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DEPARTMENT OF ENERGY documents (‘‘ECS documents’’) that conservation standards for various establish or amend the energy consumer products and certain 10 CFR Parts 429, 430, and 431 conservation standards for commercial commercial and industrial equipment. [EERE–2013–BT–STD–0030, EERE–2013– packaged boilers, portable air In addition to specifying a list of BT–STD–0033, EERE–2013–BT–STD–0040 conditioners, industrial air compressors, covered consumer products and and EERE–2016–BT–STD–0022] and uninterruptible power supplies. commercial equipment, EPCA contains These four documents are being provisions that enable the Secretary of RINs 1904–AD01, 1904–AD02, 1904–AC83 published to comply with an order from Energy to classify additional types of and 1904–AD69 the U.S. District Court for the Northern consumer products as covered products. Energy Conservation Program: Energy District of California in the consolidated On April 18, 2016, the U.S. Department Conservation Standards cases of Natural Resources Defense of Energy (DOE or the Department) Council, et al. v. Perry and People of the published a final coverage AGENCY: Office of Energy Efficiency and State of California et al. v. Perry, Case determination to classify portable air Renewable Energy, Department of No. 17–cv–03404–VC. This order was conditioners (ACs) as covered consumer Energy. affirmed by the Ninth Circuit in a products under the applicable ACTION: Final action; implementation of subsequent appeal, Case Nos. 18–15380 provisions in EPCA. In this final rule, court order. and 18–15475, and, accordingly, DOE is DOE establishes new energy publishing these documents pursuant to conservation standards for portable ACs. SUMMARY: Pursuant to an order from the the District Court’s order. DOE has determined that the energy U.S. District Court for the Northern Pursuant to this order, DOE submitted conservation standards for these District of California in the consolidated the documents, as originally signed and products would result in significant cases of Natural Resources Defense dated in 2016. By publishing this final conservation of energy, and are Council, et al. v. Perry and People of the action, DOE reaffirms the validity of the technologically feasible and State of California et al. v. Perry, Case original signatures on the ECS economically justified. No. 17–cv–03404–VC, as affirmed by the documents under 1 CFR 18.1 and 18.7. DATES: The effective date of this rule is U.S. Court of Appeals for the Ninth Each of the ECS documents is March 10, 2020. Compliance with the Circuit in the consolidated cases Nos. substantively identical to the documents standards established for portable ACs 18–15380 and 18–15475, the previously posted to DOE’s website. in this final rule is required on and after Department of Energy (‘‘DOE’’) is However, consistent with the normal January 10, 2025. publishing elsewhere in this issue of the publication process, each document has ADDRESSES: Federal Register four final rule The docket for this been reviewed and edited to ensure that rulemaking, which includes Federal documents that either establish or the requirements set out by the amend the energy conservation Register notices, public meeting Administrative Committee of the attendee lists and transcripts, standards for commercial packaged Federal Register (1 CFR chapter I) and boilers, portable air conditioners, comments, and other supporting the Office of the Federal Register documents/materials, is available for industrial air compressors, and (Document Drafting Handbook, uninterruptible power supplies. review at www.regulations.gov. All www.archives.gov/federal-register/write/ documents in the docket are listed in DATES: January 10, 2020. handbook/ddh/pdf) regarding the www.regulations.gov index. ADDRESSES: The docket, which includes formatting and organizational structure However, not all documents listed in Federal Register notices, comments, have been satisfied. the index may be publicly available, and other supporting documents/ Signed in Washington, DC, on December 2, such as information that is exempt from materials, is available for review at 2019. public disclosure. http://www.regulations.gov. All Daniel Simmons, The docket web page can be found at documents in the docket are listed in Assistant Secretary for Energy Efficiency and https://www.regulations.gov/docket? the http://www.regulations.gov index. Renewable Energy. D=EERE-2013-BT-STD-0033. The docket However, some documents listed in the [FR Doc. 2019–26345 Filed 1–9–20; 8:45 am] web page contains simple instructions index, such as those containing BILLING CODE 6450–01–P on how to access all documents, information that is exempt from public including public comments, in the disclosure, may not be publicly docket. available. DEPARTMENT OF ENERGY For further information on how to Docket: The docket web pages for review the docket, contact the each of the documents referenced in the 10 CFR Parts 429 and 430 Appliance and Equipment Standards summary above are listed in each Program staff at (202) 586–6636 or by individual document establishing or [Docket Number EERE–2013–BT–STD– 0033] email: ApplianceStandardsQuestions@ amending an energy conservation ee.doe.gov. standard. The docket web page contains RIN 1904–AD02 FOR FURTHER INFORMATION CONTACT: simple instructions on how to access all Energy Conservation Program: Energy Mr. Bryan Berringer, U.S. Department documents, including public comments, of Energy, Office of Energy Efficiency in the docket. Conservation Standards for Portable Air Conditioners and Renewable Energy, Building FOR FURTHER INFORMATION CONTACT: For Technologies Office, EE–5B, 1000 further information on how to review AGENCY: Office of Energy Efficiency and Independence Avenue SW, Washington, the docket, contact the Appliance and Renewable Energy, Department of DC 20585–0121. Telephone: (202) 586– Equipment Standards Program staff at Energy. 0371. Email: Bryan.Berringer@ (202) 586–6636 or by email: Appliance ACTION: Final rule. ee.doe.gov. [email protected]. Ms. Sarah Butler, U.S. Department of SUPPLEMENTARY INFORMATION: Elsewhere SUMMARY: The Energy Policy and Energy, Office of the General Counsel, in this issue of the Federal Register, Conservation Act of 1975 (EPCA or the GC–33, 1000 Independence Avenue SW, DOE is publishing four separate Act), as amended, prescribes energy Washington, DC 20585–0121.
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Telephone: (202) 586–1777. Email: 7. Discount Rates D. Review Under the National [email protected]. 8. Energy Efficiency Distribution in the No- Environmental Policy Act of 1969 New-Standards Case E. Review Under Executive Order 13132 SUPPLEMENTARY INFORMATION: 9. Payback Period Analysis F. Review Under Executive Order 12988 Table of Contents G. Shipments Analysis G. Review Under the Unfunded Mandates H. National Impact Analysis Reform Act of 1995 I. Synopsis of the Final Rule 1. Product Efficiency Trends H. Review Under the Treasury and General A. Benefits and Costs to Consumers 2. National Energy Savings Government Appropriations Act, 1999 B. Impact on Manufacturers 3. Net Present Value Analysis I. Review Under Executive Order 12630 C. National Benefits and Costs I. Consumer Subgroup Analysis J. Review Under the Treasury and General D. Conclusion J. Manufacturer Impact Analysis Government Appropriations Act, 2001 II. Introduction 1. Overview K. Review Under Executive Order 13211 A. Authority 2. Government Regulatory Impact Model L. Review Under the Information Quality B. Background (GRIM) and Key Inputs Bulletin for Peer Review III. General Discussion a. Manufacturer Production Costs M. Congressional Notification A. Product Classes and Scope of Coverage VII. Approval of the Office of the Secretary B. Test Procedure b. Shipment Projections C. Technological Feasibility c. Product and Capital Conversion Costs I. Synopsis of the Final Rule 1. General d. Markup Scenarios 1 2. Maximum Technologically Feasible 3. Discussion of Comments Title III, Part B of the Energy Policy Levels K. Emissions Analysis and Conservation Act of 1975 (EPCA or D. Energy Savings L. Monetizing Carbon Dioxide and Other the Act), Public Law 94–163 (42 U.S.C. 1. Determination of Savings Emissions Impacts 6291–6309, as codified), established the 2. Significance of Savings 1. Social Cost of Carbon Energy Conservation Program for E. Economic Justification a. Monetizing Carbon Dioxide Emissions b. Development of Social Cost of Carbon Consumer Products Other Than 1. Specific Criteria Automobiles.2 In addition to specifying a. Economic Impact on Manufacturers and Values Consumers c. Current Approach and Key Assumptions a list of covered residential products b. Savings in Operating Costs Compared to 2. Social Cost of Methane and Nitrous and commercial equipment, EPCA Increase in Price Oxide contains provisions that enable the c. Energy Savings 3. Social Cost of Other Air Pollutants Secretary of Energy to classify d. Lessening of Utility or Performance of M. Utility Impact Analysis additional types of consumer products Products N. Employment Impact Analysis as covered products. (42 U.S.C. e. Impact of Any Lessening of Competition V. Analytical Results and Conclusions 6292(a)(20)) In a final determination of f. Need for National Energy Conservation A. Trial Standard Levels (TSLs) coverage published in the Federal g. Other Factors B. Economic Justification and Energy 2. Rebuttable Presumption Savings Register on April 18, 2016 (the ‘‘April F. Other Issues 1. Economic Impacts on Individual 2016 Final Coverage Determination’’), IV. Methodology and Discussion of Related Consumers DOE classified portable ACs as covered Comments a. Life-Cycle Cost and Payback Period consumer products under EPCA. 81 FR A. Market and Technology Assessment b. Consumer Subgroup Analysis 22514. 1. Definition and Scope of Coverage c. Rebuttable Presumption Payback Pursuant to EPCA, any new or 2. Product Classes 2. Economic Impacts on Manufacturers amended energy conservation standard a. Preliminary Analysis and Notice of a. Industry Cash Flow Analysis Results must be designed to achieve the Proposed Rulemaking (NOPR) Proposals b. Impacts on Employment maximum improvement in energy b. Comments and Responses c. Impacts on Manufacturing Capacity 3. Technology Options d. Impacts on Subgroups of Manufacturers efficiency that DOE determines is B. Screening Analysis e. Cumulative Regulatory Burden technologically feasible and 1. Screened-Out Technologies 3. National Impact Analysis economically justified. (42 U.S.C. 2. Additional Comments a. Significance of Energy Savings 6295(o)(2)(A)) Furthermore, the new or 3. Remaining Technologies b. Net Present Value of Consumer Costs amended standard must result in C. Engineering Analysis and Benefits significant conservation of energy. (42 1. Efficiency Levels c. Indirect Impacts on Employment U.S.C. 6295(o)(3)(B)) a. Baseline Efficiency Levels 4. Impact on Utility or Performance of In accordance with these and other b. Higher Energy Efficiency Levels Products statutory provisions discussed in this 2. Manufacturer Production Cost Estimates 5. Impact of Any Lessening of Competition D. Markups Analysis 6. Need of the Nation to Conserve Energy document, DOE is adopting energy E. Energy Use Analysis 7. Other Factors conservation standards for portable ACs. 1. Consumer Samples 8. Summary of National Economic Impacts The standards, which correspond to 2. Cooling Mode Hours and Sensitivity C. Conclusion trial standard level (TSL) 2 (described in Analyses 1. Benefits and Burdens of TSLs section V.A of this document), are 3. Fan-only Mode and Standby Mode Considered for Portable AC Standards minimum allowable combined energy Hours 2. Annualized Benefits and Costs of the efficiency ratio (CEER) standards, which F. Life-Cycle Cost and Payback Period Adopted Standards are expressed in British thermal units Analysis VI. Procedural Issues and Regulatory Review (Btu) per watt-hour (Wh), and are shown 1. Product Cost A. Review Under Executive Orders 12866 2. Installation Cost and 13563 in Table I.1. These standards apply to 3. Annual Energy Consumption B. Review Under the Regulatory Flexibility all single-duct portable ACs and dual- 4. Energy Prices Act duct portable ACs that are manufactured 5. Maintenance and Repair Costs C. Review Under the Paperwork Reduction in, or imported into, the United States 6. Product Lifetime Act starting on January 10, 2025.
1 For editorial reasons, upon codification in the 2 All references to EPCA in this document refer Efficiency Improvement Act of 2015, Public Law U.S. Code, Part B was redesignated Part A. to the statute as amended through the Energy 114–11 (Apr. 30, 2015).
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A. Benefits and Costs to Consumers portable ACs, as measured by the PBP is less than the average lifetime of Table I.2 summarizes DOE’s average life-cycle cost (LCC) savings and portable ACs, which is estimated to be evaluation of the economic impacts of the simple payback period (PBP).3 The approximately 10 years (see section the adopted standards on consumers of average LCC savings are positive and the IV.F.6 of this document).
TABLE I.2—IMPACTS OF NEW ENERGY CONSERVATION STANDARDS ON CONSUMERS OF PORTABLE AIR CONDITIONERS
Simple Average LCC payback Product class savings period (2015$) (years)
Single-duct and dual-duct portable air conditioners ...... 125 2.6
DOE’s analysis of the impacts of the IV.E, V.B.1, and appendix 8F and C. National Benefits and Costs 4 adopted standards on consumers is appendix 10E of the final rule TSD. DOE’s analyses indicate that the described in section IV.F of this B. Impact on Manufacturers adopted energy conservation standards document. DOE also performed three for portable ACs would save a sensitivity analyses on its primary The industry net present value (INPV) significant amount of energy. Relative to assertion that portable air conditioners is the sum of the discounted cash flows the case without new standards the are used and operated in a similar to the industry from the base year lifetime energy savings for portable ACs manner to room air conditioners to through the end of the analysis period purchased in the 30-year period that further analyze the effects of the benefits (2017–2051). Using a real discount rate begins in the anticipated year of and cost to consumers from these of 6.6 percent, DOE estimates that the compliance with the new standards products. In one sensitivity analysis, INPV for manufacturers of portable ACs (2022–2051), amount to 0.49 quadrillion DOE found that reducing operating in the case without new standards is Btu, or quads.5 This represents a savings hours by 50 percent, resulted in an $738.5 million in 2015$. Under the of 6.4 percent relative to the energy use estimate of one-third of the energy cost adopted standards, DOE expects the of these products in the case without ¥ savings relative to the primary estimate. change in INPV to range from 34.3 new standards (referred to as the ‘‘no- ¥ In this low-usage case, the average LCC percent to 28.8 percent, which is new-standards case’’). ¥ savings for all consumers under the approximately $253.4 million to The cumulative net present value ¥ adopted standards would be $35 $212.4 million. In order to bring (NPV) of total consumer benefits of the (compared with $125 in the primary products into compliance with new standards for portable ACs ranges from estimate), and 42 percent of consumers standards, DOE expects the industry to $1.25 billion (at a 7-percent discount would be impacted negatively incur total conversion costs of $320.9 rate) to $3.06 billion (at a 3-percent (compared with 27 percent in the million. discount rate). This NPV expresses the primary estimate). The simple payback DOE’s analysis of the impacts of the estimated total value of future period would be 5.1 years (compared adopted standards on manufacturers is operating-cost savings minus the with 2.6 years in the primary estimate). described in section IV.J and section estimated increased product costs for Further details are presented in section V.B.2 of this document. portable ACs purchased in 2022–2051.
3 The average LCC savings refer to consumers that measured relative to the baseline product (see energy consumed in extracting, processing, and are affected by a standard and are measured relative section IV.C of this document). transporting primary fuels (i.e., coal, natural gas, to the efficiency distribution in the no-new- 4 All monetary values in this document are petroleum fuels), and, thus, presents a more standards case, which depicts the market in the expressed in 2015 dollars and, where appropriate, complete picture of the impacts of energy efficiency compliance year in the absence of standards (see are discounted to 2015 unless explicitly stated standards. For more information on the FFC metric, otherwise. section IV.F of this document). The simple PBP, see section IV.H.1 of this document. 5 The quantity refers to full-fuel-cycle (FFC) which is designed to compare specific ELs, is energy savings. FFC energy savings includes the
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In addition, the new standards for CO2) developed by a Federal estimated present value of the CH4 portable ACs are projected to yield interagency working group.8 The emissions reduction is between $0.04 significant environmental benefits. DOE derivation of the SC-CO2 values is billion and $0.3 billion, with a value of estimates that the standards will result discussed in section IV.L.1 of this $0.1 billion using the central SC-CH4 in cumulative emission reductions (over document. Using discount rates case, and the estimated present value of the same period as for energy savings) appropriate for each set of SC-CO2 the N2O emissions reduction is between of 25.6 million metric tons (Mt) 6 of values, DOE estimates the present value $0.001 billion and $0.011 billion, with carbon dioxide (CO2), 16.4 thousand of the CO2 emissions reduction is a value of $0.004 billion using the tons of sulfur dioxide (SO2), 32.2 tons of between $0.2 billion and $2.5 billion, central SC-N2O case. nitrogen oxides (NOX), 124.8 thousand with a value of 0.8 billion using the DOE also estimates that the present tons of methane (CH4), 0.4 thousand central SC-CO2 case represented by value of the NOX emissions reduction to tons of nitrous oxide (N2O), and 0.06 $40.6/metric ton (t) in 2015. be $0.02 billion using a 7-percent tons of mercury (Hg).7 The estimated DOE also calculated the value of the discount rate, and $0.06 billion using a 10 reduction in CO2 emissions through reduction in emissions of the non-CO2 3-percent discount rate. DOE is still 2030 amounts to 4.0 Mt, which is greenhouse gases (GHGs), CH4 and N2O, investigating appropriate valuation of equivalent to the emissions resulting using values for the social cost of the reduction in other emissions, and from the annual electricity use of more methane (SC-CH4) and the social cost of therefore did not include any such than 0.42 million homes. nitrous oxide (SC-N2O) recently values in the analysis for this final rule. The value of the CO2 reductions is developed by the interagency working Table I.3 summarizes the economic calculated using a range of values per group.9 See section IV.L.2 for benefits and costs expected to result metric ton (t) of CO2 (otherwise known description of the methodology and the from the adopted standards for portable as the ‘‘social cost of carbon’’, or SC- values used for DOE’s analysis. The ACs.
TABLE I.3—SELECTED CATEGORIES OF ECONOMIC BENEFITS AND COSTS OF NEW ENERGY CONSERVATION STANDARDS FOR PORTABLE AIR CONDITIONERS * [TSL 2]
Present value Discount rate Category (billion 2015$) percent
Benefits
Consumer Operating Cost Savings ...... 1.8 7 4.1 3 GHG Reduction (using avg. social costs at 5% discount rate) **. 0.2 5 GHG Reduction (using avg. social costs at 3% discount rate) **. 1.0 3 GHG Reduction (using avg. social costs at 2.5% discount rate) **. 1.5 2.5 GHG Reduction (using 95th percentile social costs at 3% discount rate) **. 2.9 3 NOX Reduction † 0.02 7 0.06 3 Total Benefits ‡ ...... 2.8 7 5.1 3
Costs
Consumer Incremental Installed Costs ...... 0.5 7 1.0 3
Total Net Benefits
Including GHG and NOX Reduction Monetized Value ‡ ...... 7
6 A metric ton is equivalent to 1.1 short tons. 9 U.S. Government—Interagency Working Group IV.L of this document for further discussion. The Results for emissions other than CO2 are presented on Social Cost of Greenhouse Gases. Addendum to U.S. Supreme Court has stayed the rule in short tons. Technical Support Document on Social Cost of implementing the Clean Power Plan until the Carbon for Regulatory Impact Analysis under 7 DOE calculated emissions reductions relative to current litigation against it concludes. Chamber of Executive Order 12866: Application of the the no-standards-case, which reflects key Commerce, et al. v. EPA, et al., Order in Pending Methodology to Estimate the Social Cost of Methane Case, 577 U.S. (2016). However, the benefit-per-ton assumptions in the Annual Energy Outlook 2016 and the Social Cost of Nitrous Oxide. August 2016. estimates established in the Regulatory Impact (AEO 2016). AEO 2016 represents current https://www.whitehouse.gov/sites/default/files/ Analysis for the Clean Power Plan are based on legislation and environmental regulations for which omb/inforeg/august_2016_sc_ch4_sc_n2o_ scientific studies that remain valid irrespective of implementing regulations were available as of the addendum_final_8_26_16.pdf. 10 the legal status of the Clean Power Plan. DOE is end of February 2016. DOE estimated the monetized value of NOX primarily using a national benefit-per-ton estimate 8 U.S. Government—Interagency Working Group emissions reductions associated with electricity savings using benefit per ton estimates from the for NOX emitted from the Electricity Generating on Social Cost of Carbon. Technical Support Regulatory Impact Analysis for the Clean Power Unit sector based on an estimate of premature Document: Technical Update of the Social Cost of Plan Final Rule, published in August 2015 by mortality derived from the American Cancer Carbon for Regulatory Impact Analysis Under Environmental Protection Agency’s (EPA’s) Office Society (ACS) study (Krewski et al. 2009). If the Executive Order 12866. May 2013. Revised July of Air Quality Planning and Standards. Available at benefit-per-ton estimates were based on the Six 2015. https://www.whitehouse.gov/sites/default/ www.epa.gov/cleanpowerplan/clean-power-plan- Cities study (Lepuele et al. 2011), the values would files/omb/inforeg/scc-tsd-final-july-2015.pdf. final-rule-regulatory-impact-analysis. See section be nearly two-and-a-half times larger.
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TABLE I.3—SELECTED CATEGORIES OF ECONOMIC BENEFITS AND COSTS OF NEW ENERGY CONSERVATION STANDARDS FOR PORTABLE AIR CONDITIONERS *—Continued [TSL 2]
Present value Discount rate Category (billion 2015$) percent
4.1 3 * This table presents the costs and benefits associated with portable ACs shipped in 2022–2051. These results include benefits to consumers which accrue after 2051 from the products shipped in 2022–2051. The incremental installed costs include incremental equipment cost as well as installation costs. The costs account for the incremental variable and fixed costs incurred by manufacturers due to the proposed standards, some of which may be incurred in preparation for the rule. The GHG reduction benefits are global benefits due to actions that occur domestically. ** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-N2O values for use in regulatory analyses. Three sets of values are based on the average social costs from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. The fourth set, which represents the 95th percentile of the SC-CO2 distribution calculated using a 3-percent discount rate, is included to represent higher- than-expected impacts from climate change further out in the tails of the social cost distributions. The social cost values are emission year spe- cific. See section IV.L.1 of this document for more details. † 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 Stand- ards. (Available at www.epa.gov/cleanpowerplan/clean-power-plan-final-rule-regulatory-impact-analysis.) See section IV.L of this document for further discussion. DOE is primarily using a national benefit-per-ton estimate for NOX emitted from the electricity generating 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. ‡ Total Benefits for both the 3-percent and 7-percent cases are presented using the average social costs with 3-percent discount rate.
The benefits and costs of the adopted standards are also calculated based on year in increased equipment costs, standards, for portable ACs sold in the lifetime of portable ACs shipped in while the estimated annual benefits are 2022–2051, can also be expressed in 2022–2051. Because CO2 emissions have $202.7 million in reduced equipment terms of annualized values. The a very long residence time in the operating costs, $56.7 million in GHG monetary values for the total annualized atmosphere, the SC-CO2 values for CO2 reductions, and $2.6 million in reduced net benefits are (1) the reduced emissions in future years reflect impacts NOX emissions. In this case, the net consumer operating costs, minus (2) the that continue through 2300. The CO2 benefit amounts to $201 million per increases in product purchase prices reduction is a benefit that accrues year. Using a 3-percent discount rate for and installation costs, plus (3) the value globally. all benefits and costs, the estimated cost of the benefits of CO and NO emission Estimates of annualized benefits and 2 X of the standards is $59 million per year reductions, all annualized.11 costs of the adopted standards are The national operating cost savings shown in Table I.4. The results under in increased equipment costs, while the are domestic private U.S. consumer the primary estimate are as follows. estimated annual benefits are $240.0 monetary savings that occur as a result Using a 7-percent discount rate for million in reduced operating costs, of purchasing the covered products and benefits and costs other than GHG $56.7 million in GHG reductions, and are measured for the lifetime of portable reduction (for which DOE used average $3.3 million in reduced NOX emissions. ACs shipped in 2022–2051. The benefits social costs with a 3-percent discount In this case, the net benefit amounts to 12 associated with reduced CO2 emissions rate, the estimated cost of the $241 million per year. achieved as a result of the adopted standards in this rule is $61 million per
TABLE I.4—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF NEW STANDARDS (TSL 2) FOR PORTABLE ACS *
Discount Low-net- High-net- rate Primary benefits benefits (percent) estimate estimate estimate
(million 2015$/year)
Benefits
Consumer Operating Cost Savings ...... 7 ...... 202.7 ...... 99.1 ...... 214.4. 3 ...... 240.0 ...... 116.3 ...... 256.1. CO2 Reduction (using avg. social costs at 5% discount rate) ** ... 5 ...... 18.4 ...... 8.8 ...... 19.9. CO2 Reduction (using avg. social costs at 3% discount rate) ** ... 3 ...... 56.7 ...... 27.0 ...... 61.4. CO2 Reduction (using avg. social costs at 2.5% discount rate) ** 2.5 ...... 81.1 ...... 38.6 ...... 87.9. CO2 Reduction (using 95th percentile SC-CO2 at 3% discount 3 ...... 169.9 ...... 80.9 ...... 184.1. rate) **. NOX Reduction † ...... 7 ...... 2.6 ...... 1.2 ...... 6.2. 3 ...... 3.3 ...... 1.6 ...... 8.1. Total Benefits ‡ ...... 7 plus CO2 range ...... 224 to 375 ..... 213 to 354 ..... 240 to 405.
11 To convert the time-series of costs and benefits discounted the present value from each year to the compliance year, that yields the same present into annualized values, DOE calculated a present 2016. The calculation uses discount rates of 3 and value. value in 2016, the year used for discounting the 7 percent for all costs and benefits except for the 12 DOE used average social costs with a 3-percent NPV of total consumer costs and savings. For the value of CO reductions, for which DOE used case- 2 discount rate. These values are considered as the benefits, DOE calculated a present value associated specific discount rates, as shown in Table I.3. Using with each year’s shipments in the year in which the the present value, DOE then calculated the fixed ‘‘central’’ estimates by the interagency group. shipments occur (e.g., 2020 or 2030), and then annual payment over a 30-year period, starting in
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TABLE I.4—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF NEW STANDARDS (TSL 2) FOR PORTABLE ACS *—Continued
Discount Low-net- High-net- rate Primary benefits benefits (percent) estimate estimate estimate
(million 2015$/year)
7 ...... 262 ...... 249 ...... 282. 3 plus CO2 range ...... 262 to 413 ..... 248 to 389 ..... 284 to 448. 3 ...... 300 ...... 283 ...... 326.
Costs
Consumer Incremental Product Costs ...... 7 ...... 61.0 ...... 60.8 ...... 55.6. 3 ...... 59.0 ...... 58.9 ...... 53.3.
Net Benefits
Total ‡ ...... 7 plus CO2 range ...... 163 to 314 ..... 48 to 120 ...... 185 to 349. 7 ...... 201 ...... 67 ...... 226. 3 plus CO2 range ...... 203 to 354 ..... 68 to 140 ...... 231 to 395. 3 ...... 241 ...... 86 ...... 272. * This table presents the annualized costs and benefits associated with portable ACs shipped in 2022–2051. These results include benefits to consumers which accrue after 2051 from the portable ACs purchased from 2022–2051. The incremental installed costs include incremental equipment cost as well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy price trends from the AEO 2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth case, respectively. In addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high decline rate in the High Benefits Estimate. The Low Benefits Estimate re- flects a 50-percent reduction in the operating hours relative to the reference case operating hours. The methods used to derive projected price trends are explained in section IV.F of this document. The benefits and costs are based on equipment efficiency distributions as described in sections IV.F.8 and IV.H.1. Purchases of higher efficiency equipment are a result of many different factors unique to each consumer including past purchases, expected usage, and others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the no-new-standards case may correlate positively with higher energy prices. To the extent that this occurs, it would be expected to result in some lowering of the consumer operating cost savings from those calculated in this rule. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding. ** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-N2O values for use in regulatory analyses. Three sets of values are based on the average social costs from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. The fourth set, which represents the 95th percentile of the social cost distributions calculated using a 3-percent discount rate, is included to represent high- er-than-expected impacts from climate change further out in the tails of the social cost distributions The SC-CO2 values are emission year spe- cific. See section IV.L.1 of this document for more details. † 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 Stand- ards. (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 national benefit-per-ton estimates for NOX emitted from the Electric Gener- ating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For the High Net Benefits Esti- mate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2011); these are nearly two-and-a-half times larger than those from the ACS study. ‡ Total Benefits for both the 3-percent and 7-percent cases are presented using the average social costs with 3-percent discount rate. In the rows labeled ‘‘7% plus GHG range’’ and ‘‘3% plus GHG range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of social cost values.
DOE’s analysis of the national impacts II. Introduction consumer product to be classified as a of the adopted standards is described in covered product, the Secretary must The following section briefly sections IV.H, IV.K, and IV.L of this determine that: discusses the statutory authority document. (1) Classifying the product as a underlying this final rule, as well as covered product is necessary for the D. Conclusion some of the relevant historical purposes of EPCA; and background related to the establishment (2) The average annual per-household Based on the analyses culminating in of standards for portable ACs. energy use by products of such type is this final rule, DOE found the benefits A. Authority likely to exceed 100 kilowatt-hours to the nation of the standards (energy (kWh) per year. (42 U.S.C. 6292(b)(1)) savings, consumer LCC savings, positive Title III, Part B of the EPCA, Public Under the authority established in NPV of consumer benefit, and emission Law 94–163 (codified as 42 U.S.C. EPCA, DOE published the April 2016 reductions) outweigh the burdens (loss 6291–6309) established the Energy Final Coverage Determination that of INPV and LCC increases for some Conservation Program for Consumer established portable ACs as a covered users of these products). DOE has Products Other Than Automobiles, a product because such a classification is concluded that the standards in this program covering most major household necessary or appropriate to carry out the final rule represent the maximum appliances (collectively referred to as purposes of EPCA, and the average U.S. improvement in energy efficiency that is ‘‘covered products’’). EPCA authorizes household energy use for portable ACs technologically feasible and the Secretary of Energy to classify is likely to exceed 100 kWh per year. 81 economically justified, and would result additional types of consumer products FR 22514 (Apr. 18, 2016). in significant conservation of energy. not otherwise specified in Part A as EPCA, as amended, grants DOE covered products. For a type of authority to prescribe an energy
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conservation standard for any type (or manufacturers to produce, and standard is economically justified, DOE class) of covered products of a type consumers and other persons to must determine whether the benefits of specified in 42 U.S.C. 6292(a)(19) 13 if purchase, portable ACs that achieve the the standard exceed its burdens. (42 the requirements of 42 U.S.C. 6295(o) maximum energy efficiency which is U.S.C. 6295(o)(2)(B)(i)) DOE must make and (p) are met and the Secretary technologically feasible and this determination after receiving determines that— economically justified (see chapter 17 of comments on the proposed standard, (1) the average per household energy this final rule TSD). and by considering, to the greatest use within the United States by Pursuant to EPCA, DOE’s energy extent practicable, the following seven products of such type (or class) conservation program for covered statutory factors: exceeded 150 kilowatt-hours (kWh) (or products consists essentially of four (1) The economic impact of the its Btu equivalent) for any 12-month parts: (1) Testing, (2) labeling, (3) the standard on manufacturers and period ending before such establishment of Federal energy consumers of the products subject to the determination; conservation standards, and (4) standard; (2) the aggregate household energy certification and enforcement (2) The savings in operating costs use within the United States by procedures. The Federal Trade throughout the estimated average life of products of such type (of class) Commission (FTC) is primarily the covered products in the type (or exceeded 4,200,000,000 kWh (or its Btu responsible for labeling, and DOE class) compared to any increase in the equivalent) for any such 12-month implements the remainder of the price, initial charges, or maintenance period; program. Subject to certain criteria and expenses for the covered products that (3) substantial improvement in the conditions, DOE is required to develop are likely to result from the standard; energy efficiency of products of such test procedures to measure the energy (3) The total projected amount of type (or class) is technologically efficiency, energy use, or estimated energy (or as applicable, water) savings feasible; and annual operating cost of each covered likely to result directly from the (4) the application of a labeling rule product. (42 U.S.C. 6295(o)(3)(A) and standard; under 42 U.S.C. 6294 to such type (or (r)) Manufacturers of covered products (4) Any lessening of the utility or the class) is not likely to be sufficient to must use the prescribed DOE test performance of the covered products induce manufacturers to produce, and procedure as the basis for certifying to likely to result from the standard; consumers and other persons to DOE that their products comply with (5) The impact of any lessening of purchase, covered products of such type the applicable energy conservation competition, as determined in writing (or class) which achieve the maximum standards adopted under EPCA and by the Attorney General, that is likely to energy efficiency which is when making representations to the result from the standard; technologically feasible and public regarding the energy use or (6) The need for national energy and economically justified. (42 U.S.C. efficiency of those products. (42 U.S.C. water conservation; and 6295(l)(1)) 6293(c)) Similarly, DOE must use these (7) Other factors the Secretary of DOE has determined that portable test procedures to determine whether Energy (Secretary) considers relevant. ACs meet the four criteria outlined in 42 the products comply with standards (42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) U.S.C. 6295(l)(1) for prescribing energy adopted pursuant to EPCA. (42 U.S.C. Further, EPCA, as codified, conservation standards for newly 6295(s)) The DOE test procedures for establishes a rebuttable presumption covered products. Specifically, DOE has portable ACs were established in a final that a standard is economically justified determined that for a 12-month period rule published on June 1, 2016 (81 FR if the Secretary finds that the additional ending before such determination, the 35241; hereinafter the ‘‘June 2016 TP cost to the consumer of purchasing a average per household energy use Final Rule’’), and appear at title 10 of product complying with an energy within the U.S. by portable ACs the Code of Federal Regulations (CFR) conservation standard level will be less exceeded 150 kWh (see chapter 7 of this part 430, subpart B, appendix CC than three times the value of the energy final rule technical support document (hereinafter ‘‘appendix CC’’) and 10 CFR savings during the first year that the (TSD)). DOE has also determined that 430.23(dd). consumer will receive as a result of the the aggregate household energy use DOE must follow specific statutory standard, as calculated under the within the United States by portable criteria for prescribing new or amended applicable test procedure. (42 U.S.C. ACs exceeded 4,200,000,000 kWh (or its standards for covered products, 6295(o)(2)(B)(iii)) Btu equivalent) for such a 12-month including portable ACs. Any new or EPCA, as codified, states that the period (see chapter 10 of this final rule amended standard for a covered product Secretary may not prescribe an amended TSD). Further, DOE has determined that must be designed to achieve the or new standard if interested persons substantial improvement in the energy maximum improvement in energy have established by a preponderance of efficiency of portable ACs is efficiency that the Secretary of Energy the evidence that the standard is likely technologically feasible (see section determines is technologically feasible to result in the unavailability in the U.S. IV.C of this document and chapter 5 of and economically justified. (42 U.S.C. in any covered product type (or class) of the final rule TSD), and has determined 6295(o)(2)(A) and (3)(B)) Furthermore, performance characteristics (including that the application of a labeling rule DOE may not adopt any standard that reliability), features, sizes, capacities, under 42 U.S.C. 6294 to portable ACs is would not result in the significant and volumes that are substantially the not likely to be sufficient to induce conservation of energy. (42 U.S.C. same as those generally available in the 6295(o)(3)(B)) Moreover, DOE may not U.S. (42 U.S.C. 6295(o)(4)) 13 In amending EPCA, Congress added metal prescribe a standard (1) for certain Additionally, EPCA specifies halide lamp fixtures as a covered product at 42 U.S.C. 6292(a)(19) and redesignated the existing products, including portable ACs, if no requirements when promulgating an listing for (19) (i.e., any other type of consumer test procedure has been established for energy conservation standard for a product which the Secretary classifies as a covered the product, or (2) if DOE determines by covered product that has two or more product under subsection (b) of this section) as (20). rule that the standard is not subcategories. DOE must specify a However, the corresponding reference in 42 U.S.C. 6295(l)(1) was not updated. DOE has determined technologically feasible or economically different standard level for a type or this to be a drafting error and is giving the provision justified. (42 U.S.C. 6295(o)(3)(A)–(B)) class of products that has the same its intended effect as if such error had not occurred. In deciding whether a proposed function or intended use if DOE
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determines that products within such as do the new standards adopted in this regarding the preliminary analysis it group (A) consume a different kind of final rule. conducted. The meeting covered the energy from that consumed by other analytical framework, models, and tools B. Background covered products within such type (or that DOE uses to evaluate potential class); or (B) have a capacity or other DOE has not previously conducted an standards; the results of preliminary performance-related feature which other energy conservation standards analyses performed by DOE for this products within such type (or class) do rulemaking for portable ACs. product; the potential energy not have and such feature justifies a Consequently, there are currently no conservation standard levels derived higher or lower standard. (42 U.S.C. Federal energy conservation standards from these analyses that DOE could 6295(q)(1)) In determining whether a for portable ACs. consider for this product; and any other performance-related feature justifies a On February 27, 2015, DOE published issues relevant to the development of different standard for a group of a notice of public meeting and notice of energy conservation standards for products, DOE must consider such availability of a preliminary TSD for portable ACs. portable AC energy conservation factors as the utility to the consumer of Interested parties commented at the standards (hereinafter the ‘‘February such a feature and other factors DOE public meeting and submitted written 2015 Preliminary Analysis’’). In the deems appropriate. Id. Any rule comments regarding the following major preliminary analysis, DOE conducted prescribing such a standard must issues: Rulemaking schedule with in-depth technical analyses in the include an explanation of the basis on respect to establishing the test following areas: (1) Engineering, (2) which such higher or lower level was procedure, covered product markups to determine product price, (3) established. (42 U.S.C. 6295(q)(2)) configurations, product classes and energy use, (4) LCC and PBP, and (5) Federal energy conservation national impacts. 80 FR 10628. The impacts on consumer utility, technology requirements generally supersede State preliminary TSD that presented the options, efficiency levels (ELs), laws or regulations concerning energy methodology and results of each of incremental costs, data sources, and conservation testing, labeling, and these analyses is available at http:// cumulative regulatory burden. standards. (42 U.S.C. 6297(a)–(c)) DOE www.regulations.gov/#!document Comments received in response to the may, however, grant waivers of Federal Detail;D=EERE-2013-BT-STD-0033- February 2015 Preliminary Analysis preemption for particular State laws or 0007. helped DOE identify and resolve issues regulations, in accordance with the DOE also conducted, and discussed in related to the preliminary analysis. After procedures and other provisions set the preliminary TSD, several other reviewing these comments, DOE forth under 42 U.S.C. 6297(d)). analyses that supported the major gathered additional information, held Finally, pursuant to the amendments analyses or were expanded upon in the further discussions with manufacturers, contained in the Energy Independence later stages of the standards rulemaking. and completed and revised the various and Security Act of 2007 (EISA 2007), These analyses included: (1) The market analyses described in the preliminary Public Law 110–140, any final rule for and technology assessment; (2) the analysis. new or amended energy conservation screening analysis, which contributes to On June 13, 2016, DOE published an standards promulgated after July 1, the engineering analysis; and (3) the energy conservation standards (ECS) 2010, is required to address standby shipments analysis,14 which contributes notice of proposed rulemaking mode and off mode energy use. (42 to the LCC and PBP analysis and (hereinafter the ‘‘June 2016 ECS NOPR’’) U.S.C. 6295(gg)(3)) Specifically, when national impact analysis (NIA). In and notice of public meeting. 81 FR DOE adopts a standard for a covered addition to these analyses, DOE began 38397. The June 2016 ECS NOPR and product after that date, it must, if preliminary work on the manufacturer accompanying TSD presented the justified by the criteria for adoption of impact analysis (MIA) and identified the results of DOE’s updated analyses and standards under EPCA (42 U.S.C. methods to be used for the consumer proposed new standards for portable 6295(o)), incorporate standby mode and subgroup analysis, the emissions ACs. On July 20, 2016, DOE held a off mode energy use into a single analysis, the employment impact standards public meeting to discuss the standard, or, if that is not feasible, adopt analysis, the regulatory impact analysis, issues detailed in the June 2016 ECS a separate standard for such energy use and the utility impact analysis. 80 FR NOPR (hereinafter the ‘‘July 2016 STD for that product. (42 U.S.C. 10628 (Feb. 27, 2015). Public Meeting’’). Interested parties, 6295(gg)(3)(A)–(B)) DOE’s current test DOE held a public meeting on March listed in Table II.1, commented on the procedures for portable ACs address 18, 2015, to discuss the analyses and various aspects of the proposed rule and standby mode and off mode energy use, solicit comments from interested parties submitted written comments.
TABLE II.1—INTERESTED PARTIES PROVIDING COMMENTS ON THE JUNE 2016 ECS NOPR FOR PORTABLE ACS
Commenter Name Acronym type *
Appliance Standards Awareness Project ...... ASAP ...... EA ASAP, Natural Resources Defense Council, Alliance to Save Energy, American Council for an The Joint Commenters ...... EA Energy-Efficient Economy, Consumers Union, Northwest Energy Efficiency Alliance, and North- west Power and Conservation Council. Association of Home Appliance Manufacturers ...... AHAM ...... TA De’ Longhi Appliances s.r.l ...... De’ Longhi ...... M GE Appliances, a Haier Company ...... GE ...... M GREE Electrical Appliance ...... GREE ...... M Industrial Energy Consumers of America ...... IECA ...... TA
14 Industry data track shipments from national unit retail sales are lacking, but are presumed to be close to shipments under normal manufacturers into the distribution chain. Data on circumstances.
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TABLE II.1—INTERESTED PARTIES PROVIDING COMMENTS ON THE JUNE 2016 ECS NOPR FOR PORTABLE ACS— Continued
Commenter Name Acronym type *
Toma´s Carbonell, Environmental Defense Fund (EDF); Rachel Cleetus, Union of Concerned Sci- The Joint Advocates ...... EA entists; Jayni Hein **; Peter H. Howard **; Benjamin Longstreth, NRDC; Richard L. Revesz **; Jason A. Schwartz **; Peter Zalzal, EDF. Intertek Testing Services ...... Intertek ...... TL JMATEK—Honeywell Authorized Licensee ...... JMATEK ...... M LG Electronics ...... LG ...... M National Association of Manufacturers ...... NAM ...... TA Natural Resources Defense Council ...... NRDC ...... EA Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas and Elec- California IOUs ...... U tric, and Southern California Edison (the California Investor-Owned Utilities). People’s Republic of China ...... China ...... GA Temp-Air ...... Temp-Air ...... M U.S. Chamber of Commerce, American Chemistry Council, American Forest & Paper Associa- The Associations ...... TA tion, American Fuel & Petrochemical Manufacturers, American Petroleum Institute, Brick Indus- try Association, Council of Industrial Boiler Owners, National Association of Manufacturers, Na- tional Mining Association, National Oilseed Processors Association. * EA: Efficiency Advocate; GA: Government Agency; M: Manufacturer; RO: Research Organization; TA: Trade Association; TL: Third-party Test Laboratory; U: Utility. ** Institute for Policy Integrity, NYU School of Law; listed for identification purposes only and does not purport to present New York University School of Law’s views, if any.
