[Federal Register Volume 81, Number 151 (Friday, August 5, 2016)]
[Proposed Rules]
[Pages 52195-52246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18446]



[[Page 52195]]

Vol. 81

Friday,

No. 151

August 5, 2016

Part V





 Department of Energy





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10 CFR Part 430





 Energy Conservation Program: Energy Conservation Standards for 
Uninterruptible Power Supplies; Proposed Rule

Federal Register / Vol. 81 , No. 151 / Friday, August 5, 2016 / 
Proposed Rules

[[Page 52196]]


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DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2016-BT-STD-0022]
RIN 1904-AD69


Energy Conservation Program: Energy Conservation Standards for 
Uninterruptible Power Supplies

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of proposed rulemaking (NOPR) and announcement of public 
meeting.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
products and certain commercial and industrial equipment, including 
battery chargers. In this notice, the U.S. Department of Energy (DOE) 
proposes new energy conservation standards for uninterruptible power 
supplies, a class of battery chargers, and also announces a public 
meeting to receive comment on these proposed standards and associated 
analyses and results.

DATES: Comments: DOE will accept comments, data, and information 
regarding this notice of proposed rulemaking (NOPR) before and after 
the public meeting, but no later than October 4, 2016. See section VII, 
``Public Participation,'' for details.
    Comments regarding the likely competitive impact of the proposed 
standard should be sent to the Department of Justice contact listed in 
the ADDRESSES section before September 6, 2016.
    Meeting: DOE will hold a public meeting on Friday, September 9, 
2016, from 9:30 a.m. to 2:00 p.m., in Washington, DC. The meeting will 
also be broadcast as a webinar. See section VII, ``Public 
Participation,'' for webinar registration information, participant 
instructions, and information about the capabilities available to 
webinar participants.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 6E-069, 1000 Independence Avenue SW., 
Washington, DC 20585.
    Instructions: Any comments submitted must identify the NOPR on 
Energy Conservation Standards for Battery Chargers, and provide docket 
number EERE-2016-BT-STD-0022 and/or regulatory information number (RIN) 
1904-AD69. Comments may be submitted using any of the following 
methods:
    (1) Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    (2) Email: [email protected]. Include the 
docket number and/or RIN in the subject line of the message. Submit 
electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file 
format, and avoid the use of special characters or any form of 
encryption.
    (3) Postal Mail: Mr. Jeremy Dommu, U.S. Department of Energy, 
Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue 
SW., Washington, DC 20585-0121. If possible, please submit all items on 
a compact disc (CD), in which case it is not necessary to include 
printed copies.
    (4) Hand Delivery/Courier: Mr. Jeremy Dommu, U.S. Department of 
Energy, Building Technologies Office, 950 L'Enfant Plaza SW., 
Washington, DC 20024. Telephone: (202) 586-2945. If possible, please 
submit all items on a CD, in which case it is not necessary to include 
printed copies.
    No telefacsimilies (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see section VII of this document (``Public 
Participation'').
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
[email protected].
    EPCA requires the Attorney General to provide DOE a written 
determination of whether the proposed standard is likely to lessen 
competition. The U.S. Department of Justice Antitrust Division invites 
input from market participants and other interested persons with views 
on the likely competitive impact of the proposed standard. Interested 
persons may contact the Division at [email protected] before 
September 6, 2016. Please indicate in the ``Subject'' line of your 
email the title and Docket Number of this proposed rulemaking.
    Docket: 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 may not be publicly 
available, such as those containing information that is exempt from 
public disclosure.
    The docket Web page can be found at: http://www.regulations.gov/#!docketDetail;D=EERE-2016-BT-STD-0022. This Web page contains a link 
to the docket for this notice on the www.regulations.gov site. The 
www.regulations.gov Web page contains simple instructions on how to 
access all documents, including public comments, in the docket. See 
section VII, ``Public Participation,'' for further information on how 
to submit comments through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:
Jeremy Dommu, 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) 
586-9870. Email: 
[email protected].
Celia Sher, U.S. Department of Energy, Office of the General Counsel, 
GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. 
Telephone: (202) 287-6122. Email: [email protected].

    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Appliance and Equipment Standards Program staff at (202) 586-
6636 or by email: 
[email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Synopsis of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits and Costs
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Battery Chargers
III. General Discussion
    A. Test Procedure
    B. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    C. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    D. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price
    c. Energy Savings
    d. Lessening of Utility or Performance of Products

[[Page 52197]]

    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage and Product Classes
    2. Technology Options
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Testing
    2. Cost Analysis
    3. Representative Units and Efficiency Levels
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Efficiency Distribution in the No-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    1. Shipment Projections in the No-standards Case
    2. Shipment Projections in the Standards Case
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. GRIM Analysis and Key Inputs
    a. Capital and Product Conversion Costs
    b. Manufacturer Production Costs
    c. Shipment Scenarios
    d. Markup Scenarios
    3. Discussion of Comments
    4. Manufacturer Interviews
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Development of Social Cost of Carbon Values
    c. Current Approach and Key Assumptions
    2. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results 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
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    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 UPS Standards
    2. Summary of Annualized Benefits and Costs of the Proposed 
Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    1. Description of Reasons Why Action Is Being Considered
    2. Objectives of, and Legal Basis for, Rule
    3. Description and Estimated Number of Small Entities Regulated
    4. Description and Estimate of Compliance Requirements Including 
Differences in Cost, if Any, for Different Groups of Small Entities
    5. Identification of Duplication, Overlap, and Conflict With 
Other Rules and Regulations
    6. A Description of Significant Alternatives to the Rule
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Prepared General Statements for 
Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

    Title III, Part 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 battery 
chargers, the subject of this rulemaking.
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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, 
Public Law 114-11 (Apr. 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 a significant conservation of energy. (42 U.S.C. 
6295(o)(3)(B)) EPCA also provides that not later than 6 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))
    In accordance with these and other statutory provisions discussed 
in this document, DOE proposes new energy conservation standards for 
uninterruptible power supplies (hereafter referred to as ``UPSs''), a 
class of battery chargers. The proposed standards, which are expressed 
in average load adjusted efficiency, are shown in Table I.1.
    These proposed standards, if adopted, would apply to all UPSs 
listed in Table I.1 and manufactured in, or imported into, the United 
States starting on and after the date two years after the publication 
of the final rule for this rulemaking.

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[GRAPHIC] [TIFF OMITTED] TP05AU16.019

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on consumers of UPSs, as measured by the average 
life-cycle cost (LCC) savings and the simple payback period (PBP).\3\ 
The average LCC savings are positive for all product classes, and the 
PBP is less than the average lifetime of UPSs, which is estimated to be 
between 5 and 10 years, depending on product class (see section 
IV.F.6).
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    \3\ The average LCC savings are measured relative to the 
efficiency distribution in the no-standards case, which depicts the 
market in the compliance year in the absence of standards (see 
section IV.F.8). The simple PBP, which is designed to compare 
specific efficiency levels, is measured relative to the baseline 
model (see section IV.F.9).

                Table I.2--Impacts of Proposed Energy Conservation Standards on Consumers of UPSs
----------------------------------------------------------------------------------------------------------------
                                                                               Average LCC       Simple payback
                Product class                          Description           savings [2015$]      period years
----------------------------------------------------------------------------------------------------------------
10a.........................................  VFD UPS                                   $33.1                0.0
10b.........................................  VI UPS                                     6.09                4.6
10c.........................................  VFI UPS                                    34.7                4.7
----------------------------------------------------------------------------------------------------------------

    DOE's analysis of the impacts of the proposed standards on 
consumers is described in section IV.F of this document.

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the reference year through the end of 
the analysis period (2016 to 2048). Using a real discount rate of 6.1 
percent, DOE estimates that the INPV for manufacturers of UPSs in the 
case without standards is $2,555 million in 2015$. Under the proposed 
standards, DOE expects that manufacturers may lose up to 23.4 percent 
of this INPV, which is approximately $598 million. Additionally, based 
on DOE's interviews with the manufacturers of UPSs, DOE does not expect 
significant impacts on manufacturing capacity or loss of employment for 
the industry as a whole to result from the proposed standards for UPSs.
    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this document.

C. National Benefits and Costs \4\
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    \4\ 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 proposed energy conservation 
standards for UPSs would save a significant amount of energy. Relative 
to the case without new standards, the lifetime energy savings for UPSs 
purchased in the 30-year period that begins in the anticipated year of 
compliance with the new standards (2019-2048) amount to 1.18 
quadrillion British thermal units (Btu), or quads.\5\ This represents a 
savings of 22.6 percent relative to the energy use of these products in 
the case without new standards (referred to as the ``no-standards 
case'').
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    \5\ 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.2.
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    The cumulative net present value (NPV) of total consumer costs and 
savings of the proposed standards for UPSs ranges from $1.87 billion 
(at a 7-percent discount rate) to $4.40 billion (at a 3-percent 
discount rate). This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product costs for 
UPSs purchased in 2019-2048.
    In addition, the proposed standards for UPSs are projected to yield 
significant environmental benefits. DOE estimates that the proposed 
standards would result in cumulative emission reductions (over the same 
period as for energy savings) of 72.0 million metric tons (Mt) \6\ of 
carbon dioxide (CO2), 40.9 thousand tons of sulfur dioxide 
(SO2), 130 thousand tons of nitrogen oxides 
(NOX), 306 thousand tons of methane

[[Page 52199]]

(CH4), 0.850 thousand tons of nitrous oxide 
(N2O), and 0.151 tons of mercury (Hg).\7\ The cumulative 
reduction in CO2 emissions through 2030 amounts to 19.1 Mt, 
which is equivalent to the emissions resulting from the annual 
electricity use of 2.63 million homes.
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    \6\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \7\ DOE calculated emissions reductions relative to the no-
standards case, which reflects key assumptions in the Annual Energy 
Outlook 2015 (AEO 2015) Reference case, which generally represents 
current legislation and environmental regulations for which 
implementing regulations were available as of October 31, 2014.
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    The value of the CO2 reductions is calculated using a 
range of values per metric ton (t) of CO2 (otherwise known 
as the ``Social Cost of Carbon'', or SCC) developed by a Federal 
interagency working group.\8\ 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 $0.559 billion and $7.49 billion, with a value of 
$2.46 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 $126 million at a 7-percent 
discount rate and $274 million at a 3-percent discount rate.\9\ DOE is 
investigating appropriate valuation of the reduction in methane and 
other emissions, and did not include any values in this rulemaking.
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    \8\ 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.
    \9\ DOE estimated the monetized value of NOX 
emissions reductions associated with electricity savings 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 
www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis. See section IV.L 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 national economic benefits and costs 
expected to result from the proposed standards for UPSs.

 Table I.3--Summary of National Economic Benefits and Costs of Proposed
                 Energy Conservation Standards for UPSs
                                [TSL 2] *
------------------------------------------------------------------------
                                           Present value   Discount rate
                Category                   billion 2015$     (percent)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings.........            4.40               7
                                                    9.02               3
CO2 Reduction Monetized Value ($12.4/t             0.559               5
 case) **...............................
CO2 Reduction Monetized Value ($40.6/t              2.46               3
 case) **...............................
CO2 Reduction Monetized Value ($63.2/t              3.87             2.5
 case) **...............................
CO2 Reduction Monetized Value ($118/t               7.49               3
 case) **...............................
NOX Reduction Monetized Value[dagger]...           0.126               7
                                                   0.274               3
                                         -------------------------------
    Total Benefits [Dagger].............            6.99               7
                                                    11.8               3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs....            2.53               7
                                                    4.62               3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction                     4.46               7
 Monetized Value [dagger]...............            7.14               3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with UPSs
  shipped in 2019-2048. These results include benefits to consumers
  which accrue after 2048 from the products purchased in 2019-2048. The
  costs account for the incremental variable and fixed costs incurred by
  manufacturers due to the standard, some of which may be incurred in
  preparation for the rule. Note that the Benefits and Costs may not sum
  to the Net Benefits due to rounding.
** The CO2 values represent global monetized values of the SCC, in 2015$
  per metric ton (t), in 2015 under several scenarios of the updated SCC
  values. The first three cases use the averages of SCC distributions
  calculated using 5-percent, 3-percent, and 2.5-percent discount rates,
  respectively. The fourth case represents the 95th percentile of the
  SCC distribution calculated using a 3% discount rate. The SCC time
  series incorporate an escalation factor.
[dagger] DOE estimated the monetized value of NOX emissions reductions
  associated with electricity savings 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 www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L
  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] Total Benefits for both the 3% and 7% cases are derived using
  the series corresponding to average SCC with 3-percent discount rate
  ($40.6/t case).


[[Page 52200]]

    The benefits and costs of the proposed standards, for UPSs sold in 
2019-2048, can also be expressed in terms of annualized values. The 
monetary values for the total annualized net benefits are the sum of 
(1) the national economic value of the benefits in reduced consumer 
operating costs, minus (2) the increase in product purchase prices and 
installation costs, plus (3) the value of the benefits of 
CO2 and NOX emission reductions, all 
annualized.\10\
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    \10\ 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.3. Using the present value, DOE then 
calculated the fixed annual payment over a 30-year period, starting 
in the compliance year, that yields the same present value.
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    Although the values of operating cost savings and CO2 
emission reductions are both important, two issues are relevant. First, 
the national operating savings are domestic U.S. consumer monetary 
savings that occur as a result of market transactions, whereas the 
value of CO2 reductions is based on a global value. Second, 
the assessments of operating cost savings and CO2 savings 
are performed with different methods that use different time frames for 
analysis. The national operating cost savings is measured for the 
lifetime of UPSs shipped in 2019-2048. Because CO2 emissions 
have a very long residence time in the atmosphere,\11\ the SCC values 
in future years reflect future CO2-emissions impacts that 
continue beyond 2100.
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    \11\ The atmospheric lifetime of CO2 is estimated on 
the order of 30-95 years. Jacobson, M. Z. Correction to ``Control of 
fossil-fuel particulate black carbon and organic matter, possibly 
the most effective method of slowing global warming.'' J. Geophys. 
Res. 2005. 110: D14105. doi:10.1029/2005JD005888
---------------------------------------------------------------------------

    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.4. The results under the primary 
estimate are as follows. Using a 7-percent discount rate for benefits 
and costs other than CO2 reduction (for which DOE used a 3-
percent discount rate along with the average SCC series that has a 
value of $40.6/t in 2015),\12\ the estimated cost of the standards 
proposed in this rule is $234 million per year in increased equipment 
costs, while the estimated annual benefits are $406 million in reduced 
equipment operating costs, $133 million in CO2 reductions, 
and $11.6 million in reduced NOX emissions. In this case, 
the net benefit amounts to $317 million per year. Using a 3-percent 
discount rate for all benefits and costs and the average SCC series 
that has a value of $40.6/t in 2015, the estimated cost of the proposed 
standards is $250 million per year in increased equipment costs, while 
the estimated annual benefits are $488 million in reduced operating 
costs, $133 million in CO2 reductions, and $14.8 million in 
reduced NOX emissions. In this case, the net benefit amounts 
to $386 million per year.
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    \12\ 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 (section IV.L).

                               Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for UPSs
                                                                         [TSL 2]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2015$/year
                                                                     -----------------------------------------------------------------------------------
                                              Discount rate                                        Low net benefits estimate  High net benefits estimate
                                                                          Primary  estimate *                  *                           *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings...  7%..............................  406.......................  348.......................  462.
                                    3%..............................  488.......................  413.......................  565.
CO2 Reduction Monetized Value       5%..............................  40.1......................  35.5......................  44.4.
 ($12.4/t case) **.
CO2 Reduction Monetized Value       3%..............................  133.......................  117.......................  148.
 ($40.6/t case) **.
CO2 Reduction Monetized Value       2.5%............................  194.......................  171.......................  216.
 ($63.2/t case) **.
CO2 Reduction Monetized Value       3%..............................  405.......................  357.......................  451.
 ($118/t case) **.
NOX Reduction Monetized Value       7%..............................  11.6......................  10.4......................  28.6.
 [dagger].                          3%..............................  14.8......................  13.1......................  37.5.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Benefits [Dagger].......  7% plus CO2 range...............  458 to 823................  394 to 716................  535 to 941.
                                    7%..............................  551.......................  476.......................  638.
                                    3% plus CO2 range...............  543 to 908................  462 to 783................  647 to 1,050.
                                    3%..............................  636.......................  544.......................  751.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Product Costs  7%..............................  234.......................  209.......................  256.
                                    3%..............................  250.......................  221.......................  277.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [Dagger]................  7% plus CO2 range...............  224 to 589................  185 to 507................  278 to 685.
                                    7%..............................  317.......................  267.......................  382.
                                    3% plus CO2 range...............  293 to 658................  241 to 563................  369 to 776.
                                    3%..............................  386.......................  323.......................  473.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with UPSs shipped in 2019-2048. These results include benefits to consumers which
  accrue after 2048 from the products purchased in 2019-2048. The results account for the incremental variable and fixed costs incurred by manufacturers
  due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low 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. .Note that the
  Benefits and Costs may not sum to the Net Benefits due to rounding.

[[Page 52201]]

 
** The CO2 values represent global monetized values of the SCC, in 2015$ per metric ton (t), in 2015 under several scenarios of the updated SCC values.
  The first three cases use the averages of SCC distributions calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The
  fourth case represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC time series incorporate an
  escalation factor.
[dagger] DOE estimated the monetized value of NOX emissions reductions associated with electricity savings 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 www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L 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 DOE's High Net Benefits Estimate, the benefit-per-
  ton estimates were based on the Six Cities study (Lepuele et al. 2011), which are nearly two-and-a-half times larger than those from the ACS study.
[Dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3-percent discount rate ($40.6/
  t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled
  discount rate, and those values are added to the full range of CO2 values.

    DOE's analysis of the national impacts of the proposed standards is 
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

    DOE has tentatively concluded that the proposed standards represent 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified, and would result in the 
significant conservation of energy. DOE further notes that UPSs 
achieving these standard levels are already commercially available for 
all product classes covered by this proposal. Based on the analyses 
described above, DOE has tentatively concluded that the benefits of the 
proposed standards to the Nation (energy savings, positive NPV of 
consumer benefits, consumer LCC savings, and emission reductions) would 
outweigh the burdens (loss of INPV for manufacturers and LCC increases 
for some consumers).
    DOE also considered more-stringent energy efficiency levels as 
potential standards, and is still considering them in this rulemaking. 
However, DOE has tentatively concluded that the potential burdens of 
the more-stringent energy efficiency levels would outweigh the 
projected benefits. Based on consideration of the public comments DOE 
receives in response to this notice and related information collected 
and analyzed during the course of this rulemaking effort, DOE may adopt 
energy efficiency levels presented in this notice that are either 
higher or lower than the proposed standards, or some combination of 
level(s) that incorporate the proposed standards in part.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposed rule, as well as some of the relevant 
historical background related to the establishment of standards for 
battery chargers. DOE's regulations define ``battery charger'' as a 
device that charges batteries for consumer products, including battery 
chargers embedded in other consumer products. 10 CFR 430.2.

A. Authority

    Title III, Part B of the Energy Policy and Conservation Act of 1975 
(EPCA or the Act), Public Law 94-163 (codified as 42 U.S.C. 6291-6309) 
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 
battery chargers.
    Section 309 of the Energy Independence and Security Act of 2007 
(``EISA 2007'') amended EPCA by directing DOE to prescribe, by rule, 
definitions and test procedure for the power use of battery chargers 
(42 U.S.C. 6295(u)(1)), and to issue a final rule that prescribes 
energy conservation standards for battery chargers or classes of 
battery chargers or determine that no energy conservation standard is 
technologically feasible and economically justified. (42 U.S.C. 
6295(u)(1)(E)).
    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. (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 procedure for battery chargers appears at title 
10 of the Code of Federal Regulations (CFR) part 430, subpart B, 
appendix Y.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including battery chargers. 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 battery chargers, if no test procedure has 
been established for the product, or (2) if DOE determines by rule that 
the standard is not technologically feasible or economically justified. 
(42 U.S.C. 6295(o)(3)(A)and (B)) In deciding whether a proposed 
standard is economically justified, 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 after receiving 
comments on the proposed standard, and by considering, to the greatest 
extent practicable, the following seven statutory factors:
    (1) The economic impact of the standard on manufacturers and 
consumers of the 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;

[[Page 52202]]

    (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))
    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))
    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of a covered 
product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe 
an amended or new standard if interested persons have established by a 
preponderance of the evidence that the standard is likely to result in 
the unavailability in the United States in any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of 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 which 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))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297(a) through (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)).
    Finally, pursuant to the amendments contained in EISA 2007, 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)and (B))

B. Background

1. Current Standards
    In a final rule published on June 13, 2016, DOE prescribed the 
current energy conservation standards for battery chargers manufactured 
on and after June 13, 2018. 81 FR 38266. These standards, which do not 
cover UPSs, are set forth in DOE's regulations at 10 CFR 430.32 and are 
repeated in Table II.1.
[GRAPHIC] [TIFF OMITTED] TP05AU16.020


[[Page 52203]]


2. History of Standards Rulemaking for UPSs
    DOE originally proposed energy conservation standards for battery 
chargers including UPSs in the battery charger energy conservation 
standards NOPR published on March 27, 2012 (March 2012 NOPR). In this 
NOPR, DOE proposed to test all covered battery chargers, including 
UPSs, using the battery charger test procedure finalized on June 1, 
2011 and to regulate them using a unit energy consumption (``UEC'') 
metric. See 77 FR 18478.
    DOE issued a battery charger energy conservation standards 
supplemental notice of proposed rulemaking (``SNOPR'') to propose 
revised energy standards for battery chargers on September 1, 2015. See 
80 FR 52850. This notice did not propose standards for UPSs because of 
DOE's intention to regulate UPS as part of the separate rulemaking for 
computer and battery backup systems. DOE also issued a battery charger 
test procedure NOPR on August 6, 2015, which proposed to exclude backup 
battery chargers, including UPSs, from the scope of the battery charger 
test procedure. See 80 FR 46855. DOE held a public meeting on September 
15, 2015 to discuss both of these notices.
    During 2014, DOE explored whether to regulate UPSs as ``computer 
systems.'' See, e.g., 79 FR 11345 (Feb. 28, 2014) (proposed coverage 
determination); 79 FR 41656 (July 17, 2014) (computer systems framework 
document). DOE received a number of comments in response to those 
documents (and the related public meetings) regarding testing of UPSs 
and the appropriate venue to address these devices.
    Additionally, DOE received a number of stakeholder comments on the 
August 2015 battery charger test procedure NOPR and the September 2015 
battery charger energy conservation standard SNOPR regarding regulation 
of UPSs. After considering these comments, DOE reconsidered its 
position and found that since a UPS meets the definition of a battery 
charger, it is more appropriate to regulate UPSs as part of the battery 
charger rulemaking, rather than the computers rulemaking. While the 
changes proposed in the August 2015 battery charger test procedure NOPR 
and the September 2015 energy conservation standard SNOPR were 
finalized on May 20, 2016 (81 FR 31827) and June 13, 2016 (81 FR 
38266), respectively, DOE continues to conduct rulemaking activities to 
consider test procedures and energy conservations standards for UPSs as 
part of ongoing and future battery charger rulemaking proceedings. To 
that end, DOE published a notice of proposed rulemaking on May 19, 2016 
to amend the battery charger test procedure to include specific testing 
requirements for UPSs (``UPS test procedure NOPR''). See 81 FR 31542. 
DOE is now proposing energy conservation standards for UPSs as part of 
the battery charger regulations in this NOPR.

