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Petroleum Institute standard 619, (9) Has a full-load actual volume flow (12) Is in one of the equipment classes ‘‘Rotary-Type Positive-Displacement rate less than or equal to 1,250 cfm, or listed in the Table 1, must have a full- Compressors for Petroleum, is distributed in commerce with a load package isentropic efficiency or Petrochemical, and Natural Gas compressor motor nominal horsepower part-load package isentropic efficiency Industries,’’ less than or equal to 200 hp, that is not less than the appropriate (8) Has full-load actual volume flow ‘‘Minimum Package Isentropic rate greater than or equal to 35 cubic (10) Is driven by a three-phase electric motor, Efficiency’’ value listed in Table 1 of feet per minute (cfm), or is distributed this section. in commerce with a compressor motor (11) Is manufactured alone or as a nominal horsepower greater than or component of another piece of equal to 10 horsepower (hp), equipment; and

TABLE 1—ENERGY CONSERVATION STANDARDS FOR CERTAIN COMPRESSORS

hRegr d Equipment class Minimum package isentropic efficiency (package isentropic efficiency reference (percentage curve) loss reduction)

2 Rotary, lubricated, air-cooled, fixed- hRegr + (1 ¥ hRegr) * (d/100) ...... ¥0.00928 * ln (.4719 * V1) + 0.13911 * ¥15 speed compressor. ln(.4719 * V1) + 0.27110. 2 Rotary, lubricated, air-cooled, variable- hRegr + (1 ¥ hRegr) * (d/100) ...... ¥0.01549 * ln (.4719 * V1) + 0.21573 * ¥10 speed compressor. ln(.4719 * V1) + 0.00905. 2 Rotary, lubricated, liquid-cooled, fixed- .02349 + hRegr + (1 ¥ hRegr) * (d/100) .... ¥0.00928 * ln (.4719 * V1) + 0.13911 * ¥15 speed compressor. ln(.4719 * V1) + 0.27110. 2 Rotary, lubricated, liquid-cooled, vari- .02349 + hRegr + (1 ¥ hRegr) * (d/100) .... ¥0.01549 * ln (.4719 * V1) + 0.21573 * ¥15 able-speed compressor. ln(.4719 * V1) + 0.00905.

(b) Instructions for the use of Table 1 Note: The following letter will not appear higher prices to manufacturers and of this section: in the Code of Federal Regulations. consumers. (1) To determine the standard level a We have reviewed the proposed standards U.S. Department of Justice, Antitrust contained in the Notice of Proposed compressor must meet, the correct Division. Rulemaking (81 FR 31680, May 19, 2016) and equipment class must be identified. The Renata B. Hesse, the related technical support documents. We descriptions are in the first column Acting Assistant Attorney General. have also reviewed supplementary (‘‘Equipment Class’’); definitions for Main Justice Building, 950 Pennsylvania information submitted to the Attorney these descriptions are found in Avenue NW, Washington, DC 20530– General by the Department of Energy, as well as materials presented at the public meeting § 431.342. 0001, (202) 514–2401/(202) 616–2645 (2) The second column (‘‘Minimum held on the proposed standards on June 20, (Fax) 2016, and conducted interviews with Package Isentropic Efficiency’’) contains July 18, 2016 industry members. the applicable energy conservation Based on the information currently standard level, provided in terms of Anne Harkavy, Deputy General Counsel for Litigation, available, we do not believe that the package isentropic efficiency. Regulation and Enforcement, U.S. proposed energy conservation standards for (3) For ‘‘Fixed-speed compressor’’ Department of Energy, Washington, DC compressors are likely to have a significant equipment classes, the relevant Package 20585 adverse impact on competition. Isentropic Efficiency is Full-load Re: Energy Conservation Standards for Sincerely, Package Isentropic Efficiency. For Compressors; Doc. No. EERE–2013–BT–STD– Renata B. Hesse ‘‘Variable-speed compressor’’ 0040 [FR Doc. 2019–26355 Filed 1–9–20; 8:45 am] Dear Deputy General Counsel Harkavy: equipment classes, the relevant Package BILLING CODE 6450–01–P Isentropic Efficiency is Part-load I am responding to your May 19, 2016, Package Isentropic Efficiency. Both Full- letter seeking the views of the Attorney and Part-load Package Isentropic General about the potential impact on DEPARTMENT OF ENERGY Efficiency are determined in accordance competition of proposed energy conservation standards for compressors. Your request was 10 CFR Part 431 with the test procedure in § 431.344. submitted under Section 325(o)(2)(B)(i)(V) of (4) The second column (‘‘Minimum the Energy Policy and Conservation Act, as [Docket Number EERE–2013–BT–STD– Package Isentropic Efficiency’’) amended (ECPA), 42 U.S.C. 0030] references the third column (‘‘hRegr’’), 6295(o)(2)(B)(i)(V), which requires the also a function of full-load actual Attorney General to make a determination of RIN 1904–AD01 volume flow rate, and the fourth column the impact of any lessening of competition that is likely to result from the imposition of Energy Conservation Program: Energy (‘‘d’’). The equations are provided proposed energy conservation standards. The separately to maintain consistency with Conservation Standards for Attorney General’s responsibility for Commercial Packaged Boilers the language of the preamble and responding to requests from other analysis. departments about the effect of a program on AGENCY: Office of Energy Efficiency and (5) The second and third columns competition has been delegated to the head Renewable Energy, Department of of the Antitrust Division in 28 CFR 0.40(g). contain the term V1, which denotes Energy. compressor full-load actual volume flow In conducting its analysis, the Antitrust Division examines whether a proposed ACTION: Final rule. rate, given in terms of cubic feet per standard may lessen competition, for minute (‘‘cfm’’) and determined in example, by substantially limiting consumer SUMMARY: The Energy Policy and accordance with the test procedure in choice or increasing industry concentration. Conservation Act of 1975 (EPCA), as § 431.344. A lessening of competition could result in amended, prescribes energy

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conservation standards for various 2. History of Standards Rulemaking for 11. General Comments consumer equipment and certain Commercial Packaged Boilers G. Shipments Analysis commercial and industrial equipment, III. General Discussion H. National Impact Analysis including commercial packaged boilers A. Compliance Dates 1. Equipment Efficiency in the No-New- B. Test Procedure Standards Case and Standards Cases (CPBs). EPCA also requires the U.S. 1. Summary of Recent Updates 2. National Energy Savings Department of Energy (DOE) to 2. Timing of the Test Procedure and Energy 3. Net Present Value of Consumer Benefit periodically review standards. In this Conservation Standards Rulemakings a. Total Annual Cost final rule, DOE is adopting more- 3. Impact on Efficiency Ratings b. Total Annual Operating Cost Savings stringent energy conservation standards C. Technological Feasibility c. Discount Rate for certain commercial packaged boilers. 1. General I. Consumer Subgroup Analysis 2. Maximum Technologically Feasible J. Manufacturer Impact Analysis DATES: The effective date of this rule is Levels 1. Overview March 10, 2020. Compliance with the D. Energy Savings 2. Government Regulatory Impact Model amended standards established for 1. Determination of Savings a. Government Regulatory Impact Model commercial packaged boilers in this 2. Significance of Savings Key Inputs final rule is required on and after E. Economic Justification b. Government Regulatory Impact Model January 10, 2023. 1. Specific Criteria Scenarios a. Economic Impact on Manufacturers and 3. Discussion of Comments ADDRESSES: The docket, which includes Consumers a. Elimination of Natural Draft Equipment Federal Register notices, public, public b. Savings in Operating Costs Compared To b. Impacts on Direct Employment meeting attendee lists and transcripts, Increase in Price c. Conversion Costs comments, and other supporting c. Energy Savings d. Cumulative Regulatory Burden documents/materials, is available for d. Lessening of Utility or Performance of K. Emissions Analysis review at www.regulations.gov. All Equipment L. Monetizing Carbon Dioxide and Other Emissions Impacts documents in the docket are listed in e. Impact of Any Lessening of Competition f. Need for National Energy Conservation 1. Social Cost of Carbon the www.regulations.gov index. a. Monetizing Carbon Dioxide Emissions However, not all documents listed in g. Other Factors 2. Rebuttable Presumption b. Development of Social Cost of Carbon the index may be publicly available, F. General Comments Values such as information that is exempt from 1. Proposed Standard Levels c. Current Approaches and Key Assumptions public disclosure. a. Comments on Proposed TSL 2 2. Social Cost of Other Air Pollutants The docket web page can be found at b. Comments on TSL 3 M. Utility Impact Analysis c. Other Comments www.regulations.gov/docket?D=EERE- N. Employment Impact Analysis 2. Statutory Requirements 2013-BT-STD-0030. The docket web V. Analytical Results and Conclusions page contains simple instructions on IV. Methodology and Discussion of Related A. Trial Standard Levels how to access all documents, including Comments B. Economic Justification and Energy public comments, in the docket. A. Market and Technology Assessment Savings 1. General For further information on how to 1. Economic Impacts on Individual 2. Scope of Coverage Consumers review the docket, contact the 3. Equipment Classes Appliance and Equipment Standards a. Life-Cycle Cost and Payback Period 4. Market Assessment b. Consumer Subgroup Analysis Program staff at (202) 586–6636 or by 5. Technology Options c. Rebuttable Presumption Payback email: ApplianceStandardsQuestions@ B. Screening Analysis 2. Economic Impacts on Manufacturers ee.doe.gov. C. Engineering Analysis a. Industry Cash-Flow Analysis Results 1. Methodology FOR FURTHER INFORMATION CONTACT: b. Impacts on Direct Employment a. Analysis of Large CPB Equipment c. Impacts on Manufacturing Capacity Mr. James Raba, U.S. Department of Classes d. Impacts on Subgroups of Manufacturers Energy, Office of Energy Efficiency and 2. Data Collection and Categorization e. Cumulative Regulatory Burden Renewable Energy, Building 3. Baseline Efficiency 3. National Impact Analysis Technologies Program, EE–5B, 1000 4. Intermediate and Max-Tech Efficiency a. Significance of Energy Savings Independence Avenue SW, Washington, Levels b. Net Present Value of Consumer Costs DC 20585–0121. Telephone: (202) 586– 5. Incremental Price and Price-Efficiency and Benefits Curves c. Indirect Impacts on Employment 8654. Email: D. Markups Analysis ApplianceStandardsQuestions@ 4. Impact on Utility or Performance E. Energy Use Analysis 5. Impact of Any Lessening of Competition ee.doe.gov. 1. Energy Use Characterization 6. Need of the Nation To Conserve Energy Mr. Peter Cochran, U.S. Department of 2. Building Sample Selection and Sizing 7. Other Factors Energy, Office of the General Counsel, Methodology 8. Summary of National Economic Impacts GC–33, 1000 Independence Avenue SW, 3. Miscellaneous Energy Use C. Conclusion Washington, DC 20585–0121. F. Life-Cycle Cost and Payback Period 1. Benefits and Burdens of Trial Standard Telephone: (202) 586–9496. Email: Analysis Levels Considered for Commercial [email protected]. 1. Equipment Costs Packaged Boiler Standards 2. Installation Costs 2. Summary of Benefits and Costs SUPPLEMENTARY INFORMATION: a. Base Boiler Installation (Annualized) of the Adopted Standards Table of Contents b. Venting VI. Procedural Issues and Regulatory Review c. Other A. Review Under Executive Orders 12866 I. Synopsis of the Final Rule 3. Annual Per-Unit Energy Consumption and 13563 A. Benefits and Costs to Consumers 4. Energy Prices and Energy Price Trends B. Review Under the Regulatory Flexibility B. Impact on Manufacturers 5. Maintenance Costs Act C. National Benefits and Costs 6. Repair Costs 1. Need for, Objectives of, and Legal Basis D. Conclusion 7. Lifetime for, the Rule II. Introduction 8. Discount Rates 2. Significant Issues Raised In Response to A. Authority 9. Market Efficiency Distribution in the No- the IRFA B. Background New-Standards Case 3. Description and Estimate of the Number 1. Current Standards 10. Payback Period Inputs of Small Entities Affected

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a. Methodology for Estimating the Number reasons was re-designated as Part A–1 detail in section IV.A.3 of this of Small Entities upon incorporation into the U.S. Code document, DOE opted to: (1) 4. Description and Estimate of Compliance (42 U.S.C. 6311–6317, as codified), Discontinue the use of draft type as a Requirements, Including Differences in establishes the ‘‘Energy Conservation criterion for equipment classes; and (2) Cost, If Any, for Different Groups of Small Entities Program for Certain Industrial establish separate equipment classes for 5. Significant Alternatives to the Rule Equipment,’’ which includes ‘‘very large’’ commercial packaged C. Review Under the Paperwork Reduction commercial packaged boilers (CPBs), the boilers. Eliminating the use of draft type Act subject of this rulemaking.1 (42 U.S.C. as a distinguishing feature for D. Review Under the National 6311(1)(J)) equipment classes consolidated the 4 Environmental Policy Act of 1969 EPCA requires DOE to conduct an existing draft-specific equipment classes E. Review Under Executive Order 13132 evaluation of its standards for CPB into 2 non-draft-specific equipment F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates equipment every 6 years and to publish classes, while adding very large Reform Act of 1995 either a notice of determination that commercial packaged boilers as separate H. Review Under the Treasury and General such standards do not need to be equipment classes resulted in an Government Appropriations Act, 1999 amended or a notice of proposed additional 4 equipment classes. As a I. Review Under Executive Order 12630 rulemaking (NOPR) including new result, the total number of equipment J. Review Under the Treasury and General proposed standards. (42 U.S.C. classes has increased from 10 to 12. Government Appropriations Act, 2001 6313(a)(6)(C)(i)) This final rule satisfies DOE is adopting more stringent K. Review Under Executive Order 13211 DOE’s statutory obligation under 42 standards for 8 of the 12 equipment L. Review Under the Information Quality U.S.C. 6313(a)(6)(C). Bulletin for Peer Review classes in this final rule, which includes M. Congressional Notification In accordance with these and other all classes except for the newly adopted VII. Approval of the Office of the Secretary statutory requirements discussed in this very large CPB classes. The amended document, DOE is adopting amended standards, which prescribe minimum I. Synopsis of the Final Rule energy conservation standards for thermal efficiencies (ET) or combustion Title III of the Energy Policy and commercial packaged boilers. DOE has efficiencies (EC), as applicable, are Conservation Act of 1975 (42 U.S.C. examined the existing CPB standards shown in Table I.1. These amended 6291, et seq; ‘‘EPCA’’), Public Law 94– and concludes that modifying and standards apply to all equipment listed 163, sets forth a variety of provisions expanding the existing 10 CPB in Table I.1 and manufactured in, or designed to improve energy efficiency. equipment classes to 12 equipment imported into, the United States on and Part C of Title III, which for editorial classes is warranted. As discussed in after the compliance dates in Table I.1. TABLE I.1—ENERGY CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS

Size category Energy Equipment conservation Compliance date † (input) standard *

Small Gas-Fired Hot Water Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 84.0% ET ...... January 10, 2023. Large Gas-Fired Hot Water Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 85.0% EC ...... January 10, 2023. Very Large Gas-Fired Hot Water Commercial Packaged Boilers ...... >10,000,000 Btu/h ...... 82.0% EC ...... March 2, 2012. Small Oil-Fired Hot Water Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 87.0% ET ...... January 10, 2023. Large Oil-Fired Hot Water Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 88.0% EC ...... January 10, 2023. Very Large Oil-Fired Hot Water Commercial Packaged Boilers ...... >10,000,000 Btu/h ...... 84.0% EC ...... March 2, 2012. Small Gas-Fired Steam Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 81.0% ET ...... January 10, 2023. Large Gas-Fired Steam Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 82.0% ET ...... January 10, 2023. Very Large Gas-Fired Steam Commercial Packaged Boilers ** ...... >10,000,000 Btu/h ...... 79.0% ET ...... March 2, 2012. Small Oil-Fired Steam Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 84.0% ET ...... January 10, 2023. Large Oil-Fired Steam Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 85.0% ET ...... January 10, 2023. Very Large Oil-Fired Steam Commercial Packaged Boilers ...... >10,000,000 Btu/h ...... 81.0% ET ...... March 2, 2012.

*ET means ‘‘thermal efficiency.’’ EC means ‘‘combustion efficiency.’’ ** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum thermal efficiency level of 77% is permitted and meets Federal commercial packaged boiler energy conservation standards. † For very large CPB equipment classes DOE is not amending the existing standards, which had a compliance date of March 2, 2012, as shown.

A. Benefits and Costs to Consumers standards on consumers of commercial equipment classes, and the PBP is less packaged boilers, as measured by the than the average lifetime of the Table I.2 summarizes DOE’s average life-cycle cost (LCC) savings and equipment, which is estimated to be evaluation of the economic impacts of the simple payback period (PBP).2 The 24.8 years for all equipment classes the adopted energy conservation average LCC savings are positive for all evaluated in this final rule.

1 All references to EPCA in this document refer to the no-new-standards case efficiency designed to compare specific efficiency levels for to the statute as amended through the Energy distribution, which depicts the CPB market in the commercial packaged boilers, is measured relative Efficiency Improvement Act of 2015, Public Law compliance year in the absence of amended to the baseline CPB equipment (see section IV.F.10 114–11 (April 30, 2015). standard levels (see section IV.F.9 of this document of this document and chapter 8 of the TSD). 2 The average LCC savings refer to consumers that and chapter 8 of the final rule technical support are affected by a standard and are measured relative document (TSD)). The simple PBP, which is

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TABLE I.2—IMPACTS OF ADOPTED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Equipment class (2015$) (years)

Small Gas-Fired Hot Water ...... $212 10.1 Large Gas-Fired Hot Water ...... 2,037 7.0 Small Oil-Fired Hot Water ...... 14,421 4.1 Large Oil-Fired Hot Water ...... 31,379 4.8 Small Gas-Fired Steam ...... 1,002 10.1 Large Gas-fired Steam ...... 11,188 4.2 Small Oil-fired Steam ...... 5,839 4.0 Large Oil-Fired Steam ...... 36,832 2.7

DOE’s analysis of the impacts of the described in section IV.J and section billion (at a 7-percent discount rate) to amended standards on consumers is V.B.2 of this document. $1.977 billion (at a 3-percent discount described in section IV.F of this rate). This NPV expresses the estimated C. National Benefits and Costs 4 document and in chapter 8 of the final total value of future operating-cost rule technical support document (TSD). DOE’s analyses indicate that the savings minus the estimated increased adopted standards would save a B. Impact on Manufacturers equipment and installation costs for significant amount of energy. The commercial packaged boilers purchased The industry net present value (INPV) lifetime energy savings for commercial in 2020–2049. is the sum of the discounted cash flows packaged boilers purchased in the 30- In addition, the adopted CPB to the industry from the reference year year period that begins in the standards are projected to yield through the end of the analysis period anticipated first full year of compliance significant environmental benefits. The (2016 to 2049). Using a real discount with amended standards (2020–2049), energy savings described in this section rate of 9.5 percent,3 DOE estimates that relative to the case without amended are estimated to result in cumulative the INPV for manufacturers of standards (referred to as the ‘‘no-new- emission reductions (over the same commercial packaged boilers in the case standards case’’), amount to 0.27 period as for energy savings) of 16 without amended standards is $277.6 5 quadrillion Btu (quad). This represents million metric tons (Mt) 7 of carbon million in 2015$. Under amended a savings of 0.6 percent relative to the dioxide (CO2), 139 thousand tons of standards, DOE expects the change in energy use of this equipment in the no- ¥ methane (CH4), 3.1 thousand tons of INPV to range from approximately 6.7 new-standards case.6 ¥ sulfur dioxide (SO2), 41 thousand tons to 3.7 percent, which corresponds to The cumulative net present value ¥ ¥ of nitrogen oxides (NOX), 0.1 thousand approximately $18.5 to $10.3 (NPV) of total consumer benefits of the million (in 2015$). In order to bring tons of nitrous oxide (N2O), and 0.0003 amended standards for commercial tons of mercury (Hg).8 The estimated equipment into compliance with packaged boilers ranges from $0.558 amended standards, DOE expects the cumulative reduction in CO2 emissions industry to incur $21.2 million in through 2030 amounts to 1.58 Mt, 4 All monetary values in this section are which is equivalent to the emissions conversion costs. expressed in 2015 dollars and, where appropriate, DOE’s analysis of the impacts of the are discounted to 2016. resulting from the annual electricity use adopted standards on manufacturers is 5 A quad is equal to 1015 British thermal units of 0.233 million homes. (Btu). The quantity refers to full-fuel-cycle (FFC) 7 3 DOE estimated draft financial metrics, including energy savings. FFC energy savings include the A metric ton is equivalent to 1.1 short tons. the industry discount rate, based on data from energy consumed in extracting, processing, and Results for emissions other than CO2 are presented Securities and Exchange Commission (SEC) filings. transporting primary fuels (i.e., coal, natural gas, in short tons (ton). DOE presented the draft financial metrics to petroleum fuels), and thus present a more complete 8 DOE calculated emissions reductions relative to picture of the impacts of energy efficiency manufacturers in MIA interviews and adjusted the no-new-standards-case, which reflects key standards. For more information on the FFC metric, those values based on feedback from industry. The assumptions in the Annual Energy Outlook 2016 complete set of financial metrics and more detail see section IV.H.2 of this document. about the methodology can be found in section 6 The no-new-standards case assumptions are (AEO2016). AEO2016 represents current federal and 12.4.3 of chapter 12 of the TSD. described in section IV.F.9 of this document. state legislation and final implementation of regulations as of the end of February 2016.

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The value of the CO2 reductions is present value of the CO2 emissions investigating appropriate valuation of calculated using a range of values per reduction is between $0.1 billion and the reduction in other emissions and metric ton (t) of CO2 (otherwise known $1.5 billion, with a value of $0.48 did not include any such values in this as the ‘‘social cost of CO2,’’ or SCC) billion using the central SCC case rulemaking. More detailed results can developed by a Federal interagency represented by $40.6 per metric ton in be found in chapter 14 of the final rule working group.9 The derivation of the 2015.10 DOE also estimates the present TSD. SCC values is discussed in section monetary value of the NOX emissions Table I.3 summarizes the national IV.L.1 of this document. Using discount reduction is $0.35 billion at a 7-percent economic benefits and costs expected to rates appropriate for each set of SCC discount rate and $0.99 billion at a 3- result from the adopted standards for values (see Table I.3), DOE estimates the percent discount rate.11 DOE is commercial packaged boilers.

TABLE I.3—SELECTED CATEGORIES OF NATIONAL ECONOMIC BENEFITS AND COSTS OF ENERGY CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS [TSL 2 *]

Present value Discount rate Category (million 2015$) (%)

Benefits

Operating Cost Savings ...... 907 7 2,585 3 CO2 Reduction Monetized Value (using mean SCC at 5% discount rate) ** ...... 100 5 CO2 Reduction Monetized Value (using mean SCC at 3% discount rate) ** ...... 482 3 CO2 Reduction Monetized Value (using mean SCC at 2.5% discount rate) ** ...... 777 2.5 CO2 Reduction Monetized Value (using 95th percentile SCC at 3% discount rate) ** ...... 1,468 3 † NOX Reduction ...... 35 7 99 3 Total Benefits ‡ ...... 1,425 7 3,166 3

Costs

Incremental Installed Costs ...... 350 7 609 3

Total Net Benefits

‡ Including CO2 and NOX Reduction Monetized Value ...... 1,075 7 2,558 3 * This table presents the costs and benefits associated with commercial packaged boilers shipped in 2020–2049. These results include benefits to consumers that accrue after 2049 from the equipment purchased in 2020–2049. The incremental installed costs include incremental equip- ment cost as well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. ** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the integrated assessment models, at discount rates of 5 percent, 3 percent, and 2.5 percent. For example, for 2015 emissions, these val- ues are $12.4/t, $40.6/t, and $63.2/t, in 2015$, respectively. The fourth set ($118/t in 2015$ for 2015 emissions), which represents the 95th per- centile of the SCC distribution calculated using a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the SCC distribution. The SCC values are emission year specific. See section IV.L.1 for more details. † 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.2 for further discussion. To be conservative, DOE is primarily using a national benefit-per-ton estimate for NOX emitted from the Electricity Generating Unit sector based on an estimate of premature mortality derived from the ACS study (Krewski et al. 2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al. 2011), the values would be nearly two-and-a-half times larger. ‡ Total Benefits for both the 3-percent and 7-percent cases are presented using only the average SCC with 3-percent discount rate.

The benefits and costs of the adopted The monetary values for the total the amended standards (consisting energy conservation standards, for annualized net benefits are the sum of primarily of reduced operating costs covered commercial packaged boilers (1) the annualized national economic minus increases in equipment purchase sold in 2020–2049, can also be value of the benefits from consumer price and installation costs) and (2) the expressed in terms of annualized values. operation of the equipment that meets

9 United States Government—Interagency savings using benefit per ton estimates from the established in the Regulatory Impact Analysis for Working Group on Social Cost of Carbon. Technical Regulatory Impact Analysis for the Clean Power the Clean Power Plan are based on scientific studies Support Document: Technical Update of the Social Plan Final Rule, published in August 2015 by EPA’s that remain valid irrespective of the legal status of Cost of Carbon for Regulatory Impact Analysis Office of Air Quality Planning and Standards. the Clean Power Plan. To be conservative, DOE is Under Executive Order 12866. (Revised July 2015). Available at www.epa.gov/cleanpowerplan/clean- primarily using a national benefit-per-ton estimate https://www.whitehouse.gov/sites/default/files/ power-plan-final-rule-regulatory-impact-analysis. for NO emitted from the Electricity Generating omb/inforeg/scc-tsd-final-july-2015.pdf. See section IV.L.2 for further discussion. The U.S. X 10 Unit sector based on an estimate of premature The values only include CO2 emissions; CO2 Supreme Court has stayed the rule implementing equivalent emissions from other greenhouse gases the Clean Power Plan until the current litigation mortality derived from the ACS study (Krewski et are not included. against it concludes. Chamber of Commerce, et al. al. 2009). If the benefit-per-ton estimates were based 11 DOE estimated the monetized value of NOX v. EPA, et al., Order in Pending Case, 577 U.S. ll on the Six Cities study (Lepuele et al. 2011), the emissions reductions associated with electricity (2016). However, the benefit-per-ton estimates values would be nearly two-and-a-half times larger.

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annualized value of the benefits of CO2 CO2-emissions impacts that continue CO2 reductions, and $3.5 million per 12 and NOX emission reductions. beyond 2100 through 2300. year in reduced NOX emissions. In this Estimates of annualized benefits and The national operating cost savings case, the net benefit amounts to $85 costs of the amended standards are are domestic private U.S. consumer million per year. shown in Table I.4. The results under Using a 3-percent discount rate for all monetary savings that occur as a result the primary estimate are as follows. of purchasing the covered equipment. Using a 7-percent discount rate for benefits and costs and the average SCC The national operating cost savings is series corresponding to a value of $40.6/ benefits and costs other than CO2 measured for the lifetime of commercial reductions (for which DOE used a 3- t in 2015 (in 2015$), the estimated cost packaged boilers shipped in 2020–2049. percent discount rate along with the of the adopted standards for commercial The CO2 reduction is a benefit that average SCC series corresponding to a packaged boilers is $34 million per year accrues globally due to decreased value of $40.6/t in 2015 (2015$)),14 the in increased equipment costs, while the domestic energy consumption that is estimated cost of the adopted standards estimated annual benefits are $144 expected to result from this rule. for CPB equipment is $35 million per million in reduced operating costs, $27 Because CO2 emissions have a very long year in increased equipment costs, million in CO2 reductions, and $5.5 residence time in the atmosphere,13 the while the estimated benefits are $90 million in reduced NOX emissions. In SCC values in future years reflect future million per year in reduced equipment this case, the net benefit would amount operating costs, $27 million per year in to $143 million per year.

TABLE I.4—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF ADOPTED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS

Low net High net Discount Primary benefits benefits rate estimate * estimate * estimate *

(million 2015$/year)

Benefits

Consumer Operating Cost Savings * ...... 7% ...... 90 ...... 80 ...... 98. 3% ...... 144 ...... 128 ...... 160. CO2 Reduction Monetized Value (using mean SCC at 5% dis- 5% ...... 8 ...... 7 ...... 8. count rate) * **. CO2 Reduction Monetized Value (using mean SCC at 3% dis- 3% ...... 27 ...... 24 ...... 29. count rate) * **. CO2 Reduction Monetized Value (using mean SCC at 2.5% dis- 2.5% ...... 40 ...... 36 ...... 43. count rate) * **. CO2 Reduction Monetized Value (using 95th percentile SCC at 3% ...... 82 ...... 74 ...... 89. 3% discount rate) * **. † NOX Reduction ...... 7% ...... 3 ...... 3 ...... 9. 3% ...... 5 ...... 5 ...... 12. ‡ Total Benefits ...... 7% plus CO2 range ...... 101 to 175 ..... 90 to 158 ...... 115 to 196. 7% ...... 120 ...... 108 ...... 136. 3% plus CO2 range ...... 157 to 231 ..... 140 to 208 ..... 180 to 261. 3% ...... 177 ...... 158 ...... 201.

Costs

Consumer Incremental Equipment Costs ...... 7% ...... 35 ...... 31 ...... 37. 3% ...... 34 ...... 31 ...... 37.

Net Benefits

‡ Total ...... 7% plus CO2 range ...... 66 to 140 ...... 59 to 127 ...... 78 to 158. 7% ...... 85 ...... 77 ...... 99. 3% plus CO2 range ...... 123 to 198 ..... 109 to 177 ..... 144 to 224.

12 To convert the time-series of costs and benefits 7 percent for all costs and benefits except for the ‘‘Correction to ‘Control of fossil-fuel particulate into annualized values, DOE calculated a present value of CO2 reductions, for which DOE used case- black carbon and organic matter, possibly the most value in 2016, the year used for discounting the specific discount rates, as shown in Table I.4. Using effective method of slowing global warming,’ ’’ J. NPV of total consumer costs and savings. For the the present value, DOE then calculated the fixed Geophys. Res. 110. pp. D14105 (2005). annual payment over a 30-year period starting in benefits, DOE calculated a present value associated 14 with each year’s shipments in the year in which the the compliance year that yields the same present DOE used a 3-percent discount rate because the shipments occur (e.g., 2020 or 2030), and then value. SCC values for the series used in the calculation 13 discounted the present value from each year to The atmospheric lifetime of CO2 is estimated to were derived using a 3-percent discount rate (see 2016. The calculation uses discount rates of 3 and be on the order of 30–95 years. Jacobson, MZ, section IV.L).

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TABLE I.4—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF ADOPTED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS—Continued

Low net High net Discount Primary benefits benefits rate estimate * estimate * estimate *

(million 2015$/year)

3% ...... 143 ...... 127 ...... 165. * This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2020–2049. These results in- clude benefits to consumers that accrue after 2049 from the equipment purchased in 2020–2049. The incremental installed costs include incre- mental equipment cost as well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Pri- mary, Low Benefits, and High Benefits Estimates utilize projections of building stock and energy prices from the AEO2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to manufacture a given unit of higher efficiency neither increases nor decreases over time. Compared to a case where a reduction in equipment price over time is applied (e.g., due to an observed price learning), a constant price assumption results in a more conservative estimate of economic benefits. The equipment price projection is described in section IV.F.1 of this document and chapter 8 of the final rule technical support document (TSD). In addition, DOE used estimates for equipment efficiency distribution in its analysis based on national data supplied by industry. Purchases of higher efficiency equipment are a result of many different factors unique to each consumer in- cluding boiler heating loads, installation costs, site environmental consideration, and others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the baseline would 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. ** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5-per- cent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC values are emission year specific. See section IV.L.1 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.2 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 SCC with 3-percent discount rate. In the rows la- beled ‘‘7% plus CO2 range’’ and ‘‘3% plus CO2 range,’’ the operating cost and NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of CO2 values.

DOE’s analysis of the national impacts of standards for commercial packaged need to be amended as adoption of a of the adopted standards is described in boilers. more stringent level is not supported by clear and convincing evidence; or (2) sections IV.H, IV.K, and IV.L of this A. Authority document. issue a notice of proposed rulemaking The American Society of Heating, including new proposed standards D. Conclusion Refrigerating, and Air-Conditioning based on certain criteria and procedures Engineers (ASHRAE) Standard 90.1 in subparagraph (B).16 (42 U.S.C. Based on the analysis culminating in (ASHRAE Standard 90.1), ‘‘Energy this final rule, DOE finds the benefits of 6313(a)(6)(C)) Standard for Buildings Except Low-Rise In deciding whether a more-stringent the amended standards to the Nation Residential Buildings,’’ sets industry standard is economically justified, (energy savings, positive NPV of energy efficiency levels for small, large, under either the provisions of 42 U.S.C. consumer benefits, consumer LCC and very large commercial package air- 6313(a)(6)(A) or (C), DOE must savings, and emission reductions) conditioning and heating equipment, determine whether the benefits of the outweigh the burdens (loss of INPV for packaged terminal air conditioners, standard exceed its burdens. DOE must manufacturers and LCC increases for packaged terminal heat pumps, warm make this determination after receiving some consumers). DOE also concludes air furnaces, packaged boilers, storage comments on the proposed standard, that the amended standards represent water heaters, instantaneous water and by considering, to the maximum significant additional energy heaters, and unfired hot water storage extent practicable, the following seven conservation and are technologically tanks (collectively ‘‘ASHRAE factors: feasible and economically justified. DOE equipment’’). For each type of listed (1) The economic impact of the further notes that equipment achieving equipment, EPCA directs that if standard on manufacturers and these standard levels is already ASHRAE amends Standard 90.1, DOE commercially available for all must adopt amended standards at the 16 In relevant part, subparagraph (B) specifies equipment classes covered by this final new ASHRAE efficiency level, unless that: (1) In making a determination of economic rule.15 DOE determines, supported by clear and justification, DOE must consider, to the maximum convincing evidence, that adoption of a extent practicable, the benefits and burdens of an II. Introduction amended standard based on the seven criteria more stringent level would produce described in EPCA; (2) DOE may not prescribe any The following section briefly significant additional conservation of standard that increases the energy use or decreases energy and would be technologically the energy efficiency of a covered product; and (3) discusses the statutory authority DOE may not prescribe any standard that interested underlying this final rule, as well as feasible and economically justified. (42 persons have established by a preponderance of some of the relevant historical U.S.C. 6313(a)(6)(A)(ii) evidence is likely to result in the unavailability in background related to the establishment Under EPCA, DOE must also review the United States of any product type (or class) of energy efficiency standards for performance characteristics (including reliability, features, sizes, capacities, and volumes) that are 15 See chapter 3 of the final rule TSD for commercial packaged boilers every six substantially the same as those generally available information about the efficiency ratings of years and either: (1) Issue a notice of in the United States. (42 U.S.C. 6313(a)(6)(B)(ii)– equipment currently available on the market. determination that the standards do not (iii))

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consumers of products subject to the and volumes that are substantially the Therefore, DOE maintains the existing standard; same as those generally available in the standards because there is not sufficient (2) The savings in operating costs United States at the time of the data to support, by clear and convincing throughout the estimated average life of Secretary’s finding. (42 U.S.C. evidence, more stringent standards for the covered products in the type (or 6313(a)(6)(B)(iii)(II)(aa)) commercial packaged boilers with rated class) compared to any increase in the Further, EPCA, as codified, inputs >10,000 kBtu/h. (42 U.S.C. price, initial charges, or maintenance establishes a rebuttable presumption 6313(a)(6)(C)(i)(I) For more discussion expenses for the covered equipment that that an energy conservation standard is on commercial packaged boilers with are likely to result from the standard; economically justified if the Secretary rated input greater than 10,000 kBtu/h, (3) The total projected amount of finds that the additional cost to the see section IV.A.3 of this final rule. energy savings likely to result directly consumer of purchasing a product that from the standard; complies with the standard will be less B. Background (4) Any lessening of the utility or the than three times the value of the energy 1. Current Standards performance of the covered product (and, as applicable, water) savings likely to result from the standard; during the first year that the consumer Prior to this final rule, DOE last (5) The impact of any lessening of will receive as a result of the standard, amended its energy conservation competition, as determined in writing as calculated under the applicable test standards for commercial packaged by the Attorney General, that is likely to procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) boilers through a final rule published in result from the standard; However, while this rebuttable the Federal Register on July 22, 2009 (6) The need for national energy presumption analysis applies to most (July 2009 final rule). 74 FR 36312. conservation; and commercial and industrial equipment More specifically, the July 2009 final (7) Other factors the Secretary of (42 U.S.C. 6316(a)), it is not a required rule updated the energy conservation Energy considers relevant. analysis for ASHRAE equipment, standards for commercial packaged 42 U.S.C. 6313(a)(6)(B)(ii)(I)–(VII)) including commercial packaged boilers boilers to correspond to the levels in the Because ASHRAE did not update its (42 U.S.C. 6316(b)(1)). Nonetheless, 2007 revision of ASHRAE Standard 90.1 efficiency levels for commercial DOE considered the criteria for (i.e., ASHRAE Standard 90.1–2007). The packaged boilers in any of its most rebuttable presumption as part of its July 2009 final rule established thermal recent updates to ASHRAE Standard economic justification analysis. efficiency as the energy efficiency 90.1 (i.e., ASHRAE Standard 90.1–2010, After carefully reviewing all CPB metric for all equipment classes other ASHRAE Standard 90.1–2013, and equipment classes, DOE has concluded than commercial packaged boilers with ASHRAE Standard 90.1–2016), DOE is that amended energy conservation fuel rated input greater than 2,500,000 analyzing amended standards consistent standards for 8 of the 12 CPB equipment Btu/h and that are designed to deliver with the procedures defined under 42 classes adopted in this final rule (i.e., all hot water. For such equipment classes U.S.C. 6313(a)(6)(C). commercial packaged boilers with rated (i.e., gas-fired and oil-fired hot water EPCA, as codified, also contains what inputs ≤10,000 kBtu/h) will result in commercial packaged boilers with rated is known as an ‘‘anti-backsliding’’ significant additional conservation of input greater than 2,500,000 Btu/h), provision, which prevents DOE from energy and are technologically feasible DOE established combustion efficiency prescribing any amended standard that and economically justified, as mandated as the energy efficiency metric. either increases the maximum allowable by 42 U.S.C. 6313(a)(6). Compliance with the standards adopted energy use or decreases the minimum For the remaining 4 equipment in the July 2009 final rule was required required energy efficiency of a covered classes, (i.e., all commercial packaged beginning on March 2, 2012. These product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) boilers with rated inputs >10,000 kBtu/ levels are shown in Table II.1. Also in Furthermore, DOE may not prescribe an h), DOE tentatively decided in the the July 2009 final rule, DOE again amended or new standard if interested March 2016 NOPR not to amend energy followed ASHRAE’s approach in persons have established by a conservation standards because of a lack Standard 90.1–2007 and adopted a preponderance of the evidence that the of sufficient data to justify amended second tier of energy conservation standard is likely to result in the standards. 81 FR 15836, 15851–15853 standards for two classes of commercial unavailability in the United States of (March 24, 2016). DOE did not receive packaged boilers, which are shown in any covered product type (or class) of any additional information or data that Table II.2. Compliance with the latter performance characteristics (including would support the rulemaking analysis standards is required beginning on reliability), features, sizes, capacities, for such commercial packaged boilers. March 2, 2022.

TABLE II.1—FEDERAL ENERGY EFFICIENCY STANDARDS FOR COMMERCIAL PACKAGED BOILERS MANUFACTURED ON OR AFTER MARCH 2, 2012

Efficiency level— Equipment type Subcategory Size category effective date: (input) March 2, 2012 *

Hot Water Commercial Packaged Boil- Gas-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h 80.0% ET. ers. Hot Water Commercial Packaged Boil- Gas-fired ...... >2,500,000 Btu/h ...... 82.0% EC. ers. Hot Water Commercial Packaged Boil- Oil-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h 82.0% ET. ers. Hot Water Commercial Packaged Boil- Oil-fired ...... >2,500,000 Btu/h ...... 84.0% EC. ers. Steam Commercial Packaged Boilers .. Gas-fired—All, Except Natural Draft ... ≥300,000 Btu/h and ≤2,500,000 Btu/h 79.0% ET. Steam Commercial Packaged Boilers .. Gas-fired—All, Except Natural Draft ... >2,500,000 Btu/h ...... 79.0% ET. Steam Commercial Packaged Boilers .. Gas-fired—Natural Draft ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h 77.0% ET.

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TABLE II.1—FEDERAL ENERGY EFFICIENCY STANDARDS FOR COMMERCIAL PACKAGED BOILERS MANUFACTURED ON OR AFTER MARCH 2, 2012—Continued

Efficiency level— Equipment type Subcategory Size category effective date: (input) March 2, 2012 *

Steam Commercial Packaged Boilers .. Gas-fired—Natural Draft ...... >2,500,000 Btu/h ...... 77.0% ET. Steam Commercial Packaged Boilers .. Oil-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h 81.0% ET. Steam Commercial Packaged Boilers .. Oil-fired ...... >2,500,000 Btu/h ...... 81.0% ET.

*ET means ‘‘thermal efficiency.’’ EC means ‘‘combustion efficiency.’’

TABLE II.2—FEDERAL ENERGY EFFICIENCY STANDARDS FOR COMMERCIAL PACKAGED BOILERS MANUFACTURED ON OR AFTER MARCH 2, 2022

Efficiency level— Equipment type Subcategory Size category effective date: (input) March 2, 2022

Steam Commercial Packaged Boilers .. Gas-fired—Natural Draft ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h 79.0% ET. Steam Commercial Packaged Boilers .. Gas-fired—Natural Draft ...... >2,500,000 Btu/h ...... 79.0% ET.

2. History of Standards Rulemaking for environmental and energy efficiency associations, environmental and energy Commercial Packaged Boilers advocates, and other interested parties efficiency advocates, and other DOE is conducting this rulemaking attended the meeting. The participants interested parties attended the meeting. pursuant to 42 U.S.C. 6313(a)(6)(C), discussed the following major topics, The public meeting provided an which requires that every 6 years, DOE among others: (1) The rulemaking scope opportunity for the attendees to provide must publish either: (1) A notice of the (2) test procedures for commercial feedback and comments that would help determination that standards for the packaged boilers; and (3) various issues improve DOE’s analysis and results for equipment do not need to be amended, related to the planned analyses of the NOPR stage. In addition, DOE also or (2) a NOPR including proposed amended energy conservation received several written comments from energy conservation standards. As noted standards. Interested parties also interested parties and stakeholders, in above, DOE’s last final rule for provided comments on the Framework response to the preliminary analysis commercial packaged boilers was document, which DOE considered and TSD. published on July 22, 2009. DOE is responded to in chapter 2 of the On March 24, 2016, DOE issuing this final rule pursuant to its preliminary analysis TSD. subsequently published a notice of statutory obligation under 42 U.S.C. On November 20, 2014, DOE proposed rulemaking (NOPR) and notice 6313(a)(6)(C). published a second notice, ‘‘Energy of public meeting in the Federal In initiating this rulemaking, DOE Conservation Standards for Commercial Register (March 2016 NOPR) that prepared a Framework document, Packaged Boilers: Public Meeting and addressed all of the comments received ‘‘Energy Conservation Standards Availability of the Preliminary in response to the preliminary analysis Rulemaking Framework Document for Technical Support Document’’ in the TSD and proposed amended energy Commercial Packaged Boilers,’’ which Federal Register to announce the conservation standards for commercial describes the procedural and analytical availability of the preliminary analysis packaged boilers. 81 FR 15836. In approaches DOE anticipated using to technical support document (TSD). 79 addition to amended energy evaluate energy conservation standards FR 69066. The preliminary analysis TSD conservation standards, DOE also for commercial packaged boilers. DOE provided preliminary results of the proposed to reorganize the equipment published a notice that announced both analyses that DOE conducted in support class structure for commercial packaged the availability of the Framework of the energy conservation standards boilers. The March 2016 NOPR also document and a public meeting to rulemaking. DOE invited interested updated the rulemaking analysis based discuss the proposed analytical parties to comment on the preliminary on comments received in response to framework for the rulemaking. That analysis, and requested public the preliminary analysis and the most notice also invited written comments comments on specific issues related to recent data sources available, and from the public. 78 FR 54197 (Sept. 3, the TSD. These issues are listed in the sought comments from interested 2013). The Framework document is Executive Summary chapter of the parties on specific issues listed in the available at: https:// preliminary analysis TSD. The March 2016 NOPR. The March 2016 www1.eere.energy.gov/buildings/ preliminary analysis TSD is available at: NOPR and the NOPR TSD are available appliance_standards/rulemaking.aspx/ https://www1.eere.energy.gov/buildings/ at: https://www1.eere.energy.gov/ ruleid/79. appliance_standards/rulemaking.aspx/ buildings/appliance_standards/ DOE held a public meeting on ruleid/79. rulemaking.aspx/ruleid/79. October 1, 2013, at which it described On December 9, 2014, DOE held a On April 21, 2016, DOE held a public the various analyses DOE would public meeting, at which it described meeting where it presented and conduct as part of the rulemaking, such the methodology and preliminary discussed the analyses conducted as as the engineering analysis, the life- results of the various analyses it part of this rulemaking (e.g., engineering cycle cost (LCC) and payback period conducted as part of the rulemaking, analysis, LCC and PBP analysis, (PBP) analyses, and the national impact such as the engineering analysis, the national impact analysis). In the public analysis (NIA). Representatives of LCC and PBP analyses, and the NIA. meeting, DOE presented the results of manufacturers, trade associations, Representatives of manufacturers, trade these analyses and requested comments

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from stakeholders on various issues public meeting) and written comments that commented on the March 2016 related to the rulemaking. In response to from interested parties that were NOPR are shown in Table II.3 of this the March 2016 NOPR, DOE received considered while updating its analysis final rule. both verbal comments (during the for this final rule. The interested parties

TABLE II.3—PARTIES THAT PROVIDED COMMENTS ON THE MARCH 2016 NOPR

Name of party Abbreviation Source of comments Type *

Air-Conditioning, Heating and Refrigeration Institute ...... AHRI ...... Public Meeting, Written .. TA American Boiler Manufacturers Association ...... ABMA ...... Public Meeting, Written .. TA American Council for Energy Efficient Economy, Appliance Standards Awareness Joint Advocates ...... Written ...... EA Project, Natural Resource Defense Council, Northwest Energy Efficiency Alliance. American Gas Association, American Public Gas Association ...... Gas Associations ...... Public Meeting, Written .. UA Appliance Standards Awareness Project ...... ASAP ...... Public Meeting ...... EA Bradford White Corporation ...... Bradford White ...... Written ...... M Burnham Holdings ...... BHI ...... Written ...... M Cato Institute ...... Cato ...... Written ...... O The U.S. Chamber of Commerce, the American Chemistry Council, the American The Associations ...... Written ...... TA Coke and Coal Chemicals Institute, the American Forest & Paper Association, the American Fuel & Petrochemical Manufacturers, the American Petroleum Institute, the Brick Industry Association, the Council of Industrial Boiler Owners, the Na- tional Association of Manufacturers, the National Mining Association, the National Oilseed Processors Association, and the Portland Cement Association. Crown Boiler ...... Crown ...... Public Meeting, Written .. M Industrial Energy Consumers of America ...... IECA ...... Written ...... TA Lochinvar, LLC ...... Lochinvar ...... Public Meeting, Written .. M Sidel Systems ...... Sidel ...... Written ...... M Pacific Gas & Electric, San Diego Gas & Electric ...... Joint Utilities ...... Written, Public Meeting .. U Phoenix Energy Management ...... PEM ...... Public Meeting ...... C Raypak, Inc ...... Raypak ...... Public Meeting, Written .. M Southern California Gas ...... SoCalGas ...... Public Meeting, Written .. U Spire (formerly The LaClede Group, Inc.) ...... Spire/LaClede ...... Public Meeting ...... U Spire ...... Written Tom Nussbaum ...... Tom Nussbaum ...... Written ...... I Weil-McLain ...... Weil-McLain ...... Written ...... M * TA: Trade Association; EA: Efficiency/Environmental Advocate; M: Manufacturer; C: Contractor; U: Utility; UA: Utility Association; I: Individual; O: Other.

In parallel to the energy conservation received on the issue of coverage final rule in the Federal Register, which standards rulemaking, DOE published a determination of natural draft updated the test procedure for notice of proposed determination on commercial packaged boilers and commercial packaged boilers. 81 FR August 13, 2013 (August 2013 NOPD), determining that the comments 89276. Section III.B of this document which initiated a coverage indicated a common and long-standing briefly discusses the amendments made determination to explicitly clarify DOE’s understanding from interested parties to the test procedure.17 The analyses statutory authority under EPCA to cover that natural draft commercial packaged conducted for this final rule reflect the natural draft commercial packaged boilers are and have been covered changes adopted in the December 2016 boilers. DOE initiated this coverage equipment under part A–1 of Title III of test procedure final rule. (2016 CPB TP determination because the existing EPCA, DOE decided to withdraw the final rule) definition of ‘‘packaged boiler’’ could August 2013 NOPD on August 25, 2015 have allowed for differing (August 2015 withdrawal notice). 80 FR III. General Discussion 51487. interpretations as to whether natural A. Compliance Dates draft commercial packaged boilers are DOE also recently completed a covered equipment. 78 FR 49202. In the separate test procedure rulemaking to In 42 U.S.C. 6313(a), EPCA prescribes August 2013 NOPD, DOE proposed a consider an amended test procedure for a number of compliance dates for definition for natural draft commercial commercial packaged boilers. On amended standards for commercial packaged boilers that would clarify its February 20, 2014, DOE initiated the packaged boilers. These compliance statutory authority to cover such test procedure rulemaking by publishing dates vary depending on the specific equipment. DOE sought public a request for information (RFI) in the statutory authority under which DOE is comments in response to its proposed Federal Register that sought comments conducting its review (i.e., whether DOE determination and definition for natural and information from stakeholders on is triggered by a revision to ASHRAE draft commercial packaged boilers, and several issues pertaining to the CPB test Standard 90.1 or whether DOE is received several written comments from procedure. 79 FR 9643. On March 17, undertaking a 6-year review), and the interested parties. In addition, DOE also 2016, DOE published a NOPR in the action taken (i.e., whether DOE is received several comments in response Federal Register, which proposed to adopting ASHRAE Standard 90.1 levels to the preliminary analysis TSD that are update the test procedure for or more stringent levels). The discussion relevant to the issue of coverage determining the efficiency of determination of natural draft commercial packaged boilers (2016 CPB 17 For detailed discussion on the test procedure commercial packaged boilers. After TP NOPR). 81 FR 14642. Subsequently, including the comments and DOE’s response please carefully reviewing all of the comments on December 9, 2016, DOE published a see the docket #EERE–2014–BT–TP–0006.