Following the July 2016 STD Public ACs. Furthermore, DOE did not separate Revised Energy Conservation Standards Meeting, DOE gathered additional portable ACs into multiple product for Consumer Products). Pursuant to information and incorporated feedback classes for the February 2015 that guidance, DOE endeavors to issue from comments received in response to Preliminary Analysis following a final test procedure rules for a given the June 2016 ECS NOPR. Based on this determination that there is no unique covered product in advance of the information, DOE revised the analyses utility associated with single-duct or publication of a NOPR proposing energy presented in the June 2016 ECS NOPR dual-duct portable ACs. conservation standards for that covered for this final rule. The results of these The test procedure established in the product. analyses are detailed in the final rule June 2016 TP Final Rule maintained On May 9, 2014, DOE initiated a test TSD, available in the docket for this provisions for testing only single-duct procedure rulemaking for portable ACs rulemaking. and dual-duct portable AC by publishing a notice of data configurations and therefore, in the June availability (hereinafter the ‘‘May 2014 III. General Discussion 2016 ECS NOPR that was published TP NODA’’) to request feedback on DOE developed this final rule after following the June 2016 TP Final Rule, potential testing options. In the May considering verbal and written DOE proposed standards for a single 2014 TP NODA, DOE discussed various comments, data, and information from product class of single-duct and dual- industry test procedures and presented interested parties that represent a duct portable AC configurations. In this results from its investigative testing that variety of interests. The following final rule, DOE is establishing standards evaluated existing methodologies and discussion addresses issues raised by for one product class for all single-duct alternate approaches that could be these commenters. and dual-duct portable ACs. Comments incorporated in a future DOE test received relating to the scope of procedure, should DOE determine that A. Product Classes and Scope of coverage and product classes are portable ACs are covered products. 79 Coverage discussed in section IV.A of this FR 26639. When evaluating and establishing document. On February 25, 2015, DOE published energy conservation standards, DOE a NOPR (hereinafter the ‘‘February 2015 divides covered products into product B. Test Procedure TP NOPR’’) in which it proposed to classes by the type of energy used or by EPCA sets forth generally applicable establish test procedures for single-duct capacity or other performance-related criteria and procedures for DOE’s and dual-duct portable ACs. The features that justify differing standards. adoption and amendment of test proposed test procedures were based In making a determination whether a procedures. (42 U.S.C. 6293) upon industry methods to determine performance-related feature justifies a Manufacturers of covered products must energy consumption in active modes, different standard, DOE must consider use these test procedures to certify to off-cycle mode, standby modes, and off such factors as the utility of the feature DOE that their product complies with mode, with certain modifications to to the consumer and other factors DOE energy conservation standards and to ensure the test procedures are determines are appropriate. (42 U.S.C. quantify the efficiency of their product. repeatable and representative. 80 FR 6295(q)) With respect to the process of 10211. In the February 2015 Preliminary establishing test procedures and On November 27, 2015, DOE Analysis, DOE did not consider energy standards for a given product, DOE published a supplemental notice of conservation standards for portable ACs notes that it generally follows the proposed rulemaking (SNOPR) other than single-duct or dual-duct approach laid out in its guidance found (hereinafter the ‘‘November 2015 TP portable ACs, as the test procedure in 10 CFR part 430, subpart C, appendix SNOPR’’), in which it proposed proposed at that time did not include A (Procedures, Interpretations and revisions to the test procedure proposed provisions for testing other portable Policies for Consideration of New or in the February 2015 TP NOPR to
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improve repeatability, reduce test it had tested a portable AC according to C. Technological Feasibility burden, and ensure the test procedure is the test procedures in appendix CC and 1. General representative of typical consumer was able to achieve all required test usage. 80 FR 74020. conditions. (Intertek, No. 37 at p. 1) In each energy conservation standards On June 1, 2016, following rulemaking, DOE conducts a screening In a memo published on August 19, analysis based on information gathered publication of the April 2016 Final 2016, and titled, ‘‘Memo_AHAM Coverage Determination, DOE published on all current technology options and Request for Info on PACs_2016–08–19’’ the June 2016 TP Final Rule that prototype designs that could improve (hereinafter the ‘‘DOE response established test procedures for portable the efficiency of the products or memo’’),17 DOE stated that it was aware ACs at appendix CC and 10 CFR equipment that are the subject of the of at least one third-party laboratory 430.23(dd). 81 FR 35241. The energy rulemaking. As the first step in such an conservation standards established in capable of testing according to appendix analysis, DOE develops a list of this final rule are expressed in terms of CC. In response to that memo, AHAM technology options for consideration in CEER, in Btu per Wh, based on the commented that a single laboratory consultation with manufacturers, design seasonally adjusted cooling capacity cannot do all of the testing necessary for engineers, and other interested parties. (SACC), in Btu per hour, as determined manufacturers to understand the DOE then determines which of those in accordance with the DOE test potential impact of the proposed means for improving efficiency are procedure for portable ACs at appendix standard within the time allotted, and technologically feasible. DOE considers CC. accordingly, its members have been technologies incorporated in In response to the June 2016 ECS unable to conduct a sufficient amount of commercially available products or in NOPR, DOE received comments from testing to meaningfully participate in working prototypes to be interested parties regarding DOE’s this standards rulemaking. (AHAM, No. technologically feasible. 10 CFR part portable AC test procedures and the 43 at p. 3) 430, subpart C, appendix A, section associated impacts on the analysis for 4(a)(4)(i). As discussed in section III.F of this After DOE has determined that new standards. The following sections document, several interested parties particular technology options are discuss the relevant test procedure requested that DOE extend the June technologically feasible, it further comments. 2016 ECS NOPR comment period to evaluates each technology option in Laboratory Testing Capability provide manufacturers and test light of the following additional laboratories additional time to gain DOE received several comments screening criteria: (1) Practicability to expertise with the test procedures in manufacture, install, and service; (2) regarding the timing of the publication appendix CC and collect and analyze adverse impacts on product utility or of the June 2016 TP Final Rule and performance data to help support the availability; and (3) adverse impacts on manufacturers’ opportunity to use the standards rulemaking. To address those health or safety. 10 CFR part 430, final test procedure in evaluating design comments, on August 8, 2016, DOE subpart C, appendix A, section options and the proposed standards published a notice to extend the original 4(a)(4)(ii)–(iv) Additionally, it is DOE level from the June 2016 ECS NOPR. GE, comment period for the June 2016 ECS policy not to include in its analysis any AHAM, JMATEK, and China claimed NOPR by 45 days. DOE stated that this proprietary technology that is a unique that neither manufacturers nor third- extension would allow additional time pathway to achieving a certain party laboratories have the equipment or for AHAM and its members and other efficiency level. Section IV.B of this expertise to conduct tests according to interested parties to test existing models final rule discusses the results of the appendix CC. GE and China commented to the test procedure; examine the data, screening analysis for portable ACs, that laboratories would require particularly the designs DOE additional time and investment to information, and analysis presented in considered, those it screened out, and upgrade their test chambers to measure the STD NOPR TSD; gather any those that are the basis for the standards the infiltration air and to fully additional data and information to considered in this rulemaking. For understand the repeatability and address the proposed standards; and further details on the screening analysis reproducibility of the new test submit comments to DOE. 81 FR 53961. for this rulemaking, see chapter 4 of the procedure. AHAM stated that, with As discussed further in section IV.C of final rule TSD. sufficient time, it expected to identify this final rule, DOE believes that the laboratories that could test enough comment period extension addressed 2. Maximum Technologically Feasible portable AC models to provide the concerns presented by commenters Levels as this timeline allowed AHAM and its additional test data for DOE’s analysis. When DOE adopts a new or amended members to conduct testing and provide JMATEK asserted that additional time standard for a type or class of covered data for 22 portable AC models, which would be necessary to test its full product, it must determine the DOE has incorporated into its analysis. product line. (GE, Public Meeting maximum improvement in energy Transcript, No. 39 at pp. 17, 64, 129– efficiency or maximum reduction in 130; AHAM, Public Meeting Transcript, number 39, which is the public meeting transcript energy use that is technologically No. 39 at pp. 14–15, 64; AHAM, No. 43 that is filed in the docket of this test procedure rulemaking; and (3) which appears on pages 17, 64, feasible for such product. (42 U.S.C. at p. 3; China, No. 34 at p. 3; JMATEK, and 129 through 130 of document number 39. 6295(p)(1)) Accordingly, in the 15 16 No. 40 at p. 2) Intertek stated that 16 A notation in the form ‘‘AHAM, No. 43 at p. engineering analysis, DOE determined 3’’ identifies a written comment: (1) Made by the the maximum technologically feasible 15 A notation in the form ‘‘GE, Public Meeting Association of Home Appliance Manufacturers; (2) (‘‘max-tech’’) improvements in energy Transcript, No. 39 at pp. 17, 64, 129–130’’ identifies recorded in document number 43 that is filed in the an oral comment that DOE received on July 20, docket of this standards rulemaking (Docket No. efficiency for portable ACs, using the 2016 during the NOPR public meeting, and was EERE–2013–BT–STD–0033) and available for design parameters for the most efficient recorded in the public meeting transcript in the review at www.regulations.gov; and (3) which products available on the market or in docket for this standards rulemaking (Docket No. appears on page 3 of document number 43. working prototypes. The max-tech EERE–2013–BT–STD–0033). This particular 17 DOE’s response memo can be found at https:// notation refers to a comment (1) made by GE during www.regulations.gov/document?D=EERE-2013-BT- levels that DOE determined for this the public meeting; (2) recorded in document STD-0033-0038. rulemaking are described in section
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IV.C.1.b of this document and in chapter District of Columbia Circuit in Natural evaluates the LCC impacts of potential 5 of the final rule TSD. Resources Defense Council v. standards on identifiable subgroups of Herrington, 768 F.2d 1355, 1373 (D.C. consumers that may be affected D. Energy Savings Cir. 1985), indicated that Congress disproportionately by a national 1. Determination of Savings intended ‘‘significant’’ energy savings in standard. For each TSL, DOE projected energy the context of EPCA to be savings that b. Savings in Operating Costs Compared savings from application of the TSL to are not ‘‘genuinely trivial.’’ The energy To Increase in Price portable ACs purchased in the 30-year savings for all the TSLs considered in EPCA requires DOE to consider the period that begins in the year of this rulemaking, including the adopted savings in operating costs throughout compliance with the standards (2022– standards, are nontrivial, and, therefore, the estimated average life of the covered 2051).18 The savings are measured over DOE considers them ‘‘significant’’ product in the type (or class) compared the entire lifetime of products within the meaning of section 325 of to any increase in the price of, or in the purchased in the 30-year analysis EPCA. initial charges for, or maintenance period. DOE quantified the energy E. Economic Justification expenses of, the covered product that savings attributable to each TSL as the are likely to result from a standard. (42 difference in energy consumption 1. Specific Criteria U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts between each standards case and the no- As noted above, EPCA provides seven this comparison in its LCC and PBP new-standards case. The no-new- factors to be evaluated in determining analysis. standards case represents a projection of whether a potential energy conservation The LCC is the sum of the purchase energy consumption that reflects how standard is economically justified. (42 price of a product (including its the market for a product would likely U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The installation) and the operating cost evolve in the absence of energy following sections discuss how DOE has (including energy, maintenance, and conservation standards. addressed each of those seven factors in repair expenditures) discounted over DOE used its NIA spreadsheet models this rulemaking. the lifetime of the product. The LCC to estimate national energy savings (NES) from potential standards for a. Economic Impact on Manufacturers analysis requires a variety of inputs, portable ACs. The NIA spreadsheet and Consumers such as product prices, product energy consumption, energy prices, model (described in section IV.H of this In determining the impacts of document) calculates energy savings in maintenance and repair costs, product potential standards on manufacturers, lifetime, and discount rates appropriate terms of site energy, which is the energy DOE conducts a MIA, as discussed in directly consumed by products at the for consumers. To account for section IV.J of this document. DOE first uncertainty and variability in specific locations where they are used. For uses an annual cash-flow approach to electricity, DOE reports NES in terms of inputs, such as product lifetime and determine the quantitative impacts. This discount rate, DOE uses a distribution of primary energy savings, which is the step includes both a short-term savings in the energy that is used to values, with probabilities attached to assessment—based on the cost and each value. generate and transmit the site capital requirements during the period electricity. For natural gas, the primary The PBP is the estimated amount of between when a regulation is issued and time (in years) it takes consumers to energy savings are considered to be when entities must comply with the equal to the site energy savings. DOE recover the increased purchase cost regulation—and a long-term assessment (including installation) of a more- also calculates NES in terms of full-fuel- over a 30-year period. The industry- cycle (FFC) energy savings. The FFC efficient product through lower wide impacts analyzed include (1) operating costs. DOE calculates the PBP metric includes the energy consumed in INPV, which values the industry on the extracting, processing, and transporting by dividing the change in purchase cost basis of expected future cash flows; (2) due to a more-stringent standard by the primary fuels (i.e., coal, natural gas, cash flows by year; (3) changes in petroleum fuels), and thus presents a change in annual operating cost for the revenue and income; and (4) other year that standards are assumed to take more complete picture of the impacts of measures of impact, as appropriate. energy conservation standards.19 DOE’s effect. Second, DOE analyzes and reports the For its LCC and PBP analysis, DOE approach is based on the calculation of impacts on different types of an FFC multiplier for each of the energy assumes that consumers will purchase manufacturers, including impacts on types used by covered products or the covered products in the first year of small manufacturers. Third, DOE equipment. For more information on compliance with new or amended considers the impact of standards on FFC energy savings, see section IV.H.2 standards. The LCC savings for the domestic manufacturer employment and of this final rule. considered efficiency levels are manufacturing capacity, as well as the calculated relative to the case that 2. Significance of Savings potential for standards to result in plant reflects projected market trends in the To adopt any new or amended closures and loss of capital investment. absence of new or amended standards. standards for a covered product, DOE Finally, DOE takes into account DOE’s LCC and PBP analysis is must determine that such action would cumulative impacts of various DOE discussed in further detail in section result in significant energy savings. (42 regulations and other regulatory IV.F of this document. requirements on manufacturers. U.S.C. 6295(o)(3)(B)) Although the term c. Energy Savings ‘‘significant’’ is not defined in the Act, For individual consumers, measures the U.S. Court of Appeals, for the of economic impact include the changes Although significant conservation of in LCC and PBP associated with new or energy is a separate statutory 18 DOE also presents a sensitivity analysis that amended standards. These measures are requirement for adopting an energy considers impacts for products shipped in a 9-year discussed further in the following conservation standard, EPCA requires period. section. For consumers in the aggregate, DOE, in determining the economic 19 The FFC metric is discussed in DOE’s DOE also calculates the national NPV of justification of a standard, to consider statement of policy and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as the economic impacts applicable to a the total projected energy savings that amended at 77 FR 49701 (Aug. 17, 2012). particular rulemaking. DOE also are expected to result directly from the
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standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) generation capacity, as discussed in F. Other Issues As discussed in section III.D.1 of this section IV.M of this document. In response to the June 2016 ECS document, DOE uses the NIA The adopted standards also are likely NOPR, DOE received additional spreadsheet models to project national to result in environmental benefits in comments from interested parties energy savings. the form of reduced emissions of air regarding general issues, discussed in d. Lessening of Utility or Performance of pollutants and GHGs associated with the following section. Products energy production and use. DOE Establishment of New Standards In establishing product classes, and in conducts an emissions analysis to AHAM, De’ Longhi, GE, Temp-Air, evaluating design options and the estimate how potential standards may ASAP, and the California IOUs impact of potential standard levels, DOE affect these emissions, as discussed in evaluates potential standards that would section IV.K of this document; the supported DOE’s efforts to establish a not lessen the utility or performance of emissions impacts are reported in test procedure and initial energy the considered products. (42 U.S.C. section V.B.6 of this final rule. DOE also conservation standards for portable ACs. 6295(o)(2)(B)(i)(IV)) Based on data estimates the economic value of GE expects that, with the DOE test available to DOE, the standards adopted emissions reductions resulting from the procedure and standards in place, in this document would not reduce the considered TSLs, as discussed in consumers will be better able to select an appropriately sized portable AC for utility or performance of the products section IV.L of this document. under consideration in this rulemaking. their cooling needs. ASAP similarly g. Other Factors believes that a portable AC test e. Impact of Any Lessening of procedure and energy conservation Competition In determining whether an energy standards would help consumers EPCA directs DOE to consider the conservation standard is economically compare the actual performance of impact of any lessening of competition, justified, DOE may consider any other portable ACs and reduce energy as determined in writing by the factors that the Secretary deems to be consumption, particularly because this Attorney General, that is likely to result relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) is a growing product category and from a standard. (42 U.S.C. To the extent interested parties submit portable ACs use approximately twice 6295(o)(2)(B)(i)(V)) It also directs the any relevant information regarding as much energy as room ACs. The Attorney General to determine the economic justification that does not fit California IOUs claimed that consumers impact, if any, of any lessening of into the other categories described may use portable ACs as replacements competition likely to result from a above, DOE could consider such for room ACs and dehumidifiers, and standard and to transmit such information under ‘‘other factors.’’ therefore encouraged DOE to set standards that have similar levels of determination to the Secretary within 60 2. Rebuttable Presumption days of the publication of a proposed stringency to those products. (AHAM, rule, together with an analysis of the As set forth in 42 U.S.C. Public Meeting Transcript, No. 39 at p. nature and extent of the impact. (42 6295(o)(2)(B)(iii), EPCA creates a 12; AHAM, No. 43 at p. 1; De’ Longhi, U.S.C. 6295(o)(2)(B)(ii)) To assist the rebuttable presumption that an energy No. 41 at p. 1; GE, Public Meeting Department of Justice (DOJ) in making conservation standard is economically Transcript, No. 39 at pp. 16–17; Temp- such a determination, DOE transmitted justified if the additional cost to the Air, No. 45 at p. 1; ASAP, Public copies of its proposed rule and the consumer of a product that meets the Meeting Transcript, No. 39 at p. 10; NOPR TSD to the Attorney General for standard is less than three times the California IOUs, No. 42 at p. 1) review, with a request that the DOJ value of the first year’s energy savings In this final rule, DOE is establishing provide its determination on this issue. resulting from the standard, as energy conservation standards for In its assessment letter responding to calculated under the applicable DOE portable ACs that, pursuant to EPCA (42 U.S.C. 6295(o)(2)(A)), are determined to DOE, DOJ concluded that the proposed test procedure. DOE’s LCC and PBP achieve the maximum improvement in energy conservation standards for analyses generate values used to energy efficiency that is technologically portable ACs are unlikely to have a calculate the effect potential new or feasible and economically justified. significant adverse impact on amended energy conservation standards competition. DOE is publishing the would have on the payback period for NOPR Comment Period and Test Attorney General’s assessment at the consumers. These analyses include, but Procedure Timing end of this final rule. are not limited to, the 3-year payback GE expressed concern about the f. Need for National Energy period contemplated under the NOPR proposals due to the lack of time Conservation rebuttable-presumption test. In addition, manufacturers and third-party DOE also considers the need for DOE routinely conducts an economic laboratories have had to understand the national energy conservation in analysis that considers the full range of test procedure. (Public Meeting determining whether a new or amended impacts to consumers, manufacturers, Transcript, No. 39 at pp. 16–18) AHAM standard is economically justified. (42 the Nation, and the environment, as noted that DOE developed the portable U.S.C. 6295(o)(2)(B)(i)(VI)) The energy required under 42 U.S.C. AC test procedure in parallel with the savings from the adopted standards are 6295(o)(2)(B)(i). The results of this standards analysis, which, according to likely to provide improvements to the analysis serve as the basis for DOE’s AHAM, minimized manufacturers’ security and reliability of the Nation’s evaluation of the economic justification ability to participate in the rulemaking. energy system. Reductions in the for a potential standard level (thereby AHAM suggested that manufacturers demand for electricity also may result in supporting or rebutting the results of need at least 6 months between the date reduced costs for maintaining the any preliminary determination of of publication of the test procedure and reliability of the Nation’s electricity economic justification). The rebuttable the close of the June 2016 ECS NOPR system. DOE conducts a utility impact presumption payback calculation is comment period to gain expertise with analysis to estimate how standards may discussed in section IV.F of this the test procedure and collect a affect the Nation’s needed power document. sufficient sample of test results to assess
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the proposed standards. AHAM asserted attempt to identify any necessary in the Federal Register. This 5-year that its portable AC test standard, which modifications to establish test period is intended to provide is referenced by the DOE test procedure procedures when ‘‘initiating the manufacturers ample time to assess with certain adjustments, is not standards development process.’’ their product designs and implement currently used industry-wide by all Further, AHAM stated that section 7(b) any necessary modifications to meet the manufacturers and third-party test states that ‘‘needed modifications to test new standards. laboratories. With sufficient time, procedures will be identified in Certification and Enforcement AHAM stated that it expects to collect consultation with experts and interested Requirements and aggregate manufacturer-provided parties early in the screening stage of data under the DOE test procedure to the standards development process,’’ The Joint Commenters supported supplement or support DOE’s analysis. and section 7(c) states that ‘‘final, DOE’s proposal that portable AC AHAM noted that in its opinion, the modified test procedures will be issued certification reports include CEER and analysis must be based on such data prior to the NOPR on proposed SACC, duct configuration, presence of a rather than assumptions. (AHAM, standards.’’ AHAM commented that the heating function, and primary Public Meeting Transcript, No. 39 at pp. same principles apply to new test condensate removal feature, noting that 13–14, 16, 26–27) procedures and the Process these proposed certification reporting In response to AHAM’s request for a Improvement Rule indicates that it also requirements will provide useful comment period extension, on August applies to development of new information both to the public and to 15, 2016, DOE extended the comment standards. (AHAM, No. 43 at p. 2) DOE for use in a future rulemaking. period for the June 2016 ECS NOPR by In response, DOE notes that AHAM (Joint Commenters, No. 44 at p. 6) 45 days from the original comment and several other interested parties, AHAM opposed reporting of the deadline of August 12, 2016, to including, manufacturers, efficiency presence of a heating function in the September 26, 2016. 81 FR 53961. advocates, utilities, and manufacturer certification reports because the test Following the comment period organizations, have participated in procedure in appendix CC does not test extension, AHAM submitted additional every stage of the portable AC standards the heating function and the heating comments expressing concern with rulemaking, providing valuable function is not relevant to compliance DOE’s approach to proceed with a feedback to DOE. As discussed earlier in with DOE’s proposed standard. (AHAM, standards analysis and development in this section, DOE extended the No. 43 at p. 30) DOE is including the the absence of a final test procedure. comment period for the June 2016 ECS reporting requirement for presence of a AHAM noted that 42 U.S.C. 6295(r) NOPR by 45 days from the original heating function in this final rule requires that a new standard must comment deadline. With this additional because the information will aid DOE in include test procedures prescribed in time, AHAM’s members were able to collecting and analyzing product accordance with 42 U.S.C. 6293, and test 22 portable ACs according to the characteristics in support of future AHAM stated that it believes this test procedures in appendix CC. AHAM rulemakings, and does not believe that requirement is not effective if a test provided the test data to DOE, including this reporting requirement procedure is not finalized with performed a similar analysis to represents a substantive burden to sufficient time prior to a proposed or determine appropriate efficiency levels, manufacturers in preparing certification final standards rule, limiting the and recommended a new standards reports. involvement and ability for level. Therefore, DOE believes that JMATEK requested clarification manufacturers and interested parties to AHAM has had sufficient time to regarding the acceptable tolerance of evaluate the standards. In the case of the evaluate the June 2016 ECS NOPR cooling capacity and efficiency and June 2016 ECS NOPR analysis, AHAM proposal. DOE appreciates AHAM’s heating mode measurements, asserted that manufacturers, efficiency feedback and has incorporated their specifically the SACC and CEER advocates, and interested parties have information into this final rule analysis. tolerances, and detailed information had little experience with the test In addition to its standard LCC regarding calculating heating mode procedure and have been unable to use analysis, DOE did consider how the performance. (JMATEK, No. 40 at p. 2) it to assess the standards analysis, and standards would affect certain groups of The certification requirements proposed in particular the estimated impacts on consumers, including senior-only in the NOPR only require reporting the consumers and manufacturers. AHAM households, low-income households, presence of heating mode and do not suggested that DOE should not issue a and small business. Presentation of the require reporting heating mode new portable AC standard without approach to the consumer sub-groups performance. The provisions in 10 CFR determining if it is justified and how development can be found in section 429.62(a) specify the sampling plan to consumers, especially those with low IV.I of this document and LCC results be used to demonstrate compliance with and fixed incomes, may be impacted via can be found in section V.B.1.b of this the portable AC standards, including 10 increased product cost and loss of final rule. CFR 429.62(a)(3) and 10 CFR functionality, features, and choice. China suggested an additional year for 429.62(a)(4) which provide the rounding (AHAM, No. 43 at pp. 2, 30) manufacturers to comply with any requirements for SACC and CEER, AHAM commented that no standard portable AC standards. (China, No. 34 at respectively. Appendix CC contains test can pass the substantial evidence test if p. 3) equipment and measurement it is not based on a final test procedure, EPCA requires that newly-established requirements. if one is required, and noted that such standards shall not apply to products China asked, under the proposed test procedure must have been based on manufactured within five years after the enforcement provision in 10 CFR a full and useful opportunity for the publication of the final rule. (42 U.S.C. 429.134(n), whether the certified SACC public to comment on the procedure 6295(l)(2)) In accordance with this is valid only if the average measured and its impact on proposed standard requirement, compliance with the SACC is within 5 percent of the certified levels. AHAM additionally noted that energy conservation standards SACC is an upper or lower limit, or Section 7 of the Process Improvement established in this final rule will be both. (China, No. 34 at p. 4) The Rule (10 CFR part 430, subpart C, required 5 years after the date of provision refers to the absolute value of appendix A) states that DOE will publication of this standards final rule the difference between the measured
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SACC and certified SACC, and that California IOUs suggested that the study subsections address each component of difference must be less than 5 percent did not accurately estimate the DOE’s analyses. for the certified SACC to be used to consumer propensity for using DOE used several analytical tools to demonstrate compliance; otherwise, the dehumidification mode, as it did not estimate the impact of the standards measured value would be used to capture consumers purchasing, or considered in this document. The first determine compliance with the repurposing, a portable AC with the tool is a spreadsheet that calculates the standard. intent of also using it as a dehumidifier. LCC savings and PBP of potential AHAM agreed with DOE’s proposed The California IOUs suggested that if amended or new energy conservation enforcement approach but noted that a portable ACs are not covered under the standards. The NIA uses a second 5-percent tolerance might not be enough Federal standards for dehumidifiers, spreadsheet tool that provides given the inexperience with the new test DOE should require that portable ACs shipments projections and calculates procedure. AHAM suggested that DOE with dehumidification mode also meet NES and NPV of total consumer costs should work to understand the variation the Federal energy conservation and savings expected to result from in that test with regard to determining standards for dehumidifiers when potential energy conservation standards. cooling capacity before deciding on a operating in that mode and require that DOE uses the third spreadsheet tool, the threshold. (AHAM, No. 43 at p. 30) The manufacturers indicate the presence of Government Regulatory Impact Model 5-percent tolerance on cooling capacity dehumidification mode as a certification (GRIM), to assess manufacturer impacts for enforcement is consistent with the requirement, similar to the same of potential standards. These three tolerance used for packaged terminal air requirement for heating mode. spreadsheet tools are available on the conditioners (PTACs) and packaged According to the California IOUs, this DOE website for this rulemaking: terminal heat pumps (PTHPs). Because additional requirement would mandate https://www1.eere.energy.gov/buildings/ _ cooling mode testing for PTACs and that moisture removal performed by appliance standards/rulemaking.aspx/ PTHPs utilize the same air enthalpy portable ACs is tested and labeled in ruleid/76. Additionally, DOE used method that is the basis for the cooling accordance with DOE requirements for output from the latest version of the mode testing in appendix CC, DOE residential dehumidifiers, and as a Energy Information Administration’s determined that a similar cooling result, consumers would be better- (EIA)’s Annual Energy Outlook (AEO) capacity tolerance for enforcement is informed when making purchasing for the emissions and utility impact appropriate for portable ACs, and thus decisions. The California IOUs stated analyses. establishes 5-percent tolerance limit in that this would ensure that standards for A. Market and Technology Assessment this final rule. residential dehumidifiers are not DOE develops information in the Dual Coverage circumvented by multi-functional units market and technology assessment that The California IOUs urged DOE to such as portable ACs. (California IOUs, provides an overall picture of the require portable ACs with No. 42 at p. 2) market for the products concerned, dehumidification mode to meet the Dehumidification naturally occurs as including the purpose of the products, Federal standards for dehumidifiers, a result of the refrigeration-based air- the industry structure, manufacturers, and that DOE should include the cooling process. However, air market characteristics, and technologies presence of dehumidification mode in conditioning products are typically used in the products. This activity the certification reporting requirements. optimized to remove sensible heat, includes both quantitative and They noted that the majority of portable while dehumidifiers are optimized to qualitative assessments, based primarily ACs currently available for purchase remove latent heat, so they would on publicly-available information. The from major retailers are equipped with achieve different operating efficiencies subjects addressed in the market and a dehumidification mode, and the when dehumidifying. Additionally, the technology assessment for this advertised moisture removal capacities definition for dehumidifier in 10 CFR rulemaking include: (1) A determination for these units are comparable to those 430.2 specifically excludes air of the scope of the rulemaking and of residential dehumidifiers. The conditioning products (portable ACs, product classes, (2) manufacturers and California IOUs also noted that certain room ACs, and packaged terminal ACs) industry structure, (3) existing retailer websites allow consumers to to avoid ambiguity as to what would be efficiency programs, (4) shipments sort and filter listings for portable AC classified as a dehumidifier. Therefore, information, (5) market and industry units by moisture removal capacity, and portable ACs would not be subject to trends, and (6) technologies or design therefore posited that consumer energy conservation standards for options that could improve the energy purchasing decisions are likely dehumidifiers. Furthermore, requiring efficiency of portable ACs. The key influenced by the dehumidification portables ACs to be tested, labeled, and findings of DOE’s market assessment are capacity. The California IOUs further certified for performance in summarized below. See chapter 3 of the suggested that consumers may opt for a dehumidification mode according to the final rule TSD for further discussion of portable AC unit instead of purchasing same requirements as for residential the market and technology assessment. a separate dehumidifier, or may use dehumidifiers would be de facto their existing portable AC as a establishing coverage of the product as 1. Definition and Scope of Coverage dehumidifier. The California IOUs both a portable AC and a dehumidifier, DOE conducted the February 2015 stated that DOE opted to exclude and such multiple classification is not Preliminary Analysis based on the dehumidification mode from the allowable under the definition of portable AC definition proposed in the portable AC test procedure because it ‘‘covered product’’ established in EPCA. February 2015 TP NOPR, which stated determined dehumidification mode (42 U.S.C. 6291(2)) that a portable AC is an encased assembly, other than a ‘‘packaged operating hours are insignificant, based IV. Methodology and Discussion of terminal air conditioner,’’ ‘‘room air on the assessment of a metered study, Related Comments even though the study included only 19 conditioner,’’ or ‘‘dehumidifier,’’ that is sites from two states and participants This section addresses the analyses designed as a portable unit to deliver were informed of the test purpose and DOE has performed for this rulemaking cooled, conditioned air to an enclosed scope prior to the study. Therefore, the with regard to portable ACs. Separate space. A portable AC is powered by
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single-phase power and may rest on the Meeting, DOE clarified that in the April a. Preliminary Analysis and Notice of floor or elevated surface. It includes a 2016 Final Coverage Determination, Proposed Rulemaking (NOPR) Proposals source of refrigeration and may include DOE established a definition of all Following an evaluation of the additional means for air circulation and portable ACs that are considered to be portable AC market in preparation of the heating. 80 FR 10212, 10215 (Feb. 25, covered products that could be subject February 2015 Preliminary Analysis, 2015). to test procedures or standards. Under DOE determined that there are three In the April 2016 Final Coverage EPCA, a ‘‘consumer product’’ is any types of duct configurations that affect Determination, DOE codified this article of a type that consumes, or is product performance: Single-duct, dual- definition at 10 CFR 430.2, with minor designed to consume, energy and duct, and spot cooler. DOE noted in the editorial revisions that did not modify which, to any significant extent, is February 2015 Preliminary Analysis that the intent or scope of the definition: distributed in commerce for personal the DOE test procedure proposed in the A portable encased assembly, other use or consumption by individuals. (42 February 2015 TP NOPR did not include than a ‘‘packaged terminal air U.S.C. 6291(1)) EPCA further specifies measures of spot cooler performance, conditioner,’’ ‘‘room air conditioner,’’ or that the definition of a consumer and, therefore, as discussed previously, ‘‘dehumidifier,’’ that delivers cooled, product applies without regard to DOE did not consider standards for spot conditioned air to an enclosed space, whether the product is in fact coolers. See chapter 3 of the preliminary and is powered by single-phase electric distributed in commerce for personal TSD for more information. current. It includes a source of use or consumption by an individual. DOE further evaluated if there was refrigeration and may include additional (42 U.S.C. 6291(1)(B)) DOE’s definition any consumer utility associated with the means for air circulation and heating. 81 of ‘‘portable air conditioner’’ excludes single-duct and dual-duct FR 22514 (April 18, 2016). units that could normally not be used in configurations under consideration. As NAM requested clarification regarding a residential setting by including only what is considered a spot cooler and those portable ACs that are powered by detailed in chapter 3 of the preliminary what products are covered under the single-phase electric current. Thus, any TSD, DOE investigated installation energy conservation standards proposed product with single-phase power that locations and noise levels, and found in the June 2016 ECS NOPR. NAM otherwise meets the definition of a that duct configuration had no impact stated that there are approximately five portable AC is a covered product, on either of these key consumer utility small business manufacturers in the regardless of the manufacturer-intended variables. Therefore, DOE determined in U.S. that produce ‘‘portable commercial application or installation location. the February 2015 Preliminary Analysis ACs,’’ which they consider to be niche However, DOE also clarified in the that a single product class is appropriate products manufactured on a case-by- July 2016 STD Public Meeting that not for portable ACs. case basis. NAM suggested that these every product that meets the definition In the June 2016 ECS NOPR, DOE small business manufacturers are of portable AC may be subject to DOE’s proposed to maintain the February 2015 unsure if the test procedure is test procedures and standards. As DOE Preliminary Analysis approach, in applicable to their products, as 90 to 95 explained, only those products that which only single-duct and dual-duct percent of them operate on single-phase meet the definition of single-duct or portable ACs would be considered for power, and are unsure as well if their dual-duct portable AC, as established in potential standards as one product class. products would be covered under the the June 2016 TP Final Rule, would be For portable ACs that can be optionally proposed energy conservation subject to the appendix CC test configured in both single-duct and dual- standards. Temp-Air commented that procedure and the standards proposed duct configurations, DOE further their products are intended for in the June 2016 ECS NOPR. DOE proposed that operation in both duct temporary applications and the usage maintains this approach in this final configurations be certified under any environment for their products is rule, and establishes energy future portable AC energy conservation different than those products currently conservation standards only for standards. In the June 2016 TP Final under consideration. Temp-Air stated products that meet the definition of Rule, DOE subsequently required that if that its portable AC market share is less single-duct or dual-duct portable AC as a product is able to operate as both a than 0.1 percent of DOE’s annual codified 10 CFR 430.2 single-duct and dual-duct portable AC projected portable AC shipments as distributed in commerce by the volume. Therefore, Temp-Air urged 2. Product Classes manufacturer, it must be tested and DOE to revise and clarify its portable AC When evaluating and establishing rated for both duct configurations. 81 FR definition to exclude single-phase energy conservation standards, DOE 35241, 35247 (June 1, 2016). models destined for commercial divides covered products into product b. Comments and Responses industrial applications. NAM and classes by the type of energy used or by Temp-Air commented that classifying capacity or other performance-related ASAP, the Joint Commenters, and the these products as covered products features that justify a different standard. California IOUs supported a single obliges small business manufacturers to In making a determination whether a product class for portable ACs and expend a significant amount of their performance-related feature justifies a agreed with DOE’s conclusion that there research and development (R&D) different standard, DOE must consider is no consumer utility associated with budgets to save a limited amount of such factors as the utility to the duct configuration. The California IOUs overall energy due to the low shipments consumer of the feature and other further stated that although aesthetics is volume. NAM and Temp-Air claimed factors DOE determines are appropriate. an important consumer utility, product that if the small business manufacturers’ (42 U.S.C. 6295(q)) images from several major online products are expected to meet the Portable ACs recently became a retailers (e.g., Best Buy, Home Depot, proposed conservation standards, these covered product when DOE issued the and Sears) typically do not display the manufacturers will be unable to take on April 2016 Final Coverage ducts and therefore, duct configuration the additional costs and will close. Determination on April 18, 2016, and is likely not a major consideration for (NAM, Public Meeting Transcript, No. therefore do not have existing energy consumers when assessing the 39 at pp. 19–20, 110; Temp-Air, No. 45 conservation standards or product class aesthetics of a portable AC unit. (ASAP, at p. 1) During the July 2016 STD Public divisions. 81 FR 22514. Public Meeting Transcript, No. 39 at p.
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37; Joint Commenters, No. 44 at p. 4–5; TABLE IV.1—TECHNOLOGY OPTIONS TABLE IV.2—TECHNOLOGY OPTIONS California IOUs, No. 42 at p. 1) FOR PORTABLE AIR CONDI- FOR PORTABLE AIR CONDI- AHAM opposed a single product class TIONERS—FEBRUARY 2015 PRELIMI- TIONERS—JUNE 2016 ECS NOPR for portable ACs and instead proposed NARY ANALYSIS ANALYSIS—Continued that DOE define separate product classes for single-duct and dual-duct Increased Heat-Transfer Surface Area: Increased Heat-Transfer Coefficients: portable ACs. AHAM argued that dual- 1. Increased frontal coil area. 5. Improved fin design. 6. Improved tube design. duct units are not as portable as single- 2. Increased depth of coil (add tube rows). 7. Spray condensate onto condenser coil. 3. Increased fin density. duct units, primarily due to having two 8. Microchannel heat exchangers. 4. Add subcooler to condenser coil. hoses instead of one. AHAM also noted Component Improvements: Increased Heat-Transfer Coefficients: that one hose is typically longer with a 9. Improved compressor efficiency. greater pressure drop, so a larger 5. Improved fin design. 10. Improved blower/fan efficiency. diameter hose is needed. (AHAM, 6. Improved tube design. 11. Low-standby-power electronic controls. 7. Spray condensate onto condenser coil. 12. Ducting insulation. Public Meeting Transcript, No. 39 at p. 8. Microchannel heat exchangers. 36; AHAM, No. 43 at p. 9) 13. Improved duct connections. Component Improvements: 14. Case insulation. AHAM further asserted that a recent 9. Improved compressor efficiency. Part-Load Technology Improvements: AHAM consumer survey showed that 10. Improved blower/fan efficiency. 15. Variable-speed compressors. size and weight of a unit are important 11. Low-standby-power electronic controls. 16. Thermostatic or electronic expansion considerations for consumers, and that 12. Ducting insulation. valves. nearly seven of ten portable AC owners 13. Improved duct connections. Alternative Refrigerants: indicated that duct configuration was a 14. Case insulation. 17. Propane and R–32. Part-Load Technology Improvements: key purchase factor. AHAM concluded Reduced Infiltration Air: 15. Variable-speed compressors. 18. Air flow optimization. from this survey that duct configuration 16. Thermostatic or electronic expansion does offer a unique consumer utility and valves. After identifying all potential therefore is a basis for separate product technology options for improving the classes. (AHAM, No. 43 at p. 9) In the June 2016 ECS NOPR, DOE efficiency of portable ACs, DOE In addition to the consumer utility noted that propane refrigerant is widely performed a screening analysis (see factors of installation locations and used for portable ACs manufactured and section IV.B of this final rule and product noise, which DOE previously sold internationally, and that R–32 is chapter 4 of the final rule TSD) to determined did not depend on duct being introduced in some markets determine which technologies merited configuration, DOE considered other outside the U.S. for portable and room further consideration in the engineering factors raised by AHAM that could ACs, albeit primarily because it is has a analysis. justify separate product classes for low global warming potential (GWP). portable ACs based on duct Based on this product availability and B. Screening Analysis configuration. For all units in its test discussions with manufacturers, DOE DOE uses the following four screening sample, DOE observed that the ducts are included alternative refrigerants as a criteria to determine which technology similarly constructed from plastic in a potential technology option in the options are suitable for further collapsible design, and typically weigh technology assessment. consideration in an energy conservation approximately 1 pound, as compared to DOE also noted in the June 2016 ECS standards rulemaking: overall product weights ranging from 45 NOPR that a potential means of (1) Technological feasibility. to 86 pounds. DOE also notes that all improving portable AC efficiencies, air Technologies that are not incorporated dual-duct units in its test sample had flow optimization, was not included as in commercial products or in working the same size and length ducts for the a technology option in the February prototypes will not be considered condenser inlet and exhaust ducts. DOE 2015 Preliminary Analysis. DOE did, further. does not expect the minimal weight however, consider optimized air flow in (2) Practicability to manufacture, increase associated with a second duct the engineering analysis in the February install, and service. If it is determined to have a significant impact on 2015 Preliminary Analysis, and that mass production and reliable consumer utility in terms of portability. therefore further assessed optimized air installation and servicing of a Further, DOE has observed no flow as a technology option in the June technology in commercial products consistent efficiency improvement 2016 ECS NOPR. could not be achieved on the scale associated with either single-duct or Therefore, in addition to the necessary to serve the relevant market at dual-duct portable ACs. Accordingly, technology options considered in the the time of the projected compliance duct configuration would not justify February 2015 Preliminary Analysis, date of the standard, then that different standards. Therefore, DOE DOE considered alternative refrigerants technology will not be considered maintains the approach used in the and air flow optimization in the June further. February 2015 Preliminary Analysis and 2016 ECS NOPR, as shown in Table (3) Impacts on product utility or June 2016 ECS NOPR and establishes a IV.2. product availability. If it is determined single product class for portable ACs in that a technology would have significant this final rule. TABLE IV.2—TECHNOLOGY OPTIONS adverse impact on the utility of the product to significant subgroups of 3. Technology Options FOR PORTABLE AIR CONDI- TIONERS—JUNE 2016 ECS NOPR consumers or would result in the In the preliminary market and ANALYSIS unavailability of any covered product technology assessment, DOE identified type with performance characteristics 16 technology options in four different Increased Heat-Transfer Surface Area: (including reliability), features, sizes, categories that would be expected to 1. Increased frontal coil area. capacities, and volumes that are improve the efficiency of portable ACs, 2. Increased depth of coil (add tube rows). substantially the same as products as measured by the DOE test procedure, 3. Increased fin density. generally available in the U.S. at the shown in Table IV.1: 4. Add subcooler to condenser coil. time, it will not be considered further.
