended standards are in accordance with 42 U.S.C. 6295(o), which
contains the criteria for prescribing new or amended standards.
Specifically, the Secretary has determined that the adoption of the
recommended standards would result in the significant conservation of
energy and is technologically feasible and economically justified. In
determining whether the recommended standards are economically
justified, the Secretary has determined that the benefits of the
recommended standards exceed the burdens. Namely, the Secretary has
concluded that the recommended standards, when considering the benefits
of energy savings, positive NPV of consumer benefits, emission
reductions, the estimated monetary value of the emissions reductions,
and positive average LCC savings, would yield benefits outweighing the
negative impacts on some consumers and on manufacturers, including the
conversion
[[Page 1792]]
costs that could result in a reduction in INPV for manufacturers.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule amending the energy conservation
standards for residential central air conditioners and heat pumps.
Consistent with this authority, DOE is also publishing elsewhere in
this Federal Register a notice of proposed rulemaking proposing
standards that are identical to those contained in this direct final
rule. See 42 U.S.C. 6295(p)(4)(A)(i).
II. Introduction
The following sections briefly discuss the statutory authority
underlying this direct final rule, as well as the historical background
related to the establishment of standards for residential central air
conditioners and heat pumps.
A. Authority
Title III, Part B of the Energy Policy and Conservation Act of 1975
(EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as codified)
established the Energy Conservation Program for Consumer Products Other
Than Automobiles, a program covering most major household appliances
(collectively referred to as ``covered products''), which includes the
residential central air conditioners and heat pumps that are the
subject of this rulemaking. (42 U.S.C. 6292(a)(3))
Pursuant to EPCA, DOE's energy conservation program for covered
products consists essentially of four parts: (1) Testing; (2) labeling;
(3) the establishment of Federal energy conservation standards; and (4)
certification and enforcement procedures. The Federal Trade Commission
(FTC) is primarily responsible for labeling, and DOE implements the
remainder of the program. Subject to certain criteria and conditions,
DOE is required to develop test procedures to measure the energy
efficiency, energy use, or estimated annual operating cost of each
covered product prior to the adoption of a new or amended energy
conservation standard. (42 U.S.C. 6295(o)(3)(A) and (r)) Manufacturers
of covered products must use the prescribed DOE test procedure as the
basis for certifying to DOE that their products comply with the
applicable energy conservation standards adopted under EPCA and when
making representations to the public regarding the energy use or
efficiency of those products. (42 U.S.C. 6293(c) and 6295(s))
Similarly, DOE must use these test procedures to determine whether the
products comply with standards adopted pursuant to EPCA. (42 U.S.C.
6295(s)) The DOE test procedures for central air conditioners and heat
pumps appear at title 10 of the Code of Federal Regulations (CFR) part
430, subpart B, appendix M and M1.
The National Appliance Energy Conservation Act of 1987 (NAECA; Pub.
L. 100-12) included amendments to EPCA that established the original
energy conservation standards for central air conditioners and heat
pumps. (42 U.S.C. 6295(d)(1)-(2)) EPCA, as amended, also requires DOE
to conduct two cycles of rulemakings to determine whether to amend the
energy conservation standards for central air conditioners and heat
pumps. (42 U.S.C. 6295(d)(3)) The first cycle culminated in a final
rule published in the Federal Register on August 17, 2004 (the August
2004 Rule), which prescribed energy conservation standards for central
air conditioners and heat pumps manufactured or imported on and after
January 23, 2006. 69 FR 50997. DOE completed the second of the two
rulemaking cycles by issuing a direct final rule on June 6, 2011 (2011
Direct Final Rule), which was published in the Federal Register on June
27, 2011. 76 FR 37408. The 2011 Direct Final Rule (June 2011 DFR)
amended standards for central air conditioners and heat pumps
manufactured on or after January 1, 2015.
EPCA requires DOE to periodically review its already established
energy conservation standards for a covered product. Not later than six
years after issuance of any final rule establishing or amending a
standard, DOE must publish a notice of determination that standards for
the product do not need to be amended, or a notice of proposed
rulemaking including new proposed standards. (42 U.S.C. 6295(m)(1))
Pursuant to this requirement, the next review that DOE would need to
conduct must occur no later than six years from the issuance of the
2011 direct final rule. This direct final rule fulfills that
requirement.
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including residential central
air conditioners and heat pumps. Any new or amended standard for a
covered product must be designed to achieve the maximum improvement in
energy efficiency that is technologically feasible and economically
justified. (42 U.S.C. 6295(o)(2)(A) and (3)(B)) Furthermore, DOE may
not adopt any standard that would not result in the significant
conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not
prescribe a standard: (1) For certain products, including residential
central air conditioners and heat pumps, if no test procedure has been
established for the product, or (2) if DOE determines by rule that the
proposed standard is not technologically feasible or economically
justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed
standard is economically justified, after receiving comments on the
proposed standard, DOE must determine whether the benefits of the
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make
this determination by, to the greatest extent practicable, considering
the following seven factors:
(1) The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the standard;
(3) The total projected amount of energy (or as applicable, water)
savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the covered
products likely to result from the standard;
(5) The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
standard;
(6) The need for national energy and water conservation; and
(7) Other factors the Secretary of Energy (Secretary) considers
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
DOE notes that the current energy conservation standards for
central air conditioners and heat pumps (set forth at 10 CFR 430.32(c))
contain requirements for seasonal energy efficiency ratio (SEER),
heating seasonal performance factor (HSPF), energy efficiency ratio
(EER), and average off mode power consumption. Standards based upon the
latter two metrics were newly adopted in the June 27, 2011 DFR for the
reasons stated in that rulemaking. 76 FR 37408. As discussed below in
section II.B.1 and section II.B.3, DOE has chosen to specify
performance standards based on EER and SEER for only the southwest
region of the country. Pursuant to its mandate under 42 U.S.C.
6295(m)(1), this DOE rulemaking has considered amending the existing
energy conservation standards for central air conditioners and heat
pumps, and DOE is adopting the amended standards contained in this
direct final rule.
EPCA, as codified, also contains what is known as an ``anti-
backsliding''
[[Page 1793]]
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. 6295(o)(1)) Also, the Secretary may not prescribe an amended
or new standard if interested persons have established by a
preponderance of evidence that the standard is likely to result in the
unavailability in the United States of any covered product type (or
class) or performance characteristics (including reliability),
features, sizes, capacities, and volumes that are substantially the
same as those generally available in the United States. (42 U.S.C.
6295(o)(4))
Further, EPCA, as codified, establishes a rebuttable presumption
that a standard is economically justified if the Secretary finds that
the additional cost to the consumer of purchasing a product complying
with an energy conservation standard level will be less than three
times the value of the energy savings during the first year that the
consumer will receive as a result of the standard, as calculated under
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE
generally considers these criteria as part of its analysis but
consistently conducts a more thorough analysis of a given standard's
projected impacts that extends beyond this presumption.
Additionally, 42 U.S.C. 6295(q)(1) specifies requirements when
promulgating an energy conservation standard for a covered product that
has two or more subcategories. In this case, DOE must specify a
different standard level for a type or class of covered product that
has 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 such feature
justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In
determining whether a performance-related feature justifies a different
standard for a group of products, DOE must consider such factors as the
utility to the consumer of the feature and other factors DOE deems
appropriate. Id. Any rule prescribing such a standard must include an
explanation of the basis on which such higher or lower level was
established. (42 U.S.C. 6295(q)(2))
Under 42 U.S.C. 6295(o)(6), which was added to EPCA by section
306(a) of the Energy Independence and Security Act of 2007 (EISA 2007;
Public Law. 110-140), DOE may consider the establishment of regional
standards for central air conditioners and heat pumps. Specifically, in
addition to a base national standard for a product, DOE may for central
air conditioners and heat pumps, establish one or two more-restrictive
regional standards. (42 U.S.C. 6295(o)(6)(B)) The regions must include
only contiguous States (with the exception of Alaska and Hawaii, which
may be included in regions with which they are not contiguous), and
each State may be placed in only one region (i.e., an entire State
cannot simultaneously be placed in two regions, nor can it be divided
between two regions). (42 U.S.C. 6295(o)(6)(C)) Further, DOE can
establish the additional regional standards only: (1) Where doing so
would produce significant energy savings in comparison to a single
national standard, (2) if the regional standards are economically
justified, and (3) after considering the impact of these standards on
consumers, manufacturers, and other market participants, including
product distributors, dealers, contractors, and installers. (42 U.S.C.
6295(o)(6)(D))
Federal energy conservation requirements generally supersede State
laws or regulations concerning energy conservation testing, labeling,
and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers
of Federal preemption for particular State laws or regulations, in
accordance with the procedures and other provisions set forth under 42
U.S.C. 6297(d).
Pursuant to further amendments to EPCA contained in EISA 2007, Pub.
L. 110-140, any final rule for new or amended energy conservation
standards promulgated after July 1, 2010, is required to address
standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3))
Specifically, when DOE adopts a standard for a covered product after
that date, it must, if justified by the criteria for adoption of
standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and
off mode energy use into a single standard, or, if that is not
feasible, adopt a separate standard for such energy use for that
product. (42 U.S.C. 6295(gg)(3)(A)-(B)) The SEER and HSPF metrics for
central air conditioners and heat pumps already account for standby
mode energy use, and the current standards include limits on off mode
energy use. Section III.E further discusses standby mode and off mode
energy use.
As mentioned previously, EISA 2007 amended EPCA, in relevant part,
to grant DOE authority to issue a final rule (hereinafter referred to
as a ``direct final rule'') establishing an energy conservation
standard on receipt of a statement submitted jointly by interested
persons that are fairly representative of relevant points of view
(including representatives of manufacturers of covered products,
States, and efficiency advocates), as determined by the Secretary, that
contains recommendations with respect to an energy or water
conservation standard that are in accordance with the provisions of 42
U.S.C. 6295(o). (42 U.S.C. 6295(p)(4)) Pursuant to 42 U.S.C.
6295(p)(4), the Secretary must also determine whether a jointly-
submitted recommendation for an energy or water conservation standard
satisfies 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable.
A notice of proposed rulemaking (NOPR) that proposes an identical
energy efficiency standard must be published simultaneously with the
direct final rule, and DOE must provide a public comment period of at
least 110 days on this proposal. (42 U.S.C. 6295(p)(4)(A)-(B)) While
DOE typically provides a comment period of 60 days on proposed
standards, in this case, DOE provides a comment period of the same
length as the comment period on the direct final rule--i.e. 110 days.
Based on the comments received during this period, the direct final
rule will either become effective, or DOE will withdraw it not later
than 120 days after its issuance if (1) one or more adverse comments is
received, and (2) DOE determines that those comments, when viewed in
light of the rulemaking record related to the direct final rule,
provide a reasonable basis for withdrawal of the direct final rule
under 42 U.S.C. 6295(o) and for DOE to continue this rulemaking under
the NOPR. (42 U.S.C. 6295(p)(4)(C)) Receipt of an alternative joint
recommendation may also trigger a DOE withdrawal of the direct final
rule in the same manner. Id.
Typical of other rulemakings, it is the substance, rather than the
quantity, of comments that will ultimately determine whether a direct
final rule will be withdrawn. To this end, the substance of any adverse
comment(s) received will be weighed against the anticipated benefits of
the jointly-submitted recommendations and the likelihood that further
consideration of the comment(s) would change the results of the
rulemaking. DOE notes that, to the extent an adverse comment had been
previously raised and addressed in the rulemaking proceeding, such a
submission will not typically provide a basis for withdrawal of a
direct final rule. Nevertheless, if the Secretary makes such a
determination, DOE must withdraw the direct final rule
[[Page 1794]]
and proceed with the simultaneously-published NOPR. DOE must publish in
the Federal Register the reason why the direct final rule was
withdrawn. Id.
B. Background
1. Current Standards
This section briefly summarizes the history leading up to and
including the conception of the current standards for residential air
conditioners and heat pumps. Congress initially prescribed statutory
standard levels for residential central air conditioners and heat pumps
through amendments to EPCA included in the National Appliance Energy
Conservation Act of 1987 (NAECA), Public Law 100-12. (42 U.S.C.
6295(d)(1)-(2)) DOE was required to subsequently conduct two rounds of
rulemaking to consider amended standards for these products. (42 U.S.C.
6295(d)(3)) The first cycle culminated in a final rule published in the
Federal Register on August 17, 2004 (the August 2004 final rule). The
August 2004 final rule prescribed energy conservation standards for
central air conditioners and heat pumps manufactured or imported on and
after January 23, 2006. 69 FR 50997.
DOE completed the second of the two rulemaking cycles by publishing
a direct final rule on June 27, 2011. 76 FR 37408. The June 2011 DFR
combined the rulemakings for residential furnaces, central air
conditioners, and heat pumps; divided the country into three regions
for CAC/HP: Southeast ``hot humid'' region, southwest ``hot-dry''
region, and northern ``rest of country'' (national standard); and
amended standards, including different standards for each region, for
central air conditioners and heat pumps manufactured on or after
January 1, 2015.
On October 31, 2011, DOE published a notice of effective date and
compliance dates for the direct final rule responding to comments it
received. 76 FR 67037. Ultimately, DOE determined that the comments
received in response to the direct final rule for amended energy
conservation standards for residential central air conditioners and
heat pumps did not provide a reasonable basis for withdrawal of the
DFR. Id.
The current standards, which differ by region, were published in
the June 27, 2011 DFR. 76 FR 37408, 37546-47. These standards are
codified in DOE's regulations in the Code of Federal Regulations (CFR)
at 10 CFR 430.32(c)(2)-(5). The standards consist of a minimum SEER for
each class of air conditioner and a minimum SEER and HSPF for each
class of heat pump. 10 CFR 430.32(c)(2)-(3). In addition, the June 2011
DFR also established regional standards on EER for the southwest region
\16\ for split-system air conditioner and single-package air
conditioner product classes. 10 CFR 430.32(c)(4). All covered central
air conditioners and heat pumps were also required to meet standards
for average off mode electrical power consumption. 10 CFR 430.32(c)(5).
DOE's current regulatory requirements for central air conditioners and
heat pumps are listed in Table II.1.
---------------------------------------------------------------------------
\16\ The 2011 Direct Final Rule divides the United States into
three different climate zones based on the number of heating degree
days: Southeast region, southwest region, and the north (also
referred to as ``rest of the country'') which represents the
national standard.
Table II-1--Energy Conservation Standards for Central Air Conditioners and Heat Pumps Manufactured On or After
January 1, 2015 [dagger]
----------------------------------------------------------------------------------------------------------------
Southeastern region Southwestern region
Product class National standard levels [dagger][dagger] standard [Dagger] standard
levels levels
----------------------------------------------------------------------------------------------------------------
Split-system air conditioners..... SEER = 13................. SEER = 14................. SEER = 14
EER = 12.2 (for
units with a rated
cooling capacity
less than 45,000
Btu/h)
EER = 11.7 (for
units with a rated
cooling capacity
equal to or greater
than 45,000 Btu/h)
-----------------------------------------------------------------------------
Split-system heat pumps........... SEER = 14
HSPF = 8.2
-----------------------------------------------------------------------------
Single-package air conditioners... SEER = 14................. SEER = 14................. SEER = 14
EER = 11.0
-----------------------------------------------------------------------------
Single-package heat pumps......... SEER = 14
HSPF = 8.0
Small-duct, high-velocity systems SEER = 12
[Dagger][Dagger].
HSPF = 7.2
Space-constrained products--air SEER = 12
conditioners [Dagger][Dagger].
Space-constrained products--heat SEER = 12
pumps [Dagger][Dagger].
HSPF = 7.4
----------------------------------------------------------------------------------------------------------------
[dagger] ``SEER'' is Seasonal Energy Efficiency Ratio; ``EER'' is Energy Efficiency Ratio; ``HSPF'' is Heating
Seasonal Performance Factor; and ``Btu/h'' is British thermal units per hour.
[dagger][dagger] The Southeastern region for central air conditioners contains the following States: Alabama,,
Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, North Carolina,
Oklahoma, South Carolina, Tennessee, Texas, and Virginia, and the District of Columbia.
[Dagger] The Southwestern region for central air conditioners contains the States of Arizona, California,
Nevada, and New Mexico.
[Dagger][Dagger] DOE did not amend energy conservation standards for these product classes.
The June 2011 DFR also established off mode energy conservation
standards for residential central air conditioners and heat pumps, as
summarized in Table II.2 and described in section III.E.
[[Page 1795]]
Table II-2--Off Mode Energy Conservation Standards for Central Air
Conditioners and Heat Pumps Manufactured On or After January 1, 2015 *
------------------------------------------------------------------------
Product class Off mode standard levels [dagger]
------------------------------------------------------------------------
Split-system air conditioners.... PW,OFF = 30 watts.
Split-system heat pumps.......... PW,OFF = 33 watts.
Single-package air conditioners.. PW,OFF = 30 watts.
Single-package heat pumps........ PW,OFF = 33 watts.
Small-duct, high-velocity systems PW,OFF = 30 watts.
Space-constrained air PW,OFF = 30 watts.
conditioners.
Space-constrained heat pumps..... PW,OFF = 33 watts.
------------------------------------------------------------------------
* ``PW,OFF'' is off mode electrical power consumption for central air
conditioners and heat pumps.
[dagger] DOE is not adopting a separate standby mode standard level for
central air conditioners and heat pumps, because standby mode power
consumption for these products is already regulated by SEER and HSPF.
2. History of the Current CAC/HP Rulemaking
This section provides an overview of the history of the current
central air conditioner and heat pump rulemaking following the June
2011 DFR up to this direct final rule.
Following DOE's adoption of the June 2011 DFR, the American Public
Gas Association (APGA) filed a petition for review with the U.S. Court
of Appeals for the District of Columbia Circuit, seeking to invalidate
the June 2011 DFR as it pertained to non-weatherized gas furnaces
(NWGFs) and mobile home gas furnaces (MHGFs). Petition for Review,
American Public Gas Association, et al. v. Department of Energy, et
al., No. 11-1485 (D.C. Cir. filed Dec. 23, 2011). APGA requested the
court to vacate and remand the direct final rule for further notice and
comment rulemaking, with its main arguments being that DOE
inappropriately banned noncondensing furnaces in the northern region
and adopted a standard that would cause significant fuel switching
without economic justification.\17\
---------------------------------------------------------------------------
\17\ Brief for Petitioner, American Public Gas Association, et
al. v. Department of Energy, et al., No. 11-1485 (D.C. Cir. filed
May 14, 2012). See also: http://www.achrnews.com/ext/resources/2013/06-2013/06-03-13/APGA-Petition-DC-Cir_11-1485.pdf.
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On April 24, 2014, the Court granted a motion that approved a
settlement agreement reached between DOE, APGA, and the various
intervenors.\18\ Under this settlement agreement, DOE agreed to a court
vacatur and remand of the regional standards for non-weatherized
natural gas and mobile home furnaces and to use best efforts to
complete a new standards rulemaking for those products within two
years. Accordingly, the Court's order vacated the June 2011 DFR in part
(i.e., those portions relating to NWGFs and MHGFs) and remanded to the
agency for further rulemaking. Notwithstanding this litigation, the
regional standards for residential central air conditioners and heat
pumps contained in the June 27, 2011 DFR went into effect as originally
scheduled with a compliance date of January 1, 2015. Around this time,
DOE also decided to initiate a negotiated rulemaking with stakeholders
on regional standards enforcement for central air conditioners and heat
pumps.
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\18\ See: http://www.acca.org/wp-content/uploads/2014/03/joint-motion-to-vacate-and-remand-2014-to-file.pdf.
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On August 26, 2014, DOE published a notice of open meetings for the
central air conditioner and heat pump regional standards enforcement
working group, which was tasked to discuss and reach consensus on a
proposed rule \19\ for the enforcement of regional standards for split-
system and single-package air conditioners. 79 FR 50856. This working
group was scheduled to periodically convene from August through October
of 2014. DOE issued a final rule on central air conditioner and heat
pump regional standards enforcement on July 14, 2016. 81 FR 45387.
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\19\ More details on the issues considered can be found in the
docket: http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-
CE-0077-0070.
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According to the Energy Policy and Conservation Act's 6-year review
requirement (42 U.S.C. 6295(m)(1)), DOE must publish a notice of
proposed rulemaking to propose new standards for residential central
air conditioner and heat pump products or a notice of determination
that the existing standards do not need to be amended by June 6, 2017.
On November 5, 2014, DOE initiated efforts pursuant to the 6-year
lookback requirement by publishing a request for information (RFI)
regarding central air conditioners and heat pumps to solicit comments
on whether to amend the current energy conservation standards for
residential central air conditioner and heat pump products. 79 FR
65603. The November 2014 RFI also described the procedural and
analytical approaches that DOE anticipated using in order to evaluate
potential amended energy conservation standards for central air
conditioners and heat pumps.
On August 28, 2015, DOE published a notice of data availability
(NODA) describing analysis to be used in support of the central air
conditioners and heat pumps standards rulemaking. 80 FR 52206. The
analysis for this notice provided the results of a series of DOE
provisional analyses regarding potential energy savings and economic
impacts of amending the central air conditioner and heat pump energy
conservation standards. These analyses were conducted for the following
categories: Engineering, consumer impacts, national impacts, and
manufacturer impacts.
In response to the November 2014 RFI, Lennox formally requested
that DOE convene a negotiated rulemaking to address potential
amendments to the current standards, which would help ensure that all
stakeholders have input into the discussion, analysis, and outcome of
the rulemaking. (Lennox, No. 22) Other key industry stakeholders made
similar suggestions. (American Council for an Energy-Efficient Economy,
No. 23; Air Conditioning Contractors of America, No. 25; Heating, Air
Conditioning & Refrigeration Distributors International, No. 26) ASRAC
carefully evaluated this request, and the Committee voted to charter a
working group to support the negotiated rulemaking effort requested by
these parties.
Subsequently, DOE determined that the complexity of the CAC/HP
rulemaking necessitated a combined effort to address these equipment
types to ensure a comprehensive vetting of all issues and related
analyses to support any final rule setting standards. To this end, DOE
solicited the public for membership nominations to the CAC/HP Working
Group that would be formed under the ASRAC charter by issuing a Notice
of Intent to Establish the Central Air Conditioners and Heat Pumps
Working Group To Negotiate a
[[Page 1796]]
Notice of Proposed Rulemaking for Energy Conservation Standards. 80 FR
40938 (July 14, 2015). The CAC/HP Working Group was established under
ASRAC in accordance with the Federal Advisory Committee Act (FACA) and
the Negotiated Rulemaking Act--with the purpose of discussing and, if
possible, reaching consensus on a set of energy conservation standards
to propose/finalize for CACs and HPs. The CAC/HP Working Group was to
consist of fairly representative parties having a defined stake in the
outcome of the proposed standards, and would consult, as appropriate,
with a range of experts on technical issues.
DOE received 26 nominations for membership. Ultimately, the CAC/HP
Working Group consisted of 15 members, including one member from ASRAC
and one DOE representative.\20\ The CAC/HP Working Group met ten times
(nine times in-person and once by teleconference). The meetings were
held on August 26, 2015, September 10, 2015, September 28-29, 2015,
October 13-14, 2015, October 26-27, 2015. November 18-19, 2015,
December 1-2, 2015, December 16-17, 2015, January 11-12, 2016, and a
webinar on January 19, 2016.
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\20\ The group members were Tony Bouza (U.S. Department of
Energy), Marshall Hunt (Pacific Gas & Electric Company, San Diego
Gas & Electric Company, Southern California Edison, and Southern
California Gas Company), Andrew deLaski (Appliance Standards
Awareness Project and ASRAC representative), Meg Waltner (Natural
Resources Defense Council), John Hurst (Lennox), Karen Meyers (Rheem
Manufacturing Company), Charles McCrudden (Air Conditioning
Contractors of America), Harvey Sachs (American Council for an
Energy Efficient Economy), Russell Tharp (Goodman Manufacturing),
Karim Amrane (Air-Conditioning, Heating, and Refrigeration
Institute), Don Brundage (Southern Company), Kristen Driskell
(California Energy Commission), John Gibbons (United Technologies),
Steve Porter (Johnstone Supply), and Jim Vershaw (Ingersoll Rand).
---------------------------------------------------------------------------
During the CAC/HP Working Group discussions, participants discussed
setting new standards for single-package air conditioners.
Specifically, arguments were made against raising the standard level
for single-package systems due to the unavailability of full product
lines, which span the entire range of cooling capacities, with
efficiencies that are only modestly greater (i.e., 15 SEER) than the
current standard level (i.e., 14 SEER). (ASRAC Public Meeting, No. 80
at pp. 75-6) After being informed that the national energy savings from
a 15 SEER standard for single-package systems would be small (i.e.,
approximately 0.1 quads), the Working Group agreed not to recommend
raising the standards for these product classes. (ASRAC Public Meeting,
No. 80 at pp. 90-91). In addition, some parties wanted the Group to
recommend a level for standards for split-system heat pumps that would
encourage use of two-speed equipment (i.e., greater than 15 SEER), but
the manufacturer representatives objected to this proposal due to two
primary concerns: (1) Only a single compressor manufacturer supplies
two-stage compressors, thereby creating the possibility of a limited or
constrained supply of the most critical component of a two-speed system
and (2) the likelihood, in replacement installations, that the
utilization of existing thermostat control wiring could result in the
use of only high-speed, thereby eliminating the efficiency gain
resulting from low-speed operation during part-load conditions.
The CAC/HP Working Group successfully reached consensus on
recommended energy conservation standards, as well as test procedure
amendments for CACs and HPs. On January 19, 2016, the CAC/HP Working
Group submitted the Term Sheet to ASRAC outlining its recommendations,
which ASRAC subsequently adopted.\21\
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\21\ Available at (copy and paste into browser): https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0076.
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3. 2015-2016 ASRAC CAC/HP Working Group Recommended Standard Levels
This section summarizes the standard levels recommended in the Term
Sheet submitted by the CAC/HP Working Group for CAC/HP standards and
the subsequent procedural steps taken by DOE. Recommendation #8 of the
Term Sheet recommends standard levels based on the test procedure at
the time of the 2015-2016 Negotiations. (ASRAC Term Sheet, No. 76 at
pp. 4-5) These recommended standard levels are presented in Table II-3.
Note that the test procedure at the time of the 2015-2016 Negotiations
did not include the amendments adopted in the November 2016 test
procedure final rule, which are outlined in section III.F.
Recommendation #9 tabulates the translated standard levels based on the
amended test procedure (ASRAC Term Sheet, No. 76 at p. 5). Details of
the other Term Sheet recommendations can be found in the Term Sheet
posted in the docket.\22\
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\22\ Available at (copy and paste into browser): https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0076.
Table II-3--Recommended Amended Energy Conservation Standards for Residential Central Air Conditioners and Heat
Pumps as Determined by the DOE Test Procedure at the Time of the 2015-2016 ASRAC Negotiations
[Recommended TSL]
----------------------------------------------------------------------------------------------------------------
National Southeast Southwest **
------------------------ * ---------------------------
Product class ------------
SEER HSPF SEER SEER EER ***
----------------------------------------------------------------------------------------------------------------
Split-System Air Conditioners with a Certified 14 .......... 15 15 **** 12.2/10.2
Cooling Capacity <45,000 Btu/h.................
Split-System Air Conditioners with a Certified 14 .......... 14.5 14.5 **** 11.7/10.2
Cooling Capacity >=45,000 Btu/h................
Split-System Heat Pumps......................... 15 8.8 .......... .......... ..............
Single-Package Air Conditioners and Heat Pumps.. 14 8.0 .......... .......... 11.0
----------------------------------------------------------------------------------------------------------------
* Southeast includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana,
Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the
District of Columbia, and the U.S. territories.
** Southwest includes the states of Arizona, California, Nevada, and New Mexico.
*** EER requirements only apply to air conditioners, not heat pumps within each product class.
**** The 10.2 EER amended energy conservation standard applies to split-system air conditioners with a seasonal
energy efficiency ratio greater than or equal to 16.
Note: The energy conservation standards for small-duct high velocity and space-constrained remain unchanged from
current levels.
[[Page 1797]]
After carefully considering the consensus recommendations for
amending the energy conservation standards for CACs and HPs submitted
by the CAC/HP Working Group and adopted by ASRAC, DOE has determined
that these recommendations are in accordance with the statutory
requirements of 42 U.S.C. 6295(p)(4) for the issuance of a direct final
rule.
More specifically, these recommendations comprise a statement
submitted by interested persons who are fairly representative of
relevant points of view on this matter. In reaching this determination,
DOE took into consideration the fact that the CAC/HP Working Group, in
conjunction with ASRAC members who approved the recommendations,
consisted of representatives of manufacturers of the covered equipment
at issue, States, and efficiency advocates--all of which are groups
specifically identified by Congress as relevant parties to any
consensus recommendation. (42 U.S.C. 6295(p)(4)(A)) As delineated
above, the Term Sheet was signed and submitted by a broad cross-section
of interests, including the manufacturers who produce the subject
products, trade associations representing these manufacturers and
installation contractors, environmental and energy-efficiency advocacy
organizations, and electric utility companies. Although States were not
direct signatories to the Term Sheet, the ASRAC Committee approving the
CAC/HP Working Group's recommendations included at least two members
representing States--one representing the National Association of State
Energy Officials (NASEO) and one representing the State of
California.\23\ Moreover, DOE does not read the statute as requiring a
statement submitted by all interested parties before the Department may
proceed with issuance of a direct final rule. By explicit language of
the statute, the Secretary has the discretion to determine when a joint
recommendation for an energy or water conservation standard has met the
requirement for representativeness (i.e., ``as determined by the
Secretary''). Id.
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\23\ These individuals were Deborah E. Miller (NASEO) and David
Hungerford (California Energy Commission).
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DOE also evaluated whether the recommendation satisfies 42 U.S.C.
6295(o), as applicable. In making this determination, DOE conducted an
analysis to evaluate whether the potential energy conservation
standards under consideration achieve the maximum improvement in energy
efficiency that is technologically feasible and economically justified
and result in significant energy conservation. The evaluation is the
same comprehensive approach that DOE typically conducts whenever it
considers potential energy conservation standards for a given type of
product or equipment.
Upon review, the Secretary determined that the Term Sheet comports
with the standard-setting criteria set forth under 42 U.S.C.
6295(p)(4)(A). Accordingly, the consensus-recommended efficiency levels
were included as the ``recommended TSL'' for CACs/HPs (see section V.A
for description of all of the considered TSLs). The details regarding
how the consensus-recommended TSLs comply with the standard-setting
criteria are discussed and demonstrated in the relevant sections
throughout this document.
In sum, as the relevant criteria under 42 U.S.C. 6295(p)(4) have
been satisfied, the Secretary has determined that it is appropriate to
adopt the consensus-recommended amended energy conservation standards
for CACs and HPs through this direct final rule. Also in accordance
with the provisions described in section II.A, DOE is simultaneously
publishing a NOPR proposing that the identical standard levels
contained in this direct final rule be adopted.
III. General Discussion
This section covers subjects that are not explicitly discussed in
other sections but provide additional necessary context for
understanding this direct final rule.
A. Regulatory Approach
When DOE initiated this rulemaking, DOE had intended to rate and
certify split-system central air conditioners based on a blower-coil
configuration. This approach was reflected in the August 2015 NODA TSD.
However, in the June 2016 test procedure final rule, DOE adopted a
different approach based on CAC/HP Working Group recommendations. 81 FR
36992, 37001-03 (June 8, 2016). At its meeting on November 19, 2015,
DOE presented two potential regulatory approaches, one based on both
coil only and blower-coil configurations (approach 1, similar to the
existing regulatory structure) and one based on blower-coil
configurations (approach 2), both of which DOE regarded as feasible.
During discussion, the CAC/HP Working Group generally supported
approach 1 based on concerns with approach 2. Working Group members'
primary concern with approach 2 is that the majority of sales are for
coil-only installations, so blower-coil only ratings would not be
representative of the majority of field installations, which could
contribute to consumer confusion. (ASRAC Public Meeting, No. 85 at pp.
6-42) \24\ The CAC/HP Working Group ultimately recommended that DOE
adopt approach 1 and require rating and certifying split-system central
air conditioners based on any configuration (i.e., coil-only or blower-
coil). The regulatory approach to split-system central air conditioners
is identified as recommendation #7 in the CAC/HP Working Group Term
Sheet. (ASRAC Term Sheet, No. 76 at p. 4) The June 2016 test procedure
final rule includes a detailed discussion of these recommended changes
and DOE's adoption of them. 81 FR 36992, 37001-37003 (June 8, 2016).
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\24\ For discussion supporting approach 1, or the approach not
based solely on blower coil ratings, see for example, Karen Meyers,
pp. 27-28; Rusty Tharp, p. 29; Jim Vershaw, p. 36.
---------------------------------------------------------------------------
For the August 2015 NODA, DOE developed cost-efficiency
relationships in the engineering analysis for blower coil systems. Then
DOE established a correlation between blower coil system efficiency and
coil-only efficiency based on ratings from the AHRI database. DOE used
this correlation to calculate the cost-efficiency relationship for
coil-only systems. Given the revised regulatory approach for this DFR,
DOE analyzed coil-only cost-efficiency directly. Section IV.C describes
in detail how DOE determined the cost-efficiency relationship for coil-
only systems in this DFR.
B. Compliance Dates
EPCA prescribes a five-year period between the standard's
publication date and the compliance date (42 U.S.C. 6295(m)(4)(A)(i)).
The compliance date for the 2011 DFR is January 1, 2015. The statute
further provides that no manufacturer shall be required to apply new
standards to a product to which other new standards have been required
during the prior six-year period (42 U.S.C. 6295(m)(4)(B)). Given these
statutory provisions, the earliest date that DOE could require
compliance with amended standards would be January 1, 2021 (i.e., six
years after January 1, 2015, the compliance date of the standards
adopted in the June 27, 2011 DFR). Thus, DOE contemplated a compliance
date in 2021 in analyzing the impacts of the TSLs other than the
Recommended TSL, which represents the recommended standards.
For the Recommended TSL, the CAC/HP Working Group recommended a
compliance date of January 1, 2023. While this implies a period between
the
[[Page 1798]]
standards final rule's publication date and the compliance date that is
longer than five years, DOE understands that EPCA provides some measure
of discretion when adopting recommended standards submitted as part of
a consensus agreement, provided that DOE determines that the
recommended standards are otherwise in accordance with the required
provisions. See 42 U.S.C. 6295(p)(4). DOE has made the determination
that the rulemaking record in this case supports the adoption of the
recommended compliance date.
C. Regional Standards
As described previously, EISA 2007 amended EPCA to allow for the
establishment of one or two more-restrictive regional standards in
addition to the base national standard for residential central air
conditioners and heat pumps. (42 U.S.C. 6295(o)(6)(B)) The regions must
include only contiguous States (with the exception of Alaska and
Hawaii, which can be included in regions with which they are not
contiguous), and each State may be placed in only one region (i.e., a
State cannot be divided among or otherwise included in two regions).
(42 U.S.C. 6295(o)(6)(C))
Further, EPCA mandates that a regional standard must produce
significant energy savings in comparison to a single national standard,
and provides that DOE must determine that the additional standards are
economically justified and consider the impact of the additional
regional standards on consumers, manufacturers, and other market
participants, including product distributors, dealers, contractors, and
installers. (42 U.S.C. 6295(o)(6)(D)) In the 2011 Direct Final Rule,
DOE considered the above-delineated impacts of regional standards in
addition to national standards for central air conditioners and heat
pumps, and the analyses indicated that regional standards will provide
additional positive impacts. See chapter 10 of the 2011 DFR TSD.\25\
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\25\ Reference to Technical Support Document for Residential
Central Air Conditioners, Heat Pumps, and Furnaces, Chapter 10
National and Regional Impact Analyses (copy and paste into browser):
http://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-STD-0011-
0012.
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Consistent with the consensus agreement \26\ submitted to DOE by a
number of interested stakeholders on January 15, 2011, the 2011 Direct
Final Rule established regional standards on EER for split-system and
single-package air conditioners for the southwest region. Pursuant to
42 U.S.C. 6295(o)(1) (i.e., the ``anti-backsliding clause''), DOE may
not prescribe any amended standard which increases the maximum
allowable energy use or decreases the minimum required energy
efficiency of a covered product. As such, DOE intends to maintain the
application of a regional standard requirement for the same product
classes in the same regions. Accordingly, DOE has addressed the
potential impacts from regional standards in the relevant analyses,
including the mark-ups to determine product price, the LCC and payback
period analysis, the national impact analysis (NIA), and the
manufacturer impact analysis (MIA). DOE's approach for addressing
regional standards is included in the methodology section corresponding
to each individual analysis in section IV of this direct final rule.
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\26\ Reference to Joint Stakeholders Comments on Energy
Conservation Standards for Residential Central Air Conditioners,
Heat Pumps, and Residential Furnaces (copy and paste into browser):
https://www.regulations.gov/document?D=EERE-2011-BT-STD-0011-0016.
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D. Alternative Refrigerants
Residential central air conditioners and heat pumps currently on
the market primarily utilize R-410A as the refrigerant. R-410A is a
mixture of hydrofluorocarbons (HFCs), specifically HFC-32 (R-32) and
HFC-125 (R-125) with a 50 percent/50 percent mass ratio. Stakeholders
have raised concern that the high global warming potential of HFCs has
put pressure on the industry to phase out HFC-containing refrigerants
in favor of alternatives with a lower global warming potential (GWP).
In response to the November 2014 RFI, ACEEE recommended that DOE
consider the potential impact of changes in refrigerants on the
standards. (ACEEE, No. 21 at p.3) Lennox suggested that DOE consider
equipment redesigns resulting from the transition to alternate
refrigerants. (Lennox, No. 10 at p. 4) Southern Co. suggested that DOE
also model efficiencies using low-Global Warming Potential (GWP)
refrigerants. (Southern Co., No. 11 at p. 2) EIA strongly urged DOE to
consider the use of low-GWP refrigerants and alternative refrigerants
such as CO2, and indirect evaporative cooling technology. (EIA, No. 12
at p. 1) Rheem suggested that DOE reevaluate the efficacy of design
options with respect to the elimination of R410a. (Rheem, No. 17 at p.
3).
In response, DOE is aware that the U.S. Environmental Protection
Agency (EPA) has proposed and finalized amendments to its lists of
approved refrigerants under its significant new alternatives policy
program \27\ (SNAP); however, these changes do not address central air
conditioners and heat pumps.\28\ It would not be appropriate for DOE to
speculate on the outcome of a rulemaking in progress or potential
proposals that have not yet been issued. Therefore, DOE has not
included possible outcomes of a potential EPA SNAP rulemaking affecting
central air conditioners and heat pumps in the engineering or LCC
analyses. This decision is consistent with past DOE practice, such as
in the 2011 direct final rule for room air conditioners. 76 FR 22454
(April 21, 2011). DOE is aware of stakeholder concerns that EPA may
broaden the applications for which HFC refrigerants are phased out at
some point in the future. DOE is confident that there will be an
adequate supply of R-410A for compliance with the standards being
adopted in this notice. However, consistent with Executive Order 13563,
``Improving Regulation and Regulatory Review,'' DOE will prioritize its
review of the potential effects of any future phase-out of HFCs (should
there be one) on the efficiency standards related to this rulemaking.
If a manufacturer believes that its design is subjected to undue
hardship by regulations, the manufacturer may petition DOE's Office of
Hearing and Appeals (OHA) for exception relief or exemption from the
standard pursuant to OHA's authority under section 504 of the DOE
Organization Act (42 U.S.C. 7194), as implemented at subpart B of 10
CFR part 1003. OHA has the authority to grant such relief on a case-by-
case basis if it determines that a manufacturer has demonstrated that
meeting the standard would cause hardship, inequity, or unfair
distribution of burdens.