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that follows explains the compliance commercial packaged boilers, (5) that the joint proposal of test procedures dates as they pertain to this rulemaking. establishes limits on the ambient and standards eliminates that As discussed in section II.A of this temperature and relative humidity opportunity. (AHRI, No. 76 at pp. 2–3) document, EPCA requires that at least conditions during testing, (6) modifies AHRI further commented that having once every 6 years, DOE must review setup and instrumentation requirements simultaneous rulemakings creates an standards for commercial packaged to remove ambiguity, and (7) unfair burden on stakeholders. (AHRI, boilers and publish either a notice of standardizes terminology and Public Meeting Transcript, No. 61 at p. determination that standards for this provisions for ‘‘fuel input rate’’ and 80) Similarly, Raypak, Bradford White, type of equipment do not need to be ‘‘rated input.’’ and Crown commented that the ongoing amended or a NOPR containing In response to the March 2016 NOPR, changes to the test procedure do not amended standards. (42 U.S.C. DOE received several comments that are allow manufacturers the opportunity to 6313(a)(6)(C)(i)) EPCA requires that an specifically related to the CPB test properly evaluate the effects of the amended standard prescribed under 42 procedure. Comments related to the proposed standards. Bradford White U.S.C. 6313(a)(6)(C) must apply to technical aspects of the test procedure noted that their resources are focused on products manufactured after the date development were considered and proposed test procedure changes. that is the later of: (1) The date 3 years addressed in the test procedure final (Raypak, No. 72 at p. 1; Bradford White, after publication of the final rule rule. No. 68 at p. 1; Crown, Public Meeting establishing a new standard or (2) the Transcript, No. 61 at p. 13; Bradford 2. Timing of the Test Procedure and date 6 years after the effective date of White, No. 68 at p. 12) Several Energy Conservation Standards the current standard for a covered stakeholders also contended that the Rulemakings product. (42 U.S.C. 6313(a)(6)(C)(iv)) timing of the test procedure and The current standards for commercial Several stakeholders expressed legal, standards rulemaking violated DOE’s packaged boilers went into effect in procedural, and practical concerns own procedural policies or ‘‘the process 2012. Thus, the date 3 years after regarding the timing of the test rule.’’ (Gas Associations, No. 69 at p. 2; publication of this final rule is later than procedure and energy conservation Bradford White, No. 68 at p. 12; Weil- the date 6 years after 2012, the effective standards revisions for commercial McLain, No. 67 at p. 4; Spire, No. 73 at date of the current standard. As a result, packaged boilers, and requested that pp. 5–7; AHRI, No. 76 at p. 3; compliance with any amended energy DOE delay any further work on the Lochinvar, No. 71 at p. 7) AHRI conservation standards promulgated in rulemakings to amend efficiency highlighted that the process rule is not this final rule is required starting from standards until after the finalization of merely a guideline, noting it was the dates specified in paragraph (b) of the test procedure. (Bradford White, No. codified in the Code of Federal 10 CFR 431.87. 68 at p. 1; Gas Associations, No. 69 at Regulations. AHRI contended that DOE p. 2; BHI, No. 71 at p. 5; Lochinvar, No. must abide by its own regulations. B. Test Procedure 70 at p. 7; AHRI, No. 76 at pp. 2–3; (AHRI, No. 76 at p. 3) 1. Summary of Recent Updates ABMA, No. 64 at p. 1, Crown, Public DOE provided a detailed response on Meeting Transcript, No. 61 at p. 13; this issue in the 2016 CPB TP final rule. DOE’s current test procedure for AHRI, Public Meeting Transcript, No. DOE re-iterates in this final rule that the commercial packaged boilers is found at 61, at p. 14); 18 AHRI highlighted that amendments to the Federal test 10 CFR 431.86. DOE has two years from the publication procedure includes updates to the As stated previously, on December 9, of the NOPR for energy conservation referenced industry test standard (ANSI/ 2016, DOE published a final rule standards before it must publish a final AHRI Standard 1500–2015) which was amending the CPB test procedure. 81 FR rule for CPB standards under 42 U.S.C. developed by a consensus-based AHRI 89276. The 2016 CPB TP final rule 6313(a)(6)(C)(iii), and asserted that DOE process. In May 2015, AHRI petitioned adopted specific sections of American has sufficient time to finalize the test DOE to replace its references to BTS– National Standards Institute (ANSI)/ procedure and subsequently reopen 2000 with ANSI/AHRI Standard 1500– AHRI Standard 1500, ‘‘Standard for comments on the proposed standard. 2015. In addition, DOE received Performance Rating of Commercial (AHRI, No. 76 at p. 5) insightful and detailed comments on the Space Heating Boilers,’’ (ANSI/AHRI AHRI argued that the non-final status proposed amendments to the test Standard 1500–2015) as the basis of the of the test procedure inhibits procedure in response to the 2016 CPB test procedure for commercial packaged stakeholders’ fair evaluation of the TP NOPR. Considering these boilers, replacing the previous industry proposed standards and stressed the developments leading up to the 2016 test standard BTS–2000. In addition, the importance of having a known CPB TP final rule, the industry was 2016 CPB TP final rule incorporates the efficiency test procedure. AHRI pointed involved at all stages of the test following amendments to the DOE test out that DOE is required to provide procedure rulemaking, and DOE’s procedure: (1) Clarifies the coverage for stakeholders the opportunity to submit amendments are largely in keeping with field-constructed commercial packaged meaningful comments (42 U.S.C. the test methodology found in boilers and the applicability of DOE’s 6306(a), 42 U.S.C. 6314(b)), and opined consensus-based industry standard test procedure and standards for this ANSI/AHRI Standard 1500–2015. Any category of commercial packaged 18 DOE will identify comments received in deviations in the 2016 CPB TP final rule boilers, (2) provides an optional field response to the March 2016 CPB ECS NOPR and from ANSI/AHRI 1500–2015 are a result test for commercial packaged boilers placed in Docket No. EERE–2013–BT–STD–0030 by of DOE’s efforts to make the test with rated input greater than 5,000,000 the commenter, the number of the comment procedure better reflect the energy document as listed in the docket maintained at Btu/h, (3) provides a conversion method www.regulations.gov, and the page number of that efficiency during a representative to calculate thermal efficiency based on document where the comment appears (for average use cycle, as required by EPCA. combustion efficiency testing for steam example: Bradford White, No. 68 at p. 1). If a (42 U.S.C. 6314(a)(2)). In the 2016 CPB commercial packaged boilers with rated comment was made during the CPB ECS NOPR TP final rule, as discussed in section public meeting, DOE will also specifically identify input greater than 5,000,000 Btu/h, (4) those as being located in the NOPR public meeting III.B.3, DOE concluded that the modifies the inlet water temperature transcript (for example: Crown, Public Meeting amendments to the test procedure that requirements during tests of hot water Transcript, No. 61 at p. 13). were ultimately adopted would mitigate

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concerns regarding the impact on No. 70 at p. 7; BHI, No. 71 at p. 3; AHRI to mitigate impacts on the efficiency ratings. 81 FR 89276, 89281–89282 No. 76 at p. 4) ratings.19 81 FR 89276, 89289–89290 (December 9, 2016). Lochinvar noted that DOE’s own test (December 9, 2016). summary shows that the TP changes Furthermore, in the energy C. Technological Feasibility conservation standards rulemaking, would reduce the rated efficiency of DOE granted a 30-day extension of the some boilers. Lochinvar also stated that 1. General comment period following the anti-backsliding provisions would publication of the March 2016 NOPR to prevent DOE from making any changes In each energy conservation standards ensure that stakeholders had sufficient to the standard after the fact if TP rulemaking, DOE conducts a screening time to comment on the analyses and changes negatively impact ratings. analysis based on information gathered results. Therefore, DOE believes that (Lochinvar, No. 70 at p. 7) AHRI noted on all current technology options and stakeholders have had adequate time to that DOE’s conclusion that the prototype designs that could improve gauge the effect of the standards efficiency ratings would not be the efficiency of the equipment that is rulemaking to enable them to provide impacted by the proposed test the subject of the rulemaking. As the meaningful comments on its analysis procedure changes is based on limited first step in such an analysis, DOE and results. testing data, and stakeholders did not conducts a market and technology assessment that develops a list of Regarding the commenters’ assertions have sufficient time to provide technology options for consideration in that DOE has violated the process rule, meaningful comments. (AHRI No. 76 at p. 4) BHI added that that the rating of consultation with manufacturers, design DOE notes that the codified procedures some equipment could be significantly engineers, and other interested parties. at 10 CFR part 430, subpart C, appendix impacted, given that the test procedure DOE then determines which of those A (7)(c), Appendix A establish is significantly different. (BHI, No. 71 at means for improving efficiency are procedures, interpretations, and policies pp. 3, 4–5) They suggested that the technologically feasible. DOE considers to guide DOE in the consideration and efficiency of 85-percent E ‘‘Category I’’ technologies incorporated in promulgation of new or revised T boilers in the directory will change due commercially available equipment or in appliance efficiency standards under to the proposed water temperature working prototypes to be EPCA. (See section 1 of 10 CFR part 430 changes in the 2016 CPB TP NOPR. technologically feasible. 10 CFR part subpart C, appendix A) These (BHI, No. 71 at p. 10) Raypak provided 430, subpart C, appendix A, section procedures are a general guide to the similar comments. (Raypak, No. 72 at p. 4(a)(4)(i) steps DOE typically follows in 3) After DOE has determined that promulgating energy conservation Weil-McLain and SoCalGas standards. The guidance recognizes that particular technology options are commented that the efficiency ratings of technologically feasible, it further DOE can and will, on occasion, deviate non-condensing boilers will drop due to from the typical process. In the case of evaluates each technology option in the new test procedure and that the light of the following additional commercial packaged boilers, DOE was proposed increases in the minimum petitioned by the industry to adopt the screening criteria: (1) Practicability to standard would combine to significantly manufacture, install, and service; (2) industry test standard AHRI Standard reduce the types of feasible non- 1500–2015, while the energy adverse impacts on equipment utility or condensing equipment. (Weil-McLain, availability; and (3) adverse impacts on conservation standards rulemaking was No. 67 at p. 2; SoCalGas, No. 77 at p. in process. The energy conservation health or safety. 10 CFR part 430, 2) AHRI commented that the analysis subpart C, appendix A, section standards rulemaking was initiated in must be based on finalized test August 2013 with the publication of the 4(a)(4)(ii)–(iv) Additionally, DOE notes procedures in order to realistically that these screening criteria do not Framework document, as discussed in represent the impacts of amended directly address the proprietary status of section II.B.2 of this final rule, and standards (including energy savings, design options. DOE only considers AHRI petitioned DOE to amend the test cost to consumers and manufacturers). efficiency levels achieved through the procedure in May 2015, as noted above. (AHRI, No. 76 at pp. 2–3) SoCal use of proprietary designs in the Therefore, per AHRI’s request, DOE suggested that the benefits of TSL 1 may engineering analysis if they are not part initiated a test procedure rulemaking actually be closer to those calculated for of a unique path to achieve that concurrent with the standards TSL 2, given the proposed water efficiency level (i.e., if there are other rulemaking. As noted above and temperature changes in the test non-proprietary technologies capable of discussed in section III.B.3, the changes procedure. (SoCalGas, No. 77 at p. 2) to the test procedure that were In the 2016 CPB TP NOPR, DOE achieving the same efficiency). DOE ultimately adopted in the 2016 CPB TP tentatively determined that the concludes that the amended standards final rule mitigated stakeholders’ proposed test procedure amendments for the equipment covered in this final concerns about impacts to efficiency would not result in an overall rule do not mandate the use of any ratings. Accordingly, DOE has measureable impact on equipment’s proprietary technologies, and that all concluded that there is no basis to delay measured efficiency. 81 FR 14642, manufacturers are able to achieve the the final rule adopting standards for 12878 (March 17, 2016). However, as amended standard levels through the commercial packaged boilers. discussed above, DOE received use of non-proprietary designs. Section comments from stakeholders in IV.B and IV.C of this final rule discuss 3. Impact on Efficiency Ratings response to both the March 2016 NOPR the results of the screening analysis and Several commenters indicated that and the 2016 CPB TP NOPR suggesting engineering analysis for commercial they expected that the proposed changes that several proposals included in the packaged boilers. For further details on to the test procedure would result in 2016 CPB TP NOPR would impact the screening analysis and engineering changes to the rated efficiency. efficiency ratings. In the 2016 CPB TP Lochinvar, BHI, and AHRI questioned final rule, DOE addressed stakeholders’ 19 For additional discussion and DOE’s detailed response to the comments please refer to the 2016 DOE’s tentative determination that the concerns and ultimately revised the CPB TP final rule docketed at ID #EERE–2014–BT– test procedure changes would not proposals that could have resulted in TP–0006. https://www.regulations.gov/docket? impact efficiency ratings. (Lochinvar, changes to the efficiency ratings in order D=EERE-2014-BT-TP-0006.

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analysis for this final rule, see chapter energy consumed in extracting, INPV, which values the industry based 4 and chapter 5 of the final rule TSD. processing, and transporting primary on expected future cash flows; (2) cash fuels (i.e., coal, natural gas, petroleum flows by year; (3) changes in revenue 2. Maximum Technologically Feasible fuels), and thus presents a more and income; and (4) other measures of Levels complete picture of the impacts of impact, as appropriate. Second, DOE When DOE proposes to adopt an energy conservation standards. DOE’s analyzes and reports the impacts on amended standard for a type or class of approach is based on the calculation of different types of manufacturers, covered equipment, it determines the an FFC multiplier for each of the energy including impacts on small maximum improvement in energy types used by covered products or manufacturers. Third, DOE considers efficiency or maximum reduction in equipment. For more information on the impact of standards on domestic energy use that is technologically FFC energy savings, see section IV.H.2 manufacturer employment and feasible for such equipment. of this document. manufacturing capacity, as well as the Accordingly, in the engineering analysis potential for standards to result in plant of this final rule, DOE determined the 2. Significance of Savings closures and loss of capital investment. maximum technologically feasible To amend standards for commercial Finally, DOE takes into account (‘‘max-tech’’) improvements in energy packaged boilers, DOE must determine cumulative impacts of various DOE efficiency for commercial packaged that the standards would result in regulations and other regulatory boilers, using the design parameters for ‘‘significant’’ additional energy savings. requirements on manufacturers. the most efficient equipment currently (42 U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i)) For individual consumers, measures available on the market. The max-tech Although the term ‘‘significant’’ is not of economic impact include the changes levels that DOE determined for this defined in the Act, the U.S. Court of in LCC and PBP associated with new or rulemaking are described in section Appeals for the District of Columbia amended standards. These measures are IV.C.4 of this document and in chapter Circuit, in Natural Resources Defense discussed further in the following 5 of the final rule TSD. Council v. Herrington, 768 F.2d 1355, section. For consumers in the aggregate, D. Energy Savings 1373 (D.C. Cir. 1985), indicated that DOE also calculates the national NPV of Congress intended ‘‘significant’’ energy the economic impacts applicable to a 1. Determination of Savings savings in the context of EPCA to be particular rulemaking. DOE also For each trial standard level (TSL), savings that were not ‘‘genuinely evaluates the LCC impacts of potential DOE projected energy savings from the trivial.’’ DOE concludes the energy standards on identifiable subgroups of application of the TSL to commercial savings for the amended standards consumers that may be affected packaged boilers purchased in the 30- (presented in section V.B.3 of this disproportionately by a national year period that begins in the year of document) are ‘‘significant’’ as required standard. compliance with amended standards by 42 U.S.C. 6313(a)(6)(A)(ii)(II) and b. Savings in Operating Costs Compared (2020–2049).20 The savings are (C)(i). To Increase in Price measured over the entire lifetime of commercial packaged boilers purchased E. Economic Justification EPCA requires DOE to consider the savings in operating costs throughout in the 30-year analysis period. DOE 1. Specific Criteria quantified the energy savings the estimated average life of the covered EPCA provides seven factors to be attributable to each TSL as the equipment in the type (or class) evaluated in determining whether a difference in energy consumption compared to any increase in the price potential energy conservation standard between each standards case and the no- of, or in the initial charges for, or new-standards-case. The no-new- is economically justified. (42 U.S.C. maintenance expenses of, the covered standards case represents a projection of 6313(a)(6)(B)(ii)(I)–(VII)) The following equipment that are likely to result from energy consumption that reflects how sections discuss how DOE has an amended standard. (42 U.S.C. the market for equipment would likely addressed each of those seven factors in 6313(a)(6)(B)(ii)(II)) DOE conducts this evolve in the absence of amended this rulemaking. comparison in its LCC and PBP analysis. The LCC is the sum of the purchase efficiency standards. a. Economic Impact on Manufacturers price of the equipment (including DOE uses its NIA spreadsheet models and Consumers to estimate energy savings from installation cost and sales tax) and the EPCA requires DOE to consider the potential amended standards. The NIA operating expense (including energy, economic impact of a standard on spreadsheet model (described in section maintenance, and repair expenditures) manufacturers and the consumers of the IV.H of this document) calculates discounted over the lifetime of the products subject to the standard. (42 savings in site energy, which is the equipment. The LCC analysis requires a U.S.C. 6313(a)(6)(B)(ii)(I)) In energy directly consumed by equipment variety of inputs, such as equipment determining the impacts of a potential at the locations where they are used. For prices, equipment energy consumption, amended standard on manufacturers, electricity, DOE reports national energy energy prices, maintenance and repair DOE conducts a manufacturer impact savings (NES) in terms of primary costs, equipment lifetime, and discount analysis (MIA), as discussed in section energy savings, which is the savings in rates appropriate for consumers. To IV.J of this document. DOE first uses an the energy that is used to generate and account for uncertainty and variability annual cash-flow approach to determine transmit the site electricity. For natural in specific inputs, such as equipment the quantitative impacts. This step gas, the primary energy savings are lifetime and discount rate, DOE uses a includes both a short-term assessment— considered to be equal to the site energy distribution of values, with probabilities based on the cost and capital savings. DOE also calculates NES in attached to each value. For its analysis, requirements during the period between terms of full-fuel-cycle (FFC) energy DOE assumes that consumers will when a regulation is issued and when savings. The FFC metric includes the purchase the covered equipment in the entities must comply with the first year of compliance with amended 20 DOE also presents a sensitivity analysis that regulation—and a long-term assessment standards. considers impacts for equipment shipped in a 9- over a 30-year period. The industry- The PBP is the estimated amount of year period. wide impacts analyzed include: (1) time (in years) it takes consumers to

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recover the increased purchase cost adverse impact on competition. DOE the 3-year PBP contemplated under the (including installation) of more-efficient has included this determination from rebuttable-presumption test. equipment through lower operating DOJ at the end of this rule. In addition, DOE routinely conducts costs. DOE calculates the PBP by an economic analysis that considers the f. Need for National Energy dividing the change in purchase cost full range of impacts to consumers, Conservation due to a more stringent standard by the manufacturers, the Nation, and the change in annual operating cost for the In considering new or amended environment, as required under 42 year that standards are assumed to take energy conservation standards, EPCA U.S.C. 6313(a)(6)(B)(ii) and (C)(i). The effect. also directs DOE to consider the need results of this analysis serve as the basis The LCC savings for the considered for the national energy conservation. (42 for DOE’s evaluation of the economic efficiency levels are calculated relative U.S.C. 6313(a)(6)(B)(ii)(VI)) The adopted justification for a potential standard to a no-new-standards-case that reflects standards are likely to improve the level (thereby supporting or rebutting projected market trends in the absence security and reliability of the Nation’s the results of any preliminary of amended standards. DOE identifies energy system. Reductions in the determination of economic the percentage of consumers estimated demand for electricity also may result in justification). The rebuttable to receive LCC savings or experience an reduced costs for maintaining the presumption payback calculation is LCC increase, in addition to the average reliability of the Nation’s electricity discussed in section V.B.1.c of this LCC savings associated with a particular system. DOE conducts a utility impact document. standard level. DOE’s LCC and PBP analysis to estimate how standards may analysis is discussed in further detail in affect the Nation’s needed power F. General Comments section IV.F of this document. generation capacity, as discussed in 1. Proposed Standard Levels section IV.M of this document. c. Energy Savings The adopted standards also are likely In response to the efficiency levels EPCA requires DOE, in determining to result in environmental benefits in proposed in the March 2016 NOPR the economic justification of a standard, the form of reduced emissions of air (NOPR TSL 2), DOE received numerous to consider the total projected energy pollutants and greenhouse gases (GHGs) comments on the appropriate levels for savings that are expected to result associated with energy production and selection as the Federal standards. directly from the standard. (42 U.S.C. use. DOE conducts an emissions a. Comments on Proposed TSL 2 6313(a)(6)(B)(ii)(III)) As discussed in analysis to estimate how standards may section III.D.1 and section IV.E of this affect these emissions, as discussed in The Joint Utilities expressed their document and chapter 10 of the final section IV.K of this document. DOE support for the proposed standard levels rule TSD, DOE uses spreadsheet models reports the emissions impacts from each (i.e., NOPR TSL 2). (Joint Utilities, No. to project national energy savings. TSL it considered in section V.B.6 of 66 at p. 1) this document. DOE also estimates the BHI, Weil-McLain, and Lochinvar d. Lessening of Utility or Performance of economic value of emissions reductions opposed the proposed standard levels at Equipment resulting from the considered TSLs, as NOPR TSL 2, and Lochinvar encouraged In determining whether amending a discussed in section IV.L of this DOE to make no change to the minimum standard is economically justified, DOE document. efficiency standard. (BHI, No. 71 at p. 1; evaluates any lessening of the utilities Weil-McLain, No. 67 at pp. 4–5; or performance of the considered g. Other Factors Lochinvar, No. 70 at p. 8) equipment. (42 U.S.C. In determining whether an energy BHI expressed concern that 6313(a)(6)(B)(ii)(IV)) Based on data conservation standard is economically commercial packaged boilers meeting available to DOE, the standards adopted justified, DOE may consider any other the efficiency levels proposed in the in this document do not reduce the factors that the Secretary deems to be March 2016 NOPR for small gas-fired utility or performance of the equipment relevant. (42 U.S.C. hot water (SGHW) and large gas-fired under consideration in this rulemaking. 6313(a)(6)(B)(ii)(VII)) To the extent hot water (LGHW) equipment classes See section IV.A.3 and section IV.B for interested parties submit any relevant (85-percent ET and 85-percent EC, DOE’s detailed determinations that information regarding economic respectively) cannot be safely vented adopted standards in this final rule do justification that does not fit into the using a conventional ‘‘category I’’ not reduce utility or performance of CBP other categories described above, DOE chimney. (BHI, No. 71 at p. 2) Raypak equipment covered under this could consider such information under added that the category I venting rulemaking. ‘‘other factors.’’ commercial packaged boilers must be retained to allow replacement of boilers e. Impact of Any Lessening of 2. Rebuttable Presumption from old installations. (Raypak, No. 72 Competition EPCA creates a rebuttable at p. 3) Raypak also expressed concern EPCA directs DOE to consider the presumption that an energy that the proposed TSL 2 is too close to impact of any lessening of competition, conservation standard is economically condensing and could lead to failure of as determined in writing by the justified if the additional cost to the B-vent pipes and leaking combustion Attorney General of the United States consumer of the equipment that meets equipment. that is likely to result from a standard. the standard is less than three times the Raypak suggested that DOE selected (42 U.S.C. 6313(a)(6)(B)(ii)(V)) DOE value of the first year’s energy savings the proposed efficiency levels because transmitted a copy of its proposed rule resulting from the standard, as higher efficiency standards exist in to the Attorney General with a request calculated under the applicable DOE Europe. Raypak noted that the that the Department of Justice (DOJ) test procedure. DOE’s LCC and PBP regulations governing boiler provide its determination on this issue. analyses generate values used to maintenance in Europe are substantially On October 19, 2015, DOJ provided its calculate the effects that amended different, and that some countries determination to DOE that the amended energy conservation standards would require annual boiler inspections and standards for commercial packaged have on the PBP for consumers. These service, which are not required in the boilers are unlikely to have a significant analyses include, but are not limited to, United States. Raypak argued that DOE

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should not set standards at the levels consumers to buy near-condensing and addressed within the specific analysis proposed in the March 2016 NOPR until condensing boilers in circumstances section to which they pertain. maintenance practices in the United where they are not warranted for DOE also disagrees with Raypak’s States are comparable to those in other installation is a perversion of the comments that the proposed standards countries. Raypak further stated that the regulatory process. (AHRI, No. 76 at p. were based on the standards applicable complexity of newer technology 27; Raypak, No. 72 at p. 2) in Europe. Although DOE researches requires installers who are skilled and ABMA commented that the proposed international energy efficiency experienced to install higher efficiency levels included in NOPR TSL 2 for the regulations in the context of its market commercial packaged boilers. (Raypak, LGHW and LOHW equipment classes assessment, the standard levels that No. 72 at p. 3) (i.e., 85-percent EC and 88-percent EC) were proposed in the March 2016 Weil-McLain expressed concern that would be unattainable for certain sizes NOPR, and those that are adopted in the proposed levels included in the of commercial packaged boilers in its this final rule are not determined based NOPR TSL 2 would significantly reduce members’ equipment lines and on international regulations. Rather, the non-condensing options available to recommended that DOE adopt standards DOE selects standard levels by weighing consumers. Weil-McLain also added at 83 percent and 86 percent, the benefits and burdens of each TSL to that DOE would erase a future increase respectively. (ABMA, No. 64 at p. 2) ensure that the standards save a in efficiency that was to take effect in Bradford White and Raypak significant additional amount of energy 2022 pursuant to 10 CFR 431.87(c), recommended that DOE adopt a and are technologically feasible and noting that manufacturers’ ability to economically justified, as required by minimum standard of 82-percent ET for make long-term development plans are the SGHW equipment class. For the EPCA. (42 U.S.C. 6313(a)(6)(A)(ii)(II) impacted when efficiency requirements LGHW equipment class, Bradford White and (C)(i)) In addition, Bradford White are obsoleted before they have even recommended DOE select 84-percent E , C questioned the selection of TSL 2 due gone into effect. (Weil-McLain, No. 67 at while, Raypak recommended 82-percent the fact that it does not meet the pp. 2–3) Both Weil-McLain and BHI E . (Bradford White, No. 68 at p. 4; C rebuttable presumption payback of three suggested that the proposed levels could Raypak, No. 72 at p. 4) reduce their ability to sell non- years, and therefore would place a Bradford White stated that the condensing commercial packaged significant burden on consumers. proposed level of 85-percent E for boilers, and therefore would create a C (Bradford White, No. 68 at p. 4) LGHW commercial packaged boilers significant burden on manufacturers. DOE notes that the 3-year payback forces the use of such equipment in (Weil-McLain, No. 67 at pp. 4–5; BHI, period is contemplated under the applications where it may not make No. 71 at p. 1) BHI further commented rebuttable presumption test. However, sense. Bradford White added that that adopting NOPR TSL 2 would DOE routinely conducts a full economic equipment with a combustion efficiency potentially reduce employment at their analysis that considers the full range of of approximately 85 to 88 percent in use facilities. (BHI, No. 71 at p. 1) The Gas impacts, including those to the Associations urged DOE to revise the today is a result of contractors consumer, manufacturer, Nation and technical analysis and economic consciously determining such environment, and the results of this justification for the 85-percent level equipment is appropriate for each economic analysis are what serve as the proposed in the March 2016 NOPR. The respective installation. Bradford White basis for DOE to definitively evaluate Gas Associations expressed concern stated that the proposed level of 85- the economic justification for a standard about issues with possible condensation percent EC for LGHW commercial level. As detailed in section IV and in the venting system and interior heat packaged boilers forces the use of such section V of DOE’s full economic exchanger leading to premature failure equipment in inappropriate applications analysis for this final rule document, and believe that the current standards and noted that changing out the vent DOE concludes based on clear and are sufficient and justified. (Gas system may not be possible in these convincing evidence that the benefits of Associations, No. 69 at p. 2) installations. (Bradford White, No. 68 at amended standards at TSL 2 outweigh SoCalGas and AHRI recommended p. 3) the burdens, and the standards at TSL that DOE adopt NOPR TSL 1. (SoCalGas, In view of the preceding stakeholder 2 are economically justified. No. 77 at p. 4; AHRI, No. 76 at pp. 27, comments about TSLs, DOE notes that b. Comments on TSL 3 44) SoCalGas argued that the changes to DOE is required to set a standard that test procedure may impact efficiency achieves significant additional energy The Joint Advocates urged DOE to ratings, and noted that if a 1 percent savings that is determined to be adopt NOPR TSL 3, noting that TSL 3 decrease in ratings were to occur as a technologically feasible and was found to be cost effective for result of the test procedure changes, the economically justified. In making such purchasers and would more than double result would be effectively requiring an a determination, DOE must consider, to the national energy savings achieved by 86-percent ET for SGHW commercial the maximum extent practicable, the NOPR TSL 2. (Joint Advocates, No. 74 packaged boilers. SoCalGas cited DOE’s benefits and burdens based on the seven at p. 1) ASAP also suggested DOE own analysis demonstrating that there criteria described in EPCA (see 42 should consider adopting NOPR TSL 3. are very few commercial packaged U.S.C. 6313(a)(6)(B)(ii)(I)–(VII)). DOE’s (ASAP, Public Meeting Transcript, No. boilers on the market meeting the 86- weighing of the benefits and burdens 61 at pp. 14–15) Weil-McLain, ABMA, percent ET level. (SoCalGas, No. 77 at p. based on the final rule analysis and and AHRI opposed the adoption of 3) AHRI also stated that, based on DOE’s rationale for the TSL selection is NOPR TSL 3. (Weil-McLain, No. 67 at analysis, it should not adopt a standard discussed in section V and in detail in p. 9; ABMA, No. 64 at p. 3; AHRI, No. more stringent than the proposed TSL 2 appendix 10C of the final rule TSD. 76 at pp. 1, 27, 44) Bradford White in all equipment classes, because the DOE notes that much of the commentary expressed the belief that the estimated increase in incorrect venting and other regarding the selection of TSL levels for gains of the SGHW equipment class at installation decisions should prohibit the standards is based on more detailed NOPR TSL 3 (i.e., at 95-percent ET) were consideration of near-condensing comments regarding specific portions of overstated in DOE’s analysis, and noted efficiency levels. (AHRI, No. 76 at p. 27) the final rule analysis. These comments that the market is voluntarily moving AHRI and Raypak stated that forcing related to specific analyses are towards products with efficiencies in

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excess of 90-percent ET. (Bradford DOE to achieve the maximum that this burden of proof is met only if White, No. 68 at p. 3) improvement in energy efficiency in its evidence ‘‘instantly tilted the DOE considered the comments energy conservation standards evidentiary scales’’ when viewed in received in response to the rulemakings do not apply to commercial light of alternative information. consideration for TSL 3 as proposed in packaged boilers. Therefore, AHRI Colorado v. New Mexico, 467 U.S. 310, the March 2016 NOPR. However, based suggested that DOE’s entire analysis is 316 (1984). By asking the stakeholders on DOE’s updated analyses and the predicated on a fundamental flaw to substantiate its assumptions and by results presented in this final rule (see because it reflects an analysis that initiating a rulemaking amending section V), TSL 3 is no longer blatantly disregards the crucial ASHRAE standards without meeting the economically feasible. Therefore, for the flexibility that DOE has to more fully burden of proof requirements, AHRI reasons discussed in section V.C.1, DOE consider negative impacts on industry, argues that DOE impermissibly shifted has rejected TSL 3. particularly on small business and job the agency’s burden of production onto c. Other Comments loss. (AHRI, No. 76 at p. 6) the stakeholders. (AHRI, No. 76 at p. 7; DOE agrees that EPCA does not Spire, No. 73 at pp. 6–8, 10) SoCalGas expressed concerns that the require DOE to select the standard level DOE notes that it is adopting these results of a SoCalGas modified LCC that provides the maximum standards pursuant to 42 U.S.C. analysis shows a potentially significant improvement in energy savings for 6313(a)(6)(C)(i)(II), which requires DOE burden to California and SoCalGas commercial packaged boilers. However, to issue new standards based on ‘‘the consumers, in particular regarding the as discussed in section II.A, an amended criteria and procedures established LGHW equipment class, but CPB standard must be designed to under subparagraph (B).’’ In relevant acknowledged limitations to their achieve significant additional energy part, subparagraph (B) specifies that: (1) analysis and filtering of the CBECS conservation and be technologically In making a determination of economic dataset. (SoCalGas, No. 77 at p. 4) feasible and economically justified. (42 justification, DOE must consider, to the Nussbaum requests clarity on whether U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i)) It maximum extent practicable, the DOE’s regulations are intended to is in DOE’s discretion to adopt amended benefits and burdens of an amended remove enforcement from existing standards at any level that meet these standard based on the seven criteria authorities, stating that California legal criteria. DOE does not base its described in EPCA; (2) DOE may not Energy Commission’s interpretation is rulemaking solely on achieving prescribe any standard that increases that DOE has taken over all enforcement maximum energy efficiency the energy use or decreases the energy related to efficiency. He further states improvements as claimed by the efficiency of a covered product; and (3) that without state and local enforcement stakeholders. In making the DOE may not prescribe any standard of efficiency, it will be sacrificed in determination of economic justification that interested persons have established order to achieve low NOX requirements of an amended standard, DOE considers, by a preponderance of evidence is likely since in California emissions to the maximum extent practicable, the to result in the unavailability in the requirements are enforced. (Nussbaum, benefits and burdens of an amended United States of any product type (or No. 60 at p. 1) standard based on the seven criteria class) of performance characteristics In response, DOE notes that while the described in EPCA, which include the (including reliability, features, sizes, SoCalGas analysis shows a small economic impact of the standard on capacities, and volumes) that are decline in the cost effectiveness (i.e., manufacturers. (See 42 U.S.C. substantially the same as those generally LCC savings) of small gas-fired hot 6313(a)(6)(B)(ii)(I)–(VII).) In considering available in the United States. (42 U.S.C. water equipment at certain efficiency both the standards proposed in the 6313(a)(6)(B)(ii)–(iii)) levels, it showed an increase in the LCC March 2016 NOPR and those being Importantly, subparagraph (B) does savings at other levels relative to DOE’s adopted in this final rule, DOE fully not mention clear and convincing analysis. While the analysis did show addressed EPCA’s requirements in 42 evidence. What is more, multiple negative LCC savings for the large gas- U.S.C. 6313(a)(6)(B)(ii)(I)–(VII), features of the statutory text indicate fired hot water equipment class at all including economic impact of the that a rule establishing standards under efficiency levels, the approach taken in amended standards on manufacturers subparagraph (C)(i)(II) need not be based modifying the model to only look at a and small businesses. A discussion of on clear and convincing evidence.21 But relatively small sample of buildings in DOE’s weighting of the benefits and the combined San Francisco and Los burdens based on these factors is 21 To explain, the reference to ‘‘criteria and Angeles climate regions, may allow for contained in section V of this final rule. procedures established under subparagraph (B)’’ is a substantial uncertainty in the LCC With regard to the specific comments on not best read as encompassing a ‘‘clear and results obtained for those regions. DOE’s impact on manufacturers and convincing evidence’’ threshold. For that phrase appears in subparagraph (A), not subparagraph (B), analysis focuses on the national costs employment impacts, DOE has and therefore it is not a criterion or procedure and benefits obtained, as befitting considered these impacts, and they are ‘‘established under subparagraph (B).’’ development of National standards. discussed in V.B of this final rule. The Subparagraph (B) does mention subparagraph (A), Regarding the comment submitted by differential impacts for small business but not in a manner that incorporates subparagraph (A) by reference; rather, subparagraph (B) says the Nussbaum, under EPCA DOE has manufacturers are discussed in section criteria and procedures it establishes are to be used authority to establish and regulate VI.B. in subparagraph (A)(ii)(II). Subparagraph (C)(i)(II) minimum efficiency for commercial AHRI and Spire commented that says the subparagraph (B) criteria and procedures packaged boilers as measured under a DOE’s CPB ECS rulemaking does not are also to be used in a subparagraph (C)(i)(II) meet EPCA’s requirement for clear and decision. It does not follow—logistically or standardized test procedure, but DOE linguistically—that such a decision must also recognizes that performance in the field convincing evidence prescribed in 42 incorporate an evidentiary threshold that is used in can vary based on installation U.S.C. 6313 (a)(6)(A)(ii)(II), because a different type of decision to which subparagraph conditions, set-up, and maintenance. DOE failed to provide reasonable basis (B) also applies. for its analyses, such as its unsupported In addition, subsection (a) includes multiple 2. Statutory Requirements cross-references to various paragraphs, assumptions for venting costs and the subparagraphs, clauses, and subclauses. See, e.g., 42 AHRI pointed out that EPCA’s fundamental energy use of commercial U.S.C. 6313(a)(5)(A); 6313(a)(5)(G); requirements in 42 U.S.C. 6295(o)(2) for packaged boilers. AHRI further stated Continued

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assuming that clear and convincing doubt, or even all reasonable doubt; conviction, well placed given the record evidence is required here, DOE believes ‘‘clear and convincing’’ is an as a whole. its findings fully satisfy that threshold. intermediate standard that is less Spire further commented that the To explain that conclusion, DOE stringent than the ‘‘beyond all NOPR was issued without remotely articulates how it understands the reasonable doubt’’ threshold required sufficient information and analysis to ‘‘clear and convincing evidence’’ for a criminal conviction. justify adoption of the standards concept to operate in the context of DOE fully recognizes that whenever it proposed and that key information and DOE’s setting energy conservation must have ‘‘clear and convincing analysis underlying it has yet to be standards. Commenters referred to the evidence’’ pursuant to subclause disclosed so that it can be exposed to context of litigation, where ‘‘clear and (A)(i)(II), it needs a higher degree of potential refutation through comment, convincing’’ means that the evidence confidence in its conclusions than and as such the NOPR is inadequate to must ‘‘place in the ultimate factfinder would be required under the satisfy notice and comment an abiding conviction that the truth’’ of ‘‘preponderance’’ standard that requirements, and should therefore be its conclusions is ‘‘highly probable.’’ 22 ordinarily applies in an agency withdrawn. At the same time, to satisfy the ‘‘clear rulemaking. In such matters, the Under the notice-and-comment or and convincing’’ standard of proof, a administrative record, taken as a whole, informal rulemaking provisions of the litigant need not eliminate all possible must justify DOE in a strong conviction Administrative Procedure Act, DOE that its conclusions are highly likely to must publish in the Federal Register a 6313(a)(6)(A)(ii)(I). Consistent with the ordinary be correct. notice of proposed rulemaking that scheme of cross-references, see House Legislative However, some commenters appear to includes: (1) A statement of the time, Counsel’s Manual on Drafting Style, HLC No. 104– think that the ‘‘clear and convincing’’ place, and nature of the public 1, p. 24 (1995); Senate Office of the Legislative Counsel, Legislative Drafting Manual 10 (1997), in threshold would preclude DOE from rulemaking proceedings; (2) a reference each of these cross-references a ‘‘subparagraph’’ using its expert judgment to make to the legal authority under which the reference is to an item labeled with a capital letter predictions. That would not be the case rule is proposed; and (3) either the (such as ‘‘subparagraph (B)’’). Given the careful in litigation; a ‘‘clear and convincing terms or substance of the proposed rule construction of the network of cross-references in subsection (a), it would be unusual for ‘‘established evidence’’ standard of proof does not or a description of the subjects and under subparagraph (B)’’ to sweep in an evidentiary restrict the type, quality, or nature of issues involved. (5 U.S.C. 553(b)) DOE standard stated in text other than subparagraph (B). evidence, including expert opinions that must then allow interested parties an DOE also notes that clause (C)(i) contains two can be used. Moreover, a standards- opportunity to participate in the cross-references. Subclause (I), addressing one decision DOE might make, mandates that it be setting rulemaking is not a litigation, rulemaking through submission of based on ‘‘the criteria established under and the differences warrant some written data, views, or arguments with subparagraph (A).’’ Subclause (II), addressing the differences in how the ‘‘clear and or without opportunity for oral decision DOE is making in this rulemaking, refers convincing evidence’’ threshold presentation. (5 U.S.C. 553(c)) On March to ‘‘the criteria and procedures established under subparagraph (B).’’ By interpreting the latter phrase operates. DOE both develops the record 24, 2016, DOE published a NOPR and not to encompass ‘‘clear and convincing evidence,’’ and reviews it to make findings. Also, notice of public meeting in the Federal DOE appropriately gives significance to this as an agency tasked with setting policy, Register that met the requirements difference in language. Evidently ‘‘the criteria DOE is ordinarily expected to use its under 5 U.S.C. 553(b). DOE also established under subparagraph (A)’’ are different from the ‘‘the criteria established under predictive judgment. The text of provided the public an opportunity to subparagraph (B)’’; were they the same criteria, paragraph (6) is consistent with that present oral and written data, views, there would have been no need to use different notion. Subparagraph (B), which and arguments on the March 2016 CPB cross-references. ‘‘Clear and convincing evidence’’ describes various factors that DOE is to ECS NOPR. is in (A), not (B).To the extent there is ambiguity consider in making a subclause (A)(i)(II) in paragraph (a)(6) about whether DOE must have IV. Methodology and Discussion of decision for which it would need clear clear and convincing evidence to establish an Related Comments amended standard under subparagraph (C), DOE and convincing evidence, repeatedly believes its approach is consistent with the calls for predictive judgments. DOE is to This section addresses the analyses purposes of subparagraph (C). That is to say, the DOE has performed for this rulemaking intent of paragraph (6) is to include ASHRAE in the forecast the likely energy savings of a standards-developing process. ASHRAE maintains standard, the economic costs and with regard to commercial packaged standards that achieve energy conservation with benefits of the standard, and other boilers. Separate subsections address respect to the products to which paragraph (6) future effects. By their nature, these each component of DOE’s analyses. applies, and ASHRAE is expected to update those DOE used three analytical tools to standards as technology and markets evolve over assessments cannot be instantly time. When ASHRAE has acted in a timely fashion, determined to be correct. Rather, DOE estimate the impact of the standards. DOE is to reflect ASHRAE’s standards in its own believes ‘‘clear and convincing The first tool is a spreadsheet that standards, unless it has clear and convincing evidence’’ would mean that DOE must calculates the LCC savings and PBP of evidence justifying more stringent standards (on the potential amended energy conservation terms of subclause (A)(i)(II)). However, the statute be strongly convinced that its forecasts directs DOE to review its standards every six are highly likely to be reasonable standards. See section IV.F and chapter years—in case ASHRAE has not acted. This six-year forecasts given current conditions and 8 of final rule TSD for details of the LCC review encourages ASHRAE to keep its standards information. and PBP spreadsheet tool. The second up to date, because if it has recently amended its In sum, for purposes of setting tool is a Microsoft Excel spreadsheet standards (and triggered DOE to follow), DOE will not need to engage in its independent standards standards under paragraph (a)(6), ‘‘clear that calculates national energy savings revision. But, if ASHRAE has not revisited its and convincing evidence’’ can include and net present value resulting from standards for some while, DOE’s six-year review the same sorts of evidence and analysis potential amended energy conservation provides an occasion on which DOE might adopt that DOE would use in any other standards. More details of this more stringent standards, without being tied to the ASHRAE standards. By not imposing the ‘‘clear and standards rulemaking. But DOE will spreadsheet tool can be found in section convincing’’ threshold for such a rulemaking, the conclude it has ‘‘clear and convincing IV.H and chapter 10 of the final rule statute encourages ASHRAE to continually update evidence’’ only when it is strongly TSD. The third spreadsheet tool, the its standards. In short, a common-sense approach to convinced that it is highly likely to have Government Regulatory Impact Model the purposes of subparagraph (C) aligns with the above careful textual reading. reached appropriate findings. With (GRIM), helps DOE to assess 22 Colorado v. New Mexico, 467 U.S. 310, 316 respect to the findings discussed in this manufacturer impacts of potential (1984). rulemaking, DOE does have that strong standards. See section IV.J and chapter

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12 of the final rule TSD. In addition, imports a commercial packaged boiler included in the Compliance these tools are available on the DOE in its entirety; (2) manufactures, Certification Database, but that appear website for this rulemaking: http:// produces, assembles, or imports a to be actively selling CPB models. DOE www.regulations.gov/docket?D=EERE- commercial packaged boiler in part, and reviewed AHRI and ABMA member 2013-BT-STD-0030. specifies or approves the boiler’s manufacturers, and also searched Additionally, DOE used output from components, including burners or other publicly available information to the 2016 version of the Energy components produced by others, as for identify several manufacturers who are Information Administration’s (EIA’s) example by specifying such components neither members of AHRI nor ABMA. Annual Energy Outlook (AEO) for the in a catalogue by make and model Through these information sources, emissions and utility impact analyses. number or parts number; or (3) is any DOE concludes it has generated a vendor or installer who sells a complete picture of the CPB market and A. Market and Technology Assessment commercial packaged boiler that manufacturers, and, thus, did not 1. General consists of a combination of require the report suggested by Bradford For the market and technology components that is not specified or White. The models offered by all assessment, DOE develops information approved by a person described in the manufacturers that DOE identified in that provides an overall snapshot of the two previous parts of this definition. this rulemaking characterize the market Through extensive search of publicly market for the equipment considered, for commercial packaged boilers in the available information, including DOE’s including the nature of the equipment, market and technology assessment Compliance Certification Database 23 market characteristics, industry (chapter 3 of the final rule TSD). and ABMA’s and AHRI’s websites, DOE structure, and technologies that improve identified 46 unique parent companies 2. Scope of Coverage energy efficiency. DOE divides the that manufacture CPB equipment. The EPCA lists ‘‘packaged boilers’’ as a market and technology assessment complete list of manufacturers can be type of covered equipment. (42 U.S.C. broadly into two categories: (1) Market found in chapter 3 of the final rule TSD. 6311(1)) EPCA defines the term assessment and (2) technology In the NOPR analysis, DOE relied on ‘‘packaged boiler’’ as ‘‘a boiler that is assessment. The purpose of the market equipment listing data from AHRI and shipped complete with heating assessment is to develop a qualitative other public sources and requested equipment, mechanical draft and quantitative characterization of the comment on any manufacturers of CPB equipment, and automatic controls; CPB industry and market structure, equipment that were not represented in usually shipped in one or more based on information that is publicly this analysis. Bradford White sections.’’ (42 U.S.C. 6311(11)(B)) available as well as data submitted by recommended that DOE review the paid In the 2016 CPB TP final rule, DOE manufacturers and other interested research reports, included in research consolidated various definitions related parties. Issues addressed include CPB from BRG Building Solutions to identify to commercial packaged boilers by characteristics (gathered from market manufacturers that are neither members revising its definitions for ‘‘packaged databases and literature), market share of AHRI nor ABMA.24 (Bradford White, boiler’’ and ‘‘commercial packaged and equipment classes; existing No. 68 at p. 4) boiler’’ at 10 CFR 431.82, and removing regulatory and non-regulatory efficiency For the final rule, DOE’s market the definitions for ‘‘packaged low improvement initiatives; models analysis is primarily based on the pressure boiler’’ and ‘‘packaged high currently available and their Compliance Certification Database. The pressure boiler.’’ The definition for distribution with respect to efficiency Compliance Certification Database ‘‘packaged boiler’’ adopted by DOE in and rated input in each equipment houses certification reports and the 2016 CPB TP final rule is essentially class. The purpose of the technology compliance statements submitted by the same as EPCA’s definition, but assessment is to investigate technologies manufacturers for covered equipment clarifies that if the boiler is shipped in currently used in commercial packaged and equipment subject to Federal more than one section, the sections may boilers, and identify those that will conservation standards. Manufacturers be produced by more than one improve the energy efficiency of of all covered equipment are required to manufacturer, and may be originated or commercial packaged boilers. The submit a certification report before a shipped at different times and from technology assessment results in a basic model is distributed in commerce. more than one location. DOE updated preliminary list of technology options The Compliance Certification Database the definition of a ‘‘commercial that can improve the thermal and/or includes only certification records of packaged boiler’’ to define the term as combustion efficiency of commercial current basic models that have been a packaged boiler that meets all of the packaged boilers. Chapter 3 of the final submitted to DOE in the past year. Thus, following criteria: (1) Has a rated input rule TSD contains all the information this database should provide the most of 300,000 Btu/h or greater; (2) is related to the market and technology comprehensive list of manufacturers distributed in commerce for space assessment. The chapter also provides actively selling commercial packaged conditioning and/or service water additional details on the methodology boilers in the United States. However, heating in buildings but does not meet used, information gathered, and results. DOE also surveyed the market to the definition of ‘‘hot water supply DOE typically uses the information identify manufacturers that are not boiler’’; (3) does not meet the definition gathered in this chapter in the various of ‘‘field-constructed’’; and (4) is downstream analyses such as 23 DOE’s Compliance Certification Database designed to, or is operated at a steam engineering analysis, shipment analysis, houses certification reports and compliance pressure of at or below 15 psig or a and manufacturer impact analyses. statements submitted by manufacturers for covered water pressure at or below 160 psig and products and equipment subject to Federal ° For this final rule, DOE explored the conservation standards. http://energy.gov/eere/ water temperature of 250 F. 81 FR market to identify manufacturers of buildings/implementation-certification-and- 89276, 89279–89280 (December 9, commercial packaged boilers. As per the enforcement. 2016). DOE also adopted a related definition set forth in 10 CFR 431.82, a 24 BRG Building Solutions is a global consultancy definition for ‘‘field-constructed.’’ that provides market data for various construction, manufacturer of a commercial packaged building products, and utility industries, including As noted above, the definition of boiler is any entity that: (1) heating and ventilation products. ‘‘packaged boiler’’ refers to a boiler that Manufactures, produces, assembles, or www.brgbuildingsolutions.com/. is shipped complete with heating

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equipment, mechanical draft ≤2,500,000 Btu/h), gas fired—natural existing natural draft venting systems equipment, and automatic controls. draft, steam classes; and the large should qualify as a unique utility of Although, the definition does not (>2,500,000 Btu/h and ≤10,000,000 Btu/ natural draft units and therefore should explicitly include natural draft h), gas fired—all except natural draft, be preserved under 42 U.S.C. equipment, DOE concluded in the steam and large (≥2,500,000 Btu/h and 6313(a)(6)(B)(i)(IV). Spire noted that August 2015 withdrawal notice that ≤10,000,000 Btu/h), gas fired—natural DOE has recognized this fact in its natural draft commercial packaged draft, steam classes from four equipment decision to maintain separate boilers are and have been covered classes to two equipment classes: (1) equipment classes for ‘‘space- equipment subject to DOE’s energy Small (≥300,000 Btu/h and ≤2,500,000 constrained’’ heat pumps and air conservation standards for commercial Btu/h), gas-fired steam; and (2) large conditions. (Spire, No. 72, at pp. 10–12) packaged boilers. 80 FR 51487. (>2,500,000 Btu/h and ≤10,000,000 Btu/ Raypak commented that DOE should Accordingly, DOE proposed amended h), gas-fired steam. 81 FR 15852. not assume that all boiler installations energy conservation standards in the The Joint Advocates and Bradford will be capable of handling new March 2016 NOPR that are applicable to White supported DOE’s reconfiguration installations at the amended efficiencies natural draft commercial packaged of the equipment classes to eliminate proposed in the March 2016 NOPR. boilers, and has likewise included draft type as a distinguishing feature. They add that half of the commercial natural draft commercial packaged (Joint Advocates, No. 74 at p. 2; buildings were built before 1980 and boilers in the analysis for this final rule Bradford White, No. 68 at p. 4) The Joint when these boilers need to be replaced, and adopts standards that are applicable Advocates added that natural draft it may not be possible to install an 85- to this equipment. boilers provide no distinct performance- percent efficient boiler in its place. related utility. (Joint Advocates, No. 74 3. Equipment Classes Raypak further states that the category I at p. 2) boilers must be retained for such When evaluating and establishing Weil-McLain, Spire, the Gas replacement scenarios. (Raypak, No. 72 energy conservation standards, DOE Associations, and BHI requested that at p. 3) typically divides covered equipment DOE establish separate equipment DOE maintains its position explained into equipment classes based on the classes for natural draft and mechanical in the March 2016 NOPR and reiterates type of energy used, capacity, or draft commercial packaged boilers, that the utility derived by consumers performance-related features that justify noting that the ability to utilize natural from commercial packaged boilers is in a different standard. In making a draft in installations provides the form of the space heating function determination whether a performance- consumers with utility. (Weil-McLain, that a boiler performs, rather than the related feature justifies a different No. 67 at p. 6; BHI, No. 71 at pp. 14– type of venting the boiler uses. Boilers standard, DOE considers such factors as 15; Spire, No. 73 at p. 11; Gas requiring Category I or Category IV the utility to the consumer of the feature Associations, No. 69 at p. 4; Crown, venting are capable of providing the and other factors DOE determines are Public Meeting Transcript, No. 61 at p. same heating function to the consumer, appropriate. The current regulations for 159) BHI stated that loss of the ability and, thus, provide the same utility with commercial packaged boilers list 10 to use Category I venting (suitable for respect to their primary function. DOE equipment classes with corresponding non-condensing boilers) is a loss in does not consider reduced costs energy efficiency standards for each.25 utility because the circumstances of associated with Category I venting in 10 CFR 431.87. These equipment classes many real world installations offer no certain installations as a utility to the are based on (1) size (rated input), (2) practical alternatives to Category I consumer, and also disagrees with BHI’s heating media (hot water or steam), and venting. BHI argued that providing heat assertion that there is a point at which (3) type of fuel used (oil or gas).26 The and hot water are not the only utility the installation costs get so prohibitively gas-fired steam commercial packaged functions, features, and performance expensive that they create a loss of boilers are further classified according characteristics of boilers, and that utility to the consumer. Instead, the to draft type. In the March 2016 NOPR, designs that allow proper installation in expenses associated with venting DOE proposed to consolidate CPB a variety of cases are a critical aspect of requirements are considered as an equipment classes that are currently utility so that such equipment can be economic impact on consumers in the divided by draft type.27 Specifically, installed and used safely. In addition, rulemaking’s cost-benefit analysis and DOE proposed to combine the small BHI stated that there is a point at which ultimately the analysis determines if the (≥300,000 Btu/h and ≤2,500,000 Btu/h), increasing installation costs become cost is economically prohibitive. Details gas fired—all except natural draft, steam large enough to effectively create a ‘‘loss regarding installation costs can be and small (≥300,000 Btu/h and of utility,’’ and this situation in the real world is as likely to ‘‘result in the located in section IV.F.2. Further, DOE 25 These standard levels were adopted in the July unavailability’’ of appropriate Category I maintains that this final rule is not in 2009 final rule. 74 FR 36312 (July 22, 2009). boilers as a pure design issue. Further, violation of ‘‘safe harbor’’ rule because 26 Under subpart E of 10 CFR part 431, BHI adds that DOE overstated the it does not result in the unavailability of commercial packaged boilers are divided into availability and utility of 85-percent gas- any covered product class of equipment classes based on rated input (i.e., size fired hot water boilers, particularly 85- performance characteristics (including category). Throughout this document, DOE refers to units with a rated input of ≥300,000 Btu/h and percent atmospheric boilers in its reliability, features, sizes, capacities and ≤2,500,000 Btu/h as ‘‘small’’ and units with a rated screening analysis. BHI suggests that the volumes) that are substantially the same input of >2,500,000 Btu/h as ‘‘large.’’ See 10 CFR adoption of 85-percent gas-fired hot as those currently available. 42 U.S.C. 431.87. water standard will leave many 6313(a)(B)(iii)(II)(aa) DOE does not 27 Because DOE is not adopting amended standards for commercial packaged boilers with consumers with no cost effective option consider the type of venting to be a rated inputs above 10,000,000 Btu/h, the standards for replacement boiler and could lead to ‘‘feature’’ that would provide utility to for equipment in this class will remain unchanged. safety issues due to problems in venting consumers; instead DOE properly Thus, although DOE is consolidating this system. BHI stated that this is a direct accounts for the economic benefits of equipment into a single class, an allowance will still be made for natural draft units to have a lower violation of the ‘‘safe harbor rule.’’ (BHI, the venting type in the economic minimum efficiency until March 2, 2022, as is No. 71 at pp. 4, 13–15) Spire also analysis. Further, with regard to issues allowed under the current standards. suggested that easy installation to of safety in venting and incorrect

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installation, DOE notes that there is In response to these proposed commercial packaged boilers with rated equipment that is currently installed in amendments, Bradford White and input greater than or equal to 2,500 commercial buildings that meets or ABMA expressed support for the kBtu/h. exceeds the amended standards introduction of the ‘‘Very Large’’ In summary, today’s final rule adopts established in this final rule. equipment classes. (Bradford White, No. the following changes proposed in the Manufacturers will also have sufficient 68 at p. 4; ABMA, No. 64 at p. 1) March 2016 NOPR: (1) Separating the time after the publication of this final However, ABMA requested DOE to equipment classes for commercial rule and before the compliance date to place a capacity limit on this packaged boilers that have rated input revise their installation and operation rulemaking. (ABMA, No. 64 at p. 1) above 10,000 kBtu/h, and (2) manuals of their compliant equipment Raypak expressed support for not consolidating the equipment classes for or to train contractors on installation of increasing the efficiency standard for small and large gas-fired steam boilers equipment that requires a change of the very large commercial packaged boilers. that are currently divided based on draft venting system. (Raypak, No. 72 at p. 4) ABMA also type into equipment classes that are not In the March 2016 NOPR, DOE noted that very large commercial divided based on draft type, thereby tentatively decided to classify packaged boilers are generally custom- reducing the four draft-specific classes commercial packaged boilers with rated built, and obtaining realistic prices for into two classes that are not draft input greater than 10,000 kBtu/h into such equipment will not be possible. specific. In addition, DOE has decided separate equipment classes and not (ABMA, No. 64 at p. 2) amend energy conservation standards Based on the foregoing, DOE adopts not to amend energy conservation for those classes because of regulatory equipment classes for ‘‘very large’’ standards for very large commercial complexities and lack of sufficient data commercial packaged boilers in this packaged boilers. The current standards to justify amended standards. 81 FR final rule. However, as discussed in the for large CPB equipment classes will 15851–15853. Specifically, DOE noted March 2016 NOPR, an upper limit for remain applicable to the corresponding that commercial packaged boilers with the rated input for commercial packaged very large CPB equipment classes. rated input greater than 10,000 kBtu/h boilers regulated by DOE’s standards Thus, in total, DOE is adopting 12 are generally engineered-to-order, have would violate EPCA’s anti-backsliding equipment classes 28 for commercial very low shipment volumes as provisions set forth in 42 U.S.C. packaged boilers. The equipment classes compared to other equipment classes 6313(a)(6)(B)(iii)(I), as the existing are categorized based on: (1) Rated input with lower rated input, and have standards apply to all equipment (small (≥300,000 Btu/h to ≤2,500,000 limited potential for significant meeting the definition of commercial Btu/h), large (>2,500,000 Btu/h and additional energy savings. These factors, packaged boiler regardless of the rated ≤10,000,000 Btu/h) and very large combined with a lack of information on input. Providing an upper limit for rated (>10,000,000 Btu/h)); (2) heating pricing, shipments, and rated efficiency, input above which standards do not medium (hot water or steam); and (3) led DOE to not propose amended energy apply would essentially be repealing the fuel type (gas-fired or oil-fired). Table conservation standards for very large existing standards for that equipment, IV.1 shows all of the CPB equipment commercial packaged boilers; however, which is prohibited by the anti- classes, including the eight equipment the current efficiency standards backsliding clause. As such, DOE classes for which DOE is amending applicable for the large CPB equipment maintains the existing standards for standards and four equipment classes classes remain applicable to the very very large commercial packaged boilers for which DOE did not amend large CPB equipment classes. at the levels currently applicable to all standards.