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(4) Adverse impacts on health or edition of UL 484. Accordingly, in the to the refrigerant charge limitations of safety. If it is determined that a June 2016 ECS NOPR DOE screened out the UL safety standards, UL certification technology would have significant propane and other flammable has failed to become an industry adverse impacts on health or safety, it refrigerants as a design option for standard for portable ACs, and will not be considered further. portable ACs as they would not be TopTenReviews’ list of the 10 best 10 CFR part 430, subpart C, appendix A, practicable to manufacture while portable ACs of 2016 includes four units 4(a)(4) and 5(b) meeting all relevant safety standards. that are not UL-certified. (Joint In sum, if DOE determines that a AHAM agreed with DOE’s Commenters, No. 44 at p. 3) technology, or a combination of determination that although portable DOE believes that UL certification is technologies, fails to meet one or more ACs are currently available a key consumer protection program that of the above four criteria, it will be internationally with amounts of ensures the operational safety of excluded from further consideration in flammable refrigerants, such as propane, portable ACs. Manufacturers the engineering analysis. The manufacturers are unable to sell those implementing propane in their portable subsequent sections include comments products in the U.S. market while ACs would not be able to receive UL from interested parties pertinent to the complying with the ninth edition of UL certification for their products, which screening criteria and whether DOE 484. (AHAM, No. 43 at p. 14) may result in significant adverse safety determined that a technology option The California IOUs disagreed with impacts. Accordingly, DOE continued to should be excluded (‘‘screened out’’) DOE’s decision to screen out alternative screen propane (R–290) from further based on the screening criteria. refrigerants as a technology option, consideration in this final rule analysis. because the most common refrigerant In the June 2016 ECS NOPR, DOE 1. Screened-Out Technologies for portable air conditioners (R–410A) noted that certain room ACs Alternative Refrigerants will likely be prohibited in California commercially available on the U.S. and Europe in favor of more efficient market utilize the mildly flammable R– The Significant New Alternatives alternatives by the 2021 effective date, 32, but it was not aware of any portable Policy (SNAP) final rule, published by and the analysis in the June 2016 ECS ACs available in the U.S. market or on the U.S. EPA on April 10, 2015 NOPR did not consider the likely state other markets that incorporate R–32. (hereinafter the ‘‘SNAP rule’’), limits the of the industry in 2021. The California Because this technology has not been maximum allowable charge of IOUs also suggested that DOE consider incorporated in commercial products or alternative refrigerants in portable ACs the 2016 strategy proposal by the in working prototypes for portable ACs, to 300 grams for R–290 (propane), 2.45 California Air Resources Board (CARB) DOE screened out R–32 refrigerant as a kilograms for R–32, and 330 grams for that is likely to push the industry technology option. R–441A. The SNAP rule limits were towards more efficient refrigerants, such In response to the June 2016 ECS consistent with those included for as R–32 and R–290. The California IOUs NOPR, AHAM agreed with DOE’s portable room ACs in Underwriter’s noted that this climate pollutant proposal to screen out R–32 refrigerant Laboratories (UL) Standard 484, reduction strategy proposes to limit the because the UL standard, which is based ‘‘Standard for Room Air Conditioners’’ 100-year GWP of refrigerants in portable on the elevation of the installed product (UL 484), eighth edition. However, the ACs to 750, and would also be effective and did not specifically assess use of R– most recent version of UL 484, the ninth in 2021. The proposal effectively 32 in portable ACs that sit on the floor. edition, reduces the allowable amount prohibits the sale of portable ACs that AHAM and GE noted that the UL of flammable refrigerant (e.g., propane use the R–410A refrigerant in California. standard does not preclude, but also and R–441A) to less than 40 percent of The authors of the proposal note that does not consider, the high pressure the SNAP limits. Manufacturers AC refrigerants are likely to meet this refrigeration system inside the room. informed DOE that the new UL charge requirement due to a fluorinated GHG Instead, it considers a compressor limits for propane and other flammable regulation by the European Union (EU) outside the room. Therefore, even if the refrigerants in portable ACs are not and a White House Council on UL safety standard currently does not sufficient for providing the necessary Environmental Quality pledge of $5 preclude use of R–32 in portable ACs minimum cooling capacity, and billion over the next 10 years in based on charge limits, these therefore it would not be feasible to research of low-GWP refrigerants for commenters urged DOE to further manufacture a portable AC with refrigerators and air conditioning consider any safety concerns that might propane or R–441A for the U.S. market equipment. The California IOUs noted arise from a compressor and while complying with the UL safety that while the 2016 CARB strategy is refrigeration system inside the room. standard. DOE reviewed propane still in the proposal stage, the EU AHAM also commented that efficiency refrigerant charges for portable ACs regulation will take effect in 2020, and gains associated with R–32 are currently available internationally and found a Article 11 of this regulation prohibits unknown, and due to higher static typical charge of 300 grams. DOE also placing on the market any ‘‘movable pressure, the portable AC refrigeration investigated other similar AC products room air-conditioning equipment’’ that system would need to be redesigned for that utilize propane refrigerant and contains hydrofluorocarbon (HFC) the use of this refrigerant. (AHAM, No. found that the minimum charge for refrigerants with GWP of 150 or more. 43 at pp. 13–14; GE, Public Meeting capacities in a range expected for The regulation would likely prohibit Transcript, No. 39 at pp. 45–46) portable ACs was 265 grams, which is both R–410A and R–32. The California In response to the June 2016 ECS still greater than the maximum IOUs stated that, in response, NOPR, other commenters generally allowable propane charge for portable manufacturers such as De’ Longhi and stated that R–32 is a viable alternative ACs in the ninth edition of UL 484. GREE have begun producing portable refrigerant for portable ACs that would Therefore, although portable ACs are ACs using R–290, which is claimed to improve efficiency. ASAP and LG noted currently available internationally with be 10 percent more efficient than its R– that the R–32 charge limit in UL 484 charge quantities of propane acceptable 410A counterpart. (California IOUs, No. (approximately 1 kilogram) would not under the SNAP rule, manufacturers are 42 at p. 3) preclude use of R–32 in portable ACs, unable to sell those products in the U.S. The Joint Commenters stated that and ASAP stated that one manufacturer market while complying with the ninth although DOE screened out propane due claims a 10-percent reduction in energy
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use with R–32 as compared to R–410A parties and described in various studies In the market and technology for other similar products such as consistently indicate performance assessment, DOE identifies all PTACs. ASAP, NRDC, and the Joint improvements through the use of this technology options that may increase Commenters disagreed with DOE’s refrigerant, in this final rule DOE portable AC efficiency. The screening decision to screen out R–32 as a viable maintained R–32 as a potential design analysis eliminates certain technology technology option and urged DOE to option for improving portable AC options from further consideration include it in the final rule engineering efficiency. based on the four criteria outlined at 10 analysis due to the expected increase in CFR part 430, subpart C, appendix A, Duct Insulation efficiency as compared to R–410A. The 4(a)(4) and 5(b). Any technology options Joint Commenters stated that In the February 2015 Preliminary meeting the four criteria are considered manufacturers claim a 10-percent Analysis, DOE identified duct in the engineering analysis. However, reduction in energy use using R–32 in insulation as a potential means for DOE does not necessarily incorporate all PTACs and that Oak Ridge National improving portable AC efficiency, as of the retained technologies in Laboratory (ORNL) found that R–32 less heat from the condenser air would developing the cost-efficiency demonstrates a 1 to 6-percent higher be transferred through the duct wall and relationship. Any technology options coefficient of performance across a would instead be transferred out of the meeting the screening criteria but not range of test conditions compared to R– conditioned space. During interviews, included as a means to improve 410A in mini-split ACs engineered for manufacturers indicated that they have efficiency in the engineering analysis R–410A. The Joint Commenters further considered insulated ducts to improve are discussed further in section IV.C of claimed, albeit without further performance but have not identified any this document. supporting information, that portable insulated ducts that are collapsible for Increased Heat-Transfer Surface Area ACs designed for R–32 should be packaging and shipping. No portable AC capable of outperforming R–410A by an in DOE’s teardown sample for the In the June 2016 ECS NOPR, DOE even higher margin. The California IOUs engineering analysis included insulated considered increased heat exchanger recommended that DOE consider certain ducts. In the absence of a collapsible area as a technology option that passed non-U.S. models already utilizing the design, such an insulated duct would the screening analysis and was R–32 refrigerant, claiming that these need to be packaged for shipment in its implemented in the engineering models would meet both CARB and UL fully expanded configuration, analysis as a design approach for requirements. The California IOUs significantly increasing the package reaching higher efficiency levels. DOE suggested that DOE test these models size. Because of this significantly considered up to a 20-percent heat when determining the maximum increased packaging size for non- exchanger area increase and determined observed efficiency level used for TSL 3. collapsible insulated ducts and that the associated increase in weight ASAP, NRDC, and the Joint Commenters unavailability on the market of and case size would not significantly further stated that, regardless of DOE’s collapsible designs, DOE determined impact consumer utility. approach in the final rule, that insulated ducts are not The Joint Commenters agreed with manufacturers would have the option of technologically feasible, are impractical DOE’s conclusion that all available data using R–32 as a way to improve portable to manufacture and install, and would suggest that heat exchanger areas can be AC efficiency and achieve the proposed impact consumer utility. Therefore, increased by 20 percent and represents energy conservation standards. (ASAP, DOE screened out insulated ducts as a a significant improvement to the Public Meeting Transcript, No. 39 at pp. design option for portable ACs in the analysis to better capture the full range 11–12, 42–43; LG, Public Meeting February 2015 Preliminary Analysis and of potential efficiency improvements. Transcript, No. 39 at p. 45; NRDC, in the June 2016 ECS NOPR. (Joint Commenters, No. 44 at p. 5) Public Meeting Transcript, No. 39 at p. AHAM agreed with DOE’s assessment AHAM disagreed with DOE’s 43; Joint Commenters, No. 44 at pp. 3– of duct insulation, because assertion that ability to move, install, or 4; California IOUs, No. 42 at p. 3) incorporating such a design option store the product would not be To evaluate the commenters’ would significantly increase shipping impacted if the case dimensions were to estimates of the reduction in energy use costs and weight of the product, and change to accommodate a 20 percent and increase in efficiency for R–32 as could also cause it to be more difficult larger heat exchanger. AHAM argued compared to R–410A and to identify any for consumers to install and eventually that an increased heat exchanger size other performance impacts, DOE further store the product in the off season. would increase the overall case size and investigated changes in performance (AHAM, No. 43 at p. 12) increase weight, thereby impacting associated with switching to R–32. As consumer utility by making the product 2. Additional Comments discussed in chapter 3 of the final rule more difficult to move from room to TSD, DOE reviewed multiple studies AHAM noted that DOE modeled and room and, particularly, up and down and experiments conducted on other air considered only four of the sixteen stairs. AHAM therefore urged DOE to conditioning products which suggested retained design options in the remove increased heat exchanger area performance improvements when engineering analysis and provided from the design approaches to reach switching to R–32 ranging from 2 to 5 reasons for not modeling seven other higher efficiency levels and screen out percent for cooling capacity and 1 to 4 design options that were retained from this technology option. AHAM also percent for efficiency, depending upon the screening analysis. AHAM argued commented that, although DOE did not the test conditions. DOE notes that the that the retention of these seven design indicate how much weight an increased models referenced by the California options is not justified if they are not heat exchanger might add to a product, IOUs are not sold in the U.S., and used in the engineering analysis for the AHAM determined from data gathered therefore were not included in this various reasons provided in the June by its members that a heat exchanger rulemaking analysis. 2016 ECS NOPR and STD NOPR TSD. area increase associated with a 4,000 Nonetheless, because R–32 is a viable AHAM proposed that DOE remove the Btu/h capacity increase would correlate refrigerant based on the UL safety design options that were not considered to an average product weight increase of requirements and because the in the June 2016 ECS NOPR engineering 16.6 pounds. AHAM further suggested information provided by interested analysis. (AHAM, No. 43 at pp. 9–10) that current portable ACs are already
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pushing the limits of a ‘‘single lift’’ a safety concern for single-duct units, as additional details, see chapter 4 of the product, and further increases in the the condenser must to be cooled for safe final rule TSD. size and weight could push the product operation of the unit. (AHAM, No. 43 at C. Engineering Analysis from being a ‘‘single lift’’ to a ‘‘dual lift’’ p. 14) product, which would impact Chapter 3 of the NOPR TSD explains In the engineering analysis, DOE portability. AHAM concluded that that optimized airflow refers to the establishes the relationship between the because consumers will likely not reduction of infiltration air. Further, the manufacturer production cost (MPC) accept increased size and/or weight, optimized airflow technology option and improved portable AC efficiency. DOE should screen out increased heat satisfies all four of the screening criteria, This relationship serves as the basis for exchanger area as a technology option and it was therefore further considered cost-benefit calculations for individual and should not use it as a design option in the final rule engineering analysis. consumers, manufacturers, and the in its analysis of higher efficiency However, as discussed in section IV.C of Nation. DOE typically structures the levels. (AHAM, Public Meeting this document, DOE has determined engineering analysis using one of three Transcript, No. 39 at pp. 44–45, 72; that manufacturers would likely not rely approaches: (1) Design option, (2) AHAM, No. 43 at p. 17) on optimized airflow to improve efficiency level, or (3) reverse As discussed in chapter 5 of the final portable AC efficiency because of the engineering (or cost assessment). The rule TSD, DOE does not expect that the limited impact on performance under design-option approach involves adding increase in heat exchanger size, and the the test procedures in appendix CC. the estimated cost and associated resulting increases in case size and efficiency of various efficiency- weight, would impact product 3. Remaining Technologies improving design changes to the portability. In addition to noting that all Through a review of each technology, baseline product to model different portable ACs equipped with wheels, DOE concludes that all of the other levels of efficiency. The efficiency-level which assist in changing locations on identified technologies listed in section approach uses estimates of costs and the same floor, DOE found the typical IV.A.3 of this document met all four efficiencies of products available on the unit weight increase would be limited to screening criteria to be examined further market at distinct efficiency levels to about 6 percent, or less than 5 pounds, as design options in DOE’s final rule develop the cost-efficiency relationship. at the maximum heat exchanger size analysis. In summary, DOE did not The reverse-engineering approach increase of 20 percent, which did not screen out the following technology involves testing products for efficiency result in any units in DOE’s test sample options, as shown in Table IV.3: and determining cost from a detailed requiring additional lifting assistance bill of materials (BOM) derived from compared to what would already be TABLE IV.3—REMAINING DESIGN OP- reverse engineering representative required with the currently reported TIONS FOR PORTABLE AIR CONDI- products. The efficiency ranges from unit weight. Additional detail can be TIONERS that of the least-efficient portable AC found in chapter 5 of the final rule TSD. sold today (i.e., the baseline) to the DOE also notes that the heat exchanger Increased Heat-Transfer Surface Area: maximum technologically feasible size increases do not necessarily affect 1. Increased frontal coil area. efficiency level. At each efficiency level the depth of the product case, typically 2. Increased depth of coil (add tube rows). examined, DOE determines the MPC; a portable AC’s smallest dimension, and 3. Increased fin density. this relationship is referred to as a cost- would not preclude any units with this 4. Add subcooler to condenser coil. efficiency curve. technology option from fitting through Increased Heat-Transfer Coefficients: In the preliminary engineering doorways, hallways, or stairwells. 5. Improved fin design. analysis, DOE used a hybrid approach of 6. Improved tube design. For these reasons, DOE retained the the design-option and reverse- 7. Spray condensate onto condenser coil. engineering approaches described technology option of a 20-percent heat 8. Microchannel heat exchangers. exchanger area increase in the final rule Component Improvements: above. This approach involved screening analysis. 9. Improved compressor efficiency. physically disassembling commercially 10. Improved blower/fan efficiency. available products, reviewing publicly Air Flow Optimization 11. Low-standby-power electronic controls. available cost information, and As discussed in section IV.A.3 of this 12. Improved duct connections. modeling equipment cost. From this document, in the June 2016 ECS NOPR 13. Case insulation. information, DOE estimated the MPCs DOE noted that a potential means of Part-Load Technology Improvements: for a range of products available at that improving portable AC efficiencies, air 14. Variable-speed compressors. time on the market. DOE then 15. Thermostatic or electronic expansion flow optimization, was not included as valves. considered the steps manufacturers a technology option in the February Reduced Infiltration Air: would likely take to improve product 2015 Preliminary Analysis. DOE did, 16. Air flow optimization. efficiencies. In its analysis, DOE however, consider optimized air flow in Alternative Refrigerants: determined that manufacturers would the engineering analysis in the February 17. R–32. likely rely on certain design options to 2015 Preliminary Analysis, and reach higher efficiencies. From this therefore further assessed optimized air DOE determined that these information, DOE estimated the cost and flow and included it as a technology technology options are technologically efficiency impacts of incorporating option in the June 2016 ECS NOPR. feasible because they are being used or specific design options at each AHAM requested that DOE define have previously been used in efficiency level. ‘‘optimized airflow’’ and demonstrate a commercially-available products or In the June 2016 ECS NOPR, DOE specific efficiency improvement that working prototypes. DOE also finds that followed the same general approach as corresponds to it; otherwise, AHAM all of the remaining technology options for the preliminary engineering analysis, asserted, this design option is too meet the other screening criteria (i.e., but modified the analysis based on the uncertain and should be screened out. practicable to manufacture, install, and test procedure for portable ACs in AHAM suggested that if optimized service and do not result in adverse appendix CC, comments from interested airflow means reducing the flow over impacts on consumer utility, product parties, and the most current available the condenser, that approach would be availability, health, or safety). For information.
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For this final rule, DOE largely a significant effect on measured cooling AC test procedure in appendix CC, maintained the approach from the capacity and energy efficiency ratio, as which incorporates two cooling mode NOPR, with slight modifications to determined according to test method test conditions and weighting factors to incorporate feedback from interested proposed in the February 2015 Test determine overall performance. Because parties and further refinements to the Procedure NOPR (the current proposal the additional test condition is at a engineering analysis. This section at the time of the preliminary analysis). lower outdoor temperature and has a provides more detail on the For units that draw air from the significantly larger weighting factor than development of efficiency levels and conditioned space over the condenser the original test condition, the impact of determination of MPCs in the final rule and then exhaust it outside of the infiltration air on overall performance is engineering analysis. conditioned space, an equivalent greatly reduced. Therefore, the approach amount of infiltration air must enter the 1. Efficiency Levels of considering a baseline unit to be a conditioned space due to the net single-duct portable AC with typical a. Baseline Efficiency Levels negative pressure differential that is system components was no longer valid. created between the conditioned and A baseline unit typically just meets DOE instead pursued an alternate current energy conservation standards unconditioned spaces. Because the test analysis approach in the June 2016 ECS and provides basic consumer utility. conditions proposed in the February NOPR, which utilized the results from Because there are no existing energy 2015 Test Procedure NOPR specify that conservation standards for portable ACs, infiltration air would be at a higher all units in DOE’s test sample, including DOE observed whether units tested with temperature than the conditioned air, 24 portable ACs (one test sample was lower efficiencies incorporated similar the infiltration air offsets a portion of tested in both a single-duct and dual- design options or features, and the cooling provided by the portable duct configuration) covering a range of considered these features when defining AC. The greater the amount of configurations, product capacities, and a baseline configuration. To determine infiltration air, the lower the overall efficiency as tested according the DOE energy savings that will result from a cooling capacity will be. Based on the test procedure in appendix CC. new energy conservation standard, DOE measured condenser exhaust air flow DOE developed a relationship compares energy use at each of the rates and the corresponding calculated between cooling mode power and higher efficiency levels to the energy magnitudes of the infiltration air heating SACC, which is a measure of cooling consumption of the baseline unit. effect, DOE determined in the February capacity that weights the performance at Similarly, to determine the changes in 2015 Preliminary Analysis that single- each of the cooling mode test conditions price to the consumer that will result duct units (i.e., units that draw all of the in appendix CC, using a best fit power from an energy conservation standard, condenser intake air from within the curve. DOE then used this relationship DOE compares the price of a unit at conditioned space and exhaust to the to develop an equation to determine each higher efficiency level to the price unconditioned space via a duct) would of a unit at the baseline. represent the baseline efficiency level nominal CEER for a given SACC based DOE noted in chapter 5 of the for portable ACs. on the results of DOE’s testing according preliminary analysis TSD that the air After the February 2015 Preliminary to the test procedure in appendix CC, flow pattern through a portable AC has Analysis, DOE established the portable shown below.
In the June 2016 ECS NOPR, DOE newly developed AHAM data set DOE’s test sample.21 DOE provided the then assessed the relative efficiency of suggests that DOE’s proposed baseline R value (0.7420) and R squared value each unit in the test sample by level is reasonable. (AHAM, No. 43 at (0.6424) in the DOE response memo, comparing the measured CEER from pp. 4, 14) which was accompanied by files containing the requested data for all of testing to the nominal CEER as defined During the July 2016 STD Public by the equation above (DOE will refer to DOE’s test units. Although AHAM Meeting and in a subsequent request for this ratio of actual CEER to nominal further sought to obtain model numbers data and information submitted to DOE for units in the test sample to ascertain CEER as the performance ratio (PR) for 20 a given unit). DOE proposed to define on July 21, 2016, AHAM requested the how representative DOE’s 24 test units baseline performance as a PR of 0.72, R value and R squared value for the were of the U.S. market, DOE identified which is based on the minimum PR regression curve used to develop the test units only by sample number in observed for units in the test sample. nominal CEER equation in the June order to maintain confidentiality of the Additional details on the baseline units 2016 ECS NOPR. (AHAM, Public results. (AHAM, No. 43 at pp. 4, 14) are in chapter 5 of the NOPR TSD. Meeting Transcript, No. 39 at p. 72) AHAM also expressed concern that AHAM objected to the methodology AHAM additionally submitted a DOE did not appear to have run a used to determine the baseline level supplemental request for data and complete test using the final test proposed in the June 2016 ECS NOPR, information on July 27, 2016, in which procedure and instead relied on a stating that the limited data sample was it requested the raw tested and modeled significant amount of modeled data. not representative of the minimum data used to perform the CEER and (AHAM, No. 43 at p. 4) As discussed in performance of products on the market SACC calculations for all 24 units in the June 2016 ECS NOPR and during the and that it would have been able to July 2016 STD Public Meeting, all provide test data on a wide range of 20 AHAM’s July 21, 2016 request for data and products if the test procedure had been 21 AHAM’s July 27, 2016 supplemental request information can be found at https://www. for data and information can be found at https:// finalized earlier. Nonetheless, AHAM regulations.gov/document?D=EERE-2013-BT-STD- www.regulations.gov/document?D=EERE-2013-BT- stated that the combined DOE and 0033-0029. STD-0033-0030.
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product capacities and efficiencies of the 18 single-duct portable ACs in After the June 2016 ECS NOPR considered for the June 2016 ECS NOPR DOE’s test sample. DOE modeled the analysis, AHAM compiled additional analysis were consistent with the performance of the seven dual-duct test data from its members for 22 appendix CC test procedures. portable ACs at the lower temperature portable ACs whose results are listed in Additionally, modeling was not test condition required in appendix CC. Table IV.4. (AHAM, No. 43 at pp. 3, 5– required to determine the performance 6)
TABLE IV.4—AHAM MEMBER TEST DATA
Tested CEER SACC Cooling power Unit Configuration (Btu/Wh) (Btu/h) (W) PR
A ...... Single-Duct ...... 5.81 6507.57 807.75 0.91 E ...... Single-Duct ...... 5.88 6950.00 846.00 0.90 J ...... Single-Duct ...... 6.82 8242.83 861.75 0.98 D ...... Single-Duct ...... 4.75 4033.24 579.71 0.90 H ...... Single-Duct ...... 4.46 4737.80 740.13 0.79 S ...... Single-Duct ...... 6.27 7692.11 854.25 0.92 G ...... Single-Duct ...... 6.47 8152.20 879.26 0.93 C ...... Single-Duct ...... 5.00 5159.80 636.00 0.86 K ...... Single-Duct ...... 5.20 6702.80 790.50 0.81 N ...... Single-Duct ...... 5.50 8334.20 958.50 0.78 P ...... Single-Duct ...... 6.50 9393.00 971.25 0.88 B ...... Single-Duct ...... 6.78 6687.50 990.00 1.05 L ...... Single-Duct ...... 5.48 3411.44 581.10 1.11 F ...... Single-Duct ...... 5.97 4474.20 988.90 1.09 M ...... Single-Duct ...... 5.46 6836.43 1206.00 0.84 R ...... Single-Duct ...... 5.01 7031.25 1238.00 0.76 Q ...... Single-Duct ...... 4.79 6371.60 1281.00 0.76 O ...... Single-Duct ...... 5.21 5362.36 914.00 0.88 T ...... Single-Duct ...... 5.63 5324.20 869.00 0.96 W ...... Single-Duct ...... 6.35 7012.40 1031.00 0.97 Z ...... Single-Duct ...... 6.17 8190.80 1253.00 0.89 U ...... Single-Duct ...... 6.28 8854.60 1312.00 0.87
AHAM analyzed the combined relative efficiency of each unit in the that efficiency would typically increase sample set of its and DOE’s data, combined test sample by comparing the with capacity, but estimated different totaling 47 units, to determine the best- measured CEER from testing to the new coefficients in the nominal CEER fit power regression, a new nominal nominal CEER. AHAM confirmed DOE’s equation. (AHAM, No. 43 at pp. 3, 5–6) CEER equation (shown below), and the conclusion in the June 2016 ECS NOPR
In conducting this final rule performance of dual-duct units For the final rule, DOE updated the engineering analysis, DOE included the operating at the lower 83 °F test relationship between cooling mode data supplied by AHAM and also condition. For those units where the power and SACC and the subsequent reassessed its own test data and user manual clearly states that the fan nominal CEER equation to reflect the performance modeling. DOE corrected operates continuously during off-cycle revised set of test and modeled data. minor errors in its test data and more mode, DOE included the off-cycle mode The resulting updated nominal CEER accurately represented the modeled power in this final rule analysis. equation is shown below.
DOE reassessed the PRs for each unit baseline efficiency level analyzed in the improve portable AC efficiency. While and found the baseline value to be 0.67, June 2016 ECS NOPR. Additional certain technology options identified in which is the minimum PR observed in details on the baseline units efficiency Table IV.1 of this final rule and the combined test sample. Although this level are included in chapter 5 of the discussed in chapter 3 of the final rule baseline PR value is lower than the final rule TSD. TSD meet all the screening criteria and value of 0.72 presented in the June 2016 b. Higher Energy Efficiency Levels may produce energy savings in certain ECS NOPR, applying the new value to real-world situations, DOE did not the updated nominal CEER curve results DOE develops incremental efficiency further consider each of them in the in a baseline efficiency level curve for levels based on the design options engineering analysis because specific this final rule that closely matches the manufacturers would likely use to efficiency gains were either not clearly
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defined or the DOE test procedure energy conservation standards in the numerically modeled component would not capture those potential June 2016 ECS NOPR. DOE also based improvements for each of the 21 out of improvements. Such technology options the June 2016 ECS NOPR analysis on 24 test units for which detailed that were not considered are: (1) Adding the SACC measured in appendix CC, a component information were available a subcooler or condenser coil, (2) weighted average of the adjusted cooling to estimate potential efficiency increasing the heat transfer coefficients, capacities at the two cooling mode test improvements to existing product (3) improving duct connections, (4) conditions. configurations. The component improving case insulation, (5) The two cooling mode test conditions improvements were performed in three implementing part-load technologies, in appendix CC are weighted based on steps for each unit. and (6) substituting R–32 for the the percentage of annual hours for each The first incremental improvement for commonly used R–410A refrigerant. test condition, on average, for each unit included a 10-percent increase Further discussion of these technology geographical locations that correspond in heat exchanger frontal area and options and the reasons why DOE to expected portable AC ownership. The raising the compressor energy efficiency tentatively concluded that they would majority (80 percent) of the total hours ratio (EER) to 10.5 Btu/Wh, the be unlikely to be implemented to were estimated to relate to the lower of maximum compressor efficiency improve efficiency can be found in the two outdoor temperatures, 83 identified at the time of the February chapter 5 of the final rule TSD. degrees Fahrenheit (°F) dry-bulb. 2015 Preliminary Analysis. Because at this lower outdoor The second incremental component i. June 2016 Standards NOPR Proposal temperature, there is only a 3 °F dry- efficiency improvement step for each In the February 2015 Preliminary bulb temperature differential and unit included a 15-percent increase in Analysis, DOE conducted its subsequent 0.38 Btu per pounds of dry heat exchanger frontal area from the engineering analysis, including defining air enthalpy differential between the original test unit and an improvement in efficiency levels, assuming that indoor and outdoor air, the potential compressor efficiency to an EER of 11.1 manufacturers would rely on airflow impact of infiltration air heating effects Btu/Wh, which DOE identified as the optimization to improve portable AC on the overall CEER metric is maximum efficiency for currently efficiencies. However, for the June 2016 substantially reduced. For this reason, available single-speed R–410A rotary ECS NOPR analysis, DOE updated the DOE found no significant relationship compressors of the type typically found efficiency levels to reflect performance between duct configuration or air flow in portable ACs and other similar based on appendix CC, which was optimization and improved efficiency, products. As with the 10-percent heat different from the proposed test and therefore alternatively considered exchanger area increase, DOE expected procedure that was the basis of the component efficiency improvements as that a chassis size and weight increase February 2015 Preliminary Analysis. the primary means to increase CEER in would be necessary to fit a 15-percent Appendix CC includes a second cooling the June 2016 ECS NOPR engineering increased heat exchanger, but mode outdoor test condition for dual- analysis. Accordingly, in the June 2016 concluded that portability and duct units and infiltration air conditions ECS NOPR, DOE defined its efficiency consumer utility would not be for both single-duct and dual-duct units. levels, other than the max-tech, based significantly impacted. The CEER metric for both single-duct on the performance observed in its test DOE included all available design and dual-duct units includes a sample, independent of duct options in the third efficiency weighted-average measure of configuration or level of air flow improvement step for each unit, performance at the two cooling mode optimization. including a 20-percent increase in heat test conditions, along with measures of As discussed previously in section exchanger frontal area from the original energy use in standby and off modes. IV.C.1.a, in the June 2016 ECS NOPR, test unit, more efficient electronically Appendix CC does not include DOE characterized and compared commutated motor (ECM) blower provisions proposed in the February performance among all portable ACs in motor(s), and a variable-speed 2015 TP NOPR for measuring case heat its test sample and determined a compressor with an EER of 13.7 Btu/ transfer. relationship between SACC and a Wh. DOE concluded that a 20-percent As discussed in the February 2015 general representation of expected increase in heat exchanger size was the Preliminary Analysis, although the CEER. DOE then assessed individual maximum allowable increase for initial test procedure proposal included unit performance relative to this consumer utility and portability to be a CEER metric that combined energy use nominal CEER relationship and retained, as discussed in section IV.B.2 in cooling mode, heating mode, and identified a baseline efficiency level at of this document. DOE also improved various low-power modes, the PR = 0.72, with PR defined as the ratio standby controls efficiency in this final preliminary analysis was conducted of actual CEER to nominal CEER. step, adjusting the standby power for using cooling mode energy efficiency For Efficiency Level 2 (EL 2), DOE each test unit to the minimum observed ratio (EERcm) as the basis for energy determined the PR that corresponded to standby power of 0.46 watts (W) in its conservation standards because cooling the maximum available efficiency across test sample. With these design options is the primary function for portable ACs, a full range of capacities (1.14), and then modeled for units in its test sample, and DOE expected that manufacturers selected an intermediate Efficiency DOE found that the single, theoretical would likely focus on improving Level 1 (EL 1) based on a PR between maximum-achievable efficiency among efficiency in this mode to achieve the baseline and EL 2 (0.94). For all modeled units corresponded to a PR higher CEERs. Because appendix CC Efficiency Level 3 (EL 3), DOE identified of 1.75, which DOE defined as does not include a heating mode test the PR for the single highest efficiency Efficiency Level 4 (EL 4). and includes a second cooling mode test unit observed in its test sample (1.31). Table IV.5 summarizes the specific condition, the CEER metric as codified Due to the variations in performance improvements DOE considered when combines the performance at both among units in DOE’s test sample, DOE modeling the performance of higher cooling mode test conditions with conducted additional performance efficiency design options applied to energy use in the low-power modes. modeling to augment its test data when each test unit in the June 2016 ECS Accordingly, DOE utilized CEER as the estimating efficiency and manufacturing NOPR. Depending on the unit, these basis for its proposed portable AC costs at each efficiency level. DOE design options could be associated with
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different efficiency levels above the baseline.
TABLE IV.5—COMPONENT IMPROVEMENTS SUMMARY—JUNE 2016 ECS NOPR
Heat exchanger area Compressor EER Blower motor Standby (% increase) (Btu/Wh) (type) (watts)
10% ...... 10.5 (single-speed) ...... (1) ...... 15% ...... 11.1 (single-speed) ...... 20% ...... 13.7 (variable-speed) ...... ECM (variable-speed) ...... 0.46 1 No blower motor or standby power changes were applied to the first two incremental steps.
In the June 2016 ECS NOPR, DOE previously discussed and the PR values analyzed efficiency levels according to listed in Table IV.6: the original nominal CEER equation
TABLE IV.6—PORTABLE AIR CONDITIONER EFFICIENCY LEVELS AND PERFORMANCE RATIOS—JUNE 2016 ECS NOPR
Performance Efficiency level Efficiency level description ratio (PR)
Baseline ...... Minimum Observed ...... 0.72 EL 1 ...... Intermediate Level ...... 0.94 EL 2 ...... Maximum Available for All Capacities ...... 1.14 EL 3 ...... Maximum Observed ...... 1.31 EL 4 ...... Max-Tech (Maximum of Modeled Component Improvements) ...... 1.75
Figure IV.1 plots each efficiency level nominal CEER curve scaled by the PR curve for SACCs from 50 to 10,000 Btu/ assigned to each efficiency level. h, based on the June 2016 ECS NOPR
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Additional details on the selection of single-duct portable ACs and the test is ACs. This EER is consistent with the efficiency levels in the June 2016 ECS conducted at one temperature. AHAM EER of the compressor used in the NOPR may be found in chapter 5 of the therefore suggested that DOE not Climax VS12 unit identified by the NOPR TSD. consider variable-speed compressors for California IOUs. DOE’s estimates for single-duct portable ACs in the efficiency improvements in the June ii. June 2016 Standards NOPR engineering analysis. AHAM suggested 2016 ECS NOPR were based on the Comments and Responses that the burden and costs of maximum operational efficiency and Variable Speed Compressors implementing a variable-speed did not consider part-load efficiency compressor for portable ACs would gains. Therefore, DOE’s consideration of ASAP and the Joint Commenters outweigh the efficiency gains and it variable-speed compressors is agreed with DOE’s consideration of would also lead to larger and heavier appropriate for both single-duct and variable-speed compressors in the STD enclosures (20-percent larger chassis). dual-duct portable ACs in this final rule NOPR analysis and agreed that they can AHAM also stated that manufacturers analysis. In addition, DOE’s analysis improve both part-load and full-load would need to use inverter controls that accounted for the higher costs when efficiency. (ASAP, Public Meeting are costly and would also require an incorporating variable-speed Transcript, No. 39 at pp. 72; Joint electronic expansion valve to modulate compressors, including their more Commenters, No. 44 at p. 5) The refrigerant flow differently as compared costly controls. DOE also modeled larger California IOUs supported the inclusion to a single-speed compressor, both of case sizes that would accommodate of variable-speed compressors as a which are costly design options. larger heat exchangers, and the larger technology option and, although DOE (AHAM, No. 43 at p. 13) case sizes would also accommodate was unable to identify any portable AC DOE included variable-speed variable-speed compressors and their models that utilize variable-speed compressors as a design option in the associated components. compressors, they suggested that DOE June 2016 ECS NOPR because of their consider models, such as the Climax high efficiency during continuous Improved Compressor Efficiency and VS12. (California IOUs, No. 42 at p. 2) operation, and not for their part-load Availability AHAM noted that the test procedure capability. As discussed in chapter 5 of AHAM agreed with DOE’s assessment proposed at the time of the June 2016 the June 2016 ECS NOPR TSD, DOE of inertia and scroll compressors, stating ECS NOPR would not capture any modeled each test unit with a variable- that implementing these compressors efficiency gains associated with speed compressor with an EER of 13.7 would significantly affect portability implementing a variable-speed Btu/Wh, representative of the maximum and consumer utility of the product. compressor for single-duct units, as available compressor efficiency for the AHAM noted that a portable AC is used there is no part-load requirement for capacity range appropriate for portable entirely inside a home with no portion
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of the portable AC located outside, and multiple market drivers, would ensure retained in the screening analysis and therefore, noise and vibration may be a adequate availability of high-efficiency considered in the engineering analysis. concern for a more efficient compressor compressors to meet higher efficiency However, case insulation was not that would be noisier, larger, and more levels. (Joint Commenters, No. 44 at pp. considered as a means manufacturers costly to implement. (AHAM, No. 43 at 1–3) would likely use to improve efficiency p. 11) DOE conducts its analyses based on in the June 2016 ECS NOPR engineering Consistent with the June 2016 ECS currently available information. analysis due to its insignificant impact NOPR analysis, DOE did not consider Accordingly, DOE has analyzed on capacity. DOE adopts that same inertia or scroll compressors in compressor efficiencies for compressors approach in this final rule. developing the final rule efficiency currently available to manufacturers. analysis. While the highest efficiency single- Improved Duct Connections and AHAM commented that determining speed and variable-speed compressors Airflow Optimization the sizes of compressors available in the are available in the appropriate capacity In chapter 5 of the June 2016 ECS future for portable ACs may be difficult range for portable ACs, the number of NOPR TSD, DOE noted that no units in considering that manufacturers may models and different capacities the test sample provided additional begin developing compressors for available may not be sufficient to cover sealing in the duct connections. DOE, alternative refrigerants. AHAM therefore the entire range of portable AC therefore, lacked information regarding suggested that DOE determine the future capacities a manufacturer would leakage rates and potential savings availability of current compressors include in its product line. The 5-year associated with reducing condenser air through discussions with compressor period prior to compliance with the leakage to the room, and did not further manufacturers. AHAM agreed with standards established in this final rule consider the improvements associated DOE’s assessment that moving to EL 3 may allow compressor manufacturers with improved duct connections in the or EL 4 would force manufacturers to sufficient time to develop components June 2016 ECS NOPR. remove certain portable AC cooling and products for a range of efficiencies. The Joint Commenters noted that capacities from the market due to However, as stated in the June 2016 ECS while DOE was unable to incorporate compressor availability being driven by NOPR, compressor availability for improved duct connections as a room ACs. (AHAM, No. 43 at pp. 11, 17) portable ACs is largely driven by the technology option in the June 2016 ECS The Joint Commenters suggested that room AC market. Compressors NOPR engineering analysis due to lack DOE’s concerns regarding the optimized for room AC operation are of data, manufacturers may be able to availability of high-efficiency not necessarily optimal for portable improve duct connections as a way to compressors to meet higher efficiency ACs. Therefore, DOE maintains its improve efficiency. (Joint Commenters, levels are unwarranted. They noted that concerns regarding availability of the No. 44 at p. 4) because portable ACs are a newly highest efficiency single-speed and AHAM commented that it has no covered product, the lead time between variable-speed compressors for portable information regarding the heat impacts the publication of the final rule and the ACs, and took these concerns into of air leakage at the duct connections compliance date will be 5 years, and account when establishing the standards and, based on DOE’s own assessment therefore, manufacturers and in this final rule. and lack of data, proposed that DOE component suppliers, including Case Insulation remove this as a design option. (AHAM, compressor manufacturers, will have 5 No. 43 at p. 12) years to develop new products and In chapter 5 of the June 2016 ECS DOE notes that although duct components. The Joint Commenters NOPR TSD, DOE concluded that adding connections were not ultimately further noted that the markets for both insulation to the product case would implemented to reach higher efficiency room ACs and dehumidifiers will likely result in little or no improvement levels in the June 2016 ECS NOPR drive increased production of high- compared to existing product cases. engineering analysis, this technology efficiency compressors, especially Because heat transfer through the case option satisfies all four of the screening because the next room AC standard is has a minimal impact on overall cooling analysis criteria and was therefore scheduled to take effect no later than capacity, the test procedure adopted in retained in the screening analysis and 2022 and DOE is funding a project appendix CC does not include a considered in the engineering analysis. conducted by ORNL in partnership with measurement of case heat transfer. DOE adopts that same approach in this GE to develop a 13 EER room AC. The AHAM proposed that because DOE is final rule. Joint Commenters also noted that not aware of any portable ACs that use dehumidifiers use similar components additional case insulation, it should be Improved Standby Controls as portable ACs and a new ENERGY removed as a technology option due to In chapter 5 of the June 2016 ECS STAR specification for dehumidifiers the lack of data. AHAM observed that NOPR TSD, DOE discussed improved that will take effect later this year is DOE did not include a measure of case standby efficiency as a component likely to drive increased compressor heat transfer in the CEER metric in improvement in the engineering efficiencies. The Joint Commenters appendix CC because DOE concluded it analysis. asserted that available compressor was insignificant, and therefore any AHAM asserted that there is no efficiencies typically increase over time, energy savings would not be captured substantial gain from improving standby as seen in the recent room AC by the test procedure and would have power of electronic controls in terms of rulemaking, and it is therefore no impact on the standards analysis. improving efficiency and therefore reasonable to expect that the available (AHAM, No. 43 at p. 12) proposed that DOE remove it as a efficiencies of both single-speed and DOE identified case insulation as a technology option as there will be an variable-speed compressors will technology option because it may insignificant impact when compared to increase in the years before a portable improve the efficiency of portable ACs overall portable AC energy AC standard takes effect. The Joint when operated in the field, albeit by a consumption. (AHAM, No. 43 at p. 11) Commenters concluded that the long small amount. This technology option DOE observes that improved standby lead time before the portable AC satisfies all four of the screening power would positively impact CEER, standard would take effect, along with analysis criteria, and was therefore and the impact would be measurable,
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albeit small, under appendix CC. ASAP and the Joint Commenters combined AHAM and DOE data. AHAM Because appendix CC can quantify the noted that the NOPR engineering stated that a PR of 0.90 would better effect of improved standby power and analysis did not consider potential reflect the current status of units on the because DOE observed this design efficiency gains from microchannel heat market and also would require more option in use in its test sample, DOE exchangers, which may be utilized by reasonable redesigns for manufacturers, considered it in the June 2016 ECS manufacturers to meet the portable AC especially for a new standard. AHAM NOPR engineering analysis and in this energy conservation standards. The noted that its proposed level is between final rule. Further, DOE notes that EPCA Joint Commenters referenced research DOE’s June 2016 ECS NOPR TSL 1 and requires that DOE address standby mode performed in 2006 that found TSL 2, and according to AHAM would and off mode energy use in its energy microchannel condensers can result in a require a 50-percent redesign of the conservation standards. (42 U.S.C. 6- to 10-percent increase in refrigeration tested units. (AHAM, No. 43 at pp. 7– 6295(gg)(3)) system efficiency, and additional 8) research for mobile air conditioning that As discussed in chapter 5 of the June Microchannel Heat Exchangers indicated that microchannel heat 2016 ECS NOPR TSD, DOE assessed the In the chapter 5 of the June 2016 ECS exchangers can increase efficiency by 8 number of units that would require a NOPR TSD, DOE concluded that percent. (ASAP, Public Meeting complete product redesign, as opposed because portable ACs already include Transcript, No. 39 at pp. 67–68; Joint to less costly and impactful component many design options to improve heat Commenters, No. 44 at p. 4) improvements, and found that 46 DOE agrees that microchannel heat percent of units in the test sample transfer in the evaporator and exchangers are associated with would require a significant product condenser, and because it lacked efficiency improvements, but also agrees redesign at TSL 2 (see table 5.5.4 in the information on the potential efficiency with AHAM regarding the complexity of STD NOPR TSD). Also, DOE’s energy gains with microchannel heat incorporating these heat exchangers into conservations standards are not exchangers, microchannel heat portable ACs. Due to the issues in determined solely based on the number exchangers were not considered in the implementing microchannel heat of units that would require updates to engineering analysis as a design option exchangers and the lack of information meet the new levels, but rather the range to reach increased portable AC regarding their use in portable ACs, of criteria discussed in section II.A of efficiencies. DOE expected that DOE maintains the June 2016 ECS this document. These considerations are manufacturers would most likely rely NOPR approach for this final rule discussed at length in the June 2016 on increased heat exchanger cross analysis, in which DOE does not ECS NOPR and TSD and are reassessed sectional areas to improve heat transfer consider this design option in the and addressed in this final rule. and increase efficiencies. engineering analysis because it expects As discussed in the following section, AHAM agreed with DOE and further that manufacturers would instead rely DOE considered the combined DOE and stated that microchannel heat on increasing heat exchanger cross- AHAM dataset to update its engineering exchangers do not work well for sectional areas to increase heat transfer. analysis in this final rule. portable ACs because they are more suitable for the condenser rather than Market Distribution iii. Final Rule Analysis the evaporator due to the difficulty in AHAM analyzed the data in the For this final rule, DOE maintained draining condensing water. AHAM also combined sample of portable ACs and the engineering analysis approach commented that, because portable ACs concluded that a greater percentage of utilized in the June 2016 ECS NOPR, spray condensed water onto the test units fell short of the proposed with additional modifications and condenser to increase the heat efficiency level (TSL 2) than DOE improvements based primarily on exchange, poor draining capability will estimated for its own test sample in the comments and data received in response also affect the condenser. AHAM also June 2016 ECS NOPR. AHAM to the June 2016 ECS NOPR. As asserted that microchannel heat determined that 17 percent of units in discussed in in section IV.C.1.a, DOE exchangers are complicated, extremely the combined dataset would meet TSL updated the test data and improved the expensive to implement, and easily 2, suggesting that 83 percent of the units performance modeling in this final rule retain more dirt in the unit, decreasing would require a redesign. Therefore, and subsequently updated the cooling performance at a much faster AHAM proposed that DOE adopt a relationship for nominal CEER based on rate. (AHAM, No. 43 at pp. 10–11) median PR of 0.90 based on the measured SACC as follows:
DOE also identified a baseline based on a PR between the baseline and information. The component efficiency level with a PR of 0.67 for this EL 2 (0.85). For EL 3, DOE identified the improvements were performed in three final rule, based on the updated test unit PR for the single highest efficiency unit steps for each unit, similar to the performance. observed in its test sample (1.18). improvements conducted for the June DOE subsequently adjusted its In this final rule, DOE relied on the 2016 ECS NOPR engineering analysis. efficiency levels based on the updated same numerically modeled component For this final rule, DOE utilized the unit performance data utilized in this improvements for each of the 21 out of same component efficiency final rule. For EL 2, DOE determined the 24 test units considered in the June improvements outlined in Table IV.5, PR that corresponded to the maximum 2016 ECS NOPR. DOE also modeled maintaining the same maximum single- available efficiency across a full range of component improvements for an speed and variable speed compressor capacities (1.04), and then selected an additional 2 units for which DOE efficiencies (11.1 Btu/Wh and 13.7 Btu/ intermediate efficiency level for EL 1 identified detailed component Wh, respectively), the same maximum
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percent heat exchanger frontal area achievable efficiency among all EL 4 is defined by the maximum increases (20 percent), the switch from modeled units corresponded to a PR of theoretical PR after modeling all design a permanent split capacitor (PSC) motor 1.62, which DOE defined as EL 4. options listed in Table IV.5. to an ECM for the blower, and a DOE emphasizes that the changes In this final rule, DOE analyzed minimum standby power of 0.46 W. listed in Table IV.5 do not uniquely efficiency levels based on test samples With these design options modeled correlate with efficiency levels beyond and modeled performance according to for units in its test sample, DOE found the baseline. Baseline through EL 3 are the following equation and the PR that the single, theoretical maximum- defined by the range of test data, while values listed in Table IV.7:
TABLE IV.7—PORTABLE AIR CONDITIONER EFFICIENCY LEVELS AND PERFORMANCE RATIOS—FINAL RULE ANALYSIS
Performance Efficiency level Efficiency level description ratio (PR)
Baseline ...... Minimum Observed ...... 0.67 EL 1 ...... Intermediate Level ...... 0.85 EL 2 ...... Maximum Available for All Capacities ...... 1.04 EL 3 ...... Maximum Observed ...... 1.18 EL 4 ...... Max-Tech (Maximum of Modeled Component Improvements) ...... 1.62
Figure IV.2 plots each efficiency level scaled by the PR assigned to each curve for SACCs from 50 to 10,000 Btu/ efficiency level. h, based on the nominal CEER curve
Additional details on the selection of 2. Manufacturer Production Cost efficiencies. For the June 2016 ECS efficiency levels may be found in Estimates NOPR analysis, DOE developed new chapter 5 of the final rule TSD. incremental MPC estimates based on the In the February 2015 Preliminary changes to the efficiency levels detailed Analysis, DOE developed incremental in section IV.C.1 of the June 2016 ECS MPC estimates based on the optimized NOPR, and also based on feedback from airflow approach to improving interested parties and on information
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gathered in additional manufacturer significant product redesigns, as and the new test procedures will require interviews. When assigning costs to reaching the maximum modeled reductions in reported capacities of efficiency levels in the June 2016 ECS efficiency would require a 20-percent existing products. AHAM suggested that NOPR analysis, DOE considered all increase in heat exchanger area and the manufacturers have not yet fully units that performed between two most efficient variable-speed explored the design requirements to efficiency levels as representative of the compressor. DOE noted that reach the various ELs and therefore lower of the two efficiency levels. DOE manufacturers would likely undertake a urged DOE to reassess its engineering determined an average baseline MPC product redesign when switching from and costing analysis to incorporate the based on the units in DOE’s test sample a single-speed to a variable-speed effects of both capacity changes and with a CEER below EL 1 (PR = 0.94). Six compressor. Additionally, as discussed modifications necessary to meet the ELs. units in the test sample with a market- in section IV.C.1.b of this document, the AHAM argued that it is not sufficient to representative range of capacities tested ability of a product to reach EL 3 or EL say that the costs associated with the below EL 1. The average MPC of these 4 would be dependent on the capacity changes are incorporated in all six units reflected the baseline MPC for availability of the most efficient ELs from the base case onward because the overall portable AC market. components. However, compressor the constraints on size and portability to DOE subsequently determined the availability for portable ACs is largely maintain the product as portable will costs for all other torn-down and driven by the room AC industry, so the have significant effects on the modeled units, and determined the most efficient single-speed and variable- practicality of technology options, average costs associated with each speed compressors may not be available particularly adding evaporator or incremental component efficiency over the entire range of capacities condenser coil area. (AHAM, No. 43 at improvement when moving between necessary for all portable AC product p. 22) efficiency levels. In addition to the costs capacities. As a result, DOE determined GREE commented that, based on its associated with the improved that moving to EL 3 or EL 4 may calculations, larger chassis designs are components themselves, DOE also necessitate manufacturers to remove necessary to meet the proposed considered the increased costs certain portable AC cooling capacities standards and consumers are likely associated with other related product from the market. unwilling to accept the additional costs changes, such as increasing case sizes to For the June 2016 ECS NOPR, DOE associated with tooling. (GREE, Public accommodate larger heat exchangers. calculated all MPCs in 2014 dollars Meeting Transcript, No. 39 at pp. 21–22) Although DOE’s test and modeled (2014$), the most recent year for which As discussed in chapter 5 of the June data resulted in a range of PRs from 0.72 full-year data was available at the time 2016 ECS NOPR TSD, based on the to 1.75, DOE noted in the June 2016 ECS of the analysis. Table IV.8 presents the range of observed heat exchanger areas NOPR that not all units in its test MPC estimates DOE developed for the in its test sample, DOE determined that sample were capable of reaching higher June 2016 ECS NOPR. a 20-percent increase in heat exchanger PRs with the identified design option area is an appropriate limit to maintain changes. For example, the modeled TABLE IV.8—PORTABLE AIR CONDI- portability and avoid impacting max-tech PR represented a unit in the TIONER INCREMENTAL MANUFAC- consumer utility. DOE also notes that all test sample that had a high PR as a TURER PRODUCTION COSTS costs necessary to increase heat starting point (near EL 3). Modeling (2014$)—JUNE 2016 ECS NOPR exchanger areas and the corresponding increased heat exchanger sizes and a chassis design changes were considered more efficient compressor in that unit Incremental in the product cost estimates presented resulted in a higher modeled PR than Efficiency level MPC in the June 2016 ECS NOPR and are also could be achieved theoretically by (2014$) considered in this final rule. applying the same design options to Additionally, DOE accounted for the baseline units. For the units that started Baseline ...... changes to both CEER and SACC that EL1 ...... $29.78 at lower PRs, DOE expected that EL2 ...... 45.13 would result from incorporating the manufacturers would have to undertake EL3 ...... 60.35 design option changes in its June 2016 a complete product redesign and EL4 ...... 108.99 ECS NOPR engineering analysis. optimization to reach higher PRs, rather AHAM noted that no portable ACs are than just applying the identified design Additional details on the manufactured in the U.S., and some are options. As a result, manufacturers of development of the incremental cost manufactured by third-party these units would incur higher MPCs to estimates for the June 2016 ECS NOPR manufactures instead of by those who reach the higher efficiency levels and analysis may be found in chapter 5 of market them. Therefore, AHAM does also significant conversion costs the June 2016 ECS NOPR TSD. not believe it is possible to characterize associated with updating their product During the July 2016 STD Public the cost structure of Chinese lines. These conversion costs are Meeting, AHAM stated it would work to manufacturing plants and ultimately discussed further in chapter 12 of the gather and provide to DOE product cost determine the manufacturer costs for June 2016 ECS NOPR TSD. information. (AHAM, Public Meeting overseas manufacturers. During the July In the June 2016 ECS NOPR, DOE Transcript, No. 39 at p. 75–76) GE 2016 STD Public Meeting and in its July found that only three units in the commented that it was unable to 21, 2016 request for data and teardown sample would be capable of provide accurate cost feedback due to information, AHAM requested insight reaching EL 3 without significant concerns regarding conducting the test into how the cost model was developed product redesign (i.e., the one unit that procedure and testing units of all duct and how DOE is able to estimate the tested at EL 3 and two units that could configurations. (GE, Public Meeting manufacturing costs for portable ACs. theoretically achieve EL 3 with the Transcript, No. 39 at p. 18) (AHAM, Public Meeting Transcript, No. highest efficiency single-speed AHAM subsequently stated that it and 39 at pp. 76–77) compressors and increasing the heat its members were unable to verify the The DOE response memo stated that exchanger area no more than 20 manufacturer product cost estimates in DOE accounts for the location of a percent). At EL 4 (max-tech), DOE the June 2016 ECS NOPR because all manufacturing facility when determined all products would require portable ACs are produced overseas, determining labor costs as well as
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tooling and equipment costs.22 Industry D. Markups Analysis AHAM states that DOE persists in financial metrics were estimated using The markups analysis develops relying on a simplistic interpretation of publically available financial appropriate markups (e.g., manufacturer economic theory that assumes only information for both manufacturers and markups, retailer markups, distributor variable costs can be passed through to importers selling portable ACs in the markups, contractor markups) in the customers because economic returns on U.S. DOE also noted that the cost distribution chain and sales taxes to capital cannot increase in a competitive estimates in the June 2016 ECS NOPR convert the MPC estimates derived in marketplace. According to AHAM, they accounted for input received from the engineering analysis to consumer and the other associations and industry manufacturers and importers during prices, which are then used in the LCC participants are unanimous in declaring confidential interviews. and PBP analysis and in the that DOE’s conclusions are simply incorrect and that percentage margins For the final rule analysis, DOE manufacturer impact analysis. At each step in the distribution channel, throughout the distribution channels followed the same approach as used in have remained largely constant. In the June 2016 ECS NOPR to develop companies mark up the price of the product to cover business costs and addition, AHAM noted that Shorey incremental MPC estimates at each Consulting has shown that empirical efficiency level. DOE updated the profit margin. For portable ACs, the main parties in the distribution chain studies of industry structure and other incremental MPC estimates from the variables have only weak correlation June 2016 ECS NOPR based on the are manufacturers, retailers, and consumers. with profitability, demonstrating that changes to the ELs detailed in section The manufacturer markup converts the economic theory DOE relies upon is IV.C.1 of this final rule, feedback from MPC to manufacturer selling price proven not to apply in practice. Rather interested parties, improved test unit (MSP). DOE developed an average than continue to debate past each other, modeling, and updated cost modeling. manufacturer markup by examining the AHAM commented that DOE should As described in section IV.C.1.a of annual Securities and Exchange submit both its work and that of the this final rule, DOE incorporated minor Commission (SEC) 10–K reports filed by various industry groups to an updates to its own data set and included publicly-traded manufacturers primarily independent peer review process. the AHAM test data to determine engaged in appliance manufacturing (AHAM, No. 43 at p. 20) performance trends and ELs. The and whose combined product range DOE disagrees that the theory behind the concept of incremental markups has adjusted data and slightly different EL includes portable ACs. been disproved. The concept is based on curve shape compared to the June 2016 DOE developed baseline and a simple notion: An increase in ECS NOPR shifted a few of the data incremental markups for the profitability, which is implied by points that would be included in each manufacturers and retailers in the distribution chain. Baseline markups are keeping a fixed markup percentage EL. Additionally, DOE did not have when the product price goes up and access to the AHAM test units for applied to the price of products with baseline efficiency, while incremental demand is relatively inelastic, is not teardowns or cost modeling, so by likely to be viable over time in a necessity relied on its own sample of markups are applied to the difference in price between baseline and higher- business that is reasonably competitive. units to define the representative DOE agrees that empirical data on incremental MPCs at each EL. For this efficiency models (the incremental cost increase). The incremental markup is markup practices would be desirable, final rule, DOE also calculated all MPCs but such information is closely held and in 2015$, the most recent year for which typically less than the baseline markup, and is designed to maintain similar per- difficult to obtain. full-year data was available at the time Regarding the Shorey Consulting of the final rule analysis. Table IV.9 unit operating profit before and after 23 interviews with appliance retailers, presents the updated MPC estimates new or amended standards. DOE relied on economic data from the although the retailers said that they DOE developed for this final rule. U.S. Census Bureau to estimate average maintain the same percentage margin baseline and incremental markups. after amended standards for refrigerators TABLE IV.9—PORTABLE AIR CONDI- AHAM commented that it strongly took effect, it is not clear to what extent TIONER INCREMENTAL MANUFAC- disagrees with the concept of the wholesale prices of refrigerators TURER PRODUCTION COSTS incremental markups. According to actually increased. There is some (2015$)—FINAL RULE ANALYSIS AHAM, manufacturers, wholesalers, empirical evidence indicating that retailers and contractors have all prices may not always increase 24 25 26 Incremental provided numerous amounts of data, following a new standard. If this Efficiency level MPC studies, and surveys saying that the happened to be the case following the (2015$) incremental markup concept has no new refrigerator standard, then there is foundation in actual practice. AHAM no reason to suppose that percentage Baseline ...... margins changed either. EL1 ...... $18.95 asked what additional information DOE would need to reassess the markups DOE’s analysis necessarily considers a EL2 ...... 50.57 simplified version of the world of EL3 ...... 93.84 approach. AHAM further asked if DOE would agree to put the concept of EL4 ...... 115.53 24 Spurlock, C.A. 2013. ‘‘Appliance Efficiency incremental markups up for peer Standards and Price Discrimination.’’ Lawrence review. (AHAM, No. 39 at pp. 80–81) Additional details on the Berkeley National Laboratory Report (LBNL) LBNL– 6283E. development of the incremental cost 23 Because the projected price of standards- 25 Houde, S. and C.A. Spurlock. 2015. ‘‘Do Energy estimates for the final rule analysis may compliant products is typically higher than the Efficiency Standards Improve Quality? Evidence be found in chapter 5 of the final rule price of baseline products, using the same markup from a Revealed Preference Approach.’’ LBNL TSD. for the incremental cost and the baseline cost would LBNL–182701. result in higher per-unit operating profit. While 26 Taylor, M., C.A. Spurlock, and H.-C. Yang. such an outcome is possible, DOE maintains that in 2015. ‘‘Confronting Regulatory Cost and Quality 22 See p. 4 of the DOE response memo, found at markets that are reasonably competitive it is Expectations: An Exploration of Technical Change https://www.regulations.gov/document?D=EERE- unlikely that standards would lead to a sustainable in Minimum Efficiency Performance Standards.’’ 2013-BT-STD-0033-0038. increase in profitability in the long run. Resources for the Future (RFF) 15–50.