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\27\ EPA regulates refrigerants for air conditioning,
refrigeration, and other end uses under the stratospheric ozone
protection provisions under Section 612(c) the Clean Air Act (CAA).
EPA's SNAP Program evaluates and regulates the availability of
refrigerants for the U.S. market by identifying and publishing lists
of acceptable and unacceptable refrigerant substitutes.
\28\ EPA on July 9, 2014 proposed new alternative refrigerants
for several applications, but not central air conditioners or heat
pumps. 79 FR 38811. On February 27, 2015, EPA issued the final rule
for this rulemaking, which was published in the Federal Register on
April 10, 2015 (see http://www.epa.gov/ozone/snap/download/SAN_5745-SNAP_Low_GWP_Refrigerants_FRM_Signature_Version-signed-2-27-2015.pdf). 80 FR 19454. Also, on August 6, 2014, EPA proposed
delisting refrigerants for several applications, but not central air
conditioners or heat pumps. 79 FR 46126. On July 20, 2015, EPA
published the final rule for this rulemaking, which went into effect
on August 19, 2015. 80 FR 42870. Refer to the docket (copy and paste
into browser): https://www.regulations.gov/docket?D=EPA-HQ-OAR-2014-0198.
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As such, DOE did not conduct additional analysis based on
alternative
[[Page 1799]]
refrigerants to replace R-410A in this rulemaking.
E. Standby Mode and Off Mode
As noted in section II.A of this document, any final rule for
amended or new energy conservation standards for consumer products that
is published on or after July 1, 2010 must address standby mode and off
mode energy use. (42 U.S.C. 6295(gg))
As set forth in 10 CFR 430.2, Standby mode means the condition in
which an energy-using product--
(1) Is connected to a main power source; and
(2) Offers one or more of the following user-oriented or protective
functions:
(i) To facilitate the activation or deactivation of other functions
(including active mode) by remote switch (including remote control),
internal sensor, or timer; or
(ii) Continuous functions, including information or status displays
(including clocks) or sensor-based functions.
For residential central air conditioners and heat pumps, the
standby mode refers to the state when a system is connected to the
power supply but the compressor and fans are not running (i.e., the
system is not actively cooling or heating but it is primed to be
activated by the thermostat). The SEER and HSPF metrics for cooling and
heating already account for standby mode energy use. Specifically, the
degradation coefficients used to adjust the steady-state efficiency
levels to account for cyclic operation of the unit when calculating
SEER or HSPF are based on electric energy measurements that include the
energy use of the unit during the compressor-off cycles, and they
include power input associated with all unit components, including the
control system.
As set forth in 10 CFR 430.2, off mode means the condition in which
an energy using product is connected to a main power source, and is not
providing any standby or active mode function. For central air
conditioners and heat pumps, off mode generally occurs during all non-
cooling seasons for air conditioners, and during the ``shoulder
seasons'' (i.e., fall and spring) for heat pumps when consumers neither
heat nor cool their homes. Unlike standby mode, off mode energy use is
not captured in the SEER and HSPF metrics. As such, the June 2011
Direct Final Rule established off mode energy conservation standards
for central air conditioners and heat pumps. In the technology
assessment of the June 2011 Direct Final Rule, DOE considered five
technologies associated with off mode for central air conditioners and
heat pumps: (1) Toroidal transformers; (2) ECM control relays; (3)
thermostatically-controlled crankcase heaters; (4) self-regulating
crankcase heaters, and (5) compressor insulation covers. DOE continues
to screen out the ECM control relay because DOE is not aware of any
commercially-available systems that use this technology, and DOE is
also not aware of any improvements to the technology that would address
the associated reliability issues. DOE did, however, consider the
remaining four technologies as design options for establishing the off
mode energy conservation standards. The adopted standards were
ultimately based upon this list of technologies. 76 FR 37408, 37447-
37450 (June 27, 2011).
For the current direct final rule, DOE further researched the four
technologies considered as design options in the June 2011 DFR. DOE was
able to find thermostatically-controlled and self-regulating crankcase
heaters in commercially-available central air conditioners and heat
pumps. However, manufacturer specifications do not provide detailed
wattage information for DOE to determine if these technologies could
lower the off mode energy use for central air conditioners and heat
pumps based on the existing off mode standards. Toroidal transformers
may have higher efficiencies than conventional laminate transformers,
but their savings potential is small compared to the precision of the
test procedure as applied to baseline products. Crankcase heater
wattage, rather than transformer loss, represents most of the measured
off mode power input. DOE also believes that compressor covers can
reduce heat loss and, therefore, reduce the off mode energy
consumption. However, the existing off mode standards established by
the June 2011 Direct Final Rule are already consistent with the energy
use achievable using these technologies, and DOE does not have evidence
to indicate that further energy savings based on these technologies are
achievable.
In addition to the four technologies considered in the June 2011
Direct Final Rule, DOE identified another two technologies that could
potentially reduce the off mode energy use for central air conditioners
and heat pumps: (1) Hermetic crankcase heaters and (2) integral
compressor motor heaters. However, DOE did not find any commercially-
available applications of these two technologies in central air
conditioners and heat pumps and did not consider these technologies
further. More details on these technologies can be found in chapter 3
of the DFR TSD.
As such, DOE concludes that amending the off mode energy
conservation standards at this time is not justified. This review
satisfies, for off mode energy conservation standards for CAC/HP
products, the periodic review of energy conservation standards required
by EPCA. (42 U.S.C. 6295(m)(1))
F. Test Procedure
This section provides a brief overview of DOE's requirements with
respect to test procedures as well as the history of the most recent
central air conditioner and heat pump test procedure rulemakings and an
overview of the significant changes adopted.
EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
certify to DOE that their product complies with energy conservation
standards and to quantify the efficiency of their product.
DOE notes that Appendix A established procedures, interpretations,
and policies to guide DOE in the consideration and promulgation of new
or revised appliance efficiency standards under EPCA. (See section 1 of
10 CFR of 430 subpart C, appendix A) These procedures are a general
guide to the steps DOE typically follows in promulgating energy
conservation standards. The guidance recognizes that DOE can and will,
on occasion, deviate from the typical process. (See 10 CFR part 430,
subpart C, appendix A, section 14(a)) In this particular instance, DOE
deviated from its typical process by conducting a negotiated rulemaking
process, per the request of multiple key stakeholders and as chartered
by ASRAC. The CAC/HP Working Group met ten times (nine times in-person
and once by teleconference) and successfully reached consensus on
recommended amended energy conservation standards, as well as test
procedure amendments for CACs and HPs. On January 19, 2016, the CAC/HP
Working Group submitted the Term Sheet to ASRAC outlining its
recommendations, which ASRAC subsequently adopted. As discussed in
section II.B.3, the Term Sheet meets the criteria of a consensus
recommendation, and DOE has determined that these recommendations are
in accordance with the statutory requirements of 42 U.S.C. 6295(p)(4)
for the issuance of a direct final rule. DOE ultimately adopted many of
the test procedure provisions and recommended standard levels that the
CAC/HP Working Group included in the Term Sheet, which
[[Page 1800]]
illustrates that DOE's deviations from the typical rulemaking process
in this instance did not adversely impact the manufacturers' ability to
understand and provide input to DOE's rulemaking process. The process
that DOE used, in this case, was a more collaborative negotiated
rulemaking effort resulting in an agreement on recommended standard
levels, which DOE is fully implementing in this direct final rule.
The most recent test procedure rulemaking included the following
key rulemaking documents: The June 2016 test procedure final rule (81
FR 36992), the August 2016 test procedure SNOPR (81 FR 58164), and the
November 2016 test procedure final rule (Docket No. EERE-2016-BT-TP-
0029). This section does not address specific comments received on
these test procedure documents, as those comments are addressed in the
three notices listed. Rather, the main purpose of this section is to
provide context for understanding the efficiency levels used in
analyses for this direct final rule and the translated levels following
the walkdown analysis. To reiterate, efficiency levels used throughout
the analyses for this DFR are based on the test procedure in effect at
the time of the CAC/HP Working Group negotiations, which did not
include the changes outlined in this section. Standard levels set in
this final rule have a compliance date simultaneous with the date that
the test procedure as modified by the November 2016 test procedure
final rule must be used to represent product efficiency. The
translation of these standard levels based on the November 2016 test
procedure final rule--which does include the changes outlined in this
section--is presented in section V.C.1.
DOE initiated a test procedure rulemaking for central air
conditioners and heat pumps in advance of the June 2011 DFR, publishing
a NOPR on June 2, 2010 (June 2010 test procedure NOPR). 75 FR 31224. In
this NOPR, DOE proposed adding calculations for the determination of
sensible heat ratio, incorporating of a method to evaluate off mode
power consumption, and also adding parameters for establishing regional
measures of energy efficiency. Id.
DOE published a supplemental notice of proposed rulemaking (SNOPR)
regarding the test procedure for central air conditioners and heat
pumps on April 1, 2011. 76 FR 18105. In this SNOPR, DOE proposed to
amend the testing requirements for off mode power consumption in
response to the comments DOE received on the June 2010 test procedure
NOPR. DOE also discussed issues related to low-voltage transformers
used when testing coil-only units, and the use of a regional standard
efficiency metric. Id.
DOE received further comments regarding the off mode testing
requirement for central air conditioners and heat pumps after the
publication of the April 2011 test procedure SNOPR. In response to
these comments, DOE published a second SNOPR on October 24, 2011. 76 FR
65616. In the October 2011 test procedure SNOPR, DOE addressed comments
only related to off mode testing for central air conditioners and heat
pumps. Id.
DOE received comments on the October 2011 test procedure SNOPR, as
well as comments relevant to the test procedure in response to the
November 2014 RFI. In response to these comments, DOE published a third
SNOPR on November 9, 2015. 80 FR 69278. DOE proposed the following in
the November 2015 test procedure SNOPR:
A new basic model definition as it pertains to central air
conditioners and heat pumps and revised rating requirements;
Revised alternative efficiency determination methods;
Termination of active waivers and interim waivers;
Revised procedures to determine off mode power
consumption;
Changes to the test procedure that would improve test
repeatability and reduce test burden;
Clarifications to ambiguous sections of the test procedure
intended also to improve test repeatability;
Inclusion of, amendments to, and withdrawals of test
procedure revisions proposed in published test procedure notices in the
rulemaking effort leading to this SNOPR; and
Changes to the test procedure that would improve field
representativeness.
Some of these proposals also included incorporation by reference of
updated industry standards. Id.
On June 8, 2016, DOE published a final rule with amendments to the
test procedure that did not change the measured energy efficiency of
central air conditioners and heat pumps when compared to the test
procedure previously in effect. 81 FR 36992. Broadly, amendments
included revisions to:
Definitions, testing, rating, and compliance of basic
models;
Requirements for Alternative Efficiency Determination
Methods (AEDMs);
Procedures for specific products that had been granted
test procedure waivers (e.g., multi-circuit products and triple-
capacity northern heat pumps);
Test methods and calculations for off mode power; and
Specific procedures concerning test repeatability and test
burden, including for example, setting fan speeds, determining the
maximum speed for variable-speed compressors, charging refrigerant
lines, and determining the coefficient of cyclic degradation
(CD), among others.
In the June 2016 test procedure final rule, DOE did not finalize
several proposals of the November 2015 SNOPR that were intended to
improve field representativeness, opting instead to revise these
proposals and obtain further stakeholder input on them. DOE did this by
publishing a SNOPR on August 24, 2016, which proposed amendments to the
test procedure established by the June 2016 test procedure final rule.
81 FR 58164 DOE indicated that several of these amendments would change
the measured energy efficiency of central air conditioners and heat
pumps, while others would provide additional improvements for clarity
and consistency. Amendments of the August 2016 SNOPR that would change
measured efficiency were proposed for a new appendix M1 that would be
required for representations coincident with the compliance date of the
new efficiency standards These included proposals to:
Increase minimum external static pressure requirements for
most products, but limit the increase for certain products;
For coil-only systems, introduce a new default fan power
based on the new minimum external static pressure, and a unique, lower
default fan power for manufactured home coil-only systems;
Revise the heating load line slope factor and the heating
load line zero-load temperature to better reflect field heating loads;
and
Revise certain aspects of the calculation procedures for
calculating HSPF, including modified and clarified requirements
regarding compressor speeds used for testing variable-speed heat pumps,
and allowing use of a 5[emsp14][deg]F test as an option for variable-
speed heat pumps.
Other proposed changes to improve clarity and consistency, which
DOE proposed as amendments to the current appendix M, as well as in
sections of 10 CFR part 429, were to take effect 30 days after
publication of the final rule. These included:
Additional changes to definitions and compliance
requirements;
Extending the requirements for no-match testing to other
kinds of outdoor units that are predominantly installed as
[[Page 1801]]
replacements where the indoor unit is not replaced;
Revision to the off-mode test procedure for systems with
self-regulating crankcase heaters.
A revised calculation for variable-speed heat pumps for
calculating maximum speed performance below 17[emsp14][deg]F;
A revised method for calculating EER and COP for all
variable-speed units, when operating at an intermediate compressor
speed;
Modifications to the outdoor air enthalpy method;
New restrictions on refrigerant pressure measurement
system internal volume;
A new limit on indoor coil surface area; and
Clarifying amendments addressing break-in periods, multi-
split system part load requirements, and cased coil installation
requirements.
On November 30, 2016 DOE issued a test procedure final rule that
adopted most of the amendments proposed in the August 2016 SNOPR, many
of these with revisions addressing stakeholder comments. Changes in
final implementation of the amendments as compared to the proposals of
the August 2016 SNOPR included:
No adoption of restrictions on indoor coil surface area;
Delay in implementation of certain amendments, moving them
to appendix M1, including the change to the off-mode test procedure and
some of the provisions for testing of variable-speed heat pumps;
Revisions to specific requirements for determining whether
an outdoor unit must be tested using the no-match test procedure;
For all secondary test methods (not just for the outdoor
air enthalpy method as proposed), requiring a match to confirm primary
capacity measurements only for certain tests, rather than for all
tests;
Modifications reducing the restrictions on refrigerant
pressure system internal volumes;
A change in the required external static pressure used for
testing for one kind of product; and
Extending optional use of a 5[emsp14][deg]F test to
single- and two-speed heat pumps in addition to variable-speed.
Note that, as discussed in section I, the analyses conducted to
support this direct final rule were based on the test procedure at the
time of the 2015-2016 ASRAC negotiations, per the request of the CAC/HP
Working Group. Consequently, the efficiency ratings and levels
referenced throughout this document are not impacted by the test
procedure amendments described above for the November 2016 test
procedure final rule. However, central air conditioners and heat pumps
will be required to be certified to the efficiency levels selected in
this direct final rule and based on the test procedure established by
the November 2016 test procedure final rule. The selected efficiency
levels--presented throughout this document in terms of the test
procedure at the time of the 2015-2016 ASRAC negotiations--are
translated to levels in terms of the November 2016 test procedure final
rule following the walk down analysis in section V.C.1.
G. Technological Feasibility
1. General
In each energy conservation standards rulemaking, DOE conducts a
screening analysis based on information gathered on all current
technology options and prototype designs that could improve the
efficiency of the products or equipment that are the subject of the
rulemaking. As the first step in such an analysis, DOE develops a list
of technology options for consideration in consultation with
manufacturers, design engineers, and other interested parties. (See
chapter 3 of the direct final rule Technical Support Document (``TSD'')
for a discussion of the list of technology options that DOE
identified.) DOE then determines which of those efficiency-improving
options 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).
Once DOE has determined that particular technology options are
technologically feasible, it further evaluates each technology option
in light of the following additional screening criteria: (1)
Practicability to manufacture, install, and service; (2) adverse
impacts on product utility or availability; and (3) adverse impacts on
health or safety. 10 CFR part 430, subpart C, appendix A, section
4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its
analysis any proprietary technology that is a unique pathway to
achieving a certain efficiency level. Section IV.B of this direct final
rule discusses the results of the screening analysis for residential
central air conditioners and heat pumps, particularly the designs DOE
considered, those it screened out, and those that are the basis for the
trial standard levels (TSLs) in this rulemaking. For further details on
the screening analysis for this rulemaking, see chapter 4 of this
direct final rule's TSD.
DOE notes that these screening criteria do not directly address the
proprietary status of design options. As noted previously, DOE only
considers efficiency levels achieved with 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 amended standards for the products covered in this
rulemaking would not mandate the use of any proprietary technologies,
and that all manufacturers would be able to achieve the amended levels
through the use of non-proprietary designs. The efficiency levels
considered in the analysis are all represented by commercially-
available technologies that are available to all manufacturers.
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 a product. (42 U.S.C. 6295(p)(1)) Accordingly, in the
engineering analysis, DOE determined the maximum technologically
feasible (``max-tech'') improvements in energy efficiency for central
air conditioners and heat pumps, using the design parameters for the
most-efficient products available on the market or in working
prototypes (see chapter 5 of the direct final rule TSD). The max-tech
levels considered for the analysis represent commercially-available
products. For most of the product classes, these max-tech products are
listed in the AHRI Directory.\29\ For the SDHV and space-constrained
air conditioner classes, the max-tech levels are as reported in
manufacturers' product literature.
---------------------------------------------------------------------------
\29\ AHRI is the trade association representing manufacturers of
heating, ventilation, air conditioning and refrigeration (HVACR) and
water heating equipment within the global industry. Products of
different manufacturers are certified to AHRI and listed in the AHRI
Directory at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx. directory:https://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------
The max-tech levels that DOE determined for this rulemaking are
presented in Table III-1. Note that these max-tech levels are in terms
of the efficiency metrics measured consistent with the test procedure
at the time of the 2015-2016 ASRAC negotiations.
[[Page 1802]]
The max-tech levels themselves are discussed in more detail in section
IV.C of this direct final rule and in chapter 5 of the accompanying
TSD.
Table III-1--Max-Tech SEER and Corresponding EER and HSPF Levels Considered in the Central Air Conditioner and
Heat Pump Analyses
----------------------------------------------------------------------------------------------------------------
Max-tech efficiency levels
Product class Representative cooling -----------------------------------
capacity (tons) SEER * HSPF *
----------------------------------------------------------------------------------------------------------------
Split-Systems
Air Conditioners **..................... 2............................. 21.0 N/A
3............................. 21.0
5............................. 20.0
Heat Pumps.............................. 2............................. 19.0 9.9
3............................. 19.0 9.9
5............................. 17.5 9.4
Single-Package Systems
Air Conditioners........................ All........................... 17.5 N/A
Heat Pumps.............................. All........................... 15.0 8.2
Small-Duct High-Velocity Air Conditioners... All........................... 14.0 N/A
Space-Constrained Air Conditioners.......... All........................... 14.0 N/A
----------------------------------------------------------------------------------------------------------------
* SEER and HSPF listed in the table are as measured using the test procedure proposed in the November 9, 2015 TP
SNOPR. 80 FR 69278 EER is also measured by the test procedure, but as discussed in section IV.C.2, DOE did not
analyze EER-based efficiency levels for this direct final rule.
** Max-Tech SEER levels are based on a blower-coil configuration.
H. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from the application of
the TSL to the central air conditioners and heat pumps that are the
subject of this rulemaking purchased in the 30-year period that begins
in the year of expected compliance with amended standards (2021-2050 or
2023-2052).\30\ The savings are measured over the entire lifetime of
central air conditioner and heat pump products 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 latter case represents a projection
of energy consumption in the absence of amended energy conservation
standards, and it considers market forces and policies that may affect
future demand for more-efficient products.
---------------------------------------------------------------------------
\30\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------
DOE used its national impact analysis (NIA) spreadsheet model to
estimate national energy savings (NES) from potential amended standards
for central air conditioners and heat pumps. The NIA spreadsheet model
(described in section IV.H of this direct final rule and chapter 10 of
the TSD) calculates energy savings in terms of site energy, which is
the energy directly consumed by products at the locations where they
are used. For electricity, DOE calculates national energy savings on an
annual basis in terms of primary (source) energy savings, which is the
savings in the energy that is used to generate and transmit electricity
to the site. To calculate primary energy savings from site electricity
savings, DOE derives annual conversion factors from data provided in
the Energy Information Administration's (EIA) most recent Annual Energy
Outlook (AEO). For natural gas, the primary energy savings are
considered to be equal to the site energy savings.
DOE also calculates NES in terms of full-fuel-cycle (FFC) energy
savings. As discussed in DOE's statement of policy, the FCC 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
conservation standards. 76 FR 51282 (August 18, 2011), as amended at 77
FR 49701 (August 17, 2012). 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 on FFC energy savings, see
section IV.H.4.
2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in ``significant'' energy
savings. (42 U.S.C. 6295(o)(3)(B)) 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 are not ``genuinely trivial.'' The energy savings for all of the
TSLs considered in this rulemaking, including the amended standards
(presented in section V.B.3), are nontrivial, and, therefore, DOE
considers them ``significant'' within the meaning of section 325 of
EPCA.
I. Economic Justification
1. Specific Criteria
As discussed in section II.B., EPCA provides seven factors to be
evaluated in determining whether a potential energy conservation
standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-
(VII)) The following sections discuss how DOE has addressed each of
those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
In quantifying the impacts of a potential amended standard on
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as
discussed in section IV.J, using an annual cash-flow approach to
determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include: (1) Industry net
present value (INPV), which values the industry on the basis of
expected future cash flows; (2) cash flows by year; (3) changes in
revenue
[[Page 1803]]
and income; and (4) other measures of impact, as appropriate. Second,
DOE analyzes and reports the impacts on different types of
manufacturers, including impacts on small manufacturers. Third, DOE
considers the impact of standards on domestic manufacturer employment
and manufacturing capacity, as well as the potential for standards to
result in plant closures and loss of capital investment. Finally, DOE
takes into account cumulative impacts of various DOE regulations and
other regulatory requirements on manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and payback period (PBP) associated with new or amended
standards. These measures are discussed further in the following
section. For consumers in the aggregate, DOE also calculates the
national net present value of the consumer costs and benefits expected
to result from particular standards. DOE also evaluates the LCC impacts
of potential standards on identifiable subgroups of consumers that may
be affected disproportionately by a national standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP
analyses.
The LCC is the sum of the purchase price of a product (including
its installation) and the operating expense (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and consumer discount rates. To
account for uncertainty and variability in specific inputs, such as
product lifetime and discount rate, DOE uses a distribution of values,
with probabilities attached to each value. For its LCC and PBP
analysis, DOE assumes that consumers will purchase the covered products
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.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with
amended standards. The LCC savings for the considered efficiency levels
are calculated relative to a case that reflects projected market trends
in the absence of amended standards.
DOE's LCC and PBP analyses are discussed in further detail in
section IV.F.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section IV.H, DOE uses the NIA spreadsheet to project
national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards considered in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine
the impact, if any, of any lessening of competition likely to result
from a proposed standard and to transmit such determination to the
Secretary within 60 days of the publication of a proposed rule,
together with an analysis of the nature and extent of the impact. (42
U.S.C. 6295(o)(2)(B)(ii)) DOE will transmit a copy of this direct final
rule to the Attorney General with a request that the Department of
Justice (DOJ) provide its determination on this issue. DOE will
consider DOJ's comments on the rule in determining whether to proceed
with the direct final rule. DOE will also publish and respond to the
DOJ's comments in the Federal Register in a separate notice.
f. Need for National Energy Conservation
DOE also considers the need for national energy conservation in
determining whether a new or amended standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the
amended standards are likely to provide improvements to the security
and reliability of the nation's energy system. Reductions in the demand
for electricity also may result in reduced costs for maintaining the
reliability of the nation's electricity system. DOE conducts a utility
impact analysis to estimate how standards may affect the Nation's
needed power generation capacity, as discussed in section IV.M.
The amended standards also are likely to result in environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases (GHGs) associated with energy production and use. DOE
conducts an emissions analysis to estimate how the amended standards
may affect these emissions, as discussed in section IV.K the emissions
impacts are reported in section V.5 of this document. DOE also
estimates the economic value of emissions reductions resulting from the
considered TSLs, as discussed in section IV.L.
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether an
energy conservation standard is economically justified, to consider any
other factors that the Secretary deems to be relevant. (42 U.S.C.
6295(o)(2)(B)(i)(VII)) 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.''
In developing the direct final rule, DOE has also considered the
submission of the jointly-submitted Term Sheet from the CAC/HP Working
Group, as approved by ASRAC. In DOE's view, the Term Sheet sets forth a
statement by interested persons that are fairly representative of
relevant points of view (including representatives of manufacturers of
covered equipment, States, and efficiency advocates) and contains
recommendations with respect to energy conservation standards that are
in accordance with 42 U.S.C. 6295(o), as required by EPCA's direct
[[Page 1804]]
final rule provision. See 42 U.S.C. 6295(p)(4). DOE has encouraged the
submission of agreements such as the one developed and submitted by the
CAC/HP Working Group as a way to bring diverse stakeholders together,
to develop an independent and probative analysis useful in DOE standard
setting, and to expedite the rulemaking process. DOE also believes that
standard levels recommended in the Term Sheet may increase the
likelihood for regulatory compliance, while decreasing the risk of
litigation.
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first full year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effects that potential
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). 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.3 of this document.
IV. Methodology
This section addresses the analyses DOE has performed for this
rulemaking with regard to residential central air conditioners and heat
pumps. Each subsection will address a component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
amended standards. The first tool is a spreadsheet that calculates the
LCC and PBP of amended energy conservation standards. The national
impacts analysis (NIA) requires a second spreadsheet set that provides
shipments forecasts and calculates national energy savings and net
present value resulting from amended energy conservation standards. DOE
used the third spreadsheet tool, the Government Regulatory Impact Model
(GRIM), to assess manufacturer impacts of amended standards. These
three spreadsheet tools are available on the DOE Web site.\31\
Additionally, DOE used output from the latest version of EIA's Annual
Energy Outlook (AEO) for the emissions and utility impact analyses.\32\
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\31\ See: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=104.
\32\ All three spreadsheet tools are available online at the
rulemaking portion of DOE's Web site: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/72.
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A. Market and Technology Assessment
In conducting a market and technology assessment, DOE develops
information that provides an overall picture of the market for covered
products. This overall picture includes the purpose of the products,
the industry structure, manufacturers, market characteristics, and
technologies used. DOE uses both quantitative and qualitative
assessments, based primarily on publicly-available information. The
market and technology assessment for this residential central air
conditioning and heat pump rulemaking covers issues that include: (1) A
determination of the scope of the rulemaking and product classes; (2)
manufacturers and industry structure; (3) quantities and types of
products sold and offered for sale; (4) retail market trends; (5)
regulatory and non-regulatory programs; and (6) technologies or design
options that could improve the energy efficiency of the product(s)
under examination. The key findings of DOE's market assessment are
summarized below. For additional detail, see chapter 3 of the DFR TSD.
1. Definition and Scope of Coverage
A residential central air conditioner or heat pump is an important
component of a home's central heating and cooling system, providing
cooled and/or heated air to the conditioned space, often through
ductwork. Split-system air conditioners are comprised of an indoor
unit, which contains the indoor coil and may contain the indoor fan
(blower); and an outdoor unit, which contains the compressor, outdoor
coil, and outdoor fan. The indoor unit either includes its own blower
(``blower-coil unit'') or uses the furnace fan (``coil-only unit'') to
circulate air over the indoor coil, transferring heat between the
circulating air and the refrigerant. The cooled (or heated) air is then
distributed via ductwork to the conditioned space. The compressor
raises the refrigerant pressure, which raises its saturation
temperature so that it is warm enough to transfer heat either to the
ambient air (for cooling mode) or the indoor air (for heat-pump mode).
Single-package systems contain all of these components in a single-
package. A residential central heat pump utilizes the same components
as a central air conditioner, but also includes a reversing valve and
other components that allow it to reverse the functions of the indoor
and outdoor coils, thus operating in heat pump mode.
EPCA defines a central air conditioner as a product, other than a
packaged terminal air conditioner,\33\ which is powered by single phase
electric current, air cooled, rated below 65,000 Btu per hour, not
contained within the same cabinet as a furnace, the rated capacity of
which is above 225,000 Btu per hour, and is a heat pump or a cooling
only unit. (42 U.S.C. 6291(21)) DOE has incorporated this definition in
its regulations at 10 CFR 430.2.
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\33\ ``Packaged terminal air conditioner'' is defined in 10 CFR
430.2 as ``a wall sleeve and a separate unencased combination of
heating and cooling assemblies specified by the builder and intended
for mounting through the wall. It includes a prime source of
refrigeration, separable outdoor louvers, forced ventilation, and
heating availability energy.''
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EPCA defines a ``heat pump'' as a product, other than a packaged
terminal heat pump,\34\ which consists of one or more assemblies,
powered by single phase electric current, rated below 65,000 Btu per
hour, utilizing an indoor conditioning coil, compressor, and
refrigerant-to-outdoor air heat exchanger to provide air heating, and
may also provide air cooling, dehumidifying, humidifying circulating,
and air cleaning. (42 U.S.C. 6291(24)) DOE has incorporated this
definition into its regulations at 10 CFR 430.2. These products, also
known as unitary air conditioners, do not include room air
conditioners.\35\
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\34\ ``Packaged terminal heat pump'' is defined in 10 CFR 430.2
as ``a packaged terminal air conditioner that utilizes reverse cycle
refrigeration as its prime heat source and should have supplementary
heating availability by builder's choice of energy.''
\35\ ``Room air conditioner'' is defined in 10 CFR 430.2 as ``a
consumer product, other than a `packaged terminal air conditioner,'
which is powered by a single phase electric current which is an
encased assembly designed as a unit for mounting in a window or
through the wall for the purpose of providing delivery of
conditioned air to an enclosed space. It includes a prime source of
refrigeration and may include a means for ventilating and heating.''
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In this DFR, DOE is amending energy conservation standards for the
products covered by DOE's current standards for central air
conditioners and heat pumps, specified at 10 CFR 430.32(c)(2), which
DOE adopted in the June 2011 DFR.
[[Page 1805]]
These products consist of: (1) Split-system air conditioners; (2)
split-system heat pumps; (3) single package air conditioners; and (4)
single package heat pumps.
DOE's current standards for central air conditioners are expressed
as the minimum seasonal energy efficiency ratio (SEER), the minimum
heating seasonal performance factor (HSPF) for heat pumps, and the
maximum off-mode power (PW, OFF). SEER is a seasonal
efficiency metric that accounts for electricity consumption in active
cooling and standby operating modes during the cooling season, while
HSPF is a seasonal efficiency metric that accounts for active heating
and standby operating modes for heat pumps during the heating season.
For the Southwest region of the United States, (four states including
Arizona, California, Nevada, and New Mexico) DOE's current standards
also include additional requirements for energy efficiency ratio (EER)
for both central air conditioners and heat pumps. 10 CFR 430.32(c).
2. Product Classes
When evaluating and establishing energy conservation standards, DOE
divides covered products into product classes by the type of energy
used, by capacity, or by another performance-related feature that
justifies a different standard. In making a determination whether a
performance-related feature justifies a different standard, DOE must
consider factors such as the utility to the consumer of the feature.
(42 U.S.C. 6295(q)). DOE has divided residential central air
conditioners and heat pumps into seven product classes: \36\
\36\ These product classes were last examined by the June 2011
DFR. 76 FR 37408, 37446 (June 27, 2011), prior to this current round
of rulemaking.
---------------------------------------------------------------------------
Split-system air conditioners
Split-system heat pumps
Single-package air conditioners
Single-package heat pumps
Small-duct high-velocity systems
Space-constrained air conditioners
Space-constrained heat pumps
In the November 2014 RFI, DOE requested feedback on whether it
should consider any changes the existing product classes for central
air conditioners and heat pumps. 79 FR 65603, 65605 (Nov. 5, 2014). In
response, AHRI and Southern Co. commented that they supported retaining
the listed product classes used in the previous rulemaking (i.e., the
June 2011 Final Rule). (AHRI, No. 13 at p. 3; Southern Co., No. 11 at
p. 2) NEEA and NPCC suggested that DOE consider the possibility of a
separate product class for variable capacity systems, given their
potential increased cost effectiveness relative to fixed capacity
systems. (NEEA & NPCC, No. 19 at p. 3) Rheem recommended that a product
class be added for combined appliances which contribute to heat
recovery for water heating. (Rheem, No. 17 at p. 2).
For this rulemaking, DOE has retained the product classes
associated with the 2011 DFR that were listed in the November 2014 RFI.
In response to NEEA & NPCC, DOE sees no need for the suggested change
because variable capacity products have no difficulty meeting the
current standards--or the standards set in this notice. In response to
Rheem's comment, DOE has not found evidence that the capability for
heat recovery for water heating reduces a product's ability to meet a
given efficiency level, and Rheem's comment did not indicate that this
is the case, nor did it explain why such product might have a different
efficiency level when tested according to the DOE test procedure for
central air conditioners and heat pumps (which does not include
transfer of heat to water). Hence, DOE believes that the threshold for
setting separate product classes for these products under EPCA is not
met. 42 U.S.C. 4295(q)(B)
3. Technology Options
As part of the market and technology assessment performed for the
November 2014 RFI and for this DFR, DOE developed a comprehensive list
of technologies to improve the energy efficiency of central air
conditioners and heat pumps. Chapter 3 of the DFR TSD contains a
detailed description of each technology that DOE identified.
DOE received comments on the technology options proposed in the
November 2014 RFI. ACEEE requested that DOE consider the addition of
multi-stage systems to the list of design options. (ACEEE, No. 21 at
p.3) Southern Co. also commented that it supported design options
associated with variable speed operation because of humidity control
considerations. (Southern Co., No. 19 at p. 2) NEEA and NPCC, as well
as PG&E, suggested that DOE add a design options for the reduction of
off and standby-mode energy use and for control systems. (NEEA & NPCC,
No. 19 at p. 10; PG&E, No. 15 at p. 2) Rheem proposed that DOE add
combined appliance technology to the list of design options. (Rheem,
No. 17 at p. 3) On the other hand, AHRI commented that DOE should
consider only design options that DOE included for central air
conditioners in the June 2011 DFR. (AHRI, No. 13 at p. 3). ACEEE also
suggested that DOE conduct a systematic evaluation of the energy
savings potential of products used in the Southeast and Southwest,
particularly the benefits of enhanced latent heat work to condition the
air. (ACEEE, No. 21 at p. 3)
In response to the comments made by ACEEE and Southern Co., DOE has
included both two-stage and variable speed compressors as design
options. Regarding the addition of design options for reducing off and
standby-mode energy use, DOE conducted a market and technology
assessment (as described in section IV.A.3) and has found that the
design options used in the June 2011 DFR are the same ones that are
viable today. Additionally, DOE refers to discussions during the CAC/HP
CAC/HP Working Group Negotiations, in which no objections were raised
by stakeholders to the proposed design option list. (ASRAC Public
Meeting, No. 88 at p. 188) Further discussion regarding the viability
of the technology options is provided in chapter 4 of the TSD.
Regarding the NEEA and NPPC comment regarding controls, there are many
ways that controls might be employed to improve rated efficiency, but
NEEA and NPPC's comment does not specify, nor could DOE infer from the
comment, what type of control design option should be considered. DOE
notes that it considered a comprehensive scope of technologies in its
market and tech assessment, and is confident that its engineering
analysis accounts for these controls. In response to Rheem, EPCA
defines ``central air conditioner'' as a product that is air-cooled.
(42 U.S.C. 6291(21)(B)) In contrast, combination appliances reject heat
to water. Hence, water-heating operation of such appliances is not
covered by DOE's regulations for central air conditioners and heat
pumps. In response to ACEEE's comment about creating a design option
for higher or lower latent capacity, any differential benefit for
systems designed for a different latent capacity or different return
air humidity would also not be captured in DOE's current or amended
test procedures, and hence was not considered as part of the analysis
to establish amended efficiency levels. Finally, in response to all of
the comments suggesting specific design options, DOE conducted an
efficiency-level-based engineering analysis based on existing product
designs. While DOE has assembled a specific list of design options that
reflect known design differences among these existing products, there
are other design differences that affect the rated efficiencies used in
the analysis that
[[Page 1806]]
represent design options, the use of which is probable but not certain.
Some of these would likely be classified as ``controls'' design
options, which would address the NEEA & NPPC comment.
These comments, as well as others, were addressed during the CAC/HP
Working Group Negotiations. Based on the RFI comments and the 2015-2016
CAC/HP Working Group discussions, DOE constructed a list of technology
options for consideration in the analysis for this direct final rule.
Table IV-1 compiles this list.
Table IV-1 Technology Options
------------------------------------------------------------------------
Component Technology
------------------------------------------------------------------------
Compressor................................ Higher-EER compressor.
Two-stage compressor.
Variable speed compressor.
Heat exchanger............................ Larger heat exchanger.
Fan Motor................................. Constant torque permanent-
magnet motor.
Constant air flow permanent-
magnet motor.
Fan....................................... Higher-efficiency fan
blades, fan wheels, and fan
configurations.
Expansion valve........................... Thermostatic expansion
valve.
Electronic expansion valve.
Controls.................................. Heat pump defrost controls.
------------------------------------------------------------------------
DOE expanded the ``higher efficiency compressor'' technology option
to indicate that, in addition to consideration of compressors with
higher energy efficiency ratio (EER, the compressor capacity divided by
its power input at the compressor rating condition expressed in Btu/h-
W), manufacturers can also consider use of two-capacity or variable-
speed compressors. DOE limited the specific technology options for heat
exchangers to only larger-size heat exchangers because most heat
exchanger technology (e.g. round-tube/flat fin, microchannel, etc.) can
be used either in baseline or higher-efficiency products. The list
includes the two general types of higher-efficiency fan motors used in
products. For fans, the revised list more generally indicates that
efficiency improvements can be associated with the fan blades of
outdoor fans, the fan wheels of indoor fans, and the general fan
configuration, including all details of design that affect efficiency
(e.g. overall size, inlet and outlet flow transitions, clearance gaps
between rotating and stationary components, etc.) The revised list
includes two specific examples of higher-efficiency expansion valves.
The list does not separately include inverter technology, which would
be captured as part of the variable-speed compressor and/or the
constant-air-flow permanent magnet motor technology options.
B. Screening Analysis
After identifying potential technology options for improving the
efficiency of residential central air conditioners and heat pumps, DOE
performed the screening analysis (see section IV.B of this direct final
rule or chapter 4 of the DFR TSD) on these technologies to determine
which could be considered further in the analysis and which should be
eliminated. DOE uses the following four screening criteria to determine
which technology options are suitable for further consideration in an
energy conservation standards rulemaking:
1. Technological feasibility. Technologies that are neither
incorporated in commercial products nor in working prototypes will not
be considered further.
2. Practicability to manufacture, install, and service. If DOE
determines that mass production, reliable installation, and servicing
of a technology in commercial products could not be achieved on the
scale necessary to serve the relevant market at the time of the
compliance date of the standard, then that technology will not be
considered further.
3. Impacts on product utility or product availability. If DOE
determines that a technology would have 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, then that
technology will not be considered further.
4. Adverse impacts on health or safety. If DOE determines that a
technology would have significant adverse impacts on health or safety,
then that technology will not be considered further. (10 CFR part 430,
subpart C, appendix A, 4(a)(4) and 5(b))
If DOE determines that a technology, or a combination of
technologies, fails to meet one or more of the above four criteria, it
will be excluded from further consideration in the engineering
analysis. DOE found that all of the identified technologies listed in
Table IV-1 met all four screening criteria and consequently, are
suitable for further examination in DOE's analysis. For off-mode
technologies, DOE determined that there is no commercial application
for the hermetic crankcase heater and the integral compressor motor
heater in central air conditioners and heat pumps. Therefore, DOE
screened out these two technologies. For additional details, please see
chapter 4 of the direct final rule TSD.