TABLE IV.1—EQUIPMENT CLASSES FOR COMMERCIAL PACKAGED BOILERS

Amended Heating standards Equipment class Size Fuel medium Acronym adopted in this final rule

Small Gas-fired Hot Water ...... ≥300kBtu/h to ≤2,500kBtu/h ...... Gas ...... Hot Water ...... SGHW Yes. Large Gas-fired Hot Water ...... >2,500kBtu/h to ≤10,000kBtu/h .... Gas ...... Hot Water ...... LGHW Yes. Very Large Gas-fired Hot Water ** >10,000kBtu/h ...... Gas ...... Hot Water ...... VLGHW No. Small Oil-fired Hot Water ...... ≥300kBtu/h to ≤2,500kBtu/h ...... Oil ...... Hot Water ...... SOHW Yes. Large Oil-fired Hot Water ...... >2,500kBtu/h to ≤10,000kBtu/h .... Oil ...... Hot Water ...... LOHW Yes. Very Large Oil-fired Hot Water ** .. >10,000kBtu/h ...... Oil ...... Hot Water ...... VLOHW No. Small Gas-fired Steam * ...... ≥300kBtu/h to ≤2,500kBtu/h ...... Gas ...... Steam ...... SGST Yes. Large Gas-fired Steam * ...... >2,500kBtu/h to ≤10,000kBtu/h .... Gas ...... Steam ...... LGST Yes. Very Large Gas-fired Steam ** ...... >10,000kBtu/h ...... Gas ...... Steam ...... VLGST No. Small Oil-fired Steam ...... ≥300kBtu/h to ≤2,500kBtu/h ...... Oil ...... Steam ...... SOST Yes. Large Oil-fired Steam ...... >2,500kBtu/h to ≤10,000kBtu/h .... Oil ...... Steam ...... LOST Yes. Very Large Oil-fired Steam ** ...... >10,000kBtu/h ...... Oil ...... Steam ...... VLOST No. * The small, gas-fired, steam, natural draft equipment classes and small, gas-fired steam, all except natural draft equipment classes prior to this final rule are consolidated into a single small gas-fired, steam equipment class. Similarly, the large, gas-fired, steam, natural draft equipment classes and large, gas-fired steam, all except natural draft equipment classes prior to this final rule are consolidated into a single large, gas-fired, steam equipment class. ** DOE establishes separate equipment classes for commercial packaged boilers with rated input above 10,000kBtu/h.

28 Consolidating the 4 draft-specific classes into 2 equipment classes from 10 to 8, and creating equipment adds 4 equipment classes. These non-draft-specific classes reduces the number of separate equipment classes for very large CPB changes result in 12 equipment classes.

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4. Market Assessment additional data from ABMA member AHRI has also provided aggregated As discussed previously, in the manufacturer literature which is not annual shipment information for market assessment DOE uses qualitative accounted for in the histograms in different non-condensing and and quantitative information to assess AHRI’s comments. condensing; and gas- and oil-fired In this final rule, DOE has created an the past and present industry structure commercial packaged boilers spanning updated database, that includes and market characteristics. In carrying the years from 2001 to 2015. (AHRI, No. commercial packaged boilers from out this assessment, DOE examines 76 at p. 13) several sources of information, DOE used the shipment data provided literature from a variety of sources, including its own Compliance by AHRI in its rulemaking analyses for including industry publications, trade Certification Database,29 AHRI’s this final rule. journals, government agencies, Directory of Certified Product Chapter 3 of the final rule TSD, the manufacturers, and trade organizations. Performance 30 (accessed in July 2016) market and technology assessment, In the March 2016 NOPR, DOE for commercial packaged boiler, and contains a detailed discussion of the compiled a database of commercial manufacturer literature. In response to models in the analysis used and the packaged boilers that was sourced from comments provided by Raypak, DOE distribution of CPB models by their the AHRI’s Directory of Certified has also considered boilers that meet the efficiency and rated input, and other Product Performance (AHRI database) definition of commercial packaged characteristics (e.g., material, for commercial packaged boilers and boilers and are produced by modulating or non-modulating). Chapter information gathered from manufacturer manufacturers who are not members of 5 of the final rule TSD, the engineering specifications of ABMA member ABMA or AHRI. DOE compiled a analysis, discusses the models used for manufacturers. In chapter 3 of the NOPR database consisting of a total of 4,791 the selection of efficiency levels and the TSD, DOE presented histograms CPB models for the final rule (MTA engineering analysis. showing the distribution of commercial database). However, in the downstream 5. Technology Options packaged boilers by efficiency and rated analysis, DOE did not use information input for each equipment class. DOE for certain models because they either: As part of the rulemaking analysis, used these distributions of models as (1) Did not list the relevant energy DOE identifies technology options that inputs to the engineering analysis to efficiency metric applicable for that are currently used in commercial calculate the incremental prices and commercial packaged boiler; (2) had packaged boilers at different efficiency identify intermediate and max-tech rated efficiency lower than the levels available on the market. This efficiency levels in each equipment corresponding energy conservation helps DOE to assess the technology class. standard; or (3) listed an efficiency changes that would be required to In response to using the distribution rating based on a test procedure other increase the efficiency of a commercial of models in the engineering analysis, than DOE’s test procedure for packaged boiler from baseline to other AHRI provided comments requesting commercial packaged boilers. While higher efficiency levels. Initially, these DOE to reconsider its approach. AHRI such equipment was considered as part technologies encompass all those DOE provided histograms of the distribution of the boiler models available on the determines are technologically feasible. of the boiler models based on their market since they meet the definition of As a starting point, DOE typically directory of certified equipment commercial packaged boilers, they were uses information from existing and past performance and highlighted the not considered in the downstream rulemakings as inputs to determine differences with the histograms analysis since the relevant data was what technologies manufacturers use to presented in the market and technology missing. Out of the total of 4,791 CPB attain higher performance levels. DOE assessment (chapter 3 of the NOPR models in the MTA database, 2,826 also researches emerging technologies TSD). (AHRI, No. 76 at p. 12) Raypak models had the necessary data for that have been demonstrated in also provided comments opposing the consideration in the engineering prototype designs. DOE developed its use of the distribution of CPB models analysis. (Note, the 2,826 model count list of design options for the considered available on the market in each does not include the models in the equipment classes through consultation equipment class, to conduct the ‘‘very large’’ equipment classes.) DOE with manufacturers, including engineering analysis. Raypak also added used these remaining boiler models for manufacturers of components and that DOE does not have equipment selecting efficiency levels and to systems, and from trade publications listings for 11 out of 45 manufacturers conduct the analysis for evaluating the and technical papers. who are not represented by AHRI or incremental prices for higher efficiency. In the March 2016 NOPR, DOE ABMA. (Raypak, Public Meeting DOE has presented the distribution of presented a list of technologies for Transcript, No. 61 at pp. 57–58; Raypak, commercial packaged boilers based on improving the efficiency of commercial No. 72 at pp. 2–3) the relevant energy-efficiency metric packaged boilers: (1) Jacket insulation; In response, DOE notes that it created (i.e., ET or EC) and rated input in chapter (2) heat exchanger improvements the equipment database for the March 3 of the final rule TSD. (including condensing heat exchanger); 2016 NOPR using the AHRI database In response to the March 2016 NOPR, (3) burner derating; (4) improved burner (that was accessed in July 2015) and AHRI provided aggregated shipments technology; (5) combustion air models of ABMA member data for SGHW and LGHW equipment preheaters; (6) economizers; (7) manufacturers. The histograms that classes, broken down by efficiencies and blowdown waste heat recovery; (8) AHRI provided in their comments only rated input for the years 2014 and 2015. oxygen trim systems; and (9) integrated, include models from a more recent In a separate correspondence with DOE, high efficiency steam boiler. DOE also version of AHRI’s directory of added in the March 2016 NOPR that it equipment performance. Therefore, the 29 DOE’s Compliance Certification Database is is considering ‘‘pulse combustion difference in the histograms is most located at: https://www.regulations.doe.gov/ burners’’ as an option to achieve likely due to the difference in the certification-data/#q=Product_Group_s%3A*. condensing operation and tentatively 30 AHRI’s Directory of Certified Product versions of the AHRI database Performance can be found at https:// decided to categorize it under considered in the March 2016 NOPR www.ahridirectory.org/ahridirectory/pages/ condensing boiler heat exchanger and in AHRI’s comments; and due to the home.aspx. design. 81 FR 15853.

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In response to the March 2016 NOPR, DOE also received comments from same as equipment generally available Lochinvar suggested that the benefits of Raypak in the NOPR public meeting in the United States at the time, it will the oxygen trim technology were recommending moving pulse not consider this technology further. overstated in the TSD and requested combustion as a completely • Adverse impacts on health or that DOE provide more details on the 1 independent technology option rather safety: If DOE determines that a to 2 percent efficiency improvement than enlisting it under heat exchanger technology will have significant adverse claim. Lochinvar noted that oxygen trim improvements. (Raypak, Public Meeting impacts on health or safety, it will not systems require electronically Transcript, No. 61 at p. 51) consider this technology further. 10 CFR positioned valves and other controls DOE agrees with the comments and part 430, subpart C, appendix A, 4(a)(4) that increase the cost of the boiler which has decided to add pulse combustion as and 5(b) must be factored into the analysis. a separate technology option different In sum, if DOE determines that a Lochinvar added that oxygen trim from heat exchanger improvements or technology, or a combination of systems incorporate oxygen sensors improved burner technology. technologies, fails to meet one or more which require replacement every few DOE did not receive any other of the above four criteria, it will be years. (Lochinvar, No. 70 at p. 7) comments on the technology options it excluded from further consideration in In response, DOE notes that the considered in the March 2016 NOPR. the engineering analysis. Additionally, efficiency increments specified in the Therefore, in this final rule, DOE has it is DOE policy not to include in its NOPR TSD for oxygen trim systems are retained all the technology options that analysis any proprietary technology that based on a possible reduction in were identified in the March 2016 is a unique pathway to achieving a combustion air and an estimated NOPR and has included ‘‘pulse certain efficiency level. In the March 2016 NOPR, DOE improvement in efficiency combustion’’ as a separate technology option. The technology options that are applied the screening criteria to all corresponding to that reduction in identified for the final rule analysis are technologies identified in the excess air. These efficiency described in detail in chapter 3 of the technology assessment (see section improvements are sourced from 31 final rule TSD. IV.A.5). Based on the screening criteria publicly available literature. Based on described previously, DOE removed the literature, every 1-percent decrease B. Screening Analysis ‘‘burner derating’’ from further in excess oxygen or 15-percent decrease After DOE identified the technologies consideration in the rulemaking in excess air in the stack, could result that might improve the energy efficiency analysis, noting that the technology in an improvement in efficiency of 0.5 of commercial packaged boilers, DOE option could lower the heating output to percent and 1 percent, respectively. conducted a screening analysis. The the consumer thereby reducing While DOE considered these technology goal of the screening analysis is to consumer utility. The remaining options as opportunities to improve the identify technology options that will be technology options passed the screening efficiency for the technology considered further, and those that will analysis. Out of the options that passed assessment, it did not use the options be eliminated from further the screening analysis criteria, DOE directly in the engineering analysis to consideration, in the rulemaking further identified technology options establish a path for improvement in analyses. DOE applied the following set that would have negligible impact on efficiency and calculate the of screening criteria to each of the the efficiency as measured by DOE’s test corresponding incremental cost. Instead, technologies identified in the procedure set forth in 10 CFR 431.86. in the engineering analysis, DOE used technology assessment to determine Specifically, DOE identified the the price-efficiency approach to which technology options are following technologies as having a determine the increase in manufacturer unsuitable for further consideration in negligible impact on the rated energy selling price of the boiler with respect the rulemaking: efficiency: (1) Jacket insulation; (2) to increase in efficiency (see section • Technological feasibility: DOE will combustion air pre-heaters; (3) IV.C.1). This approach relies on consider technologies incorporated in economizers; and (4) blowdown waste selecting efficiency levels and collecting commercial equipment or in working heat recovery. These technologies were pricing for commercial packaged boilers prototypes to be technologically removed from further consideration in at those levels, regardless of the feasible. the rulemaking analysis. The remaining particular technology used to reach the • Practicability to manufacture, technology options were found to have level and using that information to install, and service: If mass production an impact on the measured energy develop aggregate industry price and reliable installation and servicing of efficiency of commercial packaged estimates at each efficiency level. a technology in commercial equipment boilers: (1) Heat exchanger Therefore, the technology options could be achieved on the scale improvements (including condensing identified and specifically the options necessary to serve the relevant market at heat exchangers); (2) improvements in that passed the screening analysis the time the standard comes into effect, burner technology; and (3) oxygen trim (discussed in section IV.B of this final then DOE will consider that technology systems. 81 FR 15853–15855. rule) do not directly impact the practicable to manufacture, install, and As discussed in section IV.A.5 of this engineering analysis, but rather serve an service. final rule, DOE has decided to add pulse informational purpose for options that • Adverse impacts on equipment combustion as a separate technology manufacturers, researchers, and other utility or equipment availability: If DOE option. Previously DOE had included interested parties may consider to determines a technology would have a pulse combustion under heat exchanger improve the efficiency of commercial significant adverse impact on the utility technology options which passed the packaged boilers. of the equipment to significant screening analysis in the March 2016 subgroups of consumers, or would NOPR. Therefore, in this final rule, 31 For more information on ‘‘Oxygen trim result in the unavailability of any pulse combustion was included as a systems’’ see: http://www1.eere.energy.gov/ covered equipment type with separate technology option in the list manufacturing/tech_assistance/pdfs/steam4_ boiler_efficiency.pdf and http:// performance characteristics (including that passed the screening analysis. www.pdhonline.com/courses/m166/ reliability), features, sizes, capacities, DOE did not receive any comments on m166content.pdf. and volumes that are substantially the the technology options that were

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removed from further consideration or methodology generally involves equipment database to calculate the passed the screening criteria. Therefore, calculating prices of commercial weights to corresponding to the rated DOE continues to screen the packaged boilers for a given rated input input of each CPB price. DOE applied technologies as was done for the March (representative capacity) for each these weights to calculate the weighted 2016 NOPR and summarized manufacturer at different efficiency average price per rated input and the immediately above. For more levels spanning from the minimum weighted average rated input for each information on the screening analysis allowable standard (i.e., baseline level) efficiency level. see chapter 4 of the final rule TSD. to the maximum technologically feasible Next, DOE scaled the weighted efficiency level. The primary output of average price (on a per rated input basis) C. Engineering Analysis the analysis is a set of price-efficiency at each efficiency level from the The engineering analysis establishes relationships that represent the average weighted average rated input (at which the relationship between manufacturer change in manufacturer selling price for the price was calculated in the previous selling prices (MSP) and energy- higher efficiency equipment (i.e., step) to the representative rated input efficiency of commercial packaged ‘‘incremental price’’). In the subsequent for the respective equipment class. DOE boilers. This price-efficiency markups analysis (chapter 6 in the final used 800 kBtu/h and 3,000 kBtu/h as relationship serves as a basis for rule TSD), DOE determines consumer the representative rated input for the subsequent cost-benefit calculations for prices by applying additional small and large equipment classes. To individual consumers, manufacturers, distribution chain markups and sales normalize the prices back to the and the Nation. tax to the manufacturer selling prices representative capacity, DOE used non- To determine this price-efficiency developed in the engineering analysis. linear regression to determine the relationship, DOE uses data from the After applying these markups, the data equation that best represents the price market and technology assessment, serve as inputs to the life-cycle cost and on a per-unit input basis as a function publicly available equipment literature payback period analyses (chapter 8 in of rated input. Through the non-linear and research reports, and information the final rule TSD). regression, DOE noticed that for lower from manufacturers, distributors, and As discussed previously, DOE input capacities the price on a per input contractors. For this rulemaking, DOE classified commercial packaged boilers basis is higher, and as the rated input first used information from the market into twelve equipment classes based on increases, the price per input decreases. and technology assessment to identify rated input, heating medium (hot water In addition, the rate of change of the efficiency levels and representative or steam), and fuel type (gas or oil). For price on a per-unit input basis with equipment for analysis (see section all equipment classes, except the very respect to rated input also decreases IV.A). In the engineering analysis, DOE large CPB equipment classes (for which considerably as the rated input collected CPB prices primarily from DOE is not amending energy increases. The result of this non-linear manufacturers, mechanical contractors, conservation standards), DOE collected regression is a scatter plot that appears and equipment distributors. DOE pricing data which it used to directly to resemble a decreasing exponential tabulated all of the price data in a analyze the price-efficiency relationship curve. This trend is expected, as CPB separate database, which is referred to of each equipment class. DOE did not models will have certain fixed costs that as the ‘‘prices database.’’ analyze very large CPB equipment are present regardless of the size, and 1. Methodology classes in this engineering analysis. other costs that will increase as the For each manufacturer selling price rated input increases. DOE applied the DOE has identified three basic obtained, DOE first calculated the ratio regression equation to determine the methods for developing price-efficiency of the price of the commercial packaged weighted average price per input at the curves: (1) The design-option approach, boiler with respect to its rated input to representative rated input for each which provides the incremental obtain all prices on a per-unit rated efficiency level analyzed. manufacturing costs of adding design input basis (dollars per kBtu/h). The Once DOE had determined the options to a baseline model that will prices obtained were at various rated weighted average price per input at the improve its efficiency; (2) the efficiency- inputs, so DOE assigned weights to representative capacity for all efficiency level approach, which provides the individual prices (on a per rated input levels, DOE performed a regression incremental price of moving to higher basis) based on the distribution of rated analysis to deduce the equation that best efficiency levels without regard to any inputs of either CPB shipments (where represents the price-efficiency particular design option; (3) the reverse- DOE had this data available) or CPB relationship. Using the regression engineering (or cost-assessment) models available on the market. DOE equation, DOE calculated the predicted approach, which provides ‘‘bottom-up’’ gave more weight to the prices for weighted average price per input at the manufacturing cost assessments for equipment at input capacities that have representative capacity for all efficiency achieving various levels of increased higher representation in CPB shipments levels that were analyzed in each efficiency based on teardown analyses or CPB models on the market. For equipment class. DOE then multiplied (or physical teardowns) providing SGHW equipment class, AHRI provided the predicted weighted average price detailed data on costs for parts and shipment information that includes the per input at the representative capacity material, labor, shipping/packaging, and distribution of CPB shipments by rated by the representative capacity to get the investment for models that operate at input and by efficiency. Therefore, for manufacturer selling price at each particular efficiency levels.32 the engineering analysis for the SGHW efficiency level. As a final step, DOE For this rulemaking, DOE has decided equipment class, DOE used the calculated the incremental prices by to use the efficiency-level approach to information provided by AHRI to subtracting the baseline price from the conduct the engineering analysis. This calculate the weights based on the manufacturer selling price of each distribution of shipments by rated efficiency level above the baseline. 32 The term ‘cost’ refers to the manufacturing cost, input. For all other equipment classes, DOE used the methodology described while the term ‘price’ refers to the manufacturer DOE did not have information on above to analyze each equipment class selling price. In some of the engineering analysis approaches DOE calculates the manufacturing cost distribution of shipment by rated input. (other than very large equipment which is multiplied with the appropriate markups As a result, DOE used the numbers of classes). For the SGHW equipment to get the manufacturer selling price. models available on the market from the classes DOE used the same methodology

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to conduct separate analyses for the engineering analysis including, the packaged boilers. Therefore, in this final condensing and non-condensing plots that show the variation of CPB rule, DOE continues to use this efficiency levels. This was done to price with rated input are included in approach to estimate the prices at account for difference in the slopes of chapter 5 of the final rule TSD. In the several efficiency levels for LOHW, the price efficiency curves between non- March 2016 NOPR DOE tentatively used LGST and LOST commercial packaged condensing and condensing efficiency this approach to estimate prices for boilers. levels. To carry out the separate commercial packaged boilers at certain The detailed methodology for the assessment for condensing SGHW efficiency levels for the three equipment engineering analysis including the plots commercial packaged boilers, DOE classes. DOE requested comments and that show the variation of CPB price separated the condensing SGHW models feedback from interested parties on with rated input are included in chapter from the non-condensing SGHW models various aspects of the engineering 5 of the final rule TSD. and used the separate datasets to analysis performed for the NOPR 2. Data Collection and Categorization conduct the analysis as per the analysis, and specifically on the methodology described in the previous methodology and results. As part of the engineering analysis, paragraph. DOE did not have sufficient In response to this approach, DOE DOE collected 584 CPB prices from pricing data to analyze each condensing received comments from ABMA manufacturers, wholesalers, distributors efficiency level of LGHW, SOHW and expressing concern about the and contractors. LOHW. As a result, DOE did not analyze extrapolation of prices from small A distributor or wholesaler is usually these condensing levels separately. boilers to address the lack of data for the first consumer in the distribution Instead, DOE used the same incremental large boilers. ABMA stated that large chain and typically receives a discount manufacturer selling prices that were boilers not only have a significantly on the list price when purchasing determined in the preliminary analysis different applications and features but equipment from the manufacturer. This TSD to evaluate the prices for also carry an exponentially higher cost discount varies by manufacturer and the condensing efficiency levels in these for transportation, installation and start- equipment being sold, and also depends equipment classes. DOE did not receive up. (ABMA, No. 64 at p. 1) Phoenix on the business relationship between any comments in the previous stages of Energy Management stated in the NOPR the manufacturer and the purchaser the rulemaking providing additional public meeting that there is no (i.e., the discount may vary depending pricing data or suggesting that the prices connection between a small and a large on the volume of units that a distributor were inaccurate. boiler and that there are multiple or contractor purchases). While For further details on the variables that come into play in collecting price data, DOE also obtained methodology and results are provided in establishing the price. (PEM, Public information on typical discounts the chapter 5 of the final rule TSD. Meeting Transcript, No. 61 at p. 64) applicable on the list prices, and Raypak stated that the price of a 3,000 applied the discount to list prices to a. Analysis of Large CPB Equipment kBtu/h boiler is substantially different obtain the actual manufacturer selling Classes from a 10,000 kBtu/h boiler. (Raypak, price. All manufacturer selling prices As discussed in section IV.C.2, DOE Public Meeting Transcript, No. 61 at p. used in the engineering analysis include collected 584 CPB prices that covered 65) the appropriate discount to the list all CPB equipment classes that are In response, DOE notes that the prices. In chapter 5 of the NOPR TSD, analyzed in this final rule. Out of the extrapolation of prices from the small to DOE specified that the discount rates eight equipment classes analyzed, DOE large equipment classes (for oil-fired hot offered by manufacturers typically lie received sufficient information to water and steam; and gas-fired steam within a range of 15 to 40 percent. analyze five equipment classes at all equipment classes) is based on actual In response to this, AHRI commented efficiency levels without extrapolation pricing data that is available for that the equipment costs were wrongly of data from other equipment class. For commercial packaged boilers in each generated using estimated discounts three large equipment classes, i.e., corresponding small and large from list prices. AHRI highlighted that LOHW, LGST and LOST, DOE did not equipment classes. DOE obtained 163 the discount factors used in the analysis have pricing data at several efficiency prices for large CPB models in the had a large range (15 to 40 percent) and levels that are analyzed in this final LOHW, LGST, and LOST equipment were based on manufacturers or DOE’s rule. The lack of data stems from the classes that were used in developing the estimates rather than actual data. AHRI general low number of models available price trend between small and large stated that even small errors in these in the market for such equipment commercial packaged boilers in these factors would have a significant effect classes. To address these cases, DOE classes. There are only a few efficiency on the resulting relationships leveraged the pricing collected for the levels in the three large equipment established by DOE for determining small CPB equipment classes to estimate classes where DOE extrapolated data actual manufacturer selling prices. the price of a large commercial from the corresponding small classes. AHRI opposed DOE’s use of a single packaged boiler. To extrapolate the The trends in prices between the small price estimate for an assumption with prices, DOE first combined the price and large classes show a smooth linear known variability and suggested using data of each small and large equipment trend and are devoid of sudden changes distribution of the estimates. (AHRI, No. classes that have the same in pricing structure. The r-squared 76 at pp. 41–42) characteristics (e.g., SHOW and LOHW). values for the linear equations that fit DOE disagrees with AHRI’s comment DOE then performed a regression the pricing data are 0.923, 0.982 and suggesting that it used its own estimates analysis of the entire dataset to find an 0.967 for oil-fired hot water, gas-fired rather than actual data to determine the equation that represents the relationship steam and oil-fired steam equipment discounts from list pricing that are between equipment price and rated classes, respectively, indicating a strong applicable to the pricing data. The range input for the given type of equipment. fit to the data. Considering the r-squared of discount rates specified in the DOE then used the equation to estimate value of the plots, DOE is highly chapter 5 of the NOPR TSD and the price of a commercial packaged confident that the extrapolated prices mentioned in AHRI’s comment, boiler when its size is scaled up to 3,000 used in the analysis are representative represent the typical rates offered by kBtu/h. The detailed methodology for of the prices for larger commercial manufacturers. DOE gathered this

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information through consultations with these boilers are custom built to a TABLE IV.2—NUMBER OF PRICES COL- manufacturers, distributors, and specific set of requirements for a given LECTED FOR ENGINEERING ANALYSIS contractors that provided CPB price installation. ABMA noted that the data. While collecting pricing data, DOE customization is primarily in the area of Number of also requested and received specific controls, instrumentation, interfacing Equipment class prices used information on the discounts from list with building energy management in analysis price offered by specific manufacturers systems and meeting location specific SGHW ...... 203 and received by specific distributors. As emission requirements. ABMA noted LGHW ...... 52 a result, DOE had actual data on list that these add-ons carry a high price tag. SOHW ...... 70 price discounts for the models for which However, ABMA suggested that while LOHW ...... 44 pricing was obtained, and DOE applied these units are custom built, they are SGST ...... 72 those discounts directly to the built on a standard heat exchanger LGST ...... 76 corresponding CPB list prices to design and burner capacity and SOST ...... 24 calculate the manufacturer selling price therefore energy efficiency should not LOST ...... 43 that was used in the analysis. DOE be affected by the customizing features. considered the comments received from (ABMA, No. 64 at p. 2) Raypak provided Total ...... 584 AHRI with regard to using a distribution comments at the public meeting that As discussed previously, in response of list price discount estimates instead DOE should be looking at the local code to DOE’s requests for shipment data for of a fixed value. DOE concludes that requirements that vary with jurisdiction, conducting the rulemaking analyses, using actual list price discounts that for installing commercial packaged AHRI provided actual shipments data were shared by manufacturers, boilers, stating that as the size increases contractors and distributors is a more the number of applicable controls and for SGHW and LGHW equipment accurate approach to estimate the actual codes also increase. (Raypak, Public classes for the years 2014 and 2015. The manufacturer selling prices than Meeting Transcript, No. 61 at pp. 62–63) information received represents randomly assigning the discount based DOE agrees with ABMA that the shipment data collected by AHRI from on a distribution through a Monte Carlo customizing of certain optional features AHRI-member manufacturers in an simulation, as suggested by AHRI. As a do not impact the efficiency of aggregated form. The information result, DOE decided to use the actual commercial packaged boilers. To ensure includes distributions of shipments by data for list price discounts received that the cost of added features (that do rated input for the SGHW equipment from manufacturers, distributors and not improve the efficiency of the class for the years 2014 and 2015, contractors and applied it to the list equipment) are not included in the distribution of shipments by efficiency prices received from the respective prices used for the engineering analysis, for SGHW and LGHW equipment source before using the pricing data in DOE normalized the optional features classes for the years 2014 and 2015, and the engineering analysis. applicable to each boiler model by shipment weighted efficiency for all DOE collected the bulk of its prices selecting the same options for all CPB equipment classes. DOE used the for commercial packaged boilers from prices collected. For example, DOE information for the distribution of distributors and contractors. This price noticed that in several CPB series, prices shipment by rated input to conduct the data was also supplemented by of control and safety features are listed analysis for SGHW condensing and non- information gathered through separately which get added to the basic condensing efficiency levels. Further, manufacturer interviews. The prices model trade price. For such cases, DOE this information is also used to conduct cover a wide variety of commercial chose the same type of control feature LCC and PBP analysis. packaged boiler models. The models for for all CPB models where a choice is 3. Baseline Efficiency which DOE obtained pricing include offered. While selecting the prices DOE mechanical draft, natural (or also encountered scenarios where (1) a DOE selects baseline efficiency levels atmospheric) draft, condensing boilers feature that DOE has consistently as reference points for each equipment and non-condensing boilers, and cover selected for all CPB models is not class, against which DOE calculates all equipment classes that are analyzed offered for a particular series; and (2) a potential changes in energy use, cost, in this rulemaking. The input capacities particular feature becomes inapplicable and utility that could result from an of boilers for which prices were for commercial packaged boilers of amended energy conservation standard. obtained ranged from 300 kBtu/h to higher capacity within the same CPB Typically, a baseline unit is one that 9,500 kBtu/h. series. In such cases DOE selected a meets, but does not exceed, the required In the March 2016 NOPR, DOE also similar feature that would offer similar energy conservation standard, as described the approach it used in functionality. This approach helped to applicable, and provides basic selecting the add-on features applicable minimize the effects of optional consumer utility. A CPB model that has to each commercial packaged boiler that auxiliary components. a rated efficiency equal to its applicable is included in the price books. Most of In response to the engineering baseline efficiency is referred to as a the add-on features are related to control analysis presented in the NOPR public ‘‘baseline model.’’ DOE uses the system that do not have an impact on meeting, ABMA asked how much data baseline model for comparison in the ET or EC as measured using DOE’s was available and used for large sized several phases of the analyses, including test procedure. Each additional feature boilers. (ABMA, Public Meeting the engineering analysis, LCC analysis, installed on a basic boiler model adds Transcript, No. 61 at pp. 93–94) PBP analysis and NIA. For the to the price of the model. However, this In response, Table IV.2 shows the engineering analysis, DOE used the increase in price is generally not number of CPB prices that DOE used in current energy conservation standards associated with the corresponding the engineering analysis in each that are set forth in 10 CFR 431.87 as increase in efficiency. equipment class. This table was also baseline efficiency levels. In response to the engineering presented in the March 2016 NOPR. 81 As discussed previously in section analysis, ABMA stated that very large FR 15858. DOE did not collect IV.A.3 of this document, DOE has commercial packaged boilers are additional price data for the final rule consolidated the equipment classes that extremely difficult to price because analysis. are set forth in the current regulations

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such that the current draft-specific TABLE IV.3—BASELINE EFFICIENCIES levels. Additionally, for each equipment classes (i.e., those identified as being CONSIDERED IN THE ENGINEERING class, DOE generally identifies several ‘‘natural draft’’ and ‘‘all except natural ANALYSIS—Continued intermediate efficiency levels between draft’’) are merged into non-draft- the baseline efficiency level and max- specific classes. For the four draft- Baseline tech efficiency level. These efficiency specific classes, DOE used the natural Equipment class efficiency * levels typically represent the most draft equipment class efficiency (%) common efficiencies available on the standard as the baseline efficiency level. market or a major design change (e.g., Large Oil-fired Steam ...... 81 For the remaining equipment classes, switching to a condensing heat DOE used the current standards in 10 * Efficiency levels represent thermal effi- exchanger). In the analysis, DOE uses CFR 431.87 as the baseline efficiency ciency for all equipment classes except for the intermediate and max-tech levels in the engineering analysis. The Large Gas Hot Water and Large Oil Hot Water, for which the efficiency levels are in efficiency levels as target efficiencies for baseline efficiency levels for each terms of combustion efficiency. conducting the cost-benefit analysis of equipment class are presented in Table ** Mechanical draft equipment within this achieving increased efficiency levels. IV.3. class currently has a minimum standard of 79- percent thermal efficiency. 10 CFR 431.87 All During the market assessment, DOE TABLE IV.3—BASELINE EFFICIENCIES equipment analyzed below 79 percent is nat- conducted an extensive review of ural draft equipment. publicly available CPB equipment CONSIDERED IN THE ENGINEERING literature. DOE used the distribution of ANALYSIS 4. Intermediate and Max-Tech Efficiency Levels models in the equipment database Baseline compiled during the market assessment Equipment class efficiency * As part of its engineering analysis, to identify intermediate and max-tech (%) DOE determined the maximum efficiency levels for analysis. DOE technologically feasible (‘‘max-tech’’) generally selected the efficiency levels Small Gas-fired Hot Water ...... 80 improvement in energy efficiency for with the most models or that Large Gas-fired Hot Water ...... 82 each equipment class of commercial Small Oil-fired Hot Water ...... 82 represented a significant technology Large Oil-fired Hot Water ...... 84 packaged boilers. DOE surveyed the (e.g., condensing) for analysis. The Small Gas-fired Steam ...... ** 77 CPB market and the research literature efficiency levels for each equipment Large Gas-fired Steam ...... ** 77 relevant to commercial packaged boilers class that DOE considered in the final Small Oil-fired Steam ...... 81 to determine the max-tech efficiency rule TSD are presented in Table IV.4.

TABLE IV.4—BASELINE, INTERMEDIATE AND MAX TECH EFFICIENCY LEVELS ANALYZED IN THE ENGINEERING ANALYSIS

Efficiency * Equipment class (%) Efficiency level identifier

Small Gas Hot Water ...... 80 EL—0 Baseline. 81 EL—1. 82 EL—2. 84 EL—3. 85 EL—4. 93 EL—5. 95 EL—6. 99 EL—7 Max Tech. Large Gas Hot Water ...... 82 EL—0 Baseline. 83 EL—1. 84 EL—2. 85 EL—3. 94 EL—4. 97 EL—5 Max Tech. Small Oil Hot Water ...... 82 EL—0 Baseline. 83 EL—1. 84 EL—2. 85 EL—3. 87 EL—4. 88 EL—5. 97 EL—6 Max Tech. Large Oil Hot Water ...... 84 EL—0 Baseline. 86 EL—1. 88 EL—2. 89 EL—3. 97 EL—4 Max Tech. Small Gas Steam ...... 77 EL—0 Baseline. 78 EL—1. 79 EL—2. 80 EL—3. 81 EL—4. 83 EL—5 Max Tech. Large Gas Steam ...... 77 EL—0 Baseline. 78 EL—1. 79 EL—2. 80 EL—3. 81 EL—4.

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TABLE IV.4—BASELINE, INTERMEDIATE AND MAX TECH EFFICIENCY LEVELS ANALYZED IN THE ENGINEERING ANALYSIS— Continued

Efficiency * Equipment class (%) Efficiency level identifier

82 EL—5. 84 EL—6 Max Tech. Small Oil Steam ...... 81 EL—0 Baseline. 83 EL—1. 84 EL—2. 86 EL—3 Max Tech. Large Oil Steam ...... 81 EL—0 Baseline. 83 EL—1. 85 EL—2. 87 EL—3 Max Tech. * Efficiency levels represent thermal efficiency for all equipment classes except for LGHW and LOHW, for which the efficiency levels are in terms of combustion efficiency.

Bradford White commented that the market today and rated at a given inputs to the downstream analyses such prices of commercial packaged boilers efficiency would not be representative as the life cycle cost analysis. will increase due to the effect of the of models at that efficiency under an DOE received several comments on proposed CPB test procedure changes. amended standard, as such a decision the incremental price results and the Bradford White noted that if DOE would be made by individual price-efficiency curves published in the establishes an 85-percent ET standard manufacturers based on their business NOPR analysis TSD. for SGHW commercial packaged boilers, practices. Further, DOE notes that if Weil-McLain suggested that DOE’s manufacturers may choose to tests on a small sample produce a mean analysis did not adequately account for overdesign their equipment by sample efficiency that is lower than the additional costs related to additional increasing their efficiency to be 0.5 to 1 what a manufacturer believes to be the components, venting materials, system percent greater than the minimum to true mean across manufactured units, engineering and design, manufacturing ensure that the equipment passes any DOE’s regulations for commercial costs, installation costs and operating random audit test. Bradford White packaged boilers at 10 CFR 429.60 costs of higher efficiency mechanical stated that as a result of this increase, would permit the manufacturer to draft equipment. (Weil-McLain, No. 67 commercial packaged boilers will likely enlarge the sample rather than at p. 2) be operating at temperatures that will overdesign the equipment. The mean of DOE does not agree with Weil- lead to condensation forming in the a larger sample would tend to have McLain, in that the engineering analysis vent. Manufacturers may incorporate smaller departures from the population conducted in this final rule is based on additional sensors and controls, as well mean. Therefore, DOE has determined it list prices that manufacturers and their as more costly materials to protect the would be inappropriate to assume that representatives use to sell their equipment longevity. This will lead to at a given standard level under equipment. These prices include the more costly equipment. (Bradford consideration costs would be incurred manufacturing cost and the relevant White, No. 63 at p. 3) to achieve an efficiency greater than that manufacturer markups (Markups In response, DOE conducts its being analyzed. analysis is discussed in section IV.D of analysis to evaluate the increase in this final rule). Other costs related to 5. Incremental Price and Price- manufacturer selling price or installation and venting are discussed in Efficiency Curves manufacturing cost to achieve the section IV.F of this final rule. desired efficiency level selected as part The final results of the engineering Table IV.5 shows the incremental of the engineering analysis. Although analysis are a set of price-efficiency manufacturer selling price results based some manufacturers may choose to curves that represent the manufacturer on prices in 2015$ for all eight overdesign their equipment, DOE selling price for higher efficiency equipment classes along with the cannot assume that the models on the models. DOE uses these results as baseline prices.

TABLE IV.5—MANUFACTURER SELLING PRICE-EFFICIENCY RESULTS [2015$]

Baseline Equipment class Efficiency level* Incremental manufacturer prices selling price

Small Gas Hot Water ...... Baseline—80% ...... $0 $7,043 81% ...... 510 82% ...... 961 84% ...... 3,112 85% ...... 4,048 93% ...... 11,076 95% ...... 11,719 Max Tech—99% ...... 13,910 Large Gas Hot Water ...... Baseline—82% ...... 0 22,123 83% ...... 1,983 84% ...... 4,144

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TABLE IV.5—MANUFACTURER SELLING PRICE-EFFICIENCY RESULTS—Continued [2015$]

Baseline Equipment class Efficiency level* Incremental manufacturer prices selling price

85% ...... 6,498 94% ...... 31,917 Max Tech—97% ...... 36,025 Small Oil Hot Water ...... Baseline—82% ...... 0 8,626 83% ...... 689 84% ...... 1,433 85% ...... 2,236 87% ...... 4,040 88% ...... 5,051 Max Tech—97% ...... 17,465 Large Oil Hot Water ...... Baseline—84% ...... 0 19,128 86% ...... 4,870 88% ...... 10,980 89% ...... 14,595 Max Tech—97% ...... 49,710 Small Gas Steam ...... Baseline—77% ...... 0 6,630 78% ...... 568 79% ...... 1,184 80% ...... 1,853 81% ...... 2,580 Max Tech—83% ...... 4,225 Large Gas Steam ...... Baseline—77% ...... 0 19,365 78% ...... 1,132 79% ...... 2,329 80% ...... 3,597 81% ...... 4,939 82% ...... 6,359 Max Tech—84% ...... 9,453 Small Oil Steam ...... Baseline—81% ...... 0 7,617 83% ...... 1,651 84% ...... 2,607 Max Tech—86% ...... 4,823 Large Oil Steam ...... Baseline—81% ...... 0 18,781 83% ...... 3,236 85% ...... 7,029 Max Tech—87% ...... 11,476 * Efficiency levels represent thermal efficiency for all equipment classes except for LGHW and LOHW, for which the efficiency levels are in terms of combustion efficiency.

D. Markups Analysis the change in the manufacturer selling • Manufacturer → Manufacturer → The markups analysis develops price of baseline models to the change Representative Mechanical → appropriate markups in the distribution in the consumer purchase price. The Contractor Consumer chain (e.g., retailer markups, distributer incremental markup relates the change DOE characterizes the new markups, contractor markups, and sales in the manufacturer selling price of construction distribution channels for taxes) to convert the estimates of higher efficiency models (the both the residential and commercial manufacturer selling price derived in incremental cost increase) to the change buildings sectors as follows: the engineering analysis to consumer in the consumer purchase price. • → → Four different markets exist for Manufacturer Wholesaler prices (‘‘consumer’’ refers to purchasers Mechanical Contractor → General of the equipment being regulated), commercial packaged boilers: (1) New → construction in the residential buildings Contractor Consumer which are then used in the LCC and PBP • → sector, (2) new construction in the Manufacturer Manufacturer analysis and in the manufacturer impact Representative → Mechanical analysis. DOE develops baseline and commercial buildings sector, (3) Contractor → General Contractor → incremental markups based on the replacements in the residential Consumer equipment markups at each step in the buildings sector, and (4) replacements distribution chain. For this rulemaking, in the commercial buildings sector. In In addition to these distribution DOE developed distribution chain this rulemaking, DOE characterized channels, there are scenarios in which markups in the form of multipliers that eight distribution channels to address manufacturers sell commercial represent increases above equipment these four markets. packaged boilers directly to a consumer purchase costs for key market For both the residential and through a national account via a participants, including CPB commercial buildings sectors, DOE manufacturer representative, and its wholesalers/distributors, and characterizes the replacement associated markup (assumed as 12.5 mechanical contractors and general distribution channels as follows: percent of sales; other distribution contractors working on behalf of CPB • Manufacturer → Wholesaler → channels previously discussed make up consumers. The baseline markup relates Mechanical Contractor → Consumer the remaining 87.5 percent of sales).