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appliance retailing; namely, a situation E. Energy Use Analysis AHAM obtained through an online in which other than appliance product The purpose of the energy use survey. (AHAM, No. 43 at p. 19) offerings, nothing changes in response analysis is to determine the annual Although DOE has not received the full to amended standards. DOE’s analysis energy consumption of portable AC at survey results from AHAM, DOE assumes that product cost will increase different efficiencies in representative conducted a sensitivity analysis using while the other costs remain constant U.S. single-family homes, multi-family data points estimated from Figure 6 in (i.e., no change in labor, material, or residences, and commercial settings, Appendix B of AHAM’s comments. DOE operating costs), and asks whether and to assess the energy savings reweighted its residential and retailers will be able to keep the same potential of increased portable AC commercial sample such that 24 percent markup percentage over time. DOE efficiency. The energy use analysis of the sample was from the Northeast, recognizes that retailers are likely to estimates the range of energy use of 13 percent from the Midwest, 29 percent seek to maintain the same markup portable AC in the field (i.e., as they are from the South, and 34 percent from the percentage on appliances if the price actually used by consumers). The West. DOE found that this sensitivity they pay goes up as a result of appliance energy use analysis provides the basis marginally increased LCC savings and standards, but DOE contends that over for other analyses DOE performed, reduced the percent of negatively time downward adjustments are likely particularly assessments of the energy impacted consumers for both sectors. to occur due to competitive pressures. savings and the savings in consumer Results for this sensitivity can be found Some retailers may find that they can operating costs that could result from in the final rule TSD appendix 8F. gain sales by reducing the markup and adoption of amended or new standards. The California IOUs commented that maintaining the same per-unit gross DOE determined a range of annual DOE’s estimate for its residential room profit as they had before the new energy consumption of portable ACs as size threshold of 1,000 square feet could standard took effect. Additionally, DOE a function of the unit’s annual operating be further refined using data from 2013 contends that retail pricing is more hours to meet the cooling demand, study by the National Association of complicated than a simple percentage which depends on the efficiency of the Home Builders. The California IOUs margin or markup. Retailers undertake unit, power (watts) of three modes of suggested DOE’s current method limits periodic sales and they reduce the operation (cooling, fan, and standby), the sample of potential installations of prices of older models as new models and the percentage of time in each portable ACs. (California IOUs, No. 42 at come out to replace them.27 28 29 Even if mode. DOE also performed three retailers maintain the same percent sensitivity analyses on energy p. 4) markup when appliance wholesale consumption, including looking at the Sizing charts provided by vendors prices increase as the result of a effects of geographical distribution, indicate that portable ACs are intended standard, retailers may respond to room threshold size and overall to cool rooms having an area as large as competitive pressures and revert to pre- operation time on consumer benefits approximately 525 to 600 square feet. A standard average per-unit profits by and costs. review of retail websites, however, holding more frequent sales, 1. Consumer Samples indicated portable ACs may be used in discounting products under promotion rooms as large as 1,000 square feet. DOE EIA’s Residential Energy to a greater extent, or discounting older assumed 1,000 square feet to be the Consumption Survey (RECS) provides products more quickly. These factors information on whether households use maximum room size a user would would counteract the higher percentage a room AC. Because portable ACs and attempt to cool using a portable AC. In markup on average, resulting in much room ACs often serve a similar practice, only 60 records in the RECS the same effect as a lower percentage function,30 DOE developed a sample of 2009 sample (about 2 percent) represent markup in terms of the prices households that use room ACs from rooms between 600 and 1,000 square consumers actually face on average. RECS 2009, which is the latest available feet. DOE acknowledges that its approach RECS.31 DOE selected the subset of As a sensitivity, DOE removed the to estimating retailer markup practices RECS 2009 records that met relevant room size threshold from its analysis after amended standards take effect is an criteria.32 and calculated LCC results using the full approximation of real-world practices AHAM commented that DOE’s room AC sample. Removing this that are both complex and varying with consumer sample based on room ACs threshold made minimal impact on the business conditions. However, DOE does not geographically match results results. In this scenario, the average LCC continues to maintain that its savings for residential consumers under assumption that standards do not 30 It is assumed that portable ACs may perform the proposed standard (TSL 2) would be facilitate a sustainable increase in supplemental cooling to a particular space, but that the cooling loads between room ACs and portable $107 (compared with $108 in the profitability is reasonable. Chapter 6 of ACs are similar. For example, a portable AC may primary estimate), and 28 percent of the final rule TSD provides details on be used to provide cooling to a single room in place consumers would be impacted DOE’s development of markups for of a central AC to cool an entire home. For the negatively (compared with 27 percent in portable ACs. purposes of estimating energy use, DOE assumed that portable ACs are operated under similar the primary estimate). The simple cooling loads as room ACs, given their similar payback period would be 2.8 years 27 Bagwell, K. and Riordan, M.H., 1991. ‘‘High cooling capacities. (compared with 2.8 years in the primary and declining prices signal product quality.’’ The 31 DOE–EIA. Residential Energy Consumption American Economic Review, pp. 224–239. Survey. 2009. http://www.eia.gov/consumption/ estimate). The full sensitivity results can 28 Betts, E. and Peter, J.M., 1995. ‘‘The strategy of residential/data/2009/. be found in the final rule TSD appendix the retail ‘sale’: Typology, review and synthesis.’’ 32 RECS household use criteria: (1) At least one 8F. International Review of Retail, Distribution and room AC was present in the household; (2) The Consumer Research, 5(3), pp. 303–331. energy consumption of the room AC was greater To estimate the operating hours of 29 Elmaghraby, W. and Keskinocak, P., 2003. than zero; (3) The capacity of the room AC was less portable ACs used in commercial ‘‘Dynamic pricing in the presence of inventory than 14,000 Btu/hr (a cooling capacity comparable settings, DOE developed a building considerations: Research overview, current to portable ACs as measured by industry test sample from the 2012 Commercial practices, and future directions.’’ Management methods); and (4) The room being cooled measured Science, 49(10), pp. 1287–1309. no more than 1,000 square feet. Buildings Energy Consumption Survey
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(CBECS),33 again using the operating are typically used as the main cooling Further details are presented in hours of room ACs as a proxy. DOE used system, portable ACs are often used as appendix 8F and appendix 10E of the the 2003 CBECS in the June 2016 ECS supplementary systems when central final rule TSD. Thus, even if consumers NOPR analysis. The method is systems are not activated or out of order use portable ACs substantially less than described in chapter 7 of the final rule so that the annual hours of use for room ACs, the overall impacts on TSD. portable ACs are lower than for room consumers would be positive. It should AHAM and the California IOUs ACs. (De’ Longhi, No. 41 at p. 1) be noted that lower product usage encouraged DOE to replace 2003 CBECS AHAM and De’ Longhi stated that a would imply a longer lifetime; however, data with 2012 CBECS data. (AHAM, De’ Longhi survey 35 cannot be used to in this sensitivity analysis, the lifetime No. 39 at pp. 85–87; California IOUs, conclude that portable ACs and room was not lengthened. A longer lifetime No. 42 at p. 4) ACs have similar cooling mode annual would increase savings, reduce the DOE updates its inputs for analyses operating hours. De’ Longhi asserted payback period, and reduce the with credible and verifiable sources as that although both portable ACs and population segment that is negatively data become available. At the time the room ACs are used in similar periods of impacted. June 2016 ECS NOPR analysis was the day, that does not mean that they are AHAM recommended that DOE use completed, 2012 CBECS with used for the same number of hours in a data from the study by Burke et al. to expenditure microdata was not yet day and for the same number of days in calculate operating hours.36 (AHAM, available, so DOE used 2003 CBECS. a year. They believed that DOE No. 43 at p. 20) DOE believes that it Because the data set was released in mischaracterized the study and drew would be inaccurate to use the Burke et time for use in the final rule, DOE is conclusions that are not justified from al. study for estimating operating hours using 2012 CBECS in its final rule the data. De’ Longhi stated that the for the nation. As stated in the report analysis as recommended by AHAM annual hours of use for portable ACs are itself, given the limited number of test and the California IOUs. on average sensibly lower than for room sites in two locations in the Northeast, 2. Cooling Mode Hours and Sensitivity ACs. (AHAM, No. 43 at pp. 18–19; De’ the Burke et al. study was not intended Analyses Longhi, No. 41 at p. 2) to be statistically representative of DOE maintains that room AC cooling portable AC users in the U.S. It should To estimate the cooling operating hours are an appropriate proxy for also be noted that the annual energy use hours of portable ACs using datasets portable AC cooling hours as both estimates presented in the study are that are statistically representative, DOE products are used for cooling defined based on metered average outdoor used the same method and updated spaces and their product usage is temperatures which were reportedly datasets that were used in the 2011 broadly similar. However, DOE agrees lower than usual for most summers. In direct final rule for room ACs. 76 FR with the commenters that the De’ addition, the metering period began in 22454 (Apr. 21, 2011). For each sample Longhi survey cannot be used to July and it is likely that portable AC household, RECS provides the estimated conclusively draw a relationship owners either in warmer years or in energy use for cooling by room ACs. between the total annual cooling mode other areas of the country may operate After assigning an efficiency and hours of portable ACs and room ACs. To the units in earlier months (May and capacity to the room AC, DOE could account for potential differences June), which would contribute to higher then estimate its operating hours in between consumer use of portable ACs annual use. DOE did use the Burke et al. cooling mode. DOE adjusted the and room ACs, DOE conducted a study for estimations of the fan-only operating hours in cooling mode to sensitivity analysis which assumes mode operation since the report account for the likelihood that lower annual hours of use for portable provided the only publicly available improvement in building shell ACs in comparison to room ACs. fan-only information for any cooling efficiency would reduce the cooling Specifically, in this sensitivity analysis, product. load and operating hours.34 The DOE scaled the room AC cooling mode AHAM claims that the data DOE has estimated average of cooling operating hours of use by half while maintaining used raise serious and separate concerns hours for a room AC is 612 hours/year. the assumption that portable ACs are under the Data Quality Act.37 (Public Some interested parties objected to used during the same time of year as Law 106–554) According to AHAM, the DOE’s use of room AC data as a proxy room ACs, since the use of both types law and the Office of Management and for portable AC operating hours. AHAM of cooling equipment is likely to be Budget (OMB) guidelines require agency stated that DOE misrepresents portable consistent seasonally. The results of this actions aimed at ‘‘maximizing the ACs by referencing and scaling sensitivity analysis estimate one-third of quality, objectivity, utility, and integrity characteristic and performance data the energy cost savings relative to the of information (including statistical from room air conditioners. (AHAM, primary estimate. In this low-usage case, information) disseminated by the No. 43 at p. 18) AHAM asserted that for the average LCC savings under the agency.’’ Id. at § 515(b)(2)(A). (AHAM, a standards rule to be technologically adopted standards (TSL 2) would be $35 No. 43 at p. 20) feasible and economically justified, it (compared with $125 in the primary DOE maintains that the data sources must be based on product-specific data, estimate), and 42 percent of consumers and methodology used in its analyses not assumptions and estimates. (AHAM, would be impacted negatively meet the guidelines developed by OMB No. 43 at pp. 1–2) De’ Longhi stated that (compared with 27 percent in the in response to the Data Quality Act. from their experience, while room ACs primary estimate). The simple payback Data used in DOE’s analysis draws from period would be 5.1 years (compared the best available statistically-significant 33 DOE–EIA. Commercial Buildings Energy representation of how U.S. consumers Consumption Survey. 2012. http://www.eia.gov/ with 2.8 years in the primary estimate). consumption/commercial/data/2012/. 34 To account for increased building efficiency at 35 De’ Longhi Attachment to Comment on the 36 Burke et al., 2014. ‘‘Using Field-Metered Data the time that the proposed standard would take Energy Efficiency and Renewable Energy Office to Quantify Annual Energy Use of Residential effect, DOE used the 2022 building shell index (EERE) Proposed Rule: 2015–02–25 Energy Portable Air Conditioners.’’ LBNL, Berkeley, CA. factor of 0.97 for space cooling in all residences Conservation Program: Test Procedures for Portable LBNL Report LBNL–6469E. September 2014. from the EIA’s AEO. (Energy Information Air Conditioners; NOPR. May 8, 2015. https:// 37 Reference can be found at https:// Administration. Annual Energy Outlook 2016 with www.regulations.gov/document?D=EERE-2014-BT- www.whitehouse.gov/sites/default/files/omb/ Projections to 2040. July 2016.) TP-0014-0016. fedreg/reproducible2.pdf.
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use cooling devices similar in function F. Life-Cycle Cost and Payback Period the analysis captured the variability in and cooling capacity to portable ACs. Analysis energy consumption and energy prices Interested parties have been provided DOE conducted LCC and PBP associated with the use of portable ACs. opportunities at the preliminary analyses to evaluate the economic Inputs to the calculation of total analysis and NOPR stages to make data impacts on individual consumers of installed cost include the cost of the available to refine DOE’s analysis. When potential energy conservation standards product—which includes MPCs, reviewed and verified, DOE has for portable ACs. The effect of new or manufacturer markups, retailer and incorporated data from comments into amended energy conservation standards distributor markups, and sales taxes— its analysis. For example, DOE on individual consumers usually and installation costs. Note in the case incorporated analysis data and involves a reduction in operating cost of portable ACs, DOE assumed that information from interested parties and an increase in purchase cost. DOE installation costs would not change with regarding historical shipments, and used the following two metrics to efficiency ELs. So the difference of product efficiencies and capacities into measure consumer impacts: installation cost between the baseline the final rule. Additionally, DOE • The LCC (life-cycle cost) is the total and higher ELs is then $0. Inputs to the performed sensitivity analyses for consumer expense of a product over the calculation of operating expenses inputs that are subject to uncertainty to life of that product, consisting of total include annual energy consumption, assess the impact of alternative installed cost (manufacturer selling energy prices and price projections, assumptions and reports those results in price, distribution chain markups, sales repair and maintenance costs, product the final rule TSD. tax, and installation costs) plus lifetimes, and discount rates. DOE created distributions of values for The California IOUs suggested that operating costs (expenses for energy use, maintenance, and repair). To compute product lifetime and discount rates with DOE use projected cooling degree-days the operating costs, DOE discounts probabilities attached to each value, to for the LCC analysis year (2022) to future operating costs to the time of account for their uncertainty and accurately quantify the required cooling purchase and sums them over the variability. Sales tax and electricity load. (California IOUs, No. 42 at p. 4) lifetime of the product. prices are tied to the geographic DOE agrees and has incorporated this • The simple PBP (payback period) is locations of purchasers drawn from the suggestion into its final rule analysis the estimated amount of time (in years) residential and commercial samples. using census division cooling degree- it takes consumers to recover the The model DOE uses to calculate the 38 day trends from AEO 2016. Including increased purchase cost (including LCC and PBP relies on a Monte Carlo cooling degree-day trends increases installation) of a more-efficient product simulation to incorporate uncertainty operating hours by approximately 4 through lower operating costs. DOE and variability into the analysis. The percent. DOE also used the projected calculates the simple PBP by dividing Monte Carlo simulation randomly change in building shell efficiencies the change in purchase cost at higher samples input values from the from AEO 2016 when calculating ELs by the change in annual operating probability distributions and portable operating hours to account for increased cost for the year that new standards are AC user samples. The model calculated building shell efficiency of the stock. assumed to take effect. the LCC and PBP for products at each For any given EL, DOE calculates the EL for 10,000 housing units or 3. Fan-Only Mode and Standby Mode LCC savings as the change in LCC in a commercial buildings per simulation Hours standards case relative to the LCC in the run. To estimate the number of hours in no-new-standards case, which reflects DOE calculated the LCC and PBP for fan-only mode, DOE utilized a field the estimated efficiency distribution of all consumers as if each were to metering analysis of a sample of portable ACs in the absence of new or purchase a new product in the expected portable ACs in 19 homes.39 The survey amended energy conservation year of compliance with new standards. provided data on cooling-mode and fan- standards. In contrast, the simple PBP Any new standards would apply to only mode hours of operation. DOE for a given EL is measured relative to portable ACs manufactured 5 years after derived a distribution of the ratio of fan- the baseline product. publication of the final standard. (42 only mode hours to cooling-mode hours, For each considered EL, DOE U.S.C. 6295(l)(2)) Therefore, for and used this distribution to randomly calculated the LCC and PBP for a purposes of its analysis, DOE used 2022 nationally representative set of housing as the first year of compliance with new assign a ratio to each of the sample units and commercial buildings that use standards. households, which allows estimation of portable ACs. DOE used the EIA’s 2009 Table IV.10 summarizes the approach fan-only mode hours of operation. DOE RECS to develop household samples for and data DOE used to derive inputs to assumed portable ACs would only be portable ACs based on households that the LCC and PBP calculations. The plugged in during months with 5 or use room ACs. DOE also used the EIA’s subsections that follow provide further more cooling degree days. The annual 2012 CBECS to develop a sample of discussion. For energy use, RECS and hours in standby mode were derived by commercial buildings that use portable CBECS were used for number of hours subtracting the cooling-mode and fan- ACs, again based on buildings that use of use in cooling mode. A field metering only mode hours of operation from the room ACs. For each sample household report provided information regarding total number of hours in a months with or commercial building, DOE the fan-mode of portable ACs.40 Details 5 or more cooling degree days. determined the energy consumption for of the spreadsheet model, and of all the Chapter 7 of the final rule TSD the portable ACs and the appropriate inputs to the LCC and PBP analyses, are provides details on DOE’s energy use electricity price. By developing a contained in chapter 8 of the final rule analysis for portable ACs. representative sample of households, TSD and its appendices.
38 EIA’s Annual Energy Outlook. (Energy 39 Burke, Thomas, et al. 2014. Using Field- 40 Burke, Thomas, et al. 2014. Using Field- Information Administration. Annual Energy Metered Data to Quantify Annual Energy Use of Metered Data to Quantify Annual Energy Use of Outlook 2016 with Projections to 2040. July 2016.) Portable Air Conditioners. http://www.osti.gov/ Portable Air Conditioners. http://www.osti.gov/ scitech/servlets/purl/1166989. scitech/servlets/purl/1166989.
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TABLE IV.10—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. Producer Price Index (PPI) series for small household electronics fit to an exponential model. Installation Costs ...... Assumed no installation costs with baseline unit and no cost with EL. Annual Energy Use ...... Power in each mode multiplied by the hours per year in each mode. Average number of hours based on 2009 RECS, 2012 CBECS, and field metering data. Variability: Based on the 2009 RECS and 2012 CBECS. Energy Prices ...... Electricity: Based on 2014 average and marginal electricity price data from the Edison Electric Institute. Variability: Marginal electricity prices vary by season, U.S. region, and baseline electricity consump- tion level. Energy Price Trends ...... Based on AEO 2016 No-CPP case price projections. Trends are de- pendent on sector and census division. Repair and Maintenance Costs ...... Assumed no change with EL. Product Lifetime ...... Weibull distribution using parameters from room ACs. 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 ...... 2022. * References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the final rule TSD.
1. Product Cost nominal prices, adjusted for changes in the billing period. For the commercial To calculate consumer product costs, product quality. DOE calculated an sector the report provides typical bills DOE multiplied the MPCs developed in inflation-adjusted (deflated) price index for several combinations of monthly the engineering analysis by the markups by dividing the PPI series by the Gross electricity peak demand and total described in section IV.D of this Domestic Product Chained Price Index. consumption. For both the residential and document (along with sales taxes). DOE 2. Installation Cost used different markups for baseline commercial sectors, DOE defined the products and higher-efficiency Installation cost includes labor, average price as the ratio of the total bill products, because DOE applies an overhead, and any miscellaneous to the total electricity consumption. For incremental markup to the increase in materials and parts needed to install the the residential sector, DOE used the EEI MSP associated with higher-efficiency product. Available evidence indicated data to also define a marginal price as products. that no installation costs would be the ratio of the change in the bill to the Economic literature and historical incurred for baseline installation or be change in energy consumption. For the data suggest that the real costs of many impacted with increased ELs. commercial sector, marginal prices cannot be estimated directly from the products may trend downward over 3. Annual Energy Consumption time according to ‘‘learning’’ or EEI data, so DOE used a different ‘‘experience’’ curves. Experience curve For each sampled household and approach, as described in chapter 8 of analysis implicitly includes factors such building, DOE determined the energy the final rule TSD. as efficiencies in labor, capital consumption for a portable AC at Regionally weighted-average values investment, automation, materials different ELs using the approach for each type of price were calculated prices, distribution, and economies of described in section IV.E of this final for the nine census divisions and four scale at an industry-wide level.41 DOE rule. large states (CA, FL, NY and TX). Each EEI utility in a division was assigned a used the most representative Producer 4. Energy Prices Price Index (PPI) series for portable ACs weight based on the number of to fit to an exponential model to DOE used average prices (for baseline consumers it serves. Consumer counts develop an experience curve. DOE products) and marginal prices (for were taken from the most recent EIA obtained historical PPI data for ‘‘small higher-efficiency products) which vary Form 861 data (2012).44 DOE adjusted electric household appliances, except by season, region, and baseline these regional weighted-average prices fans’’ from the Labor Department’s electricity consumption level for the to account for systematic differences Bureau of Labor Statistics (BLS) for 1983 LCC. DOE estimated these prices using between IOUs and publicly-owned to 2015.42 Although this PPI series data published with the Edison Electric utilities, as the latter are not included in encompasses more than portable ACs, Institute (EEI) Typical Bills and Average the EEI data set. no PPI data specific to portable ACs Rates reports for summer and winter DOE assigned seasonal average and were available. The PPI data reflect 2014.43 For the residential sector each marginal prices to each household or report provides, for most of the major commercial building in the LCC sample 41 Taylor, M. and Fujita, K.S. Accounting for IOUs in the country, the total bill based on its location and its baseline Technological Change in Regulatory Impact assuming household consumption monthly electricity consumption for an Analyses: The Learning Curve Technique. LBNL– levels of 500, 750, and 1,000 kWh for average summer or winter month. For a 6195E. LBNL, Berkeley, CA. April 2013. http:// escholarship.org/uc/item/3c8709p4#page-1. detailed discussion of the development 42 U.S. Department of Labor BLS. Producer Price 43 EEI. Typical Bills and Average Rates Report. Index for 1983–2013. PPI series ID: Winter 2014 published April 2014, Summer 2014 44 DOE–EIA. Form EIA–861 Annual Electric PCU33521033521014. (Last accessed September 8, published October 2014. See http://www.eei.org/ Power Industry Database. http://www.eia.doe.gov/ 2014.) http://www.bls.gov/ppi/. resourcesandmedia/products/Pages/Products.aspx. cneaf/electricity/page/eia861.html.
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of electricity prices, see appendix 8C of that the lifetime distribution of portable Chapter 8 of the final rule TSD the final rule TSD. ACs is the same as that of room ACs, as provides details on DOE’s development To estimate future prices, DOE used estimated for the 2011 direct final rule. of lifetimes for portable ACs. the projected annual changes in average 76 FR 22454 (April 21, 2011). The 7. Discount Rates residential and commercial electricity average lifetime is 10.5 years. prices that are consistent with cases AHAM also noted that although room In the calculation of LCC, DOE described on p. E–8 in AEO 2016.45 AEO ACs and portable ACs are used for applies discount rates appropriate to 2016 has an end year of 2040. The AEO similar purposes, they are different households to estimate the present price trends do not distinguish between products and therefore they may have value of future operating costs. DOE marginal and average prices, so DOE different lifetimes. (AHAM, No. 39 at p. estimated a distribution of residential used the same trends for both. DOE 96) AHAM commented that DOE should discount rates for portable ACs based on reviewed the EEI data for the years 2007 use an average product lifetime of 7 consumer financing costs and the to 2014 and determined that there is no years for portable ACs and referenced a opportunity cost of consumer funds. systematic difference in the trends for 2010 survey conducted by AHAM. DOE applies weighted average marginal vs. average prices in the data. (AHAM, No. 43 at pp. 23–24) discount rates calculated from consumer AHAM did not provide the survey in debt and asset data, rather than marginal 5. Maintenance and Repair Costs 46 its comments and DOE is unable to or implicit discount rates. DOE notes Repair costs are associated with locate a copy of the survey in the public that the LCC does not analyze the repairing or replacing product appliance purchase decision, so the components that have failed in an record; therefore, DOE is unable to verify AHAM’s estimate and determine implicit discount rate is not relevant in appliance. Maintenance costs are this model. The LCC estimates NPV over associated with maintaining the whether the lifetime estimate is specifically for portable ACs or for a the lifetime of the product, so the operation of the product. Based on appropriate discount rate will reflect the available data and low product purchase similar product. Additionally, if AHAM’s estimate is for the portable AC general opportunity cost of household prices, DOE concluded that repair funds, taking this time scale into frequencies are low and do not increase product, it is unclear how a 2010 survey could accurately measure the average account. Given the long time horizon for higher-capacity or higher-efficiency modeled in the LCC, the application of units. DOE assumed a zero cost for all lifetime for a product that has only been available in large residential markets a marginal interest rate associated with ELs. an initial source of funds is inaccurate. AHAM commented that higher ELs since the early 2000s. An accurate calculation of the average lifetime Regardless of the method of purchase, may require use of variable-speed consumers are expected to continue to compressors to meet a potential requires at least one full turnover of stock to sample the entire age rebalance their debt and asset holdings standard and this would impact the over the LCC analysis period, based on repair rate and cost of higher ELs. distribution to include the longest living units that exceed the average lifetime. the restrictions consumers face in their (AHAM, No. 43 at pp. 25–26) AHAM debt payment requirements and the was unable to provide data to show that Assuming the first appreciable number relative size of the interest rates variable-speed compressors would of shipments of portable ACs occurred available on debts and assets. DOE require an increased repair rate or cost, in 2000, the oldest possible lifetime estimates the aggregate impact of this but suggested DOE consult with captured in AHAM’s survey would be rebalancing using the historical manufacturers. DOE has not found any 10 years. Excluding longer lived distribution of debts and assets. evidence that repair rates or costs would portable ACs that have not yet failed To establish residential discount rates increase with efficiency for portable would bias an estimate of the average to for the LCC analysis, DOE identified all ACs nor did any manufacturer provide lower values. Without the details of the relevant household debt or asset classes data to suggest this occurs in the market survey methodology, DOE is unable to in order to approximate a consumer’s today. Therefore, DOE estimates that include AHAM’s estimate in derivation opportunity cost of funds related to portable AC repair rates and costs do of a lifetime distribution. appliance energy cost savings. DOE not change with higher efficiency units. ASAP stated that using the lifetime of room ACs or dehumidifiers is estimated the average percentage shares 6. Product Lifetime reasonable, given the similarities of the of the various types of debt and equity The product lifetime is the age at products and the components that make by household income group using data which the product is retired from from the Federal Reserve Board’s Survey up those products. (ASAP, No. 39 at pp. 47 service. Given similar mechanical 98–99) The Joint Commenters noted that of Consumer Finances (SCF) for 1995, components and uses, DOE considered portable dehumidifiers are very similar 1998, 2001, 2004, 2007, 2010, and 2013. to portable ACs, as the two products Using the SCF and other sources, DOE 45 EIA. Annual Energy Outlook 2016 with share the same basic refrigeration developed a distribution of rates for Projections to 2040. Washington, DC. Available at system components and are both each type of debt and asset by income www.eia.gov/forecasts/aeo/. The standards finalized group to represent the rates that may in this rulemaking will take effect a few years prior portable units placed inside a room. The to the 2022 commencement of the Clean Power Plan Joint Commenters also noted that DOE 46 The implicit discount rate is inferred from a compliance requirements. As DOE has not modeled estimates the average lifetime of a the effect of CPP during the 30-year analysis period consumer purchase decision between two otherwise of this rulemaking, there is some uncertainty as to portable dehumidifier (11 years) is identical goods with different first cost and the magnitude and overall effect of the energy slightly longer than the average lifetime operating cost. It is the interest rate that equates the efficiency standards. These energy efficiency of a room AC (10.5 years) and therefore, increment of first cost to the difference in net present value of lifetime operating cost, standards are expected to put downward pressure DOE’s assumption for the average on energy prices relative to the projections in the incorporating the influence of several factors: AEO 2016 case that incorporates the CPP. lifetime of portable ACs may be Transaction costs; risk premiums and response to Consequently, DOE used the electricity price conservative. (Joint Commenters, No. 44 uncertainty; time preferences; interest rates at projections found in the AEO 2016 No-CPP case as at p. 6) DOE continues to use an average which a consumer is able to borrow or lend. 47 these electricity price projections are expected to be lifetime of 10.5 years derived from room The Federal Reserve Board, SCF 1995, 1998, lower, yielding more conservative estimates for 2001, 2004, 2007, 2010, 2013. http:// consumer savings due to the energy efficiency ACs given the similarity in their www.federalreserve.gov/pubs/oss/oss2/ standards. components. scfindex.html.