C. Engineering Analysis
The engineering analysis establishes a relationship between energy
efficiency and manufacturing production cost (MPC) for units that will
be impacted by amended energy conservation standards. This relationship
serves as the basis of cost-benefit analyses for individual consumers,
manufacturers, and the Nation.
DOE began the engineering analysis by identifying energy efficiency
levels to analyze. The current energy conservation standard served as
the baseline efficiency level from which DOE analyzed possible energy
efficiency improvements. In addition to the baseline, DOE identified
higher efficiency levels that correspond to higher-efficiency products
available on the market, including the most efficient, or max-tech,
products. Using a variety of data sources, DOE estimated market-
weighted MPCs at the baseline efficiency level and the market-weighted
incremental MPC increases required to achieve each higher efficiency
level, for each product class. Following the quantification of MPCs,
DOE estimated the additional costs to residential consumers from
markups by the manufacturers, distributors, and contractors. This
information was then used in the downstream analyses to examine the
costs and benefits associated with increased equipment efficiency.
For the August 2015 NODA, DOE used a top-down analysis approach in
which an exponential curve-fit was applied to a database of MPC vs.
efficiency values to generate a cost-efficiency relationship for each
representative capacity in each product class. 80 FR 52206 (Aug. 28,
2015). DOE did not receive comments on the NODA specifically regarding
the NODA engineering analysis methodologies and results. During the
CAC/HP Working Group meetings, however, DOE's engineering analysis was
discussed in detail. ASRAC Working Group members expressed concern that
the approach used in the August 2015 NODA did not reflect critical
aspects of the relationship between MPC and efficiency. Ingersoll Rand
and Southern Company requested to see efficiency levels differentiated
by single speed and two-speed products. (ASRAC Public Meeting, No. 40
at p. 232, 248)
[[Page 1807]]
Manufacturers generally agreed that certain efficiency levels could
only be achieved by switching from single speed to two-stage compressor
designs, which represented a considerable increase in MPC. The
manufacturers believed this design path would result in a step function
in the cost-efficiency relationship from the perspective of a given
manufacturer, which was not reflected in the relationships used by DOE
in the August 2015 NODA. (ASRAC Public Meeting, No. 40 at p. 248) AHRI
presented its own cost-efficiency data to illustrate this step function
at the October 14th CAC/HP Working Group meeting. AHRI's cost-
efficiency data showed a $280 increase in manufacturing costs at 16
SEER associated with switching from a single speed to two-speed design
for a three-ton system. AHRI was unable to share specific details about
its methodology or the components included in the $280 cost difference
because of confidentiality concerns. (ASRAC Public Meeting, No. 89 at
p. 210)
In response, DOE agrees that switching from a single speed to two-
speed design could result in a considerable increase in manufacturer
production cost. DOE also understands that not all manufacturers choose
to make this switch at the same point in the efficiency range. For
example, one manufacturer may be able to achieve 15 SEER with a single
speed design and need to switch to a two-stage design to achieve above
15 SEER, while other manufacturers may only be able to achieve 14.5
SEER with a single speed design, which would require them to switch to
a two-stage design. DOE's NODA cost-efficiency relationships reflect
the industry and therefore, represent multiple manufacturers. Step
functions in single manufacturer's cost-efficiency relationship
occurring at different points in the range of efficiency resulted in
the smoother, continuous industry cost-efficiency curves that DOE used
in the NODA. For these reasons, DOE does not believe its NODA cost-
efficiency relationships are inappropriate, but does recognize that
they may not perfectly represent the increase in cost associated with
switching from single speed to two-stage designs in the range of
efficiency in which manufacturers are making these design changes. In
response to the CAC/HP working group discussions, DOE revised its
engineering analysis to better reflect the impacts on manufacturer
production cost of switching from a single speed to a two-stage design,
which is reflected in this direct final rule. DOE's revised direct
final rule engineering analysis is described in more detail in the
subsequent paragraphs of this section.
Today's direct final rule engineering analysis is different from
the August 2015 NODA analysis in five main ways. First, DOE analyzed
single speed and two-stage split systems separately (i.e., DOE
developed MPC values at each efficiency level analyzed for single speed
and two-stage systems independently). Once combined, this approach
resulted in single cost-efficiency relationships that reflected the MPC
step associated with switching from a single speed to two-stage design.
The second key difference was that DOE analyzed individual manufacturer
cost-efficiency relationships independently, then used marketshare
information to generate a single marketshare-weighted cost-efficiency
relationship. This approach better represented the effect of these
cost-efficiency relationships on the total market and better accounted
for differences between manufacturers in the design paths they use to
achieve higher efficiency.
Third, DOE based the manufacturer-specific cost-efficiency
relationships used in this direct final rule analysis on the least-cost
units offered at each efficiency level, as opposed to all units offered
at each efficiency level. DOE believes this approach results in cost-
efficiency relationships that better reflect the design decisions
manufacturers will make in response to new standards. The fourth key
difference was that DOE analyzed coil-only and blower-coil systems
separately for this direct final rule. This approach is aligned with
the certification requirements finalized in the June 2016 CAC TP final
rule, which require compliance for all indoor/outdoor unit combinations
and also require certification of at least one coil-only combination
for all single speed and two-stage outdoor units. 81 FR 36992 (June 8,
2016).
The final critical difference was that this engineering analysis
was conducted based on efficiencies as measured according to the test
procedure in place at the time of the CAC/HP Working Group meetings,
the October 2007 CAC TP final rule. 72 FR 59906 (Oct. 22, 2007).
Following downstream analyses, DOE translated the chosen efficiency
levels to minimum standards based on measurement according to the
November 2016 test procedure final rule, which is summarized in section
III.F. DOE notes that the August 2015 NODA \37\ efficiency levels were
presented in terms of efficiency per test procedure amendments being
proposed at the time of the August 2015 NODA analysis (i.e. using the
October 2011 test procedure SNOPR (see section III.F)). 76 FR 65616
(October 24, 2011).
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\37\ More specifically, refer to Chapter 5 of the NODA Technical
Support Document (copy and paste link into browser): https://www.regulations.gov/document?D=EERE-2014-BT-STD-0048-0029.
---------------------------------------------------------------------------
For a more detailed description of the methodology used to
determine the efficiency levels and manufacturer production costs as
well as the key similarities and differences from the August 2015 NODA,
please refer to Chapter 5 of the DFR TSD.
1. Segmentation of Covered Products
For the purpose of the engineering analysis, DOE further divided
product classes into many segments to capture important differences in
the cost-efficiency relationships. As a primary example, DOE recognizes
that the cost-efficiency relationship between central air conditioners
and heat pumps varies by capacity. For this direct final rule analysis,
DOE performed separate analyses for two-ton, three-ton and five-ton
split system air conditioners and heat pumps in order to characterize
the efficiency levels at different representative capacities. For
single-package air conditioner and heat pump product classes, DOE
developed a cost-efficiency relationship based on three-ton capacity
units. For space-constrained and small-duct high-velocity (SDHV) air
conditioners, DOE used systems in the two to two-and-a-half-ton
capacity range.
As described in the introduction to this section, DOE further
segmented each split-system air conditioner representative capacity
into blower coil and coil-only systems. All split-system product
classes were further divided into single speed and two-stage outdoor
units.
Within each single-package representative capacity, DOE segmented
products according to two heat exchanger types--all-aluminum with
microchannel or tube-and-fin geometries or copper-tube aluminum fin
heat exchangers. This followed the approach DOE had previously taken in
the August 2015 NODA. 80 FR 52206. DOE has found that the reduced cost
of aluminum per pound results in significantly different cost-
efficiency relationships between products employing the two different
heat exchanger types.
2. Determination of Efficiency Levels
This section describes the RFI comments received with regard to and
the ultimate methodology adopted for
[[Page 1808]]
determining energy efficiency levels within each product class. The
levels are tabulated along with the MPC results in section IV.C.4.
In response to the November 2014 RFI, ACEEE suggested that DOE
consider technologically feasible and economically justifiable
efficiency levels based on capacity. (ACEEE, No. 21 at p. 3) DOE has
considered variation of efficiency level with capacity in its analysis
for split systems, and has adopted some variation of standard levels
with capacity, as recommended by the CAC/HP Working Group.
AHRI suggested DOE consider the impacts of the final rule for
residential furnace fans on the baseline and max-tech levels for each
product class. (AHRI, No. 13 at pp. 3-4) In response, DOE notes that it
has developed default fan power levels for testing of coil-only
systems, which reflect the improved efficiency of the furnaces likely
to be used with the air conditioners considered in the analysis--the
November 2016 test procedure final rule discusses this topic in greater
detail. (November 2016 Test Procedure Final Rule, pp. 104, 105). These
default fan power levels account for higher efficiency fan motors and
increased external static pressure, and thus are higher than the
previous default fan power used for testing of coil-only systems.
NEEA & NPCC agreed with the proposed baseline and max-tech levels.
They did, however, urge DOE to consider ``high-tech'' design options
for small duct high velocity (SDHV) systems. (NEEA & NPCC, No. 19 at p.
3) In response, DOE did evaluate ``high-tech'' design options for SDHV
systems, but did not find increased efficiency levels for such systems
to be cost-effective, based on review of efficiency levels attained by
existing products.
Rheem commented that max-tech efficiency levels proposed for all
product classes in the November 2014 RFI could not be economically
justified within any climate zone in the US. Rheem also questioned the
max-tech efficiency differential between split system CAC/HPs, SDHVs,
and space constrained AC/HPs. (Rheem, No. 17 at p. 4) In response, DOE
notes that its economic analysis is consistent with Rheem's assertion
that max-tech efficiency levels are not economically justified, and has
not set standard levels at max-tech efficiency. DOE notes that the max-
tech efficiency differentials as reported in the RFI have been adjusted
in this DFR analysis based on more a thorough review of available
products.
PG&E recommended that DOE account for larger evaporator coil areas
when evaluating max tech levels for small duct high velocity systems
and space-constrained systems due to the special constraints and
limited heat transfer associated with lower volumetric flow rates.
(PG&E, No. 15 at p. 2). In response, DOE notes that its efficiency-
level-based engineering analysis was based on existing product designs.
DOE found that for the higher-efficiency products of these classes,
evaporator coil areas were larger. However, as discussed, this analysis
did not show that increasing the efficiency level of these products was
cost-effective.
First, DOE characterized the baseline efficiency levels. Generally,
the baseline unit in each product class: (1) Represents the basic
characteristics of equipment in that class; (2) just meets the current
Federal energy conservation standards, if any; and (3) provides basic
consumer utility. For the covered product classes analyzed in this
direct final rule, the baseline efficiency levels are represented by
the standards that were set in the June 2011 Direct Final Rule and
codified at 10 CFR 430.32(c). 76 FR 37408 (June 27, 2011). The baseline
efficiency levels are reference points for each product class, against
which changes in product cost and energy use resulting from potential
amended energy conservation standards are compared.
Next, DOE established intermediate efficiency levels at 0.5 SEER
increments increasing from each baseline efficiency level. DOE did not
analyze intermediate efficiency levels for which there are few products
available on the market. DOE also determined the maximum improvement in
energy efficiency that is technologically feasible (max-tech) for
central air conditioners and heat pumps, as required under 42 U.S.C.
6295(p)(1). DOE selected max-tech efficiency levels for most of the
product classes equal to the highest efficiency levels reported in the
AHRI Directory of Certified Product Performance. For space-constrained
air conditioners, DOE selected the max-tech efficiency level based on
the efficiency reported in product literature. The resulting efficiency
levels for all product classes considered are tabulated with MPCs in
section IV.C.4IV.C.4.
As discussed in section II.A, DOE also uses EER to characterize
CAC/HP efficiency. During the CAC/HP Working Group meetings, some
parties suggested dropping EER as a metric all together. These parties
argued that the proposed SEER value would be high enough to ensure that
the EER level would be at or above the current standard. They also
stated that EER requirements are an additional burden and could
discourage two-stage and variable speed product designs for which SEER
and EER values have a higher divergence than single speed designs.
Other parties were firm about keeping EER because it would mitigate
peak load issues and improve the health of the utility grid. They added
that EER can be a better descriptor than SEER for energy use in certain
regions, such as the Southwest. (ASRAC Public Meeting, No. 81 at pp.
10-73; ASRAC Public Meeting, No. 82 at pp. 10-93; ASRAC Public Meeting,
No. 83 at pp. 11, 22, 36, 39-42)
Eventually, the CAC/HP Working Group decided to retain the current
minimum EER requirements for split-system air conditioners and single-
package air conditioners in the Southwest region with a SEER less than
15.2 and a relaxed EER requirement for split-system air conditioners
and single-package air conditioners in the Southwest region with a SEER
greater than 15.2. (ASRAC Term Sheet, No. 76 at p. 4, Recommendation
#8) The CAC/HP Working Group's decision was based on negotiation rather
than any analysis to quantify the impacts of increasing EER along with
SEER and/or HSPF or the lower EER level for systems with SEER of 16 or
higher. Maintaining an EER requirement in the Southwest region aligns
with the position of EER advocates, while not increasing the EER
requirement and relaxing it for higher SEER products addresses the
concerns of the parties that recommended eliminating the EER
requirement. DOE did not explicitly analyze the impact of increasing
EER on total installed cost, energy consumption, or life-cycle cost for
this direct final rule. Consequently, DOE did not define EER-based
efficiency levels.
To set the heating mode efficiency levels for residential heat
pumps, DOE developed correlations for split-system and single-package
heat pumps relating HSPF to SEER based on ratings in the AHRI Directory
of Certified Product Performance. Using the correlations, DOE assigned
an HSPF value to each SEER-based efficiency level. For split-system
products, DOE based the correlations on pairings of outdoor units with
indoor units designated in the AHRI Directory as the highest sales
volume indoor units. DOE also conducted the split-system analysis for
units with two-ton, three-ton and five-ton capacities. The analysis
showed that the relationship between SEER and HSPF does not differ
significantly across these capacities. Hence, DOE did not differentiate
HSPF standards by capacity in this direct final rule. For single-
package units, DOE used all the rated two-ton units to develop the
[[Page 1809]]
SEER-HSPF correlations. The development of these correlations is
described in more detail in Chapter 5 of the TSD.
During the 2015 CAC/HP Negotiations, the CAC/HP Working Group
recommended HSPF standards for both split-system and single package
heat pumps--8.8 and 8.0 HSPF, respectively. (ASRAC Term Sheet, Docket
No. EERE-2014-BT-STD-0048, No. 0076). For split-system heat pumps, the
recommendation was higher than the 8.5 HSPF value determined at 15 SEER
by DOE's HSPF/SEER correlation. DOE reviewed available data from the
BOMs and specification sheets used for its analysis to assess whether
this HSPF differential would impact costs. In this review, DOE looked
beyond the least-cost units used for its primary analysis, evaluating
costs for 15 SEER split-system heat pumps with HSPF between 8.3 and
9.0. The MPCs calculated for 15 SEER systems within this HSPF range
show that the cost differential for the HSPF increase from 8.5 to 8.8
is negligible. Hence, DOE did not in its analysis make an adjustment in
its MPCs to reflect this HSPF differential. For single-package heat
pumps, the selected standard level, 8.0 HSPF, was only slightly higher
than the correlated value, 7.9 HSPF. As for split systems, DOE did not
make an adjustment in its MPC to reflect this differential. Section
IV.E provides details on how DOE used HSPF levels to analyze the energy
use of heat pumps.
3. Estimation of Manufacturer Production Costs
For this DFR analysis, DOE determined a marketshare-weighted MPC at
each efficiency level for each representative capacity of each product
class and, as described previously in section IV.C.1, separately for
split-system air conditioner blower coil and coil-only units as well as
single speed and two-stage systems.
To calculate MPCs, DOE first compiled a database of split-system
air conditioner and heat pump indoor and outdoor units, single-package
air-conditioners and heat pumps, space-constrained air conditioners,
and SDHV air conditioners from a variety of manufacturers. For each
product class and representative capacity, the database included
indoor, outdoor and packaged units from multiple manufacturers that
represented a majority of the market and that spanned the range of
available efficiencies, to the best extent possible. For split systems,
DOE analyzed all possible matches of indoor and outdoor units in its
database that are listed in the AHRI Directory of Certified
Performance. As such, DOE believes the database of units and systems to
be representative of the market.
DOE then performed either a physical teardown or a catalog teardown
on each unit in the database. A physical teardown involves reverse-
engineering the unit in a laboratory. A catalog teardown involves
analyzing manufacturer specification sheets and supplementary component
data relative to data collected through a similar physical teardown or
other catalog teardown to determine the major physical differences
between a product that has been physically disassembled and another
similar product for which catalog data are available. The objective of
both approaches is to build a ``bottom-up'' manufacturing cost
assessment based on a detailed bill of materials.
From the teardowns, DOE generated a bill of materials (BOM) for
each unit in the database. The BOM lists all required components and
manufacturing steps to describe the product manufacturing in detail.
DOE then used the BOM data as inputs to develop a cost model that
calculates the MPC for each unit based on its detailed BOM. For split-
system air conditioners and heat pumps, DOE generated split-system MPCs
by adding the MPC of indoor and outdoor units for matches listed in the
AHRI Directory.
DOE then used the cost model outputs to generate marketshare-
weighted cost-efficiency relationships for each representative capacity
of each product class. The resulting cost-efficiency relationships were
used in the downstream analyses and are presented in section IV.C.4.
For product classes other than split-systems--single-package,
space-constrained, and small-duct high-velocity--the methodology for
calculating MPCs at each efficiency level matched the methodology used
in the August 2015 NODA analysis with updated material prices and based
on efficiency levels defined by the DOE test procedure at the time of
the CAC/HP Working Group Meetings. The results are also tabulated in
section IV.C.4.
4. Tabulated Results
DOE's market-weighted cost-efficiency relationships for central air
conditioners and heat pumps are shown in Table IV.3 through Table
IV.15. DOE used these results as inputs for the LCC and payback period
analyses.
Table IV-2--Manufacturer Production Costs for Two-Ton Split-System AC
Blower Coil ($2015)
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0-Baseline.............................. 13.0 $690
1....................................... 13.5 695
2....................................... 14.0 714
3....................................... 14.5 726
4....................................... 15.0 744
5....................................... 15.5 762
6....................................... 16.0 797
7....................................... 16.5 863
8....................................... 17.0 1,144
9....................................... 17.5 1,171
10*..................................... 18.0 1,178
11...................................... 19.0 1,314
12...................................... 20.0 1,362
13...................................... 21.0 1,362
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
[[Page 1810]]
Table IV-3--Manufacturer Production Costs for Three-Ton Split-System AC
Blower Coil
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 13.0 $788
1....................................... 13.5 815
2....................................... 14.0 822
3....................................... 14.5 855
4....................................... 15.0 887
5....................................... 15.5 925
6....................................... 16.0 927
7....................................... 16.5 1,048
8....................................... 17.0 1,310
9....................................... 17.5 1,356
10 *.................................... 18.0 1,335
11...................................... 19.0 1,360
12...................................... 20.0 1,360
13...................................... 21.0 1,608
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-4--Manufacturer Production Costs for Five-Ton Split-System AC
Blower Coil
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 13.0 $1,063
1....................................... 13.5 1,115
2....................................... 14.0 1,119
3....................................... 14.5 1,168
4....................................... 15.0 1,296
5....................................... 15.5 1,296
6....................................... 16.0 1,365
7 *..................................... 16.5 1,459
8....................................... 17.0 1,459
9....................................... 17.5 1,581
10...................................... 18.0 1,631
11...................................... 19.0 1,744
12...................................... 20.0 1,879
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-5--Manufacturer Production Costs for Two-Ton Split-System AC
Coil-Only
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 13.0 $581
1....................................... 13.5 598
2....................................... 14.0 606
3....................................... 14.5 628
4....................................... 15.0 676
5....................................... 15.5 798
6....................................... 16.0 916
7 *..................................... 16.5 1,149
8....................................... 17.0 1,153
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-6--Manufacturer Production Costs for Three-Ton Split-System AC
Coil-Only
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 13.0 $665
1....................................... 13.5 698
2....................................... 14.0 706
3....................................... 14.5 749
4....................................... 15.0 883
5 *..................................... 15.5 1,048
6....................................... 16.0 1,145
[[Page 1811]]
7....................................... 16.5 1,155
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-7--Manufacturer Production Costs for Five-Ton Split-System AC
Coil-Only
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 13.0 $908
1....................................... 13.5 943
2....................................... 14.0 1,087
3....................................... 14.5 1,173
4....................................... 15.0 1,234
5....................................... 15.5 1,287
6 *..................................... 16.0 1,352
7....................................... 16.5 1,423
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-8--Manufacturer Production Costs for Two-Ton Split-System HP
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 14.0 $881
1....................................... 14.5 900
2....................................... 15.0 936
3....................................... 15.5 991
4....................................... 16.0 1,010
5....................................... 16.5 1,152
6....................................... 17.0 1,303
7....................................... 17.5 1,311
8 *..................................... 18.0 1,353
9....................................... 18.5 1,353
10...................................... 19.0 1,418
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-9--Manufacturer Production Costs for Three-Ton Split-System HP
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 14.0 $973
1....................................... 14.5 990
2....................................... 15.0 1,031
3....................................... 15.5 1,132
4....................................... 16.0 1,137
5....................................... 16.5 1,379
6 *..................................... 17.0 1,421
7....................................... 17.5 1,438
8....................................... 18.0 1,459
9....................................... 18.5 1,520
10...................................... 19.0 1,541
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-10--Manufacturer Production Costs for Five-Ton Split-System HP
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 14.0 $1,256
1....................................... 14.5 1,324
2....................................... 15.0 1,359
[[Page 1812]]
3 *..................................... 15.5 1,543
4....................................... 16.0 1,626
5....................................... 16.5 1,743
6....................................... 17.0 1,883
7....................................... 17.5 2,064
------------------------------------------------------------------------
* Efficiency level at which designs are assumed to switch from single
speed compressors to two-stage compressors for the remaining higher
efficiency levels.
Table IV-11--Manufacturer Production Costs for Three-Ton Single-Package
AC
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 14.0 $1,050
1....................................... 14.5 1,088
2....................................... 15.0 1,128
3....................................... 15.5 1,169
4....................................... 16.0 1,212
5....................................... 17.0 1,302
6....................................... 17.5 1,350
------------------------------------------------------------------------
Table IV-12--Manufacturer Production Costs for Three-Ton Single-Package
HP
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 14.0 $1,188
1....................................... 14.5 1,233
2....................................... 15.0 1,279
------------------------------------------------------------------------
Table IV-13--Manufacturer Production Costs for Space-Constrained
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 12.0 $1,240
1....................................... 12.5 1,276
2....................................... 13.0 1,313
3....................................... 13.5 1,351
4....................................... 14.0 1,390
------------------------------------------------------------------------
Table IV-14--Manufacturer Production Costs for SDHV
[$2015]
------------------------------------------------------------------------
Efficiency level SEER MPC
------------------------------------------------------------------------
0--Baseline............................. 12.0 $1,334
1....................................... 12.5 1,442
2....................................... 13.0 1,558
3....................................... 13.5 1,683
4....................................... 14.0 1,819
------------------------------------------------------------------------
DOE calculated the manufacturer selling price (MSP) for central air
conditioners and heat pumps by multiplying the MPC at each efficiency
level (determined from the cost model) by the manufacturer markup (to
account for non-production costs and profit) and adding the product
shipping costs at the given efficiency level. The MSP is the price at
which the manufacturer can recover all production and non-production
costs and earn a profit.
DOE estimated the manufacturer markup based on publicly available
financial information for manufacturers of residential central air
conditioners and heat pumps as well as comments from manufacturer
interviews. DOE assumed the average manufacturer markup--which includes
SG&A expenses, R&D expenses, interest expenses, and profit--to be 1.34
for split-system air conditioners, 1.35 for split-system heat pumps,
and 1.32 for single-package air conditioners and single-package heat
pumps. Further details on manufacturer markups can be found in section
IV.J and in chapter 12 of the direct final rule TSD.
[[Page 1813]]
Manufacturers of HVAC products typically pay for the freight
(shipping) to the first step in the distribution chain. Freight is not
a manufacturing cost, but because it is a substantial cost incurred by
the manufacturer, DOE accounts for shipping costs separately from other
non-production costs that comprise the manufacturer markup. DOE
calculated shipping costs at each efficiency level based on a typical
53-foot straight-frame trailer with a storage volume of roughly 4,000
cubic feet. See chapter 5 of the direct final rule TSD for more details
about the methodology DOE used to determine the shipping costs.
D. Markups Analysis
DOE uses distribution channel markups and sales taxes (where
appropriate) to convert the manufacturer selling cost estimates from
the engineering analysis to consumer prices, which are then used in the
LCC, PBP, and the manufacturer impact analyses. The markups are
multipliers that are applied to the purchase cost at each stage in the
distribution channel.
DOE characterized two distribution channels to describe how central
air conditioners and heat pumps pass from manufacturers to residential
consumers: replacement market and new construction. The replacement
market channel is characterized as follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr]
Consumer
The new construction distribution channel is characterized as
follows:
Manufacturer [rarr] Wholesaler [rarr] Mechanical contractor [rarr]
General contractor [rarr] Consumer
To develop markups for the parties involved in the distribution of
the product, DOE utilized several sources, including: (1) The Heating,
Air-Conditioning & Refrigeration Distributors International (HARDI)
2013 Profit Report \38\ (to develop wholesaler markups); (2) the Air
Conditioning Contractors of America's (ACCA) 2005 financial analysis on
the heating, ventilation, air-conditioning, and refrigeration (HVACR)
contracting industry \39\ (to develop mechanical contractor markups);
and (3) U.S. Census Bureau 2007 Economic Census data \40\ on the
residential and commercial building construction industry (to develop
general contractor markups).
---------------------------------------------------------------------------
\38\ Heating, Air Conditioning & Refrigeration Distributors
International 2013 Profit Report, available at http://www.hardinet.org/Profit-Report (last accessed Aug. 19, 2014).
\39\ Air Conditioning Contractors of America (ACCA), Financial
Analysis for the HVACR Contracting Industry (2005), available at
http://www.acca.org/store/ (last accessed Aug. 19, 2014).
\40\ U.S. Census Bureau, 2007 Economic Census Data, available
at: http://www.census.gov/econ/ (last accessed April 10, 2014).
---------------------------------------------------------------------------
For wholesalers and contractors, DOE developed baseline and
incremental markups based on the product markups at each step in the
distribution chain. 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.
In addition to the markups, DOE derived state and local taxes from
data provided by the Sales Tax Clearinghouse.\41\ 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.
---------------------------------------------------------------------------
\41\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along
with Combined Average City and County Rates (2014) available at
http://thestc.com/STrates.stm (last accessed January, 2014).
---------------------------------------------------------------------------
Chapter 6 of the direct final rule TSD provides further detail on
the estimation of markups.
E. Energy Use Analysis
The purpose of the energy use analysis is to assess the energy
requirements of residential central air conditioners and heat pumps at
different efficiencies in representative U.S. single-family homes and
multi-family residences, and to assess the energy savings potential of
increased product efficiency.
DOE estimated the annual energy consumption of central air
conditioners and heat pumps at specified energy efficiency levels
across a range of climate zones, building characteristics, and cooling
applications. DOE's analysis estimated the energy use of central air
conditioners and heat pumps in the field (i.e., as they are actually
used by consumers). In contrast to the DOE test procedure, which
provides standardized results that can serve as the basis for comparing
the performance of different appliances used under the same conditions,
the energy use analysis seeks to capture the range of operating
conditions for central air conditioners and heat pumps.
In its analysis of the recommended TSL, DOE applied a higher HSPF
value to split-system heat pumps than indicated by the SEER and HSPF
correlations discussed in section IV.C.2. The higher value, 8.8 HSPF,
was recommended by the CAC/HP Working Group. At Efficiency Level 2, the
recommended TSL for split-system heat pumps, the HSPF should be 8.5
rather than the recommended value of 8.8. Since increasing the HSPF
increases the heating efficiency of the equipment, additional energy
savings are realized.
As also noted in section IV.C.2, DOE did not analyze EER-based
efficiency levels in the engineering analysis. DOE also did not analyze
the impact of EER on energy consumption or on life-cycle cost.
In the November 2014 RFI, DOE requested comment on whether it
should analyze the use of central air conditioners and heat pumps in
commercial buildings in the residential central air conditioning
rulemaking. AHRI and Southern Co. commented that they did not recommend
considering commercially-used equipment because central air
conditioners are not utilized significantly in commercial buildings.
(AHRI, No. 13 at p. 4; Southern Co., No. 11 at p. 2) Rheem stated that
commercial applications of residential equipment are less than 5
percent of the market, which would not be a significant enough
percentage of the market to warrant special consideration of the
application in the analysis for this rulemaking. (Rheem, No. 17 at p.
6)
As presented to the CAC/HP Working Group, DOE did not consider
commercial-sector applications of residential central air conditioners
and heat pumps because these represent a very small share of the
overall market.\42\ (ASRAC Public Meeting, No. 89 at pp. 7-14)
---------------------------------------------------------------------------
\42\ EIA's Commercial Building Energy Consumption Surveys from
1992, 1995, 1999, and 2003 indicate that the fraction of commercial
buildings with a residential central air conditioner or heat pump
unit ranges from 1.2 to 2.1 percent.
---------------------------------------------------------------------------
1. General Approach
To determine the field energy use of residential central air
conditioners and heat pumps used in homes, DOE used a subset of 7,283
households using a central air conditioner or heat pump from the Energy
Information Administration's (EIA) 2009 Residential Energy Consumption
Survey (RECS 2009).\43\ These households represent 60 percent of the
weighted households in the U.S. The 153 RECS households that also had a
room air conditioner, representing two percent of all weighted
households with a central air conditioner, were not included. The RECS
data provide information on the age of the home, the number of square
[[Page 1814]]
feet that are cooled, the age of its cooling equipment, and the 2009
cooling and heating energy use for each household. DOE used the
household samples not only to determine annual central air conditioner
or heat pump energy consumption, but also as the basis for conducting
the LCC and PBP analysis. DOE projected household weights, building
characteristics (such as thermal shell efficiency and square footage),
and cooling degree days (CDD) in 2021, the first full year of
compliance with any amended energy conservation standards for central
air conditioners and heat pumps. To characterize new homes in 2021, DOE
used a subset of homes that were built after 1994; these new homes
represent 23 percent of the homes with central air conditioners, and 45
percent of the homes with heat pumps.
---------------------------------------------------------------------------
\43\ U.S. Department of Energy: Energy Information
Administration, Residential Energy Consumption Survey: 2009 RECS
Survey Data (2013), available at: http://www.eia.gov/consumption/residential/data/2009/ (last accessed July 6, 2016).
---------------------------------------------------------------------------
RECS does not provide information on the type of central air
conditioner or heat pump, its capacity, or the number of units
installed (in particularly hot or humid locations more than one central
air conditioner/heat pump unit may be installed in a home). DOE
assigned the number and capacity of central air conditioner/heat pump
unit(s) based on the assumption of one ton of cooling capacity
installed per 500 square feet of cooled floor space. For homes with
more than one story and an estimated cooling capacity of between 3 and
5 tons, DOE assigned a 2-ton and a 3-ton unit, under the assumption
that home owners installed a second unit to provide separate
thermostatic control for each floor. For households with estimated
cooling capacity between 5 and 8 tons, DOE assigned a 3-ton and a 5-ton
unit, regardless of the number of stories. These assumptions resulted
in a distribution of national central air conditioner/heat pump by
capacity very similar to that of AHRI shipment data from 2007 to 2013
(30 percent 2-ton, 39 percent 3-ton, and 32 percent 5-ton). DOE's
assignment method resulted in just over one-quarter of households
having at least two central air conditioner/heat pump units installed,
with one RECS household (representing 33,000 national households)
assigned five 5-ton units.
For single-package central air conditioners and heat pumps, DOE
only used RECS households with 3-ton and 5-ton units because single-
package equipment is concentrated in these sizes. To analyze space-
constrained central air conditioners, DOE only used RECS multi-family
households with air conditioning because this equipment is targeted for
multi-family applications. To analyze small-duct high-velocity air
conditioners, DOE only used RECS single-family detached homes sized
with cooling requirements of 3-tons because this equipment is targeted
for single-family residences with moderate cooling requirements.
To estimate the annual energy consumption of central air
conditioners and heat pumps meeting the considered efficiency levels,
DOE first estimated the SEER of the existing equipment based on its age
and the average SEER of new central air conditioner/heat pump shipments
by year from AHRI data. For heat pumps, the HSPF of the existing
equipment was based on the SEER-HSPF correlation developed in the
Engineering Analysis and described in section IV.C.2.
For each sampled household, DOE adjusted the energy use estimated
for 2009 to ``normal'' weather by using ten-year CDD and HDD data for
each geographical region.\44\ As 2009 was a relatively cool year, these
adjustments increased CDD on average by eleven percent and decreased
HDD on average by five percent. DOE also accounted for the change in
climate based on Annual Energy Outlook 2015 (AEO 2015) projections of
CDD.\45\ This adjustment results in the national average building
cooling load increasing nine percent and the national average building
heating decreasing five percent from 2014 to 2021.
---------------------------------------------------------------------------
\44\ National Oceanic and Atmospheric Administration, NNDC
Climate Data Online (2014), available at http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp (last accessed July 29, 2014).
\45\ U.S. Department of Energy, Energy Information
Administration, Annual Energy Outlook 2015, available at http://www.eia.gov/forecasts/aeo/. Projections of degree days are informed
by a 30-year linear trend of each state's degree days, which are
then population-weighted to the Census division level. In this way,
the projection accounts for projected population migrations across
the nation and continues any realized historical changes in degree
days at the state level. The LCC and PBP analysis uses the climate
projected for 2021 for all TSLs.
---------------------------------------------------------------------------
DOE accounted for change in building shell characteristics and
building size (square footage) between 2009 and 2021 by applying
separate building shell indexes for existing and new homes in the
National Energy Modeling System (NEMS) associated with AEO 2015. The
indexes consider projected improvements in building thermal efficiency
due to improvement in home insulation and other thermal efficiency
practices, as well as projected increases in square footage of new
homes. Application of the index results in three percent lower building
cooling load for all homes, but one percent higher building cooling
load for new homes, between 2009 and 2021.
For each sample housing unit, DOE estimated the cooling load, and
heating load for heat pumps, in 2021 by multiplying the estimated
cooling and heating energy use in 2021 by the SEER and HSPF of the
existing central air conditioner or heat pump. The 2021 cooling and
heating loads are then used to estimate the energy use from replacing
the existing equipment with new central air conditioner or heat pump
units conforming to higher efficiency levels.
Chapter 7 of the direct final rule TSD provides further detail on
the general approach to the energy use analysis.
2. Split-System Central Air Conditioner: Blower-Coil to Coil-Only
Efficiency Adjustment
As discussed in section III.A, DOE had intended to rate and certify
split-system central air conditioners based on a blower-coil
configuration. However, the CAC/HP Working Group recommended that DOE
adopt an approach, similar to the current one, of rating and certifying
split-system central air conditioners based on any configuration (i.e.,
coil-only or blower-coil). (ASRAC Term Sheet, No. 76 at p. 4) As a
result, the energy use analysis no longer had to address the field
installation of split-system blower coil central air conditioners as
coil-only units. In its analysis, DOE analyzed coil-only and blower
coil split-system central air conditioners independently.
3. Split-System Central Air Conditioner: Coil-Only Efficiency
Adjustment
Coil-only central air conditioner installations consist of the
condensing unit and an evaporative coil. For rating purposes, a default
fan power consumption is applied to determine the SEER. In the June 8,
2016 test procedure final rule, DOE designated the default fan power
for the rating of coil-only central air conditioner split-systems to be
365 Watts per CFM, which is equivalent to a furnace fan using a
permanent split capacitor (PSC) motor. Because the energy use analysis
had to account for the actual furnace fan in the existing house to
properly represent the rated SEER of the coil-only central air
conditioner installation, DOE developed ``factory-to-field'' adjustment
factors to convert the coil-only rated SEER to a coil-only ``field
SEER''.
To develop such factors, DOE used a furnace fan-motor mix of 77-
percent PSC, 9-percent constant torque brushless permanent magnet (CT-
BPM), and 15-percent constant speed brushless permanent magnet (CS-
BPM). The above furnace fan mix is based on data developed for DOE's
furnace fan
[[Page 1815]]
standards rulemaking, and characterizes furnace fan types in the
housing stock in 2021 (the expected first full year of compliance with
any amended central air conditioner efficiency standards). 79 FR 38129
(July 3, 2014). This furnace fan mix was used in the energy use
analysis to specify the furnace fan types in the housing stock that use
both a central air conditioner and a furnace to space-condition the
home. The furnace fan mix was characterized as a custom probability
distribution and each of the furnace fan types was probabilistically
assigned to RECS households that utilized a central air conditioner and
furnace.
After the assignment of the furnace fan type to the RECS household,
the ``factory-to-field'' adjustment factor was applied to convert the
rated SEER to a ``field SEER.'' The ``factory-to-field'' adjustment
factors were developed as a function of the coil-only rated SEER; the
central air conditioner cooling capacity; and the type of furnace fan
in the existing household. For example, in the case of a 3-ton coil-
only central air conditioner unit with a rated SEER of 15 utilizing a
PSC indoor blower-motor, if the unit was installed as a coil-only unit
into a household with a CT-BPM furnace fan, then the ``factory-to-
field'' adjustment factor accounted for the reduction in fan power
associated with utilizing a CT-BPM indoor blower-motor instead of a PSC
furnace fan.
Table IV-15 shows the ``factory-to-field'' adjustment factors for
converting coil-only rated SEER to a coil-only ``field SEER.'' Appendix
7E of the direct final rule TSD provides details on exactly how the
``factory-to-field'' adjustment factors were determined.
Table IV-15--``Factory-to-Field'' Adjustment Factors to Convert Coil-Only Central Air Conditioner Rated SEER to Coil-Only ``Field SEER''
--------------------------------------------------------------------------------------------------------------------------------------------------------
Capacity of central air conditioner and the furnace fan type in the existing household
-----------------------------------------------------------------------------------------------------------
Coil-only rated SEER 2-ton 3-ton 5-ton
-----------------------------------------------------------------------------------------------------------
PSC (%) CT-BPM (%) CS-BPM (%) PSC (%) CT-BPM (%) CS-BPM (%) PSC (%) CT-BPM (%) CS-BPM (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
13.0........................................ 0.0 6.9 7.3 0.0 3.5 4.8 0.0 1.8 5.0
13.5........................................ 0.0 7.1 7.5 0.0 3.7 5.0 0.0 1.8 5.2
14.0........................................ 0.0 7.3 7.8 0.0 3.8 5.2 0.0 1.9 5.3
14.5........................................ 0.0 7.6 8.0 0.0 3.9 5.3 0.0 1.9 5.5
15.0........................................ 0.0 7.8 8.3 0.0 4.0 5.5 0.0 2.0 5.7
15.5........................................ 0.0 8.0 8.5 0.0 4.1 5.6 0.0 2.1 5.8
16.0........................................ 0.0 8.3 8.8 0.0 4.2 5.8 0.0 2.1 6.0
16.5........................................ 0.0 8.7 9.3 0.0 4.5 6.1 0.0 2.2 6.3
17.0........................................ 0.0 9.0 9.5 0.0 4.6 6.3 0.0 2.3 6.5
18.0........................................ 0.0 9.2 9.8 0.0 4.7 6.4 0.0 2.3 6.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
4. Split-System Central Air Conditioner: Coil-Only Installations
In the August 2015 NODA, the analysis assumed that coil-only
installations would consist of a new condensing unit and a new
evaporative coil utilizing the blower of the furnace. Data presented to
the CAC/HP Working Group by AHRI showed that there are far more
shipments of condensing units than evaporative coils, indicating that
new condensing units are not always paired with a new evaporative coil,
and instead some installations use the existing evaporative coil. The
AHRI data suggested that approximately 25 percent of installations use
the existing evaporative coil. (ASRAC Public Meeting, No. 88 at pp.