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These scenarios occur in both new wholesaler as the first consumer in the classes of equipment, acknowledging construction and replacements markets distribution chain does not adequately that this has drawbacks but should and in both the residential and represent the primary commercial boiler result in more accurate costs. (BHI, No. commercial sectors. The relative shares market, noting 80 percent of small and 71 at pp. 17–18) AHRI continues to for these are dependent on equipment large commercial packaged boilers object to DOE’s use of incremental class and details may be found in typically follow the path of markups, and reiterates that it has chapter 6 of the final rule TSD. In these Manufacturer → Manufacturer provided ample evidence that instances, installation is typically Representative → Mechanical contractors do not use incremental accomplished by site personnel. These Contractor → General Contractor → markups. However, it understands that distribution channels are depicted as Owner. (Lochinvar, No. 70 at p. 2) the markups in DOE’s analysis are follows: Raypak somewhat agreed with the approximately accurate as average • Manufacturer → Manufacturer distribution model used by DOE for markups, also noting manufacturer’s Representative → Consumer (National commercial packaged boilers, noting representatives have markups in the 10- Account) that it uses manufacturer representatives to 15-percent range. (AHRI, No. 76 at To develop markups for the parties almost exclusively, but also noting that pp. 41–42) NEEA commented that when involved in the distribution of the DOE’s model shows wholesalers and they do similar analyses, the focus is on commercial packaged boilers, DOE manufacturer representatives in the the costs that change based on the utilized several sources, including (1) same category and that these should be efficiency of the boiler, noting that in the Heating, Air-Conditioning & handled separately, as their functions their experience it is when you change Refrigeration Distributors International differ. Further, Raypak commented that technology (e.g., non-condensing to (HARDI) 2013 Profit Report 33 to DOE is underestimating the markups condensing) that things will change, and develop wholesaler markups; (2) the associated with manufacturer that DOE’s approach is similar in that it 2005 Air Conditioning Contractors of representatives in the distribution is looking for incremental differences, America’s (ACCA) financial analysis for formula and other downstream analyses, not specific differences in any given the heating, ventilation, air- and that it believes the estimated market building. (NEEA, Public Meeting conditioning, and refrigeration (HVACR) segment and sector weights by CPB Transcript, No. 61 at pp. 99–101) AHRI contracting industry 34 to develop equipment class breakouts are not also commented that the markups for mechanical contractor markups; and (3) appropriate and that the assumption of large and small boilers were not U.S. Census Bureau’s 2012 Economic 17.5 percent of commercial packaged different enough. Crown commented Census data 35 for the commercial and boilers sold via national accounts is a that the markup methodology being institutional building construction considerable overstatement, noting it used is probably inappropriate and that industry to develop general contractor believes it should be closer to 5 percent. DOE should take the time to survey the markups. In addition to the markups, (Raypak, No. 72 at p. 4) engineers who are actually installing DOE derived State and local taxes from DOE appreciates the stakeholder units. AHRI commented that they had data provided by the Sales Tax inputs regarding distribution channels little confidence in the incremental Clearinghouse.36 These data represent for commercial packaged boilers. DOE markups process, despite weighted-average taxes that include believes that there is a acknowledging in written comments county and city rates. DOE derived misunderstanding around the national that the markups in DOE’s analysis are shipment-weighted-average tax values account distribution channel. DOE approximately accurate as average wishes to clarify that the national for each region considered in the markups, and asked if there was an account considered for commercial analysis. intent to survey, at some level, the packaged boilers already includes a In the March 2016 NOPR, DOE actual selling point of the commercial manufacturer representative tier whose requested information or insight that boiler. (AHRI, Public Meeting markup is the same as a wholesale would better inform its markups Transcript, No. 61 at pp. 95–96, AHRI, distributor in the regular channel and analysis. Bradford White commented No. 76 at pp. 41–42, Crown, Public the equipment does not get sold to the that for the CPB market most units are Meeting Transcript, No. 61 at p. 103) sold from the manufacturer to a buy/sell consumers directly from the manufacturer but through the In response to these comments, DOE representative, also known as a notes that incremental markups relate specialty wholesaler, before being sold manufacturer representative. With respect to the estimated market segment the change in manufacturer selling price to the contractor and eventually the of higher efficiency equipment to the consumer. It is also Bradford White’s and sector weights, while Raypak commented that 17.5 percent is an change in the consumer purchase price. experience that sales to national DOE develops markups based on data accounts still go through a wholesaler. overestimation, Lochinvar’s comment suggests that 20 percent of the market on costs incurred by various entities in (Bradford White, No. 68 at p. 4) the distribution chain and considers Lochinvar stated that a distributor/ segment is handled through the national distribution channel. DOE considered that certain costs incurred by these entities would not be expected to 33 Heating, Air Conditioning & Refrigeration these comments and adjusted the Distributors International 2013 Profit Report. fraction of commercial packaged boilers increase due to merely increasing the Available at https://web.archive.org/web/ sold via the national account efficiency of equipment. For example, 20130822231322/http://www.hardinet.org/Profit- distribution channel to 12.5 percent. salaries, benefits, and operating Report. DOE also received comments expenses are among those costs that 34 Air Conditioning Contractors of America (ACCA), Financial Analysis for the HVACR regarding its use of incremental would not be expected to increase with Contracting Industry: 2005. Available at http:// markups. BHI commented that DOE higher costs of goods sold. With respect www.acca.org/store/. should eliminate the use of incremental to BHI’s and AHRI’s comment that 35 Census Bureau. 2012 Economic Census Data. markups, noting the varying supply incremental markups are not typically (2012). Available at http://www.census.gov/econ/. chains and tremendous number of used by contractors and manufacturers, 36 Sales Tax Clearinghouse Inc. State Sales Tax Rates Along with Combined Average City and options, and recommends that DOE DOE notes that it does not expect that County Rates, (2016). Available at: http:// survey building owners to find out what an individual manufacturer or thestc.com/STrates.stm. they are actually paying for various contractor would, in its general practice,

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differentially provide markups by the data available at the time from with stakeholder requests, and do not efficiency level or equipment cost. The CBECS 2012 in its NOPR, which warrant publication of an SNOPR. concept of incremental markups applies included only the building Further, DOE does not have any to an industry as a whole and serves the characteristics segment, to inform its opportunity to use RECS 2015 data as purpose in this rulemaking of analysis. However, the public use the ongoing survey is currently in the differentiating industry costs that scale microdata files on consumption and data gathering stage. expenditure required for developing up with cost of goods sold, and those 1. Energy Use Characterization that would not, as described in the final building samples used in the LCC rule TSD. DOE’s intent is to accurately analysis were not yet released. During DOE’s energy characterization estimate the price of higher efficiency the March 2016 NOPR public meeting, modeling approach calculates CPB equipment to the consumer under an and also in written comments, DOE energy use based on rated thermal amended standards scenario, and as received feedback regarding its efficiency and building heat load (BHL), such DOE maintains that the markups continued use of CBECS 2003 data. accounting for the conversion from methodology accomplishes this and is SoCalGas and the Joint Utilities urged combustion efficiency to thermal consistent with the methodology used DOE to utilize CBECS 2012 data in its efficiency where applicable, part-load in other rulemakings. energy use analysis and shipments operation (in the case of multi-stage Chapter 6 of the final rule TSD analysis, since the building energy use equipment), and cycling losses (for provides details on DOE’s development profile is expected to have changed single-stage equipment), as well as of markups for commercial packaged significantly from data in CBECS 2003, return water temperature (RWT) and boilers. noting as an example trends in climate zones. In this rulemaking, DOE commercial heating away from single analyzed CPB annual energy use based E. Energy Use Analysis large boilers and toward smaller on the building sample, equipment The purpose of the energy use modular boilers. They further efficiency characteristics, and analysis is to determine the annual encouraged DOE to utilize RECS 2015, equipment performance at part-load energy consumption of commercial should the data be released before the conditions. packaged boilers in use in the United final rule is published. (SoCalGas, No. In determining building heat load, States and assess the energy savings 77 at p. 6; Joint Utilities, No. 66 at p. DOE adjusted the building heat load to potential of increases in efficiency 2) Raypak and AHRI also encouraged reflect the expectation that buildings in (thermal efficiency (E ) or combustion DOE to update its analysis based on 2020 would have a somewhat different T building heat load than buildings in the efficiency (EC)). The energy use analysis CBECS 2012 data, noting several energy for commercial packaged boilers seeks use characterization metrics that differ CBECS 2012 and RECS 2009 building to estimate the range of energy from those of CBECS 2003 (e.g., percent sample. The adjustment involved multiplying the calculated BHL for each consumption of the equipment in the of buildings using boilers as the main CBECS 2012 or RECS 2009 building by field (i.e., as they are actually used by heating equipment and energy use the building shell efficiency index from consumers). DOE estimates the annual intensity). In addition, AHRI AEO2016. This factor differs for energy consumption of commercial commented that since significant commercial and residential buildings as packaged boilers at specified energy changes in results could be expected if well as new construction and efficiency levels across a range of CBECS 2012 data are used in the replacement buildings. Additionally, climate zones, building characteristics, analysis, DOE should consider DOE also adjusted the building heat and space and water heating publishing a corresponding load computed from CBECS 2012 and applications. The annual energy supplemental NOPR. (AHRI, No. 76 at pp. 1, 2, 13, 14, 16; Raypak, No. 72 at RECS 2009 data for each sample consumption includes natural gas, building taking into account the relative liquid petroleum gas (LPG), oil, and/or pp. 1–2) DOE understands the stakeholders’ ratio of heating degree days (HDD) for electricity use by the commercial the CBECS or RECS year (2012 or 2009) packaged boiler for space and water comments and requests and recognizes there is benefit to the use of more to the corresponding 10 year average heating. The energy use analysis HDD, both averaged over the specific provides the basis for other analyses current data that better represents the energy use of commercial packaged region of the building location. This DOE performed, particularly ratio was computed using the HDD data assessments of the energy savings and boilers that would be installed in 2020 and beyond. In this final rule DOE from the National Oceanic and the savings in consumer operating costs updated its LCC model to use the EIA’s Atmospheric Administration (NOAA) that could result from adoption of 2012 CBECS microdata 38 that became and applied to the computed building amended or new standards. available in May 2016 for developing heating load to reflect the heating load In its March 2016 NOPR, DOE building samples for each of the eight under historical average climate estimated the energy consumption of equipment classes examined. While it conditions. commercial packaged boilers in can be expected that such a change For this rulemaking, DOE adjusted the commercial buildings and multi-family would impact the modeling results to rated thermal efficiency of evaluated housing units by developing building some degree, this update was performed commercial packaged boilers based on samples for each of eight equipment at the request of stakeholders. RWT, cycling losses, and part-load classes examined based on the EIA’s Consequently, DOE concluded that the operation. High RWT is applied to all 2003 Commercial Building Energy non-condensing boiler installations. For 37 analytical results of the final rule Consumption Survey (CBECS 2003) utilizing CBECS 2012 data are an condensing boiler installations, low and EIA’s 2009 Residential Energy improvement to the analysis, consistent RWT is applied to all commercial Consumption Survey (RECS 2009). packaged boilers in the new Further, DOE noted that it had used all 38 U.S. Energy Information Administration (EIA), construction market, 25 percent of 2012 Commercial Building Energy Consumption replacement boilers in buildings built 37 U.S. Energy Information Administration (EIA), Survey (CBECS) Data, (2012). Available at https:// on or after 1990, and 5 percent of 2003 Commercial Building Energy Consumption www.eia.gov/consumption/commercial/data/2012/ Survey (CBECS) Data, (2003). (http://www.eia.gov/ index.cfm?view=microdata. Last accessed May 18, replacement boilers in buildings built consumption/commercial/data/2003/.) 2016. before 1990. DOE assumed that all other

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condensing boiler installations are high a combustion to thermal efficiency points out that the LCC model does not RWT applications. The efficiency conversion factor for the LCC analysis, establish a given amount of time a adjustment for low and high RWT is with no filtering of data applied. commercial packaged boiler will dependent on climate, with low RWT DOE received various comments condense. The model develops a values resulting in the condensing CPB regarding its return water temperature thermal efficiency adjustment that is an equipment operating in condensing assumptions in its analysis. Lochinvar average based on various factors as mode, on average, and high RWT values commented that it is overly optimistic described in appendix 7B of the final resulting in the condensing CPB to assume 25 percent of buildings rule TSD. For condensing boilers, DOE equipment operating in non-condensing constructed after 1990 are condensing does consider the fact that some mode, on average. See appendix 7B of and 100 percent of new construction is commercial packaged boilers will be the final rule TSD for the adjustment low temperature hydronic systems. operating with low return water factors used for RWT, part-load (Lochinvar, Public Meeting Transcript, temperatures, and the rest will operate operation, and cycling by climate zone. No. 61 at pp. 128–129) In its written with high return water temperatures, in For commercial packaged boilers rated comments, however, Lochinvar clarified the field. DOE notes that in the field, in combustion efficiency, DOE that DOE’s assumption that 25 percent depending on the heat load and system converted combustion efficiency to of buildings constructed after 1990 will design, the commercial packaged boiler thermal efficiency. DOE used allow for condensing boilers to may be operating at higher efficiencies combustion and thermal efficiency data condense for a significant part of the or lower efficiencies than those from the AHRI database to create a season does not correlate to true market established as the average adjusted conversion factor that is representative conditions and that their experience efficiency in the model, but it believes of the range of commercial packaged suggests the actual percentage of its approach adequately reflects the boilers on the market. buildings with low-temperature heating energy use of the commercial packaged DOE received comments in the March systems is much lower. (Lochinvar, No. boiler throughout the entire heating 2016 NOPR regarding the energy 70 at p. 2) Similarly, Weil-McLain season. DOE does assume that all new modeling approach. Regarding DOE’s commented that DOE’s heat load construction scenarios in the model (25 approach to converting combustion estimation methodology overestimates percent of buildings constructed on or efficiency to thermal efficiency in the true energy savings associated with after 1990 and 5 percent of buildings LCC model, Lochinvar commented that condensing boilers at high return water constructed before 1990) would be it is inappropriate to correlate temperature and overestimates the designed to allow for low return water combustion efficiency and thermal number of low temperature systems in temperatures, on average, and that all efficiency, as they are derived by two existence. (Weil-McLain, No. 67 at pp. other scenarios would operate with high totally different test methods. 6–7) ASAP, however, questioned DOE’s return water temperatures, on average. (Lochinvar, Public Meeting Transcript, assumption that in new construction a Regarding Lochinvar’s comment that No. 61 at p. 127) Lochinvar further condensing boiler system would not be these assumptions do not correlate to objected to DOE’s approach of removing capable of condensing a significant true market conditions, DOE notes that data samples it considered nonsensical portion of the time and whether it is neither Lochinvar, nor any other (i.e., combustion efficiency was reported more representative for new commenter, provided any data regarding as lower than thermal efficiency in an construction to assume that the system the actual number of installations it AHRI database entry) and suggested is always operating with low enough expects would use low-temperature using the entire set of data in return water temperatures to be always heating systems in new construction or determining the relationship that would in condensing mode. (ASAP, Public existing buildings, but notes that DOE be more appropriate. (Lochinvar, Public Meeting Transcript, No. 61 at pp. 133– received additional comment indicating Meeting Transcript, No. 61 at pp. 126– 134) Crown, in response to ASAP’s that even the use low temperature 128) AHRI agreed with Lochinvar comment regarding condensing boilers distribution may change over the life of regarding the fact that combustion in new construction, commented that it the building to meet occupant comfort. efficiency and thermal efficiency tests would not be assumed that, even in new use different methods, and further construction, condensing boilers would Conversely, the Joint Advocates commented that for any given boiler condense all the time, especially so, for commented that DOE’s return water model, there definitely is a relationship example, on the coldest day of the year, temperature distributions for between combustion efficiency and noting that the availability of condensing boilers represent overly thermal efficiency, but that looking at condensing mode and corresponding conservative scenarios. Further, they aggregated datasets is not the way to reset schedules depends on what point out that the default outdoor reset derive a general relationship. Each emitters are used. (Crown, Public schedules from manufacturers of model has to be looked at to sort out Meeting Transcript, No. 61 at pp. 134– condensing boilers and real-world that relationship. (AHRI, Public Meeting 137) ASAP added that the amount of implementations of condensing boilers Transcript, No. 61 at pp. 129–130) time equipment operates in condensing replacing non-condensing boilers DOE appreciates the comments mode seems conservative. (ASAP, suggest that condensing boilers can regarding its approach to convert Public Meeting Transcript, No. 61 at p. operate a greater portion of the heating combustion efficiency to thermal 136) Raypak further commented that season in condensing mode than that efficiency. DOE notes that, as AHRI and condensing mode is dependent on user assumed in DOE’s analysis, and that this Lochinvar have stated, combustion and comfort, and that a boiler may be would increase the savings from thermal efficiencies are determined by designed for condensing mode but if condensing boilers relative to non- two different methods. DOE users are uncomfortable they will raise condensing boilers. In support of these understands the concerns of the the water temperature. (Raypak, Public assertions, they cited published reports commenters and in the final rule has Meeting Transcript, No. 61 at p. 137) of field replacements of boilers, reverted to consider a relationship In response to the comments manufacturer data showing defaults and utilizing the entire dataset available regarding return water temperature and the range of reset schedules for where both combustion and thermal the time a commercial packaged boiler condensing boilers, and various efficiencies are reported in establishing operates in condensing mode, DOE strategies in new and existing buildings

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to provide lower return water many larger office buildings with analysis met the following criteria. The temperatures to enable condensing. significant internal loading and tight CPB application has the following These strategies included retrofitting thermal envelopes, such as used in the characteristics: heating systems with high-delta-T standard ASHRAE 90.1–2013 analysis • Used commercial packaged boiler(s) heating coils, lowering the design for new construction. However, many as one of the main heating equipment supply hot water temperature in existing commercial buildings will have components in the building, existing systems based on the systems heating loads above the 30 °F level • used a heating fuel that is natural being oversized for heating, showing the suggested by AHRI. gas (including propane and LPG) or fuel impact of later building improvements For the reasons noted in this section, oil or a dual fuel combination of natural in reducing heating load, using a load- DOE retained its methodology for gas and fuel oil, • based reset schedule, and using variable adjusting the thermal efficiencies of the served a building with estimated circulation pumps supplying heated commercial packaged boilers, based on design condition building heating load water to coils to further increase return water temperature conditions, in exceeding the lower limit of CPB temperature drops in systems. (Joint qualifying size (300,000 Btu/h), this final rule. • Advocates, No. 74 at pp. 2–6) During the March 2016 NOPR public had a non-trivial consumption of DOE agrees with the comments from meeting, Lochinvar commented that heating fuel allocable to the commercial the Joint Advocates in that there is a DOE should consider boilers used for packaged boiler. significant potential for system retrofits purposes other than space heating in its DOE analyzed commercial packaged and system redesigns in both new and analyses. (Lochinvar, No. 61 at pp. 124– boilers in the qualifying building in existing buildings that could provide 125) Spire commented that DOE, for its samples. DOE disaggregated the selected for better use of low return water analysis, should use a more robust data sample set of commercial packaged temperatures during a larger portion of source, specifically referencing boilers into subsets based on the fuel the heating season; however, these may Jurisdiction Online 39 and added that types (gas or oil), rated input (small or incur additional and unknown costs this online data source provides large), heating medium (steam or hot that DOE has no ability to represent on information about fuel consumption, water). DOE then used these CPB an aggregate basis. The experiences and age and location of installed boilers and subsets to group the sample buildings equipped with the same class of input from other parties indicate that types of entities that own commercial equipment evaluated in this analysis. In there is strong concern that even many boilers. (Spire, No. 73 at pp. 26–27) current condensing boiler installations In response to Lochinvar’s request to the LCC analysis, DOE used the ratio of do not live up to their energy savings include in its analysis boilers that are the weighted floor space of the groups potential. DOE concludes that its used for purposes other than space of commercial and residential building analysis (which presumes a smaller heating, DOE retained its NOPR samples associated with each fraction of older existing buildings, a approach and did not include such CPB equipment class to determine the larger fraction of newer existing equipment in its final rule analysis respective sample weights for the commercial and residential sectors. buildings, and all new construction because DOE was not able to obtain any DOE’s new construction sample was designs) will be able to support, on data needed for the analyses. Regarding based on the same selection algorithms average, low return water temperature Spire’s suggestion to use Jurisdiction as the replacement sample but included distribution and accurately reflects the Online, DOE investigated that data only buildings built on or after 1990, performance of condensing commercial source and determined that its content which DOE concluded would have packaged boilers in new construction is already captured in the EPA database building characteristics more similar to and existing building stock. used to inform shipments, and as such the new construction buildings in the AHRI commented that the energy use much of the available data are already start of the analysis period in 2020 (e.g., analysis applies residential temperature taken into account in that context. building insulation, regional bins to estimate the loading of A more detailed description of the distribution of the buildings, etc.). commercial package boilers, which energy use characterization approach results in erroneous average annual To disaggregate a selected set of can be found in appendix 7B of the final commercial packaged boilers into large energy use values, and AHRI provided rule TSD. a comparison of a typical commercial and small equipment classes, DOE used office building load profile and a 2. Building Sample Selection and Sizing a sizing methodology to determine the residential load profile. (AHRI, No. 76 at Methodology sizes of the commercial packaged pp. 14–15) In its energy analysis for this boilers installed in the building. In this final rule, DOE’s sizing methodology is In response to AHRI’s comment, DOE rulemaking, DOE’s estimation of the essentially the same as that used in the notes that the model assumes the annual energy savings of commercial March 2016 NOPR (i.e., assigning a heating load for a commercial building packaged boilers from higher efficiency ° stepwise increasing number of is zero above 50 F. The model uses the equipment alternatives relied on commercial packaged boilers for all percentage of time in a year that a given building sample data from CBECS 2012 buildings within a range of boiler sizing climate zone spends in each of four and RECS 2009. CBECS 2012 includes loads). The stepwise assignment table temperature bins that are considered for energy consumption and building developed in the March 2016 NOPR the purposes of establishing the return characteristic data for 6,720 commercial used data from an EPA boiler database 40 water temperature condition, which buildings representing 5.6 million last updated in 2005, CBECS 1979, and impacts the thermal efficiency of the commercial buildings. RECS 2009 CBECS 1983. The same table was used boiler as installed. The temperature bins includes similar data from 12,083 for allocating the number of boilers for in Table 7B.2.4 in appendix 7B of the housing units that represent almost older buildings constructed before 1990. final rule TSD are only used in the 113.6 million residential households. development of the part-load The subset of CBECS 2012 and RECS adjustment factor for condensing boilers 40 Environmental Protection Agency, 13 State 2009 building records used in the Boiler Inspector Inventory Database with and not the building thermal loads. Projections (Area Sources), EPA–HQ–OAR–2006– DOE, in addition, understands that the 39 http://www.praeses.com/jurisdiction- 0790–0013, (April 2010). Available at https:// load profile shared by AHRI may reflect online.html. www3.epa.gov/airtoxics/boiler/boilerpg.html.

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However, for buildings of newer sample buildings, constructed on or ASHRAE 90.1–2013 requirements of all construction, this assignment table was after 1990, were assigned a given boilers with an input rate of 1,000,000 modified, as DOE received new data number of boilers based on a modified Btu/h or more needed to have a that show the average size of boilers version of the allocation table where the turndown ratio of 3 to 1, and this will being smaller than the average size of percentage of building samples make the boilers more efficient. (AHRI, the sample commercial packaged boilers receiving a smaller number of boilers in No. 76 at p. 15) in the March 2016 NOPR analysis. The a given CPB sizing load range was DOE points out that it did consider sizing methodology used in this rule is reduced, and the percentage of sample the 3:1 turndown ratio requirement from described in this section. buildings receiving a larger number of ASHRAE 90.1–2013 for systems greater First, the total sizing of the heating boilers was increased, relative to their than 1 MMBtu/h and notes that its equipment is determined from the respective shares used at the March understanding is that this requirement heated square footage of the building, 2016 NOPR. Adjustments were made to in ASHRAE 90.1–2013, as adopted into the percentage of area heated, a uniform this assignment of the number of local building code, will not necessarily heating load requirement of 30 Btu/h commercial packaged boilers to be extended to replacement boilers, and, per square foot of heated area based on maximize the utility of the sampled in addition, can be met by using 41 42 references for commercial building, buildings used for this analysis with multiple boilers, which is already and an assumed equipment efficiency respect to the size range of boilers being common in DOE’s analysis for boiler mapped to the construction year. DOE’s analyzed. systems with 1 MBtu/h or above sizing methodology also takes outdoor Several interested parties commented combined rated input. As noted in the design conditions into consideration. on DOE’s usage of a parameter value of March 2016 NOPR, DOE assumed that The outdoor design condition for the 30 Btu/h per square foot for estimating all commercial packaged boilers building is based on the specific the building heating load under design installed in new buildings will be part weather location of the building. The condition. While Spire commented that of a system with at least a 3:1 turndown estimated total CPB sizing in million this is inappropriately high, Raypak ratio, and DOE calculated the adjusted 43 Btu per hour (MBtu/h) is the aggregate noted that this may not be acceptable for thermal efficiency of commercial heating equipment sizing prorated using the sizing of heating equipment for packaged boilers in such systems the area fraction heated by the commercial buildings, although it is a accordingly. DOE concludes that its commercial packaged boilers and decent metric for residential buildings. adjusted cycling loss factors designed to multiplied by an oversize factor of 1.1. Raypak stated that they would normally address multiple boiler systems will For the sample of residential multi- use a value of 25 Btu/h per square foot adequately represent the expected family buildings, the heating equipment for a commercial building in Los benefits to part-load performance for sizing methodology for commercial Angeles, California, and that they would multi-stage boilers, as well as the buildings is modified to calculate the typically use approximately 100 Btu/h ASHRAE 90.1–2013 requirement heating load for each residential unit of per square foot for 0 ßF design outdoor discussed. the multi-family buildings, and this conditions. (Spire, No. 73 at p. 25; value is multiplied by the number of Raypak, No. 72 at pp. 3–4) AHRI The Joint Advocates further noted that units, assuming each unit to have commented that the current value of DOE’s energy use analysis is likely identical area and design heating load. this parameter at 30 Btu/h per square underestimating potential energy The modified methodology for foot is unverified and possibly causing savings when compared to several cited residential multi-family buildings the LCC model to produce excessively studies of field installations, and that further assumes that a centrally located high operating hours and distorting the due to the impacts of high return water single or a multiple-boiler installation LCC results. (AHRI, No. 76 at pp. 26, 32, temperature operation and cycling, the would meet the entire design heating 37–40) operational efficiency of a non- load of the building. For commercial buildings, DOE’s condensing boiler is below that of its DOE computed the size of each methodology for estimating the design rated efficiency. (Joint Advocates, No. commercial packaged boiler in each condition heating load is uniform across 74 at pp. 1–2, 8) Crown commented that sample building by dividing the all outdoor conditions. It uses a uniform non-condensing boilers are not only aggregate CPB sizing heating load heating load requirement per square foot available as single-stage and that this is (MBtu/h) by an estimated number of of heated area, assuming a 0 °F design especially true for large boilers. (Crown, boilers of equal capacity. To estimate outdoor condition, and then adjusts Public Meeting Transcript, No. 61 at pp. the number of commercial packaged based on the outdoor design heating 130–131). boilers in a given sample building, DOE temperature for the building under In response to the comments from the assigned a variable number of consideration. In addition, DOE applies Joint Advocates regarding performance commercial packaged boilers to all the an oversizing factor on top of this. DOE degradation of non-condensing boilers, qualified sample buildings of 2012 recognizes there are simplifications in DOE notes that it does consider this in CBECS based on a predetermined this approach; however, DOE’s its analysis by using a cycling loss allocation table. In the final rule estimation of building heating loads adjustment factor that takes into account analysis, buildings constructed before stems from design data for commercial the impact of multiple sequenced 1990 were assigned a given number of buildings taking into account the design boilers operation. With regard to boilers based on the allocation table climate conditions and adequately Crown’s comment, DOE understands developed in the March 2016 NOPR captures heating load design variations that non-condensing boilers are analysis. However, the remaining in the field. DOE has high confidence available in other than single stage that its building load estimation is equipment, but DOE does not have data 41 Bell, A.A. Jr. Part 7: Heating Load Rules of representative of the building loads in on the relative sales into the market and Thumb. In HVAC Equations, Data, and Rules of the field. Therefore, DOE retained its has insufficient data regarding their Thumb, McGraw-Hill: San Francisco, CA (2000). NOPR base heating load approach in its part-load performance. DOE, however, 42 http://www.weil-mclain.com/sites/default/files/ wm-boiler-replacement-guide.pdf. analysis for this final rule. has accounted for reduced cycling 43 The industry commonly uses MBtu to refer to AHRI also commented that the energy losses in cases where multiple boilers one million Btu. use calculations did not incorporate the may be utilized.

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In the March 2016 NOPR, DOE buildings. In addition, DOE notes that Regarding regional use of commercial requested for information on the extent its analysis considers as potential packaged boilers, PEM commented that to which hybrid configurations with standards levels, commercial packaged the New York City area almost entirely both condensing and non-condensing boilers with efficiencies above the uses field-constructed boilers except for commercial packaged boilers in a single FEMP guidance, and for these reasons, new construction and schools. (PEM, system are prevalent in retrofit DOE considers Federal buildings in its Public Meeting Transcript, No. 61 at pp. installations. Lochinvar believes that analysis. 122–123) Similarly, AHRI commented approximately 5 percent of the The Gas Associations commented that that it could be useful to look at installations with condensing boilers are the energy use analysis needs to adjust geographical regions represented in hybrid systems and urged DOE to potential energy savings and associated RECS data and that commercial consider this in its energy use analysis. emissions for Federal buildings that will packaged boilers are not typically used (Lochinvar, No. 70 at p. 2) Weil-McLain not be able to have fossil fuel-generated in New York’s multi-family apartment commented that creating a baseline energy after 2030, per provisions in buildings, and that including New York assumption about the current degree of Section 433 of EPCA of 1975 as City and surrounding areas in the adoption of hybrid boiler configurations amended by EISA 2007. (Gas analysis inflates this rulemaking’s in retrofit situations is unrealistic Associations, No. 69 at pp. 2–3) energy savings. (AHRI, Public Meeting because it requires the analysis of many DOE notes that the legislation Transcript, No. 61 at pp. 122, 124). variables. (Weil-McLain, No. 67 at p. 7) establishing the fossil-fuel energy targets In response to the comments on Bradford White commented that hybrid for Federal buildings has yet to be regional use of commercial packaged configurations are difficult to codified as a final rule in the Code of boilers, DOE inquired with the New implement because legacy installation Federal Regulations at the time of this York City Buildings Department venting systems are already established, analysis. A NOPR, titled ‘‘Fossil Fuel- regarding the prevalence of field possibly in an era before the market Generated Energy Consumption constructed boilers used in heating debut of condensing boilers. (Bradford Reduction for New Federal Buildings applications in New York City (NYC). White, No. 68 at p. 2) and Major Renovations of Federal DOE was informed by the Buildings In view of the uncertainty regarding Buildings’’ was issued on October 15, Department that based on their the degree of adoption of hybrid 2010 and an SNOPR issued on October experience with inspections boiler configurations in retrofit situations and 15, 2014, addressing comments on the installations, only about 10 percent of the difficulty in incorporating this in the NOPR and noting that DOE has the commercial packaged boilers in energy use analysis due to the great NYC are field-constructed with a higher number of variables that would need to identified additional areas for fraction of those (estimated as high as be considered as well as the lack of data, clarification and consideration that about 33 percent) in the large boiler DOE did not incorporate hybrid systems would benefit from further public category. It was also noted by the in its analysis. comment. The SNOPR particularly Spire commented that DOE in its sought comment on additional Buildings Department that a large analysis should consider that the approaches to the scope of the portion of these field constructed boilers Federal purchase decisions are requirements in the context of major are steam boilers. Furthermore, as was mandated by stringent and aggressive renovations, the potential use of noted by PEM, there are instances where policy mandates and as such should not renewable energy certificates for commercial packaged boilers are used in be included in the analysis as they compliance, and a proposed streamlined the NYC area. Given both of these would meet the stringent standards even process for agencies to seek a downward considerations, DOE cannot discount if stringent standards are not adopted. adjustment from the required reduction that commercial packaged boilers are (Spire, No. 73 at p. 13) levels, particularly for major being utilized, or newly selected, in DOE understands that the Federal renovations. DOE notes that while other types of commercial buildings Energy Management Program (FEMP) providing for significant savings of including multifamily buildings in NYC provides acquisition guidance for fossil-fuel derived energy (including and surrounding areas. Given the commercial packaged boilers, but also both on-site usage of fossil fuels and on- shipment data that form the basis for provides exceptions to these Federal site usage of electricity generated from DOE’s overall national energy savings purchasing requirements where an fossil fuels) in Federal buildings, the analysis are based on AHRI input and agency demonstrates that selecting the proposed rule will not likely provide a do not include field-constructed boilers, FEMP recommended efficiency level complete limitation of fossil fuel use in DOE disagrees with AHRI that including may not be cost effective. DOE notes Federal buildings even in 2030. Federal building sample data that may have that data provided by AHRI support that agencies can and may be expected to come from NYC in its analysis inflates a higher percentage of the gas-fired hot petition for downward adjustments from the energy savings calculations. For water CPB market is condensing the required reduction levels for certain these reasons, DOE did not attempt to equipment than was used in the March buildings and building retrofits, further identify or exclude any building 2016 NOPR analysis and DOE has particularly where other options to meet observations specific to NYC in its modified in the final rule its projections the requirements are technically analyses. for the condensing boiler market into impracticable, where these options have DOE has not modified the analysis to the future to show much higher been considered in detail by these eliminate the use of commercial adoption rates. This higher adoption agencies, and where the agencies have packaged boilers in Federal buildings rate will include many Federal demonstrated they have pursued other after 2030, but understands that, buildings. However, for the remaining options. In addition, the SNOPR sought presuming the establishment and fraction of the market, DOE does not input on the use of renewable energy implementation of a final rule have sufficient information that would certificates as alternative options to addressing fossil fuel-generated energy allow it to make comparisons between meet the required reduction levels, consumption in Federal buildings, the the market shares of non-condensing which could be a more cost-effective likely impact of the rule will be a commercial packaged boilers purchased approach to on-site fossil fuel reduction reduction in overall boiler shipments to for Federal buildings versus commercial in certain situations. commercial buildings and a consequent

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reduction in the projected energy draft commercial packaged boilers. spreadsheet model combined with savings from the CPB rule. Further, as noted previously, DOE has Crystal BallTM (a commercially available Building sampling methodology is modified the CPB test procedure from software program used to conduct detailed in chapter 7 of the final rule that proposed in the 2016 CPB TP stochastic analysis using Monte Carlo TSD. NOPR, and it is also adopting a different simulation and probability 3. Miscellaneous Energy Use set of efficiency levels than was distributions) to account for uncertainty proposed in the March 2016 NOPR in and variability among the input The annual energy used by this rulemaking. DOE’s analysis variables (e.g., energy prices, commercial packaged boilers, in some adequately addresses the concerns installation cost, and repair and cases, may include energy used for non- expressed by BHI. maintenance costs). The spreadsheet space heating use such as water heating. In its final rule analysis, DOE model uses weighting factors to account Based on comments received in the maintained the electricity use analysis for distributions of shipments to November 20, 2014 NODA and method used in the March 2016 NOPR different building types and different preliminary analysis, DOE assumed that analysis. states to generate LCC savings by if the CBECS data indicate that the CPB efficiency level. Each Monte Carlo fuel is the same as the fuel used for F. Life-Cycle Cost and Payback Period Analysis simulation consists of 10,000 LCC and water heating then in 20 percent of the PBP calculations using input values that sample buildings, the same commercial DOE conducted LCC and PBP are either sampled from probability packaged boiler is also used for water analyses to evaluate the economic distributions and building samples or heating in this final rule. 79 FR 69066. impacts on individual consumers of characterized with single point values. Other associated energy consumption potential energy conservation standards The analytical results include a is due to electricity use by electrical for commercial packaged boilers. The distribution of 10,000 data points components of commercial packaged effect of new or amended energy showing the range of LCC savings and boilers including circulating pump, conservation standards on individual PBPs for a given efficiency level relative draft inducer, igniter, and other consumers usually involves a reduction to the no-new-standards case efficiency auxiliary equipment such as condensate in operating cost and an increase in forecast. In performing an iteration of pumps. In evaluating electricity use, purchase cost. the Monte Carlo simulation for a given DOE considered electricity consumed The LCC is the total consumer cost of consumer, equipment efficiency is by commercial packaged boilers both in owning and operating an appliance or chosen based on its probability. If the active mode as well as in standby and equipment, generally over its lifetime. chosen equipment efficiency is greater off modes in the preliminary analysis. The LCC calculation includes total than or equal to the efficiency of the BHI commented that the energy use installed cost (equipment manufacturer standard level under consideration, the analysis should consider that most selling price, distribution chain LCC and PBP calculation reveals that a condensing boiler installations require a markups, sales tax, and installation consumer is not impacted by the minimum of two pumps: One to costs), operating costs (energy, repair, standard level. By accounting for circulate water through the system, and and maintenance costs), equipment consumers that already purchase more- a second to circulate water through the lifetime, and discount rate. Future efficient equipment, DOE avoids boiler itself. Further, BHI stated that if operating costs are discounted to the overstating the potential benefits from DOE were to adopt the 85-percent time of purchase and summed over the increasing equipment efficiency. efficiency level and the test procedure lifetime of the appliance or equipment. For each considered efficiency level, as it was proposed in its NOPR, it would The PBP is the amount of time (in years) DOE determines the value of the first mean that there would be no Category it takes consumers to recover the year’s energy savings by calculating the I small or large hot water boilers on the assumed higher purchase price of more quantity of those savings in accordance market and therefore all such boilers energy-efficient equipment through with the applicable DOE test procedure would become mechanical draft and reduced operating costs. DOE calculates and then multiplying that amount by therefore require the associated power the PBP by dividing the change in total the average energy price forecast for the consumption. (BHI, No. 71 at p. 17) installed cost (normally higher) due to year in which compliance with the As clarified in the March 2016 NOPR, a standard by the change in annual amended standards would be required. DOE only considered the electricity use operating cost (normally lower) that DOE calculated the LCC and PBP for of pumps needed for proper operation of result from the standard. all consumers of commercial packaged the commercial packaged boiler, but not For any given efficiency level, DOE boilers as if each were to purchase new the electricity use of additional pumps measures the PBP and the change in equipment in the first year of required that may be necessary for distributing LCC relative to an estimate of the no- compliance with new or amended water throughout a system, since these new-standards case efficiency standards. The projected compliance pumps are not part of the commercial distribution. The no-new-standards date for amended standards is late 2019. packaged boiler itself and the inclusion estimate reflects the market in the Therefore, for purposes of its analysis, of distribution system pumping energy absence of amended energy DOE used January 1, 2020 as the consumption would not be appropriate conservation standards, including beginning of compliance with potential to the development of the standard. market trends for equipment that exceed amended energy standards for With respect to BHI’s comment the current energy conservation commercial packaged boilers. regarding the additional power standards. As noted in this section, DOE’s LCC consumption for mechanical draft DOE analyzed the net effect of and PBP analysis generates values that equipment, DOE notes that the March potential amended CPB standards on calculate the payback period for 2016 NOPR analysis and the final rule consumers by calculating the LCC and consumers of potential energy analysis both include the additional PBP for each efficiency level of each conservation standards, which includes, electrical power consumption for both sample building using the engineering but is not limited to, the 3-year payback draft fans/blower, condensate pump, performance data, the energy use data, period contemplated under the and controls, and that this power and the markups. DOE performed the rebuttable presumption test. However, consumption is not included for natural LCC and PBP analyses using a DOE routinely conducts a full economic

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analysis that considers the full range of already be incorporated in the real This is discussed in detail in section impacts, including those to the equipment price. IV.F.2 of this document. consumer, manufacturer, Nation, and PEM commented that there is no 2. Installation Costs environment. The results of the full correlation between boiler cost and economic analysis serve as the basis for The installation cost is the cost installation cost. (PEM, Public Meeting DOE to definitively evaluate the incurred by the consumer for installing Transcript, No. 61 at p. 98) Raypak economic justification for a potential the commercial packaged boiler. The commented that there is probably no standard level (thereby supporting or cost of installation covers all labor and incremental cost associated with rebutting the results of any preliminary material costs associated with the installing a boiler at different efficiency determination of economic replacement of an existing commercial levels, for example an 82 percent justification). packaged boiler or the installation of a efficient boiler versus an 86 percent Inputs to the LCC and PBP analysis commercial packaged boiler in a new efficient boiler. However, there will be are categorized as (1) inputs for building, removal of the existing boiler, cost differential for replacement parts. establishing the purchase cost, and any applicable permit fees. DOE (Raypak, Public Meeting Transcript, No. otherwise known as the total installed estimated the installation costs of the 61 at p. 101) ABMA commented that cost, and (2) inputs for calculating the representative capacity boiler at each larger boilers not only have significantly operating cost (i.e., energy, considered efficiency level using a different applications and features but maintenance, and repair costs). The variety of sources, including RS Means also carry an exponentially higher cost following sections contain brief 2016 facilities construction cost data, for transportation, installation, and discussions of comments on the inputs manufacturer literature, and information start-up. ABMA also commented that in and key assumptions of DOE’s LCC and from expert consultants.44 DOE adjusted attempting to develop installation costs, PBP analysis and explain how DOE took the basic installation cost for a boiler of it is important that the magnitude of these comments into consideration. a given rated input, relative to the work involved in installing the large and very large boilers is greater than 1. Equipment Costs installation cost of the representative capacity boiler, by using adjustment that for small and light weight boilers For each distribution channel, DOE factors developed using trends observed and may involve the use of fork lifts and derived the consumer equipment cost in the RS Means data. Appendix 8D of delivery trucks, and that these are extra for the baseline equipment by the final rule TSD contains a detailed expenses and as such should not be multiplying the baseline equipment discussion of the development of based on extrapolating the installation manufacturer sale price and the baseline installation costs and adjustment cost of smaller boilers. (ABMA, No. 64 overall markup (including any factors. at pp. 1–2) ABMA expressed concerns applicable sales tax). For each efficiency With regard to installation costs, DOE regarding the extrapolation of RS Means level above the baseline, DOE derived received comments from stakeholders data for small boilers into large boilers, the consumer equipment cost by adding during the March 2016 NOPR in two and wonders if a more appropriate set baseline equipment consumer cost to general areas: (1) The general cost to of estimating data had been considered, the equipment of incremental install a boiler, including components, noting Mechanical Contractors manufacturer sale price and the labor, and accessories needed; and (2) Association of America (MCAA) as a appropriate incremental overall markup the cost and impacts with regard to potential source. (ABMA, No. 64 at p. 1) (including any applicable sales tax). venting materials and upgrades Regarding PEM’s comment, DOE This consumer equipment cost is necessary. DOE addresses both groups notes that the installation costs are reflective of the representative of comments in the following derived directly from RS Means 2016 equipment size analyzed for each paragraphs. In addition, certain general Mechanical Cost Data, which indicates equipment class in the engineering comments reflecting the impact of high a strong correlation between boiler size analysis. Since the LCC analysis installation costs are addressed in and its installation cost. With respect to considers consumers whose CPB section IV.F.2.c of this document. Raypak’s comment that there is no capacities vary from the representative incremental cost for installing boilers at equipment size, the consumer a. Base Boiler Installation different efficiency levels, DOE’s equipment cost is adjusted to account DOE received several comments estimated basic installation costs for the for this. regarding installation costs. AHRI commercial packaged boilers at different DOE examined whether CPB expressed that the costing methods used efficiency levels, within an equipment equipment prices changed over time. by DOE are simplistic and inaccurate, class, do not vary with efficiency, DOE determined that there is no clear resulting in incorrect estimates of except for condensing boilers where historical price trend for CPB equipment consumer economics. AHRI commented additional costs are incurred specific to and used costs established in the that DOE’s current process of building such installations. With respect to engineering analysis directly for up costs from assumed installation Raypak’s comment about repair costs, determining 2020 equipment prices for situations is incorrect, as has been DOE notes that its annualized repair the LCC and PBP analysis. demonstrated through contractor survey cost estimates do increase with DOE notes that it received a comment data in other rulemakings, and misses efficiency. Regarding ABMA’s comment from Bradford White that the cost to much of the subtlety in installation and about very large boilers, DOE reiterates manufacture a given unit increases over venting conditions. (AHRI, No. 76 at p. that very large boiler equipment classes time, noting the increase in labor and 27, 42–43) (>10 MBtu/h) are not being analyzed in overhead rates over time due to DOE understands the comments from this rulemaking. With regard to healthcare, utility and fuel costs, etc. AHRI and notes that it has modified its installation cost differences because of (Bradford White, No. 68 at p. 5) In venting logic and installation costs in transportation, magnitude of work, and response, DOE wishes to clarify that its this final rule to address specific use of extra equipment for large boilers, price trend analysis reflects the real, concerns brought up by stakeholders. DOE notes that RS Means captures these inflation adjusted, examination of costs in its estimation of basic equipment price, and such factors 44 RS Means, Facilities Maintenance & Repair installation costs and, as such, DOE is identified by Bradford White would Cost Data 2015, 73rd ed (2014). not changing the base installation cost

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approach in this final rule. However, assigns a high return water temperature boiler installations will be capable of DOE notes that, at the March 2016 condition in those cases. Regarding having these commercial packaged NOPR stage, for each equipment class, inclusion of the Y-strainer cost in the boilers installed and safely operated. the installation cost was estimated only installation cost, DOE is aware that (Raypak, No. 72 at p. 3) for the representative rated input. For some CPB manufacturers, both DOE understands the concerns from the final rule, DOE incorporated an condensing and non-condensing, may stakeholders and notes that the adjustment factor based on trends noted recommend the use of a Y-strainer or standards being adopted in this final in RS Means that would scale the basic dirt separator for the purpose of dirt rule, and more particularly the adopted installation cost up or down, depending elimination, but did not identify standard for SGHW CPB equipment, are on the capacity of the chosen boiler to requirements for this technology. DOE lower than that proposed during the more accurately reflect the absolute cost observed that a large percentage of March 2016 NOPR. Further, revisions for installation of the selected boiler in condensing CPB equipment manuals made to the proposed test procedure (81 this analysis. Although this is a recommend the use of Y-strainers, but FR 89276, 89289–89290 (December 9, modification to the general approach, also notes that many existing CPB 2016)) address significant concerns the incremental cost from the baseline systems may already have one installed. raised by stakeholders regarding does not change, and thus this change As such, DOE included in its analysis potential impact on ratings. does not have any impact on the LCC the cost of a Y-strainer in an Notwithstanding this, DOE recognizes savings. With respect to MCAA, DOE incremental manner for condensing that under the adopted standards, there explored this source as a possible commercial packaged boilers. For CPB may be migration between Category I alternative and more appropriate data equipment classes that contain boilers and other boiler categories. source. Based on conversations with condensing equipment, DOE’s analysis However, DOE does not believe that the MCAA, DOE learned that MCAA data is includes a 33 percent higher incidence standard being adopted eliminates all not derived from time studies, but is an of Y-strainer usage with condensing Category I equipment, based on their empirical approach, and that MCAA equipment. existence in the market at these recommends utilizing one of their efficiency levels. Furthermore, AHRI’s b. Venting affiliate companies which utilize their own data demonstrates that, with regard data to determine the time requirements Crown commented that proposed to gas-fired hot water boilers, to complete a task, rather than directly standard levels for some boilers rule out efficiencies between 85-percent and 86- referencing their data. DOE inquired of Category I chimney venting and percent ET and EC for small and large MCAA regarding the comparison therefore make boiler installation in hot water boilers, respectively, represent between MCAA and RS Means data, and certain areas not cost effective. (Crown, a maximum in the efficiency was informed that while methods take No. 61 at p. 13) Other commenters noted distributions of models provided to different approaches, both data sets are that the proposed standards would DOE. (AHRI, No. 76 at p. 16) DOE has accurate. DOE has determined that RS eliminate the possibility of cheaper determined that the efficiency levels Means can serve as an appropriate Category I venting. Weil-McLain noted being adopted in this rulemaking have source of estimating data for this that proposed standards will create the adequately considered stakeholder rulemaking and has updated the data need to install new venting systems, comments. DOE has subsequently sources in this analysis to RS Means essentially eliminate Category III refined its analysis and considers that 2016. boilers, operate higher power boiler the standards being adopted in this final BHI commented that DOE has not pumps, and operate venting blowers/ rule are justified. considered that most condensing boilers fans that are necessary for most DOE received multiple comments require two pumps, an associated condensing and near-condensing regarding its handling of venting costs, ‘‘primary-secondary’’ piping system, equipment to operate and safely vent in particular those associated with 85- and ‘‘Y strainers’’ to keep out system flue gases. (Crown, No. 61 at p. 148; percent efficient boiler systems. Raypak sediment. BHI noted that only in some Raypak, No. 61 at p. 145–146; Weil- commented that replacing existing cases pump(s) are supplied with the McLain, No. 67 at pp. 2, 6) AHRI noted boilers lower than 85-percent efficiency boiler while the piping system upgrade that the installation codes that apply to will require new venting and that DOE is carried out by the installer. (BHI, No. gas and oil boilers today are should take the associated costs into 71 at p. 18) significantly different from those that account. (Raypak, No. 61 at p. 153, 155) In response to comments from BHI, existed 50 or 60 years ago. The Crown commented that every DOE notes that such system costs may installation codes are currently more commercial install at 85-percent be incurred by a consumer as part of a detailed and specific and recognize that efficiency will get a different venting heating system upgrade, which DOE boilers operating at steady state system. (Crown, No. 61 at p. 152) NEEA understands could result in condensing efficiencies in the mid-1980s represent noted that some existing boilers that commercial packaged boilers operating the near condensing range of efficiency have greater than 85-percent efficiency at higher efficiencies, on average. DOE and that the venting requirements are would already have venting that would considers in its analysis that many, if determined accordingly. (AHRI, No. 76 not need replacing, and that the DOE’s not most, boilers (e.g., 95% of cases for at p. 15–16) Weil-McLain notes that analysis takes that into account, to buildings built before 1990) in a DOE’s own analysis shows very few which Raypak agreed that systems with standards-case scenario may be installed equipment offerings at near-condensing boilers of 85-percent efficiency and in systems that do not provide for low efficiencies, and that this is because the above would not require venting return water temperature conditions, on market has determined that it is not upgrades in such cases. (NEEA, No. 61 average, and are thus assigned high economically feasible to install such at p. 154; Raypak, No. 61 at p. 155) BHI return water temperature operating commercial packaged boilers due to commented that the costs of vent conditions. As such, DOE already takes higher cost of venting. (Weil-McLain, systems will increase far more than into account the impact to the No. 67 at p. 3) Raypak noted that even reflected in the cost estimates in the consumer, in terms of lost potential for though boilers with 85-percent ET (or DOE models, as a result of a shift away additional energy savings, of using an 85-percent EC) are available in the from Category I vent systems. (BHI, No. unmodified distribution system when it market, DOE should not assume that all 71 at p. 2, 7, 10, and 11) Weil-McLain

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noted that qualified contractors will and included, in the case of small gas- venting materials and system want to make sure that a replacement fired commercial packaged boilers, a engineering/design costs. (Weil-McLain, boiler is safely installed and should cost transition at 84% efficiency which No. 67 at p. 2, 7) BHI noted that require the additional steps needed for reflects the cost of mechanically vented multiple-boiler installations requiring those installations that are on the near- CPB equipment where natural draft Category III or IV venting are required condensing/condensing efficiency equipment remains available on the to have dedicated venting for each borderline, and that this imposes market. This latter approach is boiler, effectively multiplying the cost significant costs. (Weil-McLain, No. 67 conservative with regard to overall several times. (BHI, No. 71 at p. 13) In at p. 2) installation costs. Analysis of the market the same note, Lochinvar commented Relative to the March 2016 NOPR efficiencies continues to show that there that CPB installations with condensing public meeting comments, DOE notes are Category I small gas-fired boilers often require the vent system to that in its analysis it does consider the commercial packaged boilers at the 85- be engineered and noted that DOE in its potential for a boiler to be replaced that percent efficiency level, and not all cost model should include custom is already at or above the 85-percent equipment will transition to engineering fees for these systems. efficiency level, and that the venting mechanically vented equipment. As (Lochinvar, No. 70 at p. 3) Crown costs would be lower in such a scenario noted previously, however, DOE is commented that there are terra-cotta when compared with a similar scenario adopting in this final rule an 84-percent lined chimneys that are allowed to use where the existing boiler being replaced ET level for SGHW and 85-percent EC Category I equipment, but the modeling is below 85-percent efficiency. Further, level for LGHW, and this, in assumption assumes they will need a DOE has considered venting costs that conjunction with the aforementioned B-vent. (Crown, No. 61 at p. 148) Spire would result in safe installation of modifications to DOE’s test procedure commented that the effect of the commercial packaged boilers at all final rule (81 FR 89276, (December 9, proposed standard would be to efficiency levels in its analysis, refining 2016)), will address many of the eliminate natural vent gas-fired boilers, the LCC model to select materials for concerns of stakeholders regarding the which can impose substantial additional venting that represent the concerns of standard levels that were being costs. (Spire, No. 73 at p. 24) BHI cites stakeholders. proposed in the NOPR. In response to various requirements and restrictions BHI and AHRI commented on DOE’s Lochinvar’s comment about costs regarding horizontal venting that may venting logic that allowed lower cost incurred even when a full vent system make it difficult to horizontally vent Category-I/III venting options for SGHW is not replaced, DOE does consider Category III or IV gas-fired commercial commercial packaged boilers at the 85- partial costs for venting in its final rule packaged boilers in many cases. (BHI, percent efficiency level proposed by analysis in cases where a vent is No. 71 at p. 12–13) DOE in the NOPR. BHI also noted that determined to be re-usable by replacing In response to comments about 85-percent efficiency non-condensing a portion of the existing venting system. common venting, DOE notes that, while boilers may result in operation in the The details of these costs may be found model does not explicitly address Category II/IV regime instead of in appendix 8D of the final rule TSD. common venting, DOE has not received Category I/III assumed by DOE. (BHI, With respect to AHRI’s question about any data on the relative prevalence of No. 71 at p. 8–10; AHRI, No. 76 at p. 16) 8-inch PVC venting availability, DOE common vented Category I boilers on AHRI expressed similar concerns that a notes that at the time the March 2016 the market. In addition, DOE notes that Category II/IV vent may be needed for NOPR model was developed, DOE was its analysis, which presumes gas boilers in the 83.5-percent to 85- aware of manufacturers that specified individually vented boilers, also percent efficiency levels. (AHRI, No. 76 8-inch PVC venting for commercial presumes that in the case of boiler at p. 16) BHI further commented that even some Category III boilers must be packaged boilers. However, DOE has replacements, where needed a venting vented with expensive stainless steel revised the venting logic in its final rule replacement is done for each boiler in option (i.e., AL29–4C), particularly for to not consider plastic venting on or the building individually—a cost which small commercial packaged boilers. above 8-inch diameter in order to better may, in effect, exceed that of replacing (BHI, No. 71 at p. 18). Lochinvar reflect typical industry venting a single common vent in a multiple commented that venting at 85-percent practices. boiler installation. Given the lack of efficiency level should be assumed to be DOE received several comments detail in the relative frequency of corrosion resistant, a position they say regarding special situations that require common venting and the potential is shared by Raypak and Crown Boiler. consideration in DOE’s venting logic. additional costs that DOE’s method (Lochinvar, No. 70 at p. 3) Crown also AHRI commented that the vent systems incurs, DOE feels that its approach is noted that anything above 85-percent in older buildings may be of excessive adequate for its analysis. With respect to thermal efficiency would not be an length and convoluted configuration to the comments about terra-cotta lined option for Category I venting. (Crown, properly vent by natural draft an 85- chimneys, DOE concludes that due to No. 61 at p. 148). Crown commented percent efficient gas fired commercial the relative costs of lining chimney with that even if newer high-efficiency packaged boiler, or oil-fired hot water terra-cotta liners, as opposed to metal boilers do not need their full vent boiler at the 86-percent and 87-percent liners, the latter would be much more system replaced, they are going to need efficiency levels. (AHRI, No. 76 at p. 1, reflective of the option selected in the terminals, vent adaptors, and gaskets 15–16, and 26–27) Weil-McLain current replacement boiler market. More replaced. (Crown, No. 61 at p. 158) commented that retrofitting an existing broadly, the general comments noted AHRI questioned whether 8-inch PVC building with a condensing commercial herein have been mitigated by DOE’s venting was available on the market. packaged boiler usually involves adoption of an 84-percent level for (AHRI, No. 61 at p. 150–151) running venting over extended lengths SGHW CPB equipment, which is lower In response to comments received, and usually becomes prohibitively than that presented at the March 2016 DOE included upgrades to stainless expensive. Weil-McLain further NOPR. steel venting materials, in some cases expressed doubts whether DOE’s BHI commented that DOE needs to selecting AL29–4C, for non-condensing installation cost model has captured all include the additional installation costs boilers at the 85-percent efficiency level costs, including additional components, associated with complete replacement