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apply in the year in which new or at a level commensurate with that weighted by the share of funds amended standards would take effect. reflected by credit card interest rates associates with each of those debts or DOE assigned each sample household a (i.e., that the risk premium required for assets in the portfolio. This is the best specific discount rate drawn from one of an investment in energy efficiency was approximation of the actual opportunity the distributions. The average rate very high).49 cost of funds for each household,51 and across all types of household debt and In reference to the first point, it is the value of deferred consumption equity and income groups, weighted by rebalancing, AHAM commented that the as determined by the equilibrium of the shares of each type, is 4.5 percent. inherent assumption allowing supply and demand in the financial See chapter 8 of the final rule TSD for rebalancing is that consumers will defer market. Those with very high rates of further details on the development of consumption (i.e., save) in order to discounting for deferred consumption consumer discount rates. generate surplus cash which can then be will hold more debt, potentially at To establish commercial discount used to pay down debt. AHAM stated higher rates of interest. Those with rates for the LCC analysis, DOE that this assumption is essential since lower rates will hold less. This is estimated the cost of capital for consumers have no other source of captured in the weighted average companies that purchase a portable AC. investment capital other than savings calculation of the discount rate used by The weighted average cost of capital is (e.g., individuals cannot sell ‘‘equity’’ in DOE. Additionally, DOE disagrees with commonly used to estimate the present themselves). In this case, AHAM the statement that consumers have no value of cash flows to be derived from suggested that the appropriate discount other source of investment capital other a typical company project or rate would be the implied rate of return than savings. A range of assets is investment. Most companies use both for deferring consumption. AHAM included in the weighted average debt and equity capital to fund noted that academic studies on implicit discount rate calculated by DOE investments, so their cost of capital is discount rates for the consumption/ precisely because that is the equity that the weighted average of the cost to the savings tradeoff yield discount rates consumers may hold. In particular, they firm of equity and debt financing as substantially higher than either the 4.43 can either defer putting additional funds estimated from financial data for percent assumed by DOE or the 11.6 towards one of these investments or publicly traded firms in the sectors that percent recommended by AHAM.50 they can extract equity from one of these purchase computers. For this analysis, AHAM noted that it would be pleased investments if they are able. These DOE used Damadoran Online 48 as the if DOE adopted a consumer discount financial assets are a part of the source of information about company rate based on the consumption/savings opportunity cost of funds held by debt and equity financing. The average tradeoff. (AHAM, No. 43 at pp. 24–25) consumers, and that is why they are in rate across all types of companies, DOE believes that using an average the weighted average calculation for the weighted by the shares of each type, is discount rate in the LCC best discount rate use by DOE. 5.6 percent. See chapter 8 of the NOPR approximates the actual opportunity In reference to the second point TSD for further details on the cost of funds faced by consumers. This concerning risk, AHAM stated DOE is development of commercial discount opportunity cost of funds is the time- carrying the concepts of capital asset rates. value of money for consumers. Interest pricing (CAPM) used in the commercial AHAM commented that DOE has rates, which are set by supply and sector (and used by DOE to set traditionally used a real (inflation demand for credit and capital in the commercial discount rates), which, adjusted) discount rate in the LCC financial market, vary across consumers essentially, assumes that the cost of calculation based on averaging the and across financial investment or equity is set in relationship to a risk free various components of debt and assets. credit source based on the risk rate and the systemic variance between AHAM noted that AHAM and others associated with that consumer or with a security (or set of cash flows) and a have commented that an average that investment type. Because the widely diversified set of equities. consumer discount rate is inappropriate purpose of the LCC analysis is to AHAM commented that DOE, in and that DOE should use a marginal rate determine the distributional impacts of discussing point (2), focuses on ‘‘risk based on the cost of available borrowed the proposed standard across premiums’’ associated with types of funds, generally credit card debt. heterogeneous consumers in the investments. Within the context of the population, to account for variation in (AHAM, No. 43 at p. 24) In response to CAPM model, AHAM stated that all the access to rates of return on investments questions by AHAM, DOE stated in the risks discussed by DOE are diversifiable, and interest rates of debt faced by DOE response memo and maintains that non-systemic risk. AHAM suggested consumers in the population, DOE when assessing the NPV of an that they should be incorporated (and generates a discount rates based on the investment in energy efficiency, the are incorporated by the DOE Monte average of the interest rates associated marginal interest rate alone (assuming it Carlo process) in the cash flow with debts and assets holdings, were the interest rate on the credit card used to make the purchase, for example) 51 One of the academic papers cited by AHAM in 49 The DOE response memo, ‘‘Memo_AHAM their comment deals with a product purchase would only be the relevant discount rate Request for Info on PACs_2016–08–19’’ can be decision, which is not the context of the LCC model if either: (1) The consumer were found at https://www.regulations.gov/document? because the LCC does not model purchase restricted from rebalancing their debt D=EERE-2013-BT-STD-0033-0038. decisions. See Dube´, J. P., Hitsch, G. J., & Jindal, P. and asset holdings (by redistributing 50 AHAM noted, for example, Song Yao, Carl F. (2014). The joint identification of utility and Mela, Jeongwen Chiang and Yuxin Chen discount functions from stated choice data: An debt and assets based on the relative (‘‘Determining Consumers’ Discount Rates With application to durable goods adoption. Quantitative interest rates available) over the entire Field Studies,’’ Journal of Marketing Research, 30, Marketing and Economics, 12(4), 331–377. The time period modeled in the LCC 3 (May–June), 447–468.) found a weekly discount other paper cited by AHAM is work done in a analysis; or (2) the risk associated with factor of .86–.91 (9.8–16.2% interest rate) for setting that is very different from that relevant to deferred consumption in empirical consumer the LCC analysis. It is based on data from Chinese an investment in energy efficiency was research and Jean-Pierre Dube, Gunter J. Hitsch and consumer behavior on a cell phone plan that Pranav Jindal (‘‘The joint identification of utility changes from a flat per-minute rate to two-part 48 Damodaran, A. Cost of Capital by Sector. and discount functions from stated choice data: An tariff.. See Yao, S., Mela, C. F., Chiang, J., & Chen, January 2014. New York, NY. http:// application to durable goods adoption’’, Quant Y. (2012). Determining consumers’ discount rates people.stern.nyu.edu/adamodar/New_Home_Page/ Mark Econ (2014) 12:331–377) found a consumer with field studies. Journal of Marketing Research, datafile/wacc.htm. discount rate of 43% for deferred consumption. 49(6), 822–841.
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assessment. AHAM commented that this in energy efficiency is irrelevant to the bonds (i.e., quite low). These results are whole discussion on point (2) is choice of discount rate used in the LCC. shown in Figure IV.3, below. This is irrelevant to a discussion of appropriate As DOE stated before, while there is suggestive that there is no reason to discount rates. (AHAM, No. 43 at p. 25) limited data available on the risk assume that the risk premium required First, DOE raised the issue of risk not associated with specific types of energy for an investment in energy efficiency in the context of its method but rather efficiency investments, Mills et al. should be particularly high, and to explain circumstances in which a (2006) present results from an analysis certainly not high enough to justify a higher discount rate might be demonstrating that the risk associated required rate of return at a level appropriate. In any case, DOE disagrees with the returns from investing in an commensurate with a credit card that the discussion regarding the risk ENERGY STAR Building are in line interest rate. premium appropriate for an investment with that of long-term government
AHAMstated that the actual question increased upfront product costs 8. Energy Efficiency Distribution in the would be what discount rate consumers weighed against reduced operating costs No-New-Standards Case use to evaluate investments and should over the lifetime of the covered product, To accurately estimate the share of that discount rate be some theoretical assuming the product has already been consumers that would be affected by a value (consumers ‘‘ought’’ to look at obtained and installed. Implicit or potential energy conservation standard investments in some manner) or a ‘‘imputed’’ discount rates referred to by at a particular EL, DOE’s LCC analysis factual value. AHAM commented that AHAM are not the appropriate rates to considered the projected distribution the factual value, or imputed, discount use in the context of the LCC analysis (market shares) of product efficiencies rate for energy or any other investment because such rates deviate from market under the no-new-standards case (i.e., is substantially greater than four interest rates due to a variety of factors the case without new energy percent, inflation adjusted. AHAM (e.g., imperfect information, option conservation standards). concluded that DOE should either use To estimate the energy efficiency the short-term marginal cost of funds for values, transaction costs, cognitive biases such as present-based preferences distribution of portable ACs for 2022, consumers, the actual rate used to DOE’s LCC analysis considered the finance most significant purchases, or it or loss aversion, etc.). All of these factors are irrelevant from the projected distribution (market shares) of should use a rate to reflect the time product efficiencies under the no-new- perspective of the LCC analysis; they are value in deferring consumption in the standards case (i.e., the case without already sunk costs. The short-term consumption versus saving tradeoff. new energy conservation standards). AHAM noted that either rate is marginal rate is not the appropriate Based on the engineering analysis, DOE substantially higher than the 4.43 discount rate to use because fixing the found that gains in efficiency were percent used by DOE. (AHAM, No. 43 discount rate at the marginal rate achieved by utilizing more efficient at p. 25) associated with a credit card assumes components in existing test units. DOE As DOE has responded in the past to that consumers purchase the appliance used product component characteristics comments on this topic, the LCC with a credit card, and keep that to estimate the current efficiency analysis is not modeling a purchase purchase on the credit card throughout distribution of portable ACs on the decision. The LCC analysis estimates the entire time it takes to pay off that market. DOE based EL 1, EL2, and EL 3 the NPV of financial trade-offs of debt with only operating costs savings on the performance observed in its test from the more efficient product. There sample used to develop the engineering 52 Mills, E., Kromer, S., Weiss, G. and Mathew, P.A., 2006. From volatility to value: Analyzing and is little evidence that consumers behave analysis. Therefore, DOE estimated a managing financial and performance risk in energy in this way. share of 37 percent at the baseline, 48 savings projects. Energy Policy, 34(2), pp.188–199. percent for EL 1, 13 percent for EL 2, 2.2
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percent for EL 3, and no share at EL 4. The estimated market shares for the no- See chapter 8 of the final rule TSD for EL 4 represents the maximum new-standards case for portable ACs further information on the derivation of theoretical performance based on and the average EER and CEER values the efficiency distributions. modeling the max-tech design options. for each EL are shown in Table IV.11.
TABLE IV.11—PORTABLE AIR CONDITIONER NO-NEW-STANDARDS CASE EFFICIENCY DISTRIBUTION
Market share Efficiency level EER CEER (%)
Baseline ...... 5.35 5.08 37 1 ...... 6.05 5.94 47.8 2 ...... 7.15 7.13 13 3 ...... 8.48 8.46 2.2 4 ...... 10.75 10.73 0
9. Payback Period Analysis shipments model takes an accounting during 1989–2009. Based on evidence The simple PBP is the amount of time approach, tracking market shares of that the price elasticity of demand is it takes the consumer to recover the each product class and the vintage of significantly different over the short run additional installed cost of more- units in the stock. Stock accounting uses and long run for other consumer goods efficient products, compared to baseline product shipments as inputs to estimate (i.e., automobiles), DOE assumed that products, through energy cost savings. the age distribution of in-service these elasticities decline over time. DOE PBPs are expressed in years. PBPs that product stocks for all years. The age estimated shipments in each standards exceed the life of the product mean that distribution of in-service product stocks case using the price and efficiency the increased total installed cost is not is a key input to calculations of both the elasticity along with the change in the recovered in reduced operating NES and NPV, because operating costs product price and operating costs expenses. for any year depend on the age between a standards case and the no- The inputs to the simple PBP distribution of the stock. new-standards case. calculation for each EL are the change DOE received data on portable AC AHAM commented that it believes in total installed cost of the product and shipments in 2014 from manufacturer that DOE has under-estimated the price/ the change in the first-year annual interviews. The manufacturer feature elasticity effects on portable operating expenditures relative to the interviews also provided information ACs. AHAM stated that DOE has used baseline. The PBP calculation uses the which suggested that the average annual a generic elasticity factor without same inputs as the LCC analysis, except growth in portable AC shipments looking at the specific conditions of the that discount rates are not applied. between 2004 and 2013 was 30 percent. portable AC marketplace and that As noted above, EPCA, as amended, To estimate historical shipments prior importers who purchase portable ACs establishes a rebuttable presumption to 2004, DOE interpolated between 1985 and name-brand report that they are in that a standard is economically justified (the date that portable ACs were this business because of retailer demand if the Secretary finds that the additional introduced to the residential market) for a full product line. AHAM notes that cost to the consumer of purchasing a and 2004. if manufacturers are forced to recalibrate product complying with an energy DOE estimated a saturation rate to cooling capacity and increase size and conservation standard level will be less project shipments of portable ACs. DOE weight, the dynamic of the portable AC than three times the value of the first assumed that the portable AC saturation market will diminish, with retailers year’s energy savings resulting from the rate would be no greater than half the ceasing to require portable ACs as part standard, as calculated under the current room AC saturation rate (based of a perceived full-line of products and applicable test procedure. (42 U.S.C. on RECS 2009) by the end of the leading to a negative impact on 6295(o)(2)(B)(iii)) For each considered analysis period, i.e., 2051. For each year shipments. As such, AHAM EL, DOE determined the value of the of the projection period, the saturation recommended that DOE conduct sensitivity analyses on energy saved and first year’s energy savings by calculating rate of portable ACs was determined on manufacturer impact based on a 15 the energy savings in accordance with from a combination of the total stock of percent and a 30 percent decline in the applicable DOE test procedure, and the product and total housing stock. The shipments from the 1.32 million unit multiplying those savings by the average total stock of portable ACs was based on base case. (AHAM, No. 43 at p. 26) energy price projection for the year in product lifetime and the survival AHAM’s suggestion of a 15 percent or which compliance with the new function developed in the LCC analysis. 30 percent decline in shipments does standards would be required (see DOE used total housing stock from AEO not appear to be based on any data section V.B.1.c of this final rule). 2016. Based on this revised approach, source. At TSL 2, a 15 percent decline DOE estimated that the shipments of G. Shipments Analysis in shipments implies a price elasticity portable ACs would increase from 1.32 of ¥1.7. A 30 percent decline implies DOE uses projections of annual million in 2014 to 1.67 million in 2051. product shipments to calculate the a price elasticity of ¥3.4 which is For the final rule analysis, DOE significantly smaller (i.e., more elastic) national impacts of potential amended applied price and efficiency elasticity or new energy conservation standards than any good found in the literature parameters to estimate the effect of new review. A literature review of typical on energy use, NPV, and future standards on portable AC shipments. 53 price elasticity values performed by manufacturer cash flows. The DOE estimated the price and efficiency Fujita 54 finds a range between ¥0.14 elasticity parameters from a regression 53 DOE uses data on manufacturer shipments as a proxy for national sales, as aggregate data on sales analysis that incorporated shipments, 54 Fujita, K.S. Estimating Price Elasticity using are lacking. In general, one would expect a close purchase price, and efficiency data Market-Level Appliance Data. 2015 http:// correspondence between shipments and sales. specific to several residential appliances eetd.lbl.gov/sites/all/files/lbnl-188289.pdf.
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and ¥0.42 for appliances. The value consumer costs and savings that would review of empirical estimates of the used by DOE, ¥0.45, exceeds the high be expected to result from new or rebound effect for various energy-using end of the range, which suggests that it amended standards at specific ELs.55 products.56 80 FR 13120, 13148. This is reasonable to apply to portable ACs. (‘‘Consumer’’ in this context refers to review concluded that the econometric The concern raised by AHAM that consumers of the product being and quasi-experimental studies suggest retailers may cease to carry portable ACs regulated.) DOE calculates the NES and a mean value for the direct rebound is unlikely to come to pass because the NPV for the potential standard levels effect for household heating of around adopted standards would not considered based on projections of 20 percent. DOE also examined a 2012 necessarily significantly increase size annual product shipments, along with ACEEE paper 57 and a 2013 paper by and weight, and furthermore portable the annual energy consumption and Thomas and Azevedo.58 Both of these ACs occupy a unique market niche. total installed cost data from the energy publications examined the same studies AHAM commented that the decline in use and LCC analyses. For the present that were reviewed by Sorrell, as well as shipments from the no-new-standards analysis, DOE projected the energy Greening et al.,59 and identified case should not count as a beneficial savings, operating cost savings, product methodological problems with some of reduction in energy consumption. While costs, and NPV of consumer benefits the studies. The studies, believed to be the use of energy by portable ACs will over the lifetime of portable ACs sold most reliable by Thomas and Azevedo, decline when fewer of them are bought, from 2022 through 2051. show a direct rebound effect for space AHAM stated that this is not a net DOE evaluates the impacts of new conditioning products in the 1-percent national benefit. Rather, AHAM noted standards by comparing a case without to 15-percent range, while Nadel that the loss of consumer utility and the such standards with standards-case concludes that a more likely range is 1 decline in consumer purchases of a projections. The no-new-standards case to 12 percent, with rebound effects product are the sort of results that the characterizes energy use and consumer sometimes higher than this range for EPCA statute specifically prohibits costs for each product class in the low-income households who could not when it leads to a product or a set of absence of new or amended energy afford to adequately heat their homes product features being withdrawn from conservation standards. For this prior to weatherization. Based on DOE’s the market. AHAM commented that in projection, DOE considers historical review of these recent assessments (see the case of portable ACs, the cost will trends in efficiency and various forces chapter 10 of the final rule TSD), DOE increase and product features will that are likely to affect the mix of used a 15 percent rebound effect for this worsen, if not disappear, leading to efficiencies over time. DOE compares final rule. fewer portable ACs being purchased. the no-new-standards case with DOE uses a spreadsheet model to AHAM suggested that DOE should projections characterizing the market if calculate the energy savings and the specifically exclude the effects of energy DOE adopted new standards at specific national consumer costs and savings savings from its energy reduction energy ELs (i.e., the TSLs or standards from each TSL. Interested parties can calculations in the NIA. (AHAM, No. 43 cases) for that class. For the standards review DOE’s analyses by changing at p. 28–29) DOE agrees that the energy savings cases, DOE considers how a given various input quantities within the and the NPV should reflect shipments standard would likely affect the market spreadsheet at https:// from only the affected stock (i.e., shares of products with efficiencies www.regulations.gov/docket?D=EERE- shipments impacted by a standard) and greater than the standard. 2013-BT-STD-0033. The NIA has calculated the energy savings and Higher-efficiency portable ACs reduce spreadsheet model uses typical values the NPV accordingly. the operating costs for a consumer, (as opposed to probability distributions) For details on the shipments analysis, which can lead to greater use of the as inputs. see chapter 9 of the final rule TSD for product. A direct rebound effect occurs Table IV.12 summarizes the inputs further information. when a product that is made more and methods DOE used for the NIA efficient is used more intensively, such analysis for the final rule. Discussion of H. National Impact Analysis that the expected energy savings from these inputs and methods follows the The NIA assesses the NES and the the efficiency improvement may not table. See chapter 10 of the final rule NPV from a national perspective of total fully materialize. DOE examined a 2009 TSD for further details.
TABLE IV.12—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS
Inputs Method
Shipments ...... Annual shipments from shipments model. Compliance Date of Standard ...... 2022. Efficiency Trends ...... No-New-Standards case: Annual increase in efficiency of 0.25 percent between 2022 and 2051. Standards cases: Roll-up plus shift sce- nario. 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. In- corporates projection of future product prices based on historical data.
55 The NIA accounts for impacts in the 50 states 57 Steven Nadel, ‘‘The Rebound Effect: Large or Theoretical Framework, 86 Ecological Econ. 199– and U.S. territories. Small?’’ ACEEE White Paper (August 2012) 201 (2013), available at www.sciencedirect.com/ 56 Steven Sorrell, et al, Empirical Estimates of the (Available at: www.aceee.org/white-paper/ science/article/pii/S0921800912004764. reboundeffect-large-or-small). Direct Rebound Effect: A Review, 37 Energy Policy 59 65 Lorna A. Greening, et al., Energy Efficiency 58 Brinda Thomas & Ines Azevedo, Estimating 1356–71 (2009). and Consumption—The Rebound Effect—A Survey, Direct and Indirect Rebound Effects for U.S. 28 Energy Policy 389–401 (2002). Households with Input–Output Analysis, Part 1:
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TABLE IV.12—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS—Continued
Inputs Method
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 Unit ...... Annual values do not change with EL. Energy Prices and Price Trends ...... Average and marginal electricity prices for residential and commercial sectors from life-cycle cost and payback period analysis. AEO 2016 no-CPP case price projections (to 2040) and extrapolation through 2051. Energy Site-to-Primary and FFC Conversion ...... A time-series conversion factor based on AEO 2016. Discount Rate ...... Three and seven percent. Present Year ...... 2016.
1. Product Efficiency Trends 2. National Energy Savings U.S. energy sector 60 that EIA uses to prepare its AEO. The FFC factors A key component of the NIA is the The NES analysis involves a incorporate losses in production and trend in energy efficiency projected for comparison of national energy delivery in the case of natural gas the no-new-standards case and each of consumption of the considered products (including fugitive emissions) and the standards cases. Section IV.F.8 of between each potential standards case additional energy used to produce and this document describes how DOE (TSL) and the case with no new or deliver the various fuels used by power developed an energy efficiency amended energy conservation plants. The approach used for deriving distribution for the no-new-standards standards. DOE calculated the annual FFC measures of energy use and case (which yields a shipment-weighted NES by multiplying the number of units emissions is described in appendix 10B average efficiency) for each of the (stock) of each product (by vintage or of the final rule TSD. considered product classes for the year age) by the annual energy consumption 3. Net Present Value Analysis of anticipated compliance with an savings per unit (also by vintage). DOE amended or new standard. To project calculated unit annual energy The inputs for determining the NPV the trend in efficiency absent new consumption savings based on the of the total costs and benefits standards for portable ACs over the difference in unit annual energy experienced by consumers are (1) total entire shipments projection period, DOE consumption for the no-new-standards annual installed cost, (2) total annual used as a starting point the shipments- case and for each higher efficiency operating costs (energy costs and repair and maintenance costs), and (3) a weighted cooling energy efficiency ratio standard case. DOE estimated energy discount factor to calculate the present (SWEER) estimated for 2022 in the LCC consumption and savings based on site value of costs and savings. DOE analysis and assumed an annual energy and converted the electricity calculates net savings each year as the increase in efficiency equal to the consumption and savings to primary difference between the no-new- increase estimated for room ACs in the energy (i.e., the energy consumed by standards case and each standards case 2011 direct final rule: 0.25 percent power plants to generate site electricity) in terms of total savings in operating between 2022 and 2051. 76 FR 22454 using annual conversion factors derived costs versus total increases in installed (April 21, 2011). The approach is further from AEO 2016. Cumulative energy costs. DOE calculates operating cost described in chapter 10 of the final rule savings are the sum of the NES for each savings over the lifetime of each product TSD. year over the timeframe of the analysis. shipped during the projection period. For the standards cases, DOE used a In 2011, in response to the As discussed in section IV.F.1 of this ‘‘roll-up’’ scenario to establish the recommendations of a committee on document, DOE developed portable AC shipment-weighted efficiency for the ‘‘Point-of-Use and Full-Fuel-Cycle price trends based on historical PPI year that standards are assumed to Measurement Approaches to Energy data. DOE applied the same trends to become effective (2022). In this Efficiency Standards’’ appointed by the project prices at each considered EL. By scenario, the market of products in the National Academy of Sciences, DOE 2051, which is the end date of the no-new-standards case that do not meet announced its intention to use full-fuel- projection period, the average portable the standard under consideration would cycle (FFC) measures of energy use and AC price is projected to drop 53 percent relative to 2013. DOE’s projection of ‘‘roll up’’ to meet the new standard GHG and other emissions in the NIA product prices is described in appendix level, and the market share of products and emissions analyses included in 10C of the final rule TSD. above the standard would remain future energy conservation standards To evaluate the effect of uncertainty unchanged. rulemakings. 76 FR 51281 (Aug. 18, regarding the price trend estimates, DOE To develop standards case efficiency 2011). After evaluating the approaches investigated the impact of different trends after 2022, DOE developed discussed in the August 18, 2011 notice, product price projections on the SWEER growth trends for each standard DOE published a statement of amended consumer NPV for the considered TSLs level that maintained, throughout the policy in which DOE explained its for portable ACs. In addition to the analysis period (2022–2051), the same determination that EIA’s National default price trend, DOE considered two difference in per-unit average cost as Energy Modeling System (NEMS) is the product price sensitivity cases: (1) A was determined between the no-new- most appropriate tool for its FFC standards case and each standards case analysis and its intention to use NEMS 60 For more information on NEMS, refer to The in 2022. The approach is further for that purpose. 77 FR 49701 (Aug. 17, National Energy Modeling System: An Overview 2009, DOE/EIA–0581 (2009), October 2009. described in chapter 10 of the final rule 2012). NEMS is a public domain, multi- Available at http://www.eia.gov/forecasts/aeo/ TSD. sector, partial equilibrium model of the index.cfm.
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high price decline case based on the percent real value is an estimate of the costs, product shipments, manufacturer AEO 2016 deflator for ‘‘furniture and average before-tax rate of return to markups, and investments in R&D and appliances’’; and (2) a low price decline private capital in the U.S. economy. The manufacturing capital required to case based on BLS’ inflation-adjusted 3-percent real value represents the produce compliant products. The key PPI for small electric household ‘‘social rate of time preference,’’ which GRIM outputs are the INPV, which is appliances spanning 1998–2015. The is the rate at which society discounts the sum of industry annual cash flows derivation of these price trends and the future consumption flows to their over the analysis period, discounted results of these sensitivity cases are present value. using the industry-weighted average described in appendix 10C of the final cost of capital, and the impact to rule TSD. I. Consumer Subgroup Analysis domestic manufacturing employment. The operating cost savings are energy In analyzing the potential impact of The model uses standard accounting cost savings, which are calculated using new energy conservation standards on principles to estimate the impacts of the estimated energy savings in each consumers, DOE evaluates the impact more-stringent energy conservation year and the projected price of the on identifiable subgroups of consumers standards on a given industry by appropriate form of energy. To estimate that may be disproportionately affected comparing changes in INPV and energy prices in future years, DOE by a new or amended national standard. domestic manufacturing employment multiplied the average electricity prices The purpose of a subgroup analysis is to between a no-new-standards case and by the projection of annual national- determine the extent of any such the various standards cases (TSLs). To average residential and commercial disproportional impacts. DOE evaluates capture the uncertainty relating to electricity price changes in the impacts on particular subgroups of manufacturer pricing strategies Reference case described on p. E–8 in consumers by analyzing the LCC following new or amended standards, AEO 2016.61 AEO 2016 has an end year impacts and PBP for those particular the GRIM estimates a range of possible of 2040. To estimate price trends after consumers from alternative standard impacts under different markup 2040, DOE used the average annual rate levels. For this final rule, DOE analyzed scenarios. of change in prices from 2030 to 2040. the impacts of the considered standard The qualitative part of the MIA As part of the NIA, DOE also analyzed levels on three subgroups: (1) Low- addresses manufacturer characteristics scenarios that used inputs from the AEO income households, (2) senior-only and market trends. Specifically, the MIA 2016 Low Economic Growth and High households, and (3) small businesses. considers such factors as a potential Economic Growth cases. Those cases The analysis used subsets of the RECS standard’s impact on manufacturing have higher and lower energy price 2009 sample composed of households capacity, competition within the trends compared to the Reference case. that meet the criteria and CBECS 2012 industry, cumulative impact of other NIA results based on these cases are for the considered subgroups. DOE used DOE and non-DOE regulations, and presented in appendix 10C of the final the LCC and PBP spreadsheet model to impacts on manufacturer subgroups. rule TSD. estimate the impacts of the considered The complete MIA is outlined in In calculating the NPV, DOE EL on these subgroups. Chapter 11 in chapter 12 of the final rule TSD. multiplies the net savings in future the final rule TSD describes the DOE conducted the MIA for this years by a discount factor to determine consumer subgroup analysis. rulemaking in three phases. In Phase 1 their present value. For this final rule, of the MIA, DOE prepared a profile of DOE estimated the NPV of consumer J. Manufacturer Impact Analysis the portable AC manufacturing industry benefits using both a 3-percent and a 7- 1. Overview based on the market and technology percent real discount rate. DOE uses assessment, preliminary manufacturer these discount rates in accordance with DOE performed an MIA to estimate interviews, and publicly-available guidance provided by OMB to Federal the financial impacts of new energy information. This included a top-down agencies on the development of conservation standards on analysis of portable AC manufacturers regulatory analysis.62 The discount rates manufacturers of portable ACs and to that DOE used to derive preliminary for the determination of NPV are in estimate the potential impacts of such financial inputs for the GRIM (e.g., contrast to the discount rates used in the standards on direct employment and revenues; materials, labor, overhead, LCC analysis, which are designed to manufacturing capacity. The MIA has and depreciation expenses; selling, reflect a consumer’s perspective. The 7- both quantitative and qualitative aspects general, and administrative expenses and includes analyses of projected (SG&A); and R&D expenses). DOE also 61 EIA. Annual Energy Outlook 2016 with industry cash flows, INPV, investments used public sources of information to Projections to 2040. Washington, DC. Available at in R&D and manufacturing capital, and further calibrate its initial www.eia.gov/forecasts/aeo/. The standards finalized domestic manufacturing employment. characterization of the portable AC in this rulemaking will take effect a few years prior Additionally, the MIA seeks to to the 2022 commencement of the Clean Power Plan manufacturing industry, including compliance requirements. As DOE has not modeled determine how new or amended energy company filings of form 10–K from the the effect of CPP during the 30-year analysis period conservation standards might affect SEC, corporate annual reports, the U.S. of this rulemaking, there is some uncertainty as to manufacturing capacity, and Census Bureau’s ‘‘Economic Census,’’ the magnitude and overall effect of the energy competition, as well as how standards 63 efficiency standards. These energy efficiency and reports from Hoovers. standards are expected to put downward pressure contribute to overall regulatory burden. In Phase 2 of the MIA, DOE prepared on energy prices relative to the projections in the Finally, the MIA serves to identify any a framework industry cash-flow analysis AEO 2016 case that incorporates the CPP. disproportionate impacts on to quantify the potential impacts of Consequently, DOE used the electricity price manufacturer subgroups, including portable AC energy conservation projections found in the AEO 2016 No-CPP case as these electricity price projections are expected to be small business manufacturers. standards. The GRIM uses several lower, yielding more conservative estimates for The quantitative part of the MIA factors to determine a series of annual consumer savings due to the energy efficiency primarily relies on the GRIM, an cash flows starting with the standards. industry cash flow model with inputs announcement of the standard and 62 OMB. Circular A–4: Regulatory Analysis. September 17, 2003. Section E. Available at specific to this rulemaking. The key extending over a 30-year period www.whitehouse.gov/omb/memoranda/m03- GRIM inputs include data on the 21.html. industry cost structure, unit production 63 Available at: http://www.hoovers.com/.
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following the compliance date of the 2. Government Regulatory Impact Model the MPCs into material and labor costs. standard. These factors include annual (GRIM) and Key Inputs For a complete description of the MPCs, expected revenues, costs of sales, SG&A DOE uses the GRIM to quantify the see chapter 5 of the final rule TSD. and R&D expenses, taxes, and capital changes in cash flow due to new or b. Shipment Projections expenditures. In general, energy amended standards that result in a The GRIM estimates manufacturer conservation standards can affect higher or lower industry value. The manufacturer cash flow in three distinct revenues based on total unit shipment GRIM uses a standard, annual projections and the distribution of those ways: (1) Creating a need for increased discounted cash-flow analysis that investment, (2) raising production costs shipments by EL. Changes in sales incorporates manufacturer costs, volumes and efficiency mix over time per unit, and (3) altering revenue due to markups, shipments, and industry higher per-unit prices and changes in can significantly affect manufacturer financial information as inputs. The finances. For this analysis, the GRIM sales volumes. GRIM models changes in costs, In addition, during Phase 2, DOE used the NIA’s annual shipment distribution of shipments, investments, forecasts derived from the shipments developed interview guides to distribute and manufacturer margins that could to manufacturers of portable ACs in analysis from 2017 (the base year) to result from a new or amended energy 2051 (the end of the analysis period). order to develop other key GRIM inputs, conservation standard. The GRIM including product and capital See chapter 9 of the NOPR TSD for spreadsheet uses the inputs to arrive at additional details. conversion costs, and to gather a series of annual cash flows, beginning additional information on the in 2017 (the base year of the analysis) c. Product and Capital Conversion Costs anticipated effects of energy and continuing to 2051. DOE calculated New energy conservation standards conservation standards on revenues, INPVs by summing the stream of annual may cause manufacturers to incur direct employment, capital assets, discounted cash flows during this conversion costs to bring their industry competitiveness, and subgroup period. For manufacturers of portable production facilities and equipment impacts. ACs, DOE used a real discount rate of designs into compliance with the new In Phase 3 of the MIA, DOE 6.6 percent, which was derived from standards. DOE evaluated the level of conducted structured, detailed industry financials and then modified conversion-related expenditures that interviews with representative according to feedback received during would be needed to comply with each manufacturers. During these interviews, manufacturer interviews. considered EL. For the MIA, DOE DOE discussed engineering, The GRIM calculates cash flows using classified these conversion costs into manufacturing, procurement, and standard accounting principles and two major groups: (1) Product financial topics to validate assumptions compares changes in INPV between the conversion costs; and (2) capital used in the GRIM and to identify key no-new-standards case and each conversion costs. Product conversion issues or concerns. A description of the standards case. The difference in INPV costs are investments in R&D, testing, key issues raised by portable AC between the no-new-standards case and marketing, and other non-capitalized manufacturers during interviews a standards case represents the financial costs necessary to make product designs conducted for the June 2016 ECS NOPR impact of the new or amended energy comply with new or amended energy can be found in section IV.J.3 of the conservation standard on conservation standards. Capital June 2016 ECS NOPR. See section IV.J.3 manufacturers. As discussed previously, conversion costs are investments in of this final rule for a description of DOE developed critical GRIM inputs property, plant, and equipment public comments received by DOE using a number of sources, including necessary to adapt or change existing regarding the June 2016 ECS NOPR. publicly available data, results of the production facilities such that new DOE also used manufacturer feedback to engineering analysis, and information compliant product designs can be qualitatively assess impacts of new gathered from industry during the fabricated and assembled. standards on manufacturing capacity, course of manufacturer interviews. The DOE used multiple sources of data to direct employment, and cumulative GRIM results are presented in section evaluate the level of product and capital regulatory burden. See appendix 12A of V.B.2 of this document. Additional conversion costs and stranded assets the final rule TSD for an example of the details about the GRIM, the discount manufacturers would likely face to NOPR-phase interview guide. rate, and other financial parameters can comply with new energy conservation As part of Phase 3, DOE evaluated be found in chapter 12 of the final rule standards. In estimating per-platform whether subgroups of manufacturers TSD. conversion costs at each EL considered may be disproportionately impacted by in this final rule, DOE primarily used new standards or may not be accurately a. Manufacturer Production Costs estimates of capital requirements represented by the average cost Manufacturing a higher efficiency derived from the portable AC product assumptions used to develop the product is typically more expensive teardown analysis and the engineering industry cash flow analysis. Such than manufacturing a baseline product model (as described in section IV.C of manufacturer subgroups may include due to the use of more complex and this final rule) in combination with the small business manufacturers, low- typically more costly components. The conversion cost assumptions used in the volume manufacturers (LVMs), niche changes in the MPCs of the analyzed final rule for dehumidifiers. DOE also players, and/or manufacturers products can affect the revenues, gross used feedback provided by exhibiting a cost structure that largely margins, and cash flow of the industry. manufacturers during interviews. Using differs from the industry average. DOE For each EL, DOE used the MPCs the test sample efficiency distribution identified one manufacturer subgroup developed in the engineering analysis, (including AHAM-provided data for a separate impact analysis: Small as described in section IV.C.2 of this points), per-platform conversion cost business manufacturers. The small final rule and further detailed in chapter estimates were then aggregated and business subgroup is discussed in 5 of the final rule TSD. Additionally, scaled to derive total industry estimates section VI.B of this document, ‘‘Review DOE used information from its of product and capital conversion costs. under the Regulatory Flexibility Act’’ teardown analysis, described in section In general, DOE assumes that all and in chapter 12 of the final rule TSD. IV.C of this final rule, to disaggregate conversion-related investments occur
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between the year the final rule is industry profitability as manufacturers to the inputs used in the estimation of published and the year by which are able to fully pass on additional industry conversion costs in the DOE manufacturers must comply with the production costs due to standards to response memo on August 19, 2016.64 new or amended standards. The their customers under this scenario. Regarding ASAP’s comments related investment figures used in the GRIM Under the preservation of per-unit to differences in the magnitude of can be found in section V.B.2 of this operating profit markup scenario, DOE industry capital conversion cost final rule. For additional information on modeled a situation in which estimates between the portable AC and the estimated product conversion and manufacturers are not able to increase the dehumidifier rulemakings, multiple capital conversion costs, see chapter 12 per-unit operating profit in proportion factors explain the differences in of the final rule TSD. to increases in manufacturer production industry conversion cost estimates costs. This scenario represents the lower between this final rule and the d. Markup Scenarios bound of profitability and a more dehumidifiers final rule. First, on a per- MSPs include direct manufacturing substantial impact on the portable AC platform capital investment basis, DOE production costs (i.e., labor, materials, industry as manufacturers accept a estimates that portable ACs are more and overhead estimated in DOE’s MPCs) lower margin in an attempt to offer price costly to produce than dehumidifiers, and all non-production costs (i.e., competitive products while maintaining and, accordingly, capital changes are SG&A, R&D, and interest), along with the same level of earnings before more costly. Additionally, DOE clarifies profit. To calculate the MSPs in the interest and tax (EBIT) they saw prior to that, in the June 2016 ECS NOPR, it had GRIM, DOE applied non-production new or amended standards. estimated that approximately 77 percent cost markups to the MPCs estimated in A comparison of industry financial of portable AC platforms would require the engineering analysis for each impacts under the two markup at least a partial redesign (including a product class and EL. Modifying these scenarios is presented in section V.B.2.a change in chassis size) at TSL 2. 81 FR markups in the standards case yields of this final rule. 38398, 38448 (June 13, 2016). Finally, different sets of impacts on 3. Discussion of Comments for the June 2016 ECS NOPR, DOE manufacturers. For the MIA, DOE estimated that there were approximately During and following the July 2016 modeled two standards-case markup 48 portable AC platforms available on STD NOPR public meeting, scenarios to represent uncertainty the U.S. market (updated to 54 for this manufacturers and trade organizations regarding the potential impacts on final rule), a substantially greater commented on the potential impact of prices and profitability for number of platforms than was estimated new energy conservation standards on manufacturers following the for the dehumidifier industry (DOE portable AC manufacturers. These implementation of new or amended estimated there were approximately 30 comments are outlined below. DOE energy conservation standards: (1) A dehumidifier platforms available on the considered these comments when preservation of gross margin percentage U.S. market). Again, DOE provided updating the analysis for this final rule. markup scenario; and (2) a preservation information related to conversion cost of per-unit operating profit markup During the July 2016 STD Public Meeting, both NAM and AHAM model assumptions used for this final scenario. These scenarios lead to rule in the DOE response memo on different markup values that, when requested that DOE provide more details 65 about conversion cost model August 19, 2016. applied to the MPCs, result in varying Regarding future shipments of assumptions in order to facilitate more revenue and cash flow impacts. portable ACs, AHAM commented that if Under the preservation of gross focused feedback from member energy conservation standards result in margin percentage scenario, DOE companies. Specific requests included reduced consumer demand, which, in applied a single uniform ‘‘gross margin the number of companies and turn, leads to reduced shipments percentage’’ markup across all ELs, production lines that were assumed in volumes relative to those estimated in which assumes that manufacturers developing the industry conversion cost the June 2016 ECS NOPR, negative would be able to maintain the same estimates. (NAM, Public Meeting impacts to manufacturers will be amount of profit as a percentage of Transcript, No. 39 at pp. 118–121; compounded. AHAM suggested that revenues at all ELs within a product AHAM, Public Meeting Transcript, No. DOE re-examine manufacturer impacts class. DOE used the baseline 39 at pp. 120–121) to include a significantly reduced manufacturer markup, 1.42, which Relatedly, during the July 20l6 Public accounts for the two sourcing structures Meeting, ASAP commented that the shipment scenario reflecting the that characterize the portable AC industry capital conversion cost potential reduction in consumer market. Single-duct and dual-duct estimated for the portable AC industry demand. (AHAM, No. 43 at p. 28) portable ACs sold in the U.S. are to reach TSL 2 is approximately eight AHAM suggested that after doing this, manufactured by overseas original times greater than the industry capital DOE reevaluate its balancing of costs equipment manufacturers (OEMs) either conversion costs estimated for and benefits taking into account the for sale by contract to an importer or for dehumidifier manufacturers to comply increased burden on manufacturers direct sale to retailers and builders. The with the standards adopted in the 2016 when shipment volumes drop as AHAM MPCs developed in the engineering final rule for dehumidifiers (also TSL 2), projects. (AHAM, No. 43 at p. 28) As discussed in section IV.G of this analysis, as detailed in chapter 5 of the despite the fact that, in both cases, DOE document, AHAM’s suggestion of a final rule TSD, reflect the cost of estimated that approximately 50 percent decline in shipments relative to what manufacturing at the OEM. For the OEM of platforms will require complete was forecasted in the June 2016 ECS to importer sourcing structure, this redesigns. ASAP requested that DOE NOPR does not appear to be based on production cost is marked up once by provide details about the number of any data source. Accordingly, DOE has the OEM and again by the contracting platforms assumed in estimates of not modeled an alternative shipments the company who imports the product industry conversion costs. (ASAP, and sells it to retailers. This markup was Public Meeting Transcript, No. 39 at pp. 64 DOE’s response to AHAM’s request can be used for all products when modeling the 122–123) found at https://www.regulations.gov/ no-new-standards in the GRIM. This DOE addressed the AHAM, NAM, and document?D=EERE-2013-BT-STD-0033-0038. scenario represents the upper bound of ASAP requests for information related 65 Id.
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and manufacturer impacts scenario. See AC manufacturers with compliance Change,67 DOE used GWP values of 28 section IV.G of this document for details years occurring within 3 years after the for CH4 and 265 for N2O. on DOE’s justification of its portable AC compliance year for the new portable The AEO incorporates the projected shipments forecasts. AC standard. DOE will consider the impacts of existing air quality Relatedly, AHAM also commented remaining issues put forth by AHAM in regulations on emissions. AEO 2016 that the estimated range of percent the future as it continues to evaluate its generally represents current legislation reduction in INPV (28.1 to 30.6) is approach to assessing cumulative and environmental regulations, dramatic for a small industry segment regulatory burden. including recent government actions, for and out of proportion to the potential which implementing regulations were benefits. (AHAM, No. 43 at p. 28) K. Emissions Analysis available as of the end of February 2016. As discussed in section V.C.1 of this The emissions analysis consists of DOE’s estimation of impacts accounts document, DOE weighs both the two components. The first component for the presence of the emissions control benefits and burdens associated with estimates the effect of potential energy programs discussed in the following each TSL in order to decide upon a final conservation standards on power sector paragraphs. standard level. Please see section V.C.1 SO emissions from affected electric and site (where applicable) combustion 2 for the cost-benefit discussion generating units (EGUs) are subject to emissions of CO , NO , SO , and Hg. associated with the standard adopted in 2 X 2 nationwide and regional emissions cap- The second component estimates the this final rule. and-trade programs. Title IV of the impacts of potential standards on Finally, AHAM provided several Clean Air Act sets an annual emissions emissions of two additional GHGs, CH4 comments relating to DOE’s treatment of cap on SO2 for affected EGUs in the 48 cumulative regulatory burdens. AHAM and N2O, as well as the reductions to contiguous States and the District of suggested that DOE include in its emissions of all species due to Columbia (DC). (42 U.S.C. 7651 et seq.) ‘‘upstream’’ activities in the fuel analysis of cumulative regulatory SO2 emissions from 28 eastern States impacts any rulemaking that would production chain. These upstream and DC were also limited under the have an overlapping compliance period activities comprise extraction, Clean Air Interstate Rule (CAIR). 70 FR to that of new the portable ACs processing, and transporting fuels to the 25162 (May 12, 2005). CAIR created an standard. AHAM stated that this site of combustion. The associated allowance-based trading program that adjustment would more realistically emissions are referred to as upstream operates along with the Title IV reflect regulatory burden because it emissions. program. In 2008, CAIR was remanded evaluates all rules with which The analysis of power sector to EPA by the U.S. Court of Appeals for manufacturers must comply at any emissions uses marginal emissions the District of Columbia Circuit, but it given point. AHAM also stated that, in factors that were derived from data in remained in effect.68 In 2011, EPA general, the time and resources needed AEO 2016, as described in section IV.M. issued a replacement for CAIR, the to evaluate and respond to DOE’s test Details of the methodology are Cross-State Air Pollution Rule (CSAPR). procedures and energy conservation described in the appendices to chapters 76 FR 48208 (Aug. 8, 2011). On August standards should not be excluded from 13 and 15 of the final rule TSD. 21, 2012, the D.C. Circuit issued a the cumulative regulatory burden decision to vacate CSAPR,69 and the Combustion emissions of CH4 and discussion. AHAM further commented N O are estimated using emissions court ordered EPA to continue that cumulative regulatory burden 2 intensity factors published by the EPA— administering CAIR. On April 29, 2014, analysis should also account for the GHG Emissions Factors Hub.66 The FFC the U.S. Supreme Court reversed the timing and technical and economic upstream emissions are estimated based judgment of the D.C. Circuit and relationship of those rulemakings. on the methodology described in remanded the case for further AHAM stated that, for example, DOE’s chapter 15 of the final rule TSD. The proceedings consistent with the recent practice of amending the test 70 upstream emissions include both Supreme Court’s opinion. On October procedure while at the same time emissions from fuel combustion during 23, 2014, the D.C. Circuit lifted the stay proposing amended standards increases 71 extraction, processing, and of CSAPR. Pursuant to this action, the burden on manufacturers in transportation of fuel, and ‘‘fugitive’’ responding to DOE’s proposed rules. 67 Intergovernmental Panel on Climate Change. emissions (direct leakage to the AHAM added that home appliances are Anthropogenic and Natural Radiative Forcing. In atmosphere) of CH4 and CO2. Climate Change 2013: The Physical Science Basis. now in an endless cycle of regulation, Contribution of Working Group I to the Fifth where as soon as one compliance effort The emissions intensity factors are Assessment Report of the Intergovernmental Panel ends or is near completion, another expressed in terms of physical units per on Climate Change. Chapter 8. 2013. Stocker, T.F., round of regulation to change the MWh or MMBtu of site energy savings. D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Total emissions reductions are Boschung, A. Nauels, Y. Xia, V. Bex, and P.M. standard again begins. (AHAM, No. 43 Midgley, Editors. Cambridge University Press: at pp. 29–30) estimated using the energy savings Cambridge, United Kingdom and New York, NY, For this final rule analysis of calculated in the NIA. USA. cumulative regulatory burdens, DOE has 68 See North Carolina v. EPA, 531 F.3d 896 (D.C. For CH4 and N2O, DOE calculated extended the analysis to include energy Cir. 2008), modified on rehearing, 550 F.3d 1176 emissions reduction in tons and also in (D.C. Cir. 2008). conservation standards for other terms of units of CO2 equivalent 69 See EME Homer City Generation, L.P. v. EPA, products also produced by portable AC (CO2eq). Emissions of CH4 and N2O are 696 F.3d 7 (D.C. Cir. 2012). manufacturers with a standards 70 See EPA v. EME Homer City Generation, L.P. often converted to CO2eq by multiplying compliance year occurring within the 134 S. Ct. 1584 (U.S. 2014). The Supreme Court each ton of gas by the gas’ GWP over a held in part that EPA’s methodology for quantifying compliance period for the new portable 100-year time horizon. Based on the emissions that must be eliminated in certain States AC standard, as set forth in this final Fifth Assessment Report of the due to their impacts in other downwind States was rule (2017 to 2022). Additionally, as in Intergovernmental Panel on Climate based on a permissible, workable, and equitable the June 2016 ECS NOPR analysis, the interpretation of the Clean Air Act provision that cumulative regulatory burden analysis provides statutory authority for CSAPR. 66 Available at www2.epa.gov/climateleadership/ 71 See EME Homer City Generation, L.P. v. EPA, includes energy conservation standards center-corporate-climate-leadership-ghg-emission- Order (D.C. Cir. filed October 23, 2014) (No. 11– for products also produced by portable factors-hub. 1302).