175-214)
In the analysis for this DFR, DOE assumed that 25 percent of coil-
only installations use the existing evaporative coil. Based on a
characterization of the stock of evaporative coils, DOE assumed that 25
percent of the existing evaporative coils are from a system rated at 10
SEER (the efficiency standard effective in 1992) and 75 percent are
from a system rated at 13 SEER (the efficiency standard effective in
2006). The analysis paired a new condensing unit at each considered
efficiency level with an evaporative coil at either 10 or 13 SEER, so
the system efficiency is less than would be the case with a new
evaporative coil. DOE used an equipment simulation model, the DOE/Oak
Ridge National Laboratory (ORNL) Heat Pump Design Model, Mark VI
version,\46\ along with a manufacturer's central air conditioner system
specifications, to estimate the resulting system efficiency. Appendix
7G of the DFR TSD provides details of the analysis, which were also
presented to the CAC/HP Working Group. (ASRAC Public Meeting, No. 84 at
pp. 59-61) Because 25 percent of coil-only installations use the
existing (lower-efficiency) evaporative coil, the overall average
energy use of split-system central air conditioners is higher in the
DFR analysis than in the August 2015 NODA. (ASRAC Public Meeting, No.
88 at pp. 175-214)
---------------------------------------------------------------------------
\46\ DOE/ORNL Heat Pump Design Model, Mark VI Version. http://
web.ornl.gov/~wlj/hpdm/MarkVI.shtml.
---------------------------------------------------------------------------
5. Fan Energy Use During Continuous Operation
The SEER and HSPF efficiency metrics account for fan energy use to
provide space cooling and space heating, respectively. These metrics do
not account for fan energy use in continuous operation.\47\ As noted
above in section IV.E.3, DOE published a final rule that established
energy conservation standards for residential furnace fans. Products
addressed in the final rule include furnace fans used in weatherized
and non-weatherized gas furnaces, oil furnaces, electric furnaces, and
modular blowers, which included capturing the energy use of these
products in continuous operation. The rule does not cover furnace fans
used in blower-coil indoor units of split-system central air
conditioners and heat pumps of any type.\48\ As noted above in section
IV.E.3, coil-only split-system air conditioners are coupled with non-
weatherized furnaces and, as a result, the continuous operation of the
fan was already accounted for in the furnace fan final rule. The
continuous operation of the fan for single-package air
[[Page 1816]]
conditioners was also already accounted for in the furnace fan final
rule as these products are sold within a single package that includes a
weatherized furnace. Therefore, DOE needed to account for fan energy
use in continuous operation for the following product classes: Split-
system central air conditioner product class in a blower coil
configuration, split-system heat pumps, single-package heat pumps, and
small duct high velocity air conditioners.
---------------------------------------------------------------------------
\47\ Continuous operation is used in homes that require
mechanical ventilation because are infiltration is very low.
\48\ Reference to Technical Support Document for Residential
Furnace Fans Energy Conservation Standard, Chapter 3 Market and
Technology Assessment: http://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0111.
---------------------------------------------------------------------------
To accomplish the accounting of continuous fan operation, DOE
relied on inputs from the rulemaking for furnace fans. Specifically,
DOE used the wattage reduction from certain fan technologies, the hours
of operation in continuous mode for households that use that mode, and
the fraction of households that require such continuous operation.\49\
The engineering analysis specifies the fan technologies that are
associated with specific SEER and HSPF efficiency levels, allowing for
calculation of the fan energy savings in continuous operation at each
level for split-system and package heat pumps and split-system central
air conditioners in a blower coil configuration. Further details are
given in chapter 7 of the DFR TSD.
---------------------------------------------------------------------------
\49\ Technical Support Document: Energy Efficiency Program for
Consumer Products and Commercial and Industrial Equipment:
Residential Furnace Fans. U.S. Department of Energy. Washington DC.
June 2014. Chapter 7. https://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0111.
---------------------------------------------------------------------------
6. Other Issues
Higher-efficiency central air conditioners and heat pumps can
reduce the operating costs for a consumer, which DOE understands could
lead to greater use of the product. A direct rebound effect occurs when
a piece of equipment that is made more efficient is used more
intensively, such that the expected energy savings from the efficiency
improvement may not fully materialize. In this DFR analysis, DOE
examined a 2009 review of empirical estimates of the rebound effect for
various energy-using products.\50\ However, the review contained
relatively few estimates of the direct rebound effect for household
cooling. The two studies discussed in the review were old studies (from
1978 and 1981), conducted during a period of rising energy prices and
using small sample sizes. One shows a short-run rebound effect of 4
percent,\51\ while the other reported a wide range of 1-26 percent.\52\
In the NOPR for residential furnaces, DOE chose to use a rebound effect
of 15 percent, which is roughly in the center of the range reported for
household cooling. 80 FR 13120, 13148 (May 12, 2015). For consistency,
DOE used a rebound effect of 15 percent for central air conditioner and
heat pump when counting energy savings in the NIA.
---------------------------------------------------------------------------
\50\ S. Sorrell, J. Dimitropoulos, and M. Sommerville, 2009.
Empirical Estimates of the Direct Rebound Effect: A Review. 37
Energy Policy 1356-71.
\51\ Hausman, J.A., 1979. Individual discount rates and the
purchase and utilization of energy-using durables. Bell Journal of
Economics 10(1), 33-54.
\52\ Dubin, J.A., Miedema, A.K., Chandran, R.V., 1986. Price
effects of energy-efficient technologies--a study of residential
demand for heating and cooling. Rand Journal of Economics 17(3),
310-25.
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In its comments on the November 2014 RFI, NEEA and NPCC stated that
DOE's proposed test procedure change for variable-speed units may have
a significant impact on energy savings. (NEEA & NPCC, No. 19 at p. 10)
As discussed in section III.F, DOE is amending the testing requirement
for systems with a variable speed compressor. As noted in section
III.F, however, the analyses conducted to support this direct final
rule were based on the test procedure at the time of the CAC/HP Working
Group negotiations, per the request of the CAC/HP Working Group.
Commenting on the RFI, AHRI urged DOE to evaluate the impact of
changes in SEER and EER on cooling energy savings once the 2011 DFR
standards are effective (in 2015). AHRI stated that DOE cannot
determine whether additional improvements will save energy without
evaluating whether the standards that have been adopted have actually
resulted in the energy savings predicted in the 2011 DFR analysis.
According to AHRI, if those savings are not in fact realized, DOE
cannot have a basis for concluding that further changes will result in
additional significant energy savings. (AHRI, No. 13 at p. 4)
In response, DOE expects that manufacturers will comply with the
2011 DFR standards and that the units sold at the rated SEER and EER
levels will generally perform as expected. DOE's estimation of the
energy use of standards-compliant units in representative use in U.S.
homes was extensively reviewed in the 2011 DFR rulemaking, and it is
reasonable to expect that the efficiency improvements required by the
2011 DFR will yield energy savings roughly in accord with DOE's
projections.
F. Life-Cycle Cost and Payback Period Analysis
In determining whether an energy efficiency standard is
economically justified, DOE considers the economic impact of potential
standards on consumers. The effect of new or amended standards on
individual consumers usually includes a reduction in operating cost and
an increase in purchase cost. DOE used the following two metrics to
measure consumer impacts:
LCC (life-cycle cost) is the total consumer cost of an
appliance or product, generally over the life of the appliance or
product, including purchase and operating costs. The latter costs
consist of maintenance, repair, and energy costs. Future operating
costs are discounted to the time of purchase and summed over the
lifetime of the appliance or product.
PBP (payback period) measures the amount of time it takes
consumers to recover the assumed higher purchase price of a more
energy-efficient product through reduced operating costs.
For any given efficiency level, DOE measures the change in LCC
relative to the efficiency levels estimated for the no-standards case,
which reflects the market in the absence of amended energy conservation
standards, including market trends for equipment that exceeds the
current energy conservation standards.
DOE analyzed the net effect of potential amended central air
conditioner and heat pump standards on consumers by calculating the LCC
savings and PBP for each household by efficiency level. Inputs to the
LCC calculation include the installed cost to the consumer (purchase
price, including sales tax where appropriate, plus installation cost),
operating costs (energy expenses, repair costs, and maintenance costs),
the lifetime of the product, and a discount rate. Inputs to the payback
period calculation include the installed cost to the consumer and
first-year operating costs.
DOE performed the LCC and PBP analyses using a spreadsheet model
combined with Crystal Ball \53\ to account for uncertainty and
variability among the input variables. Each Monte Carlo simulation
consists of 10,000 LCC and PBP calculations using input values that are
either sampled from probability
[[Page 1817]]
distributions and household samples or characterized with single point
values. The analytical results include a distribution of 10,000 data
points showing the range of LCC savings for a given efficiency level
relative to the no-standards case efficiency distribution. 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 who already purchase more-efficient products,
DOE avoids overstating the potential benefits from increasing product
efficiency.
---------------------------------------------------------------------------
\53\ Crystal Ball is a commercial software program developed by
Oracle and used to conduct stochastic analysis using Monte Carlo
simulation. A Monte Carlo simulation uses random sampling over many
iterations of the simulation to obtain a probability distribution of
results. Certain key inputs to the analysis are defined as
probability distributions rather than single-point values.
---------------------------------------------------------------------------
EPCA establishes a rebuttable presumption that a standard is
economically justified if the Secretary finds that the additional cost
to the consumer of purchasing a product complying with an energy
conservation standard level will be less than three times the value of
the energy (and, as applicable, water) savings during the first year
that the consumer will receive as a result of the standard, as
calculated under the test procedure in place for that standard. (42
U.S.C. 6295(o)(B)(ii)) 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.
As discussed in section IV.E, DOE developed nationally-
representative household samples from 2009 RECS. For each sampled
building, DOE determined the energy consumption of the central air
conditioner or heat pump and the appropriate energy prices in the area
where the building is located.
DOE calculated the LCC and PBP for all central air conditioner or
heat pump consumers as if the consumers were to purchase the product in
the year that compliance with amended standards is required. Because
the analysis was conducted when 2021 was the expected first year of
compliance, it used that year for all the considered TSLs, including
the Recommended TSL.
At the October 14, 2015 CAC/HP Working Group meeting, AHRI
presented an LCC sensitivity analysis demonstrating the impact of
several inputs, including manufacturer production costs, distribution
channel markups, consumer discount rates, and expected time of
ownership, on the LCC savings of more-efficient split system CACs and
HPs. AHRI's analysis demonstrated that the LCC savings are highly
sensitive to the above inputs. (ASRAC Public Meeting, No. 89 at pp.
225-239). Although AHRI did question the above inputs that DOE used in
the LCC analysis, the purpose of their analysis was to demonstrate that
the LCC savings were highly sensitive to changes in the inputs. As a
result of AHRI's analysis, DOE requested feedback and made revisions to
the above inputs based on member recommendations during subsequent CAC/
HP Working Group meetings. The inputs to the LCC analysis which were
the focus of AHRI's sensitivity analysis are described in sections
above (manufacturer production costs and markups) or below (discount
rates and product lifetime). In the case of the manufacturer production
costs, DOE details how stakeholder recommendations were considered in
the development of the costs. As a result of the Working Group's
efforts to provide meaningful input and insights for all of the input
into the LCC analysis, DOE believes the LCC results presented in
section V.B.1 accurately represent the consumer impacts of the amended
standards for CACs and HPs.
1. Inputs to Installed Cost
The primary inputs for establishing the total installed cost are
the baseline consumer product price, standard-level consumer price
increases, and installation costs (labor and material cost). Baseline
consumer prices and standard-level consumer price increases were
determined by applying markups to manufacturer selling price estimates,
including sales tax where appropriate. The installation cost is added
to the consumer price to produce a total installed cost.
a. Equipment Cost
The manufacturer selling price estimated in the engineering
analysis refers to the current price. Economic literature and
historical data suggest that the real prices of many products may trend
downward over time according to ``learning'' or ``experience'' curves.
Experience curve analysis focuses on entire industries and aggregates
over many causal factors that may not be well characterized.\54\ For
example, experience curve analysis implicitly includes factors such as
efficiencies in labor, capital investment, automation, materials
prices, distribution, and economies of scale at an industry-wide level.
An experience curve relates the product price to the cumulative
production of the product. Using a given set of historical data, DOE
derived an experience rate that expresses the percentage reduction in
price for each doubling of cumulative production.
---------------------------------------------------------------------------
\54\ Margaret Taylor & K. Sydny Fujita, Accounting for
Technological Change in Regulatory Impact Analyses: The Learning
Curve Technique. (Lawrence Berkeley Nat'l Lab., 2013) available at:
http://eetd.lbl.gov/publications/accounting-for-technological-change-0.
---------------------------------------------------------------------------
For the default price trend for residential central air conditioner
and heat pump, DOE derived an experience rate based on an analysis of
long-term historical data. As a proxy for manufacturer price, DOE used
Producer Price Index (PPI) data for unitary air conditioners from the
Bureau of Labor Statistics for 1978 through 2013.\55\ An inflation-
adjusted PPI was calculated using the GDP chained price deflators for
the same years. To calculate an experience rate, DOE performed a least-
squares power-law fit on the inflation-adjusted PPI versus cumulative
shipments of residential central air conditioners and heat pumps, based
on a corresponding series for historic shipments of these products (see
section IV.G of this direct final rule for discussion of shipments
data). A detailed discussion of DOE's derivation of the experience rate
is provided in appendix 8-C of the direct final rule TSD.
---------------------------------------------------------------------------
\55\ U.S. Department of Labor, Bureau of Labor Statistics,
Produce Price Indices Series ID PCU333415333415E, available at
http://www.bls.gov/ppi/ (last accessed July 28, 2014).
---------------------------------------------------------------------------
DOE then derived a price factor index, with the price in 2013 equal
to 1, to forecast prices in the compliance year for the LCC and PBP
analysis, and, for the NIA, for each subsequent year in the 30-year
shipments period. The index value in each year is a function of the
experience rate and the cumulative production through that year. To
derive the latter, DOE combined the historical shipments data with
projected shipments from the NIA (see section IV.H of this notice).
As discussed, DOE determined the type, capacity and number of
central air conditioner/heat pump units for each RECS household in
order to assign the correct equipment price. For packaged systems, DOE
only developed manufacturer costs for 3-ton systems, so it used these
costs for all packaged systems to arrive at equipment prices.
As discussed, the energy use analysis had to address the field
installation of coil-only installations use the existing evaporative
coil. For these installations, the equipment price was based solely on
the condensing unit.
[[Page 1818]]
b. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the equipment.
DOE developed installation labor costs for different central air
conditioner and heat pump capacities from RSMeans Facilities
Maintenance & Repair Cost Data 2015. Based on input from the CAC/HP
Working Group, two further actions were taken: The hourly wages were
updated and overhead and profit were included using the information
from RS Means. (ASRAC Public Meeting, No. 84 at pp. 76-80)
Commenting on the November 2014 RFI, AHRI stated that installation
costs are generally scalable with equipment size and weight. (AHRI, No.
13 at p. 4) Southern Co. stated that installation cost scales with
weight. (Southern Co., No. 11 at p. 2) In contrast, Rheem does not
believe that installation costs scale with equipment weight. According
to Rheem, DOE should analyze the installation costs as increasing with
efficiency due to duct modifications that are required for larger
indoor coils. (Rheem, No. 17 at p. 6)
DOE initially determined that the change in weight from the minimum
efficiency unit to maximum efficiency unit is not large enough to
require an increase in the number of people in the crew to move and
position the unit--two people are sufficient.\56\ The labor hours also
do not change with the physical size of the unit. Regarding the need
for duct modification, air flow volume does not change with efficiency,
so duct size does not need to change for the same tonnage unit even if
the indoor coil size is bigger. Based on the foregoing, the
installation cost was initially estimated to remain the same across the
considered efficiency levels. Based on input from the CAC/HP Working
Group, however, DOE revised the installation cost for replacement
installations to account for the installation of/thermostat wire as
well as the increased thermostat costs for 2-speed compressors and
indoor fan ECMs. (ASRAC Public Meeting, No. 84 at pp. 76-80) These cost
adders were generally applied to units with energy efficiencies at
about 16 SEER.
---------------------------------------------------------------------------
\56\ For example, a 5 ton air conditioner outdoor unit weight
changes from 190 lb to 290 lb when efficiency changes from 13 SEER
to 18 SEER (data from manufacturer published data).
---------------------------------------------------------------------------
The CAC/HP Working Group requested that ACCA conduct a survey of
its members to provide insight regarding the degree to which
installation costs are higher for more-efficient equipment. ACAA
conducted a survey and presented it to the CAC/HP Working Group. Based
on the survey, ACCA concluded that DOE was not fully covering
installation costs, including the costs of changing wiring and
thermostats, checking ducting, and start-up costs to commission a
higher efficiency product. (ASRAC Public Meeting, No. 85 at pp. 43-79)
In response, DOE notes that the number of survey respondents was small
(44 out of approximately 4,000 member contractors). Therefore, DOE
chose to retain its estimates of installation costs.
Commenting on the November 2014 RFI, AHRI suggested that DOE
include costs incurred by contractors and consumers associated with
installation limitations such as local fire code access restrictions
and indoor space constraints. (AHRI, No. 13 at p. 4) In response, DOE
notes that it currently has space-constrained central air conditioner
and space-constrained heat pump product classes specifically for
products that may have installation limitations due to space
constraints. Therefore, contractor and consumer costs due to space
constraints were not considered for the other non-space-constrained
product classes.
2. Inputs to Operating Costs
a. Energy Consumption
For each sample household, DOE determined the energy consumption
for a central air conditioner or heat pump at different efficiency
levels using the approach described above in section IV.E.
As discussed in section IV.E, DOE is taking into account the
rebound effect associated with more-efficient residential central air
conditioner and heat pump. The take-back in energy consumption
associated with the rebound effect provides consumers with increased
value (e.g., enhanced comfort associated with a cooler or warmer indoor
environment). The increased comfort has a cost that is equal to the
monetary value of the higher energy use. DOE could reduce the energy
cost savings to account for the rebound effect, but then it would have
to add the value of increased comfort in order to conduct a proper
economic analysis. The approach that DOE uses--not reducing the energy
cost savings to account for the rebound effect and not adding the value
of increased comfort--assumes that the value of increased comfort is
equal to the monetary value of the higher energy use. Although DOE
cannot measure the actual value of increased comfort to the consumers,
the monetary value of the higher energy use represents a lower bound
for this quantity.
b. Energy Prices
DOE used marginal and average prices which vary by season, region
and household consumption level. DOE estimated these prices using data
published with the Edison Electric Institute (EEI) Typical Bills and
Average Rates reports for summer and winter 2014.\57\ Each report
provides, for most of the major investor-owned utilities (IOUs) in the
country, the total bill assuming household consumption levels of 500,
750 and 1,000 kWh for the billing period. DOE defined an average price
as the ratio of the total bill to the electricity consumption, and a
marginal price as the ratio of the change in the bill to the change in
energy consumption.
---------------------------------------------------------------------------
\57\ Edison Electric Institute. Typical Bills and Average Rates
Report. Winter 2014 published April 2014, Summer 2014 published
October 2014. See http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx.
---------------------------------------------------------------------------
Regional weighted-average values for each type of price were
calculated for the nine census divisions and four large States (CA, FL,
NY and TX). Each EEI utility in a region was assigned a weight based on
the number of residential consumers it serves. Consumer counts were
taken from the most recent EIA Form 861 data.\58\ DOE adjusted these
regional weighted-average prices to account for systematic differences
between IOUs and publicly-owned utilities (POUs), as the latter are not
included in the EEI data set. For each region, DOE estimated a
correction factor based on the ratio of the average electricity price
for IOUs to the average price charged by POUs (calculated using EIA
Form 861 data), and the percentage of consumers served by POUs.
---------------------------------------------------------------------------
\58\ See http://www.eia.gov/electricity/data/eia861/.
---------------------------------------------------------------------------
DOE assigned seasonal average and marginal prices to each household
in the LCC sample based on its location and its baseline monthly
electricity consumption for an average summer or winter month. For a
detailed discussion of the development of seasonal average and marginal
energy prices, see appendix 8-F of the direct final rule TSD.
To estimate future prices, DOE used the projected annual changes in
average residential electricity prices in the Reference case projection
in AEO 2015.\59\ The AEO price trends do not distinguish between
marginal and average prices. DOE reviewed the EEI data for the years
2007 to 2014 and
[[Page 1819]]
determined that there is no systematic difference in the trends for
marginal vs. average prices in the data, so DOE used the same AEO 2015
trend for both.
---------------------------------------------------------------------------
\59\ U.S. Department of Energy, Energy Information
Administration, op.cit.
---------------------------------------------------------------------------
c. Maintenance and Repair Costs
Maintenance costs are associated with maintaining the proper
operation of the equipment, whereas repair costs are associated with
repairing or replacing components that have failed.
The maintenance cost for an air conditioner or heat pump unit
includes a preventative annual check done by HVAC professionals, and
preventative maintenance performed by home owners such as filter
changes.
Commenting on the November 2014 RFI, Rheem stated that more
efficient products do not require additional maintenance. (Rheem, No.
17 at p. 7) Southern Co. stated that time and cost of routine
maintenance should be higher for variable speed units. (Southern Co.,
No. 11 at p. 3)
DOE reviewed RSMeans Facilities Maintenance & Repair Cost Data 2015
and determined that the maintenance cost does not change with equipment
size and equipment efficiency, even for variable-speed products. Most
variable-speed products have intelligent controls, which have certain
diagnostic capabilities that would likely reduce the maintained cost of
the unit. However, DOE decided not to estimate lower maintenance costs
for variable-speed units to be more conservative. Therefore, DOE did
not include maintenance costs in the LCC analysis as it would have no
impact on the results.
DOE calculated the cost of repair by totaling the cost of replacing
the major components in central air conditioner or heat pump that are
expected to fail during the life of the equipment. Higher efficiency
units have more expensive components, and the estimated repair costs
are higher. The major components included in the analysis are the
indoor coil, outdoor coil, indoor blower (except for coil-only unit),
outdoor fan, indoor TXV, outdoor TXV (heat pump only), reversing valve
(heat pump only), and controls. Compressor failures were not considered
in the LCC and PBP analysis but, rather, were included in the shipments
and national impact analyses. DOE assumed that compressor failure is
the principal driver for a consumer to either replace or repair the
unit (see section IV.G). For investors, which are often used in
variable-speed compressors, manufacturers offer the same warranty term
for inverters and compressors together, so DOE assumed inverters have
approximately the same reliability as compressors.
DOE developed component failure rates from proprietary industry
data. The associated material cost and labor costs were initially
developed from RSMeans Facilities Maintenance & Repair Cost Data 2015,
the 2014 furnace fan final rule TSD,\60\ and component vendors. The
development of repair costs considered a warranty period, as almost all
manufacturers provide warranty coverage for their products. As a
result, the costs associated with component repairs occurring during
the warranty period were deducted from the total consumer repair cost.
Because equipment of different capacities and efficiencies contain
different components, repair costs were calculated as a function of
efficiency and capacity. Because component failure rates are a function
of equipment age, DOE determined failure rates and the associated
repair costs during different periods of equipment age.
---------------------------------------------------------------------------
\60\ Available at: http://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0111.
---------------------------------------------------------------------------
Commenting on the November 2014 RFI, AHRI stated that higher
efficiency products have more complex and expensive components
necessitating longer repair times by more experienced technicians, and
repair costs are generally directly proportional with equipment price.
(AHRI, No. 13 at p. 4-5) Rheem stated that with the exception of
evaporator and condenser coils, repair costs vary with replacement
component prices and not product price. Rheem noted that with more
complex technologies to achieve higher efficiency, the number of
components increases and the number of repairs per system is likely to
increase. (Rheem, No. 17 at p. 7) Southern Co. stated that inverters
tend to have shorter lives than compressors and evaporators, and costs
for inverter replacements should be separately modeled. (Southern Co.,
No. 11 at p. 3)
The cost of replacing the major components in a central air
conditioner or heat pump that are expected to fail during the life of
the equipment and the component failure rates were presented to the
CAC/HP Working Group. Based on input from the CAC/HP Working Group, DOE
revised its estimates. (ASRAC Public Meeting, No. 84 at pp. 83-100)
Failure rates and material costs were revised based on further
discussion with industry experts. All components besides fan motors
were marked up with a mechanical contractor markup. Fan motor costs
were taken from Grainger.\61\ The labor hours for the repair remained
the same as what was initially developed but the hourly wages were
updated to include overhead and profit based on RS Means. Refer to
chapter 7 of the direct final rule TSD for more details on the
development of the costs, labor hours, and failure rates.
---------------------------------------------------------------------------
\61\ W.W. Grainger, Inc. See: https://www.grainger.com/category/motors/ecatalog/N-bii?analytics=nav.
---------------------------------------------------------------------------
d. Product Lifetime
Product lifetime is the age at which an appliance is retired from
service. DOE estimated the lifetime of central air conditioners and
heat pumps as part of the shipments analysis. The method that DOE used
to develop lifetime estimates is described in section IV.G. DOE
developed separate lifetime distributions for the three considered
regions. Table IV-16 shows the average lifetimes.
Table IV-16--Average Lifetime by Region
----------------------------------------------------------------------------------------------------------------
Product class group National North Hot-humid Hot-dry
----------------------------------------------------------------------------------------------------------------
Central Air Conditioners........................ 21.2 24.1 18.0 24.9
Heat Pumps...................................... 15.3 16.4 15.1 15.4
----------------------------------------------------------------------------------------------------------------
e. Discount Rates
In the calculation of LCC, DOE applies discount rates to estimate
the present value of future operating costs. The discount rate used in
the LCC analysis represents the individual consumer's perspective.
To establish discount rates for residential consumers, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
operating cost savings. DOE's primary data source was the Federal
Reserve Board's Survey of
[[Page 1820]]
Consumer Finances (SCF) for 1995, 1998, 2001, 2004, 2007, and 2010. DOE
estimated separate discount rate distributions for six income groups,
divided based on income percentile as reported in the SCF. DOE
calculated a weighted average discount rate for each household in the
SCF using the shares of each type of debt and equity of a household's
total combined debt-plus-equity. The household-level discount rates
were then aggregated to form discount rate distributions for each of
the six income groups, representing the discount rates that may apply
in the year in which amended standards would take effect. DOE assigned
each sample household a specific discount rate drawn from the
appropriate distribution. The average residential discount rate across
all types of household debt and equity and income groups, weighted by
the shares of each class, is 4.5 percent.
See chapter 8 in the direct final rule TSD for further details on
the development of discount rates for the LCC analysis.
f. Product Efficiency in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a standard at a particular efficiency level, DOE estimates
the distribution of product efficiencies that consumers would purchase
in the case without new or amended energy efficiency standards
(referred to as the no-new-standards case) in the year compliance with
the standard is required. DOE develops such an efficiency distribution
for each of the considered product classes.
For the June 2011 DFR, AHRI provided historical shipment-weighted
efficiency data by product class through 2009.\62\ Absent any recent
data, DOE had to make its own estimates of how the efficiency
distributions determined for the June 2011 DFR were impacted by the
amended standards that became effective in January, 2015 and, in turn,
how the distributions would change further from 2015 to 2021, the
assumed first full compliance year for any amended central air
conditioner and heat pump standards. The estimated efficiency
distributions were presented to the CAC/HP Working Group, which
recommended that they be revised based on recent data from AHRI. (ASRAC
Public Meeting, No. 89 at pp. 163-170)
---------------------------------------------------------------------------
\62\ These data, along with model data from the Air-
Conditioning, Heating, and Refrigeration (ACHR) News, were used to
develop base-case efficiency distributions for 2008. DOE projected
the central air conditioner and heat pump efficiency distributions
to 2011 based on the average growth in shipment-weighted efficiency
observed in the AHRI data from 2006 to 2009. DOE then took into
account Federal tax credit programs designed to encourage purchase
of higher-efficiency products to further adjust the distributions
for the year 2016, the assumed compliance date of new standards that
was used for the DFR analysis.
---------------------------------------------------------------------------
AHRI submitted data on market share for 2015 by SEER for the three
regions for split-systems.\63\ DOE then projected the shipment-weighed
SEER for 2021 using an efficiency growth rate equal to half of the rate
in the 1993-2002 period. The years 1993 to 2002 were a time period when
no new central air conditioner and heat pump standards became
effective, and, therefore, the efficiency trend represented gains
caused solely by non-regulatory market conditions. DOE chose to use
half the growth rate observed during the historic period due to
potential technological limits on further improving efficiency with
single-speed design measures. DOE then allocated market shares to the
efficiency levels being analyzed for this rule so that the resultant
shipment-weighted SEER matched the value determined from the
application of the estimated growth rate from 2015 to 2021.
---------------------------------------------------------------------------
\63\ AHRI also provided data indicating the market shares of
split-system air conditioners in coil-only and blower coil
configurations. These fractions (61% and 39%, respectively) were
used to establish the shares of projected shipments in the shipments
model.
---------------------------------------------------------------------------
For package systems, AHRI did not provide recent data on market
share by SEER, so DOE retained the approach developed for the August
2015 NODA. First, DOE altered the efficiency distributions it developed
for the June 2011 DFR by rolling-up the market shares for products
between 13 and 13.99 SEER to 14 SEER, the new standard level effective
in 2015. To estimate the efficiency distributions in 2021, DOE applied
an efficiency growth rate that was half that observed from 1993 to 2002
to the shipment-weighted SEER estimated in 2015. After determining the
shipment-weighed SEER in 2015, DOE then allocated market shares to the
efficiency levels being analyzed for this rule so that the resultant
shipment-weighted SEER matched the value determined from the
application of the estimated growth rate from 2015 to 2021.
3. Inputs to Payback Period Analysis
The payback period is the amount of time it takes the consumer to
recover the additional installed cost of more efficient products,
compared to baseline products, through energy cost savings. The simple
payback period does not account for changes in operating expense over
time or the time value of money. Payback periods that exceed the life
of the product mean that the increase in 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 customer 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. The results of DOE's PBP analysis are
presented in section V.B.1.
For the rebuttable presumption PBP, for each considered efficiency
level, DOE determined 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 standard would be required.
G. Shipments Analysis
Shipments of covered equipment are a key input to estimates of the
national energy savings under a proposed standard. The goal of the
shipments model is to provide projections of the total number of units
of shipped during the analysis period, and to estimate how those
shipments may be affected by the equipment price and operating cost
changes induced by a standard.
The shipments model is factored into two segments: Estimation of
the total number of shipments of a given product type across all
efficiencies available in the market, and distribution of these
shipments over efficiency bins. Consumer decisions with respect to
repairs and equipment switching only affect the total number of units
shipped.
1. Model Structure
The shipments model produces separate projections for each of four
equipment classes: Split and packaged central air conditioners (central
air conditioners), and split and packaged heat pumps (heat pumps). To
capture potential effects of regional standards, a separate shipments
projection is calculated for each of the three regions considered in
the analysis: North (N), hot-humid (HH) and hot-dry (HD). For each
equipment class and each region the total shipments are divided into
three market segments: (1) New shipments to new buildings, (2) new
shipments to existing buildings, and (3) replacement shipments to
existing buildings. Buildings are defined as single-family residences.
More detail on the input data to the shipments model is provided in the
next section.
[[Page 1821]]
The model is initialized in 1983 using historic shipments from 1953
to 1982 to define the initial distribution of stock by vintage. The
model is run from 1983 to 2009, and compared with historical shipments,
to calibrate the lifetime distribution parameters. The calibrated model
is run from 1983 to 2021 to provide, for each region and product class,
an estimate of the distribution of equipment stock by vintage in the
start year of the analysis period. DOE's analysis of market saturation
data shows slowly increasing heat pump saturations and slowly
decreasing central air conditioner saturations, which lead to slight
change in the market share of central air conditioners vs. heat pumps
in the projections beyond 2021.
New shipments to new buildings are calculated as the product of new
housing starts times the new construction market saturation. Shipments
to new buildings comprise approximately 20 percent of total central air
conditioner shipments and 29 percent of total heat pump shipments in
2021.
New shipments to existing buildings represent new purchases of the
equipment by households that did not previously own it. The data show
that the market for central air conditioners is essentially saturated,
but market penetration is still growing for heat pumps. Shipments to
this market segment (i.e., homes that did not previously have a heat
pump) comprise approximately 15 percent of total heat pump shipments.
Replacement shipments constitute the largest segment of total
shipments. Replacements are determined by using a survival function to
calculate the number of units in the stock that fail in each year. The
survival function defines the probability that a unit will fail as a
function of the unit's age. This analysis uses a Weibull survival
function, adjusted to account for the difference in operating hours in
the three analysis regions, as described below in section IV.G.2.
Shipments for each product class and market segment are calculated
for the no-new-standards case and for each of the considered standard
levels. The calculations proceed in three steps.
First, the total shipments across all regions and product classes
are calculated for the no-new-standards case, which assumes that the
future shipments are driven entirely by new construction, growth in
market saturations, and replacements of failed units. This shipments
projection is then used to estimate an product price trend using a
price-learning approach.
In the second step, within each region and product class, the
product distribution model is used to estimate the distribution of
shipments across efficiency bins for each TSL. Relative market share is
determined using a logit model, which defines the product utility as
the sum of total installed cost plus discounted operating costs. The
implicit discount rate and product price sensitivity are estimated from
historic data as described in the next section. This estimation step
uses the average total installed cost, efficiency and annual operating
cost calculated for each efficiency level in the LCC. The operating
cost depends on the annual operating hours and electricity price, both
of which vary by region. The product price trend is applied to the
product price, and the electricity price trend (taken from AEO 2015) is
applied to the operating cost, to obtain time-dependent estimates of
the relative market share for each equipment class and for each region.
In the third step, the total shipments are recalculated for each
product class, region and TSL to determine the deviation from no-new-
standards case shipments. This deviation is caused by the fact that,
when the price of new products increases, some consumers will opt to
repair rather than replace failed units. These ``excess repairs'' are
numerically equal to the drop in shipments. The inputs to the
estimation are the market-share weighted product price and annual
operating cost for each product class and region, at each TSL. These
are used to calculate a market-weighted average utility. The utility is
defined as the purchase price plus the discounted operating cost over
the lifetime of the product. The consumer discount rate for future
operating costs was taken from the decision model used in the
residential demand module of NEMS. This utility function is used to
estimate the change in shipments, assuming that the percent change in
shipments is equal to the percent change in utility times a price
elasticity. DOE used a price elasticity equal to -0.34, which is an
average value estimated from an analysis of available data for consumer
purchases of household appliances (see appendix 9A). The change in
shipments is only estimated for replacement shipments, as it is
unlikely that shipments to new construction would be affected by the
adopted standards. Repaired units are estimated to survive an
additional number of years (extended lifetime), which is on average
about half of the original lifetime, and then trigger a new replacement
shipment.
Commenting on the November 2014 RFI, AHRI stated that there is
evidence that the past rulemaking on residential central air
conditioners and heat pumps (the 2006 standards) had a negative impact
on shipments. It noted that the significant price increase of 13 SEER
units (compared to 10 SEER) pushed consumers to find cheaper
alternatives including repairing old equipment or switching to room air
conditioners. (AHRI, No. 13 at p. 5) Rheem made a similar comment, and
stated that currently homeowners are deciding to repair old inefficient
air conditioners, and are also replacing central air conditioners with
less efficient window air conditioners. (Rheem, No. 17 at pp. 1, 8)
During the October 26, 2015 CAC/HP Working Group meeting, several
parties expressed concern on how repairs were accounted for in the
shipments model (ASRAC Public Meeting, No. 68 at pp. 82-103) One
stakeholder mentioned that if DOE made the SEER requirements too high,
the market for repairing would grow substantially and DOE needed to
account for it. (ASRAC Public Meeting, No. 68 at p. 102)
DOE is aware that some consumers may respond to higher prices for
central air conditioners and heat pumps by repairing the unit
(compressor replacement) or, in the case of central air conditioners,
by purchasing room air conditioners.\64\ DOE did not have sufficient
data to specifically estimate these practices, however, so it used a
price elasticity approach to estimate the consumer responses to higher
product prices. DOE assumes that demand in the new construction market
is inelastic because the decision to install central air conditioner
equipment is made by the builder rather than the consumer.
---------------------------------------------------------------------------
\64\ Purchase of room air conditioners would not be an effective
substitute to a new heat pump since they would not provide heating.
---------------------------------------------------------------------------
In response to the August 2015 NODA, the Edison Electric Institute
(EEI) commissioned a nationwide builder survey, performed by the NAHB
Home Innovation Research Labs, on the fuel and technology impacts of
higher residential heat pump energy conservation standards. The survey
asked installers to identify the price increase for a heat pump that
would lead to switching to a other types of heating systems, including
gas and oil furnaces and boilers, and identified the fractions of
installations that would switch at different levels of price increase.
(EEI, No. 33, NAHB Heat Pump Survey Final Tabulations July 2015) For
the price increases associated with heat pumps that comply with the
[[Page 1822]]
adopted standards, the survey suggests that there would be some
switching.
In response, DOE notes that since a heat pump provides space
cooling and space heating, switching away from a heat pump would
require a consumer to purchase and install a central air conditioner as
well as another type of heating product. Therefore, a decision to
switch would be influenced by the price differential between a heat
pump and a combination of a central air conditioner and alternative
heating system, not simply the price increase for a heat pump. Because
DOE is adopting standards for central air conditioners that have a
greater estimated price increase than the increase estimated for heat
pumps, DOE reasons that consumers would not switch from heat pumps to a
combination of a furnace and a central air conditioner.
2. Inputs and Method
The principal inputs to the shipments model are the projections of
housing stock and housing starts, market saturations, price-learning
parameters, equipment lifetime (survival function), and logit model
parameters.
The American Housing Survey (AHS), conducted every two years, was
used to determine the total housing stock and the saturation of central
air conditioners and heat pumps, in both new and existing buildings,
from 1983 to 2011.\65\ The U.S. Census Bureau's Characteristics of New
Housing (CNH) report, issued annually, provided the total households
built and the amount of central air conditioners or heat pumps
installed in newly constructed homes from 1983 to 2013.\66\ Both AHS
and CNH provide household and equipment saturation data by census
region (north, midwest, south, west). DOE used the U.S. Housing Census,
which provides the number of households by state, to determine the
proportion of homes from each census region that should be allocated to
the three regions considered in this analysis (N, HH, HD). Future
household projections from AEO 2015 were available by census division.
DOE used average population growth data, by state and census division,
from the U.S. Census Bureau to allocate the AEO data into the N, HH, HD
regions. The price-learning parameter that DOE applied to future
product costs was derived as described in section IV.F.1.
---------------------------------------------------------------------------
\65\ http://www.census.gov/programs-surveys/ahs.html.
\66\ https://www.census.gov/construction/chars/.
---------------------------------------------------------------------------
The calibration of the no-new-standards case shipments projection
provides an estimate of the Weibull lifetime distribution parameters s
(shape) and T (scale). These represent national average values. Within
each region, the scale parameter is adjusted to reflect the differences
in average annual operating hours. In general, for mechanical devices
the equipment life is defined as the total lifetime operating hours.