III. General Discussion

    DOE developed this proposal after considering verbal and written 
comments, data, and information from interested parties that represent 
a variety of interests. The following discussion addresses issues 
raised by these commenters.

A. Test Procedure

    DOE recently published the UPS test procedure NOPR on May 19, 2016. 
See 81 FR 31542. DOE advises all stakeholders to review that proposal.

B. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially-available products or in working prototypes to be 
technologically feasible. 10 CFR part 430, subpart C, appendix A, 
section 4(a)(4)(i)
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; and (3) adverse impacts on 
health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(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 notice 
discusses the results of the screening analysis for UPSs, particularly 
the designs DOE considered, those it screened out, and those that are 
the basis for the standards considered in this rulemaking. For further 
details on the screening analysis for this rulemaking, see chapter 4 of 
the NOPR technical support document (``TSD'').
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such 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 UPSs, 
using the design parameters for the most efficient products available 
on the market or in working prototypes. The max-tech levels that DOE 
determined for this rulemaking are described in section IV.C of this 
proposed rule and in chapter 5 of the NOPR TSD.

C. Energy Savings

1. Determination of Savings
    For each trial standard level (TSL), DOE projected energy savings 
from application of the TSL to UPSs purchased in the 30-year period 
that begins in the year of compliance with the proposed standards 
(2019-2048).\13\ The savings are measured over the entire lifetime of 
UPSs purchased in the above 30-year period. DOE quantified the energy 
savings attributable to each TSL as the difference in energy 
consumption between each standards case and the no-standards case. The 
no-standards case represents a projection of energy consumption that 
reflects how the market for a product would likely evolve in the 
absence of new energy conservation standards.
---------------------------------------------------------------------------

    \13\ Each TSL is composed of specific efficiency levels for each 
product class. The TSLs considered for this NOPR are described in 
section V.A. DOE conducted 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 or new 
standards for UPSs. The NIA spreadsheet model (described in section 
IV.H of this notice) calculates energy savings in terms of site energy, 
which is the energy directly consumed by products at the locations 
where they are used. Based on the site energy, DOE calculates NES in 
terms of primary energy savings at the site or at power plants, and 
also in terms of full-

[[Page 52204]]

fuel-cycle (FFC) energy savings. The FFC metric includes the energy 
consumed in extracting, processing, and transporting primary fuels 
(i.e., coal, natural gas, petroleum fuels), and thus presents a more 
complete picture of the impacts of energy conservation standards.\14\ 
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.2 of this 
NOPR.
---------------------------------------------------------------------------

    \14\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as 
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

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 proposed standards 
(presented in section V.B.3.a), are nontrivial, and, therefore, DOE 
considers them ``significant'' within the meaning of section 325 of 
EPCA.

D. Economic Justification

1. Specific Criteria
    As noted above, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I) through (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 determining the impacts of a potential amended standard on 
manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include (1) industry net 
present value (INPV), which values the industry on the basis of 
expected future cash flows, (2) cash flows by year, (3) changes in 
revenue and income, and (4) other measures of impact, as appropriate. 
Second, DOE analyzes and reports the impacts on different types of 
manufacturers, including impacts on small manufacturers. Third, DOE 
considers the impact of standards on domestic manufacturer employment 
and manufacturing capacity, as well as the potential for standards to 
result in plant closures and loss of capital investment. Finally, DOE 
takes into account cumulative impacts of various DOE regulations and 
other regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and payback period (PBP) associated with new 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 impacts of potential 
standards on identifiable subgroups of consumers that may be 
disproportionately affected by a standard.
b. Savings in Operating Costs Compared to Increase in Price
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered 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 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and discount rates appropriate for 
consumers. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that consumers will 
purchase the covered products in the first year of compliance with new 
standards. The LCC savings for the considered efficiency levels are 
calculated relative to the case that reflects projected market trends 
in the absence of new standards. DOE's LCC and PBP analysis is 
discussed in further detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section III.C, DOE uses the NIA spreadsheet models 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 proposed in this NOPR 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 proposed 
rule to the Attorney General with a request that the Department of 
Justice (DOJ) provide

[[Page 52205]]

its determination on this issue. DOE will publish and respond to the 
Attorney General's determination in the final rule. DOE invites comment 
from the public regarding the competitive impacts that are likely to 
result from this proposed rule. In addition, stakeholders may also 
provide comments separately to DOJ regarding these potential impacts. 
See the ADDRESSES section for information to send comments to DOJ.
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 
proposed 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 proposed 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 potential standards may 
affect these emissions, as discussed in section IV.K; the emissions 
impacts are reported in section V.B.6 of this NOPR. DOE also estimates 
the economic value of emissions reductions resulting from the 
considered TSLs, as discussed in section IV.L.
g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may 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.''
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 year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the 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.9 of this proposed rule.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to UPSs. Separate subsections address each 
component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards proposed in this document. The first tool is a spreadsheet 
that calculates the LCC savings and PBP of potential amended or new 
energy conservation standards. The national impacts analysis uses a 
second spreadsheet set that provides shipments forecasts and calculates 
national energy savings and net present value of total consumer costs 
and savings expected to result from potential energy conservation 
standards. DOE uses the third spreadsheet tool, the Government 
Regulatory Impact Model (GRIM), to assess manufacturer impacts of 
potential standards. These three spreadsheet tools are available on the 
DOE Web site for this rulemaking: https://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=26. 
Additionally, DOE used output from the latest version of EIA's Annual 
Energy Outlook (AEO), a widely known energy forecast for the United 
States, for the emissions and utility impact analyses.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly-available 
information. The subjects addressed in the market and technology 
assessment for this rulemaking include: (1) A determination of the 
scope of the rulemaking and product classes, (2) manufacturers and 
industry structure, (3) existing efficiency programs, (4) shipments 
information, (5) market and industry trends, and (6) technologies or 
design options that could improve the energy efficiency of UPSs. The 
key findings of DOE's market assessment are summarized below. See 
chapter 3 of the NOPR TSD for further discussion of the market and 
technology assessment.
1. Scope of Coverage and Product Classes
    In the May 2016 UPS test procedure NOPR, DOE proposed the 
definition of UPS from section 3.1.1 of IEC 62040-3 Edition. 2.0, 
``Uninterruptible power systems (UPS)--Method of specifying the 
performance and test requirements'', March 2011 (IEC 62040-3 Ed. 2.0). 
See 81 FR 31542.
    DOE also proposed to include definitions for voltage and frequency 
dependent (VFD), voltage independent (VI), and voltage and frequency 
independent (VFI) UPS architectures based on the definitions from 
section 1.0 of ENERGY STAR UPS Version 1.0, ``ENERGY STAR Program 
Requirements for Uninterruptible Power Supplies,'' Rev. July 2012 
(ENERGY STAR UPS V. 1.0) to differentiate between different UPS load 
ratings. The proposed definitions are as follows:
    ``Uninterruptible power supply or UPS means a combination of 
convertors, switches and energy storage devices (such as batteries), 
constituting a power system for maintaining continuity of load power in 
case of input power failure.''
    ``Voltage and frequency dependent UPS or VFD UPS means a UPS that 
produces an AC output where the output voltage and frequency are 
dependent on the input voltage and frequency. This UPS architecture 
does not provide corrective functions like those in voltage independent 
and voltage and frequency independent systems.''
    ``Voltage independent UPS or VI UPS means a UPS that produces an AC 
output within a specific tolerance band that is independent of under-
voltage or over-voltage variations in the input voltage. The output 
frequency of a VI

[[Page 52206]]

UPS is dependent on the input frequency, similar to a voltage and 
frequency dependent system.''
    ``Voltage and frequency independent UPS or VFI UPS means a UPS that 
produces an AC output voltage and frequency that is independent of 
input voltage and frequency variations and protects the load against 
adverse effects from such variations without depleting the stored 
energy source. The input voltage and frequency variations through which 
the UPS must remain in Normal Mode are as follows:

i. 10% of the rated input voltage or the tolerance range 
specified by the manufacturer, whichever is greater
ii. 2% of the rated input frequency or the tolerance range 
specified by the manufacturer, whichever is greater.''

    DOE also specified in the May 2016 UPS test procedure NOPR that 
only the devices that meet the definition of a UPS as outlined above 
and have an AC output will be subject to the testing requirements 
proposed in the battery charger test procedure NOPR. See 81 FR 31542. 
For this rulemaking, DOE proposes to maintain the scope of coverage as 
defined by its current proposal for the battery charger test procedure.
    When evaluating and establishing energy conservation standards, DOE 
often divides covered products into classes by the type of energy used, 
the capacity of the product, or any other performance-related feature 
that justifies different standard levels, such as features affecting 
consumer utility. (42 U.S.C. 6295(q)) DOE then conducts its analysis 
and considers establishing or amending standards to provide separate 
standard levels for each product class. DOE has created three product 
classes to analyze UPSs as follows: Product Class 10a (VFD UPSs), 
Product Class 10b (VI UPSs), and Product Class 10c (VFI UPSs). UPSs are 
tested at different load ratings and a normal mode average efficiency 
rating is calculated. This is based on ENERGY STAR UPSs. Within UPSs, 
VFD, VI, and VFI UPSs are different product classes based on the UPS's 
ability to filter and correct the incoming power against faults such as 
over and under-voltage conditions, noise, harmonic distortions and 
instability in the mains frequency. These product classes are VFD for 
units that do not provide any corrective functions, VI for units 
capable of correcting only the voltage and VFI for units that can 
correct the voltage as well as the frequency when they are outside 
specifications. In addition to providing such corrective functions, 
devices in these three product classes offer greater utility to 
sensitive loads by reducing the transfer time from utility power to the 
internal battery in the event of a power disruption. DOE recognizes 
that these additional utilities as well as increasing device capacity 
come at the cost of efficiency. DOE therefore proposes individual 
standards for each product class that scale with rated output power. 
This is consistent with ENERGY STAR Version 1.0, ``ENERGY STAR Program 
Requirements for Uninterruptible Power Supplies,'' Rev. July 2012 
(ENERGY STAR UPS V. 1.0) and IEC 62040-3 Edition 2.0. Additional 
details on DOE's assessment of UPS technologies can be found in chapter 
3 of the NOPR TSD.
2. Technology Options
    In the July 2014 computer and battery backup systems (computer 
systems) framework document, DOE identified three technology options 
for UPSs that would be expected to improve the efficiency of UPSs. 
These technology options are: Semiconductor improvements, digital 
signal processing and space vector modulation, and transformer-less UPS 
topologies.\15\ Since the July 2014 framework document for computer 
systems, DOE has identified the following additional technology options 
from stakeholder comments and manufacturer interviews for UPSs: Use of 
core materials with high magnetic permeability such as Sendust and Litz 
wiring in inductor design, wide band gap semiconductors such as silicon 
carbide and gallium arsenide, capacitors with low equivalent series 
resistance (ESR), printed circuit boards (PCBs) with higher copper 
content, and variable speed fan control.
---------------------------------------------------------------------------

    \15\ See July 2014 computer and battery backup systems framework 
document, pp. 48-49.
---------------------------------------------------------------------------

    DOE's further research into space vector modulation technology for 
UPSs has shown that it may have limited advantage in the scope of this 
rule and is intended primarily for higher power applications. 
Therefore, DOE did not consider this technology.
    DOE requests comment on the potential technology options identified 
for improving the efficiency of UPSs (see section VII.E).
    After identifying all potential technology options for improving 
the efficiency of UPSs, DOE performed the screening analysis (see 
section IV.B of this document and chapter 4 of the NOPR TSD) on these 
technologies to determine which to consider further in the analysis and 
which to eliminate.
B. Screening Analysis
    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 not 
incorporated in commercial products or in working prototypes will not 
be considered further.
    (2) Practicability to manufacture, install, and service. If it is 
determined that mass production and 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 
projected compliance date of the standard, then that technology will 
not be considered further.
    (3) Impacts on product utility or product availability. If it is 
determined 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, it will not be 
considered further.
    (4) Adverse impacts on health or safety. If it is determined that a 
technology would have significant adverse impacts on health or safety, 
it 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. The reasons for eliminating any technology in this rulemaking 
are discussed below.
1. Screened-Out Technologies
Transformer-Less UPS Designs
    Transformer-less UPS designs offer some of the highest efficiencies 
in the industry with lowered weight, wider input voltage tolerance, 
near unity input power factor, reduced harmonic distortion and need for 
components that mitigate electromagnetic interference (EMI) generated 
by the device. However, interviews with manufacturers have shown this 
to be a limited access technology with select manufacturers holding the 
intellectual property required for effective implementation. DOE 
therefore does not intend to consider this technology for this rule.

[[Page 52207]]

2. Remaining Technologies
    Through a review of each technology, DOE tentatively concludes that 
all of the other identified technologies listed in section IV.A.2 met 
all four screening criteria to be examined further as design options in 
DOE's NOPR analysis. In summary, DOE did not screen out the following 
technology options: Use of materials with high magnetic permeability 
such as Sendust for the inductor core and Litz wiring in inductor 
coils, silicon carbide, gallium arsenide and other wide band gap 
semiconductors, capacitors with low ESR, PCBs with higher copper 
content and variable speed fan control.
    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been used in 
commercially-available products or working prototypes. DOE also finds 
that all of the remaining technology options meet the other screening 
criteria. For additional details, see chapter 4 of the NOPR TSD.
    DOE requests comment on its screening analysis used to select the 
most viable options for consideration in setting this proposed 
standards (see section VII.E).
C. Engineering Analysis
    In the engineering analysis, DOE establishes the relationship 
between the manufacturer production cost (MPC) and improved UPS 
efficiency. This relationship serves as the basis for cost-benefit 
calculations for individual consumers, manufacturers, and the Nation. 
DOE typically structures the engineering analysis using one of three 
approaches: (1) Design option, (2) efficiency level, or (3) reverse 
engineering (cost assessment). The design-option approach involves 
adding the estimated cost and associated efficiency of various 
efficiency-improving design changes to the baseline product to model 
different levels of efficiency. The efficiency-level approach uses 
estimates of costs and efficiencies of products available on the market 
at distinct efficiency levels to develop the cost-efficiency 
relationship. The reverse-engineering approach involves testing 
products for efficiency and determining cost from a detailed bill of 
materials (BOM) derived from reverse engineering representative 
products. The efficiency ranges from that of the least-efficient UPS 
sold today (i.e., the baseline) to the maximum technologically feasible 
efficiency level. At each efficiency level examined, DOE determines the 
MPC; this relationship is referred to as a cost-efficiency curve.
    DOE used a combination of the design-option and efficiency-level 
approach when determining the efficiency curves for UPSs. UPSs are 
composed of a single highly integrated PCB consisting of control and 
power conversion circuitry without any interchangeable components. The 
efficiency-level approach therefore is more suited to creating the 
cost-efficiency relationship since components cannot be removed to 
understand their impact on overall power consumption. However, DOE did 
use the design-option approach to determine the maximum technologically 
feasible EL because these products are not available on the market 
currently.
    DOE began its analysis by completing a comprehensive study of the 
market for units that are in scope. A review of retail sales data, the 
ENERGY STAR qualified product list of compliant devices and 
manufacturer interviews aided DOE in identifying the most prevalent 
units in the market as well as those that are the least and most 
expensive and efficient. DOE then purchased units for in-house 
efficiency testing according to the May 2016 UPS test procedure NOPR. 
This testing allowed DOE to choose representative units and create 
multiple ELs for each product class.
1. Testing
    In taking the hybrid efficiency-level and design option approach, 
DOE tested multiple units of the same product class striving to ensure 
variations between successive units (e.g. LCDs, communication ports, 
etc.) were removed. The resultant efficiency values and data obtained 
from manufacturers were then curve-fitted and extrapolated to the 
entire power range (defined by the scope) to create multiple ELs. For 
example, DOE tested several VFD representative units in the 300-500 W 
range to create four ELs for VFD UPSs, which when compared against the 
device's MPC demonstrated a direct positive correlation.
2. Representative Units and Efficiency Levels
    Individual ELs for a UPS product class were created by curve-
fitting and extrapolating the efficiency values of a single test unit 
known as the representative unit for that particular EL. Each of the 
ELs are labeled EL 0 through EL 3 and reflect increasing efficiency due 
to technological advances. EL 0 represents baseline performance, EL 1 
is the minimum required efficiency to be ENERGY STAR compliant, EL 2 is 
the best technology currently available in the market and EL 3 is the 
maximum efficiency theoretically achievable. As such, the 
representative unit for EL 0 was the least efficient unit tested by DOE 
with EL 1 and EL 2 being represented by the least and most efficient 
ENERGY STAR unit respectively. While DOE derived EL 0 through EL 2 via 
testing, DOE created EL 3 from data obtained during manufacturer 
interviews.
    The proposed standard for UPSs varies based on its maximum output 
power rating. The standard is a set of curve-fit equations. Figure IV.1 
through Figure IV.3 are graphical representations of the ELs for VFD 
UPS, VI UPS and VFI UPS types respectively. Each EL is subdivided into 
power ranges for simplicity and is a piecewise approximation of the 
units overall efficiency across the entire power range as shown in the 
figures. Chapter 5 of the NOPR TSD has additional detail on the curve-
fit equations for each EL and UPS product class.

[[Page 52208]]

[GRAPHIC] [TIFF OMITTED] TP05AU16.021

    DOE requests comment on the ELs selected for each product class for 
its analysis (see section VII.E).

[[Page 52209]]

[GRAPHIC] [TIFF OMITTED] TP05AU16.022

3. Cost Analysis
    For UPSs, DOE developed an average manufacturer and distribution 
markups for ELs by examining the annual Securities and Exchange 
Commission (SEC) 10-K reports filed by publicly-traded UPS 
manufacturers and distribution chains and further verified during 
stakeholder interviews. DOE used these validated markups to convert 
consumer prices into manufacturer selling prices (MSPs) and then into 
MPCs.
    Table I.3 summarizes national economic costs expected to result 
from the proposed standards.
    In general, DOE's cost analysis of representative units 
demonstrated a direct correlation between MPC and average load adjusted 
efficiency (see Figure 5.5.1 through 5.5.3 in chapter 5 of the 
Technical Support Document). However, the one exception to this 
correlation was the EL 1 representative unit for VFD UPSs. This 
representative unit has a higher output power rating and average load 
adjusted efficiency, but a lower MPC compared to the EL 0 
representative unit of the same product class, resulting in a negative 
total incremental installed cost of $139 million and $253 million at 
seven and three percent discount rates, respectively.
    In addition to the two representative units discussed here, DOE has 
found other VFD UPSs that demonstrate this negative correlation between 
MPC and average load adjusted efficiency between EL 0 and EL 1.
    DOE believes that this exception to the otherwise direct 
correlation between MPC and average load adjusted efficiency of UPSs 
has several possible explanations. For the VFD UPSs in scope of this 
rulemaking, DOE believes consumers may typically be more concerned with 
the reliability of the protection the product provides, than its energy 
efficiency. Despite the presence of less expensive and more efficient 
units, DOE believes less efficient legacy units continue to be sold in 
the marketplace because consumers are familiar with these models and 
trust the level of protection and safety they offer even if more energy 
efficient UPS models with similar functionality and dependability are 
available at lower prices. Additionally, an unproven model that is more 
efficient yet less expensive may be perceived by consumers as less 
reliable. Therefore, UPS manufacturers may not have an incentive to 
improve the design of UPS models that have established a reputation of 
being reliable. It is also worth noting that the difference in MSP 
between the VFD UPS EL 0 and EL 1 representative units is $5.10 and 
while this can be significant on its own, it may only be a small 
fraction of the cost of the connected equipment that it is protecting 
or the potential loss in productivity if said connected equipment were 
to lose power. DOE believes this is one of the reasons why devices at 
EL 0 continue to exist in the market place at a price higher than more 
efficient EL 1 models.
    However, negative compliance costs are unexpected in an economic 
theory that assumes a perfect capital market with perfect rationality 
of agents having complete information. In such a market, because more 
efficient UPSs save consumers money on operating costs compared to the 
baseline product, consumers would have an incentive to purchase them 
even in the absence of standards. For these reasons, DOE requests 
comment on its understanding of why less efficient UPSs continue to 
exist in the market place at a price higher than more efficient units 
and the impact that energy conservation standards for UPSs will have on 
the costs and efficiencies of existing UPS models, including various 
aspects of the inputs to the installed cost analysis, such as 
assumptions about consumers' response to first cost versus long-term 
operating cost, assumptions for manufacturer capital and product 
conversion costs, and other factors.
D. Markups Analysis
    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the consumer prices, derived in the 
engineering analysis, into the MSPs for each product class and EL. The 
MSPs calculated in the markups analysis are then used as inputs to the 
MIA. The prices derived in the engineering analysis are marked up to 
reflect the distribution chain of UPSs. At each step

[[Page 52210]]

in the distribution channel, companies mark up the price of the product 
to cover business costs and profit margin. For UPSs, the main parties 
in the distribution chain are retailers. The final prices, which also 
include sales taxes, are then used in the LCC and PBP analyses.
    For retailers, DOE developed separate markups for baseline products 
(baseline markups) and for the incremental cost of more-efficient 
products (incremental markups). Incremental markups are coefficients 
that relate the change in the MSP of higher-efficiency models to the 
change in the retailer sales price. DOE relied on economic data from 
the U.S. Census Bureau \16\ to estimate average baseline and 
incremental markups.
---------------------------------------------------------------------------

    \16\ U.S. Census Bureau. Annual Retail Trade Survey, Electronics 
and Appliance Stores. 2012. www.census.gov/retail/arts/historic_releases.html.
---------------------------------------------------------------------------