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CSAPR went into effect (and CAIR believes that energy conservation L. Monetizing Carbon Dioxide and Other ceased to be in effect) as of January 1, standards that decrease electricity Emissions Impacts 72 2015. AEO 2016 incorporates generation will generally reduce SO2 As part of the development of this implementation of CSAPR. emissions in 2016 and beyond. CSAPR rule, DOE considered the estimated The attainment of emissions caps is also applies to NOX and it supersedes monetary benefits from the reduced typically flexible among EGUs and is the regulation of NOX under CAIR. emissions of CO2, CH4, N2O and NOX enforced through the use of emissions CAIR established a cap on NOX that are expected to result from each of allowances and tradable permits. Under emissions in 28 eastern States and the the TSLs considered. In order to make existing EPA regulations, any excess District of Columbia. Energy this calculation analogous to the SO2 emissions allowances resulting conservation standards are expected to calculation of the NPV of consumer from the lower electricity demand have little effect on NOX emissions in benefit, DOE considered the reduced caused by the adoption of an efficiency those States covered by CAIR because emissions expected to result over the standard could be used to permit excess NOX emissions allowances lifetime of products shipped in the offsetting increases in SO2 emissions by resulting from the lower electricity projection period for each TSL. This any regulated EGU. In past years, DOE demand could be used to permit section summarizes the basis for the recognized that there was uncertainty offsetting increases in NOX emissions values used for monetizing the about the effects of efficiency standards from other facilities. However, emissions benefits and presents the on SO2 emissions covered by the standards would be expected to reduce values considered in this final rule. existing cap-and-trade system, but it NOX emissions in the States not affected For this final rule, DOE relied on a set concluded that negligible reductions in by the caps, so DOE estimated NOX of values for the social cost of carbon power sector SO2 emissions would emissions reductions from the standards (SC-CO2) that was developed by a occur as a result of standards. considered in this final rule for these Federal interagency process. The basis Beginning in 2016, however, SO2 States. for these values is summarized in the emissions will fall as a result of the The MATS limit mercury emissions next section, and a more detailed Mercury and Air Toxics Standards from power plants, but they do not description of the methodologies used is (MATS) for power plants. 77 FR 9304 include emissions caps and, as such, provided as an appendix to chapter 14 (Feb. 16, 2012). In the MATS final rule, DOE’s energy conservation standards of the final rule TSD. EPA established a standard for hydrogen would likely reduce Hg emissions. DOE chloride as a surrogate for acid gas estimated mercury emissions reduction 1. Social Cost of Carbon
hazardous air pollutants (HAP), and also using emissions factors based on AEO The SC-CO2 is an estimate of the established a standard for SO2 (a non- 2016, which incorporates the MATS. monetized damages associated with an HAP acid gas) as an alternative The AEO 2016 Reference case (and incremental increase in carbon equivalent surrogate standard for acid some other cases) assumes emissions in a given year. It is intended gas HAP. The same controls are used to implementation of the Clean Power Plan to include (but is not limited to) reduce HAP and non-HAP acid gas; (CPP), which is the EPA program to climate-change-related changes in net thus, SO2 emissions will be reduced as regulate CO2 emissions at existing fossil- agricultural productivity, human health, 74 a result of the control technologies fired electric power plants. DOE used property damages from increased flood installed on coal-fired power plants to the AEO 2016 No-CPP case as a basis for risk, and the value of ecosystem developing emissions factors for the comply with the MATS requirements services. Estimates of the SC-CO2 are for acid gas. AEO 2016 assumes that, in electric power sector to be consistent provided in dollars per metric ton of with its use of the No-CPP case in the order to continue operating, coal plants CO2. A domestic SC-CO2 value is meant 75 must have either flue gas NIA. to reflect the value of damages in the desulfurization or dry sorbent injection U.S. resulting from a unit change in CO2 systems installed by 2016. Both MATS rule, and DOE has tentatively determined emissions, while a global SC-CO2 value technologies, which are used to reduce that the Court’s decision on the MATS rule does not change the assumptions regarding the impact of is meant to reflect the value of damages acid gas emissions, also reduce SO2 energy conservation standards on SO2 emissions. worldwide. emissions. Under the MATS, emissions Further, the Court’s decision does not change the Under section 1(b)(6) of Executive will be far below the cap established by impact of the energy conservation standards on Order 12866, ‘‘Regulatory Planning and CSAPR, so it is unlikely that excess SO mercury emissions. The EPA, in response to the 2 U.S. Supreme Court’s direction, has now Review,’’ 58 FR 51735 (Oct. 4, 1993), emissions allowances resulting from the considered cost in evaluating whether it is agencies must, to the extent permitted lower electricity demand would be appropriate and necessary to regulate coal- and oil- by law, ‘‘assess both the costs and the needed or used to permit offsetting fired EGUs under the CAA. EPA concluded in its benefits of the intended regulation and, increases in SO emissions by any final supplemental finding that a consideration of 2 cost does not alter the EPA’s previous recognizing that some costs and benefits 73 regulated EGU. Therefore, DOE determination that regulation of hazardous air are difficult to quantify, propose or pollutants, including mercury, from coal- and oil- adopt a regulation only upon a reasoned 72 On July 28, 2015, the D.C. Circuit issued its fired EGUs, is appropriate and necessary. 81 FR determination that the benefits of the opinion regarding the remaining issues raised with 24420 (April 25, 2016). The MATS rule remains in respect to CSAPR that were remanded by the effect, but litigation is pending in the D.C. Circuit intended regulation justify its costs.’’ Supreme Court. The D.C. Circuit largely upheld Court of Appeals over EPA’s final supplemental The purpose of the SC-CO2 estimates CSAPR, but remanded to EPA without vacatur finding MATS rule. https://www.gpo.gov/fdsys/pkg/ presented here is to allow agencies to certain States’ emission budgets for reconsideration. FR-2016-04-25/pdf/2016-09429.pdf. incorporate the monetized social EME Homer City Generation, LP v. EPA, 795 F.3d 74 U.S. Environmental Protection Agency, 118 (D.C. Cir. 2015). ‘‘Carbon Pollution Emission Guidelines for Existing benefits of reducing CO2 emissions into 73 DOE notes that on June 29, 2015, the U.S. Stationary Sources: Electric Utility Generating Supreme Court ruled that the EPA erred when the Units’’ (Washington, DC: October 23, 2015). https:// magnitude and overall effect of the energy agency concluded that cost did not need to be www.federalregister.gov/articles/2015/10/23/2015- efficiency standards. With respect to estimated CO2 considered in the finding that regulation of 22842/carbon-pollution-emission-guidelines-for- and NOX emissions reductions and their associated hazardous air pollutants from coal- and oil-fired existing-stationary-sources-electric-utility- monetized benefits, if implemented the CPP would electric utility steam generating units (EGUs) is generating. result in an overall decrease in CO2 emissions from appropriate and necessary under section 112 of the 75 As DOE has not modeled the effect of CPP electric generating units (EGUs), and would thus Clean Air Act (CAA). Michigan v. EPA, 135 S. Ct. during the 30-year analysis period of this likely reduce some of the estimated CO2 reductions 2699 (2015). The Supreme Court did not vacate the rulemaking, there is some uncertainty as to the associated with this rulemaking.
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cost-benefit analyses of regulatory literature. As a result, DOE has relied on Specially, the IWG considered public actions. The estimates are presented the IWG’s SC-CO2 estimates in comments and further explored the with an acknowledgement of the many quantifying the social benefits of technical literature in relevant fields. It uncertainties involved and with a clear reducing CO2 emissions. DOE estimates relied on three integrated assessment understanding that they should be the benefits from reduced (or costs from models commonly used to estimate the updated over time to reflect increasing increased) emissions in any future year SC-CO2: The FUND, DICE, and PAGE knowledge of the science and by multiplying the change in emissions models. These models are frequently economics of climate impacts. in that year by the SC-CO2 values cited in the peer-reviewed literature and As part of the interagency process that appropriate for that year. The NPV of were used in the last assessment of the developed these SC-CO2 estimates, the benefits can then be calculated by Intergovernmental Panel on Climate technical experts from numerous multiplying each of these future benefits Change (IPCC). Each model was given agencies met on a regular basis to by an appropriate discount factor and equal weight in the SC-CO2 values that consider public comments, explore the summing across all affected years. were developed. It is important to emphasize that the technical literature in relevant fields, Each model takes a slightly different and discuss key model inputs and current SC-CO2 values reflect the IWG’s best assessment, based on current data, approach to model how changes in assumptions. The main objective of this emissions result in changes in economic of the societal effect of CO2 emissions. process was to develop a range of SC- damages. A key objective of the CO2 values using a defensible set of The IWG is committed to updating these estimates as the science and economic interagency process was to enable a input assumptions grounded in the consistent exploration of the three existing scientific and economic understanding of climate change and its models, while respecting the different literatures. In this way, key impacts on society improves over time. approaches to quantifying damages uncertainties and model differences In the meantime, the IWG will continue taken by the key modelers in the field. transparently and consistently inform to explore the issues raised by this An extensive review of the literature the range of SC-CO estimates used in analysis and consider public comments 2 was conducted to select three sets of the rulemaking process. as part of the ongoing interagency process. input parameters for these models: a. Monetizing Carbon Dioxide Emissions Climate sensitivity, socio-economic and b. Development of Social Cost of Carbon emissions trajectories, and discount When attempting to assess the Values incremental economic impacts of CO rates. A probability distribution for 2 In 2009, an interagency process was emissions, the analyst faces a number of climate sensitivity was specified as an initiated to offer a preliminary challenges. A report from the National input into all three models. In addition, assessment of how best to quantify the Research Council 76 points out that any the IWG used a range of scenarios for benefits from reducing CO emissions. assessment will suffer from uncertainty, 2 the socio-economic parameters and a To ensure consistency in how benefits speculation, and lack of information range of values for the discount rate. All are evaluated across Federal agencies, about (1) future emissions of GHGs, (2) other model features were left the Administration sought to develop a unchanged, relying on the model the effects of past and future emissions transparent and defensible method, on the climate system, (3) the impact of developers’ best estimates and specifically designed for the rulemaking judgments. changes in climate on the physical and process, to quantify avoided climate biological environment, and (4) the In 2010, the IWG selected four sets of change damages from reduced CO2 translation of these environmental emissions. The IWG did not undertake SC-CO2 values for use in regulatory impacts into economic damages. As a any original analysis. Instead, it analyses. Three sets of values are based result, any effort to quantify and on the average SC-CO2 from the three combined SC-CO2 estimates from the monetize the harms associated with existing literature to use as interim integrated assessment models, at climate change will raise questions of values until a more comprehensive discount rates of 2.5, 3, and 5 percent. science, economics, and ethics and analysis could be conducted. The The fourth set, which represents the should be viewed as provisional. outcome of the preliminary assessment 95th percentile SC-CO2 estimate across Despite the limits of both by the IWG was a set of five interim all three models at a 3-percent discount quantification and monetization, SC- values that represented the first rate, was included to represent higher- CO2 estimates can be useful in sustained interagency effort within the than-expected impacts from climate estimating the social benefits of U.S. government to develop an SC-CO2 change further out in the tails of the SC- reducing CO2 emissions. Although any for use in regulatory analysis. The CO2 distribution. The values grow in numerical estimate of the benefits of results of this preliminary effort were real terms over time. Additionally, the reducing CO2 emissions is subject to presented in several proposed and final IWG determined that a range of values some uncertainty, that does not relieve rules issued by DOE and other agencies. from 7 percent to 23 percent should be DOE of its obligation to attempt to factor used to adjust the global SC-CO2 to those benefits into its cost-benefit c. Current Approach and Key calculate domestic effects,77 although analysis. Moreover, the interagency Assumptions preference is given to consideration of working group’s (IWG) SC-CO2 After the release of the interim values, the global benefits of reducing CO2 estimates are well supported by the the IWG reconvened on a regular basis emissions. Table IV.13 presents the 78 existing scientific and economic to generate improved SC-CO2 estimates. values in the 2010 IWG report.
76 National Research Council. Hidden Costs of highly speculative. There is no a priori reason why 2010. https://www.whitehouse.gov/sites/default/ Energy: Unpriced Consequences of Energy domestic benefits should be a constant fraction of files/omb/inforeg/for-agencies/Social-Cost-of- Production and Use. 2009. National Academies net global damages over time. Carbon-for-RIA.pdf. Press: Washington, DC. 78 U.S. Government—IWG on Social Cost of 77 It is recognized that this calculation for Carbon. Social Cost of Carbon for Regulatory Impact domestic values is approximate, provisional, and Analysis Under Executive Order 12866. February
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TABLE IV.13—ANNUAL SC-CO2 VALUES FROM 2010 IWG REPORT
[2007$ per metric ton CO2]
Discount rate and statistic Year 5% 3% 2.5% 3% Average Average Average 95th percentile
2010 ...... 4.7 21.4 35.1 64.9 2015 ...... 5.7 23.8 38.4 72.8 2020 ...... 6.8 26.3 41.7 80.7 2025 ...... 8.2 29.6 45.9 90.4 2030 ...... 9.7 32.8 50.0 100.0 2035 ...... 11.2 36.0 54.2 109.7 2040 ...... 12.7 39.2 58.4 119.3 2045 ...... 14.2 42.1 61.7 127.8 2050 ...... 15.7 44.9 65.0 136.2
In 2013 the IWG released an update IV.14 shows the four sets of SC-CO2 models at the 3-percent discount rate. (which was revised in July 2015) that estimates from the latest interagency However, for purposes of capturing the contained SC-CO2 values that were update in 5-year increments from 2010 uncertainties involved in regulatory generated using the most recent versions through 2050. The full set of annual SC- impact analysis, the IWG emphasizes of the three integrated assessment CO2 estimates from 2010 through 2050 the importance of including all four sets models that have been published in the is reported in appendix 14A of the final of SC-CO2 values. peer-reviewed literature.79 DOE used rule TSD. The central value that these values for this final rule. Table emerges is the average SC-CO2 across
TABLE IV.14—ANNUAL SC-CO2 VALUES FROM 2013 IWG UPDATE (REVISED JULY 2015)
[2007$ per metric ton CO2]
Discount rate and statistic Year 5% 3% 2.5% 3% Average Average Average 95th percentile
2010 ...... 10 31 50 86 2015 ...... 11 36 56 105 2020 ...... 12 42 62 123 2025 ...... 14 46 68 138 2030 ...... 16 50 73 152 2035 ...... 18 55 78 168 2040 ...... 21 60 84 183 2045 ...... 23 64 89 197 2050 ...... 26 69 95 212
It is important to recognize that a effects. There are a number of analytical deflator for gross domestic product number of key uncertainties remain, and challenges that are being addressed by (GDP) from the Bureau of Economic that current SC-CO2 estimates should be the research community, including Analysis. For each of the four sets of SC- treated as provisional and revisable research programs housed in many of CO2 cases, the values for emissions in because they will evolve with improved the Federal agencies participating in the 2020 were $13.5, $47.4, $69.9, and $139 scientific and economic understanding. interagency process to estimate the SC- per metric ton avoided (values The IWG also recognizes that the CO2. The IWG intends to periodically expressed in 2015$). DOE derived existing models are imperfect and review and reconsider those estimates to values after 2050 based on the trend in incomplete. The National Research reflect increasing knowledge of the 2010–2050 in each of the four cases in Council report mentioned previously science and economics of climate the interagency update. impacts, as well as improvements in points out that there is tension between DOE multiplied the CO2 emissions 80 the goal of producing quantified modeling. reduction estimated for each year by the estimates of the economic damages from DOE converted the values from the SC-CO2 value for that year in each of the an incremental ton of carbon and the 2013 interagency report (revised July four cases. To calculate a present value limits of existing efforts to model these 2015), to 2015$ using the implicit price of the stream of monetary values, DOE
79 U.S. Government—IWG on Social Cost of 80 In November 2013, OMB announced a new 07/02/estimating-benefits-carbon-dioxide- Carbon. Technical Support Document: Technical opportunity for public comment on the interagency emissions-reductions. It also stated its intention to Update of the Social Cost of Carbon for Regulatory technical support document underlying the revised seek independent expert advice on opportunities to Impact Analysis Under Executive Order 12866. May SC-CO2 estimates. 78 FR 70586. In July 2015 OMB improve the estimates, including many of the 2013. Revised July 2015. https:// published a detailed summary and formal response approaches suggested by commenters. www.whitehouse.gov/sites/default/files/omb/ to the many comments that were received: This is inforeg/scc-tsd-final-july-2015.pdf. available at https://www.whitehouse.gov/blog/2015/
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discounted the values in each of the and are being used transparently. (Joint zero, which is inappropriate. four cases using the specific discount Advocates, No. 23 at p. 4) The Joint Furthermore, the commenters have not rate that had been used to obtain the SC- Advocates stated that (1) the IAMs used offered alternative estimates of the SC- CO2 values in each case. reflect the best available, peer-reviewed CO2 that they believe are more accurate. DOE received several comments on science to quantify the benefits of As noted previously, in November the development of and the use of the carbon emission reductions; (2) 2013, OMB announced a new SC-CO2 values in its analyses. A group uncertainty is not a valid reason for opportunity for public comment on the of trade associations led by the U.S. rejecting the SC-CO2 analysis, and (3) interagency technical support document Chamber of Commerce objected to the IWG was rigorous in addressing underlying the revised SC-CO2 DOE’s continued use of the SC-CO2 in uncertainty inherent in estimating the estimates. 78 FR 70586 (Nov. 26, 2013). the cost-benefit analysis and stated that economic cost of pollution. (Joint In July 2015, OMB published a detailed the SC-CO2 calculation should not be Advocates, No. 23 at pp. 5, 17–18, 18– summary and formal response to the used in any rulemaking until it 19) The Joint Advocates added that the many comments that were received. undergoes a more rigorous notice, increase in the SC-CO2 estimate in the DOE stands ready to work with OMB review, and comment process. (U.S. 2013 update reflects the growing and the other members of the IWG on Chamber of Commerce, No. 36 at p. 4) scientific and economic research on the further review and revision of the SC- 81 AHAM opposed DOE’s analysis of the risks and costs of climate change, but is CO2 estimates as appropriate. social cost of carbon in this rulemaking still very likely an underestimate of the IECA stated that the SC-CO2 places U.S. manufacturing at a distinct and supported the comments submitted SC-CO2. (Joint Advocates, No. 23 at p. by the U.S. Chamber of Commerce. 4) competitive disadvantage. IECA added (AHAM, No. 43 at p. 29) IECA stated that the higher SC-CO2 cost drives In response to the comments on the that before DOE applies any SC-CO manufacturing companies offshore and 2 SC-CO , in conducting the interagency estimate in its rulemaking, DOE must 2 increases imports of more carbon- process that developed the SC-CO correct the methodological flaws that 2 intensive manufactured goods. (IECA, values, technical experts from numerous commenters have raised about the No. 33 at pp. 1–2) In response, DOE agencies met on a regular basis to IWG’s SC-CO estimate. IECA referenced notes that the SC-CO2 is simply a metric 2 consider public comments, explore the a U.S. Government Accountability that Federal agencies use to estimate the technical literature in relevant fields, Office report that IECA believes societal benefits of policy actions that and discuss key model inputs and highlights severe uncertainties in SC- reduce CO2 emissions. assumptions. Key uncertainties and CO2 values. (IECA, No. 33 at p. 2) IECA stated that the SC-CO2 value is In contrast, the Joint Advocates stated model differences transparently and unrealistically high in comparison to that only a partial accounting of the consistently inform the range of SC-CO2 carbon market prices. (IECA, No. 33 at costs of climate change (those most estimates. These uncertainties and p. 3) In response, DOE notes that the SC- model differences are discussed in the easily monetized) can be provided, CO2 is an estimate of the monetized which inevitably involves incorporating IWG’s reports, as are the major damages associated with an incremental elements of uncertainty. The Joint assumptions. Specifically, uncertainties increase in carbon emissions in a given Advocates commented that accounting in the assumptions regarding climate year, whereas carbon trading prices in for the economic harms caused by sensitivity, as well as other model existing markets are simply a function climate change is a critical component inputs such as economic growth and of the demand and supply of tradable of sound benefit-cost analyses of emissions trajectories, are discussed and permits in those markets. Such prices regulations that directly or indirectly the reasons for the specific input depend on the arrangements in specific limit GHGs. The Joint Advocates stated assumptions chosen are explained. carbon markets, and do not necessarily that several Executive Orders direct However, the three integrated bear relation to the damages associated Federal agencies to consider non- assessment models used to estimate the with an incremental increase in carbon economic costs and benefits, such as SC-CO2 are frequently cited in the peer- emissions. environmental and public health reviewed literature and were used in the IECA stated that the SC-CO2 estimates impacts. (Joint Advocates, No. 23 at pp. last assessment of the IPCC. In addition, must be made consistent with OMB 2–3) Furthermore, the Joint Advocates new versions of the models that were Circular A–4, and noted that it uses a argued that without an SC-CO2 estimate, used in 2013 to estimate revised SC-CO2 lower discount rate than recommended regulators would by default be using a values were published in the peer- by OMB Circular A–4 and values global value of zero for the benefits of reducing reviewed literature. The Government benefits rather than solely U.S. domestic carbon pollution, thereby implying that Accountability Office (GAO) report benefits. (IECA, No. 33 at p. 5) carbon pollution has no costs. The Joint mentioned by IECA describes the OMB Circular A–4 provides two Advocates stated that it would be approach the IWG used to develop suggested discount rates for use in arbitrary for a Federal agency to weigh estimates of the SC-CO2 and noted that regulatory analysis: 3 percent and 7 the societal benefits and costs of a rule evaluating the quality of the IWG’s percent. Circular A–4 states that the 3 with significant carbon pollution effects approach was outside the scope of percent discount rate is appropriate for but to assign no value at all to the GAO’s review. Although uncertainties ‘‘regulation [that] primarily and directly considerable benefits of reducing carbon remain, the revised SC-CO2 values are affects private consumption (e.g., pollution. (Joint Advocates, No. 23 at p. based on the best available scientific through higher consumer prices for 3) information on the impacts of climate goods and services).’’ The IWG that The Joint Advocates stated that change. The current estimates of the SC- developed the SC-CO2 values for use by assessment and use of the Integrated CO2 have been developed over many Federal agencies examined the Assessment Models (IAMs) in years, using the best science available, developing the SC-CO2 values has been and with input from the public. DOE 81 See https://www.whitehouse.gov/blog/2015/07/ transparent. The Joint Advocates further notes that not using SC-CO2 estimates 02/estimating-benefits-carbon-dioxide-emissions- reductions. OMB also stated its intention to seek noted that repeated opportunities for because of uncertainty would be independent expert advice on opportunities to public comment demonstrate that the tantamount to assuming that the improve the estimates, including many of the IWG’s SC-CO2 estimates were developed benefits of reduced carbon emissions are approaches suggested by commenters.
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economics literature and concluded that 2. Social Cost of Methane and Nitrous et al. (2015) provided the first set of the consumption rate of interest is the Oxide published estimates for the social cost of correct concept to use in evaluating the The Joint Advocates stated that EPA CH4 and N2O emissions that are net social costs of a marginal change in and other agencies have begun using a consistent with the methodology and CO2 emissions, as the impacts of climate methodology developed to specifically modeling assumptions underlying the 82 change are measured in consumption- measure the social cost of methane in IWG SC-CO2 estimates. Specifically, equivalent units in the three models recent proposed rulemakings, and Marten et al. used the same set of three used to estimate the SC-CO2. The IWG recommended that DOE use the social integrated assessment models, five chose to use three discount rates to span cost of methane metric to more socioeconomic and emissions scenarios, a plausible range of constant discount accurately reflect the true benefits of equilibrium climate sensitivity rates: 2.5, 3, and 5 percent per year. The energy conservation standards. They distribution, three constant discount central value, 3 percent, is consistent stated that the methodology in the study rates, and the aggregation approach used with estimates provided in the used to develop the social cost of by the IWG to develop the SC-CO2 economics literature and OMB’s methane provides reasonable estimates estimates. An addendum to the IWG’s Circular A–4 guidance for the that reflect updated evidence and Technical Support Document on Social consumption rate of interest. provide consistency with the Cost of Carbon for Regulatory Impact Government’s accepted methodology for Analysis under Executive Order 12866 Regarding the use of global SC-CO 2 estimating the SC-CO . (Joint Advocates, summarizes the Marten et al. values, DOE’s analysis estimates both 2 No. 23 at pp. 19–20) methodology and presents the SC-CH4 global and domestic benefits of CO 2 While carbon dioxide is the most and SC-N2O estimates from that study as emissions reductions. Following the prevalent GHG emitted into the a way for agencies to incorporate the recommendation of the IWG, DOE atmosphere, other GHGs are also social benefits of reducing CH4 and N2O places more focus on a global measure important contributors. These include emissions into benefit-cost analyses of of SC-CO2. The climate change problem methane and nitrous oxide. GWP values regulatory actions that have small, or is highly unusual in at least two are often used to convert emissions of ‘‘marginal,’’ impacts on cumulative 83 respects. First, it involves a global non-CO2 GHGs to CO2-equivalents to global emissions. externality: Emissions of most GHGs facilitate comparison of policies and The methodology and estimates contribute to damages around the world inventories involving different GHGs. described in the addendum have even when they are emitted in the U.S. While GWPs allow for some useful undergone multiple stages of peer Consequently, to address the global comparisons across gases on a physical review and their use in regulatory nature of the problem, the SC-CO2 must basis, using the SC-CO2 to value the analysis has been subject to public incorporate the full (global) damages damages associated with changes in comment. The estimates are presented caused by GHG emissions. Second, CO2-equivalent emissions is not with an acknowledgement of the climate change presents a problem that optimal. This is because non-CO2 GHGs limitations and uncertainties involved the U.S. alone cannot solve. Even if the differ not just in their potential to and with a clear understanding that they U.S. were to reduce its GHG emissions absorb infrared radiation over a given should be updated over time to reflect to zero, that step would be far from time frame, but also in the temporal increasing knowledge of the science and enough to avoid substantial climate pathway of their impact on radiative economics of climate impacts, just as change. Other countries would also forcing, which is relevant for estimating the IWG has committed to do for the SC- their social cost but not reflected in the need to take action to reduce emissions CO2. OMB has determined that the use if significant changes in the global GWP. Physical impacts other than of the Marten et al. estimates in climate are to be avoided. Emphasizing temperature change also vary across regulatory analysis is consistent with the need for a global solution to a global gases in ways that are not captured by the requirements of OMB’s Information problem, the U.S. has been actively GWP. Quality Guidelines Bulletin for Peer In light of these limitations and the involved in seeking international Review and OMB Circular A–4. paucity of peer-reviewed estimates of agreements to reduce emissions and in the social cost of non-CO gases in the The SC-CH4 and SC-N2O estimates are encouraging other nations, including 2 literature, the 2010 Social Cost of presented in Table IV.15. Following the emerging major economies, to take Carbon Technical Support Document same approach as with the SC-CO2, significant steps to reduce emissions. did not include an estimate of the social values for 2010, 2020, 2030, 2040, and When these considerations are taken as cost of non-CO2 GHGs and did not 2050 are calculated by combining all a whole, the IWG concluded that a endorse the use of GWP to approximate outputs from all scenarios and models global measure of the benefits from the value of non-CO2 emission changes for a given discount rate. Values for the reducing U.S. emissions is preferable. in regulatory analysis. Instead, the IWG years in between are calculated using DOE’s approach is not in contradiction noted that more work was needed to linear interpolation. The full set of of the requirement to weigh the need for link non-CO2 GHG emission changes to annual SC-CH4 and SC-N2O estimates national energy conservation, as one of economic impacts. between 2010 and 2050 is reported in the main reasons for national energy Since that time, new estimates of the appendix 14A of the final rule TSD. conservation is to contribute to efforts to social cost of non-CO2 GHG emissions DOE derived values after 2050 based on mitigate the effects of global climate have been developed in the scientific the trend in 2010–2050 in each of the change. literature, and a recent study by Marten four cases in the IWG addendum.
82 Marten, A.L., Kopits, E.A., Griffiths, C.W., 83 U.S. Government—IWG on Social Cost of August 2016. https://www.whitehouse.gov/sites/ Newbold, S.C., and A. Wolverton. 2015. GHGs. Addendum to Technical Support Document default/files/omb/inforeg/august_2016_sc_ch4_sc_ Incremental CH4 and N2O Mitigation Benefits on Social Cost of Carbon for Regulatory Impact n2o_addendum_final_8_26_16.pdf. Consistent with the U.S. Government’s SC-CO2 Analysis under Executive Order 12866: Application Estimates. Climate Policy. 15(2): 272–298 of the Methodology to Estimate the Social Cost of (published online, 2014). Methane and the Social Cost of Nitrous Oxide.
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TABLE IV.15—ANNUAL SC-CH4 AND SC-N2O ESTIMATES FROM 2016 IWG ADDENDUM [2007$ per metric ton]
SC-CH4 SC-N2O Discount rate and statistic Discount rate and statistic Year 5% 3% 2.5% 3% 5% 3% 2.5% 3% 95th 95th Average Average Average percentile Average Average Average percentile
2010 ...... 370 870 1,200 2,400 3,400 12,000 18,000 31,000 2015 ...... 450 1,000 1,400 2,800 4,000 13,000 20,000 35,000 2020 ...... 540 1,200 1,600 3,200 4,700 15,000 22,000 39,000 2025 ...... 650 1,400 1,800 3,700 5,500 17,000 24,000 44,000 2030 ...... 760 1,600 2,000 4,200 6,300 19,000 27,000 49,000 2035 ...... 900 1,800 2,300 4,900 7,400 21,000 29,000 55,000 2040 ...... 1,000 2,000 2,600 5,500 8,400 23,000 32,000 60,000 2045 ...... 1,200 2,300 2,800 6,100 9,500 25,000 34,000 66,000 2050 ...... 1,300 2,500 3,100 6,700 11,000 27,000 37,000 72,000
DOE multiplied the CH4 and N2O appendix 14B of the final rule TSD. and generation that would result for emissions reduction estimated for each DOE primarily relied on the low each TSL. The analysis is based on 85 year by the SC-CH4 and SC-N2O estimates to be conservative. The published output from the NEMS estimates for that year in each of the national average low values for 2020 (in associated with AEO 2016. NEMS four cases. To calculate a present value 2015$) are $3,187/ton at 3-percent produces the AEO Reference case, as of the stream of monetary values, DOE discount rate and $2,869/ton at 7- well as a number of side cases that discounted the values in each of the percent discount rate. DOE developed estimate the economy-wide impacts of four cases using the specific discount values specific to the sector for portable changes to energy supply and demand. rate that had been used to obtain the SC- ACs using a method described in As discussed in section IV.K, DOE is CH4 and SC-N2O estimates in each case. appendix 14B of the final rule TSD. For using the AEO 2016 No-CPP case as a Results for CH4 and N2O emissions this analysis DOE used linear basis for its analysis. For the current reduction estimates can be found in interpolation to define values for the analysis, impacts are quantified by section V.B.6 of this document and are years between 2020 and 2025 and comparing the levels of electricity sector included in the costs and benefits for between 2025 and 2030; for years generation, installed capacity, fuel those that contribute to the beyond 2030 the value is held constant. consumption and emissions in the AEO determination of the economic DOE multiplied the emissions 2016 No-CPP case and various side justification of each TSL level. reduction (in tons) in each year by the cases. Details of the methodology are 3. Social Cost of Other Air Pollutants associated $/ton values, and then provided in the appendices to chapters discounted each series using discount 13 and 15 of the final rule TSD. As noted previously, DOE estimated rates of 3 percent and 7 percent as The output of this analysis is a set of how the considered energy conservation appropriate. time-dependent coefficients that capture standards would reduce site NO X DOE is evaluating appropriate the change in electricity generation, emissions nationwide and decrease monetization of reduction in other primary fuel consumption, installed power sector NO emissions in those 22 X emissions in energy conservation capacity and power sector emissions States not affected by the CSAPR. standards rulemakings. DOE has not DOE estimated the monetized value of due to a unit reduction in demand for included monetization of those a given end use. These coefficients are NOX emissions reductions from emissions in the current analysis. electricity generation using benefit per multiplied by the stream of electricity ton estimates from the Regulatory M. Utility Impact Analysis savings calculated in the NIA to provide estimates of selected utility impacts of Impact Analysis for the Clean Power The utility impact analysis estimates new or amended energy conservation Plan Final Rule, published in August several effects on the electric power standards. 2015 by EPA’s Office of Air Quality generation industry that would result Planning and Standards.84 The report from the adoption of new or amended N. Employment Impact Analysis includes high and low values for NOX energy conservation standards. The DOE considers employment impacts (as PM2.5) for 2020, 2025, and 2030 utility impact analysis estimates the in the domestic economy as one factor using discount rates of 3 percent and 7 changes in installed electrical capacity percent; these values are presented in in selecting a standard. Employment 85 impacts from new or amended energy For the monetized NOX benefits associated 84 Available at www.epa.gov/cleanpowerplan/ with PM2.5, the related benefits are primarily based conservation standards include both clean-power-plan-final-rule-regulatory-impact- on an estimate of premature mortality derived from direct and indirect impacts. Direct analysis. See Tables 4A–3, 4A–4, and 4A–5 in the the ACS study (Krewski et al. 2009), which is the employment impacts are any changes in report. The U.S. Supreme Court has stayed the rule lower of the two EPA central tendencies. Using the implementing the Clean Power Plan until the lower value is more conservative when making the the number of employees of current litigation against it concludes. Chamber of policy decision concerning whether a particular manufacturers of the products subject to Commerce, et al. v. EPA, et al., Order in Pending standard level is economically justified. If the standards, their suppliers, and related Case, 577 U.S. ll (2016). However, the benefit- benefit-per-ton estimates were based on the Six service firms. The MIA addresses those per-ton estimates established in the Regulatory Cities study (Lepuele et al. 2012), the values would Impact Analysis for the Clean Power Plan are based be nearly two-and-a-half times larger. (See chapter impacts. Indirect employment impacts on scientific studies that remain valid irrespective 14 of the final rule TSD for citations for the studies are changes in national employment of the legal status of the Clean Power Plan. mentioned above.) that occur due to the shift in
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expenditures and capital investment efficiency standards is to shift economic analysis, see chapter 16 of the final rule caused by the purchase and operation of activity from a less labor-intensive TSD. more-efficient appliances. Indirect sector (i.e., the utility sector) to more V. Analytical Results and Conclusions employment impacts from standards labor-intensive sectors (e.g., the retail consist of the net jobs created or and service sectors). Thus, the BLS data The following section addresses the eliminated in the national economy, suggest that net national employment results from DOE’s analyses with other than in the manufacturing sector may increase due to shifts in economic respect to the considered energy being regulated, caused by (1) reduced activity resulting from energy conservation standards for portable ACs. spending by consumers on energy, (2) conservation standards. It addresses the TSLs examined by DOE, reduced spending on new energy supply DOE estimated indirect national the projected impacts of each of these by the utility industry, (3) increased employment impacts for the standard levels if adopted as energy conservation consumer spending on the products to levels considered in this final rule using standards for portable ACs, and the which the new standards apply and an input/output model of the U.S. standards levels that DOE is adopting in other goods and services, and (4) the economy called Impact of Sector Energy this final rule. Additional details effects of those three factors throughout Technologies version 4 (ImSET).87 regarding DOE’s analyses are contained the economy. ImSET is a special-purpose version of in the final rule TSD supporting this One method for assessing the possible the ‘‘U.S. Benchmark National Input- document. effects on the demand for labor of such Output’’ (I–O) model, which was A. Trial Standard Levels (TSLs) shifts in economic activity is to compare designed to estimate the national sector employment statistics developed employment and income effects of DOE analyzed the benefits and by the Labor Department’s BLS. BLS energy-saving technologies. The ImSET burdens of four TSLs for portable ACs. regularly publishes its estimates of the software includes a computer-based I–O These TSLs are equal to each of the ELs number of jobs per million dollars of model having structural coefficients that analyzed by DOE with results presented economic activity in different sectors of characterize economic flows among 187 in this document. Detailed results for the economy, as well as the jobs created sectors most relevant to industrial, TSLs that DOE analyzed are in the final elsewhere in the economy by this same commercial, and residential building rule TSD. economic activity. Data from BLS energy use. Table V.1 presents the TSLs and the indicate that expenditures in the utility DOE notes that ImSET is not a general corresponding ELs, and average EERs sector generally create fewer jobs (both equilibrium forecasting model, and and CEERs at each level that DOE has directly and indirectly) than understands the uncertainties involved identified for potential new energy expenditures in other sectors of the in projecting employment impacts, conservation standards for portable ACs. economy.86 There are many reasons for especially changes in the later years of TSL 4 represents the maximum these differences, including wage the analysis. Because ImSET does not technologically feasible (‘‘max-tech’’) differences and the fact that the utility incorporate price changes, the energy efficiency. TSL 3 consists of an sector is more capital-intensive and less employment effects predicted by ImSET intermediate EL below the max-tech labor-intensive than other sectors. may over-estimate actual job impacts level, corresponding to the single Energy conservation standards have the over the long run for this rule. highest efficiency observed in DOE’s effect of reducing consumer utility bills. Therefore, DOE used ImSET only to test sample. TSL 2 represents the Because reduced consumer generate results for near-term maximum available efficiency across the expenditures for energy likely lead to timeframes (2022–2027), where these full range of capacities, and TSL 1 increased expenditures in other sectors uncertainties are reduced. For more represents an intermediate level of the economy, the general effect of details on the employment impact between the baseline and TSL 2.
TABLE V.1—TRIAL STANDARD LEVELS FOR PORTABLE AIR CONDITIONERS
EER CEER TSL EL (Btu/Wh) (Btu/Wh)
1 ...... 1 6.05 5.94 2 ...... 2 7.15 7.13 3 ...... 3 8.48 8.46 4 ...... 4 10.75 10.73
B. Economic Justification and Energy the impacts of potential standards on operating costs decrease. Inputs used for Savings selected consumer subgroups and three calculating the LCC and PBP include sensitivity analyses on energy total installed costs (i.e., product price 1. Economic Impacts on Individual consumption. These analyses are plus installation costs), and operating Consumers discussed below. costs (i.e., annual energy use, energy DOE analyzed the economic impacts prices, energy price trends, repair costs, a. Life-Cycle Cost and Payback Period on portable ACs consumers by looking and maintenance costs). The LCC at the effects that potential new In general, higher-efficiency products calculation also uses product lifetime standards at each TSL would have on affect consumers in two ways: (1) and a discount rate. Chapter 8 of the the LCC and PBP. DOE also examined Purchase price increases and (2) annual final rule TSD provides detailed
86 See U.S. Department of Commerce—Bureau of www.bea.gov/scb/pdf/regional/perinc/meth/ Technologies Model Description and User’s Guide. Economic Analysis. Regional Multipliers: A User rims2.pdf. Pacific Northwest National Laboratory. Richland, Handbook for the Regional Input-Output Modeling 87 Livingston, O.V, S.R. Bender, M.J. Scott, and WA. PNNL–24563. System (RIMS II). 1997. U.S. Government Printing R.W. Schultz. ImSET 4.0: Impact of Sector Energy Office: Washington, DC. Available at http://
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information on the LCC and PBP from the room AC rulemaking,88 DOE purchase products with higher analyses. assumed that 87 percent of shipments efficiency in the no-new-standards case, Table V.2 through Table V.7 show the are to the residential sector and 13 the average savings are less than the LCC and PBP results for the TSLs percent are to the commercial sector. In difference between the average LCC of considered for portable ACs for both the first of each pair of tables, the EL 0 and the average LCC at each TSL. sectors, residential and commercial. The simple payback is measured relative to The savings refer only to consumers LCC results presented in Table V.2 and the baseline product (EL 0). In the who are affected by a standard at a given Table V.3 combined the results for second table, the impacts are measured TSL. Those who already purchase a residential and commercial users, which relative to the efficiency distribution in product with efficiency at or above a means that DOE had to assign an the no-new-standards case in the given TSL are not affected. Consumers appropriate weight to the results for compliance year (see section IV.F of this for whom the LCC increases at a given each type of user. Using the weighting final rule). Because some consumers TSL experience a net cost.
TABLE V.2—AVERAGE LCC AND PBP RESULTS FOR PORTABLE ACS, RESIDENTIAL SETTING
Average costs (2015$) Simple Average TSL EL First year’s Lifetime payback lifetime Installed operating operating LCC (years) (years) cost cost cost
0 559 119 995 1,554 ...... 10 1 ...... 1 588 106 892 1,480 2.3 10 2 ...... 2 635 92 769 1,404 2.8 10 3 ...... 3 700 78 655 1,355 3.5 10 4 ...... 4 733 63 533 1,265 3.1 10 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.3—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR PORTABLE ACS, RESIDENTIAL SETTING
Percent of Average LCC consumers that TSL EL savings * experience (2015$) net cost
1 ...... 1 73 9 2 ...... 2 108 27 3 ...... 3 143 38 4 ...... 4 229 34 * The savings represent the average LCC for affected consumers.
TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR PORTABLE ACS, COMMERCIAL SETTING
Average costs (2015$) Simple Average TSL EL First year’s Lifetime payback lifetime Installed operating operating LCC (years) (years) cost cost cost
0 560 246 1,818 2,378 ...... 10 1 ...... 1 588 221 1,636 2,224 1.2 10 2 ...... 2 636 192 1,419 2,055 1.4 10 3 ...... 3 701 165 1,218 1,919 1.7 10 4 ...... 4 733 135 999 1,732 1.6 10 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-NEW-STANDARDS CASE FOR PORTABLE ACS, COMMERCIAL SETTING
Percent of Average LCC consumers that TSL EL savings * experience (2015$) net cost
1 ...... 1 155 3
88 Room AC Standards Rulemaking, Direct Final www.regulations.gov/#!documentDetail;D=EERE- Rule, Chapter 8, page 51. April 18, 2011. http:// 2007-BT-STD-0010-0053.
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TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR PORTABLE ACS, COMMERCIAL SETTING—Continued
Percent of Average LCC consumers that TSL EL savings * experience (2015$) net cost
2 ...... 2 238 9 3 ...... 3 342 14 4 ...... 4 522 12 * The savings represent the average LCC for affected consumers.
TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR PORTABLE ACS, BOTH SECTORS
Average costs (2015$) Simple Average TSL EL First year’s Lifetime payback lifetime Installed operating operating LCC (years) (years) cost cost cost
0 559 135 1,103 1,663 ...... 10 1 ...... 1 588 122 990 1,578 2.2 10 2 ...... 2 635 105 855 1,490 2.6 10 3 ...... 3 700 89 729 1,429 3.2 10 4 ...... 4 733 73 594 1,327 2.9 10 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline (EL 0) product.
TABLE V.7—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR PORTABLE ACS, BOTH SECTORS
Percent of Average LCC consumers that TSL EL savings * experience (2015$) net cost
1 ...... 1 84 8 2 ...... 2 125 24 3 ...... 3 169 35 4 ...... 4 268 31 * The savings represent the average LCC for affected consumers.