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of ‘‘orphan water heaters’’ 45 (i.e., not to the consumer, the application of must meet or exceed the minimum just vent modifications) on a fraction of marginal technology (which is beyond efficiency level for the equipment class installations. (BHI, No. 71 at p. 18) the control of the manufacturer), utility under consideration. Relative to BHI’s DOE notes that it does not have data issues, and even safety issues. (BHI, No. comment about oil-fired boilers having on the relevant frequency of boiler vent 71 at p. 2, 7, 10, and 11) BHI posits that similar venting issues as gas boilers at systems that are also used to vent water many of the same issues regarding the efficiency levels proposed and not heaters, but received comment at the venting of gas-fired boilers apply to oil- being aware of any analysis by DOE to preliminary analysis stage on this issue. fired boilers at the efficiency levels ensure safe and cost-effective venting of DOE notes that the primary application proposed, and that it is unaware of any oil boilers into existing chimneys, DOE of common venting is with category I analysis performed by DOE to evaluate points out that it has considered the cost equipment. Comments on the frequency the effect of the proposed levels for oil- to remove and replace a chimney with were inconsistent; however, AHRI fired hot water and steam commercial adequate venting for both gas-fired and stated that they believed that common packaged boilers to safely and cost- oil-fired boilers when necessary. As venting of commercial boilers and effectively vent oil boilers into existing such, it has considered the economic commercial water heaters may in fact be chimneys. (BHI, No. 71 at p. 16) BHI cost to the consumer to ensure safe relatively rare given the size mismatch commented that with an 85-percent gas- venting of the commercial packaged between commercial boilers and fired hot water boiler standard there are boilers. commercial water heaters, such that too many potential installations which Several commenters noted the impact common venting would be more than breach acceptable safety levels (e.g., of building codes on type of venting problematic because the common vent reduction in flue gas buoyancy, allowed in the installation of size would be so large that when the operation closer to flue gas dew point, condensing units. Bradford White boiler wasn’t firing there would be flue gas leakage into the structure as a expressed reservation that DOE’s venting problems on the water heater. result of inadequate draft and/or vent installation cost model may not address (AHRI, Public Meeting Transcript, No. system deterioration), and responsible strict installation codes for CPB 39 at pp. 140–141). Based on input from manufacturers and installers will not installations of high rise buildings in AHRI, common venting with water install 85-percent boilers in these New York, Boston and Chicago. heaters would be negligible for large situations and will force consumers into (Bradford White, No. 68 at p. 3) BHI CPB equipment and would be condensing equipment. (BHI, No. 71 at commented that many manufacturers uncommon for small CPB equipment. p. 7, 10) and installers do not view practices that are technically possible and may meet For small CPB equipment, to the extent With respect to the comments from that common venting with water heaters the letter of some building codes as safe. AHRI, DOE concludes that CPB While these margins of safety can evolve does occur, the standards adopted in equipment manufacturers will provide this final rule and the revisions made to as manufacturers and installers gain adequate guidance for installers to more experience, there will always be a and adopted in DOE’s CPB test ensure that the venting system is safe, procedure final rule will allow the point where a manufacturer will set and that the installers used to install installation requirements or installers continued use of Category I commercial commercial packaged boilers and their packaged boilers in many commonly will set practices such that a associated vent systems will follow such ‘‘technically compliant’’ installation vented systems and thus remove guidance, and leverage their expertise, concerns with orphaned water heaters will not be allowed. (BHI, No. 71 at p. to mitigate the dangers of potential 7) In addition, DOE received comment in common vented systems. corrosion issues. With respect to venting DOE received various comments from Raypak that until regulations costs, DOE notes that it reviewed and regarding boiler maintenance in the regarding the safety of venting options updated the venting costs in the LCC used in the NOPR analysis. AHRI United States achieve a level of model based on comments and data sophistication and stringency similar to commented that a variety of venting received from stakeholders and believes installation issues arise as potential those in Europe to ensure that the that its analysis is now more boilers will operate properly, safely and standards are at, or near, condensing representative of the costs associated levels and noted that both efficiently, the minimum efficiency with near-condensing and condensing levels proposed could result in unsafe manufacturers and installers use caution CPB equipment. Regarding BHI’s in their venting installation (AHRI, No. and dangerous installations. (Raypak, comments that DOE needs to weigh No. 72 at p. 3) Lochinvar noted that 76 at p. 42–43) BHI commented that carefully the levels at which it sets its DOE’s proposed standards for SGHW some jurisdictions have enacted rules minimum efficiency standards, DOE’s that prevent installation of non-metallic and LGHW boilers demonstrates analysis weighs carefully the costs and insufficient consideration for the safety vents and estimates that the installation other issues associated with setting a costs for approximately 5 percent of consequences of attempting to vent gas- minimum efficiency standard in this installations nationwide that would fired boilers at this efficiency level into rulemaking, and has been conducted in have selected PVC venting should be some chimneys in full compliance with an open and transparent manner, recalculated to needing to select AL29– nationally recognized safety standards, incorporating input from interested 4C instead, as a result. (Lochinvar, No. such as the National Fuel Gas Code. parties throughout this rulemaking. 70 at p. 3) Further, BHI commented that DOE Furthermore, because there are With regard to the impact of building needs to weigh carefully the levels at manufacturers actively manufacturing codes on the installation of new and which it sets minimum efficiency and marketing equipment within the replacement boilers, DOE understands standards so that it does not efficiency range in question, both that local building codes can have inadvertently tip across a technology natural draft and mechanical draft, DOE specific and unique requirements divide, creating: Serious increased costs must evaluate and consider such regarding termination of venting, both efficiency levels as options within the for condensing and for non-condensing 45 A service hot water heater that shared a vent analysis. Manufacturers are not required CPB equipment that can affect costs. with a boiler is said to be ‘‘orphaned’’ when a high efficiency boiler is installed with which it can no to provide equipment at any specific However, due to the localized and longer share such vent. efficiency level, only that equipment building-specific aspects of these

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requirements, DOE has no ability to consideration of varying vent lengths there was no evidence of takeback, quantify their impact on its analysis. and base case conditions in its Monte while two estimated small amounts of DOE notes, however, that it is not Carlo analysis. DOE disagrees with takeback for specific end uses, usually adopting any condensing levels in this Spire’s contention that revised less than 10-percent. A recent paper by final rule that would precipitate these standards, such as those proposed Qiu,49 which describes a model of costs. DOE notes, with regard to boiler during the March 2016 NOPR, eliminate technology adoption and subsequent maintenance, that while commercial competition by eliminating use of the energy demand in the commercial packaged boilers in the United States main alternative to electricity. The building sector, does not present may not have national regulations standards adopted in this final rule are specific rebound percentages, but the requiring annual boiler inspections and readily available on the market through author notes that compared with the service, many local jurisdictions require most, if not all, CPB manufacturers, and residential sector, rebound effects are safety inspections. Furthermore, it is in higher efficiency levels are in fact being smaller in the commercial building the interest of commercial entities using readily incorporated in the existing sector. An important reason for this is CPB equipment to continue to operate market. This standard will not eliminate that in contrast to residential heating equipment in a safe manner. DOE the use of gas in commercial buildings. and cooling, HVAC operation concludes that equipment at the See chapter 8 and appendix 8D of the adjustment in commercial buildings is efficiency levels in its final rule can be final rule TSD for details on DOE’s driven primarily by building managers installed and operated safely over the analysis of installation costs including or owners. The comfort conditions are life of the equipment. Regarding venting costs. already established in order to satisfy Lochinvar’s comment that 3. Annual Per-Unit Energy Consumption the occupants, and they are unlikely to approximately 5 percent of installations change due to installation of higher- DOE estimated annual natural gas, that would have selected PVC venting efficiency equipment. While it is fuel oil, and electricity consumed by should be recalculated as having needed possible that a small degree of rebound each class of CPB equipment, at each to select AL29–4C due to jurisdictions could occur for higher-efficiency considered efficiency level, based on the that may not permit the use of non- commercial packaged boilers, e.g., energy use analysis described in section metallic vents, DOE notes that its building managers may choose to IV.E of this document and in chapter 7 analysis already assigns a 50 percent increase the operation time of these probability, for vent sizes in the 4-inch of the final rule TSD. DOE conducted a literature review on heating units, there is no basis to select to less than 8-inch range, that venting a specific value. Because the available materials for condensing boiler the direct rebound effect in commercial buildings, and found very few studies, information suggests that any rebound installations will be using AL29–4C. would be small to negligible, DOE did DOE understands that for the smallest especially with regard to space heating and cooling. In a paper from 1993, not include a rebound effect for this boilers, it did not include a probability, rule. however small (i.e., 5 percent), that a Nadel describes several studies on takeback in the wake of utility lighting During the March 2016 NOPR, DOE consumer might be required to utilize requested comments and data on the AL29–4C, but as noted above DOE is not efficiency programs in the commercial and industrial sectors.46 The findings assumption that a rebound effect is adopting a condensing level in this final unlikely to occur for these commercial rule and the marginal incremental cost suggest that in general the rebound associated with lighting efficiency applications. ASAP, Bradford White, that would have been associated with Lochinvar, the Joint Utilities, SoCalGas, this factor would not have impacted the programs in the commercial and 47 and Weil-McLain agreed with DOE’s standard levels adopted. industrial sectors is very small. In a 1995 paper, Eto et al.48 state that findings that a rebound effect is unlikely c. Other changes in energy service levels after to occur for commercial packaged AHRI urged DOE to avoid standards efficiency programs have been boilers. Weil-McLain added that even if that would require difficult and costly implemented have not been studied it did occur, it would be at insignificant installations, or that would remove systematically for the commercial levels. (ASAP, Public Meeting equipment technologies that are used in sector. They state that while pre-/post- Transcript, No. 61 at p. 178; Bradford the market place to meet consumer billing analyses can implicitly pick up White, No. 68 at p. 2; Lochinvar, No. 70 requirements, until it has a clear the energy use impacts of amenity at p. 3; Joint Utilities, No. 65 at p. 2; understanding of installation issues via changes resulting from program SoCalGas, No. 77 at pp. 5–6; Weil- a survey of buildings. (AHRI, No. 76 at participation, the effect is usually McLain, No. 67 at p. 8) p. 44). Spire stated that the end result impossible to isolate. A number of DOE appreciates the comments of the proposed standards would skew programs attempted to identify changes provided by stakeholders with respect the market in favor of electrical in energy service levels through to rebound effect for CPB equipment, equipment over gas-fired equipment consumer surveys. Five concluded that and notes that it has not applied a based on what Spire referred to as ‘‘an rebound effect in this final rule. apparent and unrealistic theory’’ that 46 S. Nadel, The Take-back Effect: Fact or Fiction? Conference paper: American Council for an Energy- 4. Energy Prices and Energy Price these electric boilers will be powered by Efficient Economy, (1993). Trends renewable energy in the distant future. 47 The rebound effect accounts for increased DOE derived average monthly energy Spire added that ‘‘this does not just usage of equipment by consumers after the lessen competition; it eliminates implementation of a standard, reducing the energy prices for a number of geographic areas competition by eliminating the main savings attributed to a standard. That is, the savings in the United States using the latest data from energy-efficient equipment may lead to alternative to electricity.’’ (Spire, No. 73 from EIA and monthly energy price additional use of that equipment. However, the factors that it develops. The process at p. 30) take-back in energy consumption associated with Regarding AHRI’s comment, DOE the rebound effect generally provides consumers then assigned an appropriate energy understands the potential for difficult with increased value. 48 Eto et al., Where Did the Money Go? The Cost 49 Y. Qui, Energy Efficiency and Rebound Effects: and costly installations at all efficiency and Performance of the Largest Commercial Sector An Econometric Analysis of Energy Demand in the levels, and accounts for a wide variation DSM Programs. LBL–38201, Lawrence Berkeley Commercial Building Sector, Environmental and in costs in installations through National Laboratory, Berkeley, CA (1995). Resource Economics, 59(2): 295–335 (2014).

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price to each commercial and 171; Spire/Laclede, Public Meeting versus ‘‘uninterruptible supply’’ rates. residential building in the sample based Transcript, No. 61 at p. 171) PG&E Since 95 percent of these observations on its location. DOE derived 2015 agreed with Spire that larger consumers had gas as the principal fuel, and given annual electricity prices from EIA Form pay less for utilities. (PG&E, Public that no separate equipment class exists 826 data.50 DOE obtained the data for Meeting Transcript, No. 61 at p. 172) for dual fuel boilers, DOE counted them natural gas prices from EIA’s Natural AHRI commented that the marginal gas as gas boilers. However these boilers Gas Navigator, which includes monthly rates do not accurately reflect what contribute only 3.5 percent to the total natural gas prices by state for larger consumers pay. (AHRI, Public gas boiler sample weights used in the residential, commercial, and industrial Meeting Transcript, No. 61 at p. 172) LCC analysis. DOE also noted that consumers.51 DOE collected 2014 Spire commented that EIA data is nearly 67 percent of the sample average commercial fuel oil prices from completely inaccurate for its largest buildings using both gas and oil the consumption, price, and consumers and that transport rates are continue to use significant quantities of expenditure estimates from the EIA’s typically used. (Spire/Laclede, Public the higher cost fuel oil, which more State Energy Data System (SEDS) and Meeting Transcript, No. 61 at p. 172) than offsets a 7-percent reduction in the adjusts it using GDP Implicit Price PEM commented that the largest natural gas price paid. Further, DOE Deflator factors to reflect 2015 prices.52 consumers also hedge gas prices by used gas price data from EIA in its LCC DOE developed the LCC analysis using buying and selling futures and noted analysis and notes that these prices are a marginal fuel price approach to that it is extremely difficult to figure out based on aggregate revenue and sales, convert fuel savings into corresponding what the true cost of the energy is, also which already include sales for both financial benefits for the different pointing out that there are consumers interruptible and uninterruptible equipment classes. This approach was utilizing interruptible service accounts. supply. In view of the above, DOE did based on the development of marginal (PEM, Public Meeting Transcript, No. 61 not pursue development of separate gas price factors for gas and electric fuels at p. 173) Spire commented that DOE price estimates for consumers using based on historical data relating could accurately reflect the marginal dual fuel boilers. monthly expenditures and prices large consumers pay by looking at Appendix 8C of the final rule TSD consumption. For details of DOE’s the incremental cost per therm 53 in includes more details on energy prices marginal fuel price approach, see hedge contracts. (Spire/Laclede, Public and trends. chapter 8 of the final rule TSD. Meeting Transcript, No. 61 at p. 173) To arrive at prices in future years, DOE appreciates the stakeholders 5. Maintenance Costs DOE multiplied the marginal fuel prices comments on the energy prices used in The maintenance cost is the routine by the projection of annual average the economic analysis. EIA historical cost incurred by the consumer for price changes in AEO2016, which has energy prices and AEO price trends are maintaining equipment operation. The an end year of 2040. To estimate the the best aggregate sources for energy maintenance cost depends on CPB trend after 2040, DOE uses the average prices currently available to DOE. DOE capacity and heating medium (hot water rate of change during 2030–2040. understands the importance of or steam). DOE used the most recent RS DOE received comments on marginal accurately representing the energy Means Facility Maintenance and Repair prices and, in particular, on the prices for the consumers in the Cost Data to determine labor and accuracy of the tariff rates paid by larger economic analysis and incorporates materials costs and maintenance load consumers. The Gas Associations many adjustment factors to the average frequency associated with each commented that the analysis should price data and the price trend data to maintenance task for each CPB adjust the energy price calculation account for the price differences due to equipment class analyzed.54 Within an methodology using marginal prices to a variations in locations, seasons, and equipment class, DOE assumed that the use a tariff-based approach to make the market sectors and to ensure that the maintenance cost is the same at all non- analysis more robust. (Gas Associations, energy prices are properly accounted for condensing efficiency levels, and that No. 69 at p. 3) Spire commented that in the economic analysis. the maintenance cost at condensing DOE used erroneous utility marginal Lastly, AHRI commented that the efficiency levels is slightly higher. energy pricing and forecasts in its exclusion of dual-fuel capable boilers Raypak commented that their Service analysis resulting in overstated benefits. overstates the effective prices for natural Department has estimated that (Spire, No. 73 at pp. 17–19) AHRI asked gas since consumers can make use of approximately 5 percent of current if consumers with large loads pay the interruptible natural gas rates. (AHRI, technicians are capable of servicing new same marginal rates as an average No. 76 at p. 42) technology, higher efficiency commercial consumer, and Spire With regard to consumers who may be equipment, and that DOE should responded that they do not and on interruptible rates, DOE examined account for this in its rulemaking referenced their comment submission in CBECS 2012 ‘‘consumption and process. (Raypak, No. 72 at p. 3) DOE the Residential Furnaces NOPR. (AHRI, expenditure’’ data and observed that the notes that in comments received in the Public Meeting Transcript, No. 61 at p. weighted average cost of natural gas for November 20, 2014 NODA and buildings with commercial packaged preliminary analysis, Raypak 50 U.S. Energy Information Administration, Form boilers using both natural gas and fuel commented that although they do not EIA–826 Monthly Electric Utility Sales and Revenue oil is lower by about 6.5 percent have specific data, they believe that the Report with State Distributions (EIA–826 Sales and compared to the average natural gas Revenue Spreadsheets). Available at http:// vast majority of maintenance/service is www.eia.gov/electricity/data/eia826/. price for ‘‘gas only’’ buildings. This performed by manufacturer factory- 51 U.S. Energy Information Administration, compares well with a similar statistic trained personnel due to the specialized Natural Gas Prices. Available at: http:// referenced by AHRI, who posited that equipment and expertise required to www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_ the use of ‘‘interruptible supply’’ _ properly diagnose and repair current DMcf a.htm. contracts by consumers would result in 52 Source: GDP Implicit Price Deflator factors commercial packaged boilers. (Raypak, derived from U.S. Department of Commerce, Bureau rates that result in a 7-percent savings of Economic Analysis. Available at http:// 54 RS Means, 2016 Facilities Maintenance & www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1# 53 A therm is a unit of heat equivalent to 100,000 Repair Cost Data. Available at: http://rsmeans.com/ reqid=9&step=1&isuri=1. Btu or 1.055 × 108 joules. 60305.aspx.

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No. 35 at p. 5) AHRI similarly noted that Repair Cost Data to determine labor and to extrapolate lifetime differences from the industry trend for boiler materials costs associated with repairing warranty terms. Further, as noted during maintenance is toward using external each CPB equipment class analyzed. the CPB NODA and availability of contractors who specialize in servicing DOE sought input from manufacturers Preliminary Analysis TSD, DOE agreed advanced design boilers or boiler regarding the representativeness of with commenters that it is difficult to systems. (AHRI, No. 37 at p. 5) using 1-year as warranty for parts and estimate lifetime of a technology that DOE understands that with any labor and 10-years as warranty for the has only been broadly available on the change in technology, there will be an heat exchanger and received comments market for about 15 years, and DOE adjustment time needed to develop the from interested parties. Crown concludes that the values captured in skills and expertise within the commented that manufacturer survey results may be more workforce to adequately service and warranties are a good metric for representative of early experience based maintain such technology. However, the equipment lifetime and suggested on new technology or installation comments received at preliminary condensing and non-condensing boilers issues. DOE expects that, as condensing analysis indicated that the maintenance have very different warranties. Further, boiler technology matures and installers and service markets were already in Crown noted that many warranties are become better trained at installing and transition and DOE does not believe that prorated so that a 10-year warranty maintaining condensing boilers, lifetime there is basis for presuming that the might actually be a 5-year warranty with of condensing commercial packaged service market would not adapt under a 5 years of pro-rated warranty coverage. boilers sold and installed in 2020 and new standard scenario at any of the (Crown, Public Meeting Transcript, No. beyond would be expected to be similar efficiency levels considered. 61 at pp. 165–166) Raypak commented to their non-condensing counterparts. ABMA commented that the that many manufacturers do not include Crown commented that condensing maintenance tasks for large boilers may labor as part of their warranties, and boilers would be more susceptible to be more involved and may need to be that a 1-year warranty on the heat- poor water-quality related failures due performed from a ladder or catwalk and exchanger might be more appropriate. to their smaller piping, and that as such, the maintenance cost should (Raypak, Public Meeting Transcript, No. warranties take that into account. not be based on extrapolating the 61 at p. 163) However, ABMA (Crown, Public Meeting Transcript, No. maintenance cost for smaller boilers. commented that 5-years may be a better 61 at pp. 166–167) ASAP and the Joint (ABMA, No. 64 at pp. 2–3) warranty period for heat exchangers Advocates commented that DOE is DOE’s LCC model does attempt to especially for larger sizes (ABMA, overestimating the repair costs for develop a maintenance cost for large Public Meeting Transcript, No. 61 at pp. condensing boilers and that DOE should boilers using data for multiple size 162–163) and both Bradford White and assume the same heat exchanger failure categories found in the RS Means Lochinvar agreed with DOE’s rates for condensing and non- Facilities Maintenance and Repair Data assumptions regarding warranties, condensing boilers in the absence of manual, recognizing that some tasks adding that the heat exchanger warranty data to the contrary. (ASAP, Public may be more involved for larger boilers, can be prorated for a period of time Meeting Transcript, No. 61 at p. 164, as noted by ABMA. The largest size beyond the non-prorated warranty Joint Advocates, No. 74 at p. 1, 7) category referenced did not have an period. (Bradford White, No. 68 at p. 2, DOE notes that it considered the upper size limit, but DOE believes that Lochinvar, No. 70 at p. 3) potential failures and failure the DOE developed costs, which DOE reviewed the warranty terms of probabilities particular to condensing extrapolates costs for commercial various manufacturers and determined commercial package boilers in the packaged boilers beyond the largest size that the vast majority of manufacturers estimates of repair and maintenance category available from RS Means, are offer at least ten years of coverage for costs, in particular assigning the heat likely more appropriate for the large heat exchangers and that both exchanger, a major component of the CPB equipment classes. However, DOE condensing and non-condensing boiler system, a higher probability of notes that there is no difference in warranties may use prorating as part of failure than for a non-condensing maintenance cost for a given size boiler their terms. Based on this observation commercial packaged boiler. DOE based on its efficiency, with the and comments received, DOE appreciates ASAP’s and the Joint exception that condensing boilers have determined a 10-year warranty is Advocates’ comment positing that DOE a slight incremental cost due to representative for parts coverage. This should use the same heat exchanger condensate neutralizer replacement and review also found that labor is generally failure rates for condensing and non- thus the magnitude of the maintenance called out as not being covered by condensing boilers in the absence of cost would not play a significant role in manufacturer warranties. However, DOE data to the contrary. However, DOE the LCC savings analysis. DOE considered that other players in the concludes it is a reasonable assumption concludes that its maintenance distribution chain may provide such given the level of maturity of approach and costs for larger boilers is labor cost coverage within the first year condensing CPB technology relative to appropriate for this rulemaking. of operation. DOE performed a non-condensing commercial packaged Appendix 8E of the final rule TSD sensitivity analysis of the LCC model boilers and the level of exposure a includes more details on maintenance where the consumer would cover labor condensing heat exchanger has to costs. costs for any instances of heat exchanger potentially damaging condensate. DOE’s failure within the first year and assumption provides for a more 6. Repair Costs determined that there is no impact to conservative approach to the calculation The repair cost is the cost to the the results and has retained the of benefits relative to the proposed commercial consumer for replacing or assumption of parts and labor coverage method suggested by ASAP and the repairing components that have failed in within one year of installation. With Joint Advocates. the commercial packaged boiler (such as respect to the comments suggesting DOE used the latest RS Means Facility the ignition, controls, heat exchanger, warranties as an indicator of lifetime, Maintenance and Repair Cost Data to mechanical vent damper, or power vent DOE encountered similar warranty determine labor and materials costs blower). DOE used the latest version of terms for condensing and non- associated with repairing each CPB the RS Means Facility Maintenance and condensing boilers and did not attempt equipment class analyzed. DOE

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assumed that all commercial packaged that DOE will find there are pretty stark the LCC does not analyze the appliance boilers have a 1-year warranty for parts differences between those warranties for purchase decision, so the implicit and labor and a 10-year warranty on the condensing and non-condensing boilers. discount rate is not relevant in this heat exchanger. For a detailed (Crown, Public Meeting Transcript, No. model. The LCC estimates net present discussion of repair costs, see appendix 61 at p. 165) Also commenting on value over the lifetime of the 8E of the final rule TSD. warranties, ABMA commented that a equipment, so the appropriate discount 10-year warranty on the heat exchanger rate will reflect the general opportunity 7. Lifetime for steam boilers would be foolhardy cost of household funds, taking this Equipment lifetime is defined as the since the equipment is usually poorly time scale into account. Given the long age at which equipment is retired from maintained and the life of the boilers are time horizon modeled in the LCC, the service. DOE used national survey data, highly dependent upon prevailing application of a marginal interest rate published studies, and projections operating and maintenance conditions. associated with an initial source of based on manufacturer shipment data to (ABMA, No. 64 at p. 3) funds is inaccurate. Regardless of the calculate the distribution of CPB After carefully considering these method of purchase, consumers are lifetimes. DOE based equipment lifetime comments, DOE has concluded that expected to continue to rebalance their on a retirement function, which was there is not enough data available to debt and asset holdings over the LCC based on the use of a Weibull accurately distinguish the lifetime of analysis period, based on the probability distribution, with a resulting condensing boilers because, as Bradford restrictions consumers face in their debt mean lifetime of 24.8 years. DOE White stated, they have not been around payment requirements and the relative assumed that the lifetime of a long enough to understand what is size of the interest rates available on commercial packaged boiler is the same typical versus where local adverse debts and assets. DOE estimates the across the different equipment classes conditions may cause premature boiler aggregate impact of this rebalancing and efficiency levels. For a detailed failure. In addition, condensing boiler using the historical distribution of debts discussion of CPB lifetime, see technologies have been improving since and assets. appendix 8F of the final rule TSD. In its their introduction to the U.S. market; To establish residential discount rates March 2016 NOPR, DOE considered the therefore, the lifetime of the earliest for the LCC analysis, DOE identified all potential impact of condensate on heat condensing boilers, and thus the relevant household debt or asset classes exchangers in commercial packaged perception by those surveyed, may not in order to approximate a consumer’s boilers that operate in condensing mode be representative of current or future opportunity cost of funds related to and established a higher likelihood and condensing boiler designs. However, appliance energy cost savings. It sooner time-to-failure for CPB heat DOE did retain its additional repair estimated the average percentage shares exchangers that are exposed to such costs for condensing boilers by of the various types of debt and equity condensate. assuming different service lifetimes for by household income group using data DOE received various comments heat exchangers for condensing boilers from the Federal Reserve Board’s Survey regarding CPB equipment lifetime. and non-condensing boilers, and this is of Consumer Finances 56 (SCF) for 1995, Bradford White commented that while intended to capture all factors that may 1998, 2001, 2004, 2007, 2010, and 2013. 24.8 years is a fair estimate for copper lead to shorter heat exchanger life for Using the SCF and other sources, DOE and cast iron commercial packaged condensing boilers. Regarding ABMA’s developed a distribution of rates for boilers, it was unsure if it is also a fair comment about 10-year warranties on each type of debt and asset by income estimate for newer, high efficiency heat exchangers for steam boilers, DOE group to represent the rates that may condensing models, noting that this reviewed manufacturer warranties and apply in the year in which amended equipment has not been around long determined that some steam boilers standards would take effect. DOE enough to understand what is typical warranties cover the heat exchanger for assigned each sample household a versus where local adverse conditions 10 years. specific discount rate drawn from one of may have prematurely caused the boiler Details on how DOE adjusted the the distributions. The average rate to fail. (Bradford White, No. 68 at p. 4) repair costs for heat exchangers may be across all types of household debt and PEM commented that the average life of found in appendix 8E of the final rule equity and income groups, weighted by the New York City field constructed TSD. For more details on how DOE the shares of each type, is 4.4 percent. boiler is about 25 years with a derived the CPB lifetime, see appendix For commercial end users, DOE maximum of 30 years. (PEM, Public 8F of the final rule TSD. calculated commercial discount rates as Meeting Transcript, No. 61 at p. 123) the weighted average cost of capital ABMA expressed concern regarding the 8. Discount Rates (WACC), using the Capital Asset Pricing use of EPA–DEFRA reference in the The discount rate is the rate at which Model (CAPM). DOE derived the analysis that states that with proper future expenditures and savings are discount rates by estimating the cost of maintenance condensing and non- discounted to establish their present capital of individual companies that condensing boilers should have similar value. DOE estimated discount rates purchase commercial packaged boilers. life expectancy, and inquired whether separately for commercial and Damodaran Online is a widely used the difference in maintenance standards residential end users. source of information about company between the two countries was ever For residential consumers, DOE debt and equity financing for most types considered. (ABMA, No. 64 at p. 1) BHI applies weighted average discount rates of firms and was the primary source of commented that the life expectancy of calculated from consumer debt and condensing and non-condensing boilers asset data, rather than marginal or incorporating the influence of several factors: 55 is different and that DOE needs to look implicit discount rates. DOE notes that Transaction costs; risk premiums and response to at warranty information for different uncertainty; time preferences; interest rates at commercial boilers to get some evidence 55 The implicit discount rate is inferred from a which a consumer is able to borrow or lend. in this regard. (BHI, No. 71 at p. 17) consumer purchase decision between two otherwise 56 The Federal Reserve Board, Survey of identical goods with different first cost and Consumer Finances, (1989, 1992, 1995, 1998, 2001, Similarly, Crown noted that operating cost. It is the interest rate that equates the 2004, 2007, 2010, 2013). Available at http:// manufacturer warranties are a good, increment of first cost to the difference in net www.federalreserve.gov/pubs/oss/oss2/ impartial metric of boiler lifetimes, and present value of lifetime operating cost, scfindex.html.

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data for the commercial discount rate ultimately pay for the operating and equipment than is indicated by analysis.57 After DOE estimated WACC maintenance cost of the CPB equipment. available models. values for individual companies, the Further, the discount rate is not used in DOE requested shipment information results were condensed into conjunction with the purchase of the from stakeholders at the NOPR phase. In distributions by building type and the equipment, but is used to determine a response, AHRI submitted shipment LCC model selects discount rates from present value for a future stream of information for SGHW and LGHW the distributions corresponding to the ongoing operating and maintenance equipment classes that was broken building types being modeled. costs and benefits. DOE understands down by efficiency and rated input (for See chapter 8 of the final rule TSD for that the principal time a commercial SGHW only). AHRI also submitted further details on the development of discount rate would apply is when an historical annual shipment information consumer discount rates. owner or entity can exert market power for gas-fired hot water (including DOE received several comments and claim the financial benefits as condensing boilers), gas-fired steam, oil- regarding its use of discount rates in this excess profits. Such rental markets do fired hot water and oil-fired steam rulemaking. Raypak and Spire exist, but not for the long run. Either equipment classes. DOE used the AHRI commented that residential discount new rental units get built until supply database and equipment shipment data rates should not be used and that using and demand are in balance, or some by efficiency provided by AHRI to commercial discount rates would be external shock upsets the owner’s or analyze trends within equipment better for the residential sector, noting entity’s ability to reap excess profits. As classes, as it relates to efficiency levels, that the discount rate that should apply such, for this final rule analysis, DOE is to determine the anticipated no-new- is that of the debt and equity of the using updated residential discount rates standards case efficiency distribution in owner of the buildings, not of the for the CPB equipment used in the 2020, the assumed compliance year for people that live in them. (Raypak, residential sector. amended standards. The trends show Public Meeting Transcript, No. 61 at pp. More details regarding DOE’s the market moving toward higher 176–177; Spire/Laclede, Public Meeting estimates of consumer discount rates are efficiency commercial packaged boilers, Transcript, No. 61 at p. 176; Spire, No. provided in chapter 8 of the final rule as noted by stakeholders, and DOE 73 at p. 27) AHRI agreed with comments TSD. accounted for these trends in its no- new-standards case projection. DOE from Raypak and Spire, and added that 9. Market Efficiency Distribution in the used this information for updating the commercial packaged boilers used in No-New-Standards Case residential settings are typically used in final rule analysis. For equipment large apartment buildings or complexes To accurately estimate the share of classes that lacked shipment where heating costs are included in the consumers that would be affected by a information, DOE used publicly rent and associated fees. (AHRI, No. 76 potential energy conservation standard available modeling listing and efficiency at p. 41) However, AHRI commented at a particular efficiency level, DOE information in its analysis. In the that consumer discount rates used in the analyzed the considered efficiency absence of shipment information, the LCC analysis are incorrectly computed levels relative to a no-new-standards distribution of model listings provides a and used due to the use of average case (i.e., the case without amended reasonable proxy for shipments for each rather than marginal discount rates, energy efficiency standards). This equipment class. In general, while also noting that previous analysis requires an estimate of the manufacturers are likely to offer models rulemaking comments that DOE should distribution of equipment efficiencies in with rated inputs and efficiencies where use marginal discount rates for the no-new-standards case (i.e., what demand is highest, therefore DOE consumers have little actual relevance consumers would have purchased in the assumed modeling listing and efficiency in this rulemaking, since AHRI finds compliance year in the absence of information would hold as a proxy for that the average and marginal discount amended standards). DOE refers to this efficiency distribution of shipments. rates may be approximately the same. distribution of equipment energy Regarding AHRI’s comment that DOE (AHRI, No. 76 at p. 40) NEEA efficiencies as the no-new-standards- use basic models only in its analysis, as commented that energy bills have no case efficiency distribution. opposed to the entire database, DOE Regarding DOE’s use of the AHRI influence on rent prices for multi-family does not filter the AHRI directory to database to establish the no-new- housing, reflecting a similar concern in capture only basic models and notes standards case efficiency distribution in how costs are transferred in the multi- that the AHRI database does not its NOPR analysis, AHRI commented family housing market. (NEEA, Public facilitate the differentiation between that the analysis should consider the Meeting Transcript, No. 61 at pp. 182– basic models within their model number of basic models and their 183) listings. DOE is concerned with distribution by efficiency level, which With respect to the use of residential attempting to infer which models in the differs from the number of listings, for discount rates in its analysis, DOE database represent basic models, using its economic analysis. (AHRI, No. 76 at considered the question whether a only the data available in the AHRI pp. 12, 17–24) In written and oral commercial discount rate should be database. However, DOE did perform an comments, manufacturers stated that the used for residential, multi-family analysis of the distribution of efficiency distribution of CPB equipment models, buildings. DOE understands that a levels, and it showed only a minimal based on efficiency, is not a fair commercial discount rate might apply difference between DOE’s distributions, assessment on how the market in some cases, but in other cases, while as captured in 2016 (i.e., an updated shipments are distributed. (Lochinvar, the upfront purchase is funded by a dataset obtained since that used during No. 70 at p. 6; BHI, No. 71 at p. 17; building owner or entity, ultimately the March 2016 NOPR), and those Raypak, No. 72 at p. 2) Manufacturers income from the renters pay for the CPB provided by AHRI. Further, DOE expressed that the scope of available equipment through rent paid to the understands that some models may have equipment is covered by the AHRI owner or entity and additionally more equipment units listed than the database, however, the distribution of others, correlating to a demand in the 57 Damodaran Online. Data page: Cost of Capital equipment is not representative of the market for variations from basic models, by Industry Sector. (2004–2013). Available at: volume of sales as actual shipments will which may reflect consumer demand for http://pages.stern.nyu.edu/∼adamodar/. be more biased toward high efficiency such equipment. Since DOE uses

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historical versions of the AHRI database on shipments by efficiency to inform its purchases of higher-efficiency to develop projected distributions for analysis. For the purpose of this final commercial packaged boilers that would 2020, it would be impractical to attempt rule, DOE did a general data update to provide net economic benefits to the to reassess these distributions in terms capture AHRI 2016 equipment models purchaser would not occur even in the of basic models, with little to no data and adjusted the gas-fired hot water absence of the proposed standard. improvement in the accuracy of the CPB equipment condensing market (Spire, No. 73 at p. 15) DOE makes no actual distribution. Lastly, DOE notes share approach and its projection of the such assertion, but notes that its that stakeholders have expressed no-new-standards case efficiency analysis assesses the impact of concerns historically regarding the distributions for the year 2020 based on standards on consumers, but does not the availability of historical shipments ability to infer a distribution of further assess the net economic impacts data. For all other equipment classes shipments by efficiency based on a on consumers who voluntarily select analyzed, and for portions of the SGHW distribution of available models and/or and LGHW CPB equipment classes (not higher efficiency equipment in the listing. As noted in this section, DOE including the year 2020 and its absence of standards. received and considered historical condensing market share approach for Table IV.6 presents the estimated no- shipment data by efficiency for the gas- which shipment data was used), DOE new-standards case efficiency market fired hot water CPB equipment classes retained its NOPR methodology for shares for each analyzed CPB equipment in its determination of the no-new- developing the no-new-standards case class in 2020. Appendix 8H of the final standards efficiency distributions. efficiency distribution, and considered rule TSD contains more information However it did retain its methodology all the equipment listed in the AHRI regarding DOE’s development of the from the NOPR, of using the AHRI database. efficiency distributions in the no-new- database on the other six equipment Also providing comment, Spire stated standards case. classes analyzed, as it did not have data that there is no basis to assume that

TABLE IV.6—ESTIMATED NO-NEW-STANDARDS CASE BOILER EFFICIENCY DISTRIBUTION * OF ANALYZED COMMERCIAL PACKAGED BOILER EQUIPMENT CLASSES ** IN 2020

SGHW LGHW SOHW LOHW SGST LGST SOST LOST Efficiency (%) (%) (%) (%) (%) (%) (%) (%)

77 ...... 46 13 ...... 78 ...... 6 31 ...... 79 ...... 15 13 ...... 80 ...... 9 ...... 16 21 ...... 81 ...... 4 ...... 12 5 27 35 82 ...... 5 1 32 ...... 11 ...... 83 ...... 1 24 ...... 5 ...... 53 38 84 ...... 4 4 12 40 ...... 7 14 ...... 85 ...... 8 15 17 ...... 26 86 ...... 45 ...... 6 ...... 87 ...... 10 ...... 1 88 ...... 3 10 ...... 89 ...... 1 ...... 90 ...... 91 ...... 92 ...... 93 ...... 36 ...... 94 ...... 77 ...... 95 ...... 28 ...... 96 ...... 97 ...... 2 3 3 ...... 98 ...... 99 ...... 5 ...... * Results may not add up to 100% due to rounding. ** SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.

DOE calculated the LCC and PBP for DOE used 2020 as the first year of recovered in reduced operating all consumers as if each were to compliance with amended standards. expenses. purchase new equipment in the year 10. Payback Period Inputs The inputs to the PBP calculation are that compliance with amended the total installed cost of the equipment standards is required. EPCA directs DOE The payback period is the amount of to the consumer for each efficiency level to publish a final rule amending the time it takes the consumer to recover the and the average annual operating standard for the equipment not later additional installed cost of more- expenditures for each efficiency level. than 2 years after a notice of proposed efficient equipment, compared to The PBP calculation uses the same rulemaking is issued. (42 U.S.C. baseline equipment, through energy cost inputs as the LCC analysis, except that 6313(a)(6)(C)(iii)) As discussed savings. Payback periods are expressed discount rates are not needed. previously in section III.A of this in years. Payback periods that exceed Lochinvar commented that DOE document, for purposes of its analysis, the life of the equipment mean that the should not consider a payback period increased total installed cost is not over 7 years as acceptable in this

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rulemaking, noting that commercial represents a pathway towards a more of the CBECS energy use data in the buildings are sold just like consumer effective model. (AHRI, No. 76 at pp. 2– sample itself, the energy use model property and owners will not accept a 3). Spire also commented that DOE’s produced excessively high operating payback period longer than their spreadsheets and Monte Carlo software hours in some instances and that these expected length of ownership. were unreasonably complicated and distort the economic results. (AHRI, No. (Lochinvar, No. 70 at p. 6) prone to errors and lacks transparency. 76 at pp. 37–40) AHRI’s consultant DOE notes that, in general, (Spire, No. 73 at p. 26). suggest that a more logical approach for rulemakings have selected levels with In response to the comments on the estimating may be to use directly payback periods within the lifetime of LCC model complexity, DOE welcomes measured data or estimated load data the equipment. However, DOE’s LCC feedback and data supporting modeling (AHRI, No. 76 at p. 40). DOE has not analysis and development of full life- changes in its analysis, but, in general identified a source of comprehensive cycle-cost and life-cycle-cost savings believes that it is valuable to capture burner operating hour (BOH) data for values considers additional detail and variation in inputs to help establish commercial boilers that could be used economic factors and DOE considers it variation in LCC and LCC savings in the for such an analysis nor was such a more robust assessment of the output. DOE has found that the identified to DOE by stakeholders. economic impact on consumers. examination of the fraction of a user Estimated BOH data from other sources, base which is negatively impacted by 11. General Comments such as whole building simulation possible standards is an important modeling of commercial buildings is DOE received several comments consideration in setting new standards. another approach that has been regarding complexity of the LCC Model. DOE notes that the LCC model using the considered by DOE, but could result in AHRI, through its consultant Shorey Crystal Ball software can output the the need to resolve an even larger Consulting, Inc., commented that the assumed values and results of each number of building-level modeling use of distributions, and not single point assumption and provide forecasted details and assumptions. DOE received values, makes the model more complex results for each iteration in the Monte no early guidance from stakeholders and and less transparent and suggested that Carlo simulation if desired by accordingly did not propose the use of DOE should have a dialogue with key stakeholders to review or trace the whole building simulation at the stakeholders to determine whether the output. In addition, it is possible to November 2014 NODA and preliminary apparent sophistication that comes from modify directly the assumption cells in analysis or March 2016 NOPR stages. the Monte Carlo process is worth the the model to examine impacts of Consequently, DOE has updated the loss in transparency. In addition, they changes to assumptions on the LCC and model to use the most recent CBECS suggest that DOE should also engage in fact DOE relies both of these 2012 data and made other adjustments, stakeholders to determine whether the techniques for model testing. DOE notes but has not abandoned the use of CBECS assumptions inside the LCC model are that the model provided as an example energy data nor its sizing methodology. either necessary or correct. (AHRI, No. by AHRI limited in many important DOE also notes that certain results that 76 at pp. 28–29) In particular, AHRI ways the scope of the market being are presented by AHRI for the SGHW expressed concern that the random no- examined, including omission of any class reflect the removal of the upper 10 new-standards case assignment of use of RECS data, ignoring new percent of the calculated BOH. DOE efficiencies is thoroughly embedded in construction, assumes all condensing concludes that while there is value in DOE’s model logic and is not reflective boilers operate in the high return water reviewing the BOH results, there is no of a functioning marketplace. (AHRI, temperature scenario, ordering the basis to assume that the very highest No. 76 at p. 31 and 45) Spire similarly efficiency distribution in the no-new- level of BOH seen in the buildings commented that DOE overstated standards case as a function of examined should be simply removed benefits by assuming purchasing calculated payback, and excluding the from the LCC analysis. decisions that do not make economic incremental costs of venting or AHRI also commented that combining sense will occur. (Spire, No. 73 at p. 16) maintenance and repair. In addition, a the results for natural and mechanical AHRI suggested a need for a more fundamental difference was in the base draft commercial packaged boilers, straightforward, less complex and more case assumption where the AHRI model particularly for SGHW boilers, disguises understandable approach to modeling. presumed that where the analysis the effects of market adoption of higher They assert that a core issue is the use showed the shortest paybacks, efficiency equipment and demonstrates of the Monte Carlo simulation approach, consumers were presumed to purchase this with the results obtained with their and while recognizing that many inputs the highest efficiency boilers in the no- modeling approach and assumptions. are distributions rather than single point new-standards case distribution. (AHRI, (AHRI, No. 76 at pp. 32–33) DOE, values, assert that gaining the ability to No. 76 at p. 31) This reflects an overly however, notes that it considers that use distributions has come at the cost of optimistic and unrealistic working there is variation in equipment design, clarity and traceability and the ability to market, presumes information that may including draft type, in the market. audit the model. (AHRI, No. 76 at p 28) not be available to all purchasers and, However, as has been noted by DOE in AHRI, through its consultant, provides while informative, may unreasonably this rulemaking, draft type does not an example as an illustrative modeling bias the results as presented by AHRI. define a unique utility for commercial approach that is deterministic, as While DOE appreciates the feedback packaged boilers and consequently there opposed to using Monte Carlo analysis, from AHRI and recognizes the value of is only one equipment class for the utilizes a narrower set of assumptions, clarity and traceability, it has not SGHW CPB equipment class. Thus, and whose implementation resulted in deviated from the use of the Monte DOE’s LCC analysis aggregates sample substantively different economic results. Carlo approach for the final rule. DOE selection both for consumers using Specific aspects of these results are addresses specific modeling natural draft equipment and mechanical presented in AHRI’s comment. AHRI assumptions in the discussion draft equipment. emphasizes that this model is an surrounding those variables in the LCC AHRI and BHI commented that the alternative working model, but states it inputs discussion that follows. random assignment of no-new-standards is in no way suggested as a direct AHRI posited that either due to DOE’s case efficiencies in the LCC model is not substitute for DOE’s LCC, but rather sizing assumption and/or due to the use correct, as this inherently assumes that

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the purchasers do not pay attention to switching beyond what the historical To project equipment class shipments costs and benefits in a world without shipments trend might imply. for new construction, DOE relied on standards. AHRI further stated that Furthermore, CBECS 2012 data indicate building stock and floor space data approximately 75 percent of commercial that 7 percent of commercial buildings obtained from the AEO2016. DOE buildings which use boilers are use electric boilers (not necessarily assumed that CPB equipment is used in buildings where the end user either packaged boilers) for primary space both commercial and residential multi- pays, or has significant control, over the heating. family dwellings. DOE estimated a total decision to purchase a new boiler. In the final rule DOE revised its saturation rate for each equipment class (AHRI, No. 76 at p. 26, 29, 30; BHI, No. estimates of historical shipments and based on prior CBECS data and a 71 at p. 16) shipment projections as additional data modeled size distribution of commercial In response, DOE notes that became available. The additional data packaged boilers in commercial development of a complete consumer include public use microdata files on buildings with a given design heating choice model, to support an alternative the ‘‘Consumption and Expenditure’’ load. As new data from CBECS 2012 to random assignment in the no-new- segment of EIA’s CBECS 2012. AHRI became available, DOE modified its standards case, for boiler efficiency also provided confidential historical approach to calculate the saturation would require data that are not shipment data to DOE’s contractors rates for new construction used in the currently available, as well as under confidentiality arrangement. DOE recognition of the various factors that March 2016 NOPR stage. For estimation estimated historical shipments from impact the purchasing decision, such as of saturation rates in the new stock estimates based on the CBECS incentives, the value that some commercial construction, DOE data series from 1979 to 2012. Since no consumers place on efficiency apart calculated saturation rates averaged over CBECS survey was conducted prior to from economics (i.e., ‘‘green behavior’’), a period of 9 years from 2004 through 1979, DOE used the trends in historical and whether the purchaser is a building 2012 from the estimated CPB stock for owner/occupier or landlord. For the shipment data for residential boilers to buildings constructed during the final rule, DOE used the same general estimate the historical shipments for the reference period. The new construction method to assign boiler efficiency in the 1960–1978 time period. For estimation saturation rates were projected from no-new-standards case. of stocks of gas and oil boilers, DOE 2013 till the end of the analysis period used the data on growth of commercial considering currently observed trends G. Shipments Analysis building floor space for nine building from CBECS 2012 and AEO2016 (for oil In its shipments analysis, DOE types from AEO reports, percent floor to gas shifts). For residential multi- developed shipment projections for space heated by CPB data from CBECS family units, DOE used RECS 2009 data commercial packaged boilers and, in for these building types, and estimated and considered multi-family buildings turn, calculated equipment stock over saturations of commercial packaged constructed in the 9 year period from the course of the analysis period. DOE boilers in these building types. From 2001 to 2009 as new construction for used the shipments projection and the these stock estimates, DOE derived the calculating the new construction equipment stock to calculate the shipments of gas-fired and oil-fired saturation. DOE assumed that the new national impacts of potential amended commercial packaged boilers using construction saturation in multi-family or new energy conservation standards correlations between stock and buildings are nearing their minimum shipment for gas and oil boilers. As on energy use, NPV, and future threshold values and would remain noted in section IV.E.2 of this manufacturer cash flows. DOE unchanged during the analysis period. document, to obtain individual developed shipment projections based DOE applied these new construction equipment class shipments from the on estimated historical shipment and an saturation rates to new building analysis of key market drivers for each aggregate values, DOE used the steam to additions in each year over the analysis kind of equipment. DOE did not find hot water shift trends from the EPA period (2020–2049), yielding shipments any evidence nor was provided any data database for space heating boilers. The to new buildings. The building stock during the public comment period that oil to gas shift trends were derived from indicates fuel switching from oil or gas- CBECS data for historical shipments and and additions projections from the fired commercial packaged boilers to from AEO2016 for projected shipments. AEO2016 are shown in Table IV.7. electric commercial packaged boilers The equipment class shipments were DOE estimated the percent share of occurred in the market for these further disaggregated between shipment different efficiency bins across the products. Therefore DOE did not modify to new construction and replacement/ equipment classes as detailed in chapter the shipments analysis to include fuel switch shipments. 9 of the final rule TSD.

TABLE IV.7—BUILDING STOCK PROJECTIONS

Total Total commercial Commercial building residential Residential Year building floor space floor space additions building stock building additions (million sq. ft.) (million sq. ft.) (millions of units) (millions of units)

2015 ...... 82,176 1,659 115.39 1.18 2020 ...... 86,661 2,079 120.41 1.74 2025 ...... 91,888 2,149 126.03 1.71 2030 ...... 97,148 2,210 131.39 1.67 2035 ...... 102,364 2,266 136.35 1.64 2040 ...... 107,552 2,337 141.35 1.65 2045 ...... 113,164 2,403 146.66 1.74 2049 ...... 117,864 2,458 151.06 1.79 Source: EIA AEO2016.