    The manufacturer markups, which convert MSPs to MPCs are calculated 
as part of the MIA and are not presented in the markups analysis. DOE 
developed average manufacturer markups by examining the annual SEC 10-K 
reports filed by publicly traded UPS manufacturers then refining these 
estimates based on manufacturer feedback.
    Chapter 6 of the NOPR TSD provides details on DOE's development of 
markups for UPSs.
E. Energy Use Analysis
    The purpose of the energy use analysis is to determine the annual 
energy consumption of UPSs at different efficiencies in representative 
U.S. single-family homes, multi-family residences, and commercial 
buildings, and to assess the energy savings potential of increased UPS 
efficiency. The energy use analysis estimates the range of energy use 
of UPSs in the field (i.e., as they are actually used by consumers). 
The energy use analysis provides the basis for other analyses DOE 
performed, particularly assessments of the energy savings and the 
savings in consumer operating costs that could result from adoption of 
amended or new standards.
    To develop energy use estimates, DOE multiplied UPS power loss as a 
function of rated output power, as derived in the engineering analysis, 
by annual operating hours. DOE assumed that UPSs are operated for 24 
hours per day, 365 days per year, at a typical load specific to each 
product class. In early 2015, UPS manufacturers indicated that a 
majority of in-scope products were used to back up and condition power 
to servers and desktop computers, with most VFD and low-end VI products 
attached to desktop computers and workstations. The average loading 
assumptions from ENERGY STAR UPS V. 1.0 with input power less than or 
equal to 1500 W are 67.5 percent for VFD and 75 percent for VI and VFI 
UPSs.\17\ However, the devices to which UPSs provide power may not 
always be on, especially in the case of desktop computers. Thus there 
is some uncertainty about how many hours per year UPSs are typically 
operated at various load points.
---------------------------------------------------------------------------

    \17\ These were calculated by multiplying the proportion of time 
spent at each specified proportion of the reference test load in 
Table 1 of the following reference. ENERGY STAR. ENERGY STAR Program 
Requirements: Product Specification for Uninterruptible Power 
Supplies (UPSs), Version 1.0. 2012.
---------------------------------------------------------------------------

    The responses to manufacturer interviews conducted in early 2015 
suggest that most VFD products are used with personal computers, around 
three quarters of low-end VI products are used with computers and 
workstations, and around three quarters of higher-end VI and VFI 
products are used with servers. To account for the typical power draw 
of desktop computers, and because such computers spend some time in off 
or standby modes, DOE assumed average loading for VFD UPSs to be 25 
percent. DOE further assumed average loading for VI products, which are 
operated in conjunction with both computers and servers, to be 50 
percent, and average loading for VFI products to be 75 percent, in line 
with ENERGY STAR UPS V. 1.0. DOE requests further comment on the 
average loading conditions for these product classes (see section 
VII.E).
    To capture the diversity of products available to consumers, DOE 
collected data on the distribution of UPS output power rating from 
product specifications listed on online retail Web sites. DOE then 
developed product samples for each UPS product class based on a market-
weighted distribution of product features found to impact efficiency as 
determined by the engineering analysis.
    Chapter 7 of the NOPR TSD provides details on DOE's energy use 
analysis for UPSs.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential energy conservation standards for 
UPSs. The effect of new or amended energy conservation standards on 
individual consumers usually involves a reduction in operating cost and 
an increase in purchase cost. DOE used the following two metrics to 
measure consumer impacts:

    The LCC (life-cycle cost) is the total consumer expense of an 
appliance or product over the life of that product, consisting of total 
installed cost (manufacturer selling price, distribution chain markups, 
sales tax, and installation costs) plus operating costs (expenses for 
energy use, maintenance, and repair). To compute the operating costs, 
DOE discounts future operating costs to the time of purchase and sums 
them over the lifetime of the product.
    The PBP (payback period) 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 
at higher efficiency levels by the change in annual operating cost for 
the year that amended or new standards are assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-standards case, which reflects the 
estimated efficiency distribution of UPSs in the absence of new or 
amended energy conservation standards. In contrast, the PBP for a given 
efficiency level is measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units, as well as one for commercial buildings. For each sample 
household and commercial building, DOE determined the energy 
consumption for the UPS and the appropriate electricity price. By 
developing a representative sample of households and commercial 
buildings, the analysis captured the variability in energy consumption 
and energy prices associated with the use of UPSs.
    DOE was unable to locate a survey sample specific to UPS users for 
either the residential or commercial sector. However, as mentioned in 
the previous section, manufacturer interviews indicate that most VFD 
products are used with personal computers, around three quarters of 
low-end VI products are used with computers and workstations, and 
around three quarters of higher-end VI and VFI products are used with 
servers. DOE thus created residential and commercial samples for 
desktop computers as a proxy for the sample of VFD and VI UPS owners, 
and a sample for servers as a proxy for the sample of VFI UPS owners.
    DOE developed its residential sample from the set of individual 
responses to

[[Page 52211]]

the Consumer Electronics Association's (CEA's) 16th Annual CE Ownership 
and Market Potential Study.\18\ CEA administered the survey to a 
random, nationally representative sample of more than 2,000 U.S. adults 
in January and February 2014. The individual-level survey data that CEA 
provided to DOE were weighted to reflect the known demographics of the 
sample population; weighting by geographic region, gender, age, and 
race were used to make the data generalizable to the entire U.S. adult 
population. From this dataset, DOE constructed its household sample for 
UPSs by considering the number of desktop computers per household in 
conjunction with 2013 household income and state of residence.
---------------------------------------------------------------------------

    \18\ Available for purchase at http://store.ce.org/Default.aspx?TabID=251&productId=782583.
---------------------------------------------------------------------------

    To create a commercial building sample, DOE relied on EIA's 
Commercial Buildings Energy Consumption Survey (CBECS), a nationally 
representative survey with a rich dataset of energy-related 
characteristics of the nation's stock of commercial buildings.\19\ 
Individual survey responses from the most recent survey in 2012 allowed 
DOE to consider how the commercial penetration of servers and desktop 
computers varies by principal building activity and by Census Division. 
DOE used these microdata to construct the commercial sample of UPSs, 
which are assumed to back up and condition power for servers and 
desktop computers.
---------------------------------------------------------------------------

    \19\ U.S. Department of Energy--U.S. Energy Information 
Administration. Commercial Buildings Energy Consumption Survey 
(CBECS). 2012 Public Use Microdata File. 2015. Washington, DC. 
http://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=microdata.
---------------------------------------------------------------------------

    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP relies on 
a Monte Carlo simulation to incorporate uncertainty and variability 
into the analysis. The Monte Carlo simulations randomly sample input 
values from the probability distributions and UPS user samples. The 
model calculated the LCC and PBP for products at each efficiency level 
for 10,000 housing units and 10,000 commercial buildings per simulation 
run.
    DOE calculated the LCC and PBP for all consumers of UPSs as if each 
were to purchase a new product in the expected year of required 
compliance with new standards. Any new standards would apply to UPSs 
manufactured two years after the date on which any new standard is 
published. At this time, DOE estimates publication of a final rule in 
2017. Therefore, for purposes of its analysis, DOE used 2019 as the 
first year of compliance with any new standards for UPSs.
    Table IV.1 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. Details of the spreadsheet model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the NOPR TSD and its appendices.

Table IV.1--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
              Inputs                            Source/method
------------------------------------------------------------------------
Product Cost......................  Derived by multiplying MPCs by
                                     manufacturer and retailer markups
                                     and sales tax, as appropriate. Used
                                     historical data to derive a price
                                     scaling index to forecast product
                                     costs.
Installation Costs................  Assumed no change with efficiency
                                     level.
Annual Energy Use.................  Power loss (a function of rated
                                     output power) multiplied by annual
                                     operating hours. Average number of
                                     hours at a typical load based on
                                     manufacturer input.
                                    Variability: Distribution of rated
                                     power from online retail websites.
Energy Prices.....................  Electricity: Based on 2014 marginal
                                     electricity price data from the
                                     Edison Electric Institute.
                                    Variability: Electricity prices vary
                                     by season, U.S. region, and
                                     baseline electricity consumption
                                     level.
Energy Price Trends...............  Based on AEO 2015 price forecasts.
Repair and Maintenance Costs......  Assumed no change with efficiency
                                     level.
Product Lifetime..................  Based on literature review and
                                     manufacturer interviews.
                                    Variability: Based on a Weibull
                                     distribution.
Discount Rates....................  Approach involves identifying all
                                     possible debt or asset classes that
                                     might be used to purchase the
                                     considered appliances, or might be
                                     affected indirectly. Primary data
                                     source was the Federal Reserve
                                     Board's Survey of Consumer
                                     Finances.
Compliance Date...................  2019.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the NOPR TSD.

1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described above 
(along with sales taxes). DOE used different markups for baseline 
products and higher-efficiency products, because DOE applies an 
incremental markup to the increase in MSP associated with higher-
efficiency products. The prices used in the LCC and PBP analysis are 
MPC in the compliance year, as described in chapter 5 of the TSD.
    Examination of historical price trends for a number of appliances 
that have been subject to energy conservation standards indicates that 
an assumption of constant real prices and costs may overestimate long-
term trends in appliance prices. Economic literature and historical 
data suggest that the real costs of these products may in fact trend 
downward over time according to ``learning'' or ``experience'' curves. 
On February 22, 2011, DOE published a notice of data availability 
(NODA) stating that DOE may consider refining its analysis by 
addressing equipment price trends. 76 FR 9696. It also raised the 
possibility that once sufficient long-term data are available on the 
cost or price trends for a given product subject to energy conservation 
standards, DOE would consider these data to forecast future trends. 
However, DOE found no data or manufacturer input to suggest

[[Page 52212]]

appreciable price trends for UPSs, and thus assumed no price trend for 
UPSs.
2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product. DOE found no 
evidence that installation costs would be impacted with increased 
efficiency levels for UPSs.
3. Annual Energy Consumption
    For each sampled household and commercial building, DOE determined 
the energy consumption for a UPS at different efficiency levels using 
the approach described in section IV.E of this document.
4. Energy Prices
    DOE used marginal electricity prices to characterize the 
incremental savings associated with ELs above the baseline. The 
marginal electricity prices vary by season, region, and baseline 
household electricity consumption level for the LCC. DOE estimated 
these prices using data published with the Edison Electric Institute 
(EEI) Typical Bills and Average Rates reports for summer and winter 
2014.\20\ DOE assigned seasonal marginal prices to each household or 
commercial building 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 
electricity prices, see appendix 8B of the NOPR TSD.
---------------------------------------------------------------------------

    \20\ Edison Electric Institute. Typical Bills and Average Rates 
Report. Winter 2014 published April 2014, Summer 2014 published 
October 2014. http://www.eei.org/resourcesandmedia/products/Pages/Products.aspx.
---------------------------------------------------------------------------

    The Information Technology Industry Council (ITI) suggested that 
EIA's Annual Energy Outlook (AEO) be used for estimating current and 
forecasted energy prices. (ITI, No. 0010 at p. 18) Available 
information suggests that marginal electricity prices more accurately 
represent savings associated with a new standard, and therefore DOE 
relied on EEI data instead of AEO data for current prices. However, to 
estimate energy prices in future years, DOE multiplied the average 
regional energy prices by the forecast of annual change in national-
average residential energy price in the Reference case from AEO 2015, 
which has an end year of 2040.\21\ To estimate price trends after 2040, 
DOE used the average annual rate of change in prices from 2020 to 2040.
---------------------------------------------------------------------------

    \21\ U.S. Department of Energy--Energy Information 
Administration. Annual Energy Outlook 2015 with Projections to 2040. 
2015. http://www.eia.gov/forecasts/aeo/.
---------------------------------------------------------------------------

5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance; maintenance costs are 
associated with maintaining the operation of the product. For UPSs, DOE 
assumed that small incremental increases in product efficiency produce 
no changes in repair and maintenance costs compared to baseline 
efficiency products. This assumption is supported by the National 
Electrical Manufacturers Association (NEMA's) comment that no increased 
maintenance, repair, or installation costs are associated with more 
efficient UPS designs. (NEMA, No. 0015 at p. 7)
6. Product Lifetime
    For UPSs, DOE performed a search of the published literature to 
identify minimum and maximum average lifetimes from a variety of 
sources. DOE also considered input from manufacturer interviews 
conducted in early 2015. ITI commented that UPS products have lifetimes 
of up to 20 years. (ITI, No. 0010 at p. 19) Table IV.2 summarizes the 
UPS lifetimes that DOE compiled from the literature and manufacture 
interviews. Where a range for lifetime was given, DOE noted the minimum 
and maximum values; where there was only one figure, DOE recorded this 
figure as both the minimum and maximum value. DOE computed mean 
lifetime by averaging these values across the product class.

                    Table IV.2--UPS Product Lifetimes From Literature and Manufacturer Input
----------------------------------------------------------------------------------------------------------------
                                                                        Lifetimes  (years)
        Product class             Description    ---------------------------------------------------------------
                                                      Minimum          Mean           Median          Maximum
----------------------------------------------------------------------------------------------------------------
10a..........................  VFD UPS                         3               5               5               7
10b..........................  VI UPS                          5             6.3               6               8
10c..........................  VFI UPS                         8              10              10              12
----------------------------------------------------------------------------------------------------------------

    Using these minimum, maximum, and mean lifetimes, DOE constructed 
survival functions for the various UPS product classes. No more than 10 
percent of units were assumed to fail before the minimum lifetime, and 
no more than 90 percent of units were assumed to fail before the 
maximum lifetime. DOE assumed these survival functions have the form of 
a cumulative Weibull distribution, a probability distribution commonly 
used to model appliance lifetimes. Its form is similar to that of an 
exponential distribution, which models a fixed failure rate, except a 
Weibull distribution allows for a failure rate that can increase over 
time as appliances age. For additional discussion of UPS lifetimes, 
refer to chapter 8 of the NOPR TSD.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to households to estimate the present value of future operating costs. 
DOE estimated a distribution of residential discount rates for UPSs 
based on consumer financing costs and opportunity cost of funds related 
to appliance energy cost savings and maintenance costs.
    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes in order to 
approximate a consumer's opportunity cost of funds related to appliance 
energy cost savings. It estimated the average percentage shares of the 
various types of debt and equity by household income group using data 
from the Federal Reserve Board's Survey of Consumer Finances \22\ (SCF) 
for 1995, 1998, 2001, 2004, 2007, and 2010. Using the SCF and other 
sources, DOE developed a distribution of rates for each type of debt 
and asset by income group to represent the 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 one of the 
distributions. The average rate across all types of household debt and

[[Page 52213]]

equity and income groups, weighted by the shares of each type, is 4.4 
percent. See chapter 8 of the NOPR TSD for further details on the 
development of consumer discount rates.
---------------------------------------------------------------------------

    \22\ Board of Governors of the Federal Reserve System. Survey of 
Consumer Finances. Various dates. Washington, DC. http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html.
---------------------------------------------------------------------------

    To establish commercial discount rates for the LCC analysis, DOE 
estimated the cost of capital for companies that purchase a UPS. The 
weighted average cost of capital is commonly used to estimate the 
present value of cash flows to be derived from a typical company 
project or investment. Most companies use both debt and equity capital 
to fund investments, so their cost of capital is the weighted average 
of the cost to the firm of equity and debt financing, as estimated from 
financial data for publicly traded firms in the sectors that purchase 
UPSs. For this analysis, DOE used Damodaran online \23\ as the source 
of information about company debt and equity financing. The average 
rate across all types of companies, weighted by the shares of each 
type, is 5.2 percent. See chapter 8 of the NOPR TSD for further details 
on the development of commercial discount rates.
---------------------------------------------------------------------------

    \23\ Damodaran, A. Cost of Capital by Sector. January 2014. 
(Last accessed September 25, 2014.) New York, NY. http://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm.
---------------------------------------------------------------------------

8. Efficiency Distribution in the No-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-
standards case (i.e., the case without amended or new energy 
conservation standards). To estimate the efficiency distribution of 
UPSs for 2019, DOE examined a recent ENERGY STAR qualified product 
list. Although these model lists are not sales-weighted, DOE assumed 
they were a reasonable representation of the market.
    The estimated market penetration of ENERGY STAR-qualified UPSs was 
78 percent in 2013, the most recent year for which data were 
available.\24\ DOE assumed market penetration to be 78 percent for all 
three UPS product classes, as the 2013 Unit Shipment Data report does 
not distinguish between UPS architectures. In order to assess how 
qualified products fit into proposed efficiency levels, DOE analyzed a 
qualified product list downloaded on February 16, 2016, after cross-
checking inconsistencies in reported UPS product type with product 
specifications on retail Web sites. For the 266 qualified in-scope 
models, DOE compared average efficiency to the efficiency required for 
each EL, as determined in the engineering analysis. Finally, DOE 
assumed that the market share represented by non-ENERGY STAR-qualified 
products would belong to the least-efficient efficiency level analyzed. 
The estimated market shares for the no-standards case for UPSs are 
shown in Table IV.3. See chapter 8 of the NOPR TSD for further 
information on the derivation of the efficiency distributions.
---------------------------------------------------------------------------

    \24\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 Unit Shipment Data. 2014. Washington, DC. 
https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.

             Table IV.3--Estimated Market Shares (%) in Each Efficiency Level for No-Standards Case
----------------------------------------------------------------------------------------------------------------
                                                                         Efficiency level
                                                 ---------------------------------------------------------------
        Product class             Description          EL 0
                                                    (baseline)         EL 1            EL 2            EL 3
----------------------------------------------------------------------------------------------------------------
10a..........................  VFD UPS                        47              31              21             1.5
10b..........................  VI UPS                         72              25             3.9               0
10c..........................  VFI UPS                        77              17             5.8               0
----------------------------------------------------------------------------------------------------------------

9. 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. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. The 
PBP calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
    As noted in this preamble, EPCA, as amended, 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 first year's energy savings 
resulting from the standard, as calculated under the applicable test 
procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered 
efficiency level, DOE determined the value of the first year's energy 
savings by calculating the energy savings in accordance with the 
applicable DOE test procedure, and multiplying those savings by the 
average energy price forecast for the year in which compliance with the 
new standards would be required.

G. Shipments Analysis

    DOE uses forecasts of annual product shipments to calculate the 
national impacts of potential amended energy conservation standards on 
energy use, NPV, and future manufacturer cash flows.\25\ Because UPSs 
back up and condition power for electronics, whose technology evolves 
more rapidly than many other appliances, DOE did not rely on a stock 
accounting approach common to other appliances. Instead, DOE largely 
elected to extrapolate forecasted trends from market research data. 
Data from Frost & Sullivan \26\ and ENERGY STAR unit shipments \27\ 
provided the foundation for DOE's shipments analysis for UPSs. DOE 
calculated shipment values for 30 years, from 2019, the first year of 
compliance, through 2048, the last year of the analysis period.
---------------------------------------------------------------------------

    \25\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general 
one would expect a close correspondence between shipments and sales.
    \26\ Cherian, A. Analysis of the Global Uninterruptible Power 
Supplies Market: Need for Greater Power Reliability Driving Growth. 
Frost & Sullivan. 2013. San Antonio, TX. http://www.frost.com/c/10077/sublib/display-report.do?id=NC62-01-00-00-00.
    \27\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 UPS Unit Shipment Data. 2013. Washington, 
DC. https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.

---------------------------------------------------------------------------

[[Page 52214]]

1. Shipment Projections in the No-Standards Case
    DOE relied on data from Frost & Sullivan and ENERGY STAR to develop 
the shipments in the no-standards case for UPSs.\28\ Frost & Sullivan 
provide global UPS unit shipments from 2009 to 2019 for the relevant 
output range <1000 W. Because the next power range for which shipments 
are provided is 1-5 kilo-watts (kW), and only UPSs with rated output 
power <=1500 W are in scope, DOE excluded this power range from the 
shipments analysis. For <1000 W, Frost & Sullivan supply North American 
revenue as a percent of global revenue 2009 to 2019, so DOE assumed 
that percent of revenue is a reasonable proxy for percent of shipments. 
Multiplying global shipments by the North American percentage of 
revenue, and then by 0.9 under the assumption that the United States 
makes up 90 percent of the North American market, yielded U.S. UPS 
shipments.
---------------------------------------------------------------------------

    \28\ Cherian, A. Analysis of the Global Uninterruptible Power 
Supplies Market: Need for Greater Power Reliability Driving Growth. 
Frost & Sullivan. 2013. San Antonio, TX. http://www.frost.com/c/10077/sublib/display-report.do?id=NC62-01-00-00-00.
---------------------------------------------------------------------------

    Frost & Sullivan provided no classification by type of UPS within 
the relevant power range. However, the 2013 ENERGY STAR unit shipment 
data collection process \29\ provides such a breakdown; in that year, 
market penetration of UPSs was 78 percent,\30\ so DOE assumed these 
data are representative of the market. DOE used these data to determine 
how <1000 W UPSs are apportioned among different topologies for 2013 to 
2019, assuming this allocation stays constant: 50 percent VFD, 39 
percent VI, and 12 percent VFI. The Frost & Sullivan data indicate that 
the commercial sector dominates UPS revenue in the <1000 W market 
segment; therefore, DOE assumed a split of 90 percent commercial and 10 
percent residential shipments.
---------------------------------------------------------------------------

    \29\ Environmental Protection Agency--ENERGY STAR Program. 
Certification Year 2013 UPS Unit Shipment Data. 2013. Washington, 
DC. https://www.energystar.gov/index.cfm?c=partners.unit_shipment_data.
    \30\ Ibid.
---------------------------------------------------------------------------

    To project UPS shipments from 2020-2048, DOE extrapolated the 
linear trends forecasted by Frost & Sullivan from 2014 to 2019. In 
conjunction with the 2013 fixed split between topologies and a fixed 
portion of 0.9 for the United States relative to North American 
shipments, DOE projected the increasing linear trend in global UPS 
shipments <1 kW and the decreasing linear share of North American 
revenue to forecast shipments from 2019 to 2048. DOE requests 
additional information on UPS shipments and projections (see section 
VII.E).
2. Shipment Projections in the Standards Case
    Increases in product prices resulting from standards may affect 
shipment volumes. To DOE's knowledge, price elasticity estimates are 
not readily available in existing literature for UPSs, and hence DOE 
assumed a price elasticity of demand of zero. DOE requests comment on 
commercial and residential price elasticity data for UPS product 
classes (see section VII.E).
    ITI commented that voluntary programs such as ENERGY STAR are what 
drive manufacturers to design products to be as efficient as possible 
and NEMA commented that because of the significant influence of ENERGY 
STAR on UPSs, little potential remains in product efficiency. (ITI, No. 
0010 at p. 19) (NEMA, No. 0015 at p. 3)
    DOE disagrees with the claim that little potential remains in 
product efficiency for UPSs. DOE's engineering analysis indicates that 
UPSs with higher efficiency than that required for ENERGY STAR 
designation are now or could be available, and the economic analysis 
indicates that some of these higher levels are economically justified. 
In the absence of standards, it is unlikely that the entire market 
would move to these levels. At present, approximately 20 percent of 
UPSs sold have efficiency below the ENERGY STAR level.
    See chapter 9 of the NOPR TSD for further details on the 
development of shipments projections.