This can be converted to a service lifetime in years by dividing by the
average annual operating hours. Equipment that is operated for fewer
hours can therefore be expected to have a longer service lifetime. To
account for this effect, DOE estimated the ratio of the average
operating hours within each analysis region to the national average
value. The estimate was based on a database of simulations of RECS 2009
households \67\ that was calibrated to reproduce the same distribution
of annual end-use energy consumption as the RECS. Population-weighted
average annual operating hours for central air conditioners and heat
pumps were calculated for each region, and for the nation as a whole.
If equipment failure was perfectly correlated with lifetime operating
hours, then the service lifetime would be adjusted proportionally to
the operating hours; for example, if the operating hours in the north
were half the national average, then the service lifetime in the north
would be twice the national average. However, it is likely that some
aspects of product failure depend on the actual equipment age. Hence,
DOE assumed that half the time the product failure would be related to
lifetime operating hours, and half the time it would be related to
product age. This approach results in parameter adjustments that lead
to average product service lifetime by region shown in Table IV-16.
---------------------------------------------------------------------------
\67\ Hopkins, A.S., Lekov, A., Lutz, J., Rosenquist, G. and Gu,
L. (2011). Simulating a Nationally Representative Housing Sample
Using EnergyPlus. LBNL-4420E. Berkeley, CA (US): Ernest Orlando
Lawrence Berkeley National Laboratory.
---------------------------------------------------------------------------
The product service lifetimes for central air conditioners and heat
pumps were presented to the CAC Working Group and were discussed in
detail. Members expressed general concern about the long-tailed
distribution for central air conditioner and heat pump lifetimes, given
that the long lifetimes have a very low probability of occurrence.
(ASRAC Public Meeting, No. 68 at pp. 85-103) In response, DOE notes
that the Weibull lifetime parameters were estimated to produce a match
to historical shipments from 1983 to 2009, which were the most recent
data DOE could access. DOE could not find, nor did it receive any other
shipments data, and thus DOE used the same Weibull parameters and
product service lifetimes presented to the CAC/HP Working Group in the
analysis for this DFR.
DOE used the total installed costs and annual operating cost of the
products with different efficiency levels, combined with their
respective market shares in the no-new-standards case in 2021, to
calibrate the logit model parameters (alpha for total installed costs
and beta for annual operating cost). These two parameters describe
consumers' sensitivities to first costs and operating costs. These
costs were then used to project consumer choices among efficiency
levels in the analysis period.
DOE presented the results of its latest shipments analysis to the
CAC/HP Working Group for discussion. (ASRAC Public Meeting, No. 68 at
pp. 77-127) During the meetings, certain members of the CAC Working
Group noted that DOE's projected shipments for split-system heat pumps
were markedly higher than in the June 2011 DFR. (ASRAC Public Meeting,
No. 84 at pp. 103-117) DOE reviewed the two sets of projections and
determined that the primary driver for higher forecasted heat pump
shipments in the most recent analysis versus the 2011 DFR analysis was
the higher saturation of heat pumps in new construction shown in more
recent data from the Census' Characteristics of New Housing. The latest
data also show a corresponding drop in new construction saturation for
central air conditioners. DOE found that, in addition, heat pump
shipments were also higher due to the relatively shorter product
lifetime in the hot-humid region, where much of the increase in new
housing occurs.
For details on DOE's shipments analysis, see chapter 9 of the
direct final rule TSD.
H. National Impact Analysis
The national impact analysis (NIA) assesses the national energy
savings (NES) and the net present value (NPV) from a national
perspective of total consumer costs and savings expected to result from
new or amended energy conservation standards at specific efficiency
levels. To make the analysis more accessible and transparent to all
interested parties, DOE used a spreadsheet model to calculate the
energy savings and the national consumer costs and savings from each
TSL.\68\ The NIA calculations were based
[[Page 1823]]
on the annual energy consumption and total installed cost data from the
energy use analysis and the LCC analysis. In the NIA, DOE forecasted
the energy savings, energy cost savings and installed product costs for
each product class over the lifetime of products sold from 2021 through
2050 or, for the Recommended TSL, from 2023 through 2052.
---------------------------------------------------------------------------
\68\ DOE's use of spreadsheet models provides interested parties
with access to the models within a familiar context. In addition,
the TSD and other documentation that DOE provides during the
rulemaking help explain the models and how to use them, and
interested parties can review DOE's analyses by changing various
input quantities within the spreadsheet.
---------------------------------------------------------------------------
1. Efficiency Trends
A key component of the NIA is the trend in energy efficiency
forecasted for the no-new-standards case and each of the standards
cases. Section IV.F.2.f of this direct final rule describes how DOE
developed an energy efficiency distribution for the no-new-standards
case for each of the considered product classes for the expected first
full year of compliance. To project the efficiency distribution over
the 30-year shipments period, DOE used the product distribution model
described in section IV.G. This model was calibrated based on product
cost information and the efficiency distribution for 2021. The
projected efficiency trends vary by product class and region, as
illustrated in chapter 10 of the direct final rule TSD.
In the standards cases, the market share of products with
efficiencies in the no-new-standards case that do not meet a potential
amended standard level is allocated to the particular standard level,
and the market shares of products at efficiencies above the standard
level under consideration are projected using the consumer choice
model. This approach provides a reasonable estimate of the potential
energy savings in the standards cases by including consumers'
sensitivities to total installed costs and annual operating costs, and
accounting for equipment price trend and electricity price trend during
the 30-year analysis period.
Details on how the consumer choice model was developed are in
chapter 10 of the direct final rule TSD.
2. Product Cost Trend
As discussed in section IV.F.1, DOE used an experience curve method
to project future product price trends. Application of the price index
results in a decline of 22 percent in central air conditioner and heat
pump prices (in real terms) from 2021 to 2050. In addition to the
default trend described in section IV.F.1, which shows a modest rate of
decline, DOE performed price trend sensitivity calculations in the NIA
to examine the dependence of the analysis results on different
analytical assumptions. The price trend sensitivity analysis considered
a trend with a greater rate of decline than the default trend and a
trend with constant prices. The derivation of these trends is described
in appendix 10C of the direct final rule TSD.
3. Accounting for Repaired Units
As discussed in section IV.G.1, DOE introduced ``excess repairs''
in the standards cases, assuming that when the price of new equipment
increases, some consumers will opt to repair rather than replace broken
units. The repair is assumed to consist of replacement of the
compressor. The repaired units are assumed to live an additional number
of years (extended lifetime), which is on average about half of the
original lifetime. For these ``excess repair'' units, the cost of the
repair is a one-time replacement cost for the compressor that varies
depending on the capacity of the unit. The annual energy use of the
repaired units is calculated as the average energy use for all of the
units that were installed in the same year as the repaired unit. More
details on accounting for repaired units are described in chapter 10 of
the direct final rule TSD.
4. National Energy Savings
To develop the NES, DOE calculated annual energy consumption for
the no-new-standards case and the standards cases. DOE calculated the
annual energy consumption for each case using the appropriate per-unit
annual energy use data multiplied by the projected central air
conditioner and heat pump shipments for each year. The per-unit annual
energy use is adjusted with the building shell improvement index, which
results in a decline of 12 percent in the cooling load from 2021 to
2050, and the climate index, which results in an increase of 6.6
percent in the cooling load. In the standards cases, there are fewer
shipments of central air conditioners or heat pumps compared to the no-
new-standards case because of repair rather than replacement.
As explained in section IV.E, DOE incorporated a rebound effect for
central air conditioners and heat pumps by reducing the site energy
savings in each year by 15 percent.
To estimate the national primary energy savings from amended
central air conditioner and heat pump standards, DOE used a
multiplicative factor to convert site electricity consumption (at the
home) into primary energy consumption (the energy required to convert
and deliver the site electricity). These conversion factors account for
the energy used at power plants to generate electricity and energy
losses during transmission and distribution. The factors vary over time
due to changes in generation sources (i.e., the power plant types
projected to provide electricity to the country) projected in AEO
2015.\69\ The factors that DOE developed are marginal values, which
represent the response of the electricity sector to an incremental
decrease in consumption associated with potential appliance standards.
---------------------------------------------------------------------------
\69\ U.S. Department of Energy, Energy Information
Administration, op. cit.
---------------------------------------------------------------------------
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 Science, in 2011 DOE
announced its intention to use full-fuel-cycle (FFC) measures of energy
use and greenhouse gas and other emissions in the national impact
analyses and emissions analyses included in future energy conservation
standards rulemakings. 76 FR 51281 (August 18, 2011). After evaluating
the approaches discussed in the August 18, 2011 notice, DOE published a
statement of amended policy in the Federal Register in which DOE
explained that NEMS is the most appropriate tool for its FFC analysis
and DOE intended to use NEMS for that purpose. 77 FR 49701 (August 17,
2012). The FFC factors incorporates losses in production and delivery
in the case of natural gas (including fugitive emissions) and
additional energy used to produce and deliver the various fuels used by
power plants. The approach used is described in more detail in appendix
10A of the direct final rule TSD.
5. Net Present Value of Consumer Benefit
To develop the national NPV of consumer benefits from potential
energy conservation standards, DOE calculated projected annual
operating costs (energy costs and repair and maintenance costs) and
annual installation costs for the no-new-standards case and the
standards cases. DOE calculated annual product expenditures by
multiplying the price per unit times the projected shipments in each
year.
DOE calculated annual energy expenditures from annual energy
consumption using forecasted energy prices in each year. In this direct
final rule, DOE used the projected annual changes in national-average
residential
[[Page 1824]]
electricity prices in the Reference case projection in AEO 2015.\70\
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\70\ U.S. Department of Energy, Energy Information
Administration, op.cit.
---------------------------------------------------------------------------
The aggregate difference each year between operating cost savings
and increased installation costs is the net savings or net costs. DOE
multiplies the net savings in future years by a discount factor to
determine their present value. DOE estimates the NPV of consumer
benefits using both a 3-percent and a 7-percent real discount rate, in
accordance with guidance provided by the Office of Management and
Budget (OMB) to Federal agencies on the development of regulatory
analysis.\71\ The 7-percent real value is an estimate of the average
before-tax rate of return to private capital in the U.S. economy. The
3-percent real value represents the ``societal rate of time
preference,'' which is the rate at which society discounts future
consumption flows to their present value. The discount rates for the
determination of NPV differ from the discount rates used in the LCC
analysis, which are designed to reflect a consumer's perspective.
---------------------------------------------------------------------------
\71\ Office of Management and Budget, OMB Circular A-4, section
E, Identifying and Measuring Benefits and Costs (2003), available at
http://www.whitehouse.gov/omb/memoranda/m03-21.html.
---------------------------------------------------------------------------
As noted, in determining national energy savings, DOE is accounting
for the rebound effect estimated for more-efficient central air
conditioners and heat pumps.\72\ Because consumers have foregone a
monetary savings in energy expenses, it is reasonable to conclude that
the value of the increased utility is equivalent to the monetary value
of the energy savings that would have occurred without the rebound
effect. Therefore, the economic impacts on consumers with or without
the rebound effect, as measured in the NPV, are the same.
---------------------------------------------------------------------------
\72\ As discussed in section IV.F, the rebound effect provides
consumers with increased utility (e.g., a more comfortable indoor
environment).
---------------------------------------------------------------------------
I. Consumer Subgroup Analysis
In analyzing the potential impacts of new or amended standards on
consumers, DOE evaluated the impacts on two identifiable subgroups of
consumers, low-income consumers and senior citizens, that may be
disproportionately affected by amended standards. DOE analyzed the LCC
impacts and PBP for those particular consumers from alternative
standard levels using subsets of the RECS 2009 sample comprised of
households that meet the criteria for the two subgroups for both
central air conditioners and heat pumps, along with the appropriate
inputs for these groups.
Chapter 11 of the direct final rule TSD describes the consumer
subgroup analysis and its results.
J. Manufacturer Impact Analysis
1. Overview
DOE performed a Manufacturer Impact Analysis (MIA) to estimate the
impacts of an energy conservation standard on manufacturers. The MIA
has both quantitative and qualitative aspects. The quantitative part of
the MIA primarily relies on the Government Regulatory Impact Model
(GRIM), an industry cash-flow model with inputs specific to this
rulemaking. The key GRIM inputs are data on the industry cost
structure, manufacturer productions costs, shipments, and assumptions
about markups and conversion expenditures. The key output is the
industry net present value (INPV). DOE uses the GRIM to calculate cash
flows using standard accounting principles and to compare changes in
INPV between a scenario in which there is no new standard (the no-new-
standards case) and each TSL (the standards case). The difference in
INPV between the no-new-standards case and a standards case represents
the financial impact of energy conservation standards on central air
conditioner and heat pump manufacturers. DOE uses different sets of
assumptions (markup scenarios) to represent the uncertainty surrounding
potential impacts on prices and manufacturer profitability as a result
of standards. Different sets of assumptions produce a range of INPV
results. The qualitative part of the MIA addresses the amended
standard's potential impacts on manufacturing capacity and industry
competition, as well as factors such as product characteristics,
impacts on particular subgroups of firms, and important market and
product trends.
The MIA for central air conditioners and heat pumps in this direct
final rule focuses on split-system air conditioners, split-system heat
pumps, single-package air conditioners, and single-package heat pumps.
Since this rule does not propose to amend standards for space-
constrained air conditioners, space-constrained heat pumps, or small-
duct high-velocity systems, these products were not evaluated. The
complete MIA is outlined in chapter 12 of the direct final rule TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the residential central air
conditioner and heat pump industry. This industry characterization was
developed using publicly available information, such as Securities and
Exchange Commission (SEC) 10-K reports,\73\ market research tools
(e.g., Hoovers \74\), corporate annual reports, the U.S. Census
Bureau's 2014 Annual Survey of Manufacturers (ASM),\75\ and industry
trade association membership directories (e.g., AHRI), as well as
information obtained through DOE's engineering analysis, life-cycle
cost analysis, and market and technology assessment prepared for this
rulemaking.
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\73\ U.S. Securities and Exchange Commission, Annual 10-K
Reports (Various Years) (Available at: www.sec.gov).
\74\ Hoovers Inc., Company Profiles, Various Companies
(Available at: www.hoovers.com/).
\75\ U.S. Census Bureau, Annual Survey of Manufacturers: General
Statistics: Statistics for Industry Groups and Industries (2014)
(Available at: http://www.census.gov/manufacturing/asm/index.html).
---------------------------------------------------------------------------
In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis
to quantify the potential impacts of amended energy conservation
standards on manufacturers. In general, energy conservation standards
can affect manufacturer cash flow in three distinct ways: (1) Create a
need for increased investment; (2) raise production costs per unit; and
(3) alter revenue due to higher per-unit prices and/or possible changes
in sales volumes. To quantify these impacts, DOE used the GRIM to
perform a cash-flow analysis for the industry using financial values
derived during Phase 1 and the shipment scenario used in the NIA.
DOE also conducted interviews with manufacturers. During these
interviews, DOE discussed engineering, manufacturing, procurement, and
financial topics to validate assumptions used in the GRIM and to
identify key issues or concerns. These topics were discussed again
during the course of CAC/HP Working Group meetings, which enabled DOE
to further refine inputs to the MIA, including MPCs and shipments
forecasts.
In Phase 3, DOE evaluated subgroups of manufacturers that may be
disproportionately impacted by energy conservation standards or that
may not be represented accurately by the average cost assumptions used
to develop the industry cash-flow analysis. For example, small
manufacturers, niche players, or manufacturers exhibiting a cost
structure that largely differs from the industry average could be more
negatively affected. DOE identified one subgroup for a separate impact
analysis: Small business manufacturers. The small business subgroup is
discussed in section VI.B, ``Review under the Regulatory Flexibility
Act,'' and in chapter 12 of the direct final rule TSD.
[[Page 1825]]
2. Government Regulatory Impact Model
DOE uses the GRIM in its standards rulemakings to quantify the
changes in cash flow due to amended standards that result in a higher
or lower industry value. The GRIM uses a standard, annual discounted
cash-flow analysis that incorporates manufacturer costs, markups,
shipments, and industry financial information as inputs. The GRIM
models changes in costs, distribution of shipments, investments, and
manufacturer margins that could result from an amended energy
conservation standard. The GRIM spreadsheet uses the inputs to arrive
at a series of annual cash flows, beginning in 2016 (the base year of
the analysis) and continuing to 2050.\76\ DOE calculated INPVs by
summing the stream of annual discounted cash flows during this period.
For manufacturers of residential central air conditioners and heat
pumps, DOE used a real discount rate of 11.0 percent,\77\ which was
derived from industry financials and then modified according to
feedback received during manufacturer interviews.
---------------------------------------------------------------------------
\76\ In contrast to the NIA, which uses an end date of 2050 for
TSLs 1, 3, and 4, and an end date of 2052 for TSL 2, the MIA
maintains the same end date (2050) for all TSLs. This is done to
enable clear comparison of INPV impacts across TSLs. See chapter 12
of the direct final rule TSD for a more detailed discussion of this
assumption.
\77\ DOE estimated preliminary financial metrics, including the
industry discount rate, based on publicly available financial
information, including Securities and Exchange Commission (``SEC'')
filings and S&P bond ratings. DOE presented the preliminary
financial metrics to manufacturers in MIA interviews. DOE adjusted
those values based on feedback from manufacturers. The complete set
of financial metrics and more detail about the methodology can be
found in chapter 12 of the final rule TSD. Additionally, DOE
provides a sensitivity analysis based on an alternative discount
rate in chapter 12 of the TSD.
---------------------------------------------------------------------------
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. 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. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly available data, results of the engineering
analysis, and information gathered from industry stakeholders during
the course of manufacturer interviews and subsequent CAC/HP Working
Group meetings. The GRIM results are presented in section V.B.2.
Additional details about the GRIM, the discount rate, and other
financial parameters can be found in chapter 12 of the direct final
rule TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
Manufacturing more efficient equipment is typically more expensive
than manufacturing baseline equipment due to the use of more complex
components, which are typically more costly than baseline components.
The changes in the manufacturer production costs (MPCs) of covered
products can affect the revenues, gross margins, and cash flow of the
industry.
In the MIA, DOE used the MPCs for each considered efficiency level
calculated in the engineering analysis, as described in section IV.C
and further detailed in chapter 5 of the direct final rule TSD. The
engineering analysis developed multiple MPCs for split-system air
conditioners based on representative capacities (i.e., 2-ton, 3-ton,
and 5-ton) and configurations (i.e., blower-coil versus coil only).
Similarly, MPCs for split-system heat pumps were broken out by
representative capacities. In addition, DOE used information from the
engineering teardown analysis to disaggregate MPCs into material,
labor, overhead, and depreciation costs. Both MPCs and cost breakdowns
were validated and revised with manufacturers during manufacturer
interviews. The MPCs used in the GRIM are presented in chapter 12 of
the direct final rule TSD along with the methodology used to develop
weighted average MPCs for split-system air conditioners using blower-
coil and coil only shipment weights.
Shipments Forecasts
The GRIM estimates manufacturer revenues based on total unit
shipment forecasts and the distribution of those shipments 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 2016 (the base year) to 2050 (the end year of
the analysis period). See chapter 9 of the direct final rule TSD for
additional details.
Product and Capital Conversion Costs
An amended energy conservation standard would cause manufacturers
to incur conversion costs to bring their production facilities and
equipment designs into compliance. DOE evaluated the level of
conversion-related expenditures that would be needed to comply with
each considered efficiency level in each product class. For the MIA,
DOE classified these conversion costs into two major groups: (1)
Product conversion costs; and (2) capital conversion costs. Product
conversion costs are investments in research, development, testing,
marketing, and other non-capitalized costs necessary to make product
designs comply with amended energy conservation standards. Capital
conversion costs are 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.
To evaluate the level of capital conversion expenditures
manufacturers would likely incur to comply with amended energy
conservation standards, DOE used manufacturer interviews to request
feedback on the anticipated level of capital investment that would be
required at each efficiency level. However, DOE received very limited
feedback on likely capital investments from manufacturers. As a result,
DOE developed conversion cost estimates based on estimates of capital
expenditure requirements derived from the product teardown analysis and
engineering analysis described in chapter 5 of the DFR TSD.
To evaluate the level of product conversion costs manufacturers
would likely incur to comply with amended energy conservation
standards, DOE integrated data from quantitative and qualitative
sources. As with capital conversion costs, DOE requested feedback from
manufacturers regarding potential product conversion costs. Based on
feedback received, DOE applied a scaling factor to estimate product
conversion costs based on the magnitude of capital conversion costs.
DOE estimated that product conversion costs account for 40 percent of
total conversion costs.
In general, DOE assumes that all conversion-related investments
occur between the year of publication of the final rule and the year by
which manufacturers must comply with the new standard. The conversion
cost figures used in the GRIM can be found in section V.B.2 of this
notice. For additional information on the estimated capital and product
conversion costs, see chapter 12 of the direct final rule TSD.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
MSPs include direct manufacturing production costs (i.e., labor,
materials, and overhead estimated in DOE's MPCs)
[[Page 1826]]
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 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 tiered markup scenario.
These scenarios lead to different markup values that, when applied to
the MPCs, result in varying revenue and cash flow impacts.
Under the preservation of gross margin percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
efficiency levels, which assumes that manufacturers would be able to
maintain the same amount of profit as a percentage of revenues at all
efficiency levels within 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 residential central air conditioners
and heat pumps as well as comments from manufacturer interviews, DOE
assumed the average non-production cost baseline markup--which includes
SG&A expenses, R&D expenses, interest, and profit--to be 1.34 for
split-system air conditioners, 1.35 for split-system heat pumps, and
1.32 for single-package air conditioners and single-package heat pumps.
Because the preservation of gross margin percentage markup scenario
assumes manufacturers would be able to maintain their gross margin
percentage markups as production costs increase in response to amended
energy conservation standards, it represents a high bound to industry
profitability.
Under the tiered markup scenario, DOE modeled a situation in which
manufacturers set markups based on three tiers of products. These tiers
can be described as ``good, better, best'' or ``value, standard,
premium.'' Under this tiered structure, high-volume ``value'' product
lines typically offer fewer features, lower efficiency, and lower
markups, while ``premium'' product lines offer more features, higher
efficiency, and higher markups. The tiered markup scenario evaluates
impacts on manufacturers when the breadth of their product portfolios
shrinks as higher energy conservation standards ``demote'' higher-tier
products to lower tiers. In this scenario, higher-efficiency products
that previously commanded ``standard'' and ``premium'' markups are
reassigned ``value'' and ``standard'' markups respectively. This markup
scenario represents the low bound to industry profitability under an
amended energy conservation standard.
A comparison of industry financial impacts under the two markup
scenarios is presented in section V.B.2.a of this notice.
3. Discussion of Comments
Cumulative Regulatory Burden
During the RFI stage, Lennox commented that manufacturers of
central air conditioners and heat pumps face a significant cumulative
regulatory burden and urged DOE both to consider the impact on
manufacturers of multiple regulations and to take action to minimize
the associate economic burden. (Lennox, No.10 at p. 4) In response, DOE
has performed an analysis of cumulative regulatory burden (CRB) in
section V.B.2.e of this notice. The CRB analysis is intended to
identify rulemakings that could be aligned or combined to minimize
total burden. As such, the CRB section focuses on regulations that take
effect within three years of the effective date of this rulemaking.
Rulemakings addressed in the CRB include those for: Commercial Packaged
Air Conditioners and Heat Pumps (Air-Cooled) (81 FR 2420), Residential
Boilers (81 FR 2320), Commercial and Industrial Pumps (80 FR 17826),
Portable Room Air Conditioners (81 FR 38398), Residential Furnace Fans
(80 FR 13120), and Commercial Warm Air Furnaces (81 FR 2420).
Additionally, Lennox commented that given the complexities
associated with regional standards and regulating central air
conditioners and heat pumps, DOE should utilize a negotiated rulemaking
approach. Lennox requested that DOE consider the pace and timing of
rulemakings to ensure stakeholders can provide meaningful comments and
analysis. (Lennox, No.10 at p. 3) As discussed throughout this
document, DOE established a CAC/HP Working Group to negotiate amended
standards for central air conditioners and heat pumps. The
recommendations made by the CAC/HP Working Group are presented in this
direct final rule.
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 calculated using a methodology based on results published for
the AEO 2015 reference case and a set of side cases that implement a
variety of efficiency-related policies. The methodology is described in
chapter 15 of the direct final rule TSD.
Combustion emissions of CH4 and N2O are
estimated using emissions intensity factors published by the EPA, GHG
Emissions Factors Hub.\78\ The FFC upstream emissions are estimated
based on the methodology described in chapter 15. 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.
---------------------------------------------------------------------------
\78\ Available at http://www2.epa.gov/climateleadership/center-corporate-climate-leadership-ghg-emission-factors-hub.
---------------------------------------------------------------------------
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 the greenhouse gas by the gas's global
warming potential (GWP) over a 100-year time horizon. Based on the
Fifth Assessment Report of the Intergovernmental Panel on Climate
Change,\79\ DOE used GWP values of 28 for CH4 and 265 for
N2O.
---------------------------------------------------------------------------
\79\ IPCC, Climate Change 2013: The Physical Science Basis.
Contribution of Working Group I to the Fifth Assessment Report of
the Intergovernmental Panel on Climate Change (Cambridge University
Press, 2013).
---------------------------------------------------------------------------
The AEO incorporates the projected impacts of existing air quality
regulations on emissions. AEO 2015 generally represents current
legislation and environmental regulations,
[[Page 1827]]
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)), which
created an allowance-based trading program that operates along with the
Title IV program. CAIR was remanded to the U.S. Environmental
Protection Agency (EPA) by the U.S. Court of Appeals for the District
of Columbia Circuit, but it remained in effect.\80\ In 2011, EPA issued
a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76
FR 48208 (August 8, 2011). On August 21, 2012, the D.C. Circuit issued
a decision to vacate CSAPR.\81\ The court ordered EPA to continue
administering CAIR. On April 29, 2014, the U.S. Supreme Court reversed
the judgment of the D.C. Circuit and remanded the case for further
proceedings consistent with the Supreme Court's opinion.\82\ On October
23, 2014, the D.C. Circuit lifted the stay of CSAPR.\83\ Pursuant to
this action, CSAPR went into effect (and CAIR ceased to be in effect)
as of January 1, 2015.\84\
---------------------------------------------------------------------------
\80\ See North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008),
modified on rehearing, 550 F.3d 1176 (D.C. Cir. 2008).
\81\ See EME Homer City Generation, L.P. v. EPA, 696 F.3d 7
(D.C. Cir. 2012).
\82\ See EPA v. EME Homer City Generation, L.P., 134 S.Ct. 1584
(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.
\83\ See EME Homer City Generation, L.P. v. EPA, Order (D.C.
Cir. filed October 23, 2014) (No. 11-1302).
\84\ On July 28, 2015, the D.C. Circuit issued its opinion
regarding the remaining issues raised with respect to CSAPR that
were remand by the Supreme Court. The D.C. Circuit largely upheld
CSAPR, but remanded to EPA without vacatur certain States' emission
budgets for reconsideration. EME Homer City Generation, LP v. EPA,
795 F.3d 118 (D.C. Cir. 2015).
---------------------------------------------------------------------------
EIA was not able to incorporate CSAPR into AEO 2015, so it assumes
implementation of CAIR. Although DOE's analysis used emissions factors
that assume that CAIR, not CSAPR, is the regulation in force, the
difference between CAIR and CSAPR is not 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 decline
as a result of the Mercury and Air Toxics Standards (MATS) for power
plants. 77 FR 9304 (February 16, 2012). In the final MATS rule, EPA
established a standard for hydrogen chloride as a surrogate for acid
gas hazardous air pollutants (HAP), and also established a standard for
SO2 (a non-HAP acid gas) as an alternative equivalent
surrogate standard for acid gas HAP. The same controls are used to
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be
reduced as a result of the control technologies installed on coal-fired
power plants to comply with the MATS requirements for acid gas. AEO
2015 assumes that, in order to continue operating, coal plants must
have either flue gas desulfurization or dry sorbent injection systems
installed by 2016. Both technologies, which are used to reduce acid gas
emissions, also reduce SO2 emissions. Under the MATS,
emissions will be far below the cap established by CAIR, so it is
unlikely that excess SO2 emissions allowances resulting from
the lower electricity demand would be needed or used to permit
offsetting increases in SO2 emissions by any regulated
EGU.\85\ Therefore, DOE believes that energy conservation standards
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------
\85\ DOE notes that on June 29, 2015, the U.S. Supreme Court
ruled that the EPA erred when the agency concluded that cost did not
need to be considered in the finding that regulation of hazardous
air pollutants from coal- and oil-fired electric utility steam
generating units (EGUs) is appropriate and necessary under section
112 of the Clean Air Act (CAA). Michigan v. EPA, 135 S. Ct. 2699
(2015). The Supreme Court did not vacate the MATS rule, and DOE has
tentatively determined that the Court's decision on the MATS rule
does not change the assumptions regarding the impact of energy
conservation standards on SO2 emissions. Further, the
Court's decision does not change the impact of the energy
conservation standards on mercury emissions. The EPA, in response to
the U.S. Supreme Court's direction, has now considered cost in
evaluating whether it is appropriate and necessary to regulate coal-
and oil-fired EGUs under the CAA. EPA concluded in its final
supplemental finding that a consideration of cost does not alter the
EPA's previous determination that regulation of hazardous air
pollutants, including mercury, from coal- and oil-fired EGUs is
appropriate and necessary. 79 FR 24420 (April 25, 2016). The MATS
rule remains in effect, but litigation is pending in the D.C.
Circuit Court of Appeals over EPA's final supplemental finding MATS
rule.
---------------------------------------------------------------------------
CAIR established a cap on NOX emissions in 28 eastern
States and the District of Columbia.\86\ 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 increases for these States.
---------------------------------------------------------------------------
\86\ 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 is slight.
---------------------------------------------------------------------------
The MATS limit mercury emissions from power plants, but they do not
include emissions caps and, as such, the increase in electricity demand
associated with the residential furnace efficiency levels would be
expected to increase mercury emissions. DOE estimated mercury emissions
using emissions factors based on AEO 2015, which incorporates the MATS.
L. Monetizing Carbon Dioxide and Other Emissions Impacts
As part of the development of this 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 similar to
the calculation of the NPV of consumer benefit, DOE considered the
reduced emissions expected to result over the lifetime of equipment
shipped in the forecast period for each TSL. This section summarizes
the basis for the monetary values used for each of these emissions and
presents the values considered in this direct final rule.
1. Social Cost of Carbon
The social cost of carbon (SCC) is an estimate of the monetized
damages associated with an incremental increase
[[Page 1828]]
in carbon emissions in a given year. It is intended to include (but is
not limited to) changes in net agricultural productivity, human health,
property damages from increased flood risk, and the value of ecosystem
services. Estimates of the SCC are provided in dollars per metric ton
of carbon dioxide. A domestic SCC value is meant to reflect the value
of damages in the United States resulting from a unit change in carbon
dioxide emissions, while a global SCC value is meant to reflect the
value of damages worldwide.
Under section 1(b)(6) of Executive Order 12866, ``Regulatory
Planning and Review,'' 58 FR 51735 (October 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 DOE acknowledges that there are many uncertainties involved in the
estimates and with a clear understanding that they should be updated
over time to reflect increasing knowledge of the science and economics
of climate impacts.
As part of the interagency process that developed the SCC
estimates, technical experts from numerous agencies met on a regular
basis to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. The main
objective of this process was to develop a range of SCC values using a
defensible set of input assumptions grounded in the existing scientific
and economic literatures. In this way, key uncertainties and model
differences transparently and consistently inform the range of SCC
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
When attempting to assess the incremental economic impacts of
carbon dioxide emissions, the analyst faces a number of challenges. A
recent report from the National Research Council \87\ 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.
---------------------------------------------------------------------------
\87\ National Research Council. Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use (2009).
---------------------------------------------------------------------------
Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
carbon dioxide emissions. The agency can estimate the benefits from
reduced (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 each of these future benefits by an
appropriate discount factor and summing across all affected years.
It is important to emphasize that the interagency process is
committed to updating these estimates as the science and economic
understanding of climate change and its impacts on society improves
over time. In the meantime, the interagency group will continue to
explore the issues raised by this analysis and consider public comments
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits of reducing
carbon dioxide emissions. To ensure consistency in how benefits were
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 global SCC estimates for 2007 (in 2006 dollars) of $55, $33,
$19, $10, and $5 per metric ton of CO2. These interim values
represented the first sustained interagency effort within the U.S.
government to develop an SCC for use in regulatory analysis. The
results of this preliminary effort were presented in several proposed
and final rules.
c. Current Approach and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to calculate improved SCC estimates.
Specifically, the group considered public comments and further explored
the technical literature in relevant fields. The interagency group
relied on three integrated assessment models commonly used to estimate
the SCC: The FUND, DICE, and PAGE models. These models are frequently
cited in the peer-reviewed literature and were used in the last
assessment of the Intergovernmental Panel on Climate Change (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, although preference is given to
consideration of the global benefits of reducing CO2
emissions.\88\
[[Page 1829]]
Table IV-17 presents the values in the 2010 interagency group
report,\89\ which is reproduced in appendix 14-A of the NOPR TSD.
---------------------------------------------------------------------------
\88\ It is recognized that this calculation for domestic values
is approximate, provisional, and highly speculative. There is no a
priori reason why domestic benefits should be a constant fraction of
net global damages over time.
\89\ Interagency Working Group on Social Cost of Carbon, Social
Cost of Carbon for Regulatory Impact Analysis Under Executive Order
12866 (2010), available at http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf.
Table IV-17--Annual SCC Values From 2010 Interagency Report, 2010-2050
[In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
------------------------------------------------------------------
Year 5% 3% 2.5% 3%
------------------------------------------------------------------
Average Average Average 95th Percentile
----------------------------------------------------------------------------------------------------------------
2010......................................... 4.7 21.4 35.1 64.9
2015......................................... 5.7 23.8 38.4 72.8
2020......................................... 6.8 26.3 41.7 80.7
2025......................................... 8.2 29.6 45.9 90.4
2030......................................... 9.7 32.8 50.0 100.0
2035......................................... 11.2 36.0 54.2 109.7
2040......................................... 12.7 39.2 58.4 119.3
2045......................................... 14.2 42.1 61.7 127.8
2050......................................... 15.7 44.9 65.0 136.2
----------------------------------------------------------------------------------------------------------------
The SCC values used for this document were calculated 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).\90\
---------------------------------------------------------------------------
\90\ United States Government-Interagency Working Group on
Social Cost of Carbon. Technical Support Document: Technical Update
of the Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866. May 2013. Revised July 2015. https://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf.
---------------------------------------------------------------------------
Table IV-18 shows the updated sets of SCC estimates from the latest
interagency update in five-year increments from 2010 to 2050. Appendix
14-B of the direct final rule TSD provides the full set of values. 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-18--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
[In 2007 dollars per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
------------------------------------------------------------------
Year 5% 3% 2.5% 3%
------------------------------------------------------------------
Average Average Average 95th Percentile
----------------------------------------------------------------------------------------------------------------
2010......................................... 10 31 50 86
2015......................................... 11 36 56 105
2020......................................... 12 42 62 123
2025......................................... 14 46 68 138
2030......................................... 16 50 73 152
2035......................................... 18 55 78 168
2040......................................... 21 60 84 183
2045......................................... 23 64 89 197
2050......................................... 26 69 95 212
----------------------------------------------------------------------------------------------------------------
It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable since they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The National Research
Council report describes tension between the goal of producing
quantified estimates of the economic damages from an incremental ton of
carbon and the limits of existing efforts to model these effects. There
are a number of analytical challenges that are being addressed by the
research community, including research programs housed in many of the
Federal agencies participating in the interagency process to estimate
the SCC. The interagency group intends to periodically review and
reconsider those estimates to reflect increasing knowledge of the
science and economics of climate impacts, as well as improvements in
modeling.\91\
---------------------------------------------------------------------------
\91\ In November 2013, OMB announced a new opportunity for
public comment 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. https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions. It also stated its intention to seek independent expert
advice on opportunities to improve the estimates, including many of
the approaches suggested by commenters.
---------------------------------------------------------------------------
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the
[[Page 1830]]
values from the 2013 interagency report, adjusted to 2015$ using the
Gross Domestic Product price deflator. For each of the four SCC cases
specified, the values used for emissions in 2015 were $12.4, $40.6,
$63.2, and $118 per metric ton avoided (values expressed in 2015$). DOE
derived values after 2050 based on the trend in 2010-2050 in each of
the four cases.
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 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 for the Clean Power Plan Final Rule, published in August 2015
by EPA's Office of Air Quality Planning and Standards.\92\ The report
includes high and low values for NOX (as PM2.5)
for 2020, 2025, and 2030 discounted at 3 percent and 7 percent; these
values are presented in appendix 14C of the direct final rule TSD. DOE
primarily relied on the low estimates to be conservative.\93\ The
national average low values for 2020 (in 2015$) are $3,187/ton at 3-
percent discount rate and $2,869/ton at 7-percent discount rate. DOE
assigned values after 2030 using the value for 2030. DOE developed
values specific to the end-use category for residential air
conditioners and heat pumps using a method described in appendix 14C.
For this analysis DOE used linear interpolation to define values for
the years between 2020 and 2025 and between 2025 and 2030; for years
beyond 2030 the value is held constant.
---------------------------------------------------------------------------
\92\ Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis. See Tables 4A-3,
4A-4, and 4A-5 in the report. The U.S. Supreme Court has stayed the
rule implementing the Clean Power Plan until the current litigation
against it concludes. Chamber of Commerce, et al. v. EPA, et al.,
Order in Pending Case, 577 U.S. ___(2016). However, the benefit-per-
ton estimates established in the Regulatory Impact Analysis for the
Clean Power Plan are based on scientific studies that remain valid
irrespective of the legal status of the Clean Power Plan.
\93\ For the monetized NOX benefits associated with
PM2.5, the related benefits are primarily based on an
estimate of premature mortality derived from the ACS study (Krewski
et al. 2009), which is the lower of the two EPA central tendencies.
Using the lower value is more conservative when making the policy
decision concerning whether a particular standard level is
economically justified. If the benefit-per-ton estimates were based
on the Six Cities study (Lepuele et al. 2012), the values would be
nearly two-and-a-half times larger. (See chapter 14 of the direct
final rule TSD for further description of the studies mentioned
above.)
---------------------------------------------------------------------------
DOE multiplied the emissions reduction (in tons) in each year by
the associated $/ton values, and then discounted each series using
discount rates of 3 percent and 7 percent as appropriate. DOE will
continue to evaluate the monetization of avoided NOX
emissions and will make any appropriate updates in energy conservation
standards rulemakings.
DOE is evaluating appropriate monetization of avoided
SO2 and Hg emissions in energy conservation standards
rulemakings. DOE has not included monetization of those emissions in
the current analysis.
M. Utility Impact Analysis
The utility impact analysis estimates several effects on the
electric power generation industry that would result from the adoption
of new or amended energy conservation standards. The utility impact
analysis estimates the changes in installed electrical capacity and
generation that would result for each TSL. The analysis is based on
published output from the NEMS associated with AEO 2015. NEMS produces
the AEO Reference case, as well as a number of side cases that estimate
the economy-wide impacts of changes to energy supply and demand. DOE
uses published side cases to estimate the marginal impacts of reduced
energy demand on the utility sector. These marginal factors are
estimated based on the changes to electricity sector generation,
installed capacity, fuel consumption and emissions in the AEO Reference
case and various side cases. Details of the methodology are provided in
the appendices to chapters 13 and 15 of the DFR TSD.