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Commercial consumer purchase of the EIA. (NEEA, Public Meeting that is more reflective of the decisions are influenced by the Transcript, No. 61 at pp. 192–194) marketplace. (Raypak, No. 72 at p. 2) purchase price and operating cost of the In response to the comments received Lochinvar commented that DOE has equipment, and therefore may be on projected shipments, DOE updated consistently projected shipments that different across standards levels. To its shipments model, the results of exceed industry expectations and seem estimate the impact of the increase in which display lower growth of projected unjustified by existing market data, and relative price from a particular standard shipments. In particular, for the March that DOE underestimated market trends level on CPB shipments, DOE assumed 2016 NOPR, DOE used constant values toward condensing boilers. (Lochinvar, that a portion of affected consumers are for percent floor space heated by boiler No. 70 at pp. 4, 8) Weil-McLain more price-sensitive and would repair and CPB saturation (i.e., number of expressed their belief that the impact of equipment purchased prior to units per million square feet of floor the proposed efficiency standards on enactment of the standard rather than space heated) during the entire analysis natural draft and steam boiler shipments replace it, extending the life of the period for estimating the projected could be significant and that consumers equipment by 6 years. DOE modeled shipments. In the final rule, DOE used will often decide to repair the existing this impact using a relative price a declining trend in area heated by boiler and delay replacement, creating elasticity approach. When the extended boiler (0.25 percent per year) but an unintended consequent reduction in repaired units fail after 6 more years, constant saturation resulting in only a energy savings. (Weil-McLain, No. 67 at DOE assumed they will be replaced more modest growth in shipments. pp. 4, 8) Lochinvar commented that DOE with new ones. A detailed description DOE notes that while models should consider publishing all the data of the extended repair calculations is throughout most of this rulemaking had and model parameters of the shipment provided in chapter 9 of the final rule relied to some degree on indirect model. (Lochinvar, No. 70 at p. 4) TSD. methods to estimate historical and In the March 2016 NOPR, DOE sought In light of shipment data having been projected shipments, in this final rule feedback on the assumptions used to received under confidentiality the shipments model has been develop historical and projected agreement, DOE is unable to publish the calibrated utilizing shipments data shipments of commercial packaged shipment data furnished by AHRI. provided to inform the analysis. Based boilers and the representativeness of its However, DOE has provided an updated on the availability of these shipments estimates of projected shipments. DOE version of the shipments model data and the calibration of the also requested information on historical description and the model parameters in shipments of commercial packaged chapter 9 and appendix 9A of the TSD, shipments model to better reflect the boilers including shipments by and shipments data from DOE’s marketplace, DOE concludes that it has equipment class for small, large, and calibrated model may be found in the adequately addressed the stakeholders’ very large commercial packaged boilers. NIA model. concerns in this final rule. Regarding In the March 2016 NOPR analysis, as a DOE also received various general Bradford White’s comments whether required input to the NIA model, DOE comments regarding its March 2016 standards are truly necessary, DOE had estimated historical shipments of NOPR shipments approach and notes that the shipments data it received commercial packaged boilers for over 50 shipments by efficiency level. BHI allowed DOE to better inform its years through 2012. AHRI commented commented that DOE should rely on analysis and to make that determination that DOE’s estimates of historical models sold, and not model availability, based on a more accurate assessment of shipments are lower than the actual in its analyses. (BHI, No. 71 at p. 17) the national energy savings potential, historical shipments and furnished Similarly, Lochinvar commented that among other factors it considered. With confidential historical shipment data for equipment databases are not regard to Weil-McLain’s comment about a limited period to DOE’s contractors in representative of the distribution of repair versus replace under new support of its assertion. (AHRI, No. 76 sales. (Lochinvar, Public Meeting standards, DOE assumed that a portion at p. 13) DOE appreciates the efforts of Transcript, No. 61 at p. 208) Bradford of affected consumers are more price- AHRI and its members to help better White noted that distribution of models sensitive and would repair equipment inform this rulemaking. The data based on efficiency is not a fair purchased prior to enactment of the provided were used to calibrate and assessment of how CPB shipments are standard (in 2019) rather than replace it, refine DOE’s shipments model for distributed, and further questions extending the life of the equipment by estimation of historical shipments. whether standards are truly necessary if, 6 years. DOE modeled this impact using Several commenters further pointed as DOE’s own shipments projections a relative price elasticity approach. out that the projected shipments of show for condensing boilers, the market When the extended repaired units fail commercial packaged boilers show an is already moving towards these higher after 6 more years, DOE assumed they unrealistic growth trend that could not efficiency equipment on its own. will be replaced with new ones. be observed in DOE’s historical (Bradford White, No. 68 at p. 2) Weil- Regarding Weil-McLain’s specific shipment estimates from 1960 through McLain commented that DOE should comment about natural draft boilers, 2012. (AHRI, Public Meeting Transcript, look at actual shipments to get a DOE notes that the standards for small No. 61 at p. 191; Raypak, Public Meeting realistic idea of the distribution of gas-fired hot water commercial Transcript, No. 61 at p. 193; Raypak, No. boilers installed today based on packaged boilers in the final rule are 72 at p. 2; Lochinvar, No. 70 at p. 4; efficiency levels, rather than total lower than proposed at March 2016 Crown, Public Meeting Transcript, No. number of models available in each NOPR and should alleviate the impact 61 at pp. 191–192) NEEA, however, category. (Weil-McLain, No. 67 at p. 8) on natural draft shipments. Regarding pointed out that the growth in DOE’s Raypak commented that it takes steam boilers, while DOE understands projected shipments could be attributed exception with the DOE’s use of the the observation voiced by Weil-McLain, to replacements of existing boiler stock number of models listed in the AHRI no new data was provided as to the and growth in commercial building directory as representing the actual driving force or likely significance of the stock, which should track the trends of shipments of commercial packaged impact on the overall steam boiler new construction of commercial floor boilers as no such correlation existed shipments. Consequently, DOE was not space captured in the economic models and recommended that DOE use data able to further calibrate the shipments

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model for the impact of standard levels The projected shipments at 5 year starting from 2020 and a few key years analyzed for steam boilers. intervals during the analysis period are shown in Table IV.8.

TABLE IV.8—SHIPMENTS OF COMMERCIAL PACKAGED BOILER EQUIPMENT [Thousands]

SGHW LGHW SOHW LOHW SGST LGST SOST LOST Year CPB * CPB CPB CPB CPB CPB CPB CPB

2015 ...... 25,634 2,112 4,156 298 2,313 260 1,240 93 2020 ...... 24,582 2,025 2,238 161 1,927 216 1,189 89 2025 ...... 23,979 1,976 2,159 155 1,551 174 1,140 85 2030 ...... 26,734 2,203 2,061 148 1,143 128 1,093 82 2035 ...... 28,524 2,350 1,945 140 685 77 1,045 78 2040 ...... 27,918 2,300 1,827 131 432 49 981 73 2045 ...... 28,874 2,379 1,718 123 415 47 922 69 2049 ...... 29,980 2,470 1,627 117 401 45 874 65 * SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.

Given the comments regarding the elasticity for commercial equipment Because the estimated energy usage of impact of increased repairs on (data specific to commercial packaged CPB equipment differs by commercial shipments, DOE determined that use of boilers were not available). DOE notes and residential setting, the NIA price elasticity to model the extended that it performed two sensitivity employed the same fractions of repair option should be maintained in analyses—one without the use of the shipments (or sales) to consumers as is this final rule. DOE used the price price elasticity, and one in which the used in the LCC analysis. The fraction elasticity from a residential product price elasticity was increased ten-fold. of shipments by type of commercial study to use sales and price data for The results of the sensitivity analyses consumer is shown in Table IV.9. commercial unitary air conditioners 58 are presented in appendix 10D of the to more closely approximate an final rule TSD.

TABLE IV.9—SHIPMENT SHARES BY TYPE OF COMMERCIAL CONSUMER

Commercial Residential Equipment class (%) (%)

Small Gas-Fired Hot Water Commercial Packaged Boiler ...... 89 11 Large Gas-Fired Hot Water Commercial Packaged Boiler ...... 99 1 Small Oil-Fired Hot Water Commercial Packaged Boiler ...... 74 26 Large Oil-Fired Hot Water Commercial Packaged Boiler ...... 96 4 Small Gas-Fired Steam Commercial Packaged Boiler ...... 90 10 Large Gas-Fired Steam Commercial Packaged Boiler ...... 99 1 Small Oil-Fired Steam Commercial Packaged Boiler ...... 90 10 Large Oil-Fired Steam Commercial Packaged Boiler ...... 99 1

H. National Impact Analysis rulemaking, DOE projected the energy instructions. Interested parties can savings, operating cost savings, review DOE’s analyses by interacting The NIA assesses the national energy equipment costs, and NPV of with this spreadsheet. The model and savings (NES) and the national net commercial consumer benefits for documentation are available on DOE’s present value (NPV) from a national equipment sold from 2020 through website.61 The NIA calculations are perspective of total consumer costs and 2049—the year in which the last based on the annual energy savings that would be expected to result standards-compliant equipment would consumption and total installed cost from new or amended standards at be shipped during the 30-year analysis data from the energy use analysis and specific efficiency levels.59 The NES period. the LCC analysis. and NPV were analyzed at specific To make the analysis more accessible DOE evaluates the impacts of new or efficiency levels (i.e., TSLs) for each and transparent to all interested parties, amended standards for commercial equipment class of CPB equipment. DOE uses a computer spreadsheet packaged boilers by comparing no-new- DOE calculated the NES and NPV based model to calculate the energy savings standards-case projections with on projections of annual equipment and the national consumer costs and standards-case projections. The no-new- shipments, along with the annual savings from each TSL.60 Chapter 10 standards-case projections characterize energy consumption and total installed and appendix 10A of the final rule TSD energy use and consumer costs for each cost data from the LCC analysis. In this explain the model and provide equipment class in the absence of new

58 U.S. Department of Energy. Technical Support 60 DOE understands that Microsoft Excel is the 61 DOE’s webpage on commercial packaged boiler Document: Energy Efficiency Program for Consumer most widely used spreadsheet calculation tool in equipment is available at https:// Products and Commercial and Industrial the United States and there is general familiarity www1.eere.energy.gov/buildings/appliance_ Equipment: Distribution Transformers, Chapter 9 with its basic features. Thus, DOE’s use of Excel as standards/standards.aspx?productid=8. Shipments Analysis. April 2013. the basis for the spreadsheet models provides 59 The NIA accounts for impacts in the 50 states interested parties with access to the models within and U.S. territories. a familiar context.

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and amended energy conservation level, and equipment already being the LCC analysis. The NIA also uses standards. DOE compared these purchased at efficiency levels at or projections of energy prices and projections with those characterizing above the amended standard level building stock and additions consistent the market for each equipment class if would remain unaffected. with various AEO2016 Economic DOE were to adopt amended standards Unlike the LCC analysis, the NIA Growth cases. NIA results based on at specific energy efficiency levels (i.e., analysis does not use distributions for these cases are presented in chapter 10 the standards cases) for that class. For inputs or outputs, but relies on national and appendix 10D of the final rule TSD. the standards cases, DOE used a ‘‘roll- average equipment costs and energy Table IV.10 summarizes the inputs up’’ scenario in which equipment at costs. DOE used the NES spreadsheet to and methods DOE used for the NIA for efficiency levels that do not meet the perform calculations of energy savings the final rule. Discussion of these inputs standard level under consideration and NPV using the annual energy and methods follows the table. See would ‘‘roll up’’ to the efficiency level consumption, maintenance and repair chapter 10 of the final rule TSD for that just meets the amended standard costs, and total installed cost data from further details.

TABLE IV.10—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS

Inputs Method

Shipments ...... Annual shipments from shipments model. First Year of Analysis Period ...... 2020. No-New-Standards Case Forecasted Effi- Efficiency distributions are forecasted based on historical efficiency data. ciencies. Standards Case Forecasted Efficiencies ...... Used a ‘‘roll-up’’ scenario. Annual Energy Consumption per Unit ...... Annual weighted-average values are a function of energy use at each TSL. Total Installed Cost per Unit ...... Annual weighted-average values are a function of cost at each TSL. Incorporates forecast of future equipment prices based on historical data. Annual Energy Cost per Unit ...... Annual weighted-average values as a function of the annual energy consumption per unit, and energy prices. Energy Prices ...... AEO2016 no-CPP case prices projections (to 2040) and extrapolation through 2100. Energy Site-to-Source Conversion Factors ...... A time-series conversion factor based on AEO2016. Discount Rate ...... 3- and 7-percent real. Present Year ...... Future expenses discounted to 2016, when the final rule will be published.

1. Equipment Efficiency in the No-New- comments. (Lochinvar, No. 70 at p. 4) nor does it have no-new-standards case Standards Case and Standards Cases Furthermore, Lochinvar commented and standards case efficiency that the roll-up analysis does not show distribution tables for equipment classes As described in section IV.F.9 of this any reduction in the sales of commercial separated by draft type as noted in document, DOE used a no-new- packaged boilers as the minimum comments from Lochinvar. However, standards-case distribution of efficiency efficiency levels are increased, and that DOE carefully examined the tables that levels to project what the CPB reduced sales would be expected since were the closest match in the March equipment market would look like in as the price of baseline boilers increase, 2016 NOPR TSD, and it was unable to the absence of amended standards. DOE some projects will no longer be identify any discrepancies. With respect applied the percentages of models affordable and that would impact the to Lochinvar’s comments regarding the within each efficiency range to the total number of boilers shipped. (Lochinvar, roll-up scenario and accounting for unit shipments for a given equipment No. 70 at pp. 5–6) BHI expressed reductions in boiler sales, DOE notes class to estimate the distribution of concern that DOE’s roll-up assumption that the roll-up tables represent shipments for the no-new-standards that shipments of equipment at percentages of the market for each case. Then, from those market shares efficiencies above the proposed efficiency level, with the entire market and projections of shipments by standard would be unaffected is for a given equipment class defined as equipment class, DOE extrapolated inconsistent with how SGHW boilers 100 percent. DOE does account for future equipment efficiency trends both are used. Further, BHI noted that if DOE reductions in boiler sales that may for a no-new-standards-case scenario were to adopt the 85-percent level for result from amended standards by and for standards-case scenarios. SGHW commercial packaged boilers, considering a price elasticity factor, For the standards cases, DOE used a there is reason to believe that most of hence already accounting for shipment ‘‘roll-up’’ scenario to establish the the ‘‘substandard’’ SGHW sales would impacts due to increased equipment shipment-weighted efficiency for the move to the condensing level due to the prices. Regarding BHI’s comments on year that standards are assumed to inability to use Category I venting and roll-up, DOE appreciates the insight into require compliance (2020). In this the added cost of venting materials, BHI’s experience regarding historical scenario, the market of equipment in the citing the disappearance of sales of sales of SGHW commercial packaged no-new-standards case that do not meet SGHW models at efficiencies between boilers in the 85 percent to 90 percent the standard under consideration would 85 percent and 90 percent. (BHI, No. 71 ET. While DOE’s roll-up approach does ‘‘roll up’’ to meet the new standard at p. 14) assume that sale shares of lower level, and the market share of After reviewing the tables identified efficiency equipment would roll-up to equipment above the standard would by Lochinvar, DOE determined that the 85 percent ET level, as proposed at remain unchanged. those tables were a close match to the the March 2016 NOPR, the SGHW level Lochinvar commented that Tables tables from the preliminary analysis adopted in this final rule is 84 percent 10.3.1 and 10.3.2 in the March 2016 TSD, and not the March 2016 NOPR ET. NOPR TSD contain clerical errors and TSD. The March 2016 NOPR TSD does The estimated efficiency trends in the provided corrections in written not contain Table 10.3.1 or Table 10.3.2, no-new-standards case and standards

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cases are described in chapter 10 of the energy use and emissions is described analyzed scenarios that used inputs final rule TSD. in appendix 10B of the final rule TSD. from variants of the AEO2016 case that have lower and higher economic 2. National Energy Savings 3. Net Present Value of Consumer growth. Those cases have lower and Benefit The national energy savings analysis higher energy price trends and the NIA involves a comparison of national The inputs for determining the NPV results based on these cases are energy consumption of the considered of the total costs and benefits presented in appendix 10B of the final equipment between each potential experienced by consumers of the rule TSD. standards case also known as Trial considered equipment are (1) total c. Discount Rate Standard Level (TSL) and the case with annual installed cost, (2) total annual no new or amended energy conservation savings in operating costs (energy costs In calculating the NPV, DOE standards. DOE calculated the national and repair and maintenance costs), and multiplies the net savings in future energy consumption by multiplying the (3) a discount factor. DOE calculates the years by a discount factor to determine number of units (stock) of each lifetime net savings for equipment their present value. For this final rule, equipment (by vintage or age) by the shipped each year as the difference DOE estimated the NPV of consumer unit energy consumption (also by between the no-new-standards case and benefits using both a 3-percent and a 7- vintage). DOE calculated annual NES each standards case in terms of total percent real discount rate. DOE uses based on the difference in national operating cost savings and increases in these discount rates in accordance with energy consumption for the no-new- total installed costs. DOE calculates guidance provided by the Office of standards case and for each higher lifetime operating cost savings over the Management and Budget (OMB) to efficiency standard case. DOE estimated life of each commercial packaged boiler Federal agencies on the development of energy consumption and savings based shipped during the projection period. regulatory analysis.64 The discount rates for the determination of NPV are in on site energy and converted the a. Total Annual Cost electricity consumption and savings to contrast to the discount rates used in the primary energy (i.e., the energy DOE determined the difference LCC analysis, which are designed to consumed by power plants to generate between the equipment costs under the reflect a consumer’s perspective. The 7- site electricity) using annual conversion standard-level case and the no-new- percent real value is an estimate of the factors derived from AEO2016. standards case in order to obtain the net average before-tax rate of return to Cumulative energy savings are the sum equipment cost increase resulting from private capital in the U.S. economy. The of the NES for each year over the the higher standard level. As noted in 3-percent real value represents the timeframe of the analysis. section IV.F.1 of this document, DOE ‘‘social rate of time preference,’’ which In 2011, in response to the used a constant real price assumption as is the rate at which society discounts recommendations of a committee on the default price projection; the cost to future consumption flows to their ‘‘Point-of-Use and Full-Fuel-Cycle manufacture a given unit of higher present value. Measurement Approaches to Energy efficiency neither increases nor I. Consumer Subgroup Analysis decreases over time. Efficiency Standards’’ appointed by the In analyzing the potential impacts of National Academy of Sciences, DOE b. Total Annual Operating Cost Savings new or amended standards on announced its intention to use full-fuel- consumers, DOE evaluates impacts on cycle (FFC) measures of energy use and The operating cost savings are energy cost savings, which are calculated using identifiable groups (i.e., subgroups) that greenhouse gas and other emissions in may be disproportionately affected by a the national impact analyses and the estimated energy savings in each year and the projected price of the new or amended national standard. For emissions analyses included in future this final rule, DOE analyzed the energy conservation standards appropriate form of energy. To estimate energy prices in future years, DOE impacts of the considered standard rulemakings. 76 FR 51281 (Aug. 18, levels on ‘‘low-income households for 2011). After evaluating the approaches multiplied the average regional energy prices by the projection of annual residential’’ and ‘‘small businesses for discussed in the August 18, 2011 notice, commercial sectors’’. DOE published a statement of amended national-average commercial energy price changes consistent with the With regard to its subgroup analysis, policy in which DOE explained its DOE received comments regarding the determination that EIA’s National projections found on page E–8 in AEO 2016.63 AEO2016 has an end year of appropriateness of the use of residential Energy Modeling System (NEMS) is the discount rates to analyze the impact of most appropriate tool for its FFC 2040. To estimate price trends after 2040, DOE used the average annual rate the amended standard on the ‘‘low analysis and its intention to use NEMS income households for residential’’ for that purpose. 77 FR 49701 (Aug. 17, of change in prices from 2020 through 2040. As part of the NIA, DOE also subgroup. Raypak commented that the 2012). NEMS is a public domain, multi- LCC results in the subgroup analysis

sector, partial equilibrium model of the 63 and the National level results are being 62 The standards finalized in this rulemaking will U.S. energy sector that EIA uses to take effect a few years prior to the 2022 significantly overstated due to the use of prepare its Annual Energy Outlook. The commencement of the Clean Power Plan residential discount rates for the FFC factors incorporate losses in compliance requirements. As DOE has not modeled residential installations, since the production and delivery in the case of the effect of CPP during the 30 year analysis period of this rulemaking, there is some uncertainty as to equipment under consideration is natural gas (including fugitive the magnitude and overall effect of the energy installed in a commercial setting. emissions) and additional energy used efficiency standards. These energy efficiency (Raypak, Public Meeting Transcript, No. to produce and deliver the various fuels standards are expected to put downward pressure 61 at p. 188) Spire commented that used by power plants. The approach on energy prices relative to the projections in the AEO2016 case that incorporates the CPP. some subgroups would be used for deriving FFC measures of Consequently, DOE used the energy price projections found in the AEO2016 No-CPP case as 64 United States Office of Management and 62 For more information on NEMS, refer to The these energy price projections are expected to be Budget. Circular A–4: Regulatory Analysis. National Energy Modeling System: An Overview lower, yielding more conservative estimates for September 17, 2003. Section E. Available at 2009, DOE/EIA-0581(October 2009). Available at consumer savings due to the energy efficiency www.whitehouse.gov/omb/memoranda/m03- http://www.eia.gov/forecasts/aeo/index.cfm. standards. 21.html.

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disproportionately burdened. (Spire, weighted average cost of capital, and the extending over a 30-year period No. 73 at p. 24) impact to domestic manufacturing following the compliance date of the With respect to Raypak’s comment, employment. The model uses standard standard. These factors include annual DOE has addressed the appropriateness accounting principles to estimate the expected revenues, costs of sales, SG&A of the use of residential discount rates impacts of more-stringent energy and R&D expenses, taxes, and capital for the residential sector in the national conservation standards on a given expenditures. In general, energy level LCC analysis in this final rule, and industry by comparing changes in INPV conservation standards can affect notes that the same reasoning for use of and domestic manufacturing manufacturer cash flow in three distinct residential discount rates applies to the employment between a no-new- ways: (1) Creating a need for increased subgroup analysis as well. As such, DOE standards case and the various trial investment, (2) raising production costs is retaining the same residential sector standards cases (TSLs). To capture the per unit, and (3) altering revenue due to discount rate methodology used during uncertainty relating to manufacturer higher per-unit prices and changes in the March 2016 NOPR in this final rule. pricing strategies following amended sales volumes. With respect to the comment from standards, the GRIM estimates a range of In addition, during Phase 2, DOE Spire, DOE undertook this analysis to possible impacts under different developed interview guides to distribute evaluate the impacts to subgroups that markup scenarios. to manufacturers of commercial may be disproportionately affected by a The qualitative part of the MIA packaged boilers in order to develop new or amended national standard, and addresses manufacturer characteristics other key GRIM inputs, including sought comments from stakeholders and market trends. Specifically, the MIA product and capital conversion costs, throughout this rulemaking to help considers such factors as a potential and to gather additional information on identify potential subgroups. DOE has standard’s impact on manufacturing the anticipated effects of energy concluded that the identified subgroups capacity, competition within the conservation standards on revenues, will not be significantly impacted by the industry, the cumulative impact of direct employment, capital assets, new standards. equipment-specific Federal regulations, industry competitiveness, and subgroup The consumer subgroup analysis is and impacts on manufacturer impacts. discussed in detail in chapter 11 of the subgroups. The complete MIA is In Phase 3, DOE evaluated subgroups final rule TSD. outlined in chapter 12 of the final rule of manufacturers that may be TSD. disproportionately impacted by energy J. Manufacturer Impact Analysis DOE conducted the MIA for this conservation standards or that may not 1. Overview rulemaking in three phases. In Phase 1 be represented accurately by the average of the MIA, DOE prepared a profile of cost assumptions used to develop the DOE performed an MIA to estimate the CPB manufacturing industry based industry cash-flow analysis. For the financial impacts of amended energy on the market and technology example, small manufacturers, niche conservation standards on assessment, preliminary manufacturer players, or manufacturers exhibiting a manufacturers of CPB equipment and to interviews, and publicly available cost structure that largely differs from estimate the potential impacts of such information. This included a top-down the industry average could be more standards on employment and analysis of CPB manufacturers that DOE negatively affected. DOE identified one manufacturing capacity. The MIA has used to derive preliminary financial subgroup for a separate impact analysis: both quantitative and qualitative aspects inputs for the GRIM (e.g., revenues; Small business manufacturers. The and includes analyses of projected materials, labor, overhead, and Small business subgroup is discussed in industry cash flows, the INPV, depreciation expenses; selling, general, section VI.B, ‘‘Review under the investments in research and and administrative expenses (SG&A); Regulatory Flexibility Act,’’ and in development (R&D) and manufacturing and R&D expenses). DOE also used chapter 12 of the final rule TSD. capital, and domestic manufacturing public sources of information to further 2. Government Regulatory Impact Model employment. Additionally, the MIA calibrate its initial characterization of seeks to determine how amended energy the CPB manufacturing industry, DOE uses the GRIM to analyze the conservation standards might affect including company filings of form 10– financial impacts of amended energy manufacturing employment, capacity, K from the SEC,65 corporate annual conservation standards on the CPB and competition, as well as how reports, and the U.S. Census Bureau’s industry. Standards will potentially standards contribute to overall ‘‘Economic Census’’,66 and Hoover’s require additional investments, raise regulatory burden. Finally, the MIA reports 67 to conduct this analysis. production costs, and affect revenue serves to identify any disproportionate In Phase 2 of the MIA, DOE prepared through higher prices and, possibly, impacts on manufacturer subgroups, an industry cash-flow analysis to lower sales. The GRIM is designed to including small business manufacturers. quantify the potential impacts of take into account several factors as it The quantitative part of the MIA amended energy conservation calculates a series of annual cash flows primarily relies on the Government standards. The GRIM uses several for the year standards take effect and for Regulatory Impact Model (GRIM), an factors to determine a series of annual several years after implementation. industry cash flow model with inputs cash flows starting with the These factors include annual expected specific to this rulemaking. The key announcement of the standard and revenues, costs of sales, increases in GRIM inputs include data on the labor and assembly expenditures, industry cost structure, unit production 65 U.S. Securities and Exchange Commission, selling and general administration costs, costs, equipment shipments, Annual 10–K Reports (Various Years) (Available at: and taxes, as well as capital http://www.sec.gov/edgar/searchedgar/ manufacturer markups, and investments companysearch.html). expenditures, depreciation and in R&D and manufacturing capital 66 U.S. Census Bureau, Annual Survey of maintenance related to new standards. required to produce compliant Manufacturers: General Statistics: Statistics for Inputs to the GRIM include equipment. The key GRIM outputs are Industry Group and Industries (2014) (Available at manufacturing costs, shipments http://factfinder2.census.gov/faces/nav/jsf/pages/ the INPV, which is the sum of industry searchresults.xhtml?refresh=t). forecasts, and price forecasts developed annual cash flows over the analysis 67 Hoovers Inc. Company Profiles, Various in other analyses. DOE also uses period, discounted using the industry- Companies (Available at: http://www.hoovers.com). industry financial parameters as inputs

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for the GRIM analysis, which it technology assessment, and pricing data needed to comply with each considered develops by collecting and analyzing received from manufacturers, efficiency level in each equipment class. publicly available industry financial distributors, and contractors. Using For the MIA, DOE classified these information. The GRIM spreadsheet these inputs, DOE used the conversion costs into two major groups: uses the inputs to arrive at a series of methodology described in section IV.C.1 (1) Capital conversion costs; and (2) annual cash flows, beginning in 2016 of this final rule, to calculate product conversion costs. Capital (the reference year of the manufacturer manufacturer selling prices of conversion costs are one-time impact analysis) and continuing to 2049 commercial packaged boilers for a given investments in property, plant, and (the end of the analysis period). DOE rated input (representative capacity) for equipment necessary to adapt or change calculated INPVs by summing the each equipment class at different existing production facilities such that stream of annual discounted cash flows efficiency levels spanning from the new compliant product designs can be during this period. For CPB minimum allowable standard (i.e., fabricated and assembled. Product manufacturers, DOE used a real baseline) to the maximum conversion costs are one-time discount rate of 9.5 percent, which was technologically feasible efficiency level. investments in research, development, derived from industry financials and DOE then used equipment markups testing, marketing, and other non- then modified according to feedback along with the equipment pricing to capitalized costs necessary to make received during manufacturer determine MPCs for each efficiency product designs comply with amended interviews. DOE also used the GRIM to level. These cost breakdowns and energy conservation standards. model changes in costs, shipments, equipment markups were validated and To evaluate the level of capital investments, and manufacturer margins revised with input from manufacturers conversion expenditures, manufacturers that could result from amended energy during manufacturer interviews. would likely incur to comply with amended energy conservation conservation standards. Shipments Projections After calculating industry cash flows standards, DOE used manufacturer and INPV, DOE compared changes in The GRIM estimates manufacturer interviews to gather data on the INPV between the no-new-standards revenues based on total unit shipment anticipated level of capital investment case and each standard level. The projections and the distribution of these that would be required at each difference in INPV between the no-new- values by efficiency level. Changes in efficiency level. Based on equipment standards case and a standards case sales volumes and efficiency mix over listings, provided by the engineering represents the financial impact of the time can significantly affect analysis, DOE developed industry amended energy conservation standard manufacturer finances. For this analysis, average capital expenditure by on manufacturers at a particular TSL. As the GRIM uses the NIA’s annual weighting manufacturer feedback based discussed previously, DOE collected shipment projections derived from the on model offerings as a proxy for market shipments analysis from 2016 to 2049. this information on GRIM inputs from a share. DOE supplemented manufacturer The shipments model divides the number of sources, including publicly comments and tailored its analyses with shipments of commercial packaged available data and confidential information obtained during boilers into specific market segments. interviews with a number of engineering analysis described in The model starts from a historical manufacturers. GRIM inputs are chapter 5 of the final rule TSD. reference year and calculates DOE assessed the product conversion discussed in more detail in the next retirements and shipments by market costs at each considered efficiency level section. The GRIM results are discussed segment for each year of the analysis by integrating data from quantitative in section V.B.2. Additional details period. This approach produces an and qualitative sources. DOE received about the GRIM, discount rate, and estimate of the total equipment stock, feedback regarding the potential costs of other financial parameters can be found broken down by age or vintage, in each each efficiency level from multiple in chapter 12 of the final rule TSD. year of the analysis period. In addition, manufacturers to estimate product a. Government Regulatory Impact Model the equipment stock efficiency conversion costs (e.g., research & Key Inputs distribution is calculated for the no- development (R&D) expenditures, new-standards case and for each certification costs). DOE combined this Manufacturer Production Costs standards case for each equipment class. information with product listings to Manufacturing higher-efficiency The NIA shipments forecasts are, in estimate how much manufacturers equipment is typically more expensive part, based on a roll-up scenario. The would have to spend on product than manufacturing baseline equipment forecast assumes that equipment in the development and product testing at due to the use of more complex no-new-standards case that does not each efficiency level. Manufacturer data components, which are typically more meet the standard under consideration was aggregated to better reflect the costly than baseline components. The would ‘‘roll up’’ to meet the amended industry as a whole and to protect changes in the manufacturer production standard beginning in the compliance confidential information. cost (MPC) of the analyzed equipment year of 2020. In this scenario, the market In general, DOE assumes that all can affect the revenues, gross margins, share of equipment above the standard conversion-related investments occur and cash flow of the industry, making would remain unchanged. See section between the year of publication of the the equipment cost data key GRIM VI.G of this document and chapter 9 of final rule and the year by which inputs for DOE’s analysis. the final rule TSD for additional details. manufacturers must comply with the In the MIA, DOE used the MSPs for amended standards. The conversion each considered efficiency level that Product and Capital Conversion Costs cost figures used in the GRIM can be were calculated in the engineering Amended energy conservation found in section V.B.2 of this document. analysis, (section IV.C.5 of this final standards would cause manufacturers to DOE received limited information on rule) and further detailed in chapter 5 incur one-time conversion costs to bring the conversion costs for oil-fired of the final rule TSD. To determine the their production facilities and equipment in interviews. Using manufacturer selling price-efficiency equipment designs into compliance. equipment listing counts, DOE scaled relationship, DOE used the equipment DOE evaluated the level of conversion- the feedback on gas-fired equipment to database from the market and related expenditures that would be estimate the conversion cost for oil-fired

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equipment. For additional information conservation standard. Thus, this near condensing levels would force the on the estimated product and capital manufacturer markup scenario obsolescence of certain types of conversion costs, see chapter 12 of the represents the upper bound of the CPB commercial packaged boilers. One final rule TSD. industry’s profitability in the standards manufacturer commented that if a case. condensing level is adopted by DOE, it b. Government Regulatory Impact Model DOE includes the preservation of per- is possible that natural draft boilers and Scenarios unit operating profit scenario in its steam boilers will become obsolete in Manufacturer Markup Scenarios analysis to reflect manufacturer concern the CPB industry. (Spire, No. 73, at pp. As discussed in the previous section, that would not be able to maintain 23–24) Spire stated that purchasers MSPs include direct manufacturing current markups in the standards case, would be limited to mechanical draft production costs (i.e., labor, materials, given the highly competitive nature of boilers using condensing combustion and overhead estimated in DOE’s MPCs) the CPB market. In this scenario, technology, which are significantly and all non-production costs (i.e., manufacturer markups are set so that more costly to purchase, maintain and operating profit one year after the SG&A, R&D, and interest), along with install. BHI commented that in the small compliance date of amended energy profit. To calculate the MSPs in the gas hot water equipment class in conservation standards is the same as in GRIM, DOE applied manufacturer particular, it is possible that a stringent the no-new-standards case on a per-unit markups to the MPCs estimated in the standard will result in large scale basis. In other words, manufacturers are engineering analysis for each equipment obsolescence of existing cast iron boilers not able to garner additional operating class and efficiency level. Modifying since there are many technical profit from the higher production costs these markups in the standards case constraints for marginal gains in and the investments that are required to efficiency, such as venting restrictions. yields different sets of impacts on comply with the amended standards; (BHI, No. 71 at p. 20) To limit manufacturers. For the MIA, DOE however, they are able to maintain the significantly negative industry impacts modeled two standards-case same per-unit operating profit in the on manufacturers and equipment manufacturer markup scenarios to standards case that was earned in the offerings, Lochinvar recommended that represent the uncertainty regarding the no-new-standards case. Therefore, DOE does not set a standard that potential impacts on prices and operating margin in percentage terms is requires condensing technology. profitability for manufacturers following reduced between the no-new-standards (Lochinvar, No. 31 at p. 6) the implementation of amended energy case and standards case. DOE adjusted Additionally, during the preliminary conservation standards: (1) A the manufacturer markups in the GRIM stage, Lochinvar stated that a majority of preservation of gross margin percentage at each TSL to yield approximately the heat exchangers for condensing markup scenario; and (2) a preservation same earnings before interest and taxes technology are imported. Lochinvar of per-unit operating profit markup in the standards case as in the no-new- believes overhead and equipment used scenario. These scenarios lead to standards case. The preservation of per- to produce non-condensing heat different manufacturer markup values unit operating profit markup scenario exchangers may become obsolete if that, when applied to the inputted represents the lower bound of industry condensing technology is effectively MPCs, result in varying revenue and profitability in the standards case. In mandated. (Lochinvar, Public Meeting cash-flow impacts. this scenario, similar to the preservation Transcript, No. 39 at p. 205) Under the preservation of gross of gross margin percentage markup DOE understands that a stringent margin percentage markup scenario, scenario, manufacturers are not able to standard, specifically condensing DOE applied a single uniform ‘‘gross fully pass through to consumers the technology, may negatively impact margin percentage’’ manufacturer additional costs necessitated by CPB INPV and limit industry equipment markup across all efficiency levels, standards. offerings. The adopted standards do not which assumes that following amended mandate condensing technology for any standards, manufacturers would be able 3. Discussion of Comments equipment class. This final rule adopts to maintain the same amount of profit During the notice of proposed a standard lower than the proposed as a percentage of revenue at all rulemaking public meetings, and in levels in the NOPR for small gas hot efficiency levels within an equipment written comments in the response to the water, in part to mitigate the potential class. As production costs increase with March 2016 NOPR, interested parties for negative impacts on manufacturers efficiency, this scenario implies that the commented on the assumptions and and end-users. absolute dollar markup will increase as results of the manufacturer impact b. Impacts on Direct Employment well. Based on publicly available analysis. Oral and written comments financial information for manufacturers addressed several topics, including AHRI and ABMA asserted concerns of commercial packaged boilers, as well concerns regarding the elimination of about DOE’s direct employment as comments from manufacturer natural draft equipment, impacts on estimates being too low. Two interviews, DOE assumed the average employment, conversion costs, stakeholders, representing industry manufacturer markup—which includes cumulative regulatory burden, impacts trade associations, representing industry SG&A expenses, R&D expenses, interest, on small businesses, equipment trade associations, stated that the and profit—to be 1.41 for small gas-fired distribution, and the lessening of amended rule will decrease hot water, small gas-fired steam boilers, competition. Comments regarding the employment, contrary to DOE’s large gas-fired hot water boilers, and impacts on small businesses are analysis. (AHRI, Public Meeting large oil-fired hot water boilers; 1.40 for discussed in section V.B.2, all other Transcript, No. 61 at p. 220) (ABMA, small oil-fired hot water boilers; 1.38 for MIA-related comments are discussed Public Meeting Transcript, No. 61 at p. small oil-fired steam boilers; and 1.37 below. 222) In written comments, AHRI for large gas-fired and oil-fired steam submitted estimates for HVAC boilers. During manufacturer interviews, a. Elimination of Natural Draft manufacturing employment but did not manufacturers noted that they would Equipment present employment impacts specific to not expect to maintain their current Several stakeholders expressed the covered equipment, commercial margins under a stringent energy concern that setting a standard at or packaged boilers. (AHRI, No. 78 at p. 12)

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At the NOPR stage, DOE estimated premium equipment, add-ons, or suppliers or distributors. DOE’s production employment to be 464 components that do not contribute to production worker analysis focuses on production workers in the no-new- heating function. Additional detail on direct employment, as defined in standards case for the CPB industry in the direct employment analysis can be section V.B.2.b of this document and 2019. For the final rule, DOE updated its found in chapter 12 of the final rule chapter 12 of the final rule TSD. analysis based on 2014 U.S. Census TSD. c. Conversion Costs data, the updated engineering analysis, Furthermore, AHRI stated, ‘‘DOE and the updated shipments analysis. notes that ‘if a CPB manufacturer chose AHRI notes that while it supports the DOE’s revised final rule analysis to keep their current production in the use of alternative efficiency forecasts that the industry will employ U.S., domestic employment could determination methods (AEDMs) for 594 production and 360 non-production increase at each TSL.’ 81 FR 15899. certification, the creation, validation, workers in the no-new-standards case in Given the current issues with and maintenance of AEDMs is an 2020. The final rule analysis presents an outsourcing, including that DOE in past additional burden and cost to updated set of direct employment rules has concluded manufacturers may manufacturers. They believe the impacts that range from a potential net move production abroad in response to additional burden and cost should be loss of 484 jobs to a potential net gain increased production costs, this is a included in DOE’s analysis. (AHRI, No. of 7 at the amended level. Therefore, huge assumption for which DOE 76 at p. 8) DOE’s analysis agrees with statements provides no basis in fact.’’ (AHRI, No. At this time, DOE does not include from the industry that there is a risk of 78 at p. 7) AEDMs as an additional cumulative decreasing the number of manufacturing DOE presents a range of results for burden or cost to manufacturers in its jobs related to the covered equipment. direct employment. At the upper bound, analysis. For certain consumer products In terms of estimating manufacturing DOE presents direct employment based and commercial equipment, DOE’s jobs, DOE’s direct employment analysis on current production locations, existing testing regulations include is based on three primary inputs: CPB estimated sales figures from the allowing the use of an AEDM, in lieu of shipments in the standards year from shipments analysis, labor expenditures action testing, to simulate the energy the shipments analysis, labor content of from the GRIM, and production labor consumption or efficiency of certain the covered equipment from the wage rates from the U.S. Census Annual basic models of covered equipment engineering analysis, and an average Survey of Manufacturers. Currently, the under DOE’s test procedure conditions. production worker wage level based on vast majority of CPB equipment sold The use of AEDMs is optional and, for U.S. Census Bureau’s 2014 Annual into the domestic market is compliance certification purposes, Survey of Manufacturers (ASM) 68 data manufactured in the United States and reduces the need for sample units and for NAICS Code 333414.69 In the final Canada. While some components are the overall testing burden for rule analysis, DOE estimates there are imported, the CPB industry has not seen manufacturers of expensive or highly 32,416 unit shipments in 2020 at the the dramatic shift to overseas custom basic models. amended standard level. The manufacturing associated with many ≤ engineering analysis shows that labor consumer appliances. At the adopted d. Cumulative Regulatory Burden content can range from 6 percent to 20 level, the production worker skills and With regard to the rulemakings DOE percent of the MPC, depending on the the capital equipment necessary to identified under cumulative regulatory equipment class and model. Combining produce minimally compliant burden, AHRI states that five of the nine unit shipments and labor content, DOE equipment does not vary significantly identified rulemakings do not have estimates industry production labor from the no-new-standards case. At the known expected conversion costs. expenditures of $21.2 million. Based on lower bound, DOE presents a loss of (AHRI, No. 76 at p. 8) Furthermore 2014 ASM data, DOE estimates average employment where job losses scale with Weil-McLain commented that DOE’s production workers wages of $21.06 an the portion of equipment that does not simultaneous and cumulative hour, with an average of 1,880 meet the standard. Additional rulemaking creates a significant burden production hours worked in a year. information and full calculations are for consumers and the industry. (Weil- Combining these inputs, DOE estimates presented in section V.B.2 of this McLain, No. 67 at p. 4) 954 domestic workers supporting the document. In response, DOE has performed an manufacture and assembly of covered Additionally, BHI stated in a written analysis of cumulative regulatory equipment in the CPB industry in 2020 comment that the standard will shift the burden (CRB) in section V.B.2.e of this in the no-new-standards case. market away from cast iron commercial document. Cumulative burden is a This estimated number of domestic boilers, which will ultimately reduce factor DOE considers in its weighting of production workers only accounts for the production volume at Casting costs and benefits. The five rules the labor required to manufacture the Solutions, a cast iron foundry and identified by AHRI do not yet have a most basic equipment that meets the subsidiary of BHI. The amended published NOPR. Any estimation of applicable standard—it does not take standard would result in job losses, burdens before a standard level is into account additional features that including eliminating 80 union proposed would be speculative. manufacturers use to differentiate manufacturing jobs and 20 managerial Consumer burden is discussed in jobs at Casting Solutions. (BHI, No. 71 section IV.H.3. 68 U.S. Census Bureau, Annual Survey of at p. 20) Manufacturers: General Statistics: Statistics for In response, DOE’s direct employment K. Emissions Analysis Industry Groups and Industries (2014) (Available at: analysis presents a range of potential The emissions analysis consists of http://factfinder2.census.gov/faces/nav/jsf/pages/ searchresults.xhtml?refresh=t). impacts and includes the potential for two components. The first component 69 At the March 2016 NOPR stage, DOE used job loss. The lower bound shows a loss estimates the effect of potential energy NAICS code 333415. For the final rule, DOE of 484 jobs, including both production conservation standards on power sector determined that NAICS Code, 333414 ‘‘Heating and non-production workers, at TSL 2 and site (where applicable) combustion Equipment (except Warm Air Furnaces) Manufacturing Industry,’’ is more appropriate and for manufacturers of the covered emissions of CO2, NOX, SO2, and Hg. relied on U.S. Census data from this code for its equipment. However, these job impacts The second component estimates the analyses. do not include employment from impacts of potential standards on

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emissions of two additional greenhouse standards. Site emissions of the above January 1, 2015.77 AEO2016 incorporates gases, CH4 and N2O, as well as the gases were estimated using emissions implementation of CSAPR. reductions to emissions of all species intensity factors from an EPA The attainment of emissions caps is due to ‘‘upstream’’ activities in the fuel publication.72 typically flexible among EGUs and is production chain. These upstream The AEO incorporates the projected enforced through the use of emissions activities comprise extraction, impacts of existing air quality allowances and tradable permits. Under processing, and transporting fuels to the regulations on emissions. AEO2016 existing EPA regulations, any excess site of combustion. The associated generally represents current legislation SO2 emissions allowances resulting emissions are referred to as upstream and environmental regulations, from the lower electricity demand emissions. including recent government actions, for caused by the adoption of an efficiency The analysis of power sector which implementing regulations were standard could be used to permit emissions uses marginal emissions available as of October 31, 2015. DOE’s offsetting increases in SO2 emissions by factors that were derived from data in estimation of impacts accounts for the any regulated EGU. In past years, DOE AEO2016, as described in section IV.M presence of the emissions control recognized that there was uncertainty of this document. The methodology is programs discussed in the following about the effects of efficiency standards described in chapter 13 and chapter 15 paragraphs. on SO2 emissions covered by the of the final rule TSD. SO2 emissions from affected electric existing cap-and-trade system, but it Combustion emissions of CH4 and generating units (EGUs) are subject to concluded that negligible reductions in N2O are estimated using emissions nationwide and regional emissions cap- power sector SO2 emissions would intensity factors published by the EPA, and-trade programs. Title IV of the occur as a result of standards. GHG Emissions Factors Hub.70 The FFC Clean Air Act sets an annual emissions Beginning in 2016, however, SO2 upstream emissions are estimated based cap on SO2 for affected EGUs in the 48 emissions will fall as a result of the on the methodology described in contiguous states and the District of Mercury and Air Toxics Standards appendix 10D of the final rule TSD. The Columbia (D.C.). (42 U.S.C. 7651 et seq.) (MATS) for power plants. 77 FR 9304 upstream emissions include both SO2 emissions from 28 eastern states (Feb. 16, 2012). In the MATS final rule, emissions from fuel combustion during and D.C. were also limited under the EPA established a standard for hydrogen extraction, processing, and Clean Air Interstate Rule (CAIR). 70 FR chloride as a surrogate for acid gas transportation of fuel, and ‘‘fugitive’’ 25162 (May 12, 2005). CAIR created an hazardous air pollutants (HAP), and also emissions (direct leakage to the allowance-based trading program that established a standard for SO2 (a non- operates along with the Title IV atmosphere) of CH4 and CO2. HAP acid gas) as an alternative The emissions intensity factors are program. In 2008, CAIR was remanded equivalent surrogate standard for acid expressed in terms of physical units per to EPA by the U.S. Court of Appeals for gas HAP. The same controls are used to MWh or MBtu of site energy savings. the D.C. Circuit, but it remained in reduce HAP and non-HAP acid gas; effect.73 In 2011, EPA issued a Total emissions reductions are thus, SO2 emissions will be reduced as estimated using the energy savings replacement for CAIR, the Cross-State a result of the control technologies calculated in the national impact Air Pollution Rule (CSAPR). 76 FR installed on coal-fired power plants to analysis. 48208 (Aug. 8, 2011). On August 21, comply with the MATS requirements 2012, the D.C. Circuit issued a decision For CH4 and N2O, DOE calculated for acid gas. AEO2016 assumes that, in 74 emissions reduction in tons and also in to vacate CSAPR, and the court order to continue operating, coal plants terms of units of carbon dioxide ordered EPA to continue administering must have either flue gas CAIR. On April 29, 2014, the U.S. equivalent (CO2eq). Gases are converted desulfurization or dry sorbent injection Supreme Court reversed the judgment of to CO2eq by multiplying each ton of gas systems installed by 2016. Both by the global warming potential (GWP) the D.C. Circuit and remanded the case technologies, which are used to reduce for further proceedings consistent with of the gas over a 100-year time horizon. acid gas emissions, also reduce SO2 75 Based on the Fifth Assessment Report of the Supreme Court’s opinion. On emissions. Under the MATS, emissions October 23, 2014, the D.C. Circuit lifted the Intergovernmental Panel on Climate 76 will be far below the cap established by Change,71 DOE used GWP values of 28 the stay of CSAPR. Pursuant to this CSAPR, so it is unlikely that excess SO action, CSAPR went into effect (and 2 for CH4 and 265 for N2O. emissions allowances resulting from the Because the on-site operation of CAIR ceased to be in effect) as of lower electricity demand would be commercial packaged boilers requires needed or used to permit offsetting 72 U.S. Environmental Protection Agency, combustion of fossil fuels and results in External Combustion Sources, In Compilation of Air increases in SO2 emissions by any emissions of CO2, NOX, and SO2 at the Pollutant Emission Factors, AP–42, Fifth Edition, regulated EGU.78 Therefore, DOE sites where these appliances are used, Volume I: Stationary Point and Area Sources, DOE also accounted for the reduction in Chapter 1. Available at www3.epa.gov/ttn/chief/ 77 On July 28, 2015, the D.C. Circuit issued its these site emissions and the associated ap42/index.html. opinion regarding the remaining issues raised with 73 See North Carolina v. EPA, 550 F.3d 1176 (D.C. respect to CSAPR that were remanded by the upstream emissions due to potential Cir. 2008); North Carolina v. EPA, 531 F.3d 896 Supreme Court. The D.C. Circuit largely upheld (D.C. Cir. 2008). CSAPR but remanded to EPA without vacatur 70 Available at www2.epa.gov/climateleadership/ 74 See EME Homer City Generation, LP v. EPA, certain States’ emission budgets for reconsideration. center-corporate-climate-leadership-ghg-emission- 696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 EME Homer City Generation, LP v. EPA, 795 F.3d factors-hub. U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 118 (D.C. Cir. 2015). 71 Intergovernmental Panel on Climate Change. (U.S. June 24, 2013) (No. 12–1182). 78 DOE notes that on June 29, 2015, the U.S. Anthropogenic and Natural Radiative Forcing. 75 See EPA v. EME Homer City Generation, 134 Supreme Court ruled that the EPA erred when the Chapter 8 in Climate Change 2013: The Physical S.Ct. 1584, 1610 (U.S. 2014). The Supreme Court agency concluded that cost did not need to be Science Basis. Contribution of Working Group I to held in part that EPA’s methodology for quantifying considered in the finding that regulation of the Fifth Assessment Report of the emissions that must be eliminated in certain States hazardous air pollutants from coal- and oil-fired Intergovernmental Panel on Climate Change. due to their impacts in other downwind States was electric utility steam generating units (EGUs) is Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. based on a permissible, workable, and equitable appropriate and necessary under section 112 of the Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex, and interpretation of the Clean Air Act provision that Clean Air Act (CAA). Michigan v. EPA, 135 S. Ct. P.M. Midgley, Editors. 2013. Cambridge University provides statutory authority for CSAPR. 2699 (2015). The Supreme Court did not vacate the Press: Cambridge, United Kingdom and New York, 76 See Georgia v. EPA, Order (D.C. Cir. filed MATS rule, and DOE has tentatively determined NY, USA. October 23, 2014) (No. 11–1302). Continued