As discussed in section IV.E, DOE the final rule TSD for additional subgroups, along with the average LCC conducted a sensitivity analysis that information. savings for the entire sample. In most assumes consumers use portable ACs 50 b. Consumer Subgroup Analysis cases, the average LCC savings and PBP percent less than room ACs. For the for low-income households, senior-only proposed standard, TSL 2, the average In the consumer subgroup analysis, households, and small businesses at the LCC savings for all consumers declines DOE estimated the impact of the considered ELs are not substantially considered TSLs on low-income to $35 (from $125) and 42 percent of different from the average for all households, senior-only households, consumers experience a net cost under households. Chapter 11 of the final rule and small businesses. Table V.8 the sensitivity analysis (from 24 compares the average LCC savings and TSD presents the complete LCC and percent). See appendix 8F and 10E of PBP at each EL for the three consumer PBP results for the subgroups.
TABLE V.8—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS PLUS LIGHT- COMMERCIAL ESTABLISHMENTS
Average life-cycle cost savings Simple payback period (2015$) (years) TSL Low-income Senior-only Small Both Low-income Senior-only Small Both households households businesses sectors households households businesses sectors
1 ...... 96 72 143 84 1.9 2.3 1.2 2.2 2 ...... 142 106 218 125 2.3 2.8 1.4 2.6 3 ...... 195 141 312 169 2.9 3.5 1.7 3.2 4 ...... 304 226 477 268 2.6 3.2 1.6 2.9
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c. Rebuttable Presumption Payback calculation on the DOE test procedure economic impacts of those levels, for portable ACs. In contrast, the PBPs pursuant to 42 U.S.C. 6295(o)(2)(B)(i), As discussed in section III.E.2, EPCA presented in section V.B.1.a were that considers the full range of impacts establishes a rebuttable presumption calculated using distributions for input to the consumer, manufacturer, Nation, that an energy conservation standard is values, with energy use based on field and environment. The results of that economically justified if the increased metering studies and RECS data. analysis serve as the basis for DOE to purchase cost for a product that meets Table V.9 presents the rebuttable- definitively evaluate the economic the standard is less than three times the presumption PBP for the considered justification for a potential standard value of the first-year energy savings TSLs for portable ACs. While DOE level, thereby supporting or rebutting resulting from the standard. In examined the rebuttable-presumption the results of any preliminary calculating a rebuttable presumption criterion, it considered whether the determination of economic justification. PBP for each of the considered TSLs, standard levels considered for the final Table V.9 shows the rebuttable DOE used point values, and, as required rule are economically justified through presumption PBPs for the considered by EPCA, based the energy use a more detailed analysis of the TSLs for portable ACs.
TABLE V.9—PORTABLE AIR CONDITIONERS: REBUTTABLE PBPS [Years]
Trial standard level 1 2 3 4
Residential ...... 1.7 2.1 2.6 2.3 Commercial ...... 2.3 2.8 3.4 3.1 Both sectors ...... 1.8 2.2 2.7 2.4
2. Economic Impacts on Manufacturers To assess the lower (less severe) end gross margin, but instead would cut DOE performed an MIA to estimate of the range of potential impacts, DOE their markup for minimally compliant the impact of new energy conservation modeled a preservation of gross margin products to maintain a cost-competitive standards on portable AC percentage markup scenario, in which a product offering while maintaining the manufacturers. The next section flat markup of 1.42 (i.e., the baseline same overall level of operating profit in describes the expected impacts on manufacturer markup) is applied across absolute dollars as in the no-new- manufacturers at each considered TSL. all ELs. In this scenario, DOE assumed standards case. The two tables below Chapter 12 of the final rule TSD that a manufacturer’s absolute dollar show the range of potential INPV explains the analysis in further detail. markup would increase as production impacts for manufacturers of portable costs increase in the new energy a. Industry Cash Flow Analysis Results ACs. Table V.10 reflects the lower conservation standards case. During bound of impacts (higher profitability) The following tables illustrate the interviews, manufacturers have and Table V.11 represents the upper estimated financial impacts (represented indicated that it is optimistic to assume bound of impacts (lower profitability). by changes in INPV) of new energy that they would be able to maintain the conservation standards on portable AC same gross margin markup as their Each scenario results in a unique set manufacturers, as well as the conversion production costs increase in response to of cash flows and corresponding costs that DOE estimates manufacturers a new energy conservation standard, industry values at each TSL. In the would incur at each TSL. To evaluate particularly at higher TSLs. following discussion, the INPV results the range of cash-flow impacts on the To assess the higher (more severe) end refer to the sum of discounted cash portable AC manufacturing industry, of the range of potential impacts, DOE flows through 2051, the difference in DOE used two different markup modeled the preservation of per-unit INPV between the no-new-standards scenarios to model the range of operating profit markup scenario, which case and each standards case, and the anticipated market responses to new assumes that manufacturers would not total industry conversion costs required energy conservation standards. be able to preserve the same overall for each standards case.
TABLE V.10—MANUFACTURER IMPACT ANALYSIS UNDER THE PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP SCENARIO FOR ANALYSIS PERIOD [2017–2051]
No-new- Trial standard level Units standards case 1 2 3 4
INPV ...... 2015$ Millions...... 738.5 684.7 526.1 406.5 373.0 Change in INPV ...... 2015$ Millions ...... (53.8) (212.4) (332.0) (365.5) (%) ...... (7.3%) (28.8%) (45.0%) (49.5%) Free Cash Flow (2021) ...... 2015$ Millions ...... 50.5 16.1 (78.6) (153.4) (173.0) Change in Free Cash Flow (2021) ...... (%) ...... (68.0%) (255.5%) (403.6%) (442.3%) Product Conversion Costs ...... 2015$ Millions ...... 33.1 124.4 179.0 192.2 Capital Conversion Costs ...... 2015$ Millions ...... 52.3 196.5 314.3 344.5 Total Conversion Costs ...... 2015$ Millions ...... 85.5 320.9 493.3 536.7 Parentheses indicate negative (¥) values.
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TABLE V.11—MANUFACTURER IMPACT ANALYSIS UNDER THE PRESERVATION OF PER-UNIT OPERATING PROFIT MARKUP SCENARIO FOR ANALYSIS PERIOD [2017–2051]
No-new- Trial standard level Units standards case 1 2 3 4
INPV ...... 2015$ Millions...... 738.5 676.8 485.1 324.7 248.1 Change in INPV ...... 2015$ Millions ...... (61.8) (253.4) (413.9) (490.4) (%) ...... (8.4%) (34.3%) (56.0%) (66.4%) Free Cash Flow (2021) ...... 2015$ Millions ...... 50.5 16.1 (78.6) (153.4) (173.0) Change in Free Cash Flow (2021) ...... (%) ...... (68.0%) (255.5%) (403.6%) (442.3%) Product Conversion Costs ...... 2015$ Millions ...... 33.1 124.4 179.0 192.2 Capital Conversion Costs ...... 2015$ Millions ...... 52.3 196.5 314.3 344.5 Total Conversion Costs ...... 2015$ Millions ...... 85.5 320.9 493.3 536.7 Parentheses indicate negative (¥) values.
Beyond impacts on INPV, DOE At TSL 2, DOE estimates the impact estimated to decrease by approximately includes a comparison of free cash flow on INPV for manufacturers of portable 403.6 percent to ¥$153.4 million, between the no-new-standards case and ACs to range from ¥$253.4 million to compared to the no-new-standards case the standards case at each TSL in the ¥$212.4 million, or a decrease in INPV value of $50.5 million in 2021, the year year before new standards take effect to of 34.3 percent to 28.8 percent, under before the projected compliance date. provide perspective on the short-run the preservation of per-unit operating At TSL 3, the industry as a whole is cash flow impacts in the discussion of profit markup scenario and the expected to incur $179.0 million in the results below. preservation of gross margin percentage product conversion costs associated At TSL 1, DOE estimates the impact markup scenario, respectively. At this with the upfront research, development, on INPV for manufacturers of portable TSL, industry free cash flow is testing, and certification; as well as ¥ estimated to decrease by approximately $314.3 million in one-time investments ACs to range from $61.8 million to ¥ ¥$53.8 million, or a decrease in INPV 255.5 percent to $78.6 million, in PP&E for products requiring platform of 8.4 percent to 7.3 percent, under the compared to the no-new-standards case redesigns. Again, the industry preservation of per-unit operating profit value of $50.5 million in 2021, the year conversion cost burden at this TSL before the projected compliance date. markup scenario and the preservation of would be associated with updates for portable ACs sold in the U.S. that are gross margin percentage markup At TSL 2, the industry as a whole is currently below the EL corresponding to scenario, respectively. At this TSL, expected to incur $124.4 million in product conversion costs associated TSL 3, approximately 98 percent of industry free cash flow is estimated to with the upfront research, development, platforms and 98 percent of shipments. decrease by approximately 68.0 percent testing, and certification; as well as At TSL 3, roughly 14 percent of non- to $16.1 million, compared to the no- $196.5 million in one-time investments compliant platforms will require some new-standards case value of $50.5 in PP&E for products requiring platform new components, including larger heat million in 2021, the year before the updates. The industry conversion cost exchangers (with increases in heat projected compliance date. burden at this TSL would be associated exchanger area of up to 20 percent), At TSL 1, the industry as a whole is with updates for portable ACs sold in which may necessitate larger chassis expected to incur $33.1 million in the U.S. that are currently below the EL sizes. The remaining 86 percent of non- product conversion costs attributed to corresponding to TSL 2, approximately compliant portable ACs will likely upfront research, development, testing, 83 percent of platforms and 85 percent require a complete platform redesign, and certification, as well as $52.3 of shipments. At TSL 2, roughly 67 necessitating all new components and million in one-time investments in percent of non-compliant platforms will high associated re-tooling and R&D property, plant, and equipment (PP&E) require some new components, costs. necessary to manufacture updated including larger heat exchangers (with At TSL 4, DOE estimates the impact platforms. The industry conversion cost increases in heat exchanger area of up on INPV for manufacturers of portable burden at TSL 1 would be associated to 20 percent), which may necessitate ACs to range from ¥$490.4 million to with updates for portable ACs sold in larger chassis sizes. The remaining non- ¥$365.5 million, or a decrease in INPV the U.S. that are currently at the compliant portable ACs will likely of 66.4 percent to 49.5 percent, under baseline, approximately 22 percent of require a complete platform redesign, the preservation of per-unit operating platforms and 37 percent of shipments. necessitating all new components and profit markup scenario and the At TSL 1, roughly 67 percent of non- high associated re-tooling and R&D preservation of gross margin percentage compliant platforms will require some costs. markup scenario, respectively. At this new components, including larger heat At TSL 3, DOE estimates the impact TSL, industry free cash flow is exchangers (with increases in heat on INPV for manufacturers of portable estimated to decrease by approximately exchanger area of up to 20 percent), ACs to range from ¥$413.9 million to 442.3 percent to ¥$173.0 million, which may necessitate larger chassis ¥$332.0 million, or a decrease in INPV compared to the base-case value of sizes. The remaining non-compliant of 56.0 percent to 45.0 percent, under $50.5 million in 2021, the year before portable ACs will likely require a the preservation of per-unit operating the projected compliance date. complete platform redesign, profit markup scenario and the At TSL 4, the industry as a whole is necessitating all new components and preservation of gross margin percentage expected to spend $192.2 million in high associated re-tooling and R&D markup scenario, respectively. At this product conversion costs associated costs. TSL, industry free cash flow is with the research and development and
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testing and certification, as well as fraction of domestic manufacturing literature. For a discussion of the $344.5 million in one-time investments production capacity for the covered potential impacts on the small in PP&E for complete platform product. This value is derived from manufacturer subgroup, see section VI.B redesigns. The industry conversion cost manufacturer feedback, product of this document and chapter 12 of the burden at this TSL would be associated database analysis, and publicly TSD. with updates for portable ACs sold in available information. the U.S. that are currently below the EL However, DOE estimates that none of e. Cumulative Regulatory Burden the portable ACs subject to the corresponding to TSL 4, estimated to be One aspect of assessing manufacturer standards considered in this final rule 100 percent of platforms and shipments. burden involves looking at the analysis (single-duct and dual-duct At TSL 4, all of the non-compliant cumulative impact of multiple DOE portable ACs will likely require a portable ACs) are produced standards and the product-specific complete platform redesign, domestically. Therefore, DOE does not regulatory actions of other Federal necessitating all new components and provide an estimate of direct agencies that affect the manufacturers of high associated re-tooling and R&D employment impacts. Indirect a covered product or equipment. While costs. employment impacts in the broader U.S. economy are documented in chapter 16 any one regulation may not impose a b. Impacts on Employment of the final rule TSD. significant burden on manufacturers, To quantitatively assess the impacts the combined effects of several existing of energy conservation standards on c. Impacts on Manufacturing Capacity or impending regulations may have direct employment, DOE used the GRIM As noted in the previous section, no serious consequences for some to estimate the domestic labor single-duct or dual-duct portable ACs manufacturers, groups of manufacturers, expenditures and number of production are manufactured in the U.S. Therefore, or an entire industry. Assessing the and non-production employees in the new energy conservation standards impact of a single regulation may no-new-standards case and at each TSL. would have no impact on U.S. overlook this cumulative regulatory DOE used statistical data from the U.S. production capacity. burden. In addition to energy conservation standards, other Census Bureau’s 2014 Annual Survey of d. Impacts on Subgroups of 89 regulations can significantly affect Manufactures (ASM), results of the Manufacturers engineering analysis, and manufacturer manufacturers’ financial operations. feedback to calculate industry-wide The Small Business Administration Multiple regulations affecting the same labor expenditures and direct domestic (SBA) defines a ‘‘small business’’ as manufacturer can strain profits and lead employment levels. having 1,250 employees or less for companies to abandon product lines or Labor expenditures related to product North American Industry Classification markets with lower expected future manufacturing depend on the labor System (NAICS) 333415 (‘‘Air- returns than competing products. For intensity of the product, the sales Conditioning and Warm Air Heating these reasons, DOE conducts an analysis volume, and an assumption that wages Equipment and Commercial and of cumulative regulatory burden as part remain fixed in real terms over time. Industrial Refrigeration Equipment of its rulemakings pertaining to The total labor expenditures in each Manufacturing’’). Based on this SBA appliance efficiency. year are calculated by multiplying the employee threshold, DOE identified one Some portable AC manufacturers also MPCs by the labor percentage of MPCs. entity involved in the design and make other products or equipment that The total labor expenditures in the distribution of portable ACs in the U.S. could be subject to energy conservation GRIM were then converted to domestic that qualifies as a small business. Based standards set by DOE. DOE looks at the production employment levels. To do upon available information, DOE does regulations that could affect portable AC this, DOE relied on the Production not believe that this company is a manufacturers that will take effect Workers Annual Wages, Production manufacturer. However, even if this Workers Annual Hours, Total Fringe small business does manufacture approximately 3 years before and after Benefits, Annual Payroll, Production portable ACs, because the product sold the 2022 compliance date of the Workers Average for Year, and Number by this company incorporates the standards established in this final rule. of Employees from the ASM to convert highest-efficiency variable-speed The compliance dates and expected total labor expenditure to total compressor currently available on the industry conversion costs of relevant production employees. market, DOE believes that the product energy conservation standards are The total production employees is will comply with the standard EL indicated in Table V.12. Included in the then multiplied by the U.S. labor adopted in this final rule (EL 2). table are Federal regulations that have percentage to convert total production Therefore, DOE believes that costs for compliance dates 3 years before and employment to total domestic this company would be limited to after the portable AC compliance date production employment. The U.S. labor testing, certification, and updates to (and also 8 years before the portable AC percentage represents the industry marketing materials and product compliance date). TABLE V.12—OTHER ENERGY CONSERVATION STANDARDS RULEMAKINGS AFFECTING THE PORTABLE AC INDUSTRY
Number of Number of manufacturers Approx. Industry conversion costs Industry Federal energy conservation standard manufacturers * in portable standards (millions $) conversion ACs rule ** year costs/revenue ***
Dehumidifiers, 81 FR 38338 (June 13, 2016) ...... 30 6 2019 $52.5 million (2014$) ...... 4.5%. Kitchen Ranges and Ovens, 81 FR 60784 (Sep. 2, 2016) .. 21 3 2019 $119.2 million (2015$) ...... less than 1%. Miscellaneous Refrigeration Products, 81 FR 75194 (Octo- 48 2 2019 $75.6 million (2015$) ...... 4.9%. ber 28, 2016). Res. Clothes Washers, 77 FR 32308 (May 31, 2012) † ...... 13 1 2018 $418.5 million (2010$) ...... 2.3%.
89 Available online at http://www.census.gov/ programs-surveys/asm.html.
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TABLE V.12—OTHER ENERGY CONSERVATION STANDARDS RULEMAKINGS AFFECTING THE PORTABLE AC INDUSTRY— Continued
Number of Number of manufacturers Approx. Industry conversion costs Industry Federal energy conservation standard manufacturers * in portable standards (millions $) conversion ACs rule ** year costs/revenue ***
PTACs, 80 FR 43162 (July 21, 2015) † ...... 12 3 2017 N/A ‡ ...... N/A ‡. Microwave Ovens, 78 FR 36316 (June 17, 2013) † ...... 12 2 2016 $43.1 million (2011$) ...... less than 1%. External Power Supplies, 79 FR 7846 (February 10, 243 1 2015 $43.4 million (2012$) ...... 2.3%. 2014) †. Residential Central Air Conditioners and Heat Pumps, 76 45 2 2015 $18.0 million (2009$) ...... less than 1%. FR 37408 (June 27, 2011) †. * This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory burden. ** This column presents the number of OEMs producing portable ACs that are also listed as manufacturers in the listed energy conservation standard contributing to cumulative regulatory burden. *** This column presents conversion costs as a percentage of cumulative revenue for the industry during the conversion period. The conversion period is the time- frame over which manufacturers must make conversion costs investments and lasts from the announcement year of the final rule to the standards year of the final rule. This period typically ranges from 3 to 5 years, depending on the energy conservation standard. † Consistent with Chapter 12 of the TSD, DOE has assessed whether this rule will have significant impacts on manufacturers that are also subject to significant im- pacts from other EPCA rules with compliance dates within 3 years of this rule’s compliance date. However, DOE recognizes that a manufacturer incurs costs during some period before a compliance date as it prepares to comply, such as by revising product designs and manufacturing processes, testing products, and preparing certifications. As such, to illustrate a broader set of rules that may also create additional burden on manufacturers, DOE has included additional rules with compliance dates that fall within 8 years before the compliance date of this rule by expanding the timeframe of potential cumulative regulatory burden. Note that the inclusion of any given rule in this Table does not indicate that DOE considers the rule to contribute significantly to cumulative impact. DOE has chosen to broaden its list of rules in order to provide additional information about its rulemaking activities. 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. DOE plans to seek public comment on the approaches it has used here (i.e., both the 3- and 8-year timeframes from the compliance date) in order to better understand at what point in the compliance cycle manufacturers most experience the effects of cumulative and overlapping burden from the regulation of multiple products. ‡ As detailed in the energy conservation standards final rule for PTACs and PTHPs, DOE established amended energy efficiency standards for PTACs at the min- imum efficiency level specified in the ANSI/ASHRAE/IES Standard 90.1–2013 for PTACs. For PTHPs, DOE is not amending energy conservation standards, which are already equivalent to the PTHP standards in ANSI/ASHRAE/Illuminating Engineering Society (IES) Standard 90.1–2013. Accordingly, there were no conversion costs associated with amended energy conservation standards for PTACs and PTHPs.
In addition to other Federal energy compliance cycle manufacturers most portable ACs, DOE compared their conservation standards, manufacturers experience the effects of cumulative and energy consumption under the no-new- cited potential restrictions on the use of overlapping burden from the regulation standards case to their anticipated certain refrigerants and State-level of multiple product classes. energy consumption under each TSL. refrigerant recovery regulations as 3. National Impact Analysis The savings are measured over the sources of cumulative regulatory burden entire lifetime of products purchased in for portable AC manufacturers. For more This section presents DOE’s estimates the 30-year period that begins in the of the NES and the NPV of consumer details, see chapter 12, section 12.7.3, of year of anticipated compliance with benefits that would result from each of the final rule TSD. new standards (2022–2051). Table V.13 the TSLs considered as potential new DOE plans to seek public comment on standards. presents DOE’s projections of the NES the approaches it has used here (i.e., for each TSL considered for portable both the 3- and 8-year timeframes from a. Significance of Energy Savings ACs. The savings were calculated using the compliance date) in order to better To estimate the energy savings the approach described in section understand at what point in the attributable to potential standards for IV.H.2 of this document.
TABLE V.13—CUMULATIVE NATIONAL ENERGY SAVINGS FOR PORTABLE AIR CONDITIONERS; 30 YEARS OF SHIPMENTS [2022–2051]
Trial standard level Savings 1 2 3 4
(Quads)
Source Energy Savings ...... 0.12 0.47 0.90 1.23 Full Fuel Cycle Energy Savings ...... 0.12 0.49 0.95 1.28
OMB Circular A–4 90 requires DOE undertook a sensitivity analysis established in EPCA is generally not agencies to present analytical results, using 9 years, rather than 30 years of including separate schedules of the product shipments. The choice of a any new standard is promulgated before monetized benefits and costs that show nine-year period is a proxy for the compliance is required, except that in no case may the type and timing of benefits and any new standards be required within 6 years of the timeline in EPCA for the review of compliance date of the previous standards. While costs. Circular A–4 also directs agencies certain energy conservation standards adding a 6-year review to the 3-year compliance to consider the variability of key and potential revision of and period adds up to 9 years, DOE notes that it may elements underlying the estimates of compliance with such revised undertake reviews at any time within the 6 year period and that the 3-year compliance date may benefits and costs. For this rulemaking, 91 standards. The review timeframe yield to the 6-year backstop. A 9-year analysis period may not be appropriate given the variability 90 OMB, ‘‘Circular A–4: Regulatory Analysis’’ 91 Section 325(m) of EPCA requires DOE to review that occurs in the timing of standards reviews and (Sept. 17, 2003) (Available at: http://www. its standards at least once every 6 years, and the fact that for some consumer products, the whitehouse.gov/omb/circulars_a004_a-4/). requires, for certain products, a 3-year period after compliance period is 5 years rather than 3 years.
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synchronized with the product lifetime, informational purposes only and are not nine-year analytical period are product manufacturing cycles, or other indicative of any change in DOE’s presented in Table V.14. The impacts factors specific to portable ACs. Thus, analytical methodology. The NES are counted over the lifetime of portable such results are presented for sensitivity analysis results based on a ACs purchased in 2022–2030.
TABLE V.14—CUMULATIVE NATIONAL ENERGY SAVINGS FOR PORTABLE AIR CONDITIONERS; 9 YEARS OF SHIPMENTS [2022–2030]
Trial standard level Savings 1 2 3 4
(Quads)
Source Energy Savings ...... 0.04 0.14 0.25 0.36 Full-Fuel-Cycle Energy Savings ...... 0.04 0.15 0.26 0.38
b. Net Present Value of Consumer Costs consumers that would result from the percent real discount rate. Table V.15 and Benefits TSLs considered for portable ACs. In shows the consumer NPV results with accordance with OMB’s guidelines on impacts counted over the lifetime of DOE estimated the cumulative NPV of regulatory analysis,92 DOE calculated products purchased in 2022–2051. the total costs and savings for NPV using both a 7-percent and a 3-
TABLE V.15—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR PORTABLE AIR CONDITIONERS; 30 YEARS OF SHIPMENTS [2022–2051]
Trial standard level Discount rate 1 2 3 4
(billion 2015$)
3 percent ...... 0.81 3.06 5.56 7.96 7 percent ...... 0.35 1.25 2.17 3.21
The NPV results based on the products purchased in 2022–2030. As change in DOE’s analytical methodology aforementioned 9-year analytical period mentioned previously, such results are or decision criteria. are presented in Table V.16. The presented for informational purposes impacts are counted over the lifetime of only and are not indicative of any
TABLE V.16—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR PORTABLE AIR CONDITIONERS; NINE YEARS OF SHIPMENTS [2022–2030]
Trial standard level Discount rate 1 2 3 4
(billion 2015$)
3 percent ...... 0.34 1.19 1.94 2.96 7 percent ...... 0.19 0.64 1.02 1.59
The results in Table V.16 reflect the rule TSD. In the high-price-decline case, c. Indirect Impacts on Employment use of a default trend to estimate the the NPV of consumer benefits is higher change in price for portable ACs over than in the default case due to higher DOE expects that new energy the analysis period (see section IV.F.1 of energy price trends. In the low-price- conservation standards for portable ACs this document). DOE also conducted a decline case, the NPV of consumer will reduce energy expenditures for consumers of those products, with the sensitivity analysis that considered one benefits is lower than in the default case resulting net savings being redirected to scenario with a lower rate of price due to lower energy price trends and the other forms of economic activity. These decline and 50 percent fewer operating 50 percent fewer operating hours. expected shifts in spending and hours than the reference case, and one economic activity could affect the scenario with a higher rate of price demand for labor. As described in decline than the reference case. The 92 OMB. Circular A–4: Regulatory Analysis. section IV.N of this document, DOE results of these alternative cases are September 17, 2003. www.whitehouse.gov/omb/ used an input/output model of the U.S. presented in appendix 10C of the final circulars_a004_a-4/. economy to estimate indirect
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employment impacts of the TSLs that 5. Impact of Any Lessening of Nation’s energy security, strengthens the DOE considered. DOE understands that Competition economy, and reduces the there are uncertainties involved in DOE considered any lessening of environmental impacts (costs) of energy projecting employment impacts, competition that would be likely to production. Reduced electricity demand especially changes in the later years of result from new or amended standards. due to energy conservation standards is the analysis. Therefore, DOE generated As discussed in section III.E.1.e, the also likely to reduce the cost of results for near-term timeframes (2022– Attorney General of the United States maintaining the reliability of the 2029), where these uncertainties are (Attorney General) is required to electricity system, particularly during reduced. determine the impact, if any, of any peak-load periods. As a measure of this The results suggest that the adopted lessening of competition likely to result reduced demand, chapter 15 in the final standards are likely to have a negligible from a proposed standard and to rule TSD presents the estimated impact on the net demand for labor in transmit such determination in writing reduction in generating capacity, the economy. The net change in jobs is to the Secretary within 60 days of the relative to the no-new-standards case, so small that it would be imperceptible publication of a proposed rule, together for the TSLs that DOE considered in this in national labor statistics and might be with an analysis of the nature and rulemaking. offset by other, unanticipated effects on extent of the impact. To assist the Attorney General in making this Energy conservation resulting from employment. Chapter 16 of the final potential energy conservation standards rule TSD presents detailed results determination, DOE provided the DOJ for portable ACs is expected to yield regarding anticipated indirect June 2016 ECS with copies of the June environmental benefits in the form of employment impacts. 2016 ECS NOPR and the NOPR TSD for review. In its assessment letter reduced emissions of certain air 4. Impact on Utility or Performance of responding to DOE, DOJ concluded that pollutants and GHGs. Table V.17 Products the proposed energy conservation provides DOE’s estimate of cumulative standards for portable ACs are unlikely emissions reductions expected to result As discussed in section IV.C.1.b of to have a significant adverse impact on from the TSLs considered in this this document, DOE has concluded that competition. DOE is publishing the rulemaking. The emissions were the standards adopted in this final rule Attorney General’s assessment at the calculated using the multipliers will not lessen the utility or end of this final rule. discussed in section IV.K. DOE reports performance of the portable ACs under annual emissions reductions for each consideration in this rulemaking. 6. Need of the Nation To Conserve TSL in chapter 13 of the final rule TSD. Manufacturers of these products Energy currently offer units that meet or exceed Enhanced energy efficiency, where the adopted standards. economically justified, improves the
TABLE V.17—CUMULATIVE EMISSIONS REDUCTION FOR PORTABLE ACS SHIPPED IN 2022–2051
Trial standard level 1 2 3 4
Power Sector Emissions
CO2 (million metric tons) ...... 6.0 24.2 47.0 63.9 SO2 (thousand tons) ...... 4.1 16.2 31.3 42.7 NOX (thousand tons) ...... 3.1 12.3 23.9 32.5 Hg (tons) ...... 0.01 0.06 0.12 0.16 CH4 (thousand tons) ...... 0.6 2.5 4.9 6.7 N2O (thousand tons) ...... 0.09 0.36 0.70 0.95
Upstream Emissions
CO2 (million metric tons) ...... 0.3 1.4 2.6 3.6 SO2 (thousand tons) ...... 0.04 0.16 0.30 0.41 NOX (thousand tons) ...... 4.9 19.8 38.6 52.4 Hg (tons) ...... 0.00 0.00 0.00 0.00 CH4 (thousand tons) ...... 30.4 122.3 238.0 323.2 N2O (thousand tons) ...... 0.00 0.01 0.02 0.02
Total FFC Emissions
CO2 (million metric tons) ...... 6.4 25.6 49.6 67.5 SO2 (thousand tons) ...... 4.1 16.4 31.6 43.1 NOX (thousand tons) ...... 8.0 32.2 62.5 85.0 Hg (tons) ...... 0.01 0.06 0.12 0.16 CH4 (thousand tons) ...... 31.1 124.8 242.9 329.8 CH4 (thousand tons CO2eq) * ...... 870 3,495 6,801 9,235 N2O (thousand tons) ...... 0.09 0.37 0.71 0.97 N2O (thousand tons CO2eq) * ...... 24.3 97.5 188.9 257.1
*CO2eq is the quantity of CO2 that would have the same GWP.
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As part of the analysis for this rule, use a 5-percent discount rate, a 3- calculated a present value of the stream DOE estimated monetary benefits likely percent discount rate, and a 2.5-percent of annual values using the same to result from the reduced emissions of discount rate, and the 95th-percentile discount rate that was used in the CO2 that DOE estimated for each of the values from a distribution that uses a 3- studies upon which the dollar-per-ton considered TSLs for portable ACs. As percent discount rate. The actual SC- values are based. DOE calculated discussed in section IV.L of this CO2 values used for emissions in each domestic values as a range from 7 document, for CO2, DOE used the most year are presented in appendix 14A of percent to 23 percent of the global recent values for the SC-CO2 developed the final rule TSD. values; these results are presented in by an interagency process. The four sets Table V.18 presents the global value chapter 14 of the final rule TSD. of SC-CO2 values correspond to the of CO2 emissions reductions at each average values from distributions that TSL. For each of the four cases, DOE
TABLE V.18—PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR PORTABLE ACS SHIPPED IN 2022–2051
SC-CO2 case TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate, average average average 95th percentile
(million 2015$)
Total FFC Emissions
1 ...... 45.9 208 330 635 2 ...... 182 829 1,316 2,529 3 ...... 347 1,595 2,535 4,866 4 ...... 477 2,182 3,464 6,656
As discussed in section IV.L.2, DOE each of the considered TSLs for portable Table V.19 presents the value of the estimated monetary benefits likely to ACs. DOE used the recent values for the CH4 emissions reduction at each TSL, result from the reduced emissions of SC-CH4 and SC-N2O developed by the and Table V.20 presents the value of the CH4 and N2O that DOE estimated for interagency working group. N2O emissions reduction at each TSL.
TABLE V.19—PRESENT VALUE OF METHANE EMISSIONS REDUCTION FOR PORTABLE ACS SHIPPED IN 2022–2051
SC-CH4 case TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate, average average average 95th percentile
(million 2015$)
1 ...... 9.9 31.2 44.2 83.2 2 ...... 39.5 125.0 177.2 333.4 3 ...... 76.0 242.3 343.9 646.1 4 ...... 104.1 329.9 467.8 879.7
TABLE V.20—PRESENT VALUE OF NITROUS OXIDE EMISSIONS REDUCTION FOR PORTABLE ACS SHIPPED IN 2022–2051
SC-N2O case TSL 5% Discount rate, 3% Discount rate, 2.5% Discount rate, 3% Discount rate, average average average 95th percentile
(million 2015$)
1 ...... 0.2 1.0 1.6 2.8 2 ...... 1.0 4.1 6.5 11.0 3 ...... 1.9 7.9 12.5 21.1 4 ...... 2.6 10.8 17.1 28.8
DOE is well aware that scientific and DOE, together with other Federal assumptions and issues. Consistent with economic knowledge about the agencies, will continue to review DOE’s legal obligations, and taking into contribution of CO2 and other GHG various methodologies for estimating account the uncertainty involved with emissions to changes in the future the monetary value of reductions in CO2 this particular issue, DOE has included global climate and the potential and other GHG emissions. This ongoing in this rule the most recent values and resulting damages to the world economy review will consider the comments on analyses resulting from the interagency continues to evolve rapidly. Thus, any this subject that are part of the public review process. DOE notes, however, value placed on reduced CO2 emissions record for this and other rulemakings, as that the adopted standards would be in this rulemaking is subject to change. well as other methodological economically justified, as defined by
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EPCA, even without inclusion of considered TSLs for portable ACs. The 7-percent and 3-percent discount rates. monetized benefits of reduced GHG dollar-per-ton values that DOE used are This table presents results that use the emissions. discussed in section IV.L of this low dollar-per-ton values, which reflect DOE also estimated the monetary document. Table V.21 presents the DOE’s primary estimate. Results that value of the economic benefits present values for NOX emissions reflect the range of NOX dollar-per-ton associated with NOX emissions reduction for each TSL calculated using values are presented in Table V.21. reductions anticipated to result from the
TABLE V.21—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR PORTABLE ACS SHIPPED IN 2022–2051 *
TSL 3% Discount rate 7% Discount rate
(million 2015$)
Total FFC Emissions
1 ...... 14.1 5.8 2 ...... 55.8 22.6 3 ...... 106.6 42.4 4 ...... 146.5 59.0 * Results are based on the low benefit-per-ton values.
7. Other Factors 6295(o)(2)(B)(i)(VII)) No other factors the potential economic benefits were considered in this analysis. resulting from reduced GHG and NOX The Secretary of Energy, in emissions to the NPV of consumer determining whether a standard is 8. Summary of National Economic Impacts savings calculated for each TSL economically justified, may consider considered in this rulemaking. any other factors that the Secretary Table V.22 presents the NPV values deems to be relevant. (42 U.S.C. that result from adding the estimates of
TABLE V.22—CONSUMER NPV COMBINED WITH PRESENT VALUE OF BENEFITS FROM EMISSIONS REDUCTIONS
Consumer NPV at 3% discount rate added with: TSL GHG 3% discount rate, GHG 5% discount 3% Discount rate, GHG 2.5% discount 95th rate, average case average case rate, average case percentile case
(billion 2015$)
1 ...... 0.9 1.1 1.2 1.5 2 ...... 3.3 4.1 4.6 6.0 3 ...... 6.1 7.5 8.6 11.2 4 ...... 8.7 10.6 12.1 15.7 Consumer NPV at 7% discount rate added with: TSL GHG 3% discount rate, GHG 5% discount GHG 3% discount GHG 3% discount 95th rate, average case rate, average case rate, average case percentile case
(billion 2015$)
1 ...... 0.4 0.6 0.7 1.1 2 ...... 1.5 2.2 2.8 4.2 3 ...... 2.6 4.1 5.1 7.7 4 ...... 3.9 5.8 7.2 10.8
Note: The GHG benefits include the estimated benefits for reductions in CO2, CH4, and N2O emissions using the four sets of SC-CO2, SC- CH4, and SC-N2O values developed by the IWG.
The national operating cost savings that accrues globally. Because CO2 designed to achieve the maximum are domestic U.S. monetary savings that emissions have a very long residence improvement in energy efficiency that occur as a result of purchasing the time in the atmosphere, the SC-CO2 the Secretary determines is covered portable ACs, and are measured values for future emissions reflect technologically feasible and for the lifetime of products shipped in climate-related impacts that continue economically justified. (42 U.S.C. 2022–2051. The benefits associated with through 2300. 6295(o)(2)(A)) In determining whether a reduced GHG emissions achieved as a C. Conclusion standard is economically justified, the result of the adopted standards are also Secretary must determine whether the When considering new or amended calculated based on the lifetime of energy conservation standards, the benefits of the standard exceed its portable ACs shipped in 2022–2051. standards that DOE adopts for any type burdens by, to the greatest extent However, the GHG reduction is a benefit (or class) of covered product must be practicable, considering the seven
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statutory factors discussed previously. purchases; (4) excessive focus on the While DOE is not prepared at present (42 U.S.C. 6295(o)(2)(B)(i)) The new or short term, in the form of inconsistent to provide a fuller quantifiable amended standard must also result in weighting of future energy cost savings framework for estimating the benefits significant conservation of energy. (42 relative to available returns on other and costs of changes in consumer U.S.C. 6295(o)(3)(B)) investments; (5) computational or other purchase decisions due to an energy For this final rule, DOE considered difficulties associated with the conservation standard, DOE is the impacts of potential new standards evaluation of relevant tradeoffs; and (6) committed to developing a framework for portable ACs at each TSL, beginning a divergence in incentives (for example, that can support empirical quantitative with the maximum technologically between renters and owners, or builders tools for improved assessment of the feasible level, to determine whether that and purchasers). Having less than consumer welfare impacts of appliance level was economically justified. Where perfect foresight and a high degree of standards. DOE has posted a paper that the max-tech level was not justified, uncertainty about the future, consumers discusses the issue of consumer welfare DOE then considered the next most may trade off these types of investments impacts of appliance energy efficient level and undertook the same at a higher than expected rate between conservation standards, and potential evaluation until it reached the highest current consumption and uncertain enhancements to the methodology by EL that is both technologically feasible future energy cost savings. which these impacts are defined and and economically justified and saves a In DOE’s current regulatory analysis, estimated in the regulatory process.94 significant amount of energy. potential changes in the benefits and DOE welcomes comments on how to To aid the reader as DOE discusses costs of a regulation due to changes in more fully assess the potential impact of the benefits and/or burdens of each TSL, consumer purchase decisions are energy conservation standards on tables in this section present a summary included in two ways. First, if consumer choice and how to quantify of the results of DOE’s quantitative consumers forego the purchase of a this impact in its regulatory analysis in analysis for each TSL. In addition to the product in the standards case, this future rulemakings. quantitative results presented in the decreases sales for product manufacturers, and the impact on 1. Benefits and Burdens of TSLs tables, DOE also considers other manufacturers attributed to lost revenue Considered for Portable AC Standards burdens and benefits that affect is included in the MIA. Second, DOE economic justification. These include accounts for energy savings attributable Table V.23 and Table V.24 summarize the impacts on identifiable subgroups of only to products actually used by the quantitative impacts estimated for consumers who may be consumers in the standards case; if a each TSL for portable ACs. The national disproportionately affected by a national standard decreases the number of impacts are measured over the lifetime standard and impacts on employment. products purchased by consumers, this of portable ACs purchased in the 30- DOE also notes that the economics decreases the potential energy savings year period that begins in the literature provides a wide-ranging from an energy conservation standard. anticipated year of compliance with discussion of how consumers trade off DOE provides estimates of shipments new standards (2022–2051). The energy upfront costs and energy savings in the and changes in the volume of product savings, emissions reductions, and absence of government intervention. purchases in chapter 9 of the final rule value of emissions reductions refer to Much of this literature attempts to TSD. However, DOE’s current analysis full-fuel-cycle results. The ELs explain why consumers appear to does not explicitly control for contained in each TSL are described in undervalue energy efficiency heterogeneity in consumer preferences, section V.A of this document. improvements. There is evidence that preferences across subcategories of consumers undervalue future energy products or specific features, or Studies. 2005. 72(3): pp. 853–883. doi: 10.1111/ savings as a result of (1) a lack of consumer price sensitivity variation 0034–6527.00354. information; (2) a lack of sufficient according to household income.93 94 Sanstad, A.H. Notes on the Economics of salience of the long-term or aggregate Household Energy Consumption and Technology Choice. 2010. LBNL. https://www1.eere.energy.gov/ benefits; (3) a lack of sufficient savings 93 P.C. Reiss and M.W. White. Household buildings/appliance_standards/pdfs/consumer_ee_ to warrant delaying or altering Electricity Demand, Revisited. Review of Economic theory.pdf.
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TABLE V.23—SUMMARY OF ANALYTICAL RESULTS FOR PORTABLE ACS TSLS: NATIONAL IMPACTS [2022–2051]
Category TSL 1 TSL 2 TSL 3 TSL 4
Cumulative FFC National Energy Savings (quads)
Quads ...... 0.12 ...... 0.49 ...... 0.95 ...... 1.28.
NPV of Consumer Costs and Benefits (billion 2015$)
3% discount rate ...... 0.81 ...... 3.06 ...... 5.56 ...... 7.96. 7% discount rate ...... 0.35 ...... 1.25 ...... 2.17 ...... 3.21.
Cumulative FFC Emissions Reduction (Total FFC Emission)
CO2 (million metric tons) ...... 6.4 ...... 25.6 ...... 49.6 ...... 67.5. SO2 (thousand tons) ...... 4.1 ...... 16.4 ...... 31.6 ...... 43.1. NOX (thousand tons) ...... 8.0 ...... 32.2 ...... 62.5 ...... 85.0. Hg (tons) ...... 0.01 ...... 0.06 ...... 0.12 ...... 0.16. CH4 (thousand tons) ...... 31.1 ...... 124.8 ...... 242.9 ...... 329.8. N2O (thousand tons) ...... 0.09 ...... 0.37 ...... 0.71 ...... 0.97.
Value of Emissions Reduction (Total FFC Emissions)
CO2 (billion 2015$) ** ...... 0.046 to 0.635 ...... 0.182 to 2.529 ...... 0.347 to 4.866 ...... 0.477 to 6.656. NOX—3% discount rate (million 2015$) ...... 14.1 ...... 55.8 ...... 106.6 ...... 146.5. NOX—7% discount rate (million 2015$) ...... 5.8 ...... 22.6 ...... 42.4 ...... 59.0.
* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
TABLE V.24—SUMMARY OF ANALYTICAL RESULTS FOR PORTABLE ACS TSLS: MANUFACTURER AND CONSUMER IMPACTS
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
Manufacturer Impacts
Industry NPV (million 2015$) (No-new-standards case INPV = 676.8 to 684.7 ...... 485.1 to 526.1 ...... 324.7 to 406.5 ...... 248.1 to 373.0. 738.5. Industry NPV (% change) ...... (8.4%) to (7.3%) ...... (34.3%) to (28.8%) ..... (56.0%) to (45.0%) ..... (66.4%) to (49.5%).
Consumer Average LCC Savings (2015$)
Residential ...... 73 ...... 108 ...... 143 ...... 229. Commercial ...... 155 ...... 238 ...... 342 ...... 522. Both Sectors ...... 84 ...... 125 ...... 169 ...... 268.
Consumer Simple PBP (years)
Residential ...... 2.3 ...... 2.8 ...... 3.5 ...... 3.1. Commercial ...... 1.2 ...... 1.4 ...... 1.7 ...... 1.6. Both Sectors ...... 2.2 ...... 2.6 ...... 3.2 ...... 2.9.
Percent of Consumers that Experience a Net Cost
Residential ...... 9 ...... 27 ...... 38 ...... 34. Commercial ...... 3 ...... 9 ...... 14 ...... 12. Both Sectors ...... 8 ...... 24 ...... 35 ...... 31. Parentheses indicate negative (¥) values. The entry ‘‘n.a.’’ means not applicable because there is no change in the standard at certain TSLs. * Weighted by shares of each product class in total projected shipments in 2022.