H. National Impact Analysis

    The NIA assesses the national energy savings (NES) and the national 
net present value (NPV) from a national perspective of total consumer 
costs and savings that would be expected to result from new or amended 
standards at specific efficiency levels.\31\ (``Consumer'' in this 
context refers to consumers of the product being regulated.) DOE 
calculates the NES and NPV for the potential standard levels considered 
based on projections of annual product shipments, along with the annual 
energy consumption and total installed cost data from the energy use 
and LCC analyses.\32\ For the present analysis, DOE forecasted the 
energy savings, operating cost savings, product costs, and NPV of 
consumer benefits over the lifetime of UPSs sold from 2019 through 
2048.
---------------------------------------------------------------------------

    \31\ The NIA accounts for impacts in the 50 states and U.S. 
territories.
    \32\ For the NIA, DOE adjusts the installed cost data from the 
LCC analysis to exclude sales tax, which is a transfer.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new and amended standards by comparing 
a case without such standards with standards-case projections. The no-
standards case characterizes energy use and consumer costs for each 
product class in the absence of new energy conservation standards. For 
this projection, DOE considers historical trends in efficiency and 
various forces that are likely to affect the mix of efficiencies over 
time. DOE compares the no-standards case with projections 
characterizing the market for each product class if DOE adopted new 
standards at specific energy efficiency levels (i.e., the TSLs or 
standards cases) for that class. For the standards cases, DOE considers 
how a given standard would likely affect the market shares of products 
with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    Table IV.4 summarizes the inputs and methods DOE used for the NIA 
analysis for the NOPR. Discussion of these inputs and methods follows 
the table. See chapter 10 of the NOPR TSD for further details.

    Table IV.4--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
Compliance Date of Standard.......  2019.
Efficiency Trends.................  No-standards case: No efficiency
                                     trend.
                                    Standards cases: ``roll-up''
                                     scenario.

[[Page 52215]]

 
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each TSL.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each TSL.
                                    Incorporates projection of future
                                     product prices based on historical
                                     data.
Annual Energy Cost per Unit.......  Annual weighted-average values as a
                                     function of the annual energy
                                     consumption per unit and energy
                                     prices.
Repair and Maintenance Cost per     Annual values do not change with
 Unit.                               efficiency level.
Energy Prices.....................  AEO 2015 forecasts (to 2040) and
                                     extrapolation through 2048.
Energy Site-to-Primary and FFC      A time-series conversion factor
 Conversion.                         based on AEO 2015.
Discount Rate.....................  3 percent and 7 percent.
Present Year......................  2016.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-standards case and each of the standards cases. 
Section IV.F.8 of this NOPR describes how DOE developed an energy 
efficiency distribution for the no-standards case (which yields a 
shipment-weighted average efficiency) for each of the considered 
product classes for the year of anticipated compliance with a new 
standard. To project the trend in efficiency for UPSs over the entire 
shipments projection period, DOE examined past improvements in 
efficiency over time. Little data exists to suggest that UPS 
efficiencies would improve in the 30 years following 2019 in the no-
standards case. The approach is further described in chapter 10 of the 
NOPR TSD. DOE requests further comment on relevant efficiency trends 
for UPSs (see section VII.E).
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective (2019). In this scenario, the market 
shares of products in the no-standards case that do not meet the 
standard under consideration would ``roll up'' to meet the new standard 
level, and the market share of products above the standard would remain 
unchanged. To develop standards case efficiency trends after 2019, DOE 
implemented the same trend as in the no-standards case: Zero percent 
for UPSs.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products between each 
potential standards case (TSL) and in the case with no energy 
conservation standards. DOE calculated the national energy consumption 
by multiplying the number of units (stock) of each product (by vintage 
or age) by the unit energy consumption (also by vintage). DOE 
calculated annual NES based on the difference in national energy 
consumption for the no-standards case and for each higher efficiency 
standard case. DOE estimated energy consumption and savings based on 
site energy and converted the electricity consumption and savings to 
primary energy (i.e., the energy consumed by power plants to generate 
site electricity) using annual conversion factors derived from AEO 
2015. Cumulative energy savings are the sum of the NES for each year 
over the timeframe of the analysis.
    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use full-fuel-cycle (FFC) measures of 
energy use and greenhouse gas and other emissions in the national 
impact analyses and emissions analyses included in future energy 
conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After 
evaluating the approaches discussed in the August 18, 2011 notice, DOE 
published a statement of amended policy in which DOE explained its 
determination that EIA's National Energy Modeling System (NEMS) is the 
most appropriate tool for its FFC analysis and its intention to use 
NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public 
domain, multi-sector, partial equilibrium model of the U.S. energy 
sector \33\ that EIA uses to prepare its Annual Energy Outlook. The 
approach used for deriving FFC measures of energy use and emissions is 
described in appendix 10A of the NOPR TSD.
---------------------------------------------------------------------------

    \33\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview, DOE/EIA-0581(98), February 1998. 
Available at www.eia.gov/forecasts/aeo/index.cfm.
---------------------------------------------------------------------------

3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are (1) total annual installed cost, (2) total 
annual savings in operating costs, and (3) a discount factor to 
calculate the present value of costs and savings. DOE calculates net 
savings each year as the difference between the no-standards case and 
each standards case in terms of total savings in operating costs versus 
total increases in installed costs. DOE calculates operating cost 
savings over the lifetime of each product shipped during the forecast 
period.
    The operating cost savings are energy cost savings, which are 
calculated using the estimated energy savings in each year and the 
projected price of the appropriate form of energy. To estimate energy 
prices in future years, DOE multiplied the average regional energy 
prices by the forecast of annual national-average residential energy 
price changes in the Reference case from AEO 2015, which has an end 
year of 2040. To estimate price trends after 2040, DOE used the average 
annual rate of change in prices from 2020 through 2040. As part of the 
NIA, DOE also analyzed scenarios that used inputs from the AEO 2015 Low 
Economic Growth and High Economic Growth cases. Those cases have higher 
and lower energy price trends compared to the Reference case. NIA 
results based on these cases are presented in appendix 10B of the NOPR 
TSD.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
NOPR, DOE estimated the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of

[[Page 52216]]

Management and Budget (OMB) to Federal agencies on the development of 
regulatory analysis.\34\ The discount rates for the determination of 
NPV are in contrast to the discount rates used in the LCC analysis, 
which are designed to reflect a consumer's perspective. 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 ``social rate of time preference,'' which is the rate at 
which society discounts future consumption flows to their present 
value.
---------------------------------------------------------------------------

    \34\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at 
www.whitehouse.gov/omb/memoranda/m03-21.html.
---------------------------------------------------------------------------

    CEA commented that DOE should not use a 30-year projection to 
calculate national energy savings given the short product lifecycle of 
consumer electronics. (CEA, No. 0012 at p. 6) NEMA also disagreed with 
the 30-year projection and suggested a 6-year projection. (NEMA, No. 
0015 at p. 2)
    In performing the NIA for its energy conservation standards 
rulemakings, DOE has used a 30-year analysis period, beginning on the 
effective date of the standard, because it matches the lifetime of the 
longest-lived products among the products being considered for 
standards. Matching the lifetime of the longest-lived products allows 
for a full turnover of the stock. Because products have varying 
lifetimes, DOE uses a 30-year analysis period to maintain a consistent 
time frame to compare the energy savings and economic impacts from all 
the standards rulemakings. DOE acknowledges that using a 30-year period 
for shorter-lived products such as UPSs presents challenges with 
respect to projecting future trends. However, DOE also provides a 9-
year sensitivity analysis that considers impacts for products shipped 
in a 9-year period. Further, with respect to the economic analysis, 
projected impacts for products shipped in the later part of the 30-year 
period play a relatively small role due to the effects of discounting.

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended energy 
conservation standards on consumers, DOE evaluates the impact on 
identifiable subgroups of consumers that may be disproportionately 
affected by a new or amended national standard. The purpose of a 
subgroup analysis is to determine the extent of any such 
disproportional impacts. DOE evaluates impacts on particular subgroups 
of consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels. For this NOPR, DOE analyzed 
the impacts of the considered standard levels on two subgroups: (1) 
Low-income households and (2) small businesses. DOE used the LCC and 
PBP spreadsheet model to estimate the impacts of the considered 
efficiency levels on these subgroups. Chapter 11 in the NOPR TSD 
describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impacts of new 
energy conservation standards on manufacturers of UPSs and to estimate 
the potential impacts of such standards on domestic employment, 
manufacturing capacity, and cumulative regulatory burden for those 
manufacturers. The MIA has both quantitative and qualitative aspects. 
The quantitative part of the MIA includes analyses of forecasted 
industry cash flows to create the INPV, as well as an analysis of the 
additional investments in research and development (R&D) and 
manufacturing capital necessary to comply with new standards, and the 
potential impact on domestic manufacturing employment. Additionally, 
the MIA seeks to qualitatively determine how new energy conservation 
standards might affect manufacturers' capacity and competition, as well 
as how standards contribute to manufacturers' overall regulatory 
burden. Finally, the MIA serves to identify any disproportionate 
impacts on manufacturer subgroups, including small business 
manufacturers.
    The quantitative part of the MIA primarily relies on the GRIM, an 
industry cash flow model with inputs specific to this rulemaking. The 
key GRIM inputs include data on the industry cost structure, unit 
production costs, product shipments, manufacturer markups, and 
investments in R&D and manufacturing capital required to produce 
compliant products. The key GRIM outputs are INPV, which is the sum of 
industry annual cash flows over the analysis period, discounted using 
the industry-weighted average cost of capital, and the impact on 
domestic manufacturing employment. The model uses standard accounting 
principles to estimate the impacts of new energy conservation standards 
on the UPS manufacturing industry by comparing changes in INPV and 
domestic manufacturing employment between the no-standards case and 
each of the standards levels. To capture the uncertainty relating to 
manufacturer pricing strategies following potential new standards, the 
GRIM estimates a range of possible impacts under different markup 
scenarios.
    The qualitative part of the MIA addresses manufacturer 
characteristics and market trends. Specifically, the MIA considers such 
factors as a potential standard's impact on manufacturing capacity, 
competition within the industry, the cumulative impact of other DOE and 
non-DOE regulations, and impacts on manufacturer subgroups. The 
complete MIA is outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In the 
first phase of the MIA, DOE prepared a profile of the UPS manufacturing 
industry based on the market and technology assessment, preliminary 
manufacturer interviews, and publicly-available information. This 
included a top-down analysis of UPS manufacturers that DOE used to 
derive preliminary financial inputs for the GRIM (e.g., revenues; 
materials, labor, overhead, and depreciation expenses; selling, 
general, and administrative expenses (SG&A); and R&D expenses). DOE 
also used public sources of information to further calibrate its 
initial characterization of the UPS manufacturing industry, including 
company filings of 10-K from the SEC,\35\ corporate annual reports, and 
the U.S. Census Bureau's Economic Census.\36\
---------------------------------------------------------------------------

    \35\ http://www.sec.gov/edgar.shtml.
    \36\ http://factfinder.census.gov/faces/nav/jsf/pages/searchresults.xhtml.
---------------------------------------------------------------------------

    In the second phase of the MIA, DOE prepared a framework industry 
cash-flow analysis to quantify the potential impacts of new energy 
conservation standards. The GRIM uses several factors to determine a 
series of annual cash flows starting with the announcement of the 
standards and extending over a 30-year period following the compliance 
date of the standards. These factors include annual expected revenues, 
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. 
In general, energy conservation standards can affect manufacturer cash 
flow in three distinct ways: (1) Creating a need for increased 
investment, (2) raising production costs per unit, and (3) altering 
revenue due to higher per-unit prices and changes in sales volumes.
    In addition, during the second phase, DOE developed an interview 
guide to distribute to UPS manufacturers in order to develop other key 
GRIM inputs, including product and capital

[[Page 52217]]

conversion costs, and to gather additional information on the 
anticipated effects of new energy conservation standards on revenue, 
direct employment, capital assets, industry competition, and 
manufacturer subgroup impacts.
    In the third phase of the MIA, DOE conducted structured, detailed 
interviews with representative UPS 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. See section IV.J.4 for a description 
of the key issues raised by manufacturers during the interviews. As 
part of the third phase, DOE also evaluated manufacturer subgroups that 
may be disproportionately impacted by new standards or that may not be 
accurately represented by the average cost assumptions used to develop 
the industry cash flow analysis. Such manufacturer subgroups may 
include small business manufacturers, low-volume manufacturers, niche 
players, and/or manufacturers exhibiting a cost structure that largely 
differs from the industry average.
    DOE identified one manufacturer subgroup for a separate impact 
analysis--small business manufacturers--using the small business 
employee threshold of 500 total employees published by the Small 
Business Administration (SBA). This threshold includes all employees in 
a business' parent company and any other subsidiaries. The complete MIA 
is presented in chapter 12 and in sections V.B.2.d and VII.B, and the 
analysis required by the Regulatory Flexibility Act, 5 U.S.C. 601, et. 
seq., is presented in section VI.B of this NOPR.
2. GRIM Analysis and Key Inputs
    DOE uses the GRIM to quantify the changes in cash flows over time 
due to new energy conservation standards. These changes in cash flows 
result in either a higher or lower INPV for the standards cases 
compared to the no-standards case. The GRIM analysis uses a standard 
annual cash flow analysis that incorporates manufacturer costs, 
manufacturer markups, shipments, and industry financial information as 
inputs. It then models changes in costs, investments, and manufacturer 
margins that result from new energy conservation standards. The GRIM 
uses these inputs to calculate a series of annual cash flows beginning 
with the reference year of the analysis, 2016, and continuing to 2048. 
DOE computes INPV by summing the stream of annual discounted cash flows 
during the analysis period.
    DOE used a real discount rate of 6.1 percent for UPS manufacturers. 
The discount rate estimate was derived from industry corporate annual 
reports to the Securities and Exchange Commission (SEC 10-Ks). During 
manufacturer interviews, UPS manufacturers were asked to provide 
feedback on this specific discount rate. Based on this feedback, DOE 
determined that a discount rate of 6.1 percent was appropriate to use 
for the UPS industry. Many of the GRIM inputs came from the engineering 
analysis, the NIA, manufacturer interviews, and other research 
conducted during the MIA. The major GRIM inputs are described in detail 
in the following sections.
    DOE seeks comment on its use of 6.1 percent as a discount rate for 
UPS manufacturers (see section VII.E).
a. Capital and Product Conversion Costs
    DOE expects new energy conservation standards for UPSs to cause 
manufacturers to incur conversion costs to bring their production 
facilities and product designs into compliance with new standards. For 
the MIA, DOE classified these conversion costs into two major groups: 
(1) Capital conversion costs and (2) product conversion costs. Capital 
conversion costs are investments in property, plant, and equipment 
necessary to adapt or change existing production facilities such that 
new product designs can be fabricated and assembled. Product conversion 
costs are investments in research, development, testing, marketing, 
certification, and other non-capitalized costs necessary to make 
product designs comply with new standards.
    Using feedback from manufacturer interviews, DOE conducted a 
bottom-up analysis of the conversion costs necessary to comply with new 
standards for all product classes at each analyzed EL. DOE used 
manufacturer input from manufacturer interviews regarding the types and 
dollar amounts of discrete capital and product expenditures that would 
be necessary to convert specific production lines for each product 
class at each EL.
    DOE determined that UPS manufacturers would not incur any 
additional capital conversion costs in the standards cases that would 
not be incurred in the no-standards case. Manufacturers stated that any 
product redesigns required to meet the proposed ELs would represent 
changes in component configuration as opposed to changes in the tooling 
and equipment used to manufacture more efficient UPSs (DOE does capture 
the additional costs of the more efficient components in the MPCs). 
Additionally, manufacturers stated that product design cycles for the 
majority of covered UPSs would be three years or less. The potential 
standards proposed in this NOPR would have a three-year compliance 
timeframe between the announcement of the potential standards and the 
compliance year of those standards. Therefore, the majority of these 
product design cycles would coincide with or take place before the 
compliance year of any potential standards. For manufacturers that have 
product design cycles that do not coincide with or take place before 
the compliance year and would have to redesign their UPSs to comply 
with the proposed standards, DOE included the cost of product redesign 
in the product conversion costs.
    DOE seeks comment on its determination that product redesigns 
necessary to meet the ELs required by the proposed standard would not 
require investments in equipment and tooling and on its determination 
that the majority of product design cycles would either take place 
before or coincide with the compliance period of the potential 
standards for UPSs (see section VII.E).
    DOE also assumes that there would be no stranded capital assets for 
UPS manufacturers. Again, DOE made this determination based on 
manufacturer feedback stating that no investments in equipment and 
tooling are necessary to comply with proposed standards.
    The two main types of product conversion costs for UPSs that 
manufacturers shared with DOE during manufacturer interviews were the 
engineering time and effort necessary to redesign their products to 
meet higher efficiency standards and the testing and certification 
costs necessary to comply with efficiency standards. Once DOE had 
compiled these product conversion costs, DOE then took average values 
for a UPS platform (i.e., average number of hours or average dollar 
amounts) based on the range of responses given by manufacturers for the 
product conversion cost of each product class at each EL. Finally, DOE 
scaled the per platform costs by the estimated number of platforms that 
would need to be redesigned at each EL to calculate the total industry 
product conversion cost at each EL that was used in the MIA.
    DOE seeks comment on its methodology used to calculate product 
conversion costs, including the assumption of no capital conversion 
costs or stranded assets for UPS manufacturers at analyzed ELs (see 
section VII.E).

[[Page 52218]]

    See chapter 12 of the NOPR TSD for a complete description of DOE's 
assumptions for the product conversion costs.
b. Manufacturer Production Costs
    Manufacturing more efficient UPSs is more expensive than 
manufacturing baseline products due to the need for more costly 
materials and components. The higher MPCs for these more efficient 
products can affect the revenue and gross margin, which will then 
affect total volume of future shipments, and the cash flows of UPS 
manufacturers. DOE developed MPCs for UPSs by using efficiency testing 
and market data to determine the cost-efficiency relationship for UPSs 
currently on the market that met each efficiency level in each product 
class. For more information about MPCs, see section IV.C of this NOPR.
    For a complete description of the MPCs, see chapter 5 of this NOPR 
TSD.
c. Shipment Scenarios
    INPV, the key GRIM output, depends on industry revenue, which 
depends on the quantity and prices of UPSs shipped in each year of the 
analysis period. Industry revenue calculations require forecasts of: 
(1) Total annual shipment volume of UPSs; (2) the distribution of 
shipments across product classes (because prices vary by product 
class); and, (3) the distribution of shipments across ELs (because 
prices vary by efficiency).
    In the no-standards case shipment analysis, shipments of UPSs were 
based on market forecast data. Since UPS technology evolves more 
rapidly than other appliance technologies, DOE extrapolated forecasted 
trends from market research data instead of relying on a stock 
accounting approach. Market forecasts from Frost and Sullivan as well 
as ENERGY STAR were used as the basis for standards case UPS shipments.
    In the standards cases, DOE modeled a roll-up shipment scenario for 
UPSs. In the roll-up shipment scenario, consumers who would have 
purchased UPSs that fail to meet the new standards in the no-standards 
case, purchase UPSs that just meet the new standards, but are not more 
efficient than those standards, in the standards cases. Those consumers 
that would have purchased compliant UPSs in the no-standards case 
continue to purchase the exact same UPSs in the standards cases.
    DOE believes that consumers purchasing UPSs covered by this 
rulemaking are primarily driven by the first cost of the UPSs and, 
therefore, most consumers will continue to purchase the lowest-cost 
UPSs available. This behavior is best modeled by the roll-up shipment 
scenario.
    For a complete description of the shipments see the shipments 
analysis discussion in section IV.G of this NOPR.
d. Markup Scenarios
    As discussed in section IV.J.2.b, the MPCs for each of the UPS 
product classes are the UPS manufacturers' costs for those products. 
These costs include materials, direct labor, depreciation, and 
overhead, which are collectively referred to as the cost of goods sold 
(COGS). The MSP is the price received by UPS manufacturers from their 
customers, typically a distributor but could be the direct users, 
regardless of the downstream distribution channel through which the 
UPSs are ultimately sold. The MSP is not necessarily the cost the end-
user pays for the UPS since there are typically multiple sales along 
the distribution chain and various markups applied to each sale. The 
MSP equals the MPC multiplied by the manufacturer markup. The 
manufacturer markup covers all the UPS manufacturer's non-production 
costs (i.e., SG&A, R&D, and interest, etc.) as well as profit. Total 
industry revenue for UPS manufacturers equals the MSPs at each EL for 
each product class multiplied by the number of shipments at that EL.
    Modifying these manufacturer markups in the standards cases yields 
a different set of impacts on UPS manufacturers than in the no-
standards case. For the MIA, DOE modeled two standards case markup 
scenarios to represent the uncertainty regarding the potential impacts 
on prices and profitability for UPS manufacturers following the 
implementation of new energy conservation standards. The two markup 
scenarios are; (1) a preservation of gross margin, or flat, markup 
scenario and (2) a pass through markup scenario. Each scenario leads to 
different manufacturer markup values, which, when applied to the 
inputted MPCs, result in varying revenue and cash flow impacts on UPS 
manufacturers.
    The preservation of gross margin markup scenario assumes that the 
MPC for each product is marked up by a flat percentage to cover SG&A 
expenses, R&D expenses, interest expenses, and profit. This allows 
manufacturers to preserve the same gross margin percentage in the 
standards cases as in the no-standards case. This markup scenario 
represents the upper bound of the UPS industry's profitability in the 
standards cases because UPS manufacturers are able to fully pass on 
additional costs due to standards to their consumers.
    To derive the preservation of gross margin markup percentages for 
UPSs, DOE examined the SEC 10-Ks of all publicly traded UPS 
manufacturers to estimate the average UPS manufacturer markup. DOE 
analyzed manufacturer markups for each product class separately since, 
based on manufacturer interviews, manufacturers frequently apply 
different markups to different product classes. The manufacturer markup 
represents the markup manufacturers apply to their MPCs to arrive at 
their MSPs. Based on SEC 10-Ks, DOE found the typical manufacturer 
markup for manufacturers that produce UPSs was 1.57.
    During manufacturer interviews, DOE asked UPS manufacturers if 1.57 
was an appropriate manufacturer markup to use for all UPSs. While most 
manufacturers agreed that 1.57 was an appropriate average manufacturer 
markup for all VFI, VI and VFD UPSs, these manufacturers stated that 
their manufacturer markup tends to vary by product class. Therefore, 
based on manufacturer feedback, DOE increased the manufacturer markup 
for VFI UPSs to 1.76 and decreased the manufacturer markup for VFD UPSs 
to 1.55. DOE kept the manufacturer markup for VI UPSs at 1.57 based on 
manufacturer feedback.
    DOE included an alternative markup scenario, the pass through 
markup, because UPS manufacturers stated they do not expect to be able 
to mark up the additional cost of production in the standards cases, 
given the highly competitive UPS market. The pass through markup 
scenario assumes that UPS manufacturers are able to pass through the 
incremental costs of more efficient UPSs to their consumers, but 
without earning any additional operating profit on those higher costs. 
This scenario results in overall manufacturer margin compression and 
adverse financial impacts as UPS costs increase due to new energy 
conservation standards.
    The pass through markup scenario represents the lower bound of 
industry profitability in the standards cases. This is because 
manufacturers are not able to markup up the additional costs 
necessitated by UPS energy conservation standards, as they are able to 
do in the preservation of gross margin markup scenario. Therefore, 
manufacturers earn less revenue in the pass through markup scenario 
than they do in the preservation of gross margin markup scenario.
    DOE seeks comment on its methodology used to calculate manufacturer 
markups, its use of different manufacturer markups for each product 
class, and the specific