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concludes that energy conservation Spire questioned DOE’s benefit until all of the equipment shipped in standards that decrease electricity analyses period and argues that DOE the 30-year analysis period is retired generation will generally reduce SO2 calculates benefits over an unreasonably from service. Regarding the statement emissions in 2016 and beyond. long period of time. Spire asserts that that there would be no material advance CSAPR established a cap on NOX DOE’s approach assumes that the over the next 30 years, DOE’s no-new- emissions in 28 eastern states and the proposed standard—once adopted— standards case assumptions shows a District of Columbia. Energy would remain unaltered once it is continued improvement in efficiency conservation standards are expected to adopted, and believes that this over the analysis period. In addition, if have little effect on NOX emissions in assumption is not credible, and further DOE is triggered to review, and if it those states covered by CSAPR because states that DOE assumes that there will ultimately amends standards, the excess NOX emissions allowances be no material advance in efficiency benefits calculated are based only on the resulting from the lower electricity over the next 30 years, and that DOE additional improvements in efficiency demand could be used to permit will not be triggered to review the since the previous standards were offsetting increases in NOX emissions standard in the future due to a 6-year established. Hence, DOE does not over- from other facilities. However, review or an ASHRAE 90.1 update estimate the benefits as implied by Spire standards would be expected to reduce trigger over the next 30 years. Further, in this regard. DOE understands the NOX emissions in the states not affected Spire questions DOE’s ability to make difficulty in projecting energy prices or by the caps, so DOE estimated NOX predictions regarding items such as markets and relies on the best available emissions reductions from the standards energy prices or equipment sales 30 information, as well as the input of considered in this document for these years from now, and thus it believes the stakeholders, during the rulemaking states. analysis cannot be described as clear process. As noted in this response to The MATS limit mercury emissions and convincing evidence of the benefits Spire’s comments, DOE already does from power plants, but they do not of the proposed standards. Spire states consider the projected life of the include emissions caps and, as such, that DOE should focus not just on the standard within its 30-year analysis DOE’s energy conservation standards projected life of the equipment, but on period, and any further increases in would likely reduce Hg emissions. DOE the projected life of the standard it future rulemakings are dealt with and estimated mercury emissions reduction proposes. (Spire, No. 73 at pp. 19–21) accounted for correctly in those using emissions factors based on AHRI commented that DOE violates rulemakings, in essence using the AEO2016, which incorporates the EPCA requirements for the benefits of a efficiency standards established in this MATS. proposed standard to exceed its burden rule as the baseline levels for any new The AEO2016 Reference case (and by giving emissions savings no-new-standards case analysis for some other cases) assumes disproportionate weight over other those rulemakings. With regard to implementation of the Clean Power Plan factors, noting that there is nothing in AHRI’s comments, emissions impacts (CPP), which is the EPA program to the statute that indicates that Congress from purchased equipment continue regulate CO emissions at existing fossil- 2 indicated that this be anything other until the emissions produced by the fired electric power plants.79 DOE used than an equal weighting of factors, and boilers shipped during the analysis the AEO2016 No-CPP case as a basis for that the global indirect emissions and period are essentially eliminated from developing emissions factors for the SCC reductions extend well beyond the the atmosphere. CO2 that is emitted electric power sector to be consistent life of the equipment and the relevant during the lifetime of the equipment has with its use of the No-CPP case in the period for measuring benefits relative to a long residence time in the atmosphere, NIA.80 costs, thus implying disproportionate and, thus, contributes to radiative forcing, which affects global climate, for that the Court’s decision on the MATS rule does not weighting for these benefits. (AHRI, No. 76 at pp. 11–12) AHRI specifically a long time. In the case of both change the assumptions regarding the impact of manufacturer economic costs and energy conservation standards on SO2 emissions. points out that the benefits from SCC Further, the Court’s decision does not change the extend through 2300, and that benefits benefits and the value of CO2 emissions impact of the energy conservation standards on to consumers accrue after 2050 for reductions, DOE is accounting for the mercury emissions. The EPA, in response to the lifetime impacts of equipment shipped equipment purchased in 2019–2048, U.S. Supreme Court’s direction, has now in the same analysis period. considered cost in evaluating whether it is and that incremental variable and fixed appropriate and necessary to regulate coal- and oil- costs incurred by manufacturers are L. Monetizing Carbon Dioxide and Other fired EGUs under the CAA. EPA concluded in its final supplemental finding that a consideration of included in earlier years in preparation Emissions Impacts cost does not alter the EPA’s previous for the rule. AHRI states that DOE As part of the development of this determination that regulation of hazardous air provides no justification for the final rule, DOE considered the estimated pollutants, including mercury, from coal- and oil- exclusion of many costs that monetary benefits from the reduced fired EGUs, is appropriate and necessary. 79 FR manufacturers might incur after 2050, in 24420 (April 25, 2016). The MATS rule remains in emissions of CO2 and NOX that are effect, but litigation is pending in the D.C. Circuit harmony with the time period DOE uses expected to result from each of the TSLs Court of Appeals over EPA’s final supplemental to measure benefits. (AHRI, No. 76 at p. considered. In order to make this finding MATS rule. 11) calculation analogous to the calculation 79 U.S. Environmental Protection Agency, In response, DOE considers the ‘‘Carbon Pollution Emission Guidelines for Existing of the NPV of consumer benefit, DOE Stationary Sources: Electric Utility Generating impacts over the life of the commercial considered the reduced emissions Units’’ (Washington, DC: October 23, 2015). https:// packaged boiler equipment units expected to result over the lifetime of www.federalregister.gov/articles/2015/10/23/2015- shipped in the 30-year analysis period. equipment shipped in the projection 22842/carbon-pollution-emission-guidelines-for- With respect to energy cost savings, existing-stationary-sources-electric-utility- period for each TSL. This section generating. impacts continue to be accumulated summarizes the basis for the values 80 As DOE has not modeled the effect of CPP used for each of these emissions and during the 30 year analysis period of this monetized benefits, if implemented the CPP would presents the values considered in this rulemaking, there is some uncertainty as to the result in an overall decrease in CO2 emissions from magnitude and overall effect of the energy electric generating units (EGUs), and would thus document. efficiency standards. With respect to estimated CO2 likely reduce some of the estimated CO2 reductions For this final rule, DOE relied on a set and NOX emissions reductions and their associated associated with this rulemaking. of values for the social cost of carbon

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(SCC) that was developed by a Federal emissions, the analyst faces a number of benefits from reducing CO2 emissions. interagency process. The basis for these challenges. A report from the National To ensure consistency in how benefits values is summarized in the next Research Council 81 points out that any are evaluated across agencies, the section, and a more detailed description assessment will suffer from uncertainty, Administration sought to develop a of the methodologies used is provided speculation, and lack of information transparent and defensible method, as an appendix to chapter 14 of the final about (1) future emissions of greenhouse specifically designed for the rulemaking rule TSD. gases, (2) the effects of past and future process, to quantify avoided climate change damages from reduced CO 1. Social Cost of Carbon emissions on the climate system, (3) the 2 impact of changes in climate on the emissions. The interagency group did The SCC is an estimate of the physical and biological environment, not undertake any original analysis. monetized damages associated with an and (4) the translation of these Instead, it combined SCC estimates from incremental increase in carbon environmental impacts into economic the existing literature to use as interim emissions in a given year. It is intended damages. As a result, any effort to values until a more comprehensive to include (but is not limited to) quantify and monetize the harms analysis could be conducted. The climate-change-related changes in net associated with climate change will outcome of the preliminary assessment agricultural productivity, human health, raise questions of science, economics, by the interagency group was a set of property damages from increased flood and ethics and should be viewed as five interim values: Global SCC risk, and the value of ecosystem provisional. estimates for 2007 (in 2006$) of $55, services. Estimates of the SCC are Despite the limits of both $33, $19, $10, and $5 per metric ton of provided in dollars per metric ton of quantification and monetization, SCC CO2. These interim values represented CO2. A domestic SCC value is meant to estimates can be useful in estimating the the first sustained interagency effort reflect the value of damages in the social benefits of reducing CO2 within the U.S. government to develop United States resulting from a unit emissions. Although any numerical an SCC for use in regulatory analysis. change in CO2 emissions, while a global estimate of the benefits of reducing CO2 The results of this preliminary effort SCC value is meant to reflect the value emissions is subject to some were presented in several proposed and of damages worldwide. uncertainty, that does not relieve DOE final rules. Under section 1(b)(6) of Executive of its obligation to attempt to factor Order 12866, ‘‘Regulatory Planning and c. Current Approaches and Key those benefits into its cost-benefit Review,’’ 58 FR 51735 (Oct. 4, 1993), Assumptions analysis. Moreover, the interagency agencies must, to the extent permitted After the release of the interim values, working group (IWG) SCC estimates are by law, assess both the costs and the the interagency group reconvened on a well supported by the existing scientific benefits of the intended regulation and, regular basis to generate improved SCC and economic literature. As a result, recognizing that some costs and benefits estimates. Specifically, the group DOE has relied on the IWG SCC are difficult to quantify, propose or considered public comments and estimates in quantifying the social adopt a regulation only upon a reasoned further explored the technical literature benefits of reducing CO emissions. determination that the benefits of the 2 in relevant fields. The interagency group DOE estimates the benefits from intended regulation justify its costs. The relied on three integrated assessment reduced (or costs from increased) purpose of the SCC estimates presented models commonly used to estimate the emissions in any future year by here is to allow agencies to incorporate SCC—the FUND, DICE, and PAGE multiplying the change in emissions in the monetized social benefits of models.82 These models are frequently that year by the SCC values appropriate reducing CO emissions into cost- cited in the peer-reviewed literature and 2 for that year. The NPV of the benefits benefit analyses of regulatory actions. were used in the last assessment of the can then be calculated by multiplying The estimates are presented with an Intergovernmental Panel on Climate each of these future benefits by an acknowledgement of the many Change (IPCC). Each model was given appropriate discount factor and uncertainties involved and with a clear equal weight in the SCC values that summing across all affected years. understanding that they should be were developed. It is important to emphasize that the updated over time to reflect increasing Each model takes a slightly different current SCC values reflect the IWG’s knowledge of the science and approach to model how changes in best assessment, based on current data, economics of climate impacts. emissions result in changes in economic As part of the interagency process that of the societal effect of CO2 emissions. damages. A key objective of the developed the SCC estimates, technical The IWG is committed to updating these interagency process was to enable a experts from numerous agencies met on estimates as the science and economic consistent exploration of the three a regular basis to consider public understanding of climate change and its models while respecting the different comments, explore the technical impacts on society improves over time. approaches to quantifying damages literature in relevant fields, and discuss In the meantime, the interagency group taken by the key modelers in the field. key model inputs and assumptions. The will continue to explore the issues An extensive review of the literature main objective of this process was to raised by this analysis and consider develop a range of SCC values using a public comments as part of the ongoing 82 The DICE (Dynamic Integrated Climate and interagency process. Economy) model by William Nordhaus evolved defensible set of input assumptions from a series of energy models and was first grounded in the existing scientific and b. Development of Social Cost of Carbon presented in 1990 (Nordhaus and Boyer 2000, economic literatures. In this way, key Values Nordhaus 2008). The PAGE (Policy Analysis of the uncertainties and model differences Greenhouse Effect) model was developed by Chris In 2009, an interagency process was Hope in 1991 for use by European decision-makers transparently and consistently inform initiated to offer a preliminary in assessing the marginal impact of carbon the range of SCC estimates used in the assessment of how best to quantify the emissions (Hope 2006, Hope 2008). The FUND rulemaking process. (Climate Framework for Uncertainty, Negotiation, and Distribution) model, developed by Richard Tol a. Monetizing Carbon Dioxide Emissions 81 National Research Council. 2009. Hidden Costs in the early 1990s, originally to study international of Energy: Unpriced Consequences of Energy capital transfers in climate policy is now widely When attempting to assess the Production and Use. National Academies Press: used to study climate impacts (e.g., Tol 2002a, Tol incremental economic impacts of CO2 Washington, DC. 2002b, Anthoff et al. 2009, Tol 2009).

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was conducted to select three sets of model developers’ best estimates and tails of the SCC distribution. The values input parameters for these models— judgments. grow in real terms over time. climate sensitivity, socio-economic and In 2010, the interagency group Additionally, the interagency group emissions trajectories, and discount selected four sets of SCC values for use determined that a range of values from rates. A probability distribution for in regulatory analyses. Three sets of 7 percent to 23 percent should be used climate sensitivity was specified as an values are based on the average SCC to adjust the global SCC to calculate input into all three models. In addition, from the three integrated assessment domestic effects, 83 although preference the interagency group used a range of models, at discount rates of 2.5, 3, and is given to consideration of the global 5 percent. The fourth set, which scenarios for the socio-economic benefits of reducing CO emissions. represents the 95th-percentile SCC 2 parameters and a range of values for the Table IV.11 presents the values in the estimate across all three models at a 3- discount rate. All other model features 2010 interagency group report, 84 which percent discount rate, was included to were left unchanged, relying on the represent higher than expected impacts is reproduced in appendix 14A of the from climate change further out in the final rule TSD.

TABLE IV.11—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050

[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 impact analysis, the interagency group its reasoning so that stakeholders can (which was revised in July 2015) that emphasizes the importance of including understand the basis and provide contained SCC values that were all four sets of SCC values. comment. (AHRI, No. 76 at p. 8) Regarding the use of discount rates in generated using the most recent versions For the purposes of the development of the three integrated assessment the development of SCC, AHRI of the National NPV, DOE uses the models that have been published in the commented that DOE should use guidance provided by OMB Circular No. peer-reviewed literature.85 DOE used discount rates in the analysis these values for this final rule. consistently, noting that DOE groups A–94; however, in response to the Table IV.12 shows the updated sets of results from its analysis of different concern raised regarding the use of SCC estimates from the latest factors using different discount rates different discount rates in different interagency update in 5-year increments into one overall result that does not portions of the analysis, DOE notes that from 2010 through 2050. The full set of portray an accurate representation of it used the specific discount rates as annual SCC estimates from 2010 true cost to manufacturers and to recommended by the interagency group through 2050 is reported in appendix consumers. Further, AHRI asserts that that developed the SCC values for the 14B of the final rule TSD. The central DOE is deviating from the guidance of monetization of emissions. A full value that emerges is the average SCC OMB Circular No. A–94 to utilize a 7- discussion of these discount rates is across models at a 3-percent discount percent discount rate, but goes on to say provided in Appendix 14A of the final rate. However, for purposes of capturing that if a different discount rate is rule TSD. the uncertainties involved in regulatory appropriate, DOE should clearly present

83 It is recognized that this calculation for Cost of Carbon for Regulatory Impact Analysis Support Document: Technical Update of the Social domestic values is approximate, provisional, and Under Executive Order 12866. February 2010. Cost of Carbon for Regulatory Impact Analysis highly speculative. There is no a priori reason why https://www.whitehouse.gov/sites/default/files/ Under Executive Order 12866. May 2013. Revised domestic benefits should be a constant fraction of omb/inforeg/for-agencies/Social-Cost-of-Carbon-for- July 2015. https://www.whitehouse.gov/sites/ net global damages over time. RIA.pdf. default/files/omb/inforeg/scc-tsd-final-july- 84 United States Government–Interagency 85 United States Government–Interagency 2015.pdf. Working Group on Social Cost of Carbon. Social Working Group on Social Cost of Carbon. Technical

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TABLE IV.12—ANNUAL SCC VALUES FROM 2013 INTERAGENCY UPDATE (REVISED JULY 2015), 2010–2050

[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 2015$). DOE derived values after 2050 national average low values for 2020 (in number of key uncertainties remain, and based on the trend in 2010 through 2050 2015$) are $3,187/ton at 3-percent that current SCC estimates should be in each of the four cases in the discount rate and $2,869/ton at 7- treated as provisional and revisable interagency update. percent discount rate. DOE developed since they will evolve with improved DOE multiplied the CO2 emissions values specific to the end-use category scientific and economic understanding. reduction estimated for each year by the for commercial packaged boilers using a The interagency group also recognizes SCC value for that year in each of the method described in appendix 14C of that the existing models are imperfect four cases. To calculate a present value the final rule TSD. For this analysis and incomplete. The National Research of the stream of monetary values, DOE DOE used linear interpolation to define Council report mentioned previously discounted the values in each of the values for the years between 2020 and points out that there is tension between four cases using the specific discount 2025 and between 2025 and 2030; for the goal of producing quantified rate that had been used to obtain the years beyond 2030 the value is held estimates of the economic damages from SCC values in each case. constant. DOE estimated the monetized value of an incremental ton of carbon and the 2. Social Cost of Other Air Pollutants limits of existing efforts to model these NOX emissions reductions from gas effects. There are a number of analytic As noted previously, DOE has commercial packaged boilers using challenges that are being addressed by estimated how the considered energy benefit per ton estimates from the EPA’s the research community, including conservation standards would reduce ‘‘Technical Support Document research programs housed in many of site NOX emissions nationwide and Estimating the Benefit per Ton of the Federal agencies participating in the decrease power sector NOX emissions in Reducing PM2.5 Precursors from 17 interagency process to estimate the SCC. those 22 states not affected by the CAIR. Sectors.’’ 89 Although none of the The interagency group intends to DOE estimated the monetized value of sectors refers specifically to residential periodically review and reconsider NOX emissions reductions from and commercial buildings, DOE those estimates to reflect increasing electricity generation using benefit per determined that the sector called ‘‘Area knowledge of the science and ton estimates from the Regulatory sources’’ is a reasonable proxy for economics of climate impacts, as well as Impact Analysis for the Clean Power residential and commercial buildings. improvements in modeling.86 Plan Final Rule, published in August ‘‘Area sources’’ represents all emission In summary, in considering the 2015 by EPA’s Office of Air Quality sources for which states do not have potential global benefits resulting from Planning and Standards.87 The report exact (point) locations in their reduced CO2 emissions, DOE used the includes high and low values for NOX emissions inventories. Since exact values from the 2013 interagency report (as PM2.5) for 2020, 2025, and 2030 locations would tend to be associated (revised July 2015), adjusted to 2015$ using discount rates of 3 percent and 7 with larger sources, ‘‘area sources’’ using the implicit price deflator for percent; these values are presented in would be fairly representative of small gross domestic product (GDP) from the appendix 14C of the final rule TSD. dispersed sources like homes and Bureau of Economic Analysis. For each DOE primarily relied on the low businesses. The EPA Technical Support of the four SCC cases specified, the estimates to be conservative.88 The Document provides high and low values used for emissions in 2015 were estimates for 2016, 2020, 2025, and 2030 $12.4, $40.6, $63.2, and $118 per metric 87 Available at www.epa.gov/cleanpowerplan/ at 3- and 7-percent discount rates. As clean-power-plan-final-rule-regulatory-impact- with the benefit per ton estimates for ton avoided (values expressed in analysis. See Tables 4A–3, 4A–4, and 4A–5 in the report. The U.S. Supreme Court has stayed the rule NOX emissions reductions from 86 In November 2013, OMB announced a new implementing the Clean Power Plan until the opportunity for public comment on the interagency current litigation against it concludes. Chamber of lower of the two EPA central tendencies. Using the technical support document underlying the revised Commerce, et al. v. EPA, et al., Order in Pending lower value is more conservative when making the SCC estimates. 78 FR 70586. In July 2015 OMB Case, 577 U.S. ll(2016). However, the benefit-per- policy decision concerning whether a particular published a detailed summary and formal response ton estimates established in the Regulatory Impact standard level is economically justified. If the to the many comments that were received: this is Analysis for the Clean Power Plan are based on benefit-per-ton estimates were based on the Six available at https://www.whitehouse.gov/blog/2015/ scientific studies that remain valid irrespective of Cities study (Lepuele et al. 2012), the values would 07/02/estimating-benefits-carbon-dioxide- the legal status of the Clean Power Plan. be nearly two-and-a-half times larger. (See chapter 88 emissions-reductions. It also stated its intention to For the monetized NOX benefits associated 14 of the final rule TSD for citations for the studies seek independent expert advice on opportunities to with PM2.5, the related benefits are primarily based mentioned above.) improve the estimates, including many of the on an estimate of premature mortality derived from 89 www.epa.gov/sites/production/files/2014-10/ approaches suggested by commenters. the ACS study (Krewski et al. 2009), which is the documents/sourceapportionmentbpttsd.pdf.

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electricity generation, DOE primarily model differences are discussed in the highly unusual in at least two respects. relied on the low estimates to be interagency working group’s reports, First, it involves a global externality: conservative. which are reproduced in appendices emissions of most greenhouse gases DOE multiplied the emissions 14A and 14B of the final rule TSD, as contribute to damages around the world reduction (in tons) in each year by the are the major assumptions. Specifically, even when they are emitted in the associated $/ton values, and then uncertainties in the assumptions United States. Consequently, to address discounted each series using discount regarding climate sensitivity, as well as the global nature of the problem, the rates of 3 percent and 7 percent as other model inputs such as economic SCC must incorporate the full (global) appropriate. growth and emissions trajectories, are damages caused by GHG emissions. DOE received various comments discussed and the reasons for the Second, climate change presents a regarding its use of SCC in this specific input assumptions chosen are problem that the United States alone rulemaking. explained. However, the three IAMs cannot solve. Even if the United States AHRI disputed DOE’s assumption that used to estimate the SCC are frequently were to reduce its greenhouse gas SCC values will increase over time, cited in the peer-reviewed literature and emissions to zero, that step would be far because AHRI reasons that the more were used in the last assessment of the from enough to avoid substantial economic development that occurs, the IPCC. In addition, new versions of the climate change. Other countries would more adaptation and mitigation efforts models that were used in 2013 to also need to take action to reduce that will be undertaken. (AHRI, No. 76 estimate revised SCC values were emissions if significant changes in the at p. 11) In response, the SCC increases published in the peer-reviewed global climate are to be avoided. over time because future emissions are literature (see appendix 14B of the final Emphasizing the need for a global expected to produce larger incremental rule TSD for discussion). Although solution to a global problem, the United damages as physical and economic uncertainties remain, the revised States has been actively involved in systems become more stressed in estimates that were issued in November seeking international agreements to response to greater climatic change (see 2013 are based on the best available reduce emissions and in encouraging appendix 14A of the final rule TSD). scientific information on the impacts of other nations, including emerging major The approach used by the Interagency climate change. The current estimates of economies, to take significant steps to Working Group allowed estimation of the SCC have been developed over reduce emissions. When these the growth rate of the SCC directly using many years, using the best science considerations are taken as a whole, the the three integrated assessment models available, and with input from the interagency group concluded that a (IAMs), which help to ensure that the public. In November 2013, OMB global measure of the benefits from estimates are internally consistent with announced a new opportunity for public reducing U.S. emissions is preferable. other modeling assumptions. comment on the interagency technical Therefore, DOE’s approach is not in Adaptation and mitigation efforts, while support document underlying the contradiction of the requirement to necessary and important, are not revised SCC estimates. 78 FR 70586 weigh the need for national energy without cost, particularly if their (Nov. 26, 2013). In July 2015, OMB conservation, as one of the main reasons implementation is delayed. published a detailed summary and for national energy conservation is to AHRI, IECA, Spire, and the Cato formal response to the many comments contribute to efforts to mitigate the Institute (Cato) criticized DOE’s use of that were received. OMB also stated its effects of global climate change. SCC estimates that DOE has intention to seek independent expert IECA commented that the economic acknowledged are subject to advice on opportunities to improve the models used to determine the SCC did considerable uncertainty. (AHRI, No. 76 estimates, including many of the not consider industrial GHG and at p. 9; IECA, No. 63 at p. 3; Spire, No. approaches suggested by commenters. economic leakage. Furthermore, IECA 73 at p. 21; Cato, No. 62 at pp. 1–27) DOE stands ready to work with OMB commented that the higher SCC cost Cato stated that until the IAMs are made and the other members of the drives manufacturing companies consistent with mainstream climate Interagency Working Group on further offshore and increases imports of more science, the SCC should be barred from review and revision of the SCC carbon-intensive manufactured goods, use in this and all other Federal estimates as appropriate. thereby increasing global GHG rulemakings. Cato criticized several AHRI, IECA, The Associations, and emissions and that the SCC does not aspects of the determination of the SCC Cato criticized DOE’s use of global consider this. (IECA, No. 63 at p. 2) values by the Interagency Working rather than domestic SCC values, The SCC, as developed in the Group as being discordant with the best pointing out that EPCA references referenced three models, represents climate science and not reflective of weighing of the need for national energy damage assessment and expresses this climate change impacts. (Cato, No. 62 at conservation. Cato recommended in terms of dollars per ton of emissions. pp. 1–2, 4–22) AHRI, IECA, and The reporting the results of the domestic DOE agrees that the industrial GHG and Associations also criticized the SCC calculation in the main body of the economic leakage discussed by the determination of the SCC values. (AHRI, proposed regulation. (AHRI, No. 76 at commenters is not desirable, but No.76 at p. 12; IECA, No. 63 at pp. 4– pp. 10–12; IECA, No. 63 at pp. 1–3; The disagrees that it should be part of the 5; The Associations, No. 65 at p. 4) Associations, No. 65 at p. 4; Cato, No. SCC calculations. Rather, it reflects the In conducting the interagency process 62 at pp. 2–3) impact of potential offshore production that developed the SCC values, In response, DOE’s analysis estimates of manufactured goods. The technical experts from numerous both global and domestic benefits of commenter’s concern appears to be that agencies met on a regular basis to CO2 emissions reductions. The domestic the use of the SCC in a regulatory consider public comments, explore the benefits are reported in chapter 14 of the context may increase economic leakage technical literature in relevant fields, final rule TSD. Following the and result in additional carbon and discuss key model inputs and recommendation of the Interagency emissions not captured in the analysis. assumptions. Key uncertainties and Working Group, DOE places more focus DOE understands that this is a model differences transparently and on a global measure of SCC. As possibility, but does not have a tool to consistently inform the range of SCC discussed in appendix 14A of the final confidently assess the amount of estimates. These uncertainties and rule TSD, the climate change problem is production that may move overseas,

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where that production may move, and financial impacts on utilities’ costs and these differences, including wage the associated carbon intensity of that revenues at a national level. Thus, DOE differences and the fact that the utility production. As such, DOE only was not able to perform any further sector is more capital-intensive and less recognizes the potential for some evaluation of the gas utility impacts for labor-intensive than other sectors. reduction in carbon savings from what the commercial packaged boiler Energy conservation standards have the it has assessed in this rule. standards rulemaking beyond what is effect of reducing consumer utility bills. DOE is evaluating appropriate described in this section. Because reduced consumer monetization of reduction in other See chapter 15 of the final rule TSD expenditures for energy likely lead to emissions in energy conservation for further details regarding the utility increased expenditures in other sectors standards rulemakings. DOE has not impact analysis. of the economy, the general effect of included monetization of those efficiency standards is to shift economic N. Employment Impact Analysis emissions in the current analysis. activity from a less labor-intensive M. Utility Impact Analysis DOE considers employment impacts sector (e.g., the utility sector) to more in the domestic economy as one factor labor-intensive sectors (e.g., the retail The utility impact analysis estimates in selecting a standard. Employment and service sectors). Thus, the BLS data several effects on the electric power impacts from new or amended energy suggest that net national employment generation industry that would result conservation standards include both may increase due to shifts in economic from the adoption of new or amended direct and indirect impacts. Direct activity resulting from energy energy conservation standards. The employment impacts are any changes in conservation standards. utility impact analysis estimates the the number of employees of DOE estimated indirect national changes in installed electrical capacity manufacturers of the equipment subject employment impacts for the standard and generation that would result for to standards, their suppliers, and related levels considered in this final rule using each TSL. The analysis is based on service firms; the MIA addresses those an input/output model of the U.S. published output from the NEMS impacts. Indirect employment impacts economy called Impact of Sector Energy associated with AEO2016. NEMS are changes in national employment Technologies, version 3.1.1 (ImSET).92 produces the AEO Reference case, as that occur due to the shift in ImSET is a special-purpose version of well as a number of side cases that expenditures and capital investment the ‘‘U.S. Benchmark National Input- estimate the economy-wide impacts of caused by the purchase and operation of Output’’ (I–O) model, which was changes to energy supply and demand. more efficient equipment. Indirect designed to estimate the national For the current analysis, impacts are employment impacts from standards employment and income effects of quantified by comparing the levels of consist of the jobs created or eliminated energy-saving technologies. The ImSET electricity sector generation, installed in the national economy, other than in software includes a computer-based I–O capacity, fuel consumption and the manufacturing sector being model having structural coefficients that emissions consistent with the regulated, caused by (1) reduced characterize economic flows among the projections described on page E–8 of spending by consumers on energy, (2) 187 sectors most relevant to industrial, AEO2016 and various side cases. Details reduced spending on new energy supply commercial, and residential building of the methodology are provided in the by the utility industry, (3) increased energy use. appendices to chapters 13 and 15 of the consumer spending on the purchase of DOE notes that ImSET is not a general final rule TSD. equilibrium forecasting model and The output of this analysis is a set of new equipment to which the new understands the uncertainties involved time-dependent coefficients that capture standards apply and other goods and in projecting employment impacts, the change in electricity generation, services, and (4) the effects of those especially changes in the later years of primary fuel consumption, installed three factors throughout the economy. the analysis. Because ImSET does not capacity, and power sector emissions One method for assessing the possible incorporate price changes, the due to a unit reduction in demand for effects on the demand for labor of such employment effects predicted by ImSET a given end use. These coefficients are shifts in economic activity is to compare may over-estimate actual job impacts multiplied by the stream of electricity sector employment statistics developed over the long run. Therefore, DOE used savings calculated in the NIA to provide by the Labor Department’s Bureau of 90 ImSET only to generate results for near- estimates of selected utility impacts of Labor Statistics (BLS). BLS regularly term timeframes (i.e., through 2025), potential new or amended energy publishes its estimates of the number of jobs per million dollars of economic where these uncertainties are reduced. conservation standards. For more details on the employment DOE received comments on its utility activity in different sectors of the impact analysis, see chapter 16 of the impact analysis. The Gas Associations economy, as well as the jobs created final rule TSD. commented that DOE only assessed the elsewhere in the economy by this same impacts on the electric power industry economic activity. Data from BLS V. Analytical Results and Conclusions indicate that expenditures in the utility in its utility impact analysis, and that The following section addresses the sector generally create fewer jobs (both Process Rule requires it to ‘‘[estimate] results from DOE’s analyses with directly and indirectly) than marginal impacts on electric and gas respect to the considered energy expenditures in other sectors of the utility costs and revenues.’’ (Gas conservation standards for commercial economy.91 There are many reasons for Associations, No. 69 at p. 3) packaged boilers. It addresses the TSLs Historically, DOE’s approach to the examined by DOE, the projected utility impact analysis, based on NEMS, 90 Data on industry employment, hours, labor compensation, value of production, and the implicit has been to evaluate the impact of price deflator for output for these industries are Office: Washington, DC. Available at www.bea.gov/ standards only on utility energy sales. available upon request by calling the Division of scb/pdf/regional/perinc/meth/rims2.pdf. NEMS is not suited to characterizing Industry Productivity Studies (202–691–5618) or by 92 J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET impacts of standards on gas utilities sending a request by email to [email protected]. 3.1: Impact of Sector Energy Technologies, PNNL– 91 See U.S. Department of Commerce—Bureau of 18412, Pacific Northwest National Laboratory other than those measured by sales, and Economic Analysis. Regional Multipliers: A User (2009) (Available at: www.pnl.gov/main/ DOE is unaware of any analytical tools Handbook for the Regional Input-Output Modeling publications/external/technical_reports/PNNL- that would enable an analysis of System (RIMS II). 1997. U.S. Government Printing 18412.pdf).

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impacts of each of these levels if analyzed by DOE. DOE presents the • TSL 4 is composed of the efficiency adopted as energy conservation results for the TSLs in this document, levels corresponding to the maximum standards for CPB equipment, and the while the results for all efficiency levels NPV at a 7-percent discount rate for standard levels that DOE is adopting in that DOE analyzed are in the final rule each equipment class. this final rule. Additional details TSD. • TSL 3 is composed of a mixture of regarding DOE’s analyses are contained Table V.1 and Table V.2 present the condensing and non-condensing in the final rule TSD supporting this TSLs analyzed and the corresponding document. efficiency levels that DOE identified for efficiency levels. potential amended energy conservation • TSL 2 and TSL 1 are each A. Trial Standard Levels standards for each equipment class. The composed of a mixture of non- DOE analyzed the benefits and efficiency levels in each TSL can be condensing efficiency levels only. burdens of five TSLs for CPB characterized as follows: A more detailed description of TSLs equipment. These TSLs were developed • TSL 5 corresponds to the max-tech may be found in appendix 10C of the by combining specific efficiency levels efficiency level for each equipment for each of the equipment classes class. final rule TSD.

TABLE V.1—TRIAL STANDARD LEVELS FOR COMMERCIAL PACKAGED BOILERS BY EFFICIENCY LEVEL

Trial standard level Equipment class 1 2 3 4 5 EL EL EL EL EL

Small Gas-Fired Hot Water Commercial Packaged Boilers ...... 3 3 6 6 7 Large Gas-Fired Hot Water Commercial Packaged Boilers ...... 2 3 3 5 5 Small Oil-Fired Hot Water Commercial Packaged Boilers ...... 4 4 4 6 6 Large Oil-Fired Hot Water Commercial Packaged Boilers ...... 1 2 2 3 4 Small Gas-Fired Steam Commercial Packaged Boilers ...... 3 4 4 5 5 Large Gas-Fired Steam Commercial Packaged Boilers ...... 4 5 5 6 6 Small Oil-Fired Steam Commercial Packaged Boilers ...... 1 2 2 3 3 Large Oil-Fired Steam Commercial Packaged Boilers ...... 1 2 2 3 3

TABLE V.2—TRIAL STANDARD LEVELS FOR COMMERCIAL PACKAGED BOILERS BY THERMAL EFFICIENCY AND COMBUSTION EFFICIENCY

Trial standard level *

Equipment class 1 2 3 4 5

ET EC ET EC ET EC ET EC ET EC (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

Small Gas-Fired Hot Water Commercial Pack- aged Boilers...... 84 n/a 84 n/a 95 n/a 95 n/a 99 n/a Large Gas-Fired Hot Water Commercial Pack- aged Boilers...... n/a 84 n/a 85 n/a 85 n/a 97 n/a 97 Small Oil-Fired Hot Water Commercial Pack- aged Boilers...... 87 n/a 87 n/a 87 n/a 97 n/a 97 n/a Large Oil-Fired Hot Water Commercial Pack- aged Boilers...... n/a 86 n/a 88 n/a 88 n/a 89 n/a 97 Small Gas-Fired Steam Commercial Pack- aged Boilers...... 80 n/a 81 n/a 81 n/a 83 n/a 83 n/a Large Gas-Fired Steam Commercial Pack- aged Boilers...... 81 n/a 82 n/a 82 n/a 84 n/a 84 n/a Small Oil-Fired Steam Commercial Packaged Boilers ...... 83 n/a 84 n/a 84 n/a 86 n/a 86 n/a Large Oil-Fired Steam Commercial Packaged Boilers ...... 83 n/a 85 n/a 85 n/a 87 n/a 87 n/a

*ET stands for thermal efficiency, and EC stands for combustion efficiency.

B. Economic Justification and Energy potential standards on selected (i.e., equipment price plus installation Savings consumer subgroups. These analyses are costs), and operating costs (i.e., annual discussed below. energy use, energy prices, energy price 1. Economic Impacts on Individual trends, repair costs, and maintenance Consumers a. Life-Cycle Cost and Payback Period costs). The LCC calculation also uses DOE analyzed the economic impacts In general, higher-efficiency equipment lifetime and a discount rate. on CPB consumers by looking at the equipment will affect consumers in two Chapter 8 of the final rule TSD and effects potential amended standards at ways: (1) Purchase price increases, and section IV.F of this document provide each TSL will have on the LCC and PBP. (2) annual operating costs decrease. LCC detailed information on the LCC and DOE also examined the impacts of and PBP include total installed costs PBP analysis.

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Table V.3 through Table V.18 show new-standards case in the compliance LCC at each TSL. The savings refer only the LCC and PBP results for the TSLs year (see section IV.H.1 of this to consumers who are affected by a considered for each equipment class. In document). Because some consumers standard at a given TSL. Those who the first of each pair of tables, the purchase equipment with higher already purchase equipment with simple payback is measured relative to efficiency in the no-new-standards case, efficiency at or above a given TSL are the baseline equipment. In the second the average savings are less than the not affected. Consumers for whom the table, the impacts are measured relative difference between the average LCC of LCC increases at a given TSL experience to the efficiency distribution in the no- EL 0 (efficiency level 0) and the average a net cost.

TABLE V.3—AVERAGE LCC AND SIMPLE PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL GAS-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average costs (2015$) Simple Thermal payback Average TSL efficiency First year’s Lifetime period lifetime (ET) level Installed cost operating operating LCC (years) (years) cost cost

0 ...... 0 $25,050 $10,621 $167,232 $192,282 ...... 24.8 1 25,915 10,512 165,525 191,440 7.9 24.8 2 26,857 10,406 163,862 190,718 8.4 24.8 1, 2 ...... 3 29,302 10,201 160,665 189,967 10.1 24.8 4 31,505 10,103 159,125 190,630 12.5 24.8 5 41,440 9,802 155,196 196,636 20.0 24.8 3, 4 ...... 6 42,337 9,626 152,449 194,786 17.4 24.8 5 ...... 7 45,399 9,297 147,356 192,755 15.4 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured rel- ative to the baseline equipment.

TABLE V.4—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE FOR SMALL GAS-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 $65 3 2 164 5 1, 2 ...... 3 212 14 4 ¥208 20 5 ¥2,267 28 3, 4 ...... 6 ¥993 35 5 ...... 7 945 52 * The savings represent the average LCC for affected consumers.

TABLE V.5—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR LARGE GAS-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average costs Simple Combustion (2015$) payback Average TSL efficiency period lifetime (EC) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $96,319 $61,654 $931,329 $1,027,648 ...... 24.8 1 100,141 60,911 920,158 1,020,299 5.1 24.8 1 ...... 2 104,306 60,188 909,281 1,013,587 5.4 24.8 2,3 ...... 3 111,547 59,483 898,689 1,010,236 7.0 24.8 4 167,178 56,437 856,643 1,023,821 13.6 24.8 4,5 ...... 5 175,096 54,643 829,842 1,004,938 11.2 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

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TABLE V.6—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR LARGE GAS-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Combustion Average % of TSL efficiency life-cycle consumers (EC) Level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 $588 3 1 ...... 2 1,307 4 2, 3 ...... 3 2,037 6 4 ¥1,537 16 4, 5 ...... 5 16,952 33 * The savings represent the average LCC for affected consumers.

TABLE V.7—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average costs Simple Thermal (2015$) payback Average TSL efficiency period lifetime (ET) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $27,204 $26,706 $514,805 $542,009 ...... 24.8 1 28,121 26,406 508,914 537,036 3.1 24.8 2 29,112 26,114 503,167 532,279 3.2 24.8 3 30,607 25,828 497,558 528,165 3.9 24.8 1, 2, 3 ...... 4 33,009 25,278 486,738 519,747 4.1 24.8 5 34,355 25,012 481,517 515,873 4.2 24.8 4, 5 ...... 6 51,713 23,819 459,234 510,947 8.5 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

TABLE V.8—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR SMALL OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 $1,745 3 2 4,445 6 3 7,264 10 1, 2, 3 ...... 4 14,421 14 5 18,127 17 4, 5 ...... 6 22,934 42 * The savings represent the average LCC for affected consumers.

TABLE V.9—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR LARGE OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average costs Combustion (2015$) Simple Average TSL efficiency payback period lifetime (EC) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $67,485 $92,682 $1,730,005 $1,797,490 ...... 24.8 1 ...... 1 75,964 90,644 1,691,719 1,767,683 4.2 24.8 2, 3 ...... 2 86,757 88,697 1,655,180 1,741,937 4.8 24.8 4 ...... 3 93,198 87,756 1,637,533 1,730,731 5.2 24.8 5 ...... 4 159,246 85,255 1,590,539 1,749,785 12.4 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

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TABLE V.10—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR LARGE OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Combustion Average % of TSL efficiency life-cycle consumers (EC) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 ...... 1 $10,193 1 2, 3 ...... 2 31,379 7 4 ...... 3 41,902 10 5 ...... 4 23,643 57 * The savings represent the average LCC for affected consumers.

TABLE V.11—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL GAS-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average costs Simple Thermal (2015$) payback Average TSL efficiency period lifetime (ET) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $22,734 $10,116 $159,682 $182,416 ...... 24.8 1 23,553 10,020 158,140 181,693 8.5 24.8 2 24,443 9,926 156,638 181,080 9.0 24.8 1 ...... 3 25,408 9,835 155,175 180,584 9.5 24.8 2, 3 ...... 4 26,457 9,746 153,751 180,208 10.1 24.8 4, 5 ...... 5 28,831 9,574 151,013 179,844 11.3 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

TABLE V.12—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR SMALL GAS-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 $241 17 2 465 19 1 ...... 3 720 27 2, 3 ...... 4 1,002 41 4, 5 ...... 5 1,341 54 * The savings represent the average LCC for affected consumers.

TABLE V.13—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR LARGE GAS-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average costs Simple Thermal (2015$) payback Average TSL efficiency period lifetime (ET) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $75,672 $51,229 $773,831 $849,504 ...... 24.8 1 77,684 50,623 764,684 842,368 3.3 24.8 2 79,813 50,032 755,775 835,588 3.5 24.8 3 82,066 49,456 747,095 829,162 3.6 24.8 1 ...... 4 84,452 48,895 738,636 823,088 3.8 24.8 2, 3 ...... 5 87,665 48,347 730,390 818,056 4.2 24.8 4, 5 ...... 6 93,166 47,292 714,506 807,672 4.4 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

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TABLE V.14—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR LARGE GAS-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 $498 1 2 2,066 4 3 4,239 6 1 ...... 4 7,959 11 2, 3 ...... 5 11,188 15 4, 5 ...... 6 20,291 21 * The savings represent the average LCC for affected consumers.

TABLE V.15—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average costs Simple Thermal (2015$) payback Average TSL efficiency period lifetime (ET) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $24,481 $27,361 $519,200 $543,680 ...... 24.8 1 ...... 1 26,747 26,760 507,521 534,268 3.8 24.8 2, 3 ...... 2 28,058 26,471 501,897 529,955 4.0 24.8 4, 5 ...... 3 31,580 25,913 491,053 522,633 4.9 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

TABLE V.16—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR SMALL OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 ...... 1 $2,409 2 2, 3 ...... 2 5,839 8 4, 5 ...... 3 12,779 14 * The savings represent the average LCC for affected consumers.

TABLE V.17—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR LARGE OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average costs Simple Thermal (2015$) payback Average TSL efficiency period lifetime (ET) level First year’s Lifetime (years) Installed cost operating cost operating cost LCC (years)

0 ...... 0 $70,522 $108,788 $1,990,314 $2,060,836 ...... 24.8 1 ...... 1 76,661 106,219 1,943,027 2,019,688 2.4 24.8 2, 3 ...... 2 83,859 103,773 1,898,016 1,981,874 2.7 24.8 4, 5 ...... 3 92,296 101,441 1,855,125 1,947,421 3.0 24.8 Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured rel- ative to the baseline (EL 0) equipment.

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TABLE V.18—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS-CASE EFFICIENCY DISTRIBUTION FOR LARGE OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Life-cycle cost savings

Thermal Average % of TSL efficiency life-cycle consumers (ET) level that cost savings * experience (2015$) a net cost

0 ...... 0 ...... 0 1 ...... 1 12,563 0 2, 3 ...... 2 36,832 1 4, 5 ...... 3 70,909 3 * The savings represent the average LCC for affected consumers.

b. Consumer Subgroup Analysis low-income residential and small and PBP for the low-income residential business consumers are generally subgroup compared with average CPB In the consumer subgroup analysis, similar to the impacts for all consumers consumers, as shown in Table V.19 DOE estimated the impacts of the with, for example, the residential low- through Table V.26. DOE also estimated considered TSLs on low-income (i.e., income subgroup showing somewhat LCC savings and PBP for small multi-family) residential and small higher than average benefits and the businesses, and presented the results in business consumers. Given the small business consumers showing Table V.19 through Table V.26. Chapter magnitude of the installation and slightly lower benefits when compared 11 of the final rule TSD presents the operating expenditures in question for to the overall CPB consumer population complete LCC and PBP results for the each equipment class, the LCC savings for the SGHW CPB equipment class. subgroups. and corresponding payback periods for DOE estimated the average LCC savings

TABLE V.19—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, SMALL GAS- FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Thermal (2015$) (years) TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 $108 $52 $65 5.9 8.2 7.9 2 272 133 164 6.2 8.6 8.4 1, 2 ...... 3 602 101 212 7.5 10.4 10.1 4 287 ¥354 ¥208 9.9 12.7 12.5 5 ¥771 ¥2,610 ¥2,267 15.9 20.5 20.0 3, 4 ...... 6 1,021 ¥1,526 ¥993 13.5 17.8 17.4 5 ...... 7 4,667 ¥86 945 11.7 15.8 15.4

TABLE V.20—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, LARGE GAS- FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Combustion (2015$) (years) TSL efficiency Commercial Commercial (EC) level Residential small Nation Residential small Nation low-income business low-income business

1 $334 $487 $588 6.9 5.1 5.1 1 ...... 2 724 1,077 1,307 7.3 5.4 5.4 2, 3 ...... 3 856 1,654 2,037 10.5 7.0 7.0 4 ¥4,219 ¥2,921 ¥1,537 22.5 13.5 13.6 4, 5 ...... 5 6,339 12,524 16,952 17.6 11.2 11.2

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TABLE V.21—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, SMALL OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period (2015$) (years) Thermal TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 $2,741 $1,236 $1,745 2.1 3.8 3.1 2 7,050 3,116 4,445 2.2 4.0 3.2 3 11,490 5,112 7,264 3.0 4.6 3.9 1, 2, 3 ...... 4 23,280 9,984 14,421 3.0 4.9 4.1 5 29,489 12,451 18,127 3.0 5.1 4.2 4,5 ...... 6 47,470 11,101 22,934 5.8 10.5 8.5

TABLE V.22—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, LARGE OIL-FIRED HOT WATER COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Combustion (2015$) (years) TSL efficiency Commercial Commercial (EC) level Residential small Nation Residential small Nation low-income business low-income business

1 ...... 1 $24,584 $7,705 $10,193 2.0 4.5 4.2 2, 3 ...... 2 79,156 23,115 31,379 2.3 5.3 4.8 4 ...... 3 108,008 30,418 41,902 2.5 5.7 5.2 5 ...... 4 141,883 3,718 23,643 5.9 13.4 12.4

TABLE V.23—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, SMALL GAS- FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Thermal (2015$) (years) TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 $428 $211 $241 6.0 8.7 8.5 2 855 403 465 6.3 9.2 9.0 1 ...... 3 1,387 608 720 6.7 9.7 9.5 2, 3 ...... 4 2,083 812 1,002 7.1 10.3 10.1 4, 5 ...... 5 3,461 963 1,341 7.9 11.5 11.3

TABLE V.24—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, LARGE GAS- FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period (2015$) (years) Thermal TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 $357 $444 $498 4.0 3.3 3.3 2 1,449 1,791 2,066 4.2 3.5 3.5 3 2,938 3,658 4,239 4.4 3.6 3.6 1 ...... 4 5,465 6,846 7,959 4.6 3.8 3.8 2, 3 ...... 5 6,683 9,504 11,188 5.6 4.2 4.2 4, 5 ...... 6 12,975 17,223 20,291 5.8 4.4 4.4

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TABLE V.25—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, SMALL OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Thermal (2015$) (years) TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 ...... 1 $3,848 $2,039 $2,409 2.5 4.0 3.8 2, 3...... 2 9,349 4,908 5,839 2.7 4.2 4.0 4, 5 ...... 3 20,877 10,572 12,779 3.3 5.1 4.9

TABLE V.26—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND THE NATION, LARGE OIL-FIRED STEAM COMMERCIAL PACKAGED BOILERS

Average LCC savings Simple payback period Thermal (2015$) (years) TSL efficiency Commercial Commercial (ET) level Residential small Nation Residential small Nation low-income business low-income business

1 ...... 1 $24,494 $10,960 $12,563 1.2 2.4 2.4 2, 3 ...... 2 72,382 31,813 36,832 1.4 2.7 2.7 4, 5 ...... 3 141,678 61,065 70,909 1.5 3.0 3.0

c. Rebuttable Presumption Payback packaged boilers. In contrast, the PBPs the full range of impacts to the As discussed in section III.E.2 of this presented in section V.B.1 were consumer, manufacturer, Nation, and document, EPCA establishes a calculated using distributions that environment. The results of that rebuttable presumption that an energy reflect the range of energy use in the analysis serve as the basis for DOE to conservation standard is economically field. definitively evaluate the economic justified if the increased purchase cost Table V.27 presents the rebuttable- justification for a potential standard for equipment that meets the standard is presumption PBPs for the considered level, thereby supporting or rebutting less than three times the value of the TSLs. While DOE examined the the results of any preliminary first-year energy savings resulting from rebuttable-presumption criterion, it determination of economic justification. the standard. In calculating a rebuttable considered whether the standard levels The results of that analysis serve as the presumption payback period for each of considered for this rule are basis for DOE to definitively evaluate the considered TSLs, DOE used discrete economically justified through a more the economic justification for a potential values, and, as required by EPCA, based detailed analysis of the economic standard level, thereby supporting or the energy use calculation on the DOE impacts of those levels, pursuant to 42 rebutting the results of any preliminary test procedures for commercial U.S.C. 6295(o)(2)(B)(i), that considers determination of economic justification.

TABLE V.27—REBUTTABLE PRESUMPTION PAYBACK PERIODS FOR COMMERCIAL PACKAGED BOILER EQUIPMENT CLASSES

Rebuttable presumption payback Equipment class (years) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Small Gas-Fired Hot Water Commercial Packaged Boilers 9.2 9.2 15.3 15.3 15.3 Large Gas-Fired Hot Water Commercial Packaged Boilers 4.9 5.9 5.9 10.0 10.0 Small Oil-Fired Hot Water Commercial Packaged Boilers .. 12.1 12.1 12.1 12.6 24.5 Large Oil-Fired Hot Water Commercial Packaged Boilers .. 12.0 13.6 13.6 14.6 34.3 Small Gas-Fired Steam Commercial Packaged Boilers ...... 8.5 9.0 9.0 10.1 10.1 Large Gas-Fired Steam Commercial Packaged Boilers ..... 3.4 3.9 3.9 4.1 4.1 Small Oil-Fired Steam Commercial Packaged Boilers ...... 10.5 11.2 11.2 13.9 13.9 Large Oil-Fired Steam Commercial Packaged Boilers ...... 6.5 7.2 7.2 8.0 8.0

2. Economic Impacts on Manufacturers TSD explains the analysis in further estimated financial impacts (represented detail. by changes in INPV) of potential DOE performed an MIA to estimate amended energy conservation standards a. Industry Cash-Flow Analysis Results the impact of amended energy on manufacturers of commercial conservation standards on In this section, DOE provides GRIM packaged boilers, as well as the manufacturers of commercial packaged results from the analysis, which conversion costs that DOE expects boilers. The next section describes the examines changes in the industry that manufacturers of commercial packaged expected impacts on manufacturers at would result from a standard. Table boilers will incur for all equipment each TSL. Chapter 12 of the final rule V.28 and Table V.29 depict the classes at each TSL. As discussed in

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section IV.J.2.b, DOE modeled two To assess the more severe end of the industry value between the no-new- different markup scenarios using range of potential impacts on industry standards case and each standards case different assumptions that correspond to profitability, DOE modeled the that result from the sum of discounted the range of anticipated market preservation of operating profit markup cash flows from the reference year responses to amended energy scenario, which assumes that (2016) through the end of the analysis conservation standards: (1) The manufacturers will not be able to period (2049). To provide perspective preservation of gross margin percentage generate greater operating profit on a on the short-run cash flow impact, DOE scenario and (2) the preservation of per- per-unit basis in the standards case as includes in the discussion of results a unit operating profit scenario. Each of compared to the no-new-standards case. comparison of free cash flow between these scenarios is discussed Rather, as manufacturers make the the no-new-standards case and the immediately below. necessary investments required to standards case at each TSL in the year convert their facilities to produce new To assess the less severe end of the before amended standards would take standards-compliant equipment and effect. This figure provides an range of potential impacts on industry incur higher costs of goods sold, their understanding of the magnitude of profitability, DOE modeled a percentage markup decreases. Operating required conversion costs relative to preservation of gross margin percentage profit does not change in absolute cash flows calculated by the industry in markup scenario, in which a uniform dollars and decreases as a percentage of the no-new-standards case. ‘‘gross margin percentage’’ markup is revenue. applied across all potential efficiency Each of the markup scenarios results The results in Table V.28 and Table levels. In this scenario, DOE assumed in a unique set of cash flows and V.29 show potential INPV impacts for that a manufacturer’s absolute dollar corresponding industry values at each CPB manufacturers; Table V.28 reflects markup will increase as production TSL. In the following discussion, the the upper bound of impacts and Table costs increase in the standards case. INPV results refer to the difference in V.29 represents the lower bound.