DOE first considered TSL 4, which $104 million to $880 million for CH4, percent for the commercial sector, and represents the max-tech efficiency level. and from $3 million to $29 million for 31 percent for both sectors. TSL 4 would save an estimated 1.28 N2O. The estimated monetary value of At TSL 4, the projected change in quads of energy, an amount DOE the NOX emissions reduction at TSL 4 INPV ranges from a decrease of $490.4 considers significant. Under TSL 4, the is $59.0 million using a 7-percent million to a decrease of $365.5 million, NPV of consumer benefit would be discount rate and $146.5 million using which correspond to decreases of 66.4 $3.21 billion using a discount rate of 7 a 3-percent discount rate. percent and 49.5 percent, respectively. percent, and $7.96 billion using a DOE estimates that no portion of the At TSL 4, the average LCC impact is discount rate of 3 percent. market will meet the efficiency standard The cumulative emissions reductions a savings of $229 for the residential specified by this TSL in 2021, the year sector, $522 for the commercial sector, at TSL 4 are 67.5 Mt of CO2, 43.1 before the compliance year. As such, and $268 for both sectors. The simple thousand tons of SO2, 85.0 thousand manufacturers would have to redesign payback period is 3.1 years for the tons of NOX, 0.16 ton of Hg, 329.8 all products by the 2022 compliance thousand tons of CH4, and 0.97 residential sector, 1.6 years for the date to meet demand. Redesigning all thousand tons of N2O. The estimated commercial sector, and 2.9 years for units to meet the max-tech efficiency monetary value of the GHG emissions both sectors. The fraction of consumers level would require considerable capital reduction at TSL 4 ranges from $477 experiencing a net LCC cost is 34 and product conversion expenditures. million to $6,656 million for CO2, from percent for the residential sector, 12 At TSL 4, the capital conversion costs
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total as much as $344.5 million, roughly concluded that TSL 4 is not annual budget for research and 12.9 times the industry annual ordinary economically justified. development. As such, the conversion capital expenditure in 2021 (the year DOE then considered TSL 3, which costs associated with the changes in leading up to new standards). DOE would save an estimated 0.95 quads of products and manufacturing facilities estimates that complete platform energy, an amount DOE considers required at TSL 3 would require redesigns would cost the industry significant. Under TSL 3, the NPV of significant use of manufacturers’ $192.2 million in product conversion consumer benefit would be $2.17 billion financial reserves (manufacturer capital costs. These conversion costs largely using a discount rate of 7 percent, and pools), impacting other areas of business relate to the extensive research $5.56 billion using a discount rate of 3 that compete for these resources and programs required to develop new percent. significantly reducing INPV. In products that meet the efficiency The cumulative emissions reductions addition, manufacturers could face a standards at TSL 4. These costs are at TSL 3 are 49.6 Mt of CO2, 31.6 substantial impact on profitability at equivalent to 17.0 times the industry thousand tons of SO2, 62.5 thousand TSL 3. Because manufacturers are more annual budget for research and tons of NOX, 0.12 tons of Hg, 242.9 likely to reduce their margins to development. As such, the conversion thousand tons of CH4, and 0.71 maintain a price-competitive product at costs associated with the changes in thousand tons of N2O. The estimated higher TSLs, especially in the lower- products and manufacturing facilities monetary value of the GHG emissions capacity portable segment, DOE expects required at TSL 4 would require reduction at TSL 3 ranges from $347 that TSL 3 would yield impacts closer significant use of manufacturers’ million to $4,866 million for CO2, from to the high end of the range of INPV financial reserves (manufacturer capital $76 million to $646 million for CH4, and impacts. If the high end of the range of pools), impacting other areas of business from $2 million to $21 million for N2O. impacts is reached, as DOE expects, TSL that compete for these resources and The estimated monetary value of the 3 could result in a net loss to significantly reducing INPV. In NOX emissions reduction at TSL 4 is manufacturers of 56.0 percent of INPV. addition, manufacturers could face a $42.4 million using a 7-percent discount Similar to TSL 4, beyond the direct substantial impact on profitability at rate and $106.6 million using a 3- financial impact on manufacturers, TSL percent discount rate. TSL 4. Because manufacturers are more 3 may also contribute to the At TSL 3, the average LCC impact is likely to reduce their margins to unavailability of portable ACs at certain maintain a price-competitive product at a savings of $143 for the residential sector, $342 for the commercial sector, cooling capacities. TSL 3 is based on the higher TSLs, DOE expects that TSL 4 single highest efficiency unit in DOE’s would yield impacts closer to the high and $169 for both sectors. The simple payback period is 3.5 years for the test sample. However, DOE believes end of the range of INPV impacts. If the few, if any, other units on the market are high end of the range of impacts is residential sector, 1.7 years for the commercial sector, and 3.2 years for able to achieve these efficiencies and reached, as DOE expects, TSL 4 could that the highest efficiency single-speed result in a net loss to manufacturers of both sectors. The fraction of consumers experiencing a net LCC cost is 38 compressors likely necessary to meet 66.4 percent of INPV. TSL 3 may not be available to all Beyond the direct financial impact on percent for the residential sector, 14 manufacturers for the full range of manufacturers, TSL 4 may also percent for the commercial sector, and capacities of portable ACs. Because contribute to the unavailability of 35 percent for both sectors. high-efficiency components available at portable ACs at certain cooling At TSL 3, the projected change in any given time are driven largely by the capacities. The efficiency at TSL 4 is a INPV ranges from a decrease of $413.9 markets for other products with higher theoretical level that DOE developed by million to a decrease of $332.0 million, shipments (e.g., room ACs), portable AC modeling the most efficient components which correspond to decreases of 56.0 available. However, DOE is aware that percent and 45.0 percent, respectively. manufacturers may be constrained in the highest-efficiency compressors that DOE estimates that approximately 2 their design choices. This may have the are necessary to meet TSL 4 may not be percent of available platforms and 2 potential to eliminate portable ACs of available to all manufacturers for the percent of shipments will meet the certain cooling capacities from the full range of capacities of portable ACs. efficiency standards specified by this market. Because specific high-efficiency TSL in 2021, the year before the The Secretary concludes that at TSL components available are driven largely compliance year. As such, 3 for portable ACs, the benefits of by the markets for other products with manufacturers would have to make energy savings, positive NPV of higher shipments (e.g., room ACs), upgrades to 98 percent of platforms by consumer benefits, emission reductions, portable AC manufacturers may be the 2022 compliance date to meet and the estimated monetary value of the constrained in their design choices. This demand. Redesigning these units to emissions reductions would be may have the potential to eliminate meet the EL would require considerable outweighed by the economic burden on portable ACs of certain cooling capital and product conversion some consumers, and the impacts on capacities from the market, should TSL expenditures. At TSL 3, the capital manufacturers, including the conversion 4 be selected. conversion costs total as much as $314.3 costs and profit margin impacts that The Secretary concludes that at TSL million, roughly 11.8 times the industry could result in a large reduction in 4 for portable ACs, the benefits of annual ordinary capital expenditure in INPV. Consequently, the Secretary has energy savings, positive NPV of 2021 (the year leading up to new concluded that TSL 3 is not consumer benefits, emission reductions, standards). DOE estimates that complete economically justified. and the estimated monetary value of the platform redesigns would cost the DOE then considered TSL 2, which emissions reductions would be industry $179.0 million in product would save an estimated 0.49 quads of outweighed by the economic burden on conversion costs. These conversion energy, an amount DOE considers some consumers, and the impacts on costs largely relate to the extensive significant. Under TSL 2, the NPV of manufacturers, including the conversion research programs required to develop consumer benefit would be $1.25 billion costs and profit margin impacts that new products that meet the efficiency using a discount rate of 7 percent, and could result in a large reduction in standards at TSL 3. These costs are $3.06 billion using a discount rate of 3 INPV. Consequently, the Secretary has equivalent to 15.8 times the industry percent.
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The cumulative emissions reductions percent and 28.8 percent, respectively. end of the range of impacts is reached, at TSL 2 are 25.6 Mt of CO2, 16.4 DOE estimates that approximately 17 as DOE expects, TSL 2 could result in thousand tons of SO2, 32.2 thousand percent of available platforms and 15 a net loss to manufacturers of 34.3 tons of NOX, 0.06 tons of Hg, 124.8 percent of shipments will meet the percent of INPV. thousand tons of CH4, and 0.37 efficiency standards specified by this After considering the analysis and thousand tons of N2O. The estimated TSL in 2021, the year before the weighing the benefits and burdens, the monetary value of the GHG emissions compliance year. As such, Secretary has concluded that at TSL 2 reduction at TSL 2 ranges from $182 manufacturers would have to make for portable ACs, the benefits of energy million to $2,529 million for CO , from upgrades to 83 percent of platforms by 2 savings, positive NPV of consumer $40 million to $333 million for CH , and the 2022 compliance date to meet 4 benefits, emission reductions, the from $1 million to $11 million for N O. demand. At TSL 2, the capital 2 estimated monetary value of the The estimated monetary value of the conversion costs total as much as $196.5 emissions reductions, and positive NO emissions reduction at TSL 2 is million, roughly 7.4 times the industry X average LCC savings would outweigh $22.6 million using a 7-percent discount annual ordinary capital expenditure in the negative impacts on some rate and $55.8 million using a 3-percent 2021 (the year leading up to new consumers and on manufacturers, discount rate. standards). DOE estimates that complete including the conversion costs that At TSL 2, the average LCC impact is platform redesigns would cost the could result in a reduction in INPV for a savings of $108 for the residential industry $124.4 million in product sector, $238 for the commercial sector, conversion costs. These conversion manufacturers. Accordingly, the and $125 for both sectors. The simple costs largely relate to the extensive Secretary has concluded that TSL 2 payback period is 2.8 years for the research programs required to develop would offer the maximum improvement residential sector, 1.4 years for the new products that meet the efficiency in efficiency that is technologically commercial sector, and 2.6 years for standards at TSL 2. These costs are feasible and economically justified, as both sectors. The fraction of consumers equivalent to 11.0 times the industry defined by EPCA, and would result in experiencing a net LCC cost is 27 annual budget for R&D. Because the significant conservation of energy. percent for the residential sector, 9 manufacturers are more likely to reduce Therefore, based on the above percent for the commercial sector, and their margins to maintain a price- considerations, DOE adopts the energy 24 percent for both sectors. competitive product at higher TSLs, conservation standards for portable ACs At TSL 2, the projected change in especially in the lower-capacity portable at TSL 2. The new energy conservation INPV ranges from a decrease of $253.4 segment, DOE expects that TSL 2 would standards for portable ACs, which are million to a decrease of $212.4 million, yield impacts closer to the high end of expressed as CEER as a function of which correspond to decreases of 34.3 the range of INPV impacts. If the high SACC, are shown in Table V.25.
2. Annualized Benefits and Costs of the Table V.26 shows the annualized million in reduced NOX emissions. In Adopted Standards values for portable ACs under TSL 2, this case, the net benefit would amount The benefits and costs of the adopted expressed in 2015$. The results under to $201 million per year. standards can also be expressed in terms the primary estimate are as follows. Using a 3-percent discount rate for all of annualized values. The annualized Using a 7-percent discount rate for benefits and costs, the estimated cost of net benefit is (1) the annualized national benefits and costs other than GHG the adopted standards for portable ACs economic value (expressed in 2015$) of reductions (for which DOE used average is $59 million per year in increased the benefits from operating products social costs with a 3-percent discount equipment costs, while the estimated that meet the adopted standards rate),96 the estimated cost of the adopted annual benefits are $240.0 million in (consisting primarily of operating cost standards for portable ACs is $61 reduced operating costs, $56.7 million savings from using less energy, minus million per year in increased equipment in GHG reductions, and $3.3 million in increases in product purchase costs, and costs, while the estimated annual reduced NOX emissions. In this case, the (2) the annualized monetary value of the benefits are $202.7 million in reduced net benefit amounts to $241 million per benefits of GHG and NOX emission equipment operating costs, $56.7 year. reductions.95 million in GHG reductions, and $2.6
95 To convert the time-series of costs and benefits shipments occur (2020, 2030, etc.), and then DOE then calculated the fixed annual payment over into annualized values, DOE calculated a present discounted the present value from each year to a 30-year period, starting in the compliance year value in 2014, the year used for discounting the 2015. The calculation uses discount rates of 3 and that yields the same present value. NPV of total consumer costs and savings. For the 7 percent for all costs and benefits except for the 96 DOE used average social costs with a 3-percent benefits, DOE calculated a present value associated value of CO2 reductions, for which DOE used case- discount rate; these values are considered as the with each year’s shipments in the year in which the specific discount rates. Using the present value, ‘‘central’’ estimates by the IWG.
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TABLE V.26—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF ADOPTED STANDARDS (TSL 2) FOR PORTABLE ACS *
Low-net- Discount rate Primary benefits High-net- estimate estimate benefits estimate
(million 2015$/year)
Benefits
Consumer Operating Cost Savings ...... 7% ...... 202.7 ...... 99.1 ...... 214.4. 3% ...... 240.0 ...... 116.3 ...... 256.1. CO2 Reduction (using mean SC-CO2 at 5% discount rate) ** ...... 5% ...... 18.4 ...... 8.8 ...... 19.9. CO2 Reduction (using mean SC-CO2 at 3% discount rate) ** ...... 3% ...... 56.7 ...... 27.0 ...... 61.4. CO2 Reduction (using mean SC-CO2 at 2.5% discount rate) ** ...... 2.5% ...... 81.1 ...... 38.6 ...... 87.9. CO2 Reduction (using 95th percentile SC-CO2 at 3% discount rate) ** ...... 3% ...... 169.9 ...... 80.9 ...... 184.1. NOX Reduction † ...... 7% ...... 2.6 ...... 1.2 ...... 6.2. 3% ...... 3.3 ...... 1.6 ...... 8.1. Total Benefits ‡ ...... 7% plus CO2 range ...... 224 to 375 ...... 213 to 354 ...... 240 to 405. 7% ...... 262 ...... 249 ...... 282. 3% plus CO2 range ...... 262 to 413 ...... 248 to 389 ...... 284 to 448. 3% ...... 300 ...... 283 ...... 326.
Costs
Consumer Incremental Product Costs ...... 7% ...... 61 ...... 61 ...... 56. 3% ...... 59 ...... 59 ...... 53.
Net Benefits
Total ‡ ...... 7% plus CO2 range ...... 163 to 314 ...... 48 to 120 ...... 185 to 349. 7% ...... 201 ...... 67 ...... 226. 3% plus CO2 range ...... 203 to 354 ...... 68 to 140 ...... 231 to 395. 3% ...... 241 ...... 86 ...... 272. * This table presents the annualized costs and benefits associated with portable ACs shipped in 2022–2051. These results include benefits to consumers which ac- crue after 2051 from the portable ACs purchased from 2022–2051. The incremental installed costs include incremental equipment cost as well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy price trends from the AEO 2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth case, respectively. In addition, incremental product costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Benefits Estimate, and a high decline rate in the High Benefits Esti- mate. The Low Benefits Estimate reflects a 50-percent reduction in the operating hours relative to the reference case operating hours. The methods used to derive projected price trends are explained in section IV.F of this document. The benefits and costs are based on equipment efficiency distributions as described in sections IV.F.8 and IV.H.1 of this document. Purchases of higher efficiency equipment are a result of many different factors unique to each consumer including past pur- chases, expected usage, and others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the no-new- standards case may correlate positively with higher energy prices. To the extent that this occurs, it would be expected to result in some lowering of the consumer op- erating cost savings from those calculated in this rule. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding. ** The interagency group selected four sets of SC-CO2, SC-CH4, and SC-N2O values for use in regulatory analyses. Three sets of values are based on the average social costs from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. The fourth set, which represents the 95th percentile of the social cost distributions calculated using a 3-percent discount rate, is included to represent higher-than-expected impacts from climate change further out in the tails of the social cost distributions The SC-CO2 values are emission year specific. See section IV.L.1 of this document for more details. † 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 Esti- mate, DOE used national benefit-per-ton estimates for NOX emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). For the High Net Benefits Estimate, the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2011); these are nearly two-and-a-half times larger than those from the ACS study. ‡ Total Benefits for both the 3-percent and 7-percent cases are presented using the average social costs with 3-percent discount rate. In the rows labeled ‘‘7% plus GHG range’’ and ‘‘3% plus GHG range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of social cost values.
VI. Procedural Issues and Regulatory make cost-effective investments in warming. DOE attempts to qualify some Review energy efficiency. of the external benefits through use of (2) In some cases the benefits of more social cost of carbon values. A. Review Under Executive Orders efficient equipment are not realized due The Administrator of the Office of 12866 and 13563 to misaligned incentives between Information and Regulatory Affairs Section 1(b)(1) of Executive Order purchasers and users. An example of (OIRA) in the OMB has determined that (E.O.) 12866, ‘‘Regulatory Planning and such a case is when the equipment the regulatory action in this document Review,’’ 58 FR 51735 (Oct. 4, 1993), purchase decision is made by a building is a significant regulatory action under requires each agency to identify the contractor or building owner who does section (3)(f) of E.O. 12866. problem that it intends to address, not pay the energy costs. Accordingly, pursuant to section including, where applicable, the failures (3) There are external benefits 6(a)(3)(B) of the Order, DOE has of private markets or public institutions resulting from improved energy provided to OIRA: (i) The text of the that warrant new agency action, as well efficiency of products or equipment that draft regulatory action, together with a as to assess the significance of that are not captured by the users of such reasonably detailed description of the problem. The problems that the adopted equipment. These benefits include need for the regulatory action and an standards for portable ACs are intended externalities related to public health, explanation of how the regulatory action to address are as follows: environmental protection and national will meet that need; and (ii) an (1) Insufficient information and the energy security that are not reflected in assessment of the potential costs and high costs of gathering and analyzing energy prices, such as reduced benefits of the regulatory action, relevant information leads some emissions of air pollutants and GHGs including an explanation of the manner consumers to miss opportunities to that impact human health and global in which the regulatory action is
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consistent with a statutory mandate. costs that might result from this rulemaking, DOE conducted a DOE has included these documents in technological innovation or anticipated market survey using all available public the rulemaking record. behavioral changes. For the reasons information. To identify small business In addition, the Administrator of stated in the preamble, DOE believes manufacturers, DOE surveyed the OIRA has determined that the regulatory that this final rule is consistent with AHAM membership directory,97 action is an ‘‘economically’’ significant these principles, including the California Energy Commission’s (CEC’s) regulatory action under section (3)(f)(1) requirement that, to the extent Appliance Database,98 and individual of E.O. 12866. Accordingly, pursuant to permitted by law, benefits justify costs. company websites. DOE screened out section 6(a)(3)(C) of the Order, DOE has companies that did not themselves B. Review Under the Regulatory provided to OIRA an assessment, manufacture products covered by this Flexibility Act including the underlying analysis, of rulemaking, did not meet the definition benefits and costs anticipated from the The Regulatory Flexibility Act (5 of a ‘‘small business,’’ or are foreign regulatory action, together with, to the U.S.C. 601 et seq.) requires preparation owned and operated. In the June 2016 extent feasible, a quantification of those of an initial regulatory flexibility ECS NOPR, DOE estimated that there costs; and an assessment, including the analysis (IRFA) and a final regulatory were no domestic manufacturers of underlying analysis, of costs and flexibility analysis (FRFA) for any rule portable ACs that meet the SBA’s benefits of potentially effective and that by law must be proposed for public definition of a ‘‘small business.’’ DOE reasonably feasible alternatives to the comment, unless the agency certifies subsequently identified one small, planned regulation, and an explanation that the rule, if promulgated, will not domestic business responsible for the why the planned regulatory action is have a significant economic impact on design and distribution of a dual-duct preferable to the identified potential a substantial number of small entities. portable AC. Based upon available alternatives. These assessments can be As required by E.O. 13272, ‘‘Proper information, DOE does not believe that found in the TSD for this rulemaking. Consideration of Small Entities in this company is a manufacturer. DOE has also reviewed this regulation Agency Rulemaking,’’ 67 FR 53461 Because the product sold by this pursuant to E.O. 13563, issued on (Aug. 16, 2002), DOE published company incorporates the highest- January 18, 2011. 76 FR 3281, Jan. 21, procedures and policies on February 19, efficiency variable-speed compressor 2011. E.O. 13563 is supplemental to and 2003, to ensure that the potential currently available on the market, DOE explicitly reaffirms the principles, impacts of its rules on small entities are believes that the product will comply structures, and definitions governing properly considered during the with the standard EL adopted in this regulatory review established in E.O. rulemaking process. 68 FR 7990. DOE final rule (EL 2). Therefore, DOE does 12866. To the extent permitted by law, has made its procedures and policies not expect this small business to incur agencies are required by E.O. 13563 to available on the Office of the General any design or capital-related costs. (1) propose or adopt a regulation only Counsel’s website (http://energy.gov/gc/ This small business may incur costs upon a reasoned determination that its office-general-counsel). associated with certification, testing, benefits justify its costs (recognizing DOE reviewed this final rule pursuant and marketing updates. The product that some benefits and costs are difficult to the Regulatory Flexibility Act and the sold by this company is listed in the to quantify); (2) tailor regulations to procedures and policies discussed CEC’s Appliance Database, indicating impose the least burden on society, above. Consistent with the June 2016 that this company already allocates a consistent with obtaining regulatory ECS NOPR, DOE has concluded that this portion of its resources to testing and objectives, taking into account, among rule would not have a significant impact certification of its portable AC product other things, and to the extent on a substantial number of small under ANSI/ASHRAE 128–2001. practicable, the costs of cumulative entities. The factual basis for this Preemption of California’s standard by regulations; (3) select, in choosing certification is set forth below. the standard adopted in this final rule among alternative regulatory For manufacturers of portable ACs, implies that the small business would approaches, those approaches that the SBA has set a size threshold, which divert its existing testing budget to maximize net benefits (including defines those entities classified as testing according to DOE’s test potential economic, environmental, ‘‘small businesses’’ for the purposes of procedure in appendix CC. Testing and public health and safety, and other the statute. DOE used the SBA’s small certifying under appendix CC would advantages; distributive impacts; and business size standards to determine add costs relative to testing to ANSI/ equity); (4) to the extent feasible, specify whether any small entities would be ASHRAE 128–2001 due to the dual test performance objectives, rather than subject to the requirements of the rule. condition requirement for dual-duct specifying the behavior or manner of (See 13 CFR part 121.) The size portable ACs (the product configuration compliance that regulated entities must standards are listed by NAICS code and sold by the small business). While DOE adopt; and (5) identify and assess industry description and are available at does not have third-party test laboratory available alternatives to direct www.sba.gov/sites/default/files/files/ quotes for portable AC testing costs, regulation, including providing Size_Standards_Table.pdf. DOE expects that the costs would be economic incentives to encourage the Manufacturing of portable ACs is similar to testing whole-home desired behavior, such as user fees or classified under NAICS 333415, ‘‘Air- dehumidifiers 99 because both require marketable permits, or providing Conditioning and Warm Air Heating ducted test setups within information upon which choices can be Equipment and Commercial and environmentally-controlled chambers. made by the public. Industrial Refrigeration Equipment Based on this assumption, DOE DOE emphasizes as well that E.O. Manufacturing Other Major Household estimates that testing of one portable AC 13563 requires agencies to use the best Appliance Manufacturing.’’ The SBA available techniques to quantify sets a threshold of 1,250 employees or 97 Available at: https://www.aham.org/AHAM/ anticipated present and future benefits fewer for an entity to be considered as AuxCurrentMembers. and costs as accurately as possible. In its a small business for this category. 98 Available at: https:// cacertappliances.energy.ca.gov/Pages/ guidance, OIRA has emphasized that To estimate the number of companies ApplianceSearch.aspx. such techniques may include that could be small business 99 Test Procedure Final Rule for Dehumidifiers, identifying changing future compliance manufacturers of products covered by 80 FR 45802 (July 31, 2015).
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platform under appendix CC may cost 2011); 80 FR 5099 (Jan. 30, 2015). The March 14, 2000, DOE published a an additional $7,000 compared to collection-of-information requirement statement of policy describing the current testing. Additionally, based on for the certification and recordkeeping intergovernmental consultation process feedback from manufacturers, DOE is subject to review and approval by it will follow in the development of estimates that updates to marketing OMB under the Paperwork Reduction such regulations. 65 FR 13735. DOE has materials and product literature for this Act (PRA). This requirement has been examined this rule and has determined company may total $3,000. DOE approved by OMB under OMB control that it would not have a substantial assumes these upfront costs will be number 1910–1400. Public reporting direct effect on the States, on the spread over a 5-year period leading up burden for the certification is estimated relationship between the national to the compliance year. Accordingly, on to average 30 hours per response, government and the States, or on the an annual basis, the estimated upfront including the time for reviewing distribution of power and product conversion costs equate to less instructions, searching existing data responsibilities among the various than 1 percent of this entity’s annual sources, gathering and maintaining the levels of government. EPCA governs and revenues. data needed, and completing and prescribes Federal preemption of State On the basis of the foregoing, DOE reviewing the collection of information. regulations as to energy conservation for certifies that the rule will not have a Notwithstanding any other provision the products that are the subject of this significant economic impact on a of the law, no person is required to final rule. States can petition DOE for substantial number of small entities. respond to, nor shall any person be exemption from such preemption to the Accordingly, DOE has not prepared a subject to a penalty for failure to comply extent, and based on criteria, set forth in FRFA for this rule. DOE has transmitted with, a collection of information subject EPCA. (42 U.S.C. 6297) Therefore, no this certification and supporting to the requirements of the PRA, unless further action is required by E.O. 13132. statement of factual basis to the Chief that collection of information displays a Counsel for Advocacy of the SBA for currently valid OMB Control Number. F. Review Under Executive Order 12988 review under 5 U.S.C. 605(b). With respect to the review of existing D. Review Under the National regulations and the promulgation of Significant Alternatives to the Rule Environmental Policy Act of 1969 new regulations, section 3(a) of E.O. Additional compliance flexibilities Pursuant to the National 12988, ‘‘Civil Justice Reform,’’ imposes may be available through other means. Environmental Policy Act (NEPA) of on Federal agencies the general duty to EPCA provides that a manufacturer of a 1969, DOE has determined that the rule adhere to the following requirements: covered consumer product whose fits within the category of actions (1) Eliminate drafting errors and annual gross revenue from all of its included in Categorical Exclusion (CX) ambiguity, (2) write regulations to operations does not exceed $8 million B5.1 and otherwise meets the minimize litigation, (3) provide a clear may apply for an exemption from all or requirements for application of a CX. legal standard for affected conduct part of an energy conservation standard (See 10 CFR part 1021, App. B, B5.1(b); rather than a general standard, and (4) for a period not longer than 24 months 1021.410(b) and App. B, B(1)–(5).) The promote simplification and burden after the effective date of a final rule rule fits within this category of actions reduction. 61 FR 4729 (Feb. 7, 1996). establishing the standard. (42 U.S.C. because it is a rulemaking that Regarding the review required by 6295(t)) Additionally, section 504 of the establishes energy conservation section 3(a), section 3(b) of E.O. 12988 Department of Energy Organization Act, standards for consumer products or specifically requires that Executive 42 U.S.C. 7194, provides authority for industrial equipment, and for which agencies make every reasonable effort to the Secretary to adjust a rule issued none of the exceptions identified in CX ensure that the regulation (1) clearly under EPCA in order to prevent ‘‘special B5.1(b) apply. Therefore, DOE has made specifies the preemptive effect, if any, hardship, inequity, or unfair a CX determination for this rulemaking, (2) clearly specifies any effect on distribution of burdens’’ that may be and DOE does not need to prepare an existing Federal law or regulation, (3) imposed on that manufacturer as a Environmental Assessment or provides a clear legal standard for result of such rule. Manufacturers Environmental Impact Statement for affected conduct while promoting should refer to 10 CFR part 430, subpart this rule. DOE’s CX determination for simplification and burden reduction, (4) E, and part 1003 for additional details. this rule is available at http:// specifies the retroactive effect, if any, (5) energy.gov/nepa/categorical-exclusion- adequately defines key terms, and (6) C. Review Under the Paperwork cx-determinations-cx. addresses other important issues Reduction Act affecting clarity and general E. Review Under Executive Order 13132 DOE has determined that portable draftsmanship under any guidelines ACs are a covered product under EPCA. E.O. 13132, ‘‘Federalism,’’ 64 FR issued by the Attorney General. Section 81 FR 22514 (April 18, 2016). Because 43255 (Aug. 10, 1999), imposes certain 3(c) of E.O. 12988 requires Executive portable ACs are a covered product, requirements on Federal agencies agencies to review regulations in light of manufacturers will need to certify to formulating and implementing policies applicable standards in section 3(a) and DOE that their products comply with or regulations that preempt State law or section 3(b) to determine whether they the energy conservation standards that have Federalism implications. The are met or it is unreasonable to meet one established in this final rule. In E.O. requires agencies to examine the or more of them. DOE has completed the certifying compliance, manufacturers constitutional and statutory authority required review and determined that, to must test their products according to the supporting any action that would limit the extent permitted by law, this final DOE test procedures, including any the policymaking discretion of the rule meets the relevant standards of E.O. amendments adopted for those test States and to carefully assess the 12988. procedures. DOE has established necessity for such actions. The E.O. also regulations for the certification and requires agencies to have an accountable G. Review Under the Unfunded recordkeeping requirements for all process to ensure meaningful and timely Mandates Reform Act of 1995 covered consumer products and input by State and local officials in the Title II of the Unfunded Mandates commercial equipment, including development of regulatory policies that Reform Act of 1995 (UMRA) requires portable ACs. 76 FR 12422 (Mar. 7, have Federalism implications. On each Federal agency to assess the effects
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of Federal regulatory actions on State, promulgating a rule for which a written K. Review Under Executive Order 13211 local, and Tribal governments and the statement under section 202 is required. private sector. Public Law 104–4, sec. (2 U.S.C. 1535(a)) DOE is required to Executive Order 13211, ‘‘Actions 201 (codified at 2 U.S.C. 1531). For a select from those alternatives the most Concerning Regulations That regulatory action likely to result in a cost-effective and least burdensome Significantly Affect Energy Supply, rule that may cause the expenditure by alternative that achieves the objectives Distribution, or Use,’’ 66 FR 28355 (May State, local, and Tribal governments, in of the rule unless DOE publishes an 22, 2001), requires Federal agencies to the aggregate, or by the private sector of explanation for doing otherwise, or the prepare and submit to OIRA at OMB, a $100 million or more in any one year selection of such an alternative is Statement of Energy Effects for any (adjusted annually for inflation), section inconsistent with law. This final rule significant energy action. A ‘‘significant 202 of UMRA requires a Federal agency establishes energy conservation energy action’’ is defined as any action to publish a written statement that standards for portable ACs that are by an agency that promulgates or is estimates the resulting costs, benefits, designed to achieve the maximum expected to lead to promulgation of a and other effects on the national improvement in energy efficiency that final rule, and that (1) is a significant economy. (2 U.S.C. 1532(a), (b)) The DOE has determined to be both regulatory action under Executive Order UMRA also requires a Federal agency to technologically feasible and 12866, or any successor order; and (2) develop an effective process to permit economically justified, as required by is likely to have a significant adverse timely input by elected officers of State, 6295(o)(2)(A) and 6295(o)(3)(B). A full effect on the supply, distribution, or use local, and Tribal governments on a discussion of the alternatives of energy, or (3) is designated by the ‘‘significant intergovernmental considered by DOE is presented in Administrator of OIRA as a significant mandate,’’ and requires an agency plan chapter 17 of the TSD for this final rule. energy action. For any significant energy for giving notice and opportunity for action, the agency must give a detailed timely input to potentially affected H. Review Under the Treasury and statement of any adverse effects on small governments before establishing General Government Appropriations energy supply, distribution, or use any requirements that might Act, 1999 should the proposal be implemented, significantly or uniquely affect them. On Section 654 of the Treasury and and of reasonable alternatives to the March 18, 1997, DOE published a General Government Appropriations action and their expected benefits on statement of policy on its process for Act, 1999 (Pub. L. 105–277) requires energy supply, distribution, and use. intergovernmental consultation under Federal agencies to issue a Family DOE has concluded that this UMRA. 62 FR 12820. DOE’s policy Policymaking Assessment for any rule regulatory action, which sets forth new statement is also available at http:// that may affect family well-being. This energy conservation standards for energy.gov/sites/prod/files/gcprod/ portable ACs, is not a significant energy _ rule would not have any impact on the documents/umra 97.pdf. autonomy or integrity of the family as action because the standards are not This final rule does not contain a an institution. Accordingly, DOE has likely to have a significant adverse effect Federal intergovernmental mandate concluded that it is not necessary to on the supply, distribution, or use of because it does not require expenditures prepare a Family Policymaking energy, nor has it been designated as of $100 million or more in any one year Assessment. such by the Administrator at OIRA. by the private sector. The final rule Accordingly, DOE has not prepared a could result in expenditures of $100 I. Review Under Executive Order 12630 Statement of Energy Effects on this final million or more, but there is no rule. requirement that mandates that result. Pursuant to Executive Order 12630, Potential expenditures may include: (1) ‘‘Governmental Actions and Interference L. Review Under the Information Investment in R&D and in capital with Constitutionally Protected Property Quality Bulletin for Peer Review expenditures by portable AC Rights,’’ 53 FR 8859 (March 18, 1988), manufacturers in the years between the DOE has determined that this rule On December 16, 2004, OMB, in final rule and the compliance date for would not result in any takings that consultation with the Office of Science the new standards, and (2) incremental might require compensation under the and Technology Policy (OSTP), issued additional expenditures by consumers Fifth Amendment to the U.S. its Final Information Quality Bulletin to purchase higher-efficiency portable Constitution. for Peer Review (the Bulletin). 70 FR ACs, starting at the compliance date for J. Review Under the Treasury and 2664 (Jan. 14, 2005). The Bulletin the applicable standard. General Government Appropriations establishes that certain scientific Section 202 of UMRA authorizes a Act, 2001 information shall be peer reviewed by Federal agency to respond to the content qualified specialists before it is requirements of UMRA in any other Section 515 of the Treasury and disseminated by the Federal statement or analysis that accompanies General Government Appropriations Government, including influential the final rule. (2 U.S.C. 1532(c)) The Act, 2001 (44 U.S.C. 3516, note) scientific information related to agency content requirements of section 202(b) provides for Federal agencies to review regulatory actions. The purpose of the of UMRA relevant to a private sector most disseminations of information to Bulletin is to enhance the quality and mandate substantially overlap the the public under information quality credibility of the Government’s economic analysis requirements that guidelines established by each agency scientific information. Under the apply under section 325(o) of EPCA and pursuant to general guidelines issued by Bulletin, the energy conservation Executive Order 12866. The OMB. OMB’s guidelines were published standards rulemaking analyses are SUPPLEMENTARY INFORMATION section of at 67 FR 8452 (Feb. 22, 2002), and ‘‘influential scientific information,’’ this document and the TSD for this final DOE’s guidelines were published at 67 which the Bulletin defines as ‘‘scientific rule respond to those requirements. FR 62446 (Oct. 7, 2002). DOE has information the agency reasonably can Under section 205 of UMRA, the reviewed this final rule under the OMB determine will have, or does have, a Department is obligated to identify and and DOE guidelines and has concluded clear and substantial impact on consider a reasonable number of that it is consistent with applicable important public policies or private regulatory alternatives before policies in those guidelines. sector decisions.’’ Id. at 70 FR 2667.
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In response to OMB’s Bulletin, DOE for the Ninth Circuit in the consolidated the duct configuration (single-duct, conducted formal in-progress peer cases Nos. 18–15380 and 18–15475. dual-duct, or ability to operate in both reviews of the energy conservation DOE reaffirmed the original signature configurations), presence of heating standards development process and and date in the Energy Conservation function, and primary condensate analyses and has prepared a Peer Standards implementation of the court removal feature (auto-evaporation, Review Report pertaining to the energy order published elsewhere in this issue gravity drain, removable internal conservation standards rulemaking of the Federal Register. This document collection bucket, or condensate pump). analyses. Generation of this report is substantively identical to the signed ■ 4. Section 429.134 is amended by involved a rigorous, formal, and document DOE had previously posted to adding paragraph (r) to read as follows: documented evaluation using objective its website but has been edited and criteria and qualified and independent formatted in conformance with the § 429.134 Product-specific enforcement reviewers to make a judgment as to the publication requirements for the provisions. technical/scientific/business merit, the Federal Register and CFR to ensure the * * * * * actual or anticipated results, and the document can be given legal effect. (r) Portable air conditioners. productivity and management Editorial Note: This document was Verification of seasonally adjusted effectiveness of programs and/or received for publication by the Office of the cooling capacity. The seasonally projects. The ‘‘Energy Conservation Federal Register on December 3, 2019. adjusted cooling capacity will be Standards Rulemaking Peer Review For the reasons set forth in the measured pursuant to the test Report’’ dated February 2007 has been preamble, DOE amends parts 429 and requirements of 10 CFR part 430 for disseminated and is available at the 430 of chapter II, subchapter D, of title each unit tested. The results of the following website: www.energy.gov/ 10 of the Code of Federal Regulations, measurement(s) will be averaged and eere/buildings/peer-review. to read as set forth below: compared to the value of seasonally M. Congressional Notification adjusted cooling capacity certified by PART 429—CERTIFICATION, the manufacturer. The certified As required by 5 U.S.C. 801, DOE will COMPLIANCE, AND ENFORCEMENT seasonally adjusted cooling capacity report to Congress on the promulgation FOR CONSUMER PRODUCTS AND will be considered valid only if the of this rule prior to its effective date. COMMERCIAL AND INDUSTRIAL average measured seasonally adjusted The report will state that it has been EQUIPMENT cooling capacity is within five percent determined that the rule is a ‘‘major of the certified seasonally adjusted rule’’ as defined by 5 U.S.C. 804(2). ■ 1. The authority citation for Part 429 cooling capacity. VII. Approval of the Office of the continues to read as follows: (1) If the certified seasonally adjusted Secretary Authority: 42 U.S.C. 6291–6317; 28 U.S.C. cooling capacity is found to be valid, the 2461 note. The Secretary of Energy has approved certified value will be used as the basis publication of this final rule. ■ 2. Section 429.12 is amended by: for determining the minimum allowed ■ a. In paragraph (b)(13), removing combined energy efficiency ratio for the List of Subjects ‘‘§§ 429.14 through 429.60’’ and adding basic model. 10 CFR Part 429 in its place, ‘‘§§ 429.14 through 429.62’’; (2) If the certified seasonally adjusted and cooling capacity is found to be invalid, Administrative practice and ■ b. In paragraph (d), add a new entry the average measured seasonally procedure, Confidential business to the end of the table to read as follows: adjusted cooling capacity will be used information, Energy conservation, to determine the minimum allowed Household appliances, Reporting and § 429.12 General requirements applicable combined energy efficiency ratio for the to certification reports. recordkeeping requirements. basic model. 10 CFR Part 430 * * * * * (d) * * * PART 430—ENERGY CONSERVATION Administrative practice and PROGRAM FOR CONSUMER procedure, Confidential business PRODUCTS information, Energy conservation, ***** Household appliances, Imports, Portable air conditioners ...... February 1. ■ 5. The authority citation for Part 430 Intergovernmental relations, Reporting continues to read as follows: and recordkeeping requirements, and * * * * * Small businesses. ■ Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 3. Section 429.62 is amended by 2461 note. Issued in Washington, DC, on December adding paragraph (b) to read as follows: ■ 28, 2016. 6. Section 430.32 is amended by § 429.62 Portable air conditioners. David J. Friedman, adding paragraph (cc) to read as follows: * * * * * Acting Assistant Secretary, Energy Efficiency (b) Certification reports. (1) The § 430.32 Energy and water conservation and Renewable Energy. requirements of § 429.12 are applicable standards and their effective dates. Note: DOE is publishing this to single-duct and dual-duct portable air * * * * * document concerning portable air conditioners; and (cc) Portable air conditioners. Single- conditioners to comply with an order (2) Pursuant to § 429.12(b)(13), a duct portable air conditioners and dual- from the U.S. District Court for the certification report shall include the duct portable air conditioners Northern District of California in the following public product-specific manufactured on or after January 10, consolidated cases of Natural Resources information: The combined energy 2025 must have a combined energy Defense Council, et al. v. Perry and efficiency ratio (CEER in British thermal efficiency ratio (CEER) in Btu/Wh no People of the State of California et al. units per Watt-hour (Btu/Wh)), the less than SACC: Seasonally adjusted v. Perry, Case No. 17–cv–03404–VC, as seasonally adjusted cooling capacity in cooling capacity in Btu/h, as determined affirmed by the U.S. Court of Appeals British thermal units per hour (Btu/h), in appendix CC of subpart B of this part.
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Note: The following letter will not for portable air conditioners are likely to the index may be publicly available, appear in the Code of Federal have a significant adverse impact on such as information that is exempt from Regulations. competition. public disclosure. U.S. DEPARTMENT OF JUSTICE Sincerely, The docket web page can be found at Antitrust Division Renata B. Hesse http://www.regulations.gov/#!docket Detail;D=EERE-2016-BT-STD-0022. The Renata B. Hesse [FR Doc. 2019–26350 Filed 1–9–20; 8:45 am] Acting Assistant Attorney General docket web page contains simple BILLING CODE 6450–01–P RFK Main Justice Building instructions on how to access all 950 Pennsylvania Avenue NW documents, including public comments, in the docket. Washington, DC 20530–0001 DEPARTMENT OF ENERGY (202) 514–2401 / (202) 616–2645 (Fax) For further information on how to review the docket, contact the August 12, 2016 10 CFR Part 430 Appliance and Equipment Standards Anne Harkavy [Docket Number EERE–2016–BT–STD– Program staff at (202) 586–6636 or by Deputy General Counsel for Litigation, 0022] email: ApplianceStandardsQuestions@ Regulation and Enforcement RIN 1904–AD69 ee.doe.gov. U.S. Department of Energy Washington, DC 20585 FOR FURTHER INFORMATION CONTACT: Energy Conservation Program: Energy Jeremy Dommu, U.S. Department of Re: Docket No. EERE–2013–BT–STD– Conservation Standards for Energy, Office of Energy Efficiency and 0033 Uninterruptible Power Supplies Renewable Energy, Building Dear Deputy General Counsel Harkavy: AGENCY: Office of Energy Efficiency and Technologies Office, EE–5B, 1000 I am responding to your June 13, 2016 Independence Avenue SW, Washington, letter seeking the views of the Attorney Renewable Energy, Department of Energy. DC 20585–0121. Telephone: (202) 586– General about the potential impact on 9870. Email: ApplianceStandards ACTION: Final rule. competition of proposed energy [email protected]. conservation standards for portable air SUMMARY: The Energy Policy and Celia Sher, U.S. Department of conditioners. Energy, Office of the General Counsel, Your request was submitted under Conservation Act of 1975 (EPCA), as amended, prescribes energy GC–33, 1000 Independence Avenue SW, Section 325(o)(2)(B)(i)(V) of the Energy Washington, DC 20585–0121. Policy and Conservation Act, as conservation standards for various consumer products and certain Telephone: (202) 287–6122. Email: amended (ECPA), 42 U.S.C. [email protected]. 6295(o)(2)(B)(i)(V), which requires the commercial and industrial equipment, SUPPLEMENTARY INFORMATION: Attorney General to make a including battery chargers. EPCA also determination of the impact of any requires the U.S. Department of Energy Table of Contents (DOE) to periodically determine lessening of competition that is likely to I. Synopsis of the Final Rule result from the imposition of proposed whether more-stringent standards would be technologically feasible and A. Benefits and Costs to Consumers energy conservation standards. The B. Impact on Manufacturers Attorney General’s responsibility for economically justified, and would save C. National Benefits and Costs responding to requests from other a significant amount of energy. In this D. Conclusion departments about the effect of a final rule, DOE is adopting new energy II. Introduction program on competition was delegated conservation standards for A. Authority to the Assistant Attorney General for the uninterruptible power supplies, a class B. Background of battery chargers. It has determined 1. Current Standards Antitrust Division in 28 CFR 0.40(g). 2. History of Standards Rulemaking for In conducting its analysis, the that the new energy conservation standards for these products would UPSs Antitrust Division examines whether a III. General Discussion proposed standard may lessen result in significant conservation of A. Test Procedure competition, for example, by energy, and are technologically feasible B. Technological Feasibility substantially limiting consumer choice and economically justified. 1. General or increasing industry concentration. A DATES: The effective date of this rule is 2. Maximum Technologically Feasible lessening of competition could result in March 10, 2020. Compliance with the Levels C. Energy Savings higher prices to manufacturers and new standards established for uninterruptible power supplies in this 1. Determination of Savings consumers. 2. Significance of Savings We have reviewed the proposed final rule is required on and after D. Economic Justification standards contained in the Notice of January 10, 2022. 1. Specific Criteria Proposed Rulemaking (81 FR 38398, ADDRESSES: The docket for this a. Economic Impact on Manufacturers and June 13, 2016) and the related technical rulemaking, which includes Federal Consumers support documents. We have also Register notices, public meeting b. Savings in Operating Costs Compared To monitored the public meeting held on attendee lists and transcripts, Increase in Price (LCC and PBP) the proposed standards on July 20, comments, and other supporting c. Energy Savings d. Lessening of Utility or Performance of 2016, and conducted interviews with documents/materials, is available for Products industry members. review at www.regulations.gov. All e. Impact of Any Lessening of Competition Based on the information currently documents in the docket are listed in f. Need for National Energy Conservation available, we do not believe that the the www.regulations.gov index. g. Other Factors proposed energy conservation standards However, not all documents listed in 2. Rebuttable Presumption
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