[[Page 52219]]

manufacturer markups DOE estimated for each UPS product class (see 
section VII.E).
3. Discussion of Comments
    Interested parties commented on the assumptions and results of the 
July 2014 framework document. NEMA stated that if DOE sets ELs at or 
above the current ENERGY STAR levels for UPSs, UPS manufacturers would 
lose investments previously made to meet these ENERGY STAR 
requirements. (NEMA, No. 0015 at p. 7) DOE acknowledges that UPS energy 
conservation standards set at or above ENERGY STAR levels for UPSs 
could render some product designs obsolete. This could cause 
manufactures to make additional investments in product redesign and 
testing. DOE accounts for the one-time conversion costs that UPS 
manufacturers would have to make at each potential standard level as 
part of the MIA. Additionally, because UPS technology evolves rapidly, 
DOE determined that all UPSs would be redesigned in the three year time 
period between the publication of any UPS final rule and the compliance 
year of that rulemaking, so manufactures would have to redesign those 
products even in the no-standards case. See section V.B.2.a of this 
NOPR for a complete discussion of the manufacturer investments 
necessary to comply with the analyzed energy conservation standards.
4. Manufacturer Interviews
    DOE conducted interviews with manufacturers following the 
publication of the July 2014 framework document in preparation for the 
NOPR analysis. In these interviews, DOE asked manufacturers to describe 
their major concerns with this UPS rulemaking. UPS manufacturers 
identified one key issue during these interviews, the burden of testing 
and certification.
    UPS manufacturers stated that the costs associated with testing and 
certifying all of their products covered by this rulemaking could be 
burdensome. UPS manufacturers commented that since efficient products 
do not typically earn a premium in the UPS market, manufacturers do not 
regularly conduct efficiency testing or pursue energy-efficient 
certifications for the majority of their product offerings. As a 
result, the testing and certification required for compliance with a 
potential standard represents additional costs to the typical product 
testing conducted by UPS manufacturers. Since a potential standard 
would require all UPS offerings to be tested and certified, UPS 
manufacturers explained that this process could become expensive. The 
UPS test procedure NOPR (81 FR 31542) analyzes the testing and 
certification costs manufacturers must make to comply with the analyzed 
energy conservation standards.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions to emissions of all species 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion. The associated emissions are referred 
to as upstream emissions.
    The analysis of power sector emissions uses marginal emissions 
factors that were derived from data in AEO 2015, as described in 
section IV.M. Details of the methodology are described in the 
appendices of chapters 13 and 15 of the NOPR TSD.
    Combustion emissions of CH4 and N2O are 
estimated using emissions intensity factors published by the EPA: GHG 
Emissions Factors Hub.\37\ The FFC upstream emissions are estimated 
based on the methodology described in chapter 15 of the NOPR TSD. The 
upstream emissions include both emissions from fuel combustion during 
extraction, processing, and transportation of fuel, and ``fugitive'' 
emissions (direct leakage to the atmosphere) of CH4 and 
CO2.
---------------------------------------------------------------------------

    \37\ Available at www.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 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,\38\ DOE used 
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \38\ Intergovernmental Panel on Climate Change. Anthropogenic 
and Natural Radiative Forcing. In Climate Change 2013: The Physical 
Science Basis. Contribution of Working Group I to the Fifth 
Assessment Report of the Intergovernmental Panel on Climate Change. 
Chapter 8. 2013. Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, 
S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex, and P.M. 
Midgley, Editors. Cambridge University Press: Cambridge, United 
Kingdom and New York, NY, USA.
---------------------------------------------------------------------------

    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO 2015 generally represents current 
legislation and environmental regulations, including recent government 
actions, for which implementing regulations were available as of 
October 31, 2014. DOE's estimation of impacts accounts for the presence 
of the emissions control programs discussed in the following 
paragraphs.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern States and DC were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR 
created an allowance-based trading program that operates along with the 
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court 
of Appeals for the District of Columbia Circuit, but it remained in 
effect.\39\ In 2011, EPA issued a replacement for CAIR, the Cross-State 
Air Pollution Rule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR,\40\ and the 
court ordered EPA to continue administering CAIR. On April 29, 2014, 
the U.S. Supreme Court reversed the judgment of the D.C. Circuit and 
remanded the case for further proceedings consistent with the Supreme 
Court's opinion.\41\ On October 23, 2014, the D.C. Circuit lifted the 
stay of CSAPR.\42\ Pursuant to this action, CSAPR went into effect (and 
CAIR

[[Page 52220]]

ceased to be in effect) as of January 1, 2015.
---------------------------------------------------------------------------

    \39\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); 
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
    \40\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
    \41\ See EPA v. EME Homer City Generation, 134 S. Ct. 1584, 1610 
(U.S. 2014). The Supreme Court held in part that EPA's methodology 
for quantifying emissions that must be eliminated in certain States 
due to their impacts in other downwind States was based on a 
permissible, workable, and equitable interpretation of the Clean Air 
Act provision that provides statutory authority for CSAPR.
    \42\ See Georgia v. EPA, Order (D.C. Cir. filed October 23, 
2014) (No. 11-1302).
---------------------------------------------------------------------------

    EIA was not able to incorporate CSAPR into AEO 2015, so it assumes 
implementation of CAIR. Although DOE's analysis used emissions factors 
that assume that CAIR, not CSAPR, is the regulation in force, the 
difference between CAIR and CSAPR is not significant for the purpose of 
DOE's analysis of emissions impacts from energy conservation standards.
    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an efficiency standard could be used to permit 
offsetting increases in SO2 emissions by any regulated EGU. 
In past rulemakings, DOE recognized that there was uncertainty about 
the effects of efficiency standards on SO2 emissions covered 
by the existing cap-and-trade system, but it concluded that negligible 
reductions in power sector SO2 emissions would occur as a 
result of standards.
    Beginning in 2016, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants. 
77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a 
standard for hydrogen chloride as a surrogate for acid gas hazardous 
air pollutants (HAP), and also established a standard for 
SO2 (a non-HAP acid gas) as an alternative equivalent 
surrogate standard for acid gas HAP. The same controls are used to 
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be 
reduced as a result of the control technologies installed on coal-fired 
power plants to comply with the MATS requirements for acid gas. 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.\43\ Therefore, DOE believes that energy conservation standards 
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------

    \43\ DOE notes that the Supreme Court remanded EPA's 2012 rule 
regarding national emission standards for hazardous air pollutants 
from certain electric utility steam generating units. See Michigan 
v. EPA (Case No. 14-46, 2015). DOE has tentatively determined that 
the remand of the MATS rule does not change the assumptions 
regarding the impact of energy efficiency standards on 
SO2 emissions. Further, while the remand of the MATS rule 
may have an impact on the overall amount of mercury emitted by power 
plants, it does not change the impact of the energy efficiency 
standards on mercury emissions. DOE will continue to monitor 
developments related to this case and respond to them as 
appropriate.
---------------------------------------------------------------------------

    CAIR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia.\44\ Energy conservation standards 
are expected to have little effect on NOX emissions in those 
States covered by CAIR because excess NOX emissions 
allowances resulting from the lower electricity demand could be used to 
permit offsetting increases in NOX emissions from other 
facilities. However, standards would be expected to reduce 
NOX emissions in the States not affected by the caps, so DOE 
estimated NOX emissions reductions from the standards 
considered in this NOPR for these States.
---------------------------------------------------------------------------

    \44\ CSAPR also applies to NOX, and it supersedes the 
regulation of NOX under CAIR. As stated previously, the 
current analysis assumes that CAIR, not CSAPR, is the regulation in 
force. The difference between CAIR and CSAPR with regard to DOE's 
analysis of NOX emissions is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would likely reduce Hg emissions. DOE estimated mercury 
emissions reduction using emissions factors based on AEO 2015, which 
incorporates the MATS.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this proposed rule, DOE considered 
the estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation analogous to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of products 
shipped in the forecast period for each TSL. This section summarizes 
the basis for the monetary values used for CO2 and 
NOX emissions and presents the values considered in this 
NOPR.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) climate-change-related 
changes in net agricultural productivity, human health, property 
damages from increased flood risk, and the value of ecosystem services. 
Estimates of the SCC are provided in dollars per metric ton of 
CO2. A domestic SCC value is meant to reflect the value of 
damages in the United States resulting from a unit change in 
CO2 emissions, while a global SCC value is meant to reflect 
the value of damages worldwide.
    Under section 1(b)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, ``assess both the costs and the benefits 
of the intended regulation and, recognizing that some costs and 
benefits are difficult to quantify, propose or adopt a regulation only 
upon a reasoned determination that the benefits of the intended 
regulation justify its costs.'' The purpose of the SCC estimates 
presented here is to allow agencies to incorporate the monetized social 
benefits of reducing CO2 emissions into cost-benefit 
analyses of regulatory actions. The estimates are presented with an 
acknowledgement of the many uncertainties involved and with a clear 
understanding that they should be updated over time to reflect 
increasing knowledge of the science and economics of climate impacts.
    As part of the interagency process that developed these SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    When attempting to assess the incremental economic impacts of 
CO2 emissions, the analyst faces a number of challenges. A 
report from the National Research Council \45\ points out that any 
assessment will suffer from uncertainty, speculation, and lack of 
information about (1) future emissions of GHGs, (2) the effects of past 
and future emissions on the climate system, (3) the impact of changes 
in climate on the physical and biological environment, and (4) the

[[Page 52221]]

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.
---------------------------------------------------------------------------

    \45\ National Research Council. Hidden Costs of Energy: Unpriced 
Consequences of Energy Production and Use. 2009. National Academies 
Press: Washington, DC.
---------------------------------------------------------------------------

    Despite the limits of both quantification and monetization, SCC 
estimates can be useful in estimating the social benefits of reducing 
CO2 emissions. The agency can estimate the benefits from 
reduced (or costs from increased) emissions in any future year by 
multiplying the change in emissions in that year by the SCC values 
appropriate for that year. The NPV of the benefits can then be 
calculated by multiplying each of these future benefits by an 
appropriate discount factor and summing across all affected years.
    It is important to emphasize that the interagency process is 
committed to updating these estimates as the science and economic 
understanding of climate change and its impacts on society improves 
over time. In the meantime, the interagency group will continue to 
explore the issues raised by this analysis and consider public comments 
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing carbon dioxide emissions. To ensure consistency in how 
benefits are evaluated across Federal agencies, the Administration 
sought to develop a transparent and defensible method, specifically 
designed for the rulemaking process, to quantify avoided climate change 
damages from reduced CO2 emissions. The interagency group 
did not undertake any original analysis. Instead, it combined SCC 
estimates from the existing literature to use as interim values until a 
more comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: Global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approach and Key Assumptions
    After the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specially, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC: The FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and were used in the last 
assessment of the Intergovernmental Panel on Climate Change (IPCC). 
Each model was given equal weight in the SCC values that were 
developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models, while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models: Climate sensitivity, socio-economic and emissions 
trajectories, and discount rates. A probability distribution for 
climate sensitivity was specified as an input into all three models. In 
addition, the interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the interagency group selected four sets of SCC values for 
use in regulatory analyses. Three sets of values are based on the 
average SCC from the three integrated assessment models, at discount 
rates of 2.5, 3, and 5 percent. The fourth set, which represents the 
95th percentile SCC estimate across all three models at a 3-percent 
discount rate, was included to represent higher-than-expected impacts 
from climate change further out in the tails of the SCC distribution. 
The values grow in real terms over time. Additionally, the interagency 
group determined that a range of values from 7 percent to 23 percent 
should be used to adjust the global SCC to calculate domestic 
effects,\46\ although preference is given to consideration of the 
global benefits of reducing CO2 emissions. Table IV.5 
presents the values in the 2010 interagency group report,\47\ which is 
reproduced in appendix 14A of the NOPR TSD.
---------------------------------------------------------------------------

    \46\ 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.
    \47\ United States Government-Interagency Working Group on 
Social Cost of Carbon. Social Cost of Carbon for Regulatory Impact 
Analysis Under Executive Order 12866. February 2010. https://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf.

                      Table IV.5--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       Percentile
----------------------------------------------------------------------------------------------------------------
2010............................................             4.7            21.4            35.1            64.9
2015............................................             5.7            23.8            38.4            72.8
2020............................................             6.8            26.3            41.7            80.7
2025............................................             8.2            29.6            45.9            90.4
2030............................................             9.7            32.8            50.0           100.0
2035............................................            11.2            36.0            54.2           109.7
2040............................................            12.7            39.2            58.4           119.3
2045............................................            14.2            42.1            61.7           127.8
2050............................................            15.7            44.9            65.0           136.2
----------------------------------------------------------------------------------------------------------------


[[Page 52222]]

    The SCC values used for this document were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature, as described in the 
2013 update from the interagency working group (revised July 2015).\48\ 
Table IV.6 shows the updated sets of SCC estimates from the latest 
interagency update in 5-year increments from 2010 through 2050. The 
full set of annual SCC estimates from 2010 through 2050 is reported in 
appendix 14B of the NOPR TSD. The central value that emerges is the 
average SCC across models at the 3-percent discount rate. However, for 
purposes of capturing the uncertainties involved in regulatory impact 
analysis, the interagency group emphasizes the importance of including 
all four sets of SCC values.
---------------------------------------------------------------------------

    \48\ 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.6--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              10              31              50              86
2015............................................              11              36              56             105
2020............................................              12              42              62             123
2025............................................              14              46              68             138
2030............................................              16              50              73             152
2035............................................              18              55              78             168
2040............................................              21              60              84             183
2045............................................              23              64              89             197
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 because they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned previously points out that there is tension 
between the goal of producing quantified estimates of the economic 
damages from an incremental ton of carbon and the limits of existing 
efforts to model these effects. There are a number of analytical 
challenges that are being addressed by the research community, 
including research programs housed in many of the Federal agencies 
participating in the interagency process to estimate the SCC. The 
interagency group intends to periodically review and reconsider those 
estimates to reflect increasing knowledge of the science and economics 
of climate impacts, as well as improvements in modeling.\49\
---------------------------------------------------------------------------

    \49\ 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. In July 2015 OMB 
published a detailed summary and formal response to the many 
comments that were received; this is available at 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 values from the 
2013 interagency report (revised July 2015), adjusted to 2015$ using 
the implicit price deflator for gross domestic product (GDP) from the 
Bureau of Economic Analysis. For each of the four sets of SCC cases 
specified, the values for emissions in 2015 were $12.4, $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 decrease power sector NOX 
emissions in those 22 States not affected by the CAIR.
    DOE estimated the monetized value of NOX emissions 
reductions from electricity generation 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.\50\ The report includes high and low values for 
NOX (as PM2.5) for 2020, 2025, and 2030 using 
discount rates of 3 percent and 7 percent; these values are presented 
in chapter 14 of the NOPR TSD. DOE primarily relied on the low 
estimates to be conservative.\51\ DOE assigned values for 2021-2024 and 
2026-2029 using, respectively, the values for 2020 and 2025. DOE 
assigned values after 2030 using the value for 2030. DOE developed 
values specific to the end-use category for UPSs using a method

[[Page 52223]]

described in appendix 14C of the NOPR TSD.
---------------------------------------------------------------------------

    \50\ Available at 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.
    \51\ 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 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 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 NOPR 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.
    Schneider Electric and ITI both commented that NEMS-BT was 
identified as inadequate for modeling beyond 2025 during a DOE 
distribution transformer rulemaking. (Schneider Electric, No. 0008 at 
p. 16) (ITI, No. 0010 at p. 19)
    AEO 2015 has an end year of 2040. Beyond 2040, DOE extrapolates 
various factors. DOE acknowledges that any long-range projections are 
subject to considerable uncertainty, but NEMS provides a self-
consistent framework that accounts for a wide range of factors in the 
energy sector and the larger economy.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a proposed standard. Employment impacts from new or 
amended energy conservation standards include both direct and indirect 
impacts. Direct employment impacts are any changes in the number of 
employees of manufacturers of the products subject to standards, their 
suppliers, and related service firms. The MIA addresses those impacts. 
Indirect employment impacts are changes in national employment that 
occur due to the shift in expenditures and capital investment caused by 
the purchase and operation of more-efficient appliances. Indirect 
employment impacts from standards consist of the net jobs created or 
eliminated in the national economy, other than in the manufacturing 
sector being regulated, caused by (1) reduced spending by end users on 
energy, (2) reduced spending on new energy supply by the utility 
industry, (3) increased consumer spending on new products to which the 
new standards apply, and (4) the effects of those three factors 
throughout the economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). 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.\52\ 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 due to shifts in 
economic activity resulting from energy conservation standards.
---------------------------------------------------------------------------

    \52\ See U.S. Department of Commerce-Bureau of Economic 
Analysis. Regional Multipliers: A User Handbook for the Regional 
Input-Output Modeling System (RIMS II). 1997. U.S. Government 
Printing Office: Washington, DC. Available at http://www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf.
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this NOPR using an input/output model of the U.S. 
economy called Impact of Sector Energy Technologies version 3.1.1 
(ImSET).\53\ ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among 187 
sectors most relevant to industrial, commercial, and residential 
building energy use.
---------------------------------------------------------------------------

    \53\ J.M. Roop, M.J. Scott, and R.W. Schultz. ImSET 3.1: Impact 
of Sector Energy Technologies. 2009. Pacific Northwest National 
Laboratory: Richland, WA. PNNL-18412. Available at www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf.
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and understands the uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run for this rule. Therefore, DOE generated 
results for near-term timeframes (2019-2024), where these uncertainties 
are reduced. For more details on the employment impact analysis, see 
chapter 16 of the NOPR TSD.

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for UPSs. 
It addresses the TSLs examined by DOE, the projected impacts of each of 
these levels if adopted as energy conservation standards for UPSs, and 
the standards levels that DOE is proposing to adopt in this NOPR. 
Additional details regarding DOE's analyses are contained in the NOPR 
TSD supporting this document.

A. Trial Standard Levels

    DOE analyzed the benefits and burdens of four TSLs for UPSs. These 
TSLs were developed by combining specific efficiency levels for each of 
the product classes analyzed by DOE. DOE presents the results for the 
TSLs in this

[[Page 52224]]

document, while the results for all efficiency levels that DOE analyzed 
are in the NOPR TSD. Table V.1 presents the TSLs and the corresponding 
efficiency levels for UPSs. DOE examined product classes individually.

                                                        Table V.1--Trial Standard Levels for UPSs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Trial standard level
           Product class                  Description      ---------------------------------------------------------------------------------------------
                                                                     TSL 1                   TSL 2                  TSL 3                  TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
10a...............................  VFD UPSs                EL 1                    EL 1                    EL 2                   EL 3
10b...............................  VI UPSs                 EL 1                    EL 2                    EL 2                   EL 3
10c...............................  VFI UPSs                EL 1                    EL 1                    EL 1                   EL 3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    TSL 1 is the minimum possible standard considered, and also 
corresponds to the maximum consumer NPV for each product class. TSL 2 
represents an intermediate level of performance above the baseline, 
with maximum NES while at a positive NPV for all product classes. TSL 3 
represents an intermediate level of performance above TSL 2, and 
corresponds to maximum NES while at positive NPV in aggregate across 
all three product classes (the NPV of VFD UPSs is marginally negative). 
Finally, TSL 4 represents the maximum technologically feasible (``max-
tech'') energy efficiency for all product classes and therefore, the 
maximum NES.

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on UPS consumers by looking at 
the effects potential new standards at each TSL would have on the LCC 
and PBP. DOE also examined the impacts of potential standards on 
consumer subgroups. These analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency 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 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 NOPR TSD 
provides detailed information on the LCC and PBP analyses.
    Table V.2 through Table V.4 show the LCC and PBP results for the 
TSL efficiency levels considered for each product class. In the first 
of each pair of tables, the simple payback is measured relative to the 
baseline product (EL 0). In Table V.5 through Table V.7, impacts are 
measured relative to the efficiency distribution in the no-standards 
case in the compliance year (see section IV.F.8 of this NOPR). Because 
some consumers purchase products with higher efficiency in the no-
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 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 by Efficiency Level for Product Class 10a
                                                                       [VFD UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Residential
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0              97              14              64             162  ..............             5.0
1.......................................               1              92               6              25             117             0.0             5.0
2.......................................               1              92               6              25             117             0.0             5.0
3.......................................               2             121               4              18             139             2.3             5.0
4.......................................               3             139               3              14             153             3.8             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Commercial
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0              70              10              46             116  ..............             5.0
1.......................................               1              66               4              18              84             0.0             5.0
2.......................................               1              66               4              18              84             0.0             5.0
3.......................................               2              91               3              13             104             2.8             5.0
4.......................................               3             107               2              10             117             4.5             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


[[Page 52225]]


                                    Table V.3--Average LCC and PBP Results by Efficiency Level for Product Class 10b
                                                                        [VI UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Residential
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             111              19             108             219  ..............             6.3
1.......................................               1             141               9              53             193             3.0             6.3
2.......................................               2             162               6              34             196             3.9             6.3
3.......................................               2             162               6              34             196             3.9             6.3
4.......................................               3             623               4              20             643            33.2             6.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Commercial
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0              80              14              76             156  ..............             6.3
1.......................................               1             106               7              37             143             3.6             6.3
2.......................................               2             125               4              24             149             4.7             6.3
3.......................................               2             125               4              24             149             4.7             6.3
4.......................................               3             533               3              14             547            39.8             6.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


                                    Table V.4--Average LCC and PBP Results by Efficiency Level for Product Class 10c
                                                                        [VI UPSs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Average costs (2015$)
                                                         ---------------------------------------------------------------- Simple payback      Average
                   TSL                          EL                         First year's      Lifetime                         (years)        lifetime
                                                          Installed cost  operating cost  operating cost        LCC                           (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Residential
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             408             125            1066            1474  ..............            10.0
1.......................................               1             460             111             948            1408             3.7            10.0
2.......................................               1             460             111             948            1408             3.7            10.0
3.......................................               1             460             111             948            1408             3.7            10.0
4.......................................               3            1180              71             609            1789            14.4            10.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Commercial
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       0             293              86             693             986  ..............            10.0
1.......................................               1             338              77             616             955             4.8            10.0
2.......................................               1             338              77             616             955             4.8            10.0
3.......................................               1             338              77             616             955             4.8            10.0
4.......................................               3             974              49             396            1371            18.5            10.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline (EL 0) product.