The output of this analysis is a set of time-dependent coefficients
that capture the change in electricity generation, primary fuel
consumption, installed capacity and power sector emissions due to a
unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of new or amended
energy conservation standards.
N. Employment Impact Analysis
Employment impacts 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 products subject to standards; the MIA addresses those impacts.
Indirect employment impacts are changes in national employment that
occur due to the shift in expenditures and capital investment caused by
the purchase and operation of more-efficient appliances. 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
products; and (4) the effects of those three factors throughout the
economy.
One method for assessing the possible effects on the demand for
labor of such shifts in economic activity is to compare sector
employment statistics developed by the Labor Department's Bureau of
Labor Statistics (BLS). 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.\94\ There are many reasons for these differences, including
wage differences and the fact that the utility sector is more capital-
intensive and less labor-intensive than other sectors. Energy
conservation standards have the effect of reducing consumer utility
bills. Because reduced consumer expenditures for energy likely lead to
increased expenditures in other sectors of the economy, the general
effect of efficiency standards is to shift economic activity from a
less labor-intensive sector (i.e., the utility sector) to more labor-
intensive sectors (e.g., the retail and service sectors). Thus, the BLS
data suggest that net national employment may increase because of
shifts in economic activity resulting from amended standards for
central air conditioners and heat pumps.
---------------------------------------------------------------------------
\94\ See Bureau of Economic Analysis, ``Regional Multipliers: A
Handbook for the Regional Input-Output Modeling System (RIMS II),''
U.S. Department of Commerce (1992).
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this direct final rule using an input/output model
of the U.S. economy called Impact of Sector Energy
[[Page 1831]]
Technologies, Version 3.1.1 (ImSET).\95\ 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 this DFR,
DOE used ImSET only to estimate short-term (through 2023) employment
impacts, where these uncertainties are reduced.
---------------------------------------------------------------------------
\95\ M.J. Scott, et. al., ImSET 3.1: Impact of Sector Energy
Technologies, PNNL-18412, (2009), available at www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf.
---------------------------------------------------------------------------
For more details on the employment impact analysis, see chapter 16
of the DFR TSD.
V. Analytical Results and Conclusions
This section addresses the results from DOE's analyses with respect
to amended energy conservation standards for central air conditioners
and heat pumps. It addresses the trial standard levels examined by DOE,
the projected impacts of each of these levels if adopted as energy
conservation standards for central air conditioners and heat pumps, and
the standards levels that DOE is adopting in this direct final rule.
A. Trial Standard Levels
For this DFR, DOE analyzed the benefits and burdens of seven TSLs
for central air conditioners and heat pumps. These TSLs were developed
using combinations of efficiency levels for each of the product classes
analyzed by DOE. DOE presents the results for those TSLs in this
document. The results for all efficiency levels that DOE analyzed are
in the direct final rule TSD.
Table V-1 presents the TSLs and the corresponding efficiency levels
for the central air conditioner and heat pump product classes. TSL 4
represents the maximum technologically feasible (``max-tech'') for all
product classes. TSL 3 represents the maximum energy savings,
considering a national standard. TSL 2, the Recommended TSL, represents
the maximum national NPV, considering regional standards. TSL 1
represents a minimal increase in SEER for split-system product classes
only, considering regional standards.
Table V-1--Trial Standard Levels for Central Air Conditioners and Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Product class
------------------------------------------------------------------------------
TSL Region Efficiency Split- Single- Small-duct Space-
metric Split- system heat Single- package high- constrain.
system AC pumps package AC heat pumps velocity AC
--------------------------------------------------------------------------------------------------------------------------------------------------------
1............................... National.............. SEER........... 14.0 14.5 14.0 14.0 12.0 12.0
HSPF........... n/a 8.4 n/a 8.0 n/a n/a
Hot-Humid **.......... SEER........... 14.5 n/a n/a n/a n/a n/a
Hot-Dry ***........... SEER........... 14.5 n/a n/a n/a n/a n/a
Recommend *..................... National.............. SEER........... 14.0 15.0 14.0 14.0 12.0 12.0
HSPF........... n/a 8.8 8.0 8.0 n/a n/a
Hot-Humid **.......... SEER........... [dagger] n/a n/a n/a n/a n/a
15.0/14.5
Hot-Dry ***........... SEER........... [dagger] n/a n/a n/a n/a n/a
15.0/14.5
3............................... National.............. SEER........... 16.0 16.0 15.0 15.0 12.0 12.0
HSPF........... n/a 8.9 n/a 8.2 n/a n/a
4............................... National.............. SEER........... # 17.0/16.5 ##19.0/17.5 17.5 15.0 14.0 14.0
HSPF........... n/a ## 9.9/9.4 n/a 8.2 n/a n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The Recommended TSL includes energy conservation standards based on EER in addition to SEER for split-system and single-package air conditioners in
the Hot-Dry region. For split-system air conditioners the EER standards are: 12.2 EER for cooling capacities less than 45,000 Btu/hr; 11.7 EER for
cooling capacities equal to or greater than 45,000 Btu/hr; and 10.2 EER for split-system air conditioners with a seasonal energy efficiency ratio
greater than or equal to 16.0. For single-package air conditioners, the EER standard is 11.0.
** Hot-Humid includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi, North Carolina,
Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the District of Columbia, and the U.S. territories.
*** Hot-Dry includes the states of Arizona, California, Nevada, and New Mexico.
[dagger] The 15.0 SEER energy conservation standard applies to cooling capacities less than 45,000 Btu/hr; the 14.5 SEER energy conservation standard
applies to cooling capacities equal to or greater than 45,000 Btu/hr.
# The 17.0 SEER energy conservation standard applies to cooling capacities less than 30,000 Btu/hr; the 16.5 SEER energy conservation standards applies
to cooling capacities equal to or greater than 30,000 Btu/hr.
## The 19.0 SEER and 9.9 HSPF energy conservation standards apply to cooling capacities less than 45,000 Btu/hr; the 17.5 SEER and 9.4 HSPF energy
conservation standards apply to cooling capacities equal to or greater than 45,000 Btu/hr.
n/a--Not applicable.
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on central air conditioner and
heat pump consumers by looking at the effects potential amended
standards at each TSL would have on the LCC and PBP. DOE also examined
the impacts of potential standards on selected consumer subgroups.
These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products affect consumers in two
ways: (1) Purchase price increases, and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e., product price plus installation costs), and
operating
[[Page 1832]]
costs (i.e., annual energy use, energy prices, energy price trends,
repair costs, and maintenance costs). The LCC calculation also uses
product lifetime and a discount rate. Chapter 8 of the direct final
rule TSD provides detailed information on the LCC and PBP analyses.
Table V-2 through show the LCC and PBP results for the TSLs
considered for each product class. In the first of each pair of tables,
the simple payback is measured relative to consumer use of the baseline
product. In the second table, the LCC impacts are measured relative to
the consumer LCCs projected for the no-new-standards case in the
compliance year (see section IV.F.2.f). Because some consumers purchase
products with higher efficiency in the no-new-standards case, the
average savings are less than the difference between the average LCC of
EL 0 and the average LCC at each TSL. The savings refer only to
consumers who are affected by a standard at a given TSL. Those who
already purchase a product with an efficiency at or above a given TSL
are not affected. Consumers for whom the LCC increases at a given TSL
experience a net cost.
Table V-2--Average LCC and PBP Results for Split-System Central Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
----------------------------------------------------
First Simple Average
TSL Region SEER Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline............................ North.................. 13 $3,966 $172 $3,875 $7,841 N/A 24.1
Hot-Dry................ 14 4,392 279 5,639 10,031 5.0 24.9
Hot-Humid.............. 14 4,011 320 5,044 9,054 5.0 18.0
1................................... North.................. 14 4,092 161 3,696 7,787 10.5 24.1
Hot-Dry................ 14.5 4,475 263 5,387 9,862 5.4 24.9
Hot-Humid.............. 14.5 4,086 308 4,884 8,969 5.5 18.0
Recommended......................... North.................. 14 4,092 161 3,696 7,787 10.5 24.1
Hot-Dry *.............. 15/14.5 4,584 256 5,269 9,853 7.6 24.9
Hot-Humid *............ 15/14.5 4,183 302 4,812 8,995 7.7 18.0
3................................... National............... 16 4,638 224 4,216 8,854 15.2 21.2
4................................... National **............ 17/16.5/ 4,906 217 4,130 9,036 19.2 21.2
16.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to use
of the baseline product.
* 15 SEER for 2 and 3 ton units, 14.5 SEER for 5 ton units.
** Max-Tech SEER is different for 2, 3, and 5 ton units.
Table V-3--LCC Impacts Relative to the No-New-Standards Case for Split-System Central Air Conditioners
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline.............................. North................... 13 N/A N/A
Hot-Dry................. 14 N/A N/A
Hot-Humid............... 14 N/A N/A
1..................................... North................... 14 $43 25
Hot-Dry................. 14.5 169 14
Hot-Humid............... 14.5 82 15
Recommended........................... North................... 14 43 25
Hot-Dry *............... 15/14.5 150 42
Hot-Humid *............. 15/14.5 39 45
3..................................... National................ 16 (122) 63
4..................................... National **............. 17/16.5/16.5 (304) 75
----------------------------------------------------------------------------------------------------------------
* 15 SEER for 2 and 3 ton units, 14.5 SEER for 5 ton units.
** Max-Tech SEER is different for 2, 3, and 5 ton units.
Table V-4--Average LCC and PBP Results for Split-System Central Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------
First Simple Average
TSL Region SEER HSPF Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.......................... National............ 14 8.2 $5,246 $468 $6,396 $11,642 N/A 15.3
1................................. National............ 14.5 8.4 5,318 455 6,253 11,570 5.2 15.3
Recommended....................... National............ 15 8.5 5,391 439 6,081 11,472 4.9 15.3
3................................. National............ 16 8.9 5,720 420 5,906 11,627 9.4 15.3
4................................. National *.......... 19/19/17.5 9.9/9.3 6,572 378 5,476 12,047 14.9 15.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the
baseline product.
* Max-Tech SEER is different for 2, 3, and 5 ton unit.
[[Page 1833]]
Table V-5--LCC Impacts Relative to the No-New-Standards Case for Split-System Central Heat Pumps
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER HSPF savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline...................... National........ 14 8.2 N/A N/A
1............................. National........ 14.5 8.4 $72 9
Recommended................... National........ 15 8.5 131 20
3............................. National........ 16 8.9 (25) 54
4............................. National *...... 19/19/17.5 9.9/9.3 (425) 79
----------------------------------------------------------------------------------------------------------------
* Max-Tech SEER is different for 2, 3, and 5 ton units.
Table V-6--Average LCC and PBP Results for Packaged Central Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
----------------------------------------------------
First Simple Average
TSL Region SEER Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline............................ National............... 14 $4,779 $294 $5,452 $10,231 N/A 21.2
1................................... National............... 14 4,779 294 5,452 10,231 N/A 21.2
Recommended......................... National............... 14 4,779 294 5,452 10,231 N/A 21.2
3................................... National............... 15 4,935 275 5,225 10,160 8.9 21.2
4................................... National............... 17.5 5,427 237 4,855 10,281 12.3 21.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the
baseline product.
Table V-7--LCC Impacts Relative to the No-New-Standards Case for Packaged Central Air Conditioners
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline.............................. National................ 14 N/A N/A
1..................................... National................ 14 N/A N/A
Recommended........................... National................ 14 N/A N/A
3..................................... National................ 15 $43 53
4..................................... National................ 17.5 (80) 69
----------------------------------------------------------------------------------------------------------------
Table V-8--Average LCC and PBP Results for Packaged Central Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
------------------------------------------------
First Simple Average
TSL Region SEER HSPF Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.......................... National............ 14 8.0 $5,361 $517 $6,998 $12,359 N/A 15.3
1................................. National............ 14 8.0 5,361 517 6,998 12,359 N/A 15.3
Recommended....................... National............ 14 8.0 5,361 517 6,998 12,359 N/A 15.3
3................................. National............ 15 8.2 5,545 479 6,584 12,129 5.2 15.3
4................................. National............ 15 8.2 5,545 479 6,584 12,129 5.2 15.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the
baseline product.
Table V-9--LCC Impacts Relative to the No-New-Standards Case for Packaged Central Heat Pumps
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER HSPF savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline...................... National........ 14 8.0 N/A N/A
1............................. National........ 14 8.0 N/A N/A
Recommended................... National........ 14 8.0 N/A N/A
3............................. National........ 15 8.2 $115 39
4............................. National........ 15 8.2 115 39
----------------------------------------------------------------------------------------------------------------
[[Page 1834]]
Table V-10--Average LCC and PBP Results for Space-Constrained Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
----------------------------------------------------
First Simple Average
TSL Region SEER Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline............................ National............... 12 $4,736 $190 $3,779 $8,515 N/A 21.2
1................................... National............... 12 4,736 190 3,779 8,515 N/A 21.2
Recommended......................... National............... 12 4,736 190 3,779 8,515 N/A 21.2
3................................... National............... 12 4,736 190 3,779 8,515 N/A 21.2
4................................... National............... 14 5,040 164 3,417 8,458 11.6 21.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the
baseline product.
Table V-11--LCC Impacts Relative to the No-New-Standards Case for Space-Constrained Air Conditioners
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline.............................. National................ 12 N/A N/A
1..................................... National................ 12 N/A N/A
Recommended........................... National................ 12 N/A N/A
3..................................... National................ 12 N/A N/A
4..................................... National................ 14 $58 60
----------------------------------------------------------------------------------------------------------------
Table V.12--Average LCC and PBP Results for Small-Duct High-Velocity Air Conditioners
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2015$)
----------------------------------------------------
First Simple Average
TSL Region SEER Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline............................ National............... 12 $5,544 $197 $4,035 $9,579 N/A 21.2
1................................... National............... 12 5,544 197 4,035 9,579 N/A 21.2
Recommended......................... National............... 12 5,544 197 4,035 9,579 N/A 21.2
3................................... National............... 12 5,544 197 4,035 9,579 N/A 21.2
4................................... National............... 14 6,478 170 3,648 10,126 34.3 21.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products with that efficiency level. The PBP is measured relative to the
baseline product.
Table V.13--LCC Impacts Relative to the No-New-Standards Case for Small-Duct High-Velocity Air Conditioners
----------------------------------------------------------------------------------------------------------------
Average LCC
TSL Region SEER savings % of net cost
----------------------------------------------------------------------------------------------------------------
Baseline.............................. National................ 12 N/A N/A
1..................................... National................ 12 N/A N/A
Recommended........................... National................ 12 N/A N/A
3..................................... National................ 12 N/A N/A
4..................................... National................ 14 ($540) 90
----------------------------------------------------------------------------------------------------------------
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impacts of the
considered TSLs on low-income households and senior-only households.
The average LCC savings and simple payback periods for low-income and
senior-only households are compared to the results for all consumers of
split air conditioners and split heat pumps in Table V-12 and Table V-
13. In most cases, the average LCC savings and PBP for low-income
households and senior-only households at the considered efficiency
levels are not substantially different from the average for all
households. Chapter 11 of the direct final rule TSD presents detailed
results of the consumer subgroup analysis.
[[Page 1835]]
Table V-12--Split-System Central Air Conditioners: Impacts for Senior-Only and Low-Income Consumer Subgroups Compared to All Households
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings Simple payback period
-----------------------------------------------------------------------------
TSL Region SEER All All
Senior Low-income consumers Senior Low-income consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline............................ North.................. 13 N/A N/A N/A N/A N/A N/A
Hot-Dry................ 14 N/A N/A N/A 4.9 6.8 5.0
Hot-Humid.............. 14 N/A N/A N/A 5.0 5.0 5.0
1................................... North.................. 14 $32 $28 $43 11.3 11.7 10.5
Hot-Dry................ 14.5 171 105 169 5.5 7.3 5.4
Hot-Humid.............. 14.5 74 62 82 5.8 6.1 5.5
Recommended......................... North.................. 14 32 28 43 11.3 11.7 10.5
Hot-Dry................ 15/14.5 149 71 150 7.9 10.0 7.6
Hot-Humid.............. 15/14.5 30 16 39 8.1 8.4 7.7
3................................... National............... 16 (122) (179) (122) 16.1 15.3 15.2
4................................... National............... 17/16.5/ (306) (368) (304) 20.4 19.3 19.2
16.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 15 SEER for 2 and 3 ton units, 14.5 SEER for 5 ton units.
** Max-Tech SEER is different for 2, 3, and 5 ton units.
Table V-13--Split-System Heat Pumps: Impacts for Senior-Only and Low-Income Consumer Subgroups Compared to All Households
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average LCC savings Simple payback period
---------------------------------------------------------------------------
TSL Region SEER HSPF All All
Senior Low-income consumers Senior Low-income consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline........................ National.......... 14 8.2 N/A N/A N/A N/A N/A N/A
1............................... National.......... 14.5 8.4 $76 $70 $72 5.0 5.1 5.2
Recommended..................... National.......... 15 8.5 140 125 131 4.8 5.0 4.9
3............................... National.......... 16 8.9 (6) (33) (25) 9.1 9.5 9.4
4............................... National.......... 19\19\17.5 9.9/9.3 (398) (450) (425) 14.7 15.1 14.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Max-Tech SEER is different for 2, 3, and 5 ton units.
c. Rebuttable Presumption Payback Period
As discussed in section III.J.2, EPCA establishes a rebuttable
presumption that an energy conservation standard is economically
justified if the increased purchase cost for a product that meets the
standard is less than three times the value of the first-year energy
savings resulting from the standard. In calculating a rebuttable
presumption payback period for each of the considered TSLs, DOE used
discrete values rather than distributions for input values, and, as
required by EPCA, based the energy use calculation on the DOE test
procedures for central air conditioners and heat pumps. In contrast,
the PBPs presented in section V.B.1.a were calculated using
distributions that reflect the range of energy use in the field.
Table V-14 presents the rebuttable-presumption payback periods for
the considered TSLs. While DOE examined the rebuttable-presumption
criterion, it considered whether the standard levels considered for
this rule are economically justified through a more detailed analysis
of the economic impacts of those levels, pursuant to 42 U.S.C.
6295(o)(2)(B)(i), that considers the full range of impacts to the
consumer, manufacturer, Nation, and environment. The results of that
analysis serve as the basis for DOE to definitively evaluate the
economic justification for a potential standard level, thereby
supporting or rebutting the results of any preliminary determination of
economic justification.
Table V-14 Rebuttable Presumption Payback Period for Central Air Conditioners and Heat Pumps
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class -----------------------------------------------------------------
1 Recommended 3 4
----------------------------------------------------------------------------------------------------------------
Split Air Conditioners *...................... N/A N/A 6.2 12.5
Split Heat Pumps.............................. 2.2 1.8 4.2 6.5
Package Air Conditioners **................... N/A N/A 5.5 7.7
Package Heat Pumps **......................... N/A N/A 3.9 3.9
Space-Constrained Air Conditioners **......... N/A N/A N/A 6.2
Small-Duct High-Velocity Air Conditioners **.. N/A N/A N/A 16.1
----------------------------------------------------------------------------------------------------------------
* The rebuttable presumption payback period uses a national calculation so there are no results for TSL 1 and
the Recommended TSL because split-system central air conditioners have regional standards.
** The TSL is set at the baseline level so payback period is not relevant.
[[Page 1836]]
2. Economic Impacts on Manufacturers
DOE performed a manufacturer impact analysis (MIA) to estimate the
impact of amended energy conservation standards on central air
conditioner and heat pump manufacturers. The following section
describes the expected impacts on manufacturers at each considered TSL.
Chapter 12 of the direct final rule TSD explains the analysis in
further detail.
a. Industry Cash Flow Analysis Results
Table V-15 and Table V-16 depict the estimated financial impacts
(represented by changes in industry net present value, or INPV) of
amended energy conservation standards on manufacturers of central air
conditioners and heat pumps, as well as the conversion costs that DOE
expects manufacturers would incur at each TSL.
As discussed in section 2.b, DOE modeled two different markup
scenarios to evaluate the range of cash flow impacts on the central air
conditioner and heat pump industry: (1) The preservation of gross
margin percentage markup scenario; and (2) the tiered markup scenario.
To assess the less severe end of the range of potential impacts on
industry profitability, DOE modeled a preservation of gross margin
percentage markup scenario, in which a uniform ``gross margin
percentage'' markup is applied across all potential efficiency levels.
In this scenario, DOE assumed that a manufacturer's absolute dollar
markup would increase as production costs increase in the standards
case.
To assess the more severe end of the range of potential impacts on
industry profitability, DOE modeled a tiered markup scenario. In this
scenario, the breadth of manufacturers' product portfolios shrinks as
higher energy conservation standards increase the efficiency of
baseline products. In this scenario, products in more efficient tiers
that previously commanded higher markups are ``demoted'' to lower
efficiency tiers that command lower markups. The contraction in markups
in this scenario reduces manufacturers' per-unit revenues.
Each of the markup scenarios results in a unique set of cash flows
and corresponding industry values at each TSL. In the following
discussion, the INPV results refer to the difference in industry value
between the no-new-standards case and each standards case that result
from the sum of discounted cash flows from the base year (2016) through
the end of the analysis period (2050). To provide perspective on the
short-run cash flow impact, DOE includes in the discussion of results a
comparison of free cash flow between the no-new-standards case and the
standards case at each TSL in the year before amended standards would
take effect. This figure provides an understanding of the magnitude of
required conversion costs relative to cash flows calculated by the
industry in the no-new-standards case.
Table V-15--Manufacturer Impact Analysis Results for Central Air Conditioners and Heat Pumps: Preservation of Gross Margin Percentage Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units No-new- ---------------------------------------------------------------
standard case 1 2 ** 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2015$M...................... 4,496.1 4,466.2 4,381.9 4,512.2 4,889.6
Change in INPV............................ 2015$M...................... .............. (29.9) (114.2) 16.1 393.5
%........................... .............. (0.7) (2.5) (0.4) 8.8
Product Conversion Costs.................. 2015$M...................... .............. 40.7 137.0 225.2 248.7
Capital Conversion Costs.................. 2015$M...................... .............. 61.0 205.6 337.9 373.0
Total Conversion Costs.................... 2015$M...................... .............. 101.7 342.6 563.1 621.6
Free Cash Flow............................ 2015$M...................... 416.0 (429.6 376.2 278.8 195.7 172.8
for TSL 2)
%........................... .............. (9.6) (35.1) (53.0) (58.5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.
** TSL recommended by the CAC/HP Working Group with 2023 compliance date. All other TSLs have a modeled compliance date of 2021, which is six years
after the compliance date of the standards adopted in the June 27, 2011 DFR.
Table V-16--Manufacturer Impact Analysis Results for Central Air Conditioners and Heat Pumps: Tiered Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
Units No-new- standard case ---------------------------------------------------------------
1 2 ** 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV............................... 2015$M................... 4,496.1................. 3,852.0 3,803.9 3,382.0 3,360.6
Change in INPV..................... 2015$M................... ........................ (644.1) (692.3) (1,114.2) (1,135.6)
%........................ ........................ (14.3) (15.4) (24.8) (25.3)
Product Conversion Costs........... 2015$M................... ........................ 40.7 137.0 225.2 248.7
Capital Conversion Costs........... 2015$M................... ........................ 61.0 205.6 337.9 373.0
Total Conversion Costs............. 2015$M................... ........................ 101.7 342.6 563.1 621.6
Free Cash Flow..................... 2015$M................... 411.9 (426.8 for TSL 2). 372.1 276.1 191.6 168.7
%........................ ........................ (9.7) (35.3) (53.5) (59.0)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.
** TSL recommended by the CAC/HP Working Group with 2023 compliance date. All other TSLs have a modeled compliance date of 2021, which is six years
after the compliance date of the standards adopted in the June 27, 2011 DFR.
At TSL 1, DOE estimates impacts on INPV to range from -$644.1
million to -$29.9 million, or a change of -14.3 percent to -0.7
percent. DOE projects that in the absence of new standards, 57 percent
of central air conditioner and heat pump shipments would already meet
or exceed the efficiency levels prescribed by TSL 1 in the compliance
[[Page 1837]]
year (2021). DOE estimates total industry conversion costs of $101.7
million would be required to bring the balance of shipments into
compliance with a new standard. These conversion costs drive an
estimated decrease in industry free cash flow in the year before the
compliance date (2020). In the more severe tiered markup scenario, DOE
estimates a decrease in industry free cash flow in the year prior to
compliance of $39.8 million, or a change of -9.7 percent relative to
the no-new-standards case value of $411.9 million. At TSL 1, DOE also
projects higher unit prices will result in a slight decrease in total
shipments over the period beginning with the compliance year (2021) and
ending in 2050. DOE estimates a change in shipments of -0.04 percent
relative to the no-new-standards case.
At TSL 1, under the preservation of gross margin percentage
scenario, the shipment-weighted average price per unit increases by 1.8
percent relative to the no-new-standards-case price per unit in the
year of compliance (2021). This slight price increase would mitigate a
portion of the $101.7 million in conversion costs estimated at TSL 1,
resulting in slightly negative INPV impacts under this scenario. Under
the tiered markup scenario, the industry markup structure is compressed
as the least efficient products are eliminated from the market. Under
amended standards, products in higher efficiency tiers that previously
commanded higher markups are demoted to lower efficiency tiers that
command lower markups. At TSL 1, this markup scenario results in a
weighted average price increase of 0.3 percent. This relatively modest
price increase is outweighed by the expected conversion costs and
slight decrease in total shipments, resulting in more severe INPV
impacts at TSL 1.
At TSL 2, the TSL recommended by the ASRAC CAC/HP Working Group,
DOE estimates impacts on INPV to range from -$692.3 million to -$114.2
million, or a change in INPV of -15.4 percent to -2.5 percent. DOE
projects that in the absence of new standards, 32 percent of central
air conditioner and heat pump shipments would already meet or exceed
the efficiency levels prescribed by TSL 2 in the compliance year
(2023). DOE estimates total industry conversion costs of $342.6 million
would be required to bring the balance of shipments into compliance
with a new standard. These conversion costs drive an estimated decrease
in industry free cash flow in the year before the compliance date
(2022). In the more severe tiered markup scenario, DOE estimates a
decrease in industry free cash flow of up to $150.8 million, or a
change of -35.3 percent relative to the no-new-standards case value of
$426.8 million in the year before compliance (2022). At TSL 2, DOE also
projects higher unit prices will result in a slight decrease in total
shipments over the period beginning with the compliance year (2023) and
ending in 2050. DOE estimates a change in shipments of -0.03 percent
relative to the no-new-standards case.
At TSL 2, under the preservation of gross margin percentage
scenario, the shipment-weighted average price per unit increases by 4.4
percent relative to the no-new-standards-case price per unit in the
year of compliance (2023). In this scenario, manufacturers are able to
fully pass on the increase in MPC to consumers. However, this price
increase is outweighed by the $342.6 million in conversion costs
estimated at TSL 2, resulting in slightly negative INPV impacts under
this scenario. Under the tiered markup scenario, the weighted average
price per unit increases by 2.9 percent. This price increase is offset
by the expected conversion costs and slight decrease in total
shipments, resulting in more severe INPV impacts at TSL 2.
At TSL 3, DOE estimates impacts on INPV to range from -$1,114.2
million to $16.1 million, or a change in INPV of -24.8 percent to 0.4
percent. DOE projects that in the absence of new standards, 8 percent
of central air conditioner and heat pump shipments would meet or exceed
the efficiency levels prescribed by TSL 3 in the compliance year
(2021). DOE estimates total industry conversion costs of $563.1 million
would be required to bring the balance of shipments into compliance
with a new standard. These conversion costs drive an estimated decrease
in industry free cash flow in the year before the compliance date
(2020). In the more severe tiered markup scenario, DOE estimates a
decrease in industry free cash flow in the year prior to compliance of
$220.3 million, or a change of -53.5 percent relative to the no-new-
standards case. At TSL 3, DOE also projects higher unit prices will
result in a slight decrease in total shipments over the period
beginning with the compliance year (2021) and ending in 2050. DOE
estimates a change in shipments of -0.24 percent relative to the no-
new-standards case.
At TSL 3, under the preservation of gross margin percentage
scenario, the shipment-weighted average price per unit increases by
20.9 percent relative to the no-new-standards-case price per unit in
the year of compliance (2021). Under this scenario, the higher unit
price offsets conversion costs and the slight decrease in shipments to
produce slightly positive INPV impacts. Under the tiered markup
scenario, the weighted average price increases by 17.9 percent. This
price increase is not sufficient to offset the expected conversion
costs and slight decrease in total shipments, resulting in negative
INPV impacts at this level.
At TSL 4, DOE estimates impacts on INPV to range from -$1,135.6
million to $393.5 million, or a change in INPV of -25.3 percent to 8.8
percent. DOE projects that in the absence of new standards, 3 percent
of central air conditioner and heat pump shipments would meet or exceed
the efficiency levels prescribed by TSL 4 in the compliance year
(2021). DOE estimates total industry conversion costs of $621.6 million
would be required to bring the balance of shipments into compliance
with a new standard. These conversion costs drive an estimated decrease
in industry free cash flow in the year before the compliance date
(2020). In the more severe tiered markup scenario, DOE estimates a
decrease in industry free cash flow in the year prior to compliance of
approximately $243.2 million, or a change of -59.0 percent relative to
the no-new-standards case. At this level, DOE also projects higher
prices will result in a slight decrease in total shipments over the
period beginning with the compliance year (2021) and ending in 2050.
DOE estimates a change in shipments of -0.29 percent relative to the
no-new-standards case.
At TSL 4, under the preservation of gross margin percentage
scenario, the shipment-weighted average price per unit increases by
43.2 percent relative to the no-new-standards-case price per unit in
the year of compliance (2021). Under this scenario, the higher unit
price offsets conversion costs and the slight decrease in shipments to
produce positive INPV impacts. Under the tiered markup scenario, the
weighted average price per unit increases by 39.2 percent. This
increase is outweighed by the expected conversion costs and a decrease
in total shipments, resulting in negative INPV impacts at TSL 4.
b. Direct Impacts on Employment
To quantitatively assess the potential impacts of amended energy
conservation standards on direct employment, DOE used the GRIM to
estimate the domestic labor expenditures and number of direct employees
in the no-new-standards case and at each TSL from the base year of the
analysis (2016) through the end of the analysis (2050). DOE used
statistical
[[Page 1838]]
data from the U.S. Census Bureau's 2014 Annual Survey of Manufacturers,
the results of the engineering analysis, and interviews with
manufacturers to determine the inputs necessary to calculate industry-
wide labor expenditures and domestic direct employment levels. Labor
expenditures related to producing the equipment are a function of the
labor intensity of producing the equipment, the sales volume, and an
assumption that wages remain fixed in real terms over time. The total
labor expenditures in each year are calculated by multiplying the MPCs
by the labor percentage of MPCs. DOE estimates that 50 percent of
residential central air conditioner and heat pump units are produced
domestically.
The total labor expenditures in the GRIM were then converted to
domestic production employment levels by dividing production labor
expenditures by the annual payment per production worker (production
worker hours times the labor rate found in the U.S. Census Bureau's
2014 Annual Survey of Manufacturers). The production worker estimates
in this section only cover workers up to the line-supervisor level who
are directly involved in fabricating and assembling a product within an
OEM facility. Workers performing services that are closely associated
with production operations, such as materials handling tasks using
forklifts, are also included as production labor. DOE's estimates only
account for production workers who manufacture the specific products
covered by this rulemaking.
To estimate an upper bound to employment change, DOE assumes all
domestic manufacturers would choose to continue producing products in
the U.S. and would not move production to foreign countries. To
estimate a lower bound to employment, DOE considers the case where all
manufacturers choose to relocate production overseas rather than make
the necessary conversions at domestic production facilities. A complete
description of the assumptions used to calculate these upper and lower
bounds can be found in chapter 12 of the direct final rule TSD.
In the absence of amended energy conservation standards, DOE
estimates that the residential central air conditioner and heat pump
industry would employ 10,379 and 10,708 domestic production workers in
2021 and 2023, respectively. Table V-17 shows the range of impacts of
potential amended energy conservation standards on U.S. production
workers of central air conditioners and heat pumps.
Table V-17--Potential Changes in the Total Number of Central Air Conditioner and Heat Pump Production Workers in in Compliance Year *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level **
No-new-standard --------------------------------------------------------------------------------------------
[dagger] 1 2 3 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Changes in Domestic ...................... (10,379) to 139....... (10,708) to 642...... (10,379) to 886...... (10,379) to 1,878.
Production Workers in Compliance
Year.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The compliance year for TSL 2 is 2023, as recommended by the CAC/HP Working Group; all other TSLs have a compliance year of 2021.
** Parentheses indicate negative values.
[dagger] The no-new-standard case assumes 10,379 domestic production workers in 2021 and 10,708 in 2023.
The upper end of the range estimates the maximum increase and/or
minimum decrease in the estimated number of domestic production workers
in the residential central air conditioner and heat pump industry after
implementation of amended energy conservation standards. It assumes
manufacturers would continue to produce the same scope of covered
products within the United States.
The lower end of the range represents the maximum decrease in the
total number of U.S. production workers that could result from an
amended energy conservation standard. In interviews, manufacturers
stated that the residential HVAC industry has seen increasing migration
to foreign production facilities, often located in Mexico. Many
manufacturers of central air conditioners and heat pumps already have
foreign production facilities. Some manufacturers indicated a change in
standard would lead to a re-evaluation of production in other
countries, where it may be possible to mitigate capital investments
and/or to reduce the cost of labor inputs. As a result, the lower bound
of direct employment impacts assumes domestic production of covered
products ceases as manufacturers shift production abroad in search of
reduced manufacturing costs.
This conclusion is independent of any conclusions regarding
indirect employment impacts in the broader United States economy, which
are documented in chapter 15 of the direct final rule TSD.
c. Impacts on Manufacturing Capacity
In interviews and in discussions during the CAC/HP Working Group
meetings, manufacturers of residential central air conditioners and
heat pumps did not indicate that amended energy conservation standards
would significantly constrain manufacturing production capacity.
d. Impacts on Subgroups of Manufacturers
As discussed above, using average cost assumptions to develop an
industry cash flow estimate is not adequate for assessing differential
impacts among subgroups of manufacturers. Small manufacturers, niche
players, or manufacturers exhibiting a cost structure that differs
largely from the industry average could be affected differently. DOE
used the results of the industry characterization to group
manufacturers exhibiting similar characteristics. Specifically, DOE
identified small business manufacturers as a subgroup for a separate
impact analysis.
For the small business subgroup analysis, DOE applied the small
business size standards published by the Small Business Administration
(SBA) to determine whether a company is considered a small business.
The size standards are codified at 13 CFR part 121. To be categorized
as a small business under North American Industry Classification System
(NAICS) code 333415, ``Air-Conditioning and Warm Air Heating Equipment
and Commercial and Industrial Refrigeration Equipment Manufacturing,''
a residential central air conditioner and heat pump manufacturer and
its affiliates may employ a maximum of 1,250 employees. The 1,250-
employee threshold includes all employees in a business's parent
company and any other subsidiaries. The small business subgroup
analysis is discussed in
[[Page 1839]]
section VI.B of this notice and in chapter 12 of the direct final rule
TSD.
e. Cumulative Regulatory Burden
While any one regulation may not impose a significant burden on
manufacturers, the combined effects of several impending regulations
may have serious consequences for some manufacturers, groups of
manufacturers, or an entire industry. Assessing the impact of a single
regulation may overlook this cumulative regulatory burden. Multiple
regulations affecting the same manufacturer can strain profits and can
lead companies to abandon product lines or markets with lower expected
future returns than competing products. For these reasons, DOE conducts
an analysis of cumulative regulatory burden as part of its rulemakings
pertaining to appliance efficiency.
For the cumulative regulatory burden analysis, DOE looks at other
regulations that could affect manufacturers of central air conditioners
and heat pumps during the compliance period, from 2017 to 2023, or
those that will take effect approximately three years after the 2023
compliance date of amended energy conservation standards for central
air conditioners and heat pumps. In interviews, manufacturers cited
federal regulations on equipment other than central air conditioners
and heat pumps 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-18.
Table V-18--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Residential Central Air Conditioner and
Heat Pump Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of manufacturers Approximate compliance Estimated total industry Industry conversion
Federal energy conservation standard manufacturers * affected from date conversion expenses costs/revenue [dagger]
today's rule ** (millions $)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Packaged Air Conditioners 13 11 2018 and 2023............ 520.8 (2014$)............ 4.4%.
and Heat Pumps (Air-Cooled) 81 FR
2420 (January 15, 2016).
Residential Boilers *** 81 FR 2320 36 5 2020..................... 2.5 (2014$).............. Less than 1%.
(January 15, 2016).
Commercial and Industrial Pumps 80 FR 86 1 2020..................... 81.2 (2014$)............. 5.6%.
17826 (January 26, 2016).
Portable Room Air Conditioners *** 81 29 5 2021..................... 302.8 (2014$)............ 10.8%.
FR 38398 (June 13, 2016).
Residential Furnaces *** 80 FR 13120 12 12 2021..................... 55.0 (2013$)............. 1%.
(March 12, 2015).
Commercial Packaged Boilers *** 81 FR 45 4 2022..................... 27.5 (2014$)............. 2.3%.
158836 (March 24, 2016).
Commercial Warm Air Furnaces 81 FR 14 10 2023..................... 7.5 to 22.2 (2014$) 1.7% to 5.2%
2420 (January 15, 2016). [dagger][dagger]. [dagger][dagger].
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The number of manufacturers listed in the final rule or notice of proposed rulemaking for the energy conservation standard that is contributing to
cumulative regulatory burden.
** The number of manufacturers producing central air conditioners and heat pumps that are affected by the listed energy conservation standards.
*** The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs have not been
finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the NOPR.)
[dagger] This column presents conversion costs as a percentage of cumulative revenue for the industry during the conversion period. The conversion
period is the timeframe over which manufacturers must make conversion cost investments and lasts from the announcement year of the final rule to the
standards year of the rule. This period typically ranges from 3 to 5 years, depending on the energy conservation standard.
[dagger][dagger] Low and high conversion cost scenarios were analyzed as part of this Direct Final Rule. The range of estimated conversion expenses
presented here reflects those two scenarios.
DOE also identified federal energy conservation standards for
residential water heaters, residential room air conditioners, and
commercial packaged air conditioners and heat pumps (water and
evaporative cooled) as sources of cumulative regulatory burden for
manufacturers of central air conditioners and heat pumps. However,
NOPRs have not yet been published for those standards so information on
manufacturer impacts is not yet available.
In addition to the energy conservation standards listed,
manufacturers cited increasing ENERGY STAR \96\ standards as a source
of regulatory burden. In response, DOE does not consider ENERGY STAR in
its presentation of cumulative regulatory burden, because ENERGY STAR
is a voluntary program and is not federally mandated.
---------------------------------------------------------------------------
\96\ ENERGY STAR is a U.S. EPA voluntary program designed to
identify and promote energy-efficient products to reduce greenhouse
gas emissions. For more information on the ENERGY STAR program,
please visit www.energystar.gov.
---------------------------------------------------------------------------
Manufacturers also cited the U.S. EPA Significant New Alternatives
Policy (SNAP) Program as a source of regulatory burden. The SNAP
Program evaluates and regulates substitutes for ozone-depleting
chemicals (such as air conditioning refrigerants) that are being phased
out under the stratospheric ozone protection provisions of the Clean
Air Act. On April 10, 2015, the EPA issued a final rule allowing the
use of three flammable refrigerants (HFC-32 (R-32), Propane (R-290),
and R-441A) as new acceptable substitutes, subject to use conditions,
for refrigerant in the Household and Light Commercial Air Conditioning
class of equipment. 80 FR 19454 (April 10, 2015). However, DOE notes
that the use of alternate refrigerants by manufacturers of residential
central air conditioners and heat pumps would not be required as a
direct result of this rule. Hence, alternate refrigerants were not
considered in this analysis.