             Table V.5--Average LCC Savings Relative to the No-Standards Case for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                      EL          Average LCC      consumers
                                                                                     savings *         that
                                                                                      (2015$)       experience
                                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
                                                   Residential
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              44               0
2...............................................................               1              44               0
3...............................................................               2               5              37
4...............................................................               3             -10              74
----------------------------------------------------------------------------------------------------------------

[[Page 52226]]

 
                                                   Commercial
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              32               0
2...............................................................               1              32               0
3...............................................................               2              -1              38
4...............................................................               3             -14              79
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


             Table V.6--Average LCC Savings Relative to the No-Standards Case for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                      EL          Average LCC   consumers that
                                                                                     savings *      experience
                                                                                      (2015$)        net cost
----------------------------------------------------------------------------------------------------------------
                                                   Residential
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              26               6
2...............................................................               2              18              35
3...............................................................               2              18              35
4...............................................................               3            -430             100
----------------------------------------------------------------------------------------------------------------
                                                   Commercial
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              13               8
2...............................................................               2               5              45
3...............................................................               2               5              45
4...............................................................               3            -394             100
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


             Table V.7--Average LCC Savings Relative to the No-Standards Case for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                                                    Percent of
                               TSL                                      EL          Average LCC   consumers that
                                                                                     savings *      experience
                                                                                      (2015$)        net cost
----------------------------------------------------------------------------------------------------------------
                                                   Residential
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              66               3
2...............................................................               1              66               3
3...............................................................               1              66               3
4...............................................................               3            -331              91
----------------------------------------------------------------------------------------------------------------
                                                   Commercial
----------------------------------------------------------------------------------------------------------------
1...............................................................               1              31               2
2...............................................................               1              31               2
3...............................................................               1              31               2
4...............................................................               3            -390             100
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


[[Page 52227]]

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households and small businesses. Table 
V.8 through Table V.10 compares the average LCC savings and PBP at each 
efficiency level for low-income households, along with the average LCC 
savings for the entire residential sample. Table V.11 through Table 
V.13 compares the average LCC savings and PBP at each TSL for small 
businesses, along with the average LCC savings for the commercial 
sample. In most cases, the average LCC savings and PBP for low-income 
households and small businesses at the considered efficiency levels are 
not substantially different from the average values found for the 
entire residential and commercial samples, respectively. Chapter 11 of 
the NOPR TSD presents the complete LCC and PBP results for the 
subgroups.

 Table V.8--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost      Simple payback period (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              47              44             0.0             0.0
2...............................................              47              44             0.0             0.0
3...............................................               7               5             2.2             2.3
4...............................................              -8             -10             3.5             3.8
----------------------------------------------------------------------------------------------------------------


 Table V.9--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost     Simple payback period  (years)
                                                         savings  (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              30              26             2.8             3.0
2...............................................              22              18             3.6             3.9
3...............................................              22              18             3.6             3.9
4...............................................            -426            -430            31.0            33.2
----------------------------------------------------------------------------------------------------------------


Table V.10--Comparison of LCC Savings and PBP for Low-Income Households and All Households for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost      Simple payback period (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                    Low-income                      Low-income    All households
                                                    households    All households    households
----------------------------------------------------------------------------------------------------------------
1...............................................              75              66             3.5             3.7
2...............................................              75              66             3.5             3.7
3...............................................              75              66             3.5             3.7
4...............................................            -302            -331            13.5            14.4
----------------------------------------------------------------------------------------------------------------


     Table V.11--Comparison of LCC Savings and PBP Small Businesses and All Businesses for Product Class 10a
                                                   [VFD UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost      Simple payback period (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................              31              32             0.0             0.0
2...............................................              31              32             0.0             0.0
3...............................................              -1              -1             2.8             2.8
4...............................................             -14             -14             4.5             4.5
----------------------------------------------------------------------------------------------------------------


[[Page 52228]]


     Table V.12--Comparison of LCC Savings and PBP Small Businesses and All Businesses for Product Class 10b
                                                    [VI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost      Simple payback period (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................              12              13             3.6             3.6
2...............................................               3               5             4.7             4.7
3...............................................               3               5             4.7             4.7
4...............................................            -396            -394            39.8            39.8
----------------------------------------------------------------------------------------------------------------


     Table V.13--Comparison of LCC Savings and PBP Small Businesses and All Businesses for Product Class 10c
                                                   [VFI UPSs]
----------------------------------------------------------------------------------------------------------------
                                                      Average life-cycle cost      Simple payback period (years)
                                                          savings (2015$)        -------------------------------
                       TSL                       --------------------------------
                                                       Small                           Small      All businesses
                                                    businesses    All businesses    businesses
----------------------------------------------------------------------------------------------------------------
1...............................................              28              31             4.8             4.8
2...............................................              28              31             4.8             4.8
3...............................................              28              31             4.8             4.8
4...............................................            -400            -390            18.5            18.5
----------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section III.D.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, and, as required by EPCA, based the energy use 
calculation on the DOE test procedure for UPSs. 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.
    TableV.14 presents the rebuttable-presumption payback periods for 
the considered TSLs for UPSs. While DOE examined the rebuttable-
presumption criterion, it considered whether the standard levels 
considered for the NOPR 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 PBPs for Product Classes 10a, 10b, and 10c
----------------------------------------------------------------------------------------------------------------
                               TSL                                10a (VFD UPSs)   10b (VI UPSs)  10c (VFI UPSs)
----------------------------------------------------------------------------------------------------------------
                                                   Residential
----------------------------------------------------------------------------------------------------------------
1...............................................................             0.0             2.8             3.5
2...............................................................             0.0             3.7             3.5
3...............................................................             2.0             3.7             3.5
4...............................................................             3.0            29.6            14.1
----------------------------------------------------------------------------------------------------------------
                                                   Commercial
----------------------------------------------------------------------------------------------------------------
1...............................................................             0.0             3.3             4.5
2...............................................................             0.0             4.5             4.5
3...............................................................             2.5             4.5             4.5
4...............................................................             3.6            35.6            18.1
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of new energy 
conservation standards on UPS manufacturers. The following section 
describes the estimated impacts on UPS manufacturers at each analyzed 
TSL. Chapter 12 of the NOPR TSD explains the analysis in further 
detail.
a. Industry Cash Flow Analysis Results
    Table V.15 and Table V.16 present the financial impacts 
(represented by changes in INPV) of analyzed standards on UPS 
manufacturers as well as the conversion costs that DOE estimates

[[Page 52229]]

UPS manufacturers would incur at each TSL. To evaluate the range of 
cash-flow impacts on the UPS industry, DOE modeled two markup scenarios 
that correspond to the range of anticipated market responses to new 
standards. Each scenario results in a unique set of cash flows and 
corresponding industry values at each TSL.
    To assess the upper (less severe) bound of the range of potential 
impacts on UPS manufacturers, DOE modeled a preservation of gross 
margin markup scenario. This scenario assumes that in the standards 
cases, manufacturers would be able to fully pass on higher production 
costs required to produce more efficient products to their consumers. 
Specifically, the industry would be able to maintain its average no-
standards case gross margin (as a percentage of revenue) despite the 
higher product costs in the standards cases. In general, the larger the 
product price increases, the less likely manufacturers are to achieve 
the cash flow from operations calculated in this scenario because it is 
less likely that manufacturers would be able to fully mark up these 
larger cost increases.
    To assess the lower (more severe) bound of the range of potential 
impacts on manufacturers, DOE modeled the pass through markup scenario. 
In this scenario DOE assumes that manufacturers are able to pass 
through the incremental costs of more efficient UPSs to their 
customers, but without earning any additional operating profit on those 
higher costs. This scenario represents the lower bound of the range of 
potential impacts on manufacturers because manufacture margins are 
compressed as a result of this markup scenario.

                Table V.15--Manufacturer Impact Analysis for Uninterruptible Power Supplies--Preservation of Gross Margin Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                        Units              No standards  ---------------------------------------------------------------
                                                                               case              1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2015$ millions..............           2,555           2,746           2,849           2,983           7,400
Change in INPV............................  2015$ millions..............  ..............             191             295             428           4,845
                                            %...........................  ..............             7.5            11.5            16.8           189.7
Product Conversion Costs..................  2015$ millions..............  ..............              16              20              20              23
Capital Conversion Costs..................  2015$ millions..............  ..............  ..............  ..............  ..............  ..............
                                                                         -------------------------------------------------------------------------------
    Total Conversion Costs................  2015$ millions..............  ..............              16              20              20              23
--------------------------------------------------------------------------------------------------------------------------------------------------------


                        Table V.16--Manufacturer Impact Analysis for Uninterruptible Power Supplies--Pass Through Markup Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Trial standard level
                                                        Units              No standards  ---------------------------------------------------------------
                                                                               case              1               2               3               4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV......................................  2015$ millions..............           2,555           2,166           1,957           1,619           (667)
Change in INPV............................  2015$ millions..............  ..............           (389)           (598)           (936)         (3,222)
                                            %...........................  ..............          (15.2)          (23.4)          (36.6)         (126.1)
Product Conversion Costs..................  2015$ millions..............  ..............              16              20              20              23
Capital Conversion Costs..................  2015$ millions..............  ..............  ..............  ..............  ..............  ..............
                                                                         -------------------------------------------------------------------------------
    Total Conversion Costs................  2015$ millions..............  ..............              16              20              20              23
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative numbers.

    TSL 1 sets the efficiency level at EL 1 for all UPSs. At TSL 1, DOE 
estimates impacts on INPV to range from -$389 million to $191 million, 
or a change in INPV of -15.2 percent to 7.5 percent. At this TSL, 
industry free cash flow is estimated to decrease by approximately 6.3 
percent to $81 million, compared to the no-standards case value of $86 
million in 2018, the year leading up to the proposed standard.
    DOE does not expect that UPS manufacturers will incur any capital 
conversion costs at any of the TSLs. DOE does expect that manufacturers 
will incur product conversion costs of $16.2 million at TSL 1, 
primarily driven by testing and certifying all covered UPSs as well as 
by increased R&D efforts necessary to redesign UPSs that do not meet 
efficiency levels required at TSL 1.
    At TSL 1, the shipment-weighted-average MPCs increase by 
approximately 11 percent for VFI UPSs and 21 percent for VI UPSs and 
decrease by approximately 3 percent for VFD UPSs relative to the no-
standards case MPCs in 2019, the expected compliance year of the 
standards. In the preservation of gross margin markup scenario, 
manufacturers are able to recover their $16.2 million in conversion 
costs over the course of the analysis period through the increases in 
MPCs for VFI and VI UPSs causing a slightly positive change in INPV at 
TSL 1 under the preservation of gross margin markup scenario.
    Under the pass through markup scenario, the MPC increases at TSL 1 
result in reductions in manufacturer markups from 1.76 in the no-
standards case to 1.67 for VFI UPSs at TSL 1 and from 1.57 in the no-
standards case to 1.44 for VI UPSs at TSL 1. The MPC decrease for VFD 
UPSs at TSL 1 results in an increase in manufacturer markup from 1.55 
in the no-standards case to 1.57 at TSL 1. The reductions in 
manufacturer markups for VFI and VI UPSs and $16.2 million in 
conversion costs incurred by manufacturers cause a moderately negative 
change in INPV at TSL 1 under the pass through markup scenario.
    TSL 2 sets the efficiency level at EL 1 for VFI and VFD UPSs and EL 
2 for VI UPSs. At TSL 2, DOE estimates impacts on INPV to range from -
$598 million to $295 million, or a change in INPV of -23.4 percent to 
11.5 percent. At this TSL, industry free cash flow is estimated to 
decrease by approximately 7.6 percent to $80 million, compared to the 
no-standards case value of $86

[[Page 52230]]

million in 2018, the year leading up to the proposed standard.
    DOE expects that product conversion costs will rise from $16.2 
million at TSL 1 to $19.6 million at TSL 2. Product conversion costs 
incurred at TSL 2 are primarily driven by testing and certifying all 
covered UPSs as well as by increased R&D efforts necessary to redesign 
UPSs that do not meet efficiency levels required at TSL 2 and VI UPSs 
to have best-in-market efficiency.
    At TSL 2, the shipment-weighted-average MPCs increase by 
approximately 11 percent for VFI UPSs and 41 percent for VI UPSs and 
decrease by approximately 3 percent for VFD UPSs relative to the no-
standards case MPCs in 2019, the expected compliance year of the 
standards. In the preservation of gross margin markup scenario, 
manufacturers are able to recover their $19.6 million in conversion 
costs over the course of the analysis period through the increases in 
MPCs for VFI and VI UPSs causing a moderately positive change in INPV 
at TSL 2 under the preservation of gross margin markup scenario.
    Under the pass through markup scenario at TSL 2, the MPC increases 
result in reductions in manufacturer markups from 1.76 in the no-
standards case to 1.67 for VFI UPSs at TSL 2 and from 1.57 in the no-
standards case to 1.37 for VI UPSs at TSL 2. The MPC decrease for VFD 
UPSs at TSL 2 results in an increase in manufacturer markup from 1.55 
in the no-standards case to 1.57 in the standards case at TSL 2. The 
reductions in manufacturer markups for VFI and VI UPSs and $19.6 
million in conversion costs cause a significantly negative change in 
INPV at TSL 2 under the pass through markup scenario.
    TSL 3 sets the efficiency level at EL 1 for VFI UPSs and EL 2 for 
VI and VFD UPSs. At TSL 3, DOE estimates impacts on INPV to range from 
-$936 million to $428 million, or a change in INPV of -36.6 percent to 
16.8 percent. At this TSL, industry free cash flow is estimated to 
decrease by approximately 8.0 percent to $80 million, compared to the 
no-standards case value of $86 million in 2018, the year leading up to 
the proposed standard.
    DOE expects that product conversion costs will rise slightly from 
$19.6 million at TSL 2 to $20.4 million at TSL 3. Product conversion 
costs incurred at TSL 3 are primarily driven by testing and certifying 
all covered UPSs as well as by increased R&D efforts necessary to 
redesign UPSs that do not meet efficiency levels required at TSL 3 and 
VI and VFD UPSs to have best-in-market efficiency at TSL 3.
    At TSL 3, the shipment-weighted-average MPCs increase by 
approximately 11 percent for VFI UPSs, 41 percent for VI UPSs, and 24 
percent for VFD UPSs relative to the no-standards case MPCs in 2019, 
the expected compliance year of the standards. In the preservation of 
gross margin markup scenario, manufacturers are able to recover their 
$20.4 million in conversion costs over the course of the analysis 
period through the increases in MPCs causing a moderately positive 
change in INPV at TSL 3 under the preservation of gross margin markup 
scenario.
    Under the pass through markup scenario at TSL 3, the increases in 
shipment-weighted-average MPCs result in reductions in manufacturer 
markups, from 1.76 in the no-standards case to 1.67 for VFI UPSs at TSL 
3, from 1.57 in the no-standards case to 1.37 for VI UPSs at TSL 3, and 
from 1.55 in the no-standards case to 1.43 for VFD UPSs at TSL 3. These 
reductions in manufacturer markups and $20.4 million in conversion 
costs incurred by manufacturers cause a significantly negative change 
in INPV at TSL 3 under the pass through markup scenario.
    TSL 4 sets the efficiency level at EL 3 for all UPSs, which 
represents max-tech. At TSL 4, DOE estimates impacts on INPV to range 
from -$3,222 million to $4,845 million, or a change in INPV of -126.1 
percent to 189.7 percent. At this TSL, industry free cash flow is 
estimated to decrease by approximately 9.0 percent to $79 million, 
compared to the no-standards case value of $86 million in 2018, the 
year leading up to the proposed standard.
    DOE expects that product conversion costs will rise from $20.4 
million at TSL 3 to $23.0 million at TSL 4. Product conversion costs 
incurred at TSL 4 are primarily driven by testing and certifying all 
covered UPSs as well as by increased R&D efforts necessary to redesign 
UPSs that do not meet efficiency levels required at TSL 4 to have best-
in-market efficiency and to use the most efficient materials and 
semiconductor components available.
    At TSL 4, the shipment-weighted-average MPCs increase significantly 
by approximately 209 percent for VFI UPSs, 504 percent for VI UPSs, and 
45 percent for VFD UPSs relative to the no-standards case MPCs in 2019, 
the expected compliance year of the standards. In the preservation of 
gross margin markup scenario, manufacturers are able to recover their 
$23.0 million in conversion costs over the course of the analysis 
period through the increases in MPCs causing a significantly positive 
change in INPV at TSL 4 under the preservation of gross margin markup 
scenario.
    Under the pass through markup scenario at TSL 4, the MPC increases 
result in reductions in manufacturer markups, from 1.76 in the no-
standards case to 1.30 for VFI UPSs at TSL 4, from 1.57 in the no-
standards case to 1.30 for VI UPSs at TSL 4, and from 1.55 in the no-
standards case to 1.36 for VFD UPSs at TSL 4. These reductions in 
manufacturer markups and $23.0 million in conversion costs incurred by 
manufacturers cause a significantly negative change in INPV at TSL 4 
under the pass through markup scenario.
b. Impacts on Employment
    As part of the direct employment impact analysis, DOE attempted to 
quantify the number of domestic workers involved in UPS production. 
Manufacturer interviews and DOE's research indicate that all UPS 
components that would be modified to improve the efficiency of UPSs are 
manufactured abroad. DOE was able to identify a handful of UPS 
manufacturers that do assemble these UPS components domestically. 
However, based on manufacturer interviews, DOE does not believe that 
there would be an impact on the amount of domestic workers involved in 
the assembly of UPSs due to new energy conservation standards. While 
the components of UPS configurations may change, DOE estimates that the 
same amount of labor would be needed to assemble these products. 
Therefore, DOE did not conduct a quantitative domestic manufacturing 
employment impact analysis on UPS manufacturers for this rulemaking.
    DOE also recognizes there are several UPS and UPS component 
manufacturers that have employees in the U.S. that work on design, 
technical support, sales, training, testing, certification, and other 
requirements. However, in interviews, manufacturers generally did not 
expect any negative changes in the domestic employment of the design, 
technical support, or other departments of UPS and UPS component 
manufacturers located in the U.S. in response to new energy 
conservation standards.
    DOE seeks comment on its determination that all UPS manufacturing 
takes place abroad. Additionally, DOE seeks comment on the presence of 
any domestic UPS manufacturing beyond assembly, R&D, testing, and 
certification, and if there are any potential negative impacts to 
domestic employment that could arise due to energy conservation 
standards on UPSs that are not fully captured by the

[[Page 52231]]

direct employment impact analysis (see section VII.E).
c. Impacts on Manufacturing Capacity
    UPS manufacturers stated that they did not anticipate any capacity 
constraints at any of the analyzed ELs, given a three-year timeframe 
from the publication of a final rule and the compliance year.
    DOE seeks comment on any potential UPS and UPS component 
manufacturer capacity constraints caused by the proposed standards in 
this NOPR (see section VII.E).
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop an industry cash-flow 
estimate may not be adequate for assessing differential impacts among 
manufacturer subgroups. Small manufacturers, niche product 
manufacturers, and manufacturers exhibiting cost structures 
substantially different from the industry average could be affected 
disproportionately. lDOE identified one manufacturer subgroup that it 
believes could be disproportionally impacted by energy conservation 
standards and would require a separate analysis in the MIA, small 
businesses. DOE analyzes the impacts on small businesses in a separate 
analysis in section VI.B of this NOPR as part of the Regulatory 
Flexibility Analysis. DOE did not identify any other adversely impacted 
manufacturer subgroups for this rulemaking based on the results of the 
industry characterization.
    DOE seeks comment on any other manufacturer subgroups that DOE 
should analyze and/or types of UPS manufacturers for the manufacturer 
subgroup analysis, including the identification of UPS manufacturer 
subgroups that should be analyzed separately (see section VII.E).
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves considering 
the cumulative impact of multiple DOE standards and the regulatory 
actions of other Federal agencies and States that affect the 
manufacturers of a covered product. A standard level is not 
economically justified if it contributes to an unacceptable cumulative 
regulatory burden. While any one regulation may not impose a 
significant burden on manufacturers, the combined effects of several 
existing or impending regulations may have serious consequences for 
some manufacturers, groups of manufacturers, or an entire industry. 
Assessing the impact of a single regulation may overlook this 
cumulative regulatory burden. In addition to energy conservation 
standards, other regulations can significantly affect manufacturers' 
financial operations. Multiple regulations affecting the same 
manufacturer can strain profits and lead companies to abandon product 
lines or markets with lower expected future returns than competing 
products. For these reasons, DOE conducts an analysis of cumulative 
regulatory burden as part of its rulemakings pertaining to appliance 
efficiency.
    Some UPS manufacturers could also make other products that could be 
subject to energy conservation standards set by DOE. DOE looks at these 
regulations that could affect UPS manufacturers that will take effect 
approximately 3 years before or after the estimated 2019 compliance 
date of any amended energy conservation standards for UPSs. These 
energy conservation standards include external power supplies that have 
a compliance date in 2016 \54\ and battery chargers that have a 
compliance date in 2018.\55\
---------------------------------------------------------------------------

    \54\ Energy conservation standards for external power supplies 
that become effective on February 10, 2016. 79 FR 7846. [Docket 
Number EERE-2008-BT-STD-0005-0219]
    \55\ Energy conservation standards for battery chargers will 
become effective on June 13, 2018. 81 FR 38266. [Docket Number EERE-
2008-BT-STD-0005]
---------------------------------------------------------------------------

    The compliance dates and expected industry conversion costs of 
relevant energy conservation standards are indicated in Table V.17. DOE 
notes that very few of the products listed in Table V.17 are 
manufactured domestically.

      Table V.17--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Uninterruptible Power Supply
                                                                      Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Number of
                                             Number of                            Estimated INPV (no new    Estimated total industry  manufacturers from
Federal energy  conservation standards    manufacturers *     Compliance date        standards case)           conversion expense        today's rule
                                                                                                                                          affected **
--------------------------------------------------------------------------------------------------------------------------------------------------------
External Power Supplies...............                 679                2016  $274 million (2012$).....  $43.3 million (2012$)....                   7
79 FR 7846 (February 10, 2014)........
Battery Chargers......................                 107       [dagger] 2018  $79,904 million (2013$)..  $19.5 million (2013$)....                   3
XX FR XXX (Month, Day, 2016)..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The number of manufacturers listed in the final rule for the energy conservation standard that is contributing to cumulative regulatory burden.
** The number of manufacturers producing UPSs that are affected by the listed energy conservation standards.
[dagger] The final rule for this energy conservation standard has not been published. The data points in the table are estimates from the pre-
  publication stage.

    DOE discusses these and other requirements and includes the full 
details of the cumulative regulatory burden analysis in chapter 12 of 
the NOPR TSD. DOE will continue to evaluate its approach to assessing 
cumulative regulatory burden for use in future rulemakings to ensure 
that it is effectively capturing the overlapping impacts of its 
regulations. In particular, DOE will assess whether looking at rules 
where any portion of the compliance period potentially overlaps with 
the compliance period for the subject rulemaking would yield a more 
accurate reflection of cumulative regulatory burden.
    DOE seeks comment on the compliance costs of any other regulations 
on products that UPS manufacturers also manufacture, especially if 
compliance with those regulations is required within three years before 
or after the estimated compliance date of this proposed standard (2019) 
(see section VII.E). Additionally, DOE welcomes comment on how it 
analyzes and considers cumulative regulatory burden.