More information on the cumulative regulatory burden can be found
in chapter 12 of the direct final rule TSD.
3. National Impact Analysis
a. Significance of Energy Savings
To estimate the energy savings attributable to potential standards
for central air conditioners and heat pumps, DOE compared the energy
consumption of those products under the base case to
[[Page 1840]]
their anticipated energy consumption under each TSL. The savings are
measured over the entire lifetime of products purchased in the 30-year
period that begins in the first full year of anticipated compliance
with amended standards (2021-2050 or, for the recommended TSL, 2023-
2052). Table V-19 presents the estimated national energy savings for
each considered TSL disaggregated by product class. Because TSL 1 and
the Recommended TSL are comprised of regional standards for split
system central air conditioners, the national energy savings results
for this product class are disaggregated by region. The approach for
estimating national energy savings is described in section IV.H.
Table V-19--Central Air Conditioners and Heat Pumps: Cumulative National Energy Savings for Potential Standards
[Units sold in 30-year period]
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1 * Recommended TSL * TSL 3 TSL 4
Product class -------------------------------------------------------------------------------------------------------
North Hot-humid Hot-dry North Hot-humid Hot-dry National National
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Energy Use
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 0.3 0.4 0.1 0.4 0.8 0.2 4.6 5.7
------------------------------------------------------------------------------
Split HP........................................ 0.4
1.7 3.2 7.0
Packaged AC..................................... 0.0
0.0 0.2 0.7
Packaged HP..................................... 0.0
0.0 0.3 0.3
-------------------------------------------------------------------------------------------------------
Total....................................... 1.2
3.1 8.2 13.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full Fuel Cycle Energy Use
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 0.4 0.4 0.1 0.4 0.8 0.2 4.8 5.9
------------------------------------------------------------------------------
Split HP........................................ 0.5
1.8 3.4 7.3
Packaged AC..................................... 0.0
0.0 0.2 0.7
Packaged HP..................................... 0.0
0.0 0.3 0.3
-------------------------------------------------------------------------------------------------------
Total....................................... 1.3
3.2 8.6 14.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* National results for all product classes with exception of split system central air conditioners.
OMB Circular A-4 \97\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis using nine, rather than 30, years
of product shipments. The choice of a nine-year period is a proxy for
the timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\98\ The review timeframe established in EPCA is generally
not synchronized with the product lifetime, product manufacturing
cycles, or other factors specific to central air conditioners and heat
pumps. Thus, such results are presented for informational purposes only
and are not indicative of any change in DOE's analytical methodology.
The NES sensitivity analysis results based on a nine-year period of
shipments are presented in Table V-20.
---------------------------------------------------------------------------
\97\ 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/).
\98\ Section 325(m) of EPCA requires DOE to review its standards
at least once every 6 years, and requires, for certain products, 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. 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 consumer products,
the compliance period is 5 years rather than 3 years.
Table V-20--Cumulative National Energy Savings for Potential Standards for Central Air Conditioners and Heat Pumps
[Units sold in 9-year period]
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1 * Recommended TSL * TSL 3 TSL 4
Product class -------------------------------------------------------------------------------------------------------
North Hot-humid Hot-dry North Hot-humid Hot-dry National National
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary Energy Use
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 0.1 0.1 0.0 0.1 0.2 0.0 1.2 1.5
------------------------------------------------------------------------------
Split HP........................................ 0.1
0.4 0.8 1.7
Packaged AC..................................... 0.0
0.0 0.0 0.2
Packaged HP..................................... 0.0
0.0 0.1 0.1
-------------------------------------------------------------------------------------------------------
[[Page 1841]]
Total....................................... 0.3
0.8 2.1 3.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Full Fuel Cycle Energy Use
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 0.1 0.1 0.0 0.1 0.2 0.1 1.3 1.6
------------------------------------------------------------------------------
Split HP........................................ 0.1
0.5 0.8 1.8
Packaged AC..................................... 0.0
0.0 0.0 0.2
Packaged HP..................................... 0.0
0.0 0.1 0.1
-------------------------------------------------------------------------------------------------------
Total....................................... 0.4
0.9 2.2 3.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* National results for all product classes with exception of split system central air conditioners.
b. Net Present Value of Consumer Costs and Benefits
Table V-21 shows the consumer NPV of the total costs and savings
for consumers that would result from each TSL considered for central
air conditioners and heat pumps disaggregated by product class. As
noted above in the presentation of national energy savings results,
because TSL 1 and the Recommended TSL are comprised of regional
standards for split system central air conditioners, the national
energy savings results for this product class are disaggregated by
region. The impacts cover the lifetime of products purchased in 2021-
2050. In accordance with OMB's guidelines on regulatory analysis,\99\
DOE calculated NPV using both a 7-percent and a 3-percent real discount
rate.
---------------------------------------------------------------------------
\99\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at:
http://www.whitehouse.gov/omb/circulars_a004_a-4).
Table V-21--Central Air Conditioners and Heat Pumps: Cumulative Net Present Value of Consumer Benefits for Potential Standards
[Units sold in 30-year period]
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1 * Recommended TSL * TSL 3 TSL 4
Product class -------------------------------------------------------------------------------------------------------
North Hot-humid Hot-dry North Hot-humid Hot-dry National National
--------------------------------------------------------------------------------------------------------------------------------------------------------
3-percent discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 1.0 1.6 1.0 1.0 1.2 1.5 (4.5) (18.2)
------------------------------------------------------------------------------
Split HP........................................ 2.1
8.5 3.9 (11.5)
Packaged AC..................................... 0.0
0.0 0.6 0.4
Packaged HP..................................... 0.0
0.0 1.1 1.1
-------------------------------------------------------------------------------------------------------
Total....................................... 5.7
12.2 1.1 (28.1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7-percent discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ (0.1) 0.4 0.3 0.0 (0.3) 0.3 (9.2) (18.1)
------------------------------------------------------------------------------
Split HP........................................ 0.7
2.5 (1.2) (13.1)
Packaged AC..................................... 0.0
0.0 0.1 (0.6)
Packaged HP..................................... 0.0
0.0 0.3 0.3
-------------------------------------------------------------------------------------------------------
Total....................................... 1.3
2.5 (10.0) (31.4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* National results for all product classes with exception of split system central air conditioners.
The NPV results based on the aforementioned nine-year analytical
period are presented in Table V-22. The impacts are counted over the
lifetime of products purchased in 2021-2029. As mentioned previously,
such results are presented for informational purposes only and is not
indicative of any change in DOE's analytical methodology or decision
criteria.
[[Page 1842]]
Table V-22--Cumulative Net Present Value of Consumer Benefits for Potential Standards for Central Air Conditioners and Heat Pumps
[Units sold in 9-year period]
--------------------------------------------------------------------------------------------------------------------------------------------------------
TSL 1 * Recommended TSL * TSL 3 TSL 4
Product class -------------------------------------------------------------------------------------------------------
North Hot-humid Hot-dry North Hot-humid Hot-dry National National
--------------------------------------------------------------------------------------------------------------------------------------------------------
3-percent discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ 0.2 0.5 0.3 0.3 0.2 0.5 (3.7) (9.6)
------------------------------------------------------------------------------
Split HP........................................ 0.7
2.5 0.3 (6.4)
Packaged AC..................................... 0.0
0.0 0.2 (0.1)
Packaged HP..................................... 0.0
0.0 0.3 0.3
-------------------------------------------------------------------------------------------------------
Total....................................... 1.7
3.5 (2.9) (15.7)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7-percent discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split AC........................................ (0.1) 0.1 0.1 (0.1) (0.2) 0.1 (5.5) (10.3)
------------------------------------------------------------------------------
Split HP........................................ 0.3
1.0 (1.0) (7.2)
Packaged AC..................................... 0.0
0.0 0.0 (0.4)
Packaged HP..................................... 0.0
0.0 0.1 0.1
-------------------------------------------------------------------------------------------------------
Total....................................... 0.5
0.8 (6.4) (17.8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* National results for all product classes with exception of split system central air conditioners.
The above results reflect the use of the default decreasing price
trend (see section IV.H.2) to estimate the change in price for central
air conditioners and heat pumps over the analysis period. DOE also
conducted a sensitivity analysis that considered one scenario with a
constant price trend and one scenario with a slightly higher rate of
price decline than the reference case. The results of these alternative
cases are presented in appendix 10-C of the direct final rule TSD.
c. Indirect Impacts on Employment
DOE expects amended energy conservation standards for central air
conditioners and heat pumps to reduce energy costs for consumers, with
the resulting net savings being redirected to other forms of economic
activity. Those shifts in spending and economic activity could affect
the demand for labor. As described in section IV.N, DOE used an input/
output model of the U.S. economy to estimate indirect employment
impacts of the TSLs that DOE considered in this rulemaking. DOE
understands that there are uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Therefore, DOE calculated results for near-term time frames
(2021 to 2026), where these uncertainties are reduced.
The results suggest that the amended standards are likely to have a
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 direct final rule TSD presents results
regarding anticipated indirect employment impacts.
4. Impact on Product Utility or Performance
DOE has concluded that the amended standards it is adopting in this
direct final rule would not lessen the utility or performance of
central air conditioners and heat pumps. Manufacturers of these
products currently offer central air conditioner and heat pump that
meet or exceed the amended standards.
5. Impact of Any Lessening of Competition
As discussed in section III.I.1.e, EPCA directs DOE to consider any
lessening of competition that is likely to result from standards. It
also directs the Attorney General of the United States (Attorney
General) to determine the impact, if any, of any lessening of
competition likely to result from a proposed standard and to transmit
such determination in writing to the Secretary within 60 days of the
publication of a proposed rule, together with an analysis of the nature
and extent of the impact. To assist the Attorney General in making this
determination, DOE provided the Department of Justice (DOJ) with copies
of the NOPR and the TSD for review. In its assessment letter responding
to DOE, DOJ concluded that the proposed energy conservation standards
for central air conditioners and heat pumps are unlikely to have a
significant adverse impact on competition. DOE is publishing the
Attorney General's assessment at the end of this direct final rule.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts 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 direct final rule TSD presents the estimated reduction in
generating capacity, relative to the base case, for the TSLs that DOE
considered in this rulemaking.
Energy conservation resulting from amended standards for central
air conditioners and heat pumps are expected to yield environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases. Table V-23 provides DOE's estimate of cumulative
reductions in air pollutant emissions resulting from each of the TSLs.
The tables include both power sector emissions and upstream emissions.
The emissions were calculated using the multipliers discussed in
section IV.K. DOE reports annual emissions impacts for each TSL in
chapter 13 of the direct final rule TSD.
[[Page 1843]]
Table V-23--Cumulative Emissions Reduction Estimated for Central Air Conditioner and Heat Pump Potential
Standards
[Units sold in 30-year period]
----------------------------------------------------------------------------------------------------------------
Trial standard level
-------------------------------------------------------------------
1 Recommended 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)................... 72.45 177.9 480.7 794.7
SO2 (thousand tons)......................... 40.16 98.84 267.3 443.8
NOX (thousand tons)......................... 81.71 200.5 541.6 894.3
Hg (tons)................................... 0.149 0.368 0.994 1.651
CH4 (thousand tons)......................... 5.82 14.33 38.71 64.25
N2O (thousand tons)......................... 0.820 2.019 5.456 9.058
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)................... 4.230 10.44 28.06 46.34
SO2 (thousand tons)......................... 0.780 1.923 5.176 8.546
NOX (thousand tons)......................... 60.68 149.8 402.6 664.8
Hg (tons)................................... 0.002 0.004 0.011 0.019
CH4 (thousand tons)......................... 335.4 828.0 2,225 3,674
N2O (thousand tons)......................... 0.039 0.095 0.256 0.422
----------------------------------------------------------------------------------------------------------------
Total Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)................... 76.68 188.3 508.7 841.0
SO2 (thousand tons)......................... 40.94 100.8 272.4 452.4
NOX (thousand tons)......................... 142.4 350.3 944.2 1,559
Hg (tons)................................... 0.151 0.372 1.005 1.669
CH4 (thousand tons)......................... 341.2 842.4 2,264 3,738
CH4 (thousand tons CO2eq) *................. 9,553 23,586 63,387 104,677
N2O (thousand tons)......................... 0.858 2.114 5.711 9.481
N2O (thousand tons CO2eq) *................. 227.5 560.3 1,514 2,512
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
As part of the analysis for this rule, DOE estimated monetary
benefits likely to result from the reduced emissions of CO2
and NOX that DOE estimated for each of the TSLs considered
for central air conditioners and heat pumps. As discussed in section
IV.L, for CO2, DOE used the most recent values for the SCC
developed by an interagency process. The four sets of SCC values for
CO2 emissions reductions in 2015 resulting from that process
(expressed in 2014$) are represented by $12.4/metric ton (the average
value from a distribution that uses a 5-percent discount rate), $40.6/
metric ton (the average value from a distribution that uses a 3-percent
discount rate), $63.2/metric ton (the average value from a distribution
that uses a 2.5-percent discount rate), and $118/metric ton (the 95th-
percentile value from a distribution that uses a 3-percent discount
rate). The values for later years are higher due to increasing damages
(emissions-related costs) as the projected magnitude of climate change
impacts increases.
Table V-24 presents the global value of CO2 emissions
reductions at each TSL. For each of the four cases, DOE calculated a
present value of the stream of annual values using the same discount
rate as was used in the studies upon which the dollar-per-ton values
are based. DOE calculated domestic values as a range from 7 percent to
23 percent of the global values, and these results are presented in
chapter 14 of the direct final rule TSD.
Table V-24--Estimates of Global Present Value of CO2 Emissions Reduction for Central Air Conditioner and Heat
Pump Potential Standards
[Units sold in 30-year period]
----------------------------------------------------------------------------------------------------------------
SCC Case *
-------------------------------------------------------------------
TSL 3% discount
5% discount 3% discount 2.5% discount rate 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
(billion 2015$)
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1........................................... 456 2,171 3,487 6,614
Recommended................................. 1,081 5,225 8,420 15,927
3........................................... 3,016 14,387 23,110 43,835
4........................................... 5,010 23,869 38,322 72,741
----------------------------------------------------------------------------------------------------------------
[[Page 1844]]
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1........................................... 26 126 202 383
Recommended................................. 63 305 491 929
3........................................... 174 833 1,340 2,539
4........................................... 288 1,381 2,220 4,209
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1........................................... 482 2,297 3,689 6,997
Recommended................................. 1,143 5,530 8,912 16,855
3........................................... 3,190 15,220 24,450 46,375
4........................................... 5,298 25,249 40,542 76,950
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2, and $118
per metric ton (2015$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other greenhouse gas (GHG) emissions
to changes in the future global climate and the potential resulting
damages to the world economy continues to evolve rapidly. Thus, any
value placed on reducing CO2 emissions in this rulemaking is
subject to change. DOE, together with other Federal agencies, will
continue to review various methodologies for estimating the monetary
value of reductions in CO2 and other GHG emissions. This
ongoing review will consider the comments on this subject that are part
of the public record for this and other rulemakings, as well as other
methodological 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 direct final rule
the most recent values and analyses resulting from the interagency
review process.
DOE also estimated the cumulative monetary value of the economic
benefits associated with NOX emissions reductions
anticipated to result from amended standards for central air
conditioners and heat pumps. The dollar-per-ton values that DOE used
are discussed in section IV.L.2. Table V-25 presents the cumulative
present values for NOX emissions reductions for each TSL
calculated using seven-percent and three-percent discount rates. This
table presents values that use the low dollar-per-ton values, which
reflect DOE's primary estimate. Results that reflect the range of
NOX dollar-per-ton values are presented in Table V-25.
Table V-25--Estimates of Present Value of NOX Emissions Reduction for
Central Air Conditioner and Heat Pump Potential Standards
[Units sold in 30-year period]
------------------------------------------------------------------------
3% 7%
TSL Discount Discount
rate rate
------------------------------------------------------------------------
(million 2015$)
------------------------------------------------------------------------
Power Sector Emissions
------------------------------------------------------------------------
1................................................. 123 45
Recommended....................................... 292 100
3................................................. 814 294
4................................................. 1,358 490
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1................................................. 99 35
Recommended....................................... 236 79
3................................................. 657 232
4................................................. 1,090 385
------------------------------------------------------------------------
Total FFC Emissions *
------------------------------------------------------------------------
1................................................. 222 80
Recommended....................................... 528 179
3................................................. 1,472 525
4................................................. 2,448 875
------------------------------------------------------------------------
* Components may not sum to total due to rounding.
7. Other Factors
The Secretary of Energy, in determining whether a standard is
economically justified, may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) No
other factors were considered in this analysis.
8. Summary of National Economic Impacts
The NPV of the monetized benefits associated with emissions
reductions can be viewed as a complement to the NPV of the consumer
savings calculated for each TSL considered in this rulemaking. Table V-
26 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 for the central air
conditioners and heat pumps considered in this rulemaking, at both a
seven-percent and three-percent discount rate. The CO2
values used in the columns of each table correspond to the 2015 values
in the four sets of SCC values discussed above.
[[Page 1845]]
Table V-26--Central Air Conditioners and Heat Pumps: Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2
and NOX Emissions Reductions for Potential Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer NPV at 3% discount rate added with:
---------------------------------------------------------------------------------------------------
TSL SCC case $12.4/metric SCC case $40.6/metric SCC case $63.2/metric SCC case $118/metric
ton and 3% low NOX ton and 3% low NOX ton and 3% low NOX ton and 3% low NOX
values values values values
--------------------------------------------------------------------------------------------------------------------------------------------------------
(billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................................... 6.4 8.3 9.7 13.0
Recommended......................................... 13.8 18.2 21.6 29.5
3................................................... 5.8 17.8 27.0 48.9
4................................................... (20.3) (0.4) 14.9 51.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer NPV at 7% Discount Rate added with:
---------------------------------------------------------------------------------------------------
TSL SCC case $12.4/metric SCC case $40.6/metric SCC case $63.2/metric SCC case $118/metric
ton and 7% low NOX ton and 7% low NOX ton and 7% low NOX ton and 7% low NOX
values values values values
--------------------------------------------------------------------------------------------------------------------------------------------------------
(billion 2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................................... 1.8 3.7 5.0 8.4
Recommended......................................... 3.8 8.2 11.6 19.5
3................................................... (6.3) 5.8 15.0 36.9
4................................................... (25.3) (5.3) 10.0 46.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
The national operating cost savings are domestic U.S. monetary
savings that occur as a result of purchasing the covered products. The
CO2 reduction is a benefit that accrues globally due to
decreased domestic energy consumption that is expected to result from
this rule. Because CO2 emissions have a very long residence
time in the atmosphere, the SCC values in future years reflect future
climate-related impacts that continue beyond 2100 through 2300.
C. Conclusion
When considering new or amended energy conservation standards, the
standards that DOE adopts for any type (or class) of covered product
must be designed to achieve the maximum improvement in energy
efficiency that the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) 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. 6295(o)(2)(B)(i)) The new or
amended standard must also result in significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B))
For this direct final rule, DOE considered the impacts of amended
standards for central air conditioners and heat pumps at each TSL,
beginning with the maximum technologically feasible level, to determine
whether that level was economically justified. Where the max-tech level
was not justified, DOE then considered the next-most-efficient level
and undertook the same evaluation until it reached the highest
efficiency level that is both technologically feasible and economically
justified and saves a significant amount of energy.
To aid the reader in understanding the benefits and/or burdens of
each TSL, tables in this section summarize the quantitative analytical
results for each TSL. 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 standard and impacts on employment.
DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy
savings in the absence of government intervention. Much of this
literature attempts to explain why consumers appear to undervalue
energy efficiency improvements. There is evidence that consumers
undervalue future energy savings as a result of: (1) A lack of
information; (2) a lack of sufficient salience of the long-term or
aggregate benefits; (3) a lack of sufficient savings to warrant
delaying or altering purchases; (4) excessive focus on the short term,
in the form of inconsistent weighting of future energy cost savings
relative to available returns on other investments; (5) computational
or other difficulties associated with the evaluation of relevant
tradeoffs; and (6) a divergence in incentives (for example, renter
versus owner or builder versus purchaser). Other literature indicates
that with less than perfect foresight and a high degree of uncertainty
about the future, consumers may trade off at a higher than expected
rate between current consumption and uncertain future energy cost
savings. This undervaluation suggests that regulation that promotes
energy efficiency can produce significant net private gains (as well as
producing social gains by, for example, reducing pollution).
In DOE's current regulatory analysis, potential changes in the
benefits and costs of a regulation due to changes in consumer purchase
decisions are included in two ways. First, if consumers forego a
purchase of a product in the standards case, this decreases sales for
product manufacturers, and the cost to manufacturers is included in the
MIA. Second, DOE accounts for energy savings attributable only to
products actually used by consumers in the standards case; if a
standard decreases the number of products purchased by consumers, this
decreases the potential energy savings from an energy conservation
standard. DOE provides estimates of changes in the volume of product
purchases in chapter 9 of the direct final rule TSD. DOE's current
analysis does not explicitly control for heterogeneity in consumer
preferences,
[[Page 1846]]
preferences across subcategories of products or specific features, or
consumer price sensitivity variation according to household
income.\100\
---------------------------------------------------------------------------
\100\ P.C. Reiss and M.W. White, Household Electricity Demand,
Revisited, Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------
While DOE is not prepared at present to provide a fuller
quantifiable framework for estimating the benefits and costs of changes
in consumer purchase decisions due to an energy conservation standard,
DOE is committed to developing a framework that can support empirical
quantitative tools for improved assessment of the consumer welfare
impacts of appliance standards. DOE has posted a paper that discusses
the issue of consumer welfare impacts of appliance standards, and
potential enhancements to the methodology by which these impacts are
defined and estimated in the regulatory process.\101\ DOE welcomes
comments on how to more fully assess the potential impact of energy
conservation standards on consumer choice and how to quantify this
impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------
\101\ Alan Sanstad, Notes on the Economics of Household Energy
Consumption and Technology Choice. Lawrence Berkeley National
Laboratory (2010) (Available at: http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (Last
accessed May 3, 2013).
---------------------------------------------------------------------------
1. Benefits and Burdens of TSLs Considered for Central Air Conditioner
and Heat Pump Standards
Table V-27 and Table V-28 summarize the quantitative impacts
estimated for each TSL for central air conditioners and heat pumps. The
national impacts are measured over the lifetime of central air
conditioners and heat pumps purchased in the 30-year period that begins
in the anticipated first year of compliance with any amended standards
(2021-2050 or, in the case of the recommended TSL, 2023-2052). The
energy savings, emissions reductions, and value of emissions reductions
refer to full-fuel-cycle results. The efficiency levels contained in
each TSL are described in section V.A.
Table V-27--Summary of Results for Central Air Conditioner and Heat Pump TSLs: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 Recommended TSL TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
FFC National Energy Savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Quads......................... 1.3......................... 3.2............................. 8.6........................ 14.2.
--------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Costs and Benefits (2015$ billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate.............. 5.7......................... 12.2............................ 1.1........................ (28.1).
7% discount rate.............. 1.3......................... 2.5............................. (10.0)..................... (31.4).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)..... 76.68....................... 188.3........................... 508.7...................... 841.0.
SO2 (thousand tons)........... 40.94....................... 100.8........................... 272.4...................... 452.4.
NOX (thousand tons)........... 142.4....................... 350.3........................... 944.2...................... 1,559.
Hg (tons)..................... 0.151....................... 0.372........................... 1.005...................... 1.669.
CH4 (thousand tons)........... 341.2....................... 842.4........................... 2,264...................... 3,738.
CH4 (million tons CO2eq) *.... 9,553....................... 23,586.......................... 63,387..................... 104,677.
N2O (thousand tons)........... 0.858....................... 2.114........................... 5.711...................... 9.481.
N2O (thousand tons CO2eq) *... 227.5....................... 560.3........................... 1,514...................... 2,512.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2015$ billion) **........ 0.482 to 6.997.............. 1.143 to 16.855................. 3.190 to 46.375............ 5.298 to 76.950.
NOX--3% discount rate (2015$ 222.2 to 506.6.............. 528.1 to 1204.1................. 1471.5 to 3355.0........... 2448.1 to 5581.5.
million).
NOX--7% discount rate (2015$ 80.0 to 180.4............... 178.6 to 402.6.................. 525.4 to 1184.5............ 875.0 to 1972.9.
million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** 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-28--Summary of Results for Central Air Conditioners and Heat Pumps by TSL: Manufacturer and Consumer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category TSL 1 Recommended TSL * TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2015$ million)
No-new-standards case INPV = 3,852.0 to 4,466.2.......... 3,803.9 to 4,381.9.............. 3,382.0 to 4,512.2......... 3,360.6 to 4,889.6
$4,496.1.
Change in Industry NPV (%).... (14.3) to (0.7)............. (15.4) to (2.5)................. (24.8) to 0.4.............. (25.3) to 8.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2015$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split Air Conditioners........ N: $43...................... N: $43.......................... ...........................
HD: $169.................... HD: $150........................ ($122)..................... ($304)
HH: $82..................... HH: $39.........................
Split Heat Pumps.............. $72......................... $131............................ ($25)...................... ($425)
Package Air Conditioners...... N/A......................... N/A............................. $43........................ ($80)
Package Heat Pumps............ N/A......................... N/A............................. $115....................... $115
[[Page 1847]]
Space-Constrained Air N/A......................... N/A............................. N/A........................ $58
Conditioners.
Small-Duct High-Velocity...... N/A......................... N/A............................. N/A........................ ($540)
Shipment-Weighted Average **.. $68......................... $75............................. ($71)...................... ($315)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split Air Conditioners........ N: 10.5 N: 10.5
HD: 5.4..................... HD: 7.6......................... 15.2....................... 19.2
HH: 5.5..................... HH: 7.7.........................
Split Heat Pumps.............. 5.2......................... 4.9............................. 9.4........................ 14.9
Package Air Conditioners...... N/A......................... N/A............................. 8.9........................ 12.3
Package Heat Pumps............ N/A......................... N/A............................. 5.2........................ 5.2
Space-Constrained Air N/A......................... N/A............................. N/A........................ 11.6
Conditioners.
Small-Duct High-Velocity...... N/A......................... N/A............................. N/A........................ 34.3
Shipment-Weighted Average **.. 6.0......................... 6.7............................. 12.5....................... 16.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
% of Consumers That Experience Net Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Split Air Conditioners........ N: 25%...................... N: 25%..........................
HD: 14%..................... HD: 42%......................... 63%........................ 75%
HH: 15%..................... HH: 45%.........................
Split Heat Pumps.............. 9%.......................... 20%............................. 54%........................ 79%
Package Air Conditioners...... N/A......................... N/A............................. 53%........................ 69%
Package Heat Pumps............ N/A......................... N/A............................. 39%........................ 39%
Space-Constrained Air N/A......................... N/A............................. N/A........................ 60%
Conditioners.
Small-Duct High-Velocity...... N/A......................... N/A............................. N/A........................ 90%
Shipment-Weighted Average *... 14%......................... 28%............................. 59%........................ 74%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values. N = North region. HD = Hot-dry region; HH = Hot-humid region.
* There are no impacts for Package Air Conditioners. Package Heat Pumps, Space-Constrained Air Conditioners, and Small-Duct High-Velocity because the
standard levels are at the baseline efficiency.
** Weighted by shares of each product class in total projected shipments in 2021. Does not include shipments for SCAC and SDHV.
First, DOE considered TSL 4, which would save an estimated total of
14.2 quads of energy, an amount DOE considers significant. TSL 4 has an
estimated NPV of consumer benefit of -$31.4 billion using a 7-percent
discount rate, and -$28.1 billion using a 3-percent discount rate.
The cumulative emissions reductions at TSL 4 are 841 Mt of
CO2, 452.4 thousand tons of SO2, 1,559 thousand
tons of NOX, 1.669 tons of Hg, 3,738 thousand tons of
CH4, and 9.481 thousand tons of N2O. The
estimated monetary value of the CO2 emissions reductions at
TSL 4 ranges from $5.298 billion to $76.950 billion.
At TSL 4, the average LCC savings is -$304 for split air
conditioners, -$425 for split heat pumps, -$80 for package air
conditioners, $115 for package heat pumps, $58 for space-constrained
air conditioners, and -$540 for small-duct high-velocity air
conditioners. The simple PBP is 19.2 years for split air conditioners,
14.9 years for split heat pumps, 12.3 years for package air
conditioners, 5.2 years for package heat pumps, 11.6 years for space-
constrained air conditioners, and 34.3 years for small-duct high-
velocity air conditioners. The share of consumers experiencing a net
LCC cost is 75 percent for split air conditioners, 79 percent for split
heat pumps, 69 percent for package air conditioners, 39 percent for
package heat pumps, 60 percent for space-constrained air conditioners,
and 90 percent for small-duct high-velocity air conditioners.
At TSL 4, the projected change in INPV ranges from a decrease of
$1,135.6 million to an increase of $393.5 million. If the more severe
range of impacts is reached, TSL 4 could result in a net loss of up to
25.3 percent of INPV for manufacturers.
After considering the analysis and weighing the benefits and the
burdens, the Secretary has concluded that, at TSL 4 for central air
conditioner and heat pump standards, the benefits of energy savings and
emissions reductions would be outweighed by the negative NPV of total
consumer benefits at a 3-percent and 7-percent discount rate, negative
average consumer LCC savings for most product classes, and the
reduction in industry value.
Next, DOE considered TSL 3, which would save an estimated total of
8.6 quads of energy, an amount DOE considers significant. TSL 3 has an
estimated NPV of consumer benefit of -$10 billion using a 7-percent
discount rate, and $1.1 billion using a 3-percent discount rate.
The cumulative emissions reductions at TSL 3 are 508.7 Mt of
CO2, 272.4 thousand tons of SO2, 944.2 thousand
tons of NOX, 1.005 tons of Hg, 2,264 thousand tons of
CH4, and 5.711 thousand tons of N2O. The
estimated monetary value of the CO2 emissions reductions at
TSL 3 ranges from $3.190 billion to $46.375 billion.
At TSL 3, the average LCC savings is -$122 for split air
conditioners, -$25 for split heat pumps, $43 for package air
conditioners, and $115 for package heat pumps. The simple PBP is 15.2
years for split air conditioners, 9.4 years for split heat pumps, 8.9
years for package air conditioners, and 5.2 years for package heat
pumps. The share of consumers experiencing a net LCC cost is 63 percent
for split air conditioners, 54 percent for split heat pumps, 53 percent
for package air conditioners, and 39 percent for package heat pumps.
There are no impacts on space-constrained air conditioners or small-
duct high-velocity air conditioners at TSL 3.
At TSL 3, the projected change in INPV ranges from a decrease of
$1,114.2 million to an increase of $16.1 million. If the more severe
range of impacts is reached, TSL 3 could result in a net loss of up to
24.8 percent of INPV for manufacturers.
[[Page 1848]]
After considering the analysis and weighing the benefits and the
burdens, the Secretary has concluded that at TSL 3 for central air
conditioner and heat pump standards, the benefits of energy savings,
positive NPV of consumer benefit at a 3-percent discount rate, and
emissions reductions would be outweighed by the negative NPV of
consumer benefit at a 7-percent discount rate, negative average LCC
savings for most product classes, and the potential reduction in INPV
for manufacturers.
Next, DOE considered the Recommended TSL, which would save an
estimated total of 3.2 quads of energy, an amount DOE considers
significant. The Recommended TSL has an estimated NPV of consumer
benefit of $2.5 billion using a 7-percent discount rate, and $12.2
billion using a 3-percent discount rate.
The cumulative emissions reductions under the Recommended TSL are
188.3 Mt of CO2, 100.8 thousand tons of SO2,
350.3 thousand tons of NOX, 0.372 tons of Hg, 842.4 thousand
tons of CH4, and 2.114 thousand tons of N2O. The
estimated monetary value of the CO2 emissions reductions
ranges from $1.143 billion to $16.855 billion.
Under the Recommended TSL, the average LCC savings for split air
conditioners is $43 in the north region, $150 in the hot dry region,
$39 in the hot humid region, and $131 for split heat pumps. The simple
payback period for split air conditioners is 10.5 years in the north
region, 7.6 years in the hot dry region, 7.7 years in the hot humid
region, and 4.9 years for split heat pumps. The share of consumers
experiencing a net LCC cost for split air conditioners is 25 percent in
the north region, 42 percent in the hot dry region, 45 percent in the
hot humid region, and 20 percent for split heat pumps. There are no
impacts to packaged air conditioners, packaged heat pumps, space-
constrained air conditioners, and small-duct high-velocity air
conditioners under the Recommended TSL.
Under the Recommended TSL, the projected change in INPV ranges from
a decrease of $692.3 million to a decrease of $114.2 million. If the
more severe range of impacts is reached, TSL 3 could result in a net
loss of up to 15.4 percent of INPV for manufacturers.
After considering the analysis and weighing the benefits and the
burdens, the Secretary has concluded that under the Recommended TSL for
central air conditioner and heat pump standards, the benefits of energy
savings, positive NPV of consumer benefit, positive impacts on
consumers (as indicated by positive average LCC savings and favorable
PBPs), and emission reductions, would outweigh the negative impacts on
some consumers and the potential reduction in INPV for manufacturers.
Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is
issuing this direct final rule that establishes amended energy
conservation standards for central air conditioners and heat pumps at
the Recommended TSL. The amended energy conservation standards for
central air conditioners and heat pumps as determined by the DOE test
procedure at the time of the 2015-2016 ASRAC negotiations are presented
in Table V-29.
Table V-29--Amended Energy Conservation Standards for Central Air Conditioners and Heat Pumps as Determined by
the DOE Test Procedure at the Time of the 2015-2016 ASRAC Negotiations
----------------------------------------------------------------------------------------------------------------
National Southeast * Southwest **
Product class -------------------------------------------------------------------------------
SEER HSPF SEER SEER EER
----------------------------------------------------------------------------------------------------------------
Split-System Air Conditioners 14 .............. 15 15 *** 12.2/10.2
with a Certified Cooling
Capacity <45,000 Btu/h.........
Split-System Air Conditioners 14 .............. 14.5 14.5 *** 11.7/10.2
with a Certified Cooling
Capacity >=45,000 Btu/h........
Split-System Heat Pumps......... 15 8.8
Single-Package Air Conditioners 14 .............. .............. .............. 11.0
[dagger].......................
Single-Package Heat Pumps 14 8.0
[dagger].......................
Space-Constrained Air 12
Conditioners [dagger]..........
Space-Constrained Heat Pumps 12 7.4
[dagger].......................
Small-Duct High-Velocity Systems 12 7.2
[dagger].......................
----------------------------------------------------------------------------------------------------------------
* Southeast includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana,
Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the
District of Columbia, and the U.S. territories.
** Southwest includes the states of Arizona, California, Nevada, and New Mexico.
*** The 10.2 EER amended energy conservation standard applies to split-system air conditioners with a seasonal
energy efficiency ratio greater than or equal to 16.
[dagger] The energy conservation standards for small-duct high velocity and space-constrained product classes
remain unchanged from current levels.
Table V-30 shows the amended energy conservation standards for
central air conditioners and heat pumps as determined by the November
2016 test procedure final rule.
Table V-30--Amended Energy Conservation Standards for Central Air Conditioners and Heat Pumps as Determined by
the November 2016 Test Procedure Final Rule
----------------------------------------------------------------------------------------------------------------
National Southeast * Southwest **
Product class -------------------------------------------------------------------------------
SEER2 HSPF2 SEER2 SEER2 EER2
----------------------------------------------------------------------------------------------------------------
Split-System Air Conditioners 13.4 .............. 14.3 14.3 *** 11.7/9.8
with a Certified Cooling
Capacity <45,000 Btu/h.........
Split-System Air Conditioners 13.4 .............. 13.8 13.8 *** 11.2/9.8
with a Certified Cooling
Capacity >=45,000 Btu/h........
Split-System Heat Pumps......... 14.3 7.5
[[Page 1849]]
Single-Package Air Conditioners 13.4 .............. .............. .............. 10.6
[dagger].......................
Single-Package Heat Pumps 13.4 6.7
[dagger].......................
Space-Constrained Air 11.7
Conditioners [dagger]..........
Space-Constrained Heat Pumps 11.9 6.3
[dagger].......................
Small-Duct High-Velocity Systems 12 6.1
[dagger].......................
----------------------------------------------------------------------------------------------------------------
* Southeast includes: The states of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana,
Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, the
District of Columbia, and the U.S. territories.
** Southwest includes the states of Arizona, California, Nevada, and New Mexico.
*** The 9.8 EER amended energy conservation standard applies to split-system air conditioners with a seasonal
energy efficiency ratio greater than or equal to 15.2.
[dagger] The energy conservation standards for small-duct high velocity and space-constrained product classes
remain unchanged from current levels.
The following paragraph describes how DOE translated the energy
conservation standards in Table V-29--which are in terms of SEER, HSPF,
and EER as determined by the DOE test procedure at the time of the
2015-2016 ASRAC Negotiations--to the energy conservation standard
levels in Table V-30--which are in terms of SEER2, HSPF2, and EER2 as
determined by the November 2016 test procedure final rule. DOE used a
methodology consistent with the recommendations of the CAC/HP Working
Group to translate the SEER standard levels to SEER2 standard levels
for the split-system and single-package product classes. Note that the
heating load line slope factor established by the November 2016 test
procedure final rule is different than the heating load line slope
factors used by the CAC/HP Working Group in their Term Sheet
recommendation #9. DOE translated the HSPF standard levels to HSPF2
standard levels for split-system and single-package heat pumps by
adjusting for the intermediate heating load line slope factor
established by the November 2016 test procedure final rule using
interpolation. (November 2016 Test Procedure Final Rule, pp. 127-130)
Comments in response to the provisional translations for HSPF2 for
split system and single-package heat pumps are summarized in the
November 2016 test procedure final rule. (November 2016 Test Procedure
Final Rule, pp. 127-130) Commenters agreed with the translation for
split-system heat pumps, but industry commenters felt that the 6.8
value was too high for single-package heat pumps. Alternative HSPF2
values that were suggested in comments ranged from 6.5 (Docket No.
EERE-2016-BT-TP-0029, Lennox, No. 25 at p. 10) to 6.7 (Docket No. EERE-
2016-BT-TP-0029, Goodman, No. 39 at p. 10) Data provided under
confidentiality supports the range suggested in comments. DOE combined
that data with the data it used to validate its interpolated value of
6.8. DOE found that the combined data shows that 6.7 HSPF2 is an
appropriate translation. For this reason, DOE is adopting 6.7 HSPF2 for
single-package heat pumps in this direct final rule.
The August 2016 test procedure SNOPR and November 2016 test
procedure final rule did not include translated levels for small-duct
high velocity (SDHV) and space-constrained products. Neither did
Recommendation #9 of the Term Sheet. Recommendation #9 did, however,
state that the energy conservation standards for those product classes
should remain unchanged from current levels (i.e., that there would be
no change in stringency). (ASRAC Term Sheet, No. 76 at pp. 4-5) On
October 27, 2016, DOE published a notice of data availability (NODA)
that provided provisional translations of the CAC/HP Working Group's
recommended energy conservation standard levels for small-duct high
velocity and space constrained products (which are in terms of the test
procedure at the time of the 2015-2016 Negotiations) into levels
consistent with the test procedure proposed in the August 2016 test
procedure SNOPR. 81 FR 74727 (October 27, 2016). Table V-31 presents
the provisional translations included in the October 2016 NODA. Note
that multiple provisional translations from SEER to SEER2 are included
for space-constrained air conditioners and heat pumps because, at the
time of the NODA publication, DOE had not finalized the test procedure
which would establish the minimum external static pressure
requirements.