[[Page 52232]]

3. National Impact Analysis
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential standards 
for UPSs, DOE compared their energy consumption under the no-standards 
case to 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 year of anticipated compliance 
with amended standards (2019-2048). Table V.18 present DOE's 
projections of the national energy savings for each TSL considered for 
UPSs. The savings were calculated using the approach described in 
section IV.H of this NOPR.

         Table V.18--Cumulative National Primary Energy Savings for UPSs Shipped in 2019-2048 (quads) *
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Product class             Description   ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
10a............................  VFD UPS........            0.24            0.24            0.31            0.36
10b............................  VI UPS                     0.41            0.59            0.59            0.73
10c............................  VFI UPS                    0.31            0.31            0.31            1.44
                                                 ---------------------------------------------------------------
    Total *....................  ...............            0.95            1.13            1.20            2.53
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


                Table V.19--Cumulative National Energy Savings Including Full-Full-Cycle for UPSs
                                         Shipped in 2019-2048 (quads) *
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Product class             Description   ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
10a............................  VFD UPS........            0.25            0.25            0.32            0.38
10b............................  VI UPS                     0.42            0.61            0.61            0.76
10c............................  VFI UPS                    0.33            0.33            0.33            1.51
                                                 ---------------------------------------------------------------
    Total *....................  ...............            1.00            1.18            1.26            2.65
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.

    OMB Circular A-4 \56\ 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 9-year period is a proxy for the 
timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\57\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to UPSs. 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 9-year analytical period are presented in Table 
V.20. The impacts are counted over the lifetime of UPSs purchased in 
2019-2027.
---------------------------------------------------------------------------

    \56\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. www.whitehouse.gov/omb/circulars_a004_a-4/.
    \57\ 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 products, the 
compliance period is 5 years rather than 3 years.

                        Table V.20--Cumulative National Primary Energy Savings for UPSs;
                                   9 Years of Shipments (2019-2027) (quads) *
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Product class             Description   ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
10a............................  VFD UPS........            0.06            0.06            0.07            0.09
10b............................  VI UPS                     0.10            0.14            0.14            0.17
10c............................  VFI UPS                    0.07            0.07            0.07            0.34
                                                 ---------------------------------------------------------------
    Total *....................  ...............            0.23            0.27            0.29            0.60
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


[[Page 52233]]


               Table V.21--Cumulative National Energy Savings Including Full-Fuel-Cycle for UPSs;
                                   9 Years of Shipments (2019-2027) (quads) *
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
         Product class             Description   ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
10a............................  VFD UPS........            0.06            0.06            0.08            0.09
10b............................  VI UPS                     0.10            0.15            0.15            0.18
10c............................  VFI UPS                    0.08            0.08            0.08            0.35
                                                 ---------------------------------------------------------------
    Total *....................  ...............            0.24            0.28            0.30            0.62
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for UPSs. In 
accordance with OMB's guidelines on regulatory analysis,\58\ DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V.22 shows the consumer NPV results with impacts counted 
over the lifetime of products purchased in 2019-2048.
---------------------------------------------------------------------------

    \58\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis,'' section E, (Sept. 17, 2003) (Available at: 
http://www.whitehouse.gov/omb/circulars_a004_a-4/).

           Table V.22--Cumulative Net Present Value of Consumer Benefits for UPSs Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                               Trial standard level (billion 2015$)
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
3 percent.......................................             4.8             4.4             2.4             -51
7 percent.......................................             2.2             1.9            0.75             -29
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.23. The impacts are counted over the 
lifetime of products purchased in 2019-2027. As mentioned previously, 
such results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology or decision 
criteria.

                    Table V.23--Cumulative Net Present Value of Consumer Benefits for [UPSs];
                                        9 Years of Shipments (2019-2027)
----------------------------------------------------------------------------------------------------------------
                                                               Trial standard level (billion 2015$)
                  Discount rate                  ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
3 percent.......................................             1.4             1.2            0.61             -16
7 percent.......................................            0.89            0.75            0.26             -13
----------------------------------------------------------------------------------------------------------------

    The above results reflect the use of no price trend for UPSs over 
the analysis period (see section IV.F.1 of this document).
c. Indirect Impacts on Employment
    DOE expects energy conservation standards for UPSs to reduce energy 
bills for consumers of those products, with the resulting net savings 
being redirected to other forms of economic activity. These expected 
shifts in spending and economic activity could affect the demand for 
labor. As described in section IV.N of this document, DOE used an 
input/output model of the U.S. economy to estimate indirect employment 
impacts of the TSLs that DOE considered in this rulemaking. DOE 
understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term timeframes 
(2016-2048), where these uncertainties are reduced.
    The results suggest that the proposed 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 NOPR TSD presents detailed results 
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    Based on testing conducted in support of this proposed rule, 
discussed in section IV.C.1.b of this NOPR, DOE has tentatively 
concluded that the standards proposed in this NOPR would not reduce the 
utility or performance of the UPSs under consideration in this 
rulemaking. Manufacturers of these products currently offer units that 
meet or exceed the proposed standards.
5. Impact of Any Lessening of Competition
    As discussed in section III.D.1.e, the Attorney General determines 
the impact, if any, of any lessening of competition likely to result 
from a

[[Page 52234]]

proposed standard, and transmits such determination in writing to the 
Secretary, together with an analysis of the nature and extent of such 
impact. To assist the Attorney General in making this determination, 
DOE has provided DOJ with copies of this NOPR and the accompanying TSD 
for review. DOE will consider DOJ's comments on the proposed rule in 
determining whether to proceed to a final rule. DOE will publish and 
respond to DOJ's comments in that document. DOE invites comment from 
the public regarding the competitive impacts that are likely to result 
from this proposed rule. In addition, stakeholders may also provide 
comments separately to DOJ regarding these potential impacts. See the 
ADDRESSES section for information to send comments to DOJ.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. As a measure of this reduced 
demand, chapter 15 in the NOPR TSD presents the estimated reduction in 
generating capacity, relative to the no-standards case, for the TSLs 
that DOE considered in this rulemaking.
    Energy conservation resulting from new standards for UPSs is 
expected to yield environmental benefits in the form of reduced 
emissions of air pollutants and greenhouse gases. Table V.24 provides 
DOE's estimate of cumulative emissions reductions expected to result 
from the TSLs considered in this rulemaking. The table includes both 
power sector emissions and upstream emissions. The emissions were 
calculated using the multipliers discussed in section IV.K. DOE reports 
annual emissions reductions for each TSL in chapter 13 of the NOPR TSD.

                    Table V.24--Cumulative Emissions Reduction for UPSs Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                 ---------------------------------------------------------------
                                                         1               2               3               4
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................            57.4            68.2            72.6             152
SO2 (thousand tons).............................            33.8            40.2            42.8            89.2
NOX (thousand tons).............................            63.5            75.5            80.4             169
Hg (tons).......................................           0.126           0.149           0.159           0.332
CH4 (thousand tons).............................            4.84            5.76            6.14            12.8
N2O (thousand tons).............................           0.685           0.815           0.868            1.81
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................            3.20            3.80            4.04            8.52
SO2 (thousand tons).............................           0.595           0.707           0.752            1.58
NOX (thousand tons).............................            45.8            54.4            57.9             122
Hg (tons).......................................          0.0013          0.0016          0.0017          0.0035
CH4 (thousand tons).............................             253             301             320             674
N2O (thousand tons).............................           0.029           0.035           0.037           0.078
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......................            60.5            72.0            76.7           160.6
SO2 (thousand tons).............................            34.3            40.9            43.5            90.7
NOX (thousand tons).............................             109             130             138             291
Hg (tons).......................................           0.127           0.151           0.161           0.335
CH4 (thousand tons).............................             258             306             326             686
CH4 (thousand tons CO2eq) *.....................            7220            8580            9120           19200
N2O (thousand tons).............................           0.714           0.850           0.905            1.89
N2O (thousand tons CO2eq) *.....................             189             225             240             500
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).

    As part of the analysis for this proposed rule, DOE estimated 
monetary benefits likely to result from the reduced emissions of 
CO2 and NOX that DOE estimated for each of the 
considered TSLs for UPSs. As discussed in section IV.L of this 
document, for CO2, DOE used the most recent values for the 
SCC developed by an interagency process. The four sets of SCC values 
for CO2 emissions reductions in 2015 resulting from that 
process (expressed in 2015$) 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 (public health, economic and environmental) as the 
projected magnitude of climate change increases.
    Table V.25 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; these results are presented in chapter 
14 of the NOPR TSD.

[[Page 52235]]



                Table V.25--Estimates of Global Present Value of CO2 Emissions Reduction for UPSs
                                              Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                              SCC case * (million 2015$)
                                     ---------------------------------------------------------------------------
                 TSL                  5% discount rate,  3% discount rate,    2.5% discount    3% discount rate,
                                           average            average         rate, average     95th percentile
----------------------------------------------------------------------------------------------------------------
                                             Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
1...................................                445               1960               3080               5960
2...................................                530               2330               3670               7100
3...................................                565               2480               3910               7560
4...................................               1170               5160               8130              15700
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...................................               24.3                108                170                329
2...................................               29.0                129                203                392
3...................................               30.9                137                216                417
4...................................               64.0                286                451                871
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1...................................                469               2070               3250               6290
2...................................                559               2460               3870               7490
3...................................                596               2620               4120               7980
4...................................               1230               5440               8580              16600
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2, and $118
  per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
world economy continues to evolve rapidly. Thus, any value placed on 
reduced CO2 emissions in this rulemaking is subject to 
change. DOE, together with other Federal agencies, will continue to 
review various methodologies for estimating the monetary value of 
reductions in CO2 and other GHG emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological 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 proposed 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 the considered TSLs for UPSs. The dollar-
per-ton values that DOE used are discussed in section IV.L of this 
document. Table V.26 presents the cumulative present values for 
NOX emissions for each TSL calculated using 7-percent and 3-
percent discount rates. This table presents values that use the low 
dollar-per-ton values, which reflect DOE's primary estimate. Results 
that reflect the range of NOX dollar-per-ton values are 
presented in Table V.28.

  Table V.26--Estimates of Present Value of NOX Emissions Reduction for
                       UPSs Shipped in 2019-2048 *
------------------------------------------------------------------------
                                                   Million 2015$
                                         -------------------------------
                   TSL                      3% discount     7% discount
                                               rate            rate
------------------------------------------------------------------------
                         Power Sector Emissions
------------------------------------------------------------------------
1.......................................             136            62.6
2.......................................             162            74.8
3.......................................             172            79.9
4.......................................             355             161
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................            94.6            42.5
2.......................................             113            50.8
3.......................................             120            54.2
4.......................................             249           109.9
------------------------------------------------------------------------
                           Total FFC Emissions
------------------------------------------------------------------------
1.......................................             230             105
2.......................................             274             126
3.......................................             292             134
4.......................................             603             271
------------------------------------------------------------------------
* Results are based on the low benefit-per-ton values.

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)(VII)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.27 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the 
NPV of consumer savings calculated for each TSL considered in this 
rulemaking, at both a 7-percent and 3-percent discount rate. The 
CO2 values used in the columns of each table correspond to 
the 2015 values in the four sets of SCC values discussed above.

[[Page 52236]]



Table V.27--Net Present Value of Consumer Savings Combined With Present Value of Monetized Benefits From CO2 and
                                            NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                             Consumer NPV at 3% discount rate added with: (billion 2015$)
                                     ---------------------------------------------------------------------------
                 TSL                   SCC case $12.4/t   SCC case $40.6/    SCC case $63.2/t   SCC case $118/t
                                        and 3% low NOX    tand 3% low NOX     and 3% low NOX     and 3% low NOX
                                            values             values             values             values
----------------------------------------------------------------------------------------------------------------
1...................................               5.51               7.11               8.30               11.3
2...................................               5.23               7.14               8.55               12.2
3...................................               3.29               5.32               6.82               10.7
4...................................             (49.4)             (45.2)             (42.0)             (34.0)
----------------------------------------------------------------------------------------------------------------


 
                                             Consumer NPV at 7% discount rate added with: (billion 2015$)
                                     ---------------------------------------------------------------------------
                 TSL                   SCC case $12.4/t   SCC case $40.6/t   SCC case $63.2/t   SCC case $118/t
                                        and 7% low NOX     and 7% low NOX     and 7% low NOX     and 7% low NOX
                                            values             values             values             values
----------------------------------------------------------------------------------------------------------------
1...................................               2.75               4.35               5.53               8.57
2...................................               2.55               4.46               5.87               9.48
3...................................               1.48               3.50               5.01               8.86
4...................................             (28.0)             (23.7)             (20.6)             (12.6)
----------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
Note: The SCC case values represent the global SCC in 2015, in [2015]$ per metric ton (t), for each case.

    In considering the above results, two issues are relevant. First, 
the national operating cost savings are domestic U.S. monetary savings 
that occur as a result of market transactions, while the value of 
CO2 reductions is based on a global value. Second, the 
assessments of operating cost savings and the SCC are performed with 
different methods that use different time frames for analysis. The 
national operating cost savings is measured for the lifetime of 
products shipped in 2019-2048. Because CO2 emissions have a 
very long residence time in the atmosphere,\59\ the SCC values in 
future years reflect future CO2-emissions impacts that 
continue beyond 2100.
---------------------------------------------------------------------------

    \59\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, M. Z. Correction to ``Control of 
fossil-fuel particulate black carbon and organic matter, possibly 
the most effective method of slowing global warming.'' J. Geophys. 
Res. 2005. 110: D14105. doi:10.1029/2005JD005888.
---------------------------------------------------------------------------

C. Conclusion

    When considering proposed standards, the new or amended energy 
conservation 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 NOPR, DOE considered the impacts of new standards for UPSs 
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 as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard 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, between 
renters and owners, or builders and purchasers). Having less than 
perfect foresight and a high degree of uncertainty about the future, 
consumers may trade off these types of investments at a higher than 
expected rate between current consumption and uncertain future energy 
cost savings.
    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 the 
purchase of a product in the standards case, this decreases sales for 
product manufacturers, and the impact on manufacturers attributed to 
lost revenue 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 regulatory option decreases the number of products 
purchased by consumers, this decreases the potential energy savings 
from an energy conservation standard. DOE provides estimates of 
shipments and changes in the volume of product purchases in chapter 9 
of the NOPR TSD. However, DOE's current analysis does not explicitly 
control for

[[Page 52237]]

heterogeneity in consumer preferences, preferences across subcategories 
of products or specific features, or consumer price sensitivity 
variation according to household income.\60\
---------------------------------------------------------------------------

    \60\ P.C. Reiss and M.W. White. Household Electricity Demand, 
Revisited. Review of Economic Studies. 2005. 72(3): pp., 853-883. 
doi: http://restud.oxfordjournals.org/content/72/3/853.
---------------------------------------------------------------------------

    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 energy conservation 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\61\ 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.
---------------------------------------------------------------------------

    \61\ Sanstad, A.H. Notes on the Economics of Household Energy 
Consumption and Technology Choice. 2010. Lawrence Berkeley National 
Laboratory. https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf.
---------------------------------------------------------------------------

1. Benefits and Burdens of TSLs Considered for UPS Standards
    Table V.28 and Table V.29 summarize the quantitative impacts 
estimated for each TSL for UPSs. The national impacts are measured over 
the lifetime of UPSs purchased in the 30-year period that begins in the 
anticipated year of compliance with amended standards (2019-2048). 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 of this NOPR.

                    Table V.28--Summary of Analytical Results for UPS TSLs: National Impacts
----------------------------------------------------------------------------------------------------------------
            Category                     TSL 1               TSL 2               TSL 3               TSL 4
----------------------------------------------------------------------------------------------------------------
                                 Cumulative FFC National Energy Savings (quads)
----------------------------------------------------------------------------------------------------------------
                                  1.00..............  1.18..............  1.26..............  2.65.
----------------------------------------------------------------------------------------------------------------
                               NPV of Consumer Costs and Benefits (billion 2015$)
----------------------------------------------------------------------------------------------------------------
3% discount rate................  4.81..............  4.40..............  2.41..............  (51.2).
7% discount rate................  2.17..............  1.87..............  0.749.............  (29.5).
----------------------------------------------------------------------------------------------------------------
                            Cumulative FFC Emissions Reduction (Total FFC Emissions)
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons).......  60.5..............  72.0..............  76.7..............  161.
SO2 (thousand tons).............  34.3..............  40.9..............  43.5..............  90.7.
NOX (thousand tons).............  109...............  130...............  138...............  291.
Hg (tons).......................  0.127.............  0.151.............  0.161.............  0.335.
CH4 (thousand tons).............  258...............  306...............  326...............  686.
CH4 (thousand tons CO2eq) *.....  7,220.............  8,580.............  9,120.............  19,200.
N2O (thousand tons).............  0.714.............  0.850.............  0.905.............  1.89.
N2O (thousand tons CO2eq) *.....  189...............  225...............  240...............  500.
----------------------------------------------------------------------------------------------------------------
                               Value of Emissions Reduction (Total FFC Emissions)
----------------------------------------------------------------------------------------------------------------
CO2 (billion 2015$) **..........  0.469 to 6.29.....  0.559 to 7.49.....  0.596 to 7.98.....  1.229 to 16.6.
NOX--3% discount rate (million    230 to 525........  274 to 625........  292 to 667........  603 to 1380.
 2015$).
NOX--7% discount rate (million    105 to 237........  126 to 283........  134 to 302........  271 to 611.
 2015$).
----------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* 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.


            Table V.29--Summary of Analytical Results for UPS TSLs: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
                   Category                        TSL 1 *         TSL 2 *         TSL 3 *          TSL 4 *
----------------------------------------------------------------------------------------------------------------
                                              Manufacturer Impacts
----------------------------------------------------------------------------------------------------------------
Industry NPV (2015$ millions) (No-standards       2,166-2,746     1,957-2,849     1,619-2,983        (667)-7,400
 case INPV = 2,555)..........................
Industry NPV Change:
    (2015$ millions).........................       (389)-191       (598)-295       (936)-428      (3,222)-4,845
    (%)......................................       (0.2)-0.1       (0.2)-0.1       (0.4)-0.2          (1.3)-1.9
----------------------------------------------------------------------------------------------------------------
                                      Consumer Average LCC Savings (2015$)
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)...............................              33              33          (0.08)               (13)
10b (VI UPSs)................................              14             6.1             6.1              (400)

[[Page 52238]]

 
10c (VFI UPSs)...............................              35              35              35              (380)
----------------------------------------------------------------------------------------------------------------
                                           Consumer Simple PBP (years)
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)...............................             0.0             0.0             2.7                4.4
10b (VI UPSs)................................             3.5             4.6             4.6                 39
10c (VFI UPSs)...............................             4.7             4.7             4.7                 18
----------------------------------------------------------------------------------------------------------------
                                 Percent of Consumers That Experience a Net Cost
----------------------------------------------------------------------------------------------------------------
10a (VFD UPSs)...............................              0%              0%             38%                79%
10b (VI UPSs)................................            7.6%             44%             44%               100%
10c (VFI UPSs)...............................            2.3%            2.3%            2.3%                99%
----------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative (-) values.

    DOE first considered TSL 4, which represents the max-tech 
efficiency levels. TSL 4 would save an estimated 2.65 quads of energy, 
an amount DOE considers significant. Under TSL 4, the NPV of consumer 
benefit would be -$29.5 billion using a discount rate of 7 percent, and 
-$51.2 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 161 Mt of 
CO2, 90.7 thousand tons of SO2, 291 thousand tons 
of NOX, 0.335 ton of Hg, 686 thousand tons of 
CH4, and 1.89 thousand tons of N2O. The estimated 
monetary value of the CO2 emissions reduction at TSL 4 
ranges from $1.23 billion to $16.6 billion.
    At TSL 4, the average LCC impact is a savings of -$13 for VFD UPSs, 
-$400 for VI UPSs, and -$380 for VFI UPSs. The simple payback period is 
4.4 years for VFD UPSs, 39 years for VI UPSs, and 18 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 79 
percent for VFD UPSs, 100 percent for VI UPSs, and 99 percent for VFI 
UPSs.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$3,222 million to an increase of $4,845 million, which represents a 
decrease of 126.1 percent to an increase of 189.7 percent, 
respectively.
    The Secretary tentatively concludes that at TSL 4 for UPSs, the 
benefits of energy savings, emission reductions, and the estimated 
monetary value of the emissions reductions would be outweighed by the 
negative NPV of consumer benefits, economic burden on most consumers, 
and the impacts on manufacturers, including the conversion costs and 
profit margin impacts that could result in a large reduction in INPV. 
Consequently, the Secretary has tentatively concluded that TSL 4 is not 
economically justified.
    DOE then considered TSL 3, which would save an estimated 1.26 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be $749 million using a discount rate of 7 
percent, and $2.41 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 76.7 Mt of 
CO2, 43.5 thousand tons of SO2, 138 thousand tons 
of NOX, 0.161 tons of Hg, 326 thousand tons of 
CH4, and 0.905 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 3 ranges from $0.596 billion to $7.98 billion.
    At TSL 3, the average LCC impact is a savings of -$0.08 for VFD 
UPSs, $6.1 for VI UPSs, and $35 for VFI UPSs. The simple payback period 
is 2.7 years for VFD UPSs, 4.6 years for VI UPSs, and 4.7 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 38 
percent for VFD UPSs, 44 percent for VI UPSs, and 2.3 percent for VFI 
UPSs.
    At TSL 3, the projected change in INPV ranges from a decrease of 
$936 million to an increase of $428 million, which represents a 
decrease of 36.6 percent to an increase of 16.8 percent, respectively.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has tentatively concluded that at TSL 3 for 
UPSs, the benefits of energy savings, overall positive NPV of consumer 
benefits, emissions reductions, and the estimated monetary value of the 
emissions reductions would be outweighed by the negative impacts on 
some consumers and potential negative impacts on manufacturers, 
including the conversion costs that could result in a reduction in INPV 
for manufacturers. In particular, the average LCC is negative for the 
VFD UPS product class. Consequently, the Secretary has tentatively 
concluded that TSL 3 is not economically justified.
    DOE then considered TSL 2, which would save an estimated 1.18 quads 
of energy, an amount DOE considers significant. Under TSL 2, the NPV of 
consumer benefit would be $1.87 billion using a discount rate of 7 
percent, and $4.40 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 2 are 72.0 Mt of 
CO2, 40.9 thousand tons of SO2, 130 thousand tons 
of NOX, 0.151 tons of Hg, 306 thousand tons of 
CH4, and 0.850 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reduction at 
TSL 2 ranges from $0.559 billion to $7.49 billion.
    At TSL 2, the average LCC impact is a savings of $33 for VFD UPSs, 
$6.1 for VI UPSs, and $35 for VFI UPSs. The simple payback period is 
immediate for VFD UPSs, 4.6 years for VI UPSs, and 4.7 years for VFI 
UPSs. The fraction of consumers experiencing a net LCC cost is 0 
percent for VFD UPSs, 44 percent for VI UPSs, and 2.3 percent for VFI 
UPSs.
    At TSL 2, the projected change in INPV ranges from a decrease of 
$598 million to an increase of $295 million, which represents a 
decrease of 23.4 percent to an increase of 11.5 percent, respectively.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has tentatively concluded that at TSL 2 for 
UPSs, 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 outweigh 
the negative impacts on some consumers and on manufacturers, including 
the conversion costs that could result in a reduction in INPV for 
manufacturers. Accordingly, the

[[Page 52239]]

Secretary has tentatively concluded that TSL 2 would offer the maximum 
improvement in efficiency that is technologically feasible and 
economically justified, and would result in the significant 
conservation of energy.
    Therefore, based on the above considerations, DOE proposes to adopt 
the energy conservation standards for UPSs at TSL 2. The proposed 
amended energy conservation standards for UPSs are shown in Table V.30.
[GRAPHIC] [TIFF OMITTED] TP05AU16.023

2. Summary of Annualized Benefits and Costs of the Proposed Standards
    The benefits and costs of the proposed standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
the sum of (1) the annualized national economic value (expressed in 
2015$) of the benefits from operating products that meet the proposed 
standards (consisting primarily of operating cost savings from using 
less energy, minus increases in product purchase costs) and (2) the 
annualized monetary value of the benefits of CO2 and 
NOX emission reductions.\62\
---------------------------------------------------------------------------

    \62\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2015, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(2020, 2030, etc.), and then discounted the present value from each 
year to 2015. The calculation uses discount rates of 3 and 7 percent 
for all costs and benefits except for the value of CO2 
reductions, for which DOE used case-specific discount rates. Using 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period, starting in the compliance year that yields the 
same present value.
---------------------------------------------------------------------------

    Table V.31 shows the annualized values for UPSs under TSL 2, 
expressed in 2015$. 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 corresponding to a value of $40.6/t 
in 2015 (2015$)), the estimated cost of the proposed standards for UPSs 
is $234 million per year in increased equipment costs, while the 
estimated annual benefits are $406 million in reduced equipment 
operating costs, $133 million in CO2 reductions, and $11.6 
million in reduced NOX emissions. In this case, the net 
benefit amounts to $317 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
average SCC series corresponding to a value of $40.6/t in 2015 (2015$), 
the estimated cost of the proposed standards for UPSs is $250 million 
per year in increased equipment costs, while the estimated annual 
benefits are $488 million in reduced operating costs, $133 million in 
CO2 reductions, and $14.8 million in reduced NOX 
emissions. In this case, the net benefit amounts to $386 million per 
year.