Table V-31--Provisional Translations of CAC/HP Working Group-Recommended Energy Conservation Standard Levels
Included in October 2016 NODA
----------------------------------------------------------------------------------------------------------------
CAC/HP working group August 2016 test procedure
recommendation SNOPR translation
Product class ---------------------------------------------------------------
SEER HSPF SEER2 HSPF2
----------------------------------------------------------------------------------------------------------------
Small-Duct High-Velocity Systems................ 12 7.2 12 6.1
Space-Constrained Air Conditioners.............. .............. .............. * 11.6/** 11.8
Space-Constrained Heat Pumps.................... 12 .............. * 11.5/** 11.9 6.3
----------------------------------------------------------------------------------------------------------------
* Estimated SEER2 at 0.50 in. wc.
** Estimated SEER2 at 0.30 in. wc.
In developing its provisional translations for space-constrained air
conditioners published in the NODA, DOE reviewed existing test data,
adjusted relevant measurements based on blower performance data, and
[[Page 1850]]
translated the levels based on the average impact. For the space-
constrained and SDHV heat pump translations published in the NODA, DOE
also reviewed test data and confirmed that the 15% reduction from HSPF
to HSPF2 that DOE observed for split-system and single-package heat
pumps was appropriate also for space-constrained and SDHV heat pumps.
In written comments, manufacturers and AHRI expressed support for
DOE's provisional translations for SDHV products. Unico stated that it
reviewed all of its test reports from the previous two years and found
its range of results validated DOE's translations for SDHV products.
(Unico, No. 95 at p. 2). AHRI and Lennox also expressed support for
DOE's SEER and HPSF to SEER2 and HSPF2 levels for SDHV products. (AHRI,
No. 94 at p. 1; Lennox, No. 97 at p. 1) EEI commented that it did not
agree with DOE's translation because the HSPF appears to drop by
approximately 15.3%, even though there has been no change to the
product. (EEI, No. 96 at p. 2).
Regarding the concern expressed by EEI, DOE's translations do not
assume nor reflect any change to product design. EPCA requires DOE to
consider changes in energy conservation standards if a test procedure
change alters the measurement, but does not prohibit a test procedure
change that alters the measurement. (42 U.S.C. 6293(e)) In the November
2016 test procedure final rule, DOE adopted provisions that amend the
test procedure required to determine representations for CAC/HP,
including SDHV products. These provisions impact the value of the test
procedure results. For instance, the November 2016 test procedure final
rule assumes higher heating loads for heat pumps in colder outdoor
conditions, which will typically result in lower HSPF2 ratings.
(November 2016 Test Procedure Final Rule, pp. 110-127) Simply stated,
an SDHV product tested in accordance with the test procedure at the
time of the 2015-2016 ASRAC Negotiations will get a different rating
than the same SDHV product (without design changes) tested in
accordance with the test procedure adopted in the November 2016 test
procedure final rule. DOE's translations are intended to reflect these
differences. DOE is using ``SEER2'', ``HSPF2'', and ``EER2'' to
distinguish ratings determined by the November 2016 test procedure from
the SEER, HSPF and EER ratings determined by past test procedures to
mitigate confusion that may result from the possibility that products
available before and after the November 2016 test procedure final rule
may have a different SEER2/HSPF2/EER2 than SEER/HSPF/EER rating despite
no changes to design.
Unico's SDHV data validate DOE's translations, which are also
supported by AHRI and Lennox. DOE did not receive any other comments or
data suggesting that its translations for SDHV products are
inappropriate. For these reasons, DOE is adopting the SDHV translations
presented in the October 2016 NODA in this final rule.
AHRI is concerned that the SEER2 translation DOE presented for
space-constrained air conditioners is too high by 0.1. AHRI calculated
SEER2 to be 11.7 at 0.30 in. wc. rather than 11.8. AHRI provided data
for 4 space-constrained products to illustrate its results. (AHRI, No.
94 at p. 2). Lennox also commented that DOE's SEER2 translation for
space-constrained air conditioners is too high by 0.1. (Lennox, No. 97
at p. 2) AHRI and Lennox also commented that DOE should adopt the same
SEER2 standard for space-constrained air conditioners and heat pumps
(AHRI, No. 94 at p.2; Lennox, No. 97 at p. 2) First Co. strongly
disagrees with DOE's proposed translation of SEER to SEER2 values for
space-constrained air conditioners because DOE's methodology for
determining SEER2 fails to account for the significant SEER reduction
resulting from what they claim to be ``new'' coil-only testing
requirements for space-constrained air conditioners. First Co. is
referring to amendments to the certification requirements of 10 CFR 429
adopted for CAC/HP in the June 2016 test procedure final rule, which
became effective in July 2016 and are required for representations
starting December 5, 2016. (10 CFR 429.16(a)(1)) First Co. stated that
prior to the June 2016 test procedure final rule, space constrained
units, which are manufactured and sold only for installation with
blower coil indoor units, have been tested with blower coil units with
high-efficiency motors (ECMs). The high-efficiency motors average 200W/
1000 scfm or less for indoor power compared with the default fan power
value of 365W/1000 scfm applied under the ``coil- only'' test. First
Co. claims that the impact of the ``coil-only'' test alone is
approximately a 10% reduction in SEER of these products from 12 SEER to
10.8 SEER, and that DOE's methodology is flawed because it uses a
starting point of 365W/1000 (i.e., the ``coil-only'' default fan power
value of the current test procedure) and only considers the change in
energy usage from 365W/1000 scfm to 441 W/1000 scfm. They claim that
this ignores the increase in energy usage from 200W/1000 scfm to 365W/
1000 scfm, and the resulting SEER reduction, caused by the imposition
of the ``coil-only'' test. First Co. submits that SEER2 should be
calculated by applying the following methodology, which takes into
account the new ``coil-only'' test and the changes in the August 2016
test procedure SNOPR: replace 200W/1000 scfm (test data using ECM) with
411 W/1000 scfm and recalculate the SEER. First Co. indicates that
applying this methodology, SEER will be reduced by approximately 10%
for the coil only test and by an additional 4% to account for the
suggested 411 W/1000 scfm number, resulting in a 10.4 SEER2 rating for
space constrained air conditioners. (First Co., No. 93 at pp. 1,2)
DOE appreciates the space-constrained air conditioner translation
data provided by AHRI. DOE combined AHRI's data with the data DOE used
to develop DOE's provisional translations. Note that after the October
2016 NODA, DOE issued the November 2016 test procedure final rule in
which it adopted a minimum external static pressure requirement of 0.3
in. wc. for space-constrained air conditioners and heat pumps.
(November 2016 Test Procedure Final Rule, pp. 97-99) Consequently, DOE
combined AHRI's data with DOE's data reflective of performance at that
operating condition. Once combined, the data validates AHRI's assertion
that 11.7 is the appropriate SEER2 level for space-constrained air
conditioners at 0.3 in. wc. Thus, DOE is adopting 11.7 SEER2 as the
standard level for space-constrained air conditioners in this final
rule. DOE disagrees with AHRI and Lennox that 11.7 SEER2 should also be
used for space-constrained heat pumps. While space-constrained air
conditioners are required to certify at least one coil-only combination
that is representative of the least efficient coil-only combination
distributed in commerce, space-constrained heat pumps have no coil-only
requirement. (10 CFR 429.16(a)(1)) AHRI derived 11.7 SEER2 using 406 W/
1000 scfm (the default fan power at 0.3 in. wc.) for indoor fan power
consumption. As discussed in the November 2015 test procedure SNOPR and
subsequently referenced in the November 2016 test procedure final rule,
this default fan power value is reflective of the weighted-average
performance of indoor fan by motor type distribution projected for the
effective date of this standard, which includes a significant majority
of lower-efficiency PSC motors. 80 FR 69319-20 and (November 2016 Test
Procedure Final Rule, pp. 104-110) First
[[Page 1851]]
Co. states that most space-constrained blower-coil systems currently
sold include a high-efficiency ECM motor. (First Co., No. 93 at pp. 1-
2) Brushless permanent magnet motors (often referred to as ``ECM'') are
more efficient than PSC motors. Thus, 406 W/1000 scfm is not
representative of the field operation of space-constrained blower-coil
systems being sold. DOE's provisional analysis presented in the October
2016 NODA is consistent with First Co.'s claims, showing that higher-
efficiency motors typically used in space-constrained blower-coil
systems sold today consume less than 406 W/1000 scfm, resulting in a
higher SEER2 level for space-constrained blower-coil systems compared
to space-constrained coil-only systems. DOE did not receive any
additional comments or data regarding the SEER2 level for space-
constrained heat pumps. For these reasons, DOE finds that a higher
SEER2 level for space-constrained heat pumps--which is based on blower-
coil performance--compared to space-constrained air-conditioners--which
is based on coil-only performance--is appropriate. DOE adopts its
provisional translation of 11.9 SEER2 for space-constrained heat pumps
for these reasons.
DOE provided a response to First Co.'s comment regarding the
required coil-only test for testing of space constrained products in
the November 30, 2016 test procedure final rule. (November 2016 Test
Procedure Final Rule, pp. 146-148)
2. Summary of Benefits and Costs (Annualized) of the Amended Standards
The benefits and costs of the amended standards can also be
expressed in terms of annualized values. The annualized monetary values
are the sum of: (1) The annualized national economic value (expressed
in 2015$) of the benefits from operation of products that meet the
proposed standards (consisting primarily of operating cost savings from
using less energy, minus increases in product purchase costs, which is
another way of representing consumer NPV), and (2) the annualized
monetary value of the benefits of emission reductions, including
CO2 emission reductions.\102\
---------------------------------------------------------------------------
\102\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2016, 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 2016. 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.
---------------------------------------------------------------------------
Estimates of annualized benefits and costs of the amended standards
for central air conditioners and heat pumps, expressed in 2015$, are
shown in Table V-32. 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
($40.6/t in 2015)), the estimated cost of the adopted standards is $741
million per year in increased product costs, while the estimated
benefits are $1,041 million per year in reduced product operating
costs, $337 million per year in CO2 reductions, and $22
million per year in reduced NOX emissions. In this case, the
net benefit would amount to $659 million per year.
Using a 3-percent discount rate for all benefits and costs and the
average SCC series that uses a 3-percent discount rate ($40.6/t in
2015), the estimated cost of the standards adopted in this rule is $747
million per year in increased product costs, while the estimated
benefits are $1,488 million per year in reduced product operating
costs, $337 million per year in CO2 reductions, and $32
million per year in reduced NOX emissions. In this case, the
net benefit would amount to $1,110 million per year.
DOE also notes that, using a 7-percent discount rate for only the
increased product costs and the reduced product operating costs, the
net benefit would amount to $300 million per year. Using a 3-percent
discount rate for only the increased product costs and the reduced
product operating costs, the net benefit would amount to $741 million
per year.
Table V-32--Annualized Benefits and Costs of Amended Standards (Recommended TSL) for Central Air Conditioners and Heat Pumps *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low net benefits High net benefits
Discount rate (%) Primary estimate * estimate * estimate *
--------------------------------------------------------------------------------------------------------------------------------------------------------
million 2015$/year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings... 7............................... 1,041..................... 1,005..................... 1,147
3............................... 1,488..................... 1,425..................... 1,653.
CO[ihel2] Reduction (using mean 5............................... 100....................... 100....................... 100.
SCC at 5% discount rate) \**\.
CO[ihel2] Reduction (using mean 3............................... 337....................... 337....................... 337.
SCC at 3% discount rate) \**\.
CO[ihel2] Reduction (using mean 2.5............................. 494....................... 494....................... 494.
SCC at 2.5% discount rate) \**\.
CO[ihel2] Reduction (using 95th 3............................... 1,027..................... 1,027..................... 1,027.
percentile SCC at 3% discount
rate ) \**\.
NOX Reduction [dagger]............ 7............................... 22........................ 22........................ 49.
3............................... 32........................ 32........................ 73.
Total Benefits [dagger][dagger]... 7 plus CO[ihel2] range.......... 1,163 to 2,090............ 1,127 to 2,054............ 1,296 to 2,223
7............................... 1,400..................... 1,364..................... 1,533
3 plus CO[ihel2] range.......... 1,620 to 2,547............ 1,557 to 2,484............ 1,826 to 2,753
3............................... 1,857..................... 1,794..................... 2,063
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Installed 7............................... 741....................... 784....................... 723
Costs. 3............................... 747....................... 799....................... 725
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 1852]]
Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total [dagger][dagger]............ 7 plus CO[ihel2] range.......... 422 to 1,349.............. 342 to 1,269.............. 573 to 1,500
7............................... 659....................... 580....................... 810
3 plus CO[ihel2] range.......... 873 to 1,800.............. 757 to 1,684.............. 1,100 to 2,028
3............................... 1,110..................... 994....................... 1,338
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with central air conditioners and heat pumps shipped in 2023-2052. These results
include benefits to consumers which accrue after 2050 from the products purchased in 2023-2052. The incremental installed costs include incremental
equipment cost as well as installation costs. The CO[ihel2] reduction benefits are global benefits due to actions that occur nationally. The Primary,
Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the AEO 2015 Reference case, Low Estimate, and High
Estimate, respectively. In addition, incremental product costs reflect a modest decline rate for projected product prices in the Primary Estimate, a
constant rate in the Low Net Benefits Estimate, and a higher decline rate in the High Net Benefits Estimate. The methods used to derive projected
price trends are explained in section IV.F.1. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.
** The CO[ihel2] reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5%, 3%,
and 2.5% discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC
values are emission year specific. See section IV.L.1 for more details
[dagger] DOE estimated the monetized value of NOx emissions reductions using benefit per ton estimates from the Regulatory Impact Analysis for the Clean
Power Plan Final Rule, published in August 2015 by EPA's Office of Air Quality Planning and Standards. (Available at: http://www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L.2 for further discussion. For the Primary Estimate and Low
Net Benefits Estimate, DOE used a national benefit-per-ton estimate for NOX emitted from the Electric Generating Unit sector based on an estimate of
premature mortality derived from the ACS study (Krewski et al., 2009). For the High Net Benefits Estimate, the benefit-per-ton estimates were based on
the Six Cities study (Lepuele et al., 2011); these are nearly two-and-a-half times larger than those from the ACS study.
[dagger][dagger] Total Benefits for both the 3% and 7% cases are presented using only the average SCC with 3-percent discount rate. In the rows labeled
``7% plus CO[ihel2] range'' and ``3% plus CO[ihel2] range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and
those values are added to the full range of CO[ihel2] 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 (October 4, 1993), requires each agency to
identify the problem that it intends to address, including, where
applicable, the failures of private markets or public institutions that
warrant new agency action, as well as to assess the significance of
that problem. The problems that the standards set forth in this direct
final rule are intended to 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 and equipment that are not captured by the
users of such products. These benefits include externalities related to
public health, environmental protection, and national energy security
that are not reflected in energy prices, such as reduced emissions of
air pollutants and greenhouse gases that impact human health and global
warming. DOE attempts to quantify some of the external benefits through
use of social cost of carbon values.
The Administrator of the Office of Information and Regulatory
Affairs (OIRA) in the OMB has determined that this regulatory action is
a significant regulatory action under section (3)(f) of 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
regulatory action is an ``economically'' significant regulatory action
under section (3)(f)(1) of Executive Order 12866. Accordingly, pursuant
to section 6(a)(3)(C) of the Order, DOE has provided to OIRA an
assessment, including the underlying analysis, of benefits and costs
anticipated from the regulatory action, together with, to the extent
feasible, a quantification of those costs; and an assessment, including
the underlying analysis, of costs and benefits of potentially effective
and reasonably feasible alternatives to the planned regulation, and an
explanation why the planned regulatory action is preferable to the
identified potential alternatives. These assessments can be found in
the technical support document for this rulemaking.
DOE has also reviewed this regulation pursuant to Executive Order
13563, issued on January 18, 2011. 76 FR 3281 (January 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
[[Page 1853]]
regulatory objectives, taking into account, among other things, and to
the extent practicable, the costs of cumulative regulations; (3)
select, in choosing among alternative regulatory approaches, those
approaches that maximize net benefits (including potential economic,
environmental, public health and safety, and other advantages;
distributive impacts; and equity); (4) to the extent feasible, specify
performance objectives, rather than specifying the behavior or manner
of compliance that regulated entities must adopt; and (5) identify and
assess available alternatives to direct regulation, including providing
economic incentives to encourage the desired behavior, such as user
fees or marketable permits, or providing information upon which choices
can be made by the public.
DOE emphasizes as well that Executive Order 13563 requires agencies
to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible. In its
guidance, OIRA has emphasized that such techniques may include
identifying changing future compliance costs that might result from
technological innovation or anticipated behavioral changes. For the
reasons stated in the preamble, DOE believes that this direct final
rule is consistent with these principles, including the requirement
that, to the extent permitted by law, benefits justify costs and that
net benefits are maximized.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of 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).
1. Description of Reasons Why Action is Being Considered
DOE has undertaken this rulemaking pursuant to 42 U.S.C.
6295(d)(3), which requires DOE to conduct a second round of amended
standards rulemaking for residential central air conditioners and heat
pumps. The Energy Policy and Conservation Act of 1975 (EPCA), as
amended by the Energy Independence and Security Act of 2007 (EISA
2007), requires that not later than six years after issuance of any
final rule establishing or amending a standard, DOE must publish either
a notice of the determination that standards for the product do not
need to be amended, or a notice of proposed rulemaking including new
proposed energy conservation standards. (42 U.S.C. 6295(m)(1)) DOE's
last final rule for residential central air conditioners and heat pumps
was issued on June 27, 2011, so as a result, DOE must act by June 27,
2017.
2. Objectives of, and Legal Basis for, the Rule
As described in section II.A above, Title III, Part B of the Energy
Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-
163 (42 U.S.C. 6291-6309, as codified) established the Energy
Conservation Program for Consumer Products Other Than Automobiles, a
program covering most major household appliances (collectively referred
to as ``covered products''), which includes the residential central air
conditioners and heat pumps that are the subject of this rulemaking.
(42 U.S.C. 6292(a)(3))
The National Appliance Energy Conservation Act of 1987 (NAECA; Pub.
L. 100-12) included amendments to EPCA that established the original
energy conservation standards for central air conditioners and heat
pumps. (42 U.S.C. 6295(d)(1)-(2)) EPCA, as amended, also requires DOE
to conduct two cycles of rulemakings to determine whether to amend the
energy conservation standards for central air conditioners and heat
pumps. (42 U.S.C. 6295(d)(3)) The first cycle culminated in a final
rule published in the Federal Register on August 17, 2004 (the August
2004 Rule), which prescribed energy conservation standards for central
air conditioners and heat pumps manufactured or imported on and after
January 23, 2006. 69 FR 50997. DOE completed the second of the two
rulemaking cycles by publishing a direct final rule on June 27, 2011
(2011 Direct Final Rule). 76 FR 37414. The 2011 Direct Final Rule (2011
DFR) amended standards for central air conditioners and heat pumps
manufactured on or after January 1, 2015.
EPCA requires DOE to periodically review its already established
energy conservation standards for a covered product. Not later than six
years after issuance of any final rule establishing or amending a
standard, DOE must publish a notice of determination that standards for
the product do not need to be amended, or a notice of proposed
rulemaking including new proposed standards. (42 U.S.C. 6295(m)(1))
Pursuant to this requirement, the next review that DOE would need to
conduct must occur no later than six years from the issuance of the
2011 direct final rule. This direct final rule fulfills that
requirement.
3. Description and Estimated Number of Small Entities Regulated
a. Methodology for Estimating the Number of Small Entities
For manufacturers of residential central air conditioners and heat
pumps, the Small Business Administration (SBA) has set a size
threshold, which defines those entities classified as ``small
businesses'' for the purposes of the statute. DOE used the SBA's small
business size standards to determine whether any small entities would
be subject to the requirements of this rule. The size standards are
codified at 13 CFR part 121. The standards are listed by North American
Industry Classification System (NAICS) code and industry description
and are available at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
Residential central air conditioner and heat pump manufacturing is
classified under NAICS 333415, ``Air-Conditioning and Warm Air Heating
Equipment and Commercial and Industrial Refrigeration Equipment
Manufacturing.'' The SBA sets a threshold of 1,250 employees or fewer
for an entity to be considered a small business for this category.
DOE reviewed the potential standard levels considered in today's
direct final rule under the provisions of the Regulatory Flexibility
Act and the procedures and policies published on February 19, 2003.
During its market survey, DOE used publicly available information to
identify small manufacturers. DOE's research involved industry trade
association membership directories (e.g., AHRI), information from
previous rulemakings, individual company Web sites, and market research
tools (e.g., Hoover's reports) to create a list of companies that
manufacture or sell central air conditioner and heat pump products
covered by this rulemaking. DOE also asked stakeholders and industry
representatives if they were aware of any additional small
manufacturers during manufacturer interviews. DOE
[[Page 1854]]
reviewed publicly available data and contacted various companies on its
complete list of manufacturers to determine whether they met the SBA's
definition of a small business manufacturer. DOE screened out companies
that do not offer products impacted by this rulemaking, do not meet the
definition of a ``small business,'' exclusively rebrand and distribute
products manufactured by others, or are foreign owned and operated.
DOE identified 30 manufacturers of central air conditioner and heat
pump products affected by this direct final rule. Of these, DOE
identified three as domestic small businesses.
b. Manufacturer Participation
DOE contacted the identified small businesses to invite them to
take part in a manufacturer impact analysis interview. DOE was able to
reach and discuss potential standards with one small business. DOE also
obtained information about small businesses and potential impacts on
small businesses while interviewing large manufacturers.
c. Residential Central Air Conditioner and Heat Pump Industry Structure
and Nature of Competition
Seven large manufacturers supply over 95 percent of the market for
central air conditioners and heat pumps. Of the three domestic small
businesses identified, DOE's research indicates that all three are
independent coil manufacturers (ICMs). DOE defines an ICM as a
manufacturer of indoor units that does not manufacture single-package
units or outdoor units. ICMs match their indoor evaporators or air
handlers with condensing units from original equipment manufacturers
(OEMs). For the purpose of this rulemaking, DOE did not identify any
domestic small businesses that are OEMs of central air conditioner and
heat pump products impacted by this direct final rule.
4. Description and Estimate of Compliance Requirements
As discussed in section 2.a, manufacturers of central air
conditioners and heat pumps may incur conversion costs to bring their
manufacturing facilities and product designs into compliance with
amended standards. Because DOE did not identify any small business OEMs
of products impacted by this direct final rule, the following
discussion of small business impacts focuses on the potential impacts
facing small business ICMs. Like OEMs, ICMs operate factories and
equipment and, accordingly, would be responsible for updating
manufacturing practices to ensure products comply with amended energy
conservation standards.
To evaluate impacts facing small ICMs, DOE used data from its
engineering analysis and product teardown analysis to estimate
investments in equipment and tooling that ICMs may incur as a result of
this direct final rule. Indoor coils do not have SEER ratings on their
own because they are a component of split-systems. Consequently, their
rated efficiency depends on their interaction with the outdoor units
with which they are paired. Generally, all else being equal, split-
systems with larger indoor coils will be more efficient because the
indoor coil has a larger heat transfer surface area. Accordingly, DOE
estimated investments in equipment and tooling ICMs may make in
response to this direct final rule to increase the heat transfer
surface area of their indoor coils and, in turn, increase the overall
efficiency of split-systems. DOE used the least-cost coil-only units
from its engineering analysis to determine the typical size of indoor
coil used by manufacturers at each efficiency level analyzed. DOE then
estimated potential capital conversion costs (i.e., investments in
equipment and tooling) small ICMs would make to meet the recommended
level. Focusing on equipment and tooling used to manufacture heat
exchangers and outdoor cases, DOE estimated capital conversion costs of
$2.3 million per small ICM. Using assumptions outlined in section 2.a
and in chapter 12 of the direct final rule TSD, DOE calculated product
conversion costs (i.e., R&D expenditures) as 40 percent of total
conversion costs, or $1.5 million per small ICM. This equates to total
estimated conversion costs of $3.8 million per small ICM.
Using publicly available data, DOE estimated the average annual
revenue of the three small ICMs to be $29.7 million. As negotiated by
the CAC/HP Working Group, this direct final rule will not take effect
until 2023. DOE therefore expects ICMs will be able to spread their
conversion costs over the six-year period between publication of this
direct final rule and the compliance year. Given these assumptions, DOE
estimates total conversion costs resulting from this direct final rule
to be 2.2 percent of small ICMs' six-year revenues.
5. 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 rule being considered today.
6. Significant Alternatives to the Rule
The discussion in the previous section analyzes impacts on small
businesses that would result from the recommended standards,
represented by TSL 2. In reviewing alternatives to the adopted
standards, DOE examined energy conservation standards set at both lower
and higher efficiency levels than those recommended in this direct
final rule. TSL 1 would establish less stringent efficiency levels,
potentially reducing impacts on small business manufacturers. However,
it would come at the expense of a reduction in energy savings. Where
TSL 2 is projected to save 3.2 quads of energy, TSL 1 would save only
1.3 quads of energy, or 41% of the savings achieved at TSL 2. In
addition to TSL 1, DOE examined more stringent efficiency levels at
TSLs 3 and 4. These levels would achieve significantly higher energy
savings of 8.6 and 14.2 quads respectively; however, the financial
burden facing manufacturers, including small businesses, would also be
more severe at these levels. (See section V.B.2.a for a more detailed
discussion of financial impacts facing manufacturers at each TSL.) DOE
believes that establishing standards at the recommended level, TSL 2,
balances the benefits of energy savings with the potential burdens
placed on manufacturers of covered products, including small business
manufacturers. Accordingly, DOE is not adopting one of the other TSLs
considered in the analysis, or the other policy alternatives examined
as part of the regulatory impact analysis and included in chapter 17 of
the direct final rule TSD.
Additional compliance flexibilities for small business
manufacturers 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
[[Page 1855]]
should refer to 10 CFR part 430, subpart E, and Part 1003 for
additional details.
C. Review Under the Paperwork Reduction Act
Manufacturers of central air conditioners and heat pumps must
certify to DOE that their products comply with any applicable energy
conservation standards. In certifying compliance, manufacturers must
test their products according to the DOE test procedures for central
air conditioners and heat pumps, including any amendments adopted for
those test procedures. DOE has established regulations for the
certification and recordkeeping requirements for all covered consumer
products and commercial equipment, including central air conditioners
and heat pumps. 76 FR 12422 (March 7, 2011); 80 FR 5099 (January 30,
2015). The collection-of-information requirement for the certification
and recordkeeping is subject to review and approval by OMB under the
Paperwork Reduction Act (PRA). This requirement has been approved by
OMB under OMB control number 1910-1400. Public reporting burden for the
certification is estimated to average 30 hours per response, including
the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing
the collection of information.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
D. Review Under the National Environmental Policy Act of 1969
Pursuant to the National Environmental Policy Act (NEPA) of 1969,
DOE has determined that this direct final 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 products or
industrial equipment, and for which none of the exceptions identified
in CX B5.1(b) apply. Therefore, DOE has made a CX determination for
this rulemaking, and DOE does not need to prepare an Environmental
Assessment or Environmental Impact Statement for this proposed rule.
DOE's CX determination for this rule is available at http://cxnepa.energy.gov/.
E. Review Under Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 10,
1999), imposes certain requirements on Federal agencies formulating and
implementing policies or regulations that preempt State law or that
have Federalism implications. The Executive Order requires agencies to
examine the constitutional and statutory authority supporting any
action that would limit the policymaking discretion of the States and
to carefully assess the necessity for such actions. The Executive Order
also requires agencies to have an accountable process to ensure
meaningful and timely input by State and local officials in the
development of regulatory policies that have Federalism implications.
On March 14, 2000, DOE published a statement of policy describing the
intergovernmental consultation process it will follow in the
development of such regulations. 65 FR 13735. DOE has examined this
rule and has determined that it would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. EPCA governs
and prescribes Federal preemption of State regulations as to energy
conservation for the products that are the subject of this rule. States
can petition DOE for exemption from such preemption to the extent, and
based on criteria, set forth in EPCA. (42 U.S.C. 6297) Therefore, no
further action is required by Executive Order 13132.
F. Review Under Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' imposes on Federal agencies the general duty
to adhere to the following requirements: (1) Eliminate drafting errors
and ambiguity; (2) write regulations to minimize litigation; (3)
provide a clear legal standard for affected conduct rather than a
general standard; and (4) promote simplification and burden reduction.
61 FR 4729 (February 7, 1996). Regarding the review required by section
3(a), section 3(b) of Executive Order 12988 specifically requires that
Executive agencies make every reasonable effort to ensure that the
regulation: (1) Clearly specifies the preemptive effect, if any; (2)
clearly specifies any effect on existing Federal law or regulation; (3)
provides a clear legal standard for affected conduct while promoting
simplification and burden reduction; (4) specifies the retroactive
effect, if any; (5) adequately defines key terms; and (6) addresses
other important issues affecting clarity and general draftsmanship
under any guidelines issued by the Attorney General. Section 3(c) of
Executive Order 12988 requires Executive agencies to review regulations
in light of applicable standards in section 3(a) and section 3(b) to
determine whether they are met or it is unreasonable to meet one or
more of them. DOE has completed the required review and determined
that, to the extent permitted by law, this rule meets the relevant
standards of Executive Order 12988.
G. Review Under the Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires each Federal agency to assess the effects of Federal
regulatory actions on State, local, and Tribal governments and the
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531).
For a regulatory action likely to result in a rule that may cause the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector of $100 million or more in any one year
(adjusted annually for inflation), section 202 of UMRA requires a
Federal agency to publish a written statement that estimates the
resulting costs, benefits, and other effects on the national economy.
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to
develop an effective process to permit timely input by elected officers
of State, local, and Tribal governments on a ``significant
intergovernmental mandate,'' and requires an agency plan for giving
notice and opportunity for timely input to potentially affected small
governments before establishing any requirements that might
significantly or uniquely affect them. On March 18, 1997, DOE published
a statement of policy on its process for intergovernmental consultation
under UMRA. 62 FR 12820. DOE's policy statement is also available at
http://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
DOE has concluded that this direct final rule may require
expenditures of $100 million or more by the private sector. Such
expenditures may include: (1) Investment in research and development
and in capital expenditures by central air conditioner and heat pump
manufacturers in the years between the final rule and the compliance
date for the new standards,
[[Page 1856]]
and (2) incremental additional expenditures by consumers to purchase
higher-efficiency central air conditioners and heat pumps, 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 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 this document and chapter 17 of
the TSD for this 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 rule unless DOE publishes an
explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. In accordance with the statutory
provisions discussed in this document, this rule would establish
amended energy conservation standards for central air conditioners and
heat pumps 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 chapter 17 of the TSD
for this rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This rule would not have any impact on the autonomy or integrity of the
family as an institution. Accordingly, DOE has concluded that it is not
necessary to prepare a Family Policymaking Assessment.
I. Review Under Executive Order 12630
Pursuant to Executive Order 12630, ``Governmental Actions and
Interference with Constitutionally Protected Property Rights,'' 53 FR
8859 (March 15, 1988), DOE has determined that this rule would not
result in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review
most disseminations of information to the public under information
quality guidelines established by each agency pursuant to general
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452
(February 22, 2002), and DOE's guidelines were published at 67 FR 62446
(October 7, 2002). DOE has reviewed this direct final rule under the
OMB and DOE guidelines and has concluded that it is consistent with
applicable policies in those guidelines.
K. Review Under Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA
at OMB, a Statement of Energy Effects for any 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 concluded that this regulatory action, which adopts amended
energy conservation standards for central air conditioners and heat
pumps, is not a significant energy action because the standards are not
likely to have a significant adverse effect on the supply,
distribution, or use of energy, nor has it been designated as such by
the Administrator at OIRA. Accordingly, DOE has not prepared a
Statement of Energy Effects on this rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (OSTP), issued its Final Information
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (January
14, 2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can determine will have, or does have, a clear
and substantial impact on important public policies or private sector
decisions.'' Id. at FR 2667.
In response to OMB's Bulletin, DOE conducted formal in-progress
peer reviews of the energy conservation standards development process
and analyses and has prepared a Peer Review Report pertaining to the
energy conservation standards rulemaking analyses. Generation of this
report involved a rigorous, formal, and documented evaluation using
objective criteria and qualified and independent reviewers to make a
judgment as to the technical/scientific/business merit, the actual or
anticipated results, and the productivity and management effectiveness
of programs and/or projects. The ``Energy Conservation Standards
Rulemaking Peer Review Report'' dated February 2007 has been
disseminated and is available at the following Web site:
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this direct final rule prior to its effective date. The
report will state that it has been determined that the rule is a
``major rule'' as defined by 5 U.S.C. 804(2). DOE also will submit the
supporting analyses to the Comptroller General in the U.S. Government
Accountability Office (``GAO'') and make them available to each House
of Congress.
[[Page 1857]]
VII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this direct
final rule.
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Incorporation by reference, Intergovernmental relations, Small
businesses.
Issued in Washington, DC, on December 5, 2016.
David J. Friedman,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
For the reasons set forth in the preamble, DOE is amending part 430
of chapter II, subchapter D, of title 10 of the Code of Federal
Regulations, as set forth below:
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
1. The authority citation for part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
2. Section 430.32 is amended by revising paragraphs (c)(1) through (3)
and adding paragraphs (c)(5) and (6) to read as follows:
Sec. 430.32 Energy and water conservation standards and their
compliance dates.
* * * * *
(c) Central air conditioners and heat pumps. The energy
conservation standards defined in terms of the heating seasonal
performance factor are based on Region IV, the minimum standardized
design heating requirement, and the provisions of 10 CFR 429.16. (1)
Central air conditioners and central air conditioning heat pumps
manufactured on or after January 1, 2015, and before January 1, 2023,
must have Seasonal Energy Efficiency Ratio and Heating Seasonal
Performance Factor not less than:
------------------------------------------------------------------------
Seasonal Heating
energy seasonal
Product class efficiency performance
ratio (SEER) factor (HSPF)
------------------------------------------------------------------------
(i) Split systems--air conditioners..... 13 ..............
(ii) Split systems--heat pumps.......... 14 8.2
(iii) Single package units--air 14 ..............
conditioners...........................
(iv) Single package units--heat pumps... 14 8.0
(v) Small-duct, high-velocity systems... 12 7.2
(vi)(A) Space-constrained products--air 12 ..............
conditioners...........................
(vi)(B) Space-constrained products--heat 12 7.4
pumps..................................
------------------------------------------------------------------------
(2) In addition to meeting the applicable requirements in paragraph
(c)(1) of this section, products in product class (i) of paragraph
(c)(1) of this section (i.e., split-systems--air conditioners) that are
installed on or after January 1, 2015, and before January 1, 2023, in
the States of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii,
Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma,
South Carolina, Tennessee, Texas, or Virginia, or in the District of
Columbia, must have a Seasonal Energy Efficiency Ratio (SEER) of 14 or
higher. Any outdoor unit model that has a certified combination with a
rating below 14 SEER cannot be installed in these States. The least
efficient combination of each basic model must comply with this
standard.
(3)(i) In addition to meeting the applicable requirements in
paragraph (c)(1) of this section, products in product classes (i) and
(iii) of paragraph (c)(1) of this section (i.e., split systems--air
conditioners and single-package units--air conditioners) that are
installed on or after January 1, 2015, and before January 1, 2023, in
the States of Arizona, California, Nevada, or New Mexico must have a
Seasonal Energy Efficiency Ratio (SEER) of 14 or higher and have an
Energy Efficiency Ratio (EER) (at a standard rating of 95[emsp14][deg]F
dry bulb outdoor temperature) not less than the following:
------------------------------------------------------------------------
Energy
Product class efficiency
ratio (EER)
------------------------------------------------------------------------
(i) Split systems--air conditioners with rated cooling 12.2
capacity less than 45,000 Btu/hr.......................
(ii) Split systems--air conditioners with rated cooling 11.7
capacity equal to or greater than 45,000 Btu/hr........
(iii) Single-package units--air conditioners............ 11.0
------------------------------------------------------------------------
(ii) Any outdoor unit model that has a certified combination with a
rating below 14 SEER or the applicable EER cannot be installed in this
region. The least-efficient combination of each basic model must comply
with this standard.
* * * * *
(5) Central air conditioners and central air conditioning heat
pumps manufactured on or after January 1, 2023, must have a Seasonal
Energy Efficiency Ratio 2 and a Heating Seasonal Performance Factor 2
not less than:
------------------------------------------------------------------------
Seasonal Heating
energy seasonal
Product class efficiency performance
ratio 2 factor 2
(SEER2) (HSPF2)
------------------------------------------------------------------------
(i)(A) Split systems--air conditioners 13.4 ..............
with a certified cooling capacity less
than 45,000 Btu/hr.....................
(i)(B) Split systems--air conditioners 13.4 ..............
with a certified cooling capacity equal
to or greater than 45,000 Btu/hr.......
(ii) Split systems--heat pumps.......... 14.3 7.5
(iii) Single-package units--air 13.4 ..............
conditioners...........................
[[Page 1858]]
(iv) Single-package units--heat pumps... 13.4 6.7
(v) Small-duct, high-velocity systems... 12 6.1
(vi)(A) Space-constrained products--air 11.7 ..............
conditioners...........................
(vi)(B) Space-constrained products--heat 11.9 6.3
pumps..................................
------------------------------------------------------------------------
(6)(i) In addition to meeting the applicable requirements in
paragraph (c)(5) of this section, products in product classes (i) and
(iii) of paragraph (c)(5) of this section (i.e., split systems--air
conditioners and single-package units--air conditioners) that are
installed on or after January 1, 2023, in the southeast or southwest
must have a Seasonal Energy Efficiency Ratio 2 and a Energy Efficiency
Ratio 2 not less than:
----------------------------------------------------------------------------------------------------------------
Southeast * Southwest **
Product class -----------------------------------------------
SEER2 SEER2 EER2 ***
----------------------------------------------------------------------------------------------------------------
(i)(A) Split-systems--air conditioners with a certified cooling 14.3 14.3 11.7/9.8
capacity less than 45,000 Btu/hr............................... [dagger]
(i)(B) Split-systems--air conditioners with a certified cooling 13.8 13.8 11.2/9.8
capacity equal to or greater than 45,000 Btu/hr................ [dagger][dagge
r]
(iii) Single-package units--air conditioners.................... .............. .............. 10.6
----------------------------------------------------------------------------------------------------------------
* ``Southeast'' includes the States of Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas,
Virginia, the District of Columbia, and the U.S. Territories.
** ``Southwest'' includes the States of Arizona, California, Nevada, and New Mexico.
*** EER refers to the energy efficiency ratio at a standard rating of 95 [deg]F dry bulb outdoor temperature.
[dagger] The 11.7 EER2 standard applies to products with a certified SEER2 less than 15.2. The 9.8 EER2 standard
applies to products with a certified SEER2 greater than or equal to 15.2.
[dagger][dagger] The 11.2 EER2 standard applies to products with a certified SEER2 less than 15.2. The 9.8 EER2
standard applies to products with a certified SEER2 greater than or equal to 15.2.
(ii) Any outdoor unit model that has a certified combination with a
rating below the applicable standard level(s) for a region cannot be
installed in that region. The least-efficient combination of each basic
model must comply with this standard.
* * * * *
[FR Doc. 2016-29992 Filed 1-5-17; 8:45 am]
BILLING CODE 6450-01-P