      Table V.31--Annualized Benefits and Costs of Proposed Energy Conservation Standards for UPSs (TSL 2)
----------------------------------------------------------------------------------------------------------------
                                                                          million 2015$/year
                                                     -----------------------------------------------------------
                                  Discount rate  (%)                       Low net benefits    High net benefits
                                                      Primary estimate *      estimate *          estimate *
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.  7.................  406...............  348...............  462.
                                  3.................  488...............  413...............  565.
CO2 Reduction Monetized Value     5.................  40.1..............  35.5..............  44.4.
 ($12.4/t case) **.
CO2 Reduction Monetized Value     3.................  133...............  117...............  148.
 ($40.6/t case) **.

[[Page 52240]]

 
CO2 Reduction Monetized Value     2.5...............  194...............  171...............  216.
 ($63.2/t case) **.
CO2 Reduction Monetized Value     3.................  405...............  357...............  451.
 ($118/t case) **.
NOX Reduction Monetized Value     7.................  11.6..............  10.4..............  28.6.
 [Dagger].
                                  3.................  14.8..............  13.1..............  37.5.
    Total Benefits [Dagger].....  7 plus CO2 range..  458 to 823........  394 to 716........  535 to 941.
                                  7.................  551...............  476...............  638.
                                  3 plus CO2 range..  543 to 908........  462 to 783........  647 to 1,050.
                                  3.................  636...............  544...............  751.
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Consumer Incremental Product      7.................  234...............  209...............  256.
 Costs.
                                  3.................  250...............  221...............  277.
----------------------------------------------------------------------------------------------------------------
                                                  Net Benefits
----------------------------------------------------------------------------------------------------------------
    Total [Dagger]..............  7 plus CO2 range..  224 to 589........  185 to 507........  278 to 685.
                                  7.................  317...............  267...............  382.
                                  3 plus CO2 range..  293 to 658........  241 to 563........  369 to 776.
                                  3.................  386...............  323...............  473.
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with UPSs shipped in 2019-2048. These results
  include benefits to consumers which accrue after 2048 from the products purchased in 2019-2048. The results
  account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of
  which may be incurred in preparation for the rule. The Primary, Low 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. Note that the Benefits and Costs may not sum to the Net Benefits due
  to rounding.
** The CO2 values represent global monetized values of the SCC, in 2015$ per metric ton (t), in 2015 under
  several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions
  calculated using 5-percent, 3-percent, and 2.5-percent discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC
  time series incorporate an escalation factor.
[dagger] DOE estimated the monetized value of NOX emissions reductions associated with electricity savings 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 www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L for further
  discussion. For DOE's 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 DOE's High Net Benefits Estimate, the benefit-per-ton
  estimates were based on the Six Cities study (Lepuele et al. 2011), which are nearly two-and-a-half times
  larger than those from the ACS study.
[Dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average
  SCC with a 3-percent discount rate ($40.6/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2
  range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values
  are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems that the proposed standards set forth in this NOPR 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 the proposed 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

[[Page 52241]]

consistent with a statutory mandate. DOE has included these documents 
in the rulemaking record.
    In addition, the Administrator of OIRA has determined that the 
proposed regulatory action is an ``economically'' significant 
regulatory action under section (3)(f)(1) of Executive Order 12866. 
Accordingly, pursuant to section 6(a)(3)(C) of the Order, DOE has 
provided to OIRA an assessment, including the underlying analysis, of 
benefits and costs anticipated from the regulatory action, together 
with, to the extent feasible, a quantification of those costs; and an 
assessment, including the underlying analysis, of costs and benefits of 
potentially effective and reasonably feasible alternatives to the 
planned regulation, and an explanation why the planned regulatory 
action is preferable to the identified potential alternatives. These 
assessments can be found in the technical support document for this 
rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of cumulative regulations; (3) select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity); 
(4) to the extent feasible, specify performance objectives, rather than 
specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, OIRA has emphasized that such techniques may include 
identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes. For the 
reasons stated in the preamble, DOE believes that this NOPR is 
consistent with these principles, including the requirement that, to 
the extent permitted by law, benefits justify costs and that net 
benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (Aug. 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).
    For manufacturers of UPSs, the Small Business Administration (SBA) 
has set a size threshold, which defines those entities classified as 
``small businesses'' for the purposes of the statute. DOE used the 
SBA's small business size standards to determine whether any small 
entities would be subject to the requirements of the rule. See 13 CFR 
part 121. The size standards are listed by North American Industry 
Classification System (NAICS) code and industry description and are 
available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf
    UPS manufacturing is classified under NAICS 335999, ``All Other 
Miscellaneous Electrical Equipment and Component Manufacturing.'' The 
SBA sets a threshold of 500 employees or less for an entity to be 
considered as a small business manufacturer of those product classes.
    To estimate the number of companies that could be small businesses 
that manufacture or sell UPSs covered by this rulemaking, DOE conducted 
a market survey using publicly available information. DOE first 
attempted to identify all potential UPS manufacturers by researching 
certification databases (e.g., DOE's Compliance Database and EPA's 
ENERGY STAR, \63\) retailer Web sites, individual company Web sites, 
and the SBA's database. DOE then attempted to gather information on the 
location and number of employees to determine if these companies met 
SBA's definition of a small business for each potential UPS 
manufacturer by reaching out directly to those potential small 
businesses and using market research tools (e.g., www.hoovers.com, 
www.manta.com, www.glassdoor.com, www.linkedin.com, etc.). DOE also 
asked stakeholders and industry representatives if they were aware of 
any small businesses during manufacturer interviews. DOE used 
information from these sources to create a list of companies that 
potentially manufacture or sell UPSs and would be impacted by this 
rulemaking. DOE eliminated companies that do not meet the definition of 
a ``small business,'' or are completely foreign owned and operated.
---------------------------------------------------------------------------

    \63\ ENERGY STAR. Energy Star Certified Products. Last accessed 
May 4, 2015. < http://www.energystar.gov/>.
---------------------------------------------------------------------------

    DOE initially identified a total of 48 potential companies that 
sell UPSs in the United States. Of these, DOE estimated that 12 are 
small business. After reviewing publicly available information on these 
potential small UPS businesses, DOE determined that none of these 
businesses manufacture the UPSs that they sell in the United States or 
are subsidiaries of the foreign companies that manufacture UPSs. 
Additionally it is not thought that DOE's regulation of UPSs will put 
small businesses in the U.S. that purchase UPSs from foreign 
manufacturers at a competitive disadvantage in the marketplace, because 
these companies are not responsible for the conversion costs to comply 
with standards as these UPS companies do not own the manufacturing 
facilities and tooling used to produce UPSs. Because there are no 
domestic small business UPS manufacturers, DOE's UPS regulation will 
not have a direct effect on U.S. small business in this manufacturing 
space. As such, DOE certifies that this proposed rulemaking will not 
have a significant economic impact on a substantial number of small 
entities, and the preparation of an IRFA is not warranted.
    DOE will provide its certification and supporting statement of 
factual basis to the Chief Counsel for Advocacy of the SBA for review 
under 5 U.S.C. 605(b). DOE seeks comment on its tentative conclusion 
that the proposed standard will not have a significant impact on a 
substantial number of small entities.

[[Page 52242]]

C. Review Under the Paperwork Reduction Act

    Manufacturers of UPSs 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 procedure for UPSs, including any amendments adopted for that test 
procedure. DOE has established regulations for the certification and 
recordkeeping requirements for all covered consumer products and 
commercial equipment. 76 FR 12422 (March 7, 2011). The collection-of-
information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(PRA). This requirement has been approved by OMB under OMB control 
number 1910-1400. DOE requested OMB approval of an extension of this 
information collection for three years, specifically including the 
collection of information for battery chargers, and estimated that the 
annual number of burden hours under this extension is 30 hours per 
company. In response to DOE's request, OMB approved DOE's information 
collection requirements covered under OMB control number 1910-1400 
through November 30, 2017. 80 FR 5099 (January 30, 2015).
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act (NEPA) of 1969, 
DOE has determined that the proposed rule fits within the category of 
actions included in Categorical Exclusion (CX) B5.1 and otherwise meets 
the requirements for application of a CX. (See 10 CFR part 1021, App. 
B, B5.1(b); 1021.410(b) and App. B, B(1)-(5).) The proposed rule fits 
within this category of actions because it is a rulemaking that 
establishes energy conservation standards for consumer products or 
industrial equipment, and for which none of the exceptions identified 
in CX B5.1(b) apply. Therefore, DOE has made a CX determination for 
this rulemaking, and DOE does not need to prepare an Environmental 
Assessment or Environmental Impact Statement for this proposed rule. 
DOE's CX determination for this proposed rule is available at http://energy.gov/nepa/categorical-exclusion-cx-determinations-cx/.

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
imposes certain requirements on Federal agencies formulating and 
implementing policies or regulations that preempt State law or that 
have Federalism implications. The Executive Order requires agencies to 
examine the constitutional and statutory authority supporting any 
action that would limit the policymaking discretion of the States and 
to carefully assess the necessity for such actions. The Executive Order 
also requires agencies to have an accountable process to ensure 
meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications. 
On March 14, 2000, DOE published a statement of policy describing the 
intergovernmental consultation process it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
proposed rule and has tentatively determined that it would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. EPCA 
governs and prescribes Federal preemption of State regulations as to 
energy conservation for the products that are the subject of this 
proposed rule. States can petition DOE for exemption from such 
preemption to the extent, and based on criteria, set forth in EPCA. (42 
U.S.C. 6297) Therefore, no further action is required by Executive 
Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' imposes on Federal agencies the general duty 
to adhere to the following requirements (1) eliminate drafting errors 
and ambiguity, (2) write regulations to minimize litigation, (3) 
provide a clear legal standard for affected conduct rather than a 
general standard, and (4) promote simplification and burden reduction. 
61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 
3(a), section 3(b) of Executive Order 12988 specifically requires that 
Executive agencies make every reasonable effort to ensure that the 
regulation: (1) clearly specifies the preemptive effect, if any, (2) 
clearly specifies any effect on existing Federal law or regulation, (3) 
provides a clear legal standard for affected conduct while promoting 
simplification and burden reduction, (4) specifies the retroactive 
effect, if any, (5) adequately defines key terms, and (6) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. Section 3(c) of 
Executive Order 12988 requires Executive agencies to review regulations 
in light of applicable standards in section 3(a) and section 3(b) to 
determine whether they are met or it is unreasonable to meet one or 
more of them. DOE has completed the required review and determined 
that, to the extent permitted by law, this proposed rule meets the 
relevant standards of Executive Order 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed regulatory action likely to result in a rule that may 
cause the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect 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.
    Although this proposed rule does not contain a Federal 
intergovernmental mandate, it may require expenditures of $100 million 
or more in any one year by the private sector. Such expenditures may 
include: (1) investment in research and development and in capital 
expenditures by UPS manufacturers in the years between the final rule 
and the

[[Page 52243]]

compliance date for the new standards, and (2) incremental additional 
expenditures by consumers to purchase higher-efficiency UPS, starting 
at the compliance date for the applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. (2 U.S.C. 1532(c)) The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of this NOPR and the TSD for this 
proposed rule respond to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(d), 
(f), and (o), 6313(e), and 6316(a), this proposed rule would establish 
new energy conservation standards for UPS 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 proposed rule.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Public Law 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 proposed 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 
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 
(Oct. 7, 2002). DOE has reviewed this NOPR under the OMB and DOE 
guidelines and has concluded that it is consistent with applicable 
policies in those guidelines.

K. Review Under Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001), requires Federal agencies to prepare and submit to OIRA 
at OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgates or is expected to lead to promulgation of 
a final rule, and that (1) is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
proposes new energy conservation standards for UPS, is not a 
significant energy action because the proposed standards are not likely 
to have a significant adverse effect on the supply, distribution, or 
use of energy, nor has it been designated as such by the Administrator 
at OIRA. Accordingly, DOE has not prepared a Statement of Energy 
Effects on this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' 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: 
www.energy.gov/eere/buildings/peer-review.

VII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this proposed 
rule. If you plan to attend the public meeting, please notify the 
Appliance and Equipment Standards Staff at (202) 586-6636 or 
[email protected].
    Please note that foreign nationals visiting DOE Headquarters are 
subject to advance security screening procedures which require advance 
notice prior to attendance at the public meeting. If a foreign national 
wishes to participate in the public meeting, please inform DOE

[[Page 52244]]

of this fact as soon as possible by contacting Ms. Regina Washington at 
(202) 586-1214 or by email ([email protected]) so that the 
necessary procedures can be completed.
    DOE requires visitors to have laptops and other devices, such as 
tablets, checked upon entry into the Forrestal Building. Any person 
wishing to bring these devices into the building will be required to 
obtain a property pass. Visitors should avoid bringing these devices, 
or allow an extra 45 minutes to check in. Please report to the 
visitor's desk to have devices checked before proceeding through 
security.
    Due to the REAL ID Act implemented by the Department of Homeland 
Security (DHS), there have been recent changes regarding identification 
(ID) requirements for individuals wishing to enter Federal buildings 
from specific States and U.S. territories. As a result, driver's 
licenses from several States or territory will not be accepted for 
building entry, and instead, one of the alternate forms of ID listed 
below will be required. DHS has determined that regular driver's 
licenses (and ID cards) from the following jurisdictions are not 
acceptable for entry into DOE facilities: Alaska, American Samoa, 
Arizona, Louisiana, Maine, Massachusetts, Minnesota, New York, 
Oklahoma, and Washington. Acceptable alternate forms of Photo-ID 
include: U.S. Passport or Passport Card; an Enhanced Driver's License 
or Enhanced ID-Card issued by the States of Minnesota, New York, or 
Washington (Enhanced licenses issued by these States are clearly marked 
Enhanced or Enhanced Driver's License); a military ID or other Federal 
government-issued Photo-ID card.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at https://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=26. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

    Any person who has plans to present a prepared general statement 
may request that copies of his or her statement be made available at 
the public meeting. Such persons may submit requests, along with an 
advance electronic copy of their statement in PDF (preferred), 
Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to 
the appropriate address shown in the ADDRESSES section at the beginning 
of this proposed rule. The request and advance copy of statements must 
be received at least one week before the public meeting and may be 
emailed, hand-delivered, or sent by mail. DOE prefers to receive 
requests and advance copies via email. Please include a telephone 
number to enable DOE staff to make follow-up contact, if needed.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in accordance with section 336 of EPCA. (42 U.S.C. 
6306) A court reporter will be present to record the proceedings and 
prepare a transcript. DOE reserves the right to schedule the order of 
presentations and to establish the procedures governing the conduct of 
the public meeting. There shall not be discussion of proprietary 
information, costs or prices, market share, or other commercial matters 
regulated by U.S. anti-trust laws. After the public meeting, interested 
parties may submit further comments on the proceedings, as well as on 
any aspect of the rulemaking, until the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE), 
before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to this rulemaking. The official conducting the public 
meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this document and will be accessible on the DOE Web site. In 
addition, any person may buy a copy of the transcript from the 
transcribing reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov Web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the Web site will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section below.

[[Page 52245]]

    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery/courier, or 
mail also will be posted to www.regulations.gov. If you do not want 
your personal contact information to be publicly viewable, do not 
include it in your comment or any accompanying documents. Instead, 
provide your contact information in a cover letter. Include your first 
and last names, email address, telephone number, and optional mailing 
address. The cover letter will not be publicly viewable as long as it 
does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No 
telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked ``confidential'' including all the 
information believed to be confidential, and one copy of the document 
marked ``non-confidential'' with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential 
status of the information and treat it according to its determination.
    Factors of interest to DOE when evaluating requests to treat 
submitted information as confidential include (1) a description of the 
items, (2) whether and why such items are customarily treated as 
confidential within the industry, (3) whether the information is 
generally known by or available from other sources, (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality, (5) an explanation of the 
competitive injury to the submitting person that would result from 
public disclosure, (6) when such information might lose its 
confidential character due to the passage of time, and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    (1) DOE requests comments on the potential technology options 
identified for improving the efficiency of UPSs. See section IV.A.2 for 
further detail.
    (2) DOE requests comment on its screening analysis used to select 
the most viable options for consideration in setting this proposed 
standards. See section IV.B.2 for further detail.
    (3) DOE requests comment on the ELs selected for each product class 
for its analysis. See section IV.C.2 for further detail.
    (4) DOE requests comment on its understanding of why less efficient 
UPSs continue to exist in the market place at a price higher than more 
efficient units. See section IV.C.3 for further detail.
    (5) DOE requests further comment on the average loading conditions 
for UPS product classes. See section IV.E for further detail.
    (6) DOE requests additional information on UPS shipment volumes and 
projections. See section IV.G for further detail.
    (7) DOE requests comment on commercial and residential price 
elasticity data for UPS product classes. See section IV.G for further 
detail.
    (8) DOE requests comment or data that may inform historical or 
forecasted efficiency trends for UPSs. See section IV.H for further 
detail.
    (9) DOE seeks comment on its use of 6.1 percent as a discount rate 
for UPS manufacturers. See section IV.J.2 for further detail.
    (10) DOE seeks comment on its determination that product redesigns 
necessary to meet the ELs required by the proposed standard would not 
require investments in equipment and tooling, and on its determination 
that the majority of product design cycles would either take place 
before or coincide with the compliance period of the potential 
standards for UPSs. See section IV.J.2.a for further detail.
    (11) DOE seeks comment on its methodology used to calculate product 
conversion costs, including the assumption of no capital conversion 
costs or stranded assets for UPS manufacturers at analyzed ELs. See 
section IV.J.2.a for further detail.
    (12) DOE seeks comment on its methodology used to calculate 
manufacturer markups, its use of different manufacturer markups for 
each product class, and the specific manufacturer markups DOE estimated 
for each UPS product class. See section IV.J.2.d for further detail.
    (13) DOE seeks comment on its determination that all UPS 
manufacturing takes place abroad. Additionally, DOE seeks comment on 
the presence of any domestic UPS manufacturing beyond assembly, R&D, 
testing, and certification, and if there are any potential negative 
impacts to domestic employment that could arise due to energy 
conservation standards on UPSs that are not fully captured by the 
direct employment impact analysis. See section V.B.2.b for further 
detail.
    (14) DOE seeks comment on any potential UPS component manufacturer 
capacity constraints caused by the proposed standards in this NOPR. See 
section V.B.2.c for further detail.
    (15) DOE seeks comment on any other manufacturer subgroups that DOE 
should analyze and/or types of UPS manufacturers for the manufacturer 
subgroup analysis, including the identification of UPS manufacturer 
subgroups that should be analyzed separately. See section V.B.2.d for 
further detail.
    (16) DOE seeks comment on the compliance costs that UPS 
manufacturers must make for any other regulations, especially if 
compliance with those regulations is required within three years before 
or after the estimated compliance year of this

[[Page 52246]]

proposed standard (2019). See section V.B.2.e for further detail.
    (17) DOE seeks comment on its tentative conclusion that the 
proposed standard will not have a significant impact on a substantial 
number of small entities. See section VI.B.3 for further detail.
    (18) DOE invites comment from the public regarding the competitive 
impacts that are likely to result from this proposed rule. In addition, 
stakeholders may also provide comments separately to DOJ regarding 
these potential impacts. See ADDRESSES section for information to send 
comments to DOJ. See section V.B.5 for further detail.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

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 July 25, 2016.
David Friedman,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble, DOE proposes to amend 
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 adding paragraph (z)(3) to read as 
follows:


Sec.  430.32   Energy and water conservation standards and their 
effective dates.

* * * * *
    (z) * * *
    (3) All uninterruptible power supplies (UPS) manufactured on and 
after [DATE 2 years after final rule Federal Register publication], 
shall have an average load adjusted efficiency that meets or exceeds 
the values shown in the table below based on the rated output power 
(Prated) of the UPS.
[GRAPHIC] [TIFF OMITTED] TP05AU16.024

[FR Doc. 2016-18446 Filed 8-4-16; 8:45 am]
 BILLING CODE 6450-01-P