TABLE V.28—MANUFACTURER IMPACT ANALYSIS FOR COMMERCIAL PACKAGED BOILERS—PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP SCENARIO *

No-new- Trial standard level Units standards case 1 2 3 4 5

INPV ...... 2015$ M 277.6 272.4 267.3 252.1 235.3 235.3 Change in INPV ...... 2015$ M ...... (5.2) (10.3) (25.5) (42.3) (42.3) % ...... (1.9) (3.7) (9.2) (15.2) (15.2) Product Conversion Costs ...... 2015$ M ...... 8.2 13.4 17.7 19.4 19.8 Capital Conversion Costs ...... 2015$ M ...... 5.3 7.8 22.8 35.8 36.5 Total Conversion Costs 2015$ M ...... 13.5 21.2 40.5 55.2 56.4 Free Cash Flow (2019) 2015$ M 19.3 14.2 11.4 3.2 (3.2) (3.7) Change in Free Cash Flow ...... 2015$ M ...... (5.1) (8.0) (16.1) (22.5) (23.0) % ...... (26.3) (41.2) (83.4) (116.6) (119.0) * Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.

TABLE V.29—MANUFACTURER IMPACT ANALYSIS FOR COMMERCIAL PACKAGED BOILERS—PRESERVATION OF OPERATING PROFIT MARKUP SCENARIO *

No-new- Trial standard level Units standards case 1 2 3 4 5

INPV ...... 2015$ M 277.6 265.4 259.1 227.6 160.9 159.1 Change in INPV ...... 2015$ M ...... (12.2) (18.5) (50.0) (116.7) (118.5) % ...... (4.4) (6.7) (18.0) (42.0) (42.7) Product Conversion Costs ...... 2015$ M ...... 8.2 13.4 17.7 19.4 19.8 Capital Conversion Costs ...... 2015$ M ...... 5.3 7.8 22.8 35.8 36.5 Total Conversion Costs 2015$ M ...... 13.5 21.2 40.5 55.2 56.4 Free Cash Flow (2019) 2015$ M 19.3 14.2 11.4 3.2 (3.2) (3.7) Change in Free Cash Flow ...... 2015$ M ...... (5.1) (8.0) (16.1) (22.5) (23.0) % ...... (26.3) (41.2) (83.4) (116.6) (119.0) * Parentheses indicate negative values. All values have been rounded to the nearest tenth. M = millions.

TSL 1 represents EL 3 (84 percent) for fired hot water boilers, EL 1 (86 percent) fired steam boilers, EL 1 (83 percent) for small gas-fired hot water boilers, EL 2 for large oil-fired hot water boilers, EL small oil-fired steam boilers, and EL 1 (84 percent) for large gas-fired hot water 3 (80 percent) for small gas-fired steam (83 percent) for large oil-fired steam boilers, EL 4 (87 percent) for small oil- boilers, EL 4 (81 percent) for large gas- boilers. At TSL 1, DOE estimates

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impacts on INPV for CPB manufacturers million and capital conversion costs of the increase in MPC to consumers. to range from ¥4.4 percent to ¥1.9 $7.8 million at this standard level. At However, this price increase in percent, or a change in INPV of ¥$12.2 TSL 2, DOE also projects higher unit outweighed by the $40.5 million in million to ¥$5.2 million. At this prices will result in a slight decrease in conversion costs estimated at TSL 3, potential standard level, industry free total shipments in the compliance year resulting in slightly negative INPV cash flow will be estimated to decrease (2020). DOE estimates a change in impacts under this scenario. Under the by approximately 26.3 percent to $14.2 shipments of ¥0.03 percent relative to preservation of operating profit markup million, compared to the no-new- the no-new-standards case. scenario, the weighted average price per standards case value of $19.3 million in At TSL 2, under the preservation of unit increases by 18.0 percent. This 2019, the year before the compliance gross margin percentage markup price increase is offset by the expected date. Overall, DOE expects industry to scenario, the shipment-weighted conversion costs and slight decrease in incur product conversion costs of $8.2 average price per unit increases by 5.3 total shipments, resulting in more million and capital conversion costs of percent relative to the no-new-standards severe INPV impacts. $5.3 million to reach this standard level. case price per unit in the year of TSL 4 represents EL 7 (99 percent) for At TSL 1, DOE also projects higher unit compliance (2020). In this scenario, small gas-fired hot water boilers, EL 5 prices will result in a slight decrease in manufacturers are able to fully pass on (97 percent) for large gas-fired hot water total shipments in the compliance year the increase in MPC to consumers. boilers, EL 6 (97 percent) for small oil- (2020). DOE estimates a change in However, this price increase in fired hot water boilers, EL 3 (89 percent) shipments of ¥0.03 percent relative to outweighed by the $21.2 million in for large oil-fired hot water boilers, EL the no-new-standards case. conversion costs estimated at TSL 2, 5 (83 percent) for small gas-fired steam At TSL 1, under the preservation of resulting in slightly negative INPV boilers, EL 6 (84 percent) for large gas- gross margin percentage markup impacts under this scenario. Under the fired steam boilers, EL 3 (86 percent) for scenario, the shipment-weighted preservation of operating profit markup small oil-fired steam boilers, and EL 3 average price per unit increases by 4.6 scenario, the weighted average price per (87 percent) for large oil-fired steam percent relative to the no-new-standards unit increases by 4.9 percent. This price boilers. At TSL 4, DOE estimates case price per unit in the year of increase is offset by the expected impacts on INPV for CPB manufacturers compliance (2020). This slight price conversion costs and slight decrease in to range from ¥42.0 percent to ¥15.2 increase would mitigate a portion of the total shipments, resulting in more percent, or a change in INPV of ¥$116.7 $13.5 million in conversion costs severe INPV impacts. million to ¥$42.3 million. At this estimated at TSL 1, resulting in slightly TSL 3 represents EL 6 (95 percent) for potential standard level, industry free negative INPV impacts under this small gas-fired hot water boilers, EL 3 cash flow will be estimated to decrease scenario. Under the preservation of (85 percent) for large gas-fired hot water by approximately 116.6 percent in the operating profit markup scenario, boilers, EL 4 (87 percent) for small oil- year before compliance (2019) to ¥$3.2 products at higher efficiency levels fired hot water boilers, EL 2 (88 percent) million relative to the no-new-standards command a lower markup to maintain for large oil-fired hot water boilers, EL case value of $19.3 million. DOE the same operating profit per unit in the 4 (81 percent) for small gas-fired steam estimates that manufacturers will incur no-new-standards case. At TSL 1, this boilers, EL 5 (82 percent) for large gas- product conversion costs of $19.4 markup scenario results in a weighted fired steam boilers, EL 2 (84 percent) for million and capital conversion costs of average price increase of 4.2 percent. small oil-fired steam boilers, and EL 2 $35.8 million to reach this standard This relatively modest price increase in (85 percent) for large oil-fired steam level. At TSL 4, DOE also projects outweighed by the expected conversion boilers. At TSL 3, DOE estimates higher unit prices will result in a slight costs and slight decrease in total impacts on INPV for CPB manufacturers decrease in total shipments in the shipments, resulting in more severe to range from ¥18.0 percent to ¥9.2 compliance year (2020). DOE estimates INPV impacts. percent, or a change in INPV of ¥$50.0 a change in shipments of ¥0. 24 percent TSL 2 sets the efficiency level at EL million to ¥$25.5 million. At this relative to the no-new-standards case. 3 (84 percent) for small gas-fired hot potential standard level, industry free At TSL 4, under the preservation of water boilers, EL 3 (85 percent) for large cash flow will be estimated to decrease gross margin percentage markup gas-fired hot water boilers, EL 4 (87 by approximately 83.4 percent in 2019, scenario, the shipment-weighted percent) for small oil-fired hot water the year before compliance to $3.2 average price per unit increases by 39.3 boilers, EL 2 (88 percent) for large oil- million compared to the no-new- percent relative to the no-new-standards fired hot water, EL 4 (81 percent) for standards case value of $19.3 million. case price per unit in the year of small gas-fired steam boilers, EL 5 (82 DOE estimates manufactures will incur compliance (2020). In this scenario, percent) for large gas-fired steam boilers, product conversion costs of $17.7 manufacturers are able to fully pass on EL 2 (84 percent) for small oil-fired million and capital conversion costs of the increase in MPC to consumers. steam boilers, and EL 2 (85 percent) for $22.8 million to reach this standard However, this price increase in large oil-fired steam boilers. At TSL 2, level. At TSL 3, DOE also projects outweighed by the $55.2 million in DOE estimates impacts on INPV for CPB higher unit prices will result in a slight conversion costs estimated at TSL 4, manufacturers to range from ¥6.7 decrease in total shipments in the resulting in slightly negative INPV percent to ¥3.7 percent, or a change in compliance year (2020). DOE estimates impacts under this scenario. Under the INPV of ¥$18.5 million to ¥$10.3 a change in shipments of ¥0.12 percent preservation of operating profit markup million. At this potential standard level, relative to the no-new-standards case. scenario, the weighted average price per industry free cash flow will be At TSL 3, under the preservation of unit increases by 36.1 percent. This estimated to decrease by approximately gross margin percentage markup price increase is offset by the expected 41.2 percent to $11.4 million, compared scenario, the shipment-weighted conversion costs and slight decrease in to the no-new-standards case value of average price per unit increases by 19.1 total shipments, resulting in more $19.3 million in 2019, the year before percent relative to the no-new-standards severe INPV impacts. the compliance date. Overall, DOE case price per unit in the year of TSL 5 represents EL 7 (99 percent) for estimates manufactures will incur compliance (2020). In this scenario, small gas-fired hot water boilers, EL 5 product conversion costs of $13.4 manufacturers are able to fully pass on (97 percent) for large gas-fired hot water

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boilers, EL 6 (97 percent) for small oil- impacts under this scenario. Under the worker (production worker hours times fired hot water boilers, EL 4 (97 percent) preservation of operating profit markup the labor rate found in the U.S. Census for large oil-fired hot water boilers, EL scenario, the weighted average price per Bureau’s 2014 ASM). The estimates of 5 (83 percent) for small gas-fired steam unit increases by 37.0 percent. This production workers in this section cover boilers, EL 6 (84 percent) for large gas- price increase is offset by the expected workers, including line-supervisors who fired steam boilers, EL 3 (86 percent) for conversion costs and slight decrease in are directly involved in fabricating and small oil-fired steam boilers, and EL 3 total shipments, resulting in more assembling a unit within the (87 percent) for large oil-fired steam severe INPV impacts. manufacturing facility. Workers boilers. TSL 5 represents max-tech for performing services that are closely b. Impacts on Direct Employment all equipment classes. At TSL 5, DOE associated with production operations, estimates impacts on INPV for CPB To quantitatively assess the impacts such as materials handling tasks using manufacturers to range from ¥42.7 of amended energy conservation forklifts, are also included as production percent to ¥15.2 percent, or a change in standards on direct employment in the labor. INPV of ¥$118.5 million to ¥$42.3 CPB industry, DOE used the GRIM to To calculate non-production workers, million. At this potential standard level, estimate the domestic labor the GRIM assumed non-production industry free cash flow will be expenditures and number of direct workers account for 38 percent of total estimated to decrease by approximately employees in the no-new-standards case direct employment, which is a ratio 119.0 percent in the year before and in each of the standards cases in derived from 2014 ASM Census data. compliance (2019) to ¥$3.7 million 2020. In its analysis, DOE assumed that The total direct employment impacts relative to the no-new-standards case the ratio of production workers to non- calculated in the GRIM are the sum of value of $19.3 million. DOE estimates production workers remains constant. the changes in the number of domestic manufacturers will incur product The sum of domestic production and production and non-production workers conversion costs of $19.8 million and non-production workers represent total resulting from the amended energy capital conversion costs of $36.5 million domestic direct employment. DOE used conservation standards for CPBs, as to reach this standard level. At TSL 5, statistical data from the U.S. Census compared to the no-new-standards case. DOE also projects higher unit prices will Bureau’s 2014 ASM, the results of the In general, more-efficient CPBs are more result in a slight decrease in total engineering analysis, and interviews complex and more labor intensive. Per- shipments in the compliance year with manufacturers to determine the unit labor requirements and production (2020). DOE estimates a change in inputs necessary to calculate industry- time requirements increase with higher shipments of ¥0.24 percent relative to wide labor expenditures and domestic energy conservation standards. the no-new-standards case. employment levels. Labor expenditures DOE estimates that in the absence of At TSL 5, under the preservation of related to manufacturing of the product amended energy conservation gross margin percentage markup are a function of the labor intensity of standards, there will be 954 domestic scenario, the shipment-weighted the product, the sales volume, and an production and non-production workers average price per unit increases by 40.3 assumption that wages remain fixed in in the CPB industry in 2020, the year of percent relative to the no-new-standards real terms over time. The total labor compliance. DOE estimates that case price per unit in the year of expenditures in each year are calculated approximately 80 percent of commercial compliance (2020). In this scenario, by multiplying the MPCs by the labor packaged boilers sold in the United manufacturers are able to fully pass on percentage of MPCs. States are manufactured domestically. the increase in MPC to consumers. The total labor expenditures in the Table V.30 shows the range of the However, this price increase in GRIM are converted to domestic impacts of potential amended energy outweighed by the $56.4 million in production employment levels by conservation standards on U.S. conversion costs estimated at TSL 5, dividing production labor expenditures production and non-production workers resulting in slightly negative INPV by the annual payment per production of commercial packaged boilers.

TABLE V.30—POTENTIAL CHANGES IN THE TOTAL NUMBER OF COMMERCIAL PACKAGED BOILERS DIRECT EMPLOYMENT IN 2020

Trial standard level * No-new- standards 1 2 3 4 5 case

Total Number of Domestic Production 594 364 to 624 ..... 323 to 628 ..... 175 to 645 ..... 8 to 730 ...... 8 to 739. Workers in 2020 (without changes in production locations). Potential Changes in Domestic Produc- ...... (230) to 30 ..... (301) to 4 ...... (453) to 17 ..... (637) to 85 ..... (722) to 9. tion Workers in 2020. Total Number of Domestic Direct Em- 954 585 to 1,002 .. 518 to 1,009 .. 281 to 1,036 .. 13 to 1,173 .... 13 to 1,187. ployment in 2020 **. Potential Changes in Domestic Direct ...... (369) to 48 ..... (484) to 7 ...... (728) to 27 ..... (1,023) to 137 (1,160) to 14. Employment in 2020. * DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers. ** This field presents impacts on total domestic direct employment, which aggregates production and non-production workers. Based on ASM census data, we assumed the ratio of production to non-production employees stays consistent across all analyzed TSLs, which is 38 percent non-production workers.

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At the upper end of the range, all efficiency levels where manufacturers For the CPB industry, DOE identified examined TSLs show positive impacts will use condensing technology for hot and evaluated the impact of amended on domestic employment levels. water boilers will not have a large effect energy conservation standards on one Producing more-efficient CPBs tends to on capacity. The impacts of a subgroup—small manufacturers. The require more labor, and DOE estimates condensing standard on manufacturer SBA defines a ‘‘small business’’ as that if CPB manufacturers chose to keep capacity are difficult to quantify. Some having 500 employees or less for NAICS their current production in the U.S., manufacturers who are already making 333414, ‘‘Heating Equipment (except domestic employment could increase at condensing equipment with a sourced Warm Air Furnaces) Manufacturing.’’ each TSL. In interviews, some heat exchanger said they will likely be Based on this definition, DOE identified manufacturers who produce high- able to increase production using the 33 manufacturers in the CPB industry efficiency boiler equipment stated that a equipment they already have by that qualify as small businesses. For a standard that went to condensing levels utilizing a second shift. Others said a discussion of the impacts on the small could cause them to hire more condensing standard will idle a large manufacturer subgroup, see the employees to increase their production portion of their business, causing regulatory flexibility analysis in section capacity. stranded assets and decreased capacity. VI.B of this document and chapter 12 of To establish a lower bound end of These manufacturers will have to the final rule TSD. production worker employment, DOE determine how to best increase their assumes no manufacturer chooses to condensing boiler production capacity. e. Cumulative Regulatory Burden invest in redesign of equipment that DOE believes that some larger domestic One aspect of assessing manufacturer does not meet the standard. Production manufacturers may choose to add burden involves looking at the worker employment drops in proportion production capacity for a condensing cumulative impact of multiple DOE with the percentage of equipment that is heat exchanger production line. standards and the regulatory actions of Manufacturers stated that in a retired. Since this is a lower bound, other Federal agencies and States that scenario where a potential standard DOE does not account for additional affect the manufacturers of a covered would require efficiency levels at which production labor needed for higher product or equipment. While any one manufacturers would use condensing efficiency equipment. During regulation may not impose a significant technology, there is concern about the interviews, several manufacturers burden on manufacturers, the combined level of technical resources required to expressed that they could lose a effects of several existing or impending redesign and test all equipment. The significant number of employees at TSL regulations may have serious engineering analysis shows that 3, TSL 4 and TSL 5, due to the fact that consequences for some manufacturers, increasingly complex components and these TSLs contain condensing groups of manufacturers, or an entire control strategies are required as efficiency levels for the gas-fired hot industry. Multiple regulations affecting standard levels increase. Manufacturers water boiler equipment classes and oil- the same manufacturer can strain profits commented in interviews that the fired hot water boiler equipment classes. and lead companies to abandon industry would need to add electrical These manufacturers have employees equipment lines or markets with lower engineering and control systems who work on production lines that expected future returns than competing engineering talent beyond current produce cast iron sections and carbon equipment. For these reasons, DOE staffing to meet the redesign steel or copper heat exchangers for conducts an analysis of cumulative requirements of higher TSLs. Additional lower to mid-efficiency equipment. If regulatory burden as part of its training might be needed for amended energy conservation standards rulemakings pertaining to equipment manufacturing engineers, laboratory were to require condensing efficiency efficiency. levels, these employees will no longer technicians, and service personnel if be needed for that function, and condensing equipment was broadly For the cumulative regulatory burden manufacturers will have to decide adopted. However, because TSL 2 (the analysis, DOE looks at other regulations whether to develop their own adopted level) will not require that could affect CPB manufacturers condensing heat exchanger production, condensing standards, DOE does not during the compliance period, from source heat exchangers from Asia or expect manufacturers to face long-term 2017 to 2020, or those that take effect Europe and assemble higher efficiency capacity constraints due to the standard within three years of the 2020 equipment, or leave the market entirely. levels adopted in this final rule. compliance date of amended energy DOE notes that the employment conservation standards for this d. Impacts on Subgroups of impacts discussed here are independent equipment. In interviews, Manufacturers of the indirect employment impacts to manufacturers cited Federal regulations the broader U.S. economy, which are Small manufacturers, niche on equipment other than commercial documented in chapter 15 of the final equipment manufacturers, and packaged boilers that contribute to their rule TSD. manufacturers exhibiting a cost cumulative regulatory burden. The structure substantially different from the compliance years and expected industry c. Impacts on Manufacturing Capacity industry average could be affected conversion costs of relevant amended In manufacturer interviews, most CPB disproportionately. Using average cost energy conservation standards are manufacturers stated that their current assumptions developed for an industry indicated in Table V.31. Included in the production is only running at 50- cash-flow estimate is inadequate to table are Federal regulations that have percent to 75-percent capacity and that assess differential impacts among compliance dates beyond the six year any standard that does not propose manufacturer subgroups. range of DOE’s analysis.

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TABLE V.31—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION STANDARDS AFFECTING COMMERCIAL PACKAGED BOILERS MANUFACTURERS

Number of Federal energy conservation Number of manufacturers Approx. standards Industry Industry standard manufacturers * affected from year conversion costs conversion today’s rule ** (millions $) costs/revenue ***

Commercial Packaged Air Condi- 13 2 2018 and 2023 ...... 520.8 (2014$) ...... 4.4%. tioners and Heat Pumps (Air- Cooled) 81 FR 2420 (January 15, 2016). Residential Furnace Fans, 79 FR 38 2 2019...... 40.6 (2014$)...... 1.6%. 38129 (July 3, 2014). Commercial Water Heaters † 81 FR 25 17 2019...... 29.8 (2014$)...... 3.0%. 34440 (May 31, 2016). Residential Boilers 81 FR 2320 36 22 2020 ...... 2.5 (2014$) ...... Less than 1%. (January 15, 2016). Residential Furnaces † 80 FR 12 2 2021...... 55.0 (2013$)...... 1.0%. 13120 (March 12, 2015). Central Air Conditioners and Heat 30 4 2023 ...... 342.6 (2015$) ...... Less than 1%. Pumps § (December 5, 2016). Commercial Warm Air Furnaces 81 14 3 2023 ...... 7.5 to 22.2 (2014$) ‡ ... 1.7% to 5.2% ‡. FR 2420 (January 15, 2016). Residential Water Heaters 75 FR 39 6 2015...... 17.5 (2009$)...... 4.9%. 20112 (April 2016, 2010) +. * This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regu- latory burden. ** This column presents the number of manufacturers producing CPB equipment that are also listed as manufacturers in the listed energy con- servation 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 conver- sion period is the timeframe 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. † The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs have not been finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the March 2016 NOPR.) ‡ Low and high conversion cost scenarios were analyzed as part of this Direct Final Rule. The range of estimated conversion expenses pre- sented here reflects those two scenarios. § DOE has issued a pre-publication Federal Register direct final rule on December 5, 2016. The document can be found at: http://energy.gov/ eere/buildings/downloads/issuance-2016-12-05-energy-conservation-program-energy-conservation-0. + 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 impacts from other EPCA rules with compliance dates within three years of this rule’s compliance date. However, DOE rec- ognizes that a manufacturer incurs costs during some period before a compliance date as it prepares to comply, such as by revising product de- signs and manufacturing processes, testing products, and preparing certifications. As such, to illustrate a broader set of rules that may also cre- ate additional burden on manufacturers, DOE has included another rule with compliance dates that fall within six years of 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 in- dicate 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.

In addition to the Federal energy DOE Certification, Compliance, and implementation-certification-and- conservation standards listed in Table Enforcement (CC&E) Rule enforcement. V.31, there are multiple appliance 3. National Impact Analysis standards that do not have published The amended standard that DOE NOPRs, including residential water adopted will also impose accompanying This section presents DOE’s estimates heaters and residential pool heaters. CC&E requirements for manufacturers of of the national energy savings and the CPB equipment. DOE conducted a DOE also identified other regulatory NPV of consumer benefits that would rulemaking to expand AEDM coverage burdens that will affect manufacturers result from each of the TSLs considered to commercial HVAC, including of commercial packaged boilers: as potential amended standards. commercial packaged boilers and issued DOE will continue to evaluate its a final rule on December 31, 2013. (78 a. Significance of Energy Savings approach to assessing cumulative FR 79579). An AEDM is a computer To estimate the energy savings regulatory burden for use in future modeling or mathematical tool that attributable to potential amended rulemakings to ensure that it is predicts the performance of non-tested standards for commercial packaged effectively capturing the overlapping basic models. For this final rule, DOE boilers, DOE compared their energy impacts of its regulations. DOE plans to permits manufacturers of commercial consumption under the no-new- seek public comment on the approaches packaged boilers to rate basic models standards case to their anticipated it has used here (i.e., both the 3 and 6 using AEDMs for compliance energy consumption under each TSL. year timeframes from the compliance certification purposes, reducing the The savings are measured over the date) in order to better understand at need for sample units and reducing entire lifetime of equipment purchased what point in the compliance cycle burden on manufacturers. The final rule in the 30-year period that begins in the manufacturers most experience the establishes revised verification year of anticipated compliance with effects of cumulative and overlapping tolerances CPB manufacturers. More amended standards (2020–2049). Table burden from the regulation of multiple information can be found at http:// V.32 presents DOE’s projections of the equipment classes. energy.gov/eere/buildings/ national energy savings for each TSL

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considered for commercial packaged using the approach described in section boilers. The savings were calculated IV.H.2 of this final rule.

TABLE V.32—CUMULATIVE NATIONAL ENERGY SAVINGS FOR COMMERCIAL PACKAGED BOILERS; 30 YEARS OF SHIPMENTS [2020–2049]

Trial standard level 1 2 3 4 5

(quads)

Primary Energy...... 0.202 0.242 0.721 1.885 1.894 FFC Energy...... 0.227 0.272 0.803 2.096 2.107

Circular A–4 requires agencies to equipment shipments. The choice of a Thus, such results are presented for present analytical results, including 9-year period is a proxy for the timeline informational purposes only and are not separate schedules of the monetized in EPCA for the review of certain energy indicative of any change in DOE’s benefits and costs that show the type conservation standards and potential analytical methodology. The NES and timing of benefits and costs.93 revision of and compliance with such sensitivity analysis results based on a 9- Circular A–4 also directs agencies to revised standards.94 The review year analytical period are presented in consider the variability of key elements timeframe established in EPCA is Table V.33. The impacts are counted underlying the estimates of benefits and generally not synchronized with the over the lifetime of equipment costs. For this rulemaking, DOE equipment lifetime, equipment purchased in 2020–2028. undertook a sensitivity analysis using 9 manufacturing cycles, or other factors years, rather than 30 years, of specific to commercial packaged boilers.

TABLE V.33—CUMULATIVE NATIONAL ENERGY SAVINGS FOR COMMERCIAL PACKAGED BOILERS; 9 YEARS OF SHIPMENTS [2020–2028]

Trial standard level 1 2 3 4 5

(quads)

Primary Energy...... 0.065 0.079 0.218 0.550 0.553 FFC Energy...... 0.073 0.089 0.243 0.611 0.615

b. Net Present Value of Consumer Costs packaged boilers. In accordance with discount rates respectively for each TSL and Benefits OMB’s guidelines on regulatory considered for commercial packaged analysis,95 DOE calculated NPV using boilers covered in this rulemaking. In DOE estimated the cumulative NPV of both a 7-percent and a 3-percent real each case, the impacts cover the lifetime the total costs and savings for discount rate. of equipment purchased in 2020–2049. consumers that will result from the Table V.34 shows the consumer NPV TSLs considered for commercial results at 3-percent and 7-percent

TABLE V.34—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR COMMERCIAL PACKAGED BOILER EQUIPMENT; 30 YEARS OF SHIPMENTS [2020–2049]

Trial standard level Discount rate 1 2 3 4 5

(billion 2015$)

3 percent...... 1.607 1.977 3.323 9.347 9.361 7 percent...... 0.451 0.558 0.606 1.997 1.966

93 U.S. Office of Management and Budget. except that in no case may any new standards be variability that occurs in the timing of standards Circular A–4: Regulatory Analysis. September 17, required within 6 years of the compliance date of reviews and the fact that for some commercial 2003. www.whitehouse.gov/omb/circulars_a004_a- the previous standards. (42 U.S.C. 6313(a)(6)(C)) equipment, the compliance period is 5 years rather 4/. While adding a 6-year review to the 3-year than 3 years. compliance period adds up to 9 years, DOE notes 94 95 EPCA requires DOE to review its standards at that it may undertake reviews at any time within Office of Management and Budget. OMB least once every 6 years, and requires, for certain the 6-year period and that the 3-year compliance Circular A–4, Regulatory Analysis. Section E. 2003. equipment, a 3-year period after any new standard date may yield to the 6-year backstop. A 9-year Washington, DC. September 17, 2003. https:// is promulgated before compliance is required, analysis period may not be appropriate given the www.whitehouse.gov/omb/circulars_a004_a-4/.

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The NPV results based on the commercial packaged boilers purchased indicative of any change in DOE’s aforementioned 9-year analytical period in 2020–2028. As mentioned previously, analytical methodology or decision are presented in Table V.35. The such results are presented for criteria. impacts are counted over the lifetime of informational purposes only and are not

TABLE V.35—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR COMMERCIAL PACKAGED BOILER EQUIPMENT; 9 YEARS OF SHIPMENTS [2020–2028]

Trial standard level Discount rate 1 2 3 4 5

(billion 2015$)

3 percent...... 0.545 0.675 0.952 2.665 2.663 7 percent...... 0.204 0.254 0.197 0.705 0.685

c. Indirect Impacts on Employment the standards adopted in this final rule 6. Need of the Nation To Conserve DOE expects that amended energy will not reduce the utility or Energy performance of commercial packaged conservation standards for commercial Enhanced energy efficiency, where packaged boilers would reduce energy boilers under consideration in this economically justified, improves the expenditures for consumers of the rulemaking. Manufacturers of the Nation’s energy security, strengthens the equipment, with the resulting net equipment currently offer units that savings being redirected to other forms meet or exceed the adopted standards. economy, and reduces the of economic activity. These expected environmental impacts (costs) of energy 5. Impact of Any Lessening of production. Reduced electricity demand shifts in spending and economic activity Competition could affect the demand for labor. As due to energy conservation standards is described in section IV.N of this DOE considered any lessening of also likely to reduce the cost of document, DOE used an input/output competition that would be likely to maintaining the reliability of the model of the U.S. economy to estimate result from new or amended standards. electricity system, particularly during indirect employment impacts of the As discussed in section III.E.1.e, the peak-load periods. As a measure of this TSLs that DOE considered in this Attorney General of the United States reduced demand, chapter 15 in the final rulemaking. DOE understands that there (Attorney General) determines the rule TSD presents the estimated are uncertainties involved in projecting impact, if any, of any lessening of reduction in generating capacity, employment impacts, especially competition likely to result from an relative to the no-new-standards case, changes in the later years of the adopted standard and transmits such for the TSLs that DOE considered in this analysis. Therefore, DOE generated determination in writing to the rulemaking. results for near-term timeframes (2020– Secretary within 60 days of the Energy conservation resulting from 2025), where these uncertainties are publication of a proposed rule, together amended standards for commercial reduced. with an analysis of the nature and packaged boilers is expected to yield The results suggest that the adopted extent of such impact. environmental benefits in the form of standards are likely to have negligible reduced emissions of certain air impact on the net demand for labor in To assist the Attorney General in pollutants and greenhouse gases. Table the economy. The net change in jobs is making this determination, DOE so small that it will be imperceptible in provided the Department of Justice V.36 provides DOE’s estimate of national labor statistics and might be (DOJ) with copies of the 2016 CPB cumulative emissions reductions offset by other, unanticipated effects on NOPR and the NOPR TSD for review. In expected to result from the TSLs employment. Chapter 16 of the final its assessment letter responding to DOE, considered in this rulemaking. The table rule TSD presents detailed results DOJ concluded that the proposed energy includes both power sector emissions regarding anticipated indirect conservation standards for commercial and upstream emissions. The emissions employment impacts. packaged boilers are unlikely to have a were calculated using the multipliers significant adverse impact on discussed in section IV.K of this 4. Impact on Utility or Performance competition. DOE is publishing the document. DOE reports annual As discussed in section III.E.1.d of Attorney General’s assessment at the emissions reductions for each TSL in this final rule, DOE has concluded that end of this final rule. chapter 13 of the final rule TSD.

TABLE V.36—CUMULATIVE EMISSIONS REDUCTION FOR COMMERCIAL PACKAGED BOILERS SHIPPED IN 2020–2049

TSL 1 2 3 4 5

Power Sector Emissions

CO2 (million metric tons) ...... 11.99 14.48 40.01 104.03 104.73 NOX (thousand tons) ...... 10.57 12.77 35.35 91.61 92.24 Hg (tons) ...... 0.00 0.00 (0.00) (0.00) (0.00) N2O (thousand tons) ...... 0.10 0.13 0.18 0.44 0.46

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TABLE V.36—CUMULATIVE EMISSIONS REDUCTION FOR COMMERCIAL PACKAGED BOILERS SHIPPED IN 2020–2049— Continued

TSL 1 2 3 4 5

CH4 (thousand tons) ...... 0.30 0.37 0.85 2.28 2.30 SO2 (thousand tons) ...... 2.26 2.93 2.54 6.66 7.03

Upstream Emissions

CO2 (million metric tons) ...... 1.65 2.01 5.32 13.72 13.83 NOX (thousand tons) ...... 23.32 28.11 79.79 206.51 207.85 Hg (tons) ...... 0.00 0.00 0.00 0.00 0.00 N2O (thousand tons) ...... 0.01 0.01 0.02 0.04 0.04 CH4 (thousand tons) ...... 118.36 138.58 492.36 1,289.41 1,290.98 SO2 (thousand tons) ...... 0.14 0.19 0.20 0.47 0.49

Total FFC Emissions

CO2 (million metric tons) ...... 13.65 16.49 45.33 117.75 118.57 NOX (thousand tons) ...... 33.90 40.88 115.15 298.12 300.09 Hg (tons) ...... 0.00 0.00 (0.00) (0.00) (0.00) N2O (thousand tons) ...... 0.11 0.14 0.19 0.48 0.49 N2O (thousand tons CO2eq) * ...... 29.11 37.20 50.61 126.68 130.98 CH4 (thousand tons) ...... 118.66 138.95 493.21 1,291.69 1,293.28 CH4 (thousand tons CO2eq) * ...... 3,322.44 3,890.66 13,809.78 36,167.26 36,211.79 SO2 (thousand tons) ...... 2.40 3.11 2.74 7.13 7.52

*CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). Note: Parentheses indicate negative values. Negative values refer to an increase in emissions.

As part of the analysis for this final from a distribution that uses a 3-percent Table V.37 presents the global value rule, DOE estimated monetary benefits discount rate, the average values from a of CO2 emissions reductions at each likely to result from the reduced distribution that uses a 2.5-percent TSL. For each of the four cases, DOE emissions of CO2 and NOX estimated for discount rate, and the 95th-percentile calculated a present value of the stream each of the TSLs considered for values from a distribution that uses a 3- of annual values using the same commercial packaged boilers. As percent discount rate. For emissions in discount rate as was used in the studies discussed in section IV.L of this 2015, the SCC values (expressed in upon which the dollar-per-ton values document, for CO2, DOE used the most 2015$) are represented by $12.4/t, are based. DOE calculated domestic recent values for the SCC developed by $40.6/t, $63.2/t, and $118/t, values as a range from 7 percent to 23 an interagency process. The four sets of respectively. The values for later years percent of the global values, and these SCC values for CO emissions are higher due to increasing damages 2 results are presented in chapter 14 of reductions correspond to the average (public health, economic and the final rule TSD. values from a distribution that uses a 5- environmental) as the projected percent discount rate, the average values magnitude of climate change increases.

TABLE V.37—ESTIMATE OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR COMMERCIAL PACKAGED BOILERS SHIPPED IN 2020–2049

SCC scenario * TSL 3% Discount 5% Discount 3% Discount 2.5% Discount rate, 95th rate, average rate, average rate, average percentile

(million 2015$)

Power Sector Emissions

1 ...... 73 350 565 1,066 2 ...... 88 424 683 1,289 3 ...... 240 1,161 1,874 3,533 4 ...... 621 3,010 4,860 9,160 5 ...... 625 3,031 4,893 9,223

Upstream Emissions

1 ...... 10 48 78 147 2 ...... 12 59 95 179 3 ...... 32 154 249 470 4 ...... 82 397 641 1,208

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TABLE V.37—ESTIMATE OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR COMMERCIAL PACKAGED BOILERS SHIPPED IN 2020–2049—Continued

SCC scenario * TSL 3% Discount 5% Discount 3% Discount 2.5% Discount rate, 95th rate, average rate, average rate, average percentile

(million 2015$)

5 ...... 83 400 646 1,218

Total FFC Emissions

1 ...... 83 399 643 1,213 2 ...... 100 482 777 1,468 3 ...... 272 1,316 2,123 4,003 4 ...... 703 3,407 5,501 10,368 5 ...... 708 3,431 5,539 10,441 * For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.4, $40.6, $63.2 and $118 per metric ton (2015$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).

DOE is well aware that scientific and this subject that are part of the public packaged boilers. The dollar-per-ton economic knowledge about the record for this and other rulemakings, as value that DOE used is discussed in contribution of CO2 and other GHG well as other methodological section IV.L of this document. Table emissions to changes in the future assumptions and issues. However, V.38 presents the cumulative present global climate and the potential consistent with DOE’s legal obligations, values for NOX emissions reductions for resulting damages to the world economy and taking into account the uncertainty each TSL calculated using 7-percent and continues to evolve rapidly. Thus, any involved with this particular issue, DOE 3-percent discount rates. This table value placed on reduced CO2 emissions has included in this final rule the most presents values that use the low dollar- in this rulemaking is subject to change. recent values and analyses resulting per-ton values, which reflect DOE’s DOE, together with other Federal from the interagency review process. primary estimate. Results that reflect the agencies, will continue to review DOE also estimated the cumulative range of NOX dollar-per-ton values are various methodologies for estimating monetary value of the economic benefits presented in Table V.40. Detailed the monetary value of reductions in CO2 associated with NOX emissions discussions on NOX emissions and other GHG emissions. This ongoing reductions anticipated to result from the reductions are available in chapter 14 of review will consider the comments on considered TSLs for commercial the final rule TSD.

TABLE V.38—ESTIMATES OF PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR COMMERCIAL PACKAGED BOILERS SHIPPED IN 2020–2049

TSL 3% Discount rate 7% Discount rate

(million 2015$)

Power Sector Emissions

1 ...... 44 15 2 ...... 53 19 3 ...... 146 51 4 ...... 376 129 5 ...... 379 130

Upstream Emissions

1 ...... 37 13 2 ...... 45 16 3 ...... 126 45 4 ...... 325 114 5 ...... 327 114

Total FFC Emissions

1 ...... 81 29 2 ...... 99 35 3 ...... 273 95 4 ...... 701 243 5 ...... 706 245

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7. Other Factors 8. Summary of National Economic scenarios to the NPV of consumer Impacts savings calculated for each TSL The Secretary of Energy, in considered in this rulemaking, at both a determining whether a standard is The NPV of the monetized benefits associated with emissions reductions 7-percent and 3-percent discount rate. economically justified, may consider can be viewed as a complement to the The CO2 label values used in the any other factors that the Secretary NPV of the consumer savings calculated columns correspond to the 2015 values deems to be relevant. (42 U.S.C. for each TSL considered in this in the four sets of SCC values discussed 6313(a)(6)(B)(ii)(VII)) No other factors rulemaking. Table V.39 presents the in section IV.L.1 of this document. The were considered in this analysis. NPV values that result from adding the dollar-per-ton values that DOE used for estimates of the potential economic NOX emissions are presented in the benefits resulting from reduced CO2 and final rule TSD chapter 14 of the final NOX emissions in each of four valuation rule TSD.

TABLE V.39—COMMERCIAL PACKAGED BOILERS TSLS: NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH NET PRESENT VALUE OF MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS

Consumer NPV at 3% discount rate added with: TSL SCC value of SCC value of SCC value of SCC value of $12.4/t CO2* and $40.6/t CO2* and $63.2/t CO2* and $118/t CO2* and 3% low NOX value 3% low NOX value 3% low NOX value 3% low NOX value

(billion 2015$)

1 ...... 1.772 2.088 2.331 2.902 2 ...... 2.176 2.558 2.853 3.543 3 ...... 3.867 4.911 5.718 7.599 4 ...... 10.751 13.455 15.549 20.416 5 ...... 10.776 13.499 15.607 20.509

Consumer NPV at 7% discount rate added with: TSL SCC value of SCC value of SCC value of SCC value of $12.4/t CO2* and $40.6/t CO2* and $63.2/t CO2* and $118/t CO2* and 7% low NOX value 7% low NOX value 7% low NOX value 7% low NOX value

(billion 2015$)

1 ...... 0.563 0.879 1.123 1.693 2 ...... 0.693 1.075 1.370 2.060 3 ...... 0.973 2.017 2.824 4.705 4 ...... 2.943 5.647 7.741 12.608 5 ...... 2.918 5.641 7.749 12.651 * These label values represent the global SCC in 2015, in 2015$. The present values have been calculated with scenario-consistent discount rates.

In considering the results in Table improvement in energy efficiency and economically justified and saves a V.39, two issues are relevant. First, the be technologically feasible and significant amount of energy. national operating cost savings are economically justified. (42 U.S.C. To aid the reader as DOE discusses domestic U.S. monetary savings that 6313(a)(6)(A)(ii) and (C)(i)) In the benefits and/or burdens of each TSL, occur as a result of purchasing the determining whether a standard is tables in this section present a summary covered commercial packaged boilers. economically justified, the Secretary of the results of DOE’s quantitative The national operating cost savings is must determine whether the benefits of analysis for each TSL. In addition to the measured for the lifetime of units the standard exceed its burdens by, to quantitative results presented in the shipped in 2020–2049. The CO2 the greatest extent practicable, tables, DOE also considers other reduction is a benefit that accrues considering the seven statutory factors burdens and benefits that affect globally due to decreased domestic discussed previously. (42 U.S.C. economic justification. These include energy consumption that is expected to 6313(a)(6)(B)(ii)(I)–(VII) and (C)(i)) the impacts on identifiable subgroups of result from this rule. Because CO2 consumers who may be emissions have a very long residence For this final rule, DOE considered disproportionately affected by a national time in the atmosphere, the SCC values the impacts of amended standards for standard and impacts on employment. in future years reflect future climate- commercial packaged boilers at each 1. Benefits and Burdens of Trial related impacts that continue beyond TSL, beginning with the maximum Standard Levels Considered for 2100 through 2300. technologically feasible level, to determine whether that level was Commercial Packaged Boiler Standards C. Conclusion economically justified. Where the max- Table V.40, Table V.41, and Table When considering new or amended tech level was not justified, DOE then V.42 summarize the quantitative energy conservation standards for considered the next most efficient level impacts estimated for each TSL for commercial packaged boilers, the and undertook the same evaluation until commercial packaged boilers. The standards that DOE adopts must be it reached the highest TSL that is both national impacts are measured over the designed to achieve significant technologically feasible and lifetime of commercial packaged boilers

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purchased in the 30-year period that (2020–2049). The energy savings, cycle results. The efficiency levels begins in the anticipated year of emissions reductions, and value of contained in each TSL are described in compliance with amended standards emissions reductions refer to full-fuel- section V.A of this final rule. TABLE V.40—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL PACKAGED BOILER TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Cumulative FFC National Energy Savings (quads) .... 0.227 ...... 0.272 ...... 0.803 ...... 2.096 ...... 2.107.

NPV of Commercial consumer Benefits (billion 2015$)

3% discount rate ...... 1.607 ...... 1.977 ...... 3.323 ...... 9.347 ...... 9.361. 7% discount rate ...... 0.451 ...... 0.558 ...... 0.606 ...... 1.997 ...... 1.966.

Cumulative Emissions Reduction (Total FFC Emissions)

CO2 (million metric tons) ...... 13.65 ...... 16.49 ...... 45.33 ...... 117.75 ...... 118.57. NOX (thousand tons) ...... 33.90 ...... 40.88 ...... 115.15 ...... 298.12 ...... 300.09. Hg (tons) ...... 0.000 ...... 0.00 ...... 0.00 ...... 0.00 ...... 0.00. N2O (thousand tons) ...... 0.11 ...... 0.14 ...... 0.19 ...... 0.48 ...... 0.49. N2O (thousand tons CO2eq) * ...... 29.11 ...... 37.20 ...... 50.61 ...... 126.68 ...... 130.98. CH4 (thousand tons) ...... 118.66 ...... 138.95 ...... 493.21 ...... 1,291.69 ...... 1,293.28. CH4 (thousand tons CO2eq) * ...... 3,322.44 ...... 3,890.66 ...... 13,809.78 ...... 36,167.26 ...... 36,211.79. SO2 (thousand tons) ...... 2.40 ...... 3.11 ...... 2.74 ...... 7.13 ...... 7.52.

Value of Emissions Reduction (Total FFC Emissions)

CO2 (million 2015$) ** ...... 83 to 1,213 ...... 100 to 1,468 ...... 272 to 4,003 ...... 703 to 10,368 ...... 708 to 10,441. NOX—3% discount rate (million 2015$) ...... 81 to 168 ...... 99 to 201 ...... 273 to 595 ...... 701 to 1,535 ...... 706 to 1,543. NOX—7% discount rate (million 2015$) ...... 29 to 66 ...... 35 to 80 ...... 95 to 215 ...... 243 to 549 ...... 245 to 553. Parentheses indicate negative (¥) values. *CO2eq is the quantity of CO2 that would have the same global warming potential (GWP). ** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.

TABLE V.41—NPV OF COMMERCIAL CONSUMER BENEFITS BY EQUIPMENT CLASS

Discount Trial standard level Equipment class rate (%) 1 2 3 4 5

(billion 2015$)

Small Gas-Fired Hot Water ...... 3 0.527 0.527 1.873 4.986 4.986 Commercial Packaged Boilers ...... 7 0.114 0.114 0.163 0.898 0.898 Large Gas-Fired Hot Water ...... 3 0.115 0.183 0.183 2.009 2.009 Commercial Packaged Boilers ...... 7 0.032 0.047 0.047 0.491 0.491 Small Oil-Fired Hot Water ...... 3 0.770 0.770 0.770 1.405 1.405 Commercial Packaged Boilers ...... 7 0.242 0.242 0.242 0.324 0.324 Large Oil-Fired Hot Water ...... 3 0.044 0.140 0.140 0.190 0.205 Commercial Packaged Boilers ...... 7 0.014 0.042 0.042 0.056 0.025 Small Gas-Fired Steam...... 3 0.019 0.040 0.040 0.082 0.082 Commercial Packaged Boilers ...... 7 0.005 0.010 0.010 0.017 0.017 Large Gas-Fired Steam ...... 3 0.027 0.043 0.043 0.084 0.084 Commercial Packaged Boilers ...... 7 0.010 0.015 0.015 0.029 0.029 Small Oil-Fired Steam...... 3 0.075 0.184 0.184 0.415 0.415 Commercial Packaged Boilers ...... 7 0.024 0.058 0.058 0.125 0.125 Large Oil-Fired Steam...... 3 0.030 0.089 0.089 0.174 0.174 Commercial Packaged Boilers ...... 7 0.010 0.029 0.029 0.057 0.057

Total—All Classes ...... 3 1.607 1.977 3.323 9.347 9.361 7 0.451 0.558 0.606 1.997 1.966 * Parentheses indicate negative (¥) values.

TABLE V.42—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL PACKAGED BOILER TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 * TSL 2 * TSL 3 * TSL 4 * TSL 5 *

Manufacturer Impacts

Industry NPV (million 2015$) (No-new-standards 265.4 to 272.4 ...... 259.1 to 267.3 ...... 227.6 to 252.1 ...... 160.9 to 235.3 ...... 159.1 to 235.3. case INPV = 277.6). Industry NPV (% change) ...... (4.4) to (1.9) ...... (6.7) to (3.7) ...... (18.0) to (9.2) ...... (42.0) to (15.2) ...... (42.7) to (15.2).

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TABLE V.42—SUMMARY OF ANALYTICAL RESULTS FOR COMMERCIAL PACKAGED BOILER TSLS: MANUFACTURER AND CONSUMER IMPACTS—Continued

Category TSL 1 * TSL 2 * TSL 3 * TSL 4 * TSL 5 *

Consumer Average LCC Savings (2015$)

Small Gas-Fired Hot Water Commercial Packaged $212 ...... $212 ...... ($2,267) ...... ($2,267) ...... $945. Boilers. Large Gas-Fired Hot Water Commercial Packaged $1,307 ...... $2,037 ...... $2,037 ...... $16,952 ...... $16,952. Boilers. Small Oil-Fired Hot Water Commercial Packaged $14,421 ...... $14,421 ...... $14,421 ...... $22,934 ...... $22,934. Boilers. Large Oil-Fired Hot Water Commercial Packaged $10,193 ...... $31,379 ...... $31,379 ...... $41,902 ...... $23,643. Boilers. Small Gas-Fired Steam Commercial Packaged Boil- $720 ...... $1,002 ...... $1,002 ...... $1,341 ...... $1,341. ers. Large Gas-Fired Steam Commercial Packaged Boil- $7,959 ...... $11,188 ...... $11,188 ...... $20,291 ...... $20,291. ers. Small Oil-Fired Steam Commercial Packaged Boilers $2,409 ...... $5,839 ...... $5,839 ...... $12,779 ...... $12,779. Large Oil-Fired Steam Commercial Packaged Boilers $12,563 ...... $36,832 ...... $36,832 ...... $70,909 ...... $70,909.

Consumer Simple PBP (years)

Small Gas-Fired Hot Water Commercial Packaged 10.1 ...... 10.1 ...... 17.4 ...... 17.4 ...... 15.4. Boilers. Large Gas-Fired Hot Water Commercial Packaged 5.4 ...... 7.0 ...... 7.0 ...... 11.2 ...... 11.2. Boilers. Small Oil-Fired Hot Water Commercial Packaged 4.1 ...... 4.1 ...... 4.1 ...... 8.5 ...... 8.5. Boilers. Large Oil-Fired Hot Water Commercial Packaged 4.2 ...... 4.8 ...... 4.8 ...... 5.2 ...... 12.4. Boilers. Small Gas-Fired Steam Commercial Packaged Boil- 9.5 ...... 10.1 ...... 10.1 ...... 11.3 ...... 11.3. ers. Large Gas-Fired Steam Commercial Packaged Boil- 3.8 ...... 4.2 ...... 4.2 ...... 4.4 ...... 4.4. ers. Small Oil-Fired Steam Commercial Packaged Boilers 3.8 ...... 4.0 ...... 4.0 ...... 4.9 ...... 4.9. Large Oil-Fired Steam Commercial Packaged Boilers 2.4 ...... 2.7 ...... 2.7 ...... 3.0 ...... 3.0.

% of Consumers that Experience Net Cost

Small Gas-Fired Hot Water Commercial Packaged 14% ...... 14% ...... 35% ...... 35% ...... 52%. Boilers. Large Gas-Fired Hot Water Commercial Packaged 4% ...... 6% ...... 6% ...... 33% ...... 33%. Boilers. Small Oil-Fired Hot Water Commercial Packaged 14% ...... 14% ...... 14% ...... 42% ...... 42%. Boilers. Large Oil-Fired Hot Water Commercial Packaged 1% ...... 7% ...... 7% ...... 10% ...... 57%. Boilers. Small Gas-Fired Steam Commercial Packaged Boil- 27% ...... 41% ...... 41% ...... 54% ...... 54%. ers. Large Gas-Fired Steam Commercial Packaged Boil- 11% ...... 15% ...... 15% ...... 21% ...... 21%. ers. Small Oil-Fired Steam Commercial Packaged Boilers 2% ...... 8% ...... 8% ...... 14% ...... 14%. Large Oil-Fired Steam Commercial Packaged Boilers 0% ...... 1% ...... 1% ...... 3% ...... 3%. * Parentheses indicate negative (¥) values.

DOE first considered TSL 5, which ranges from $708 million to $10,441 stated they will require additional represents the max-tech level for all the million. engineering expertise and production equipment classes and offers the At TSL 5, the average LCC savings lines, or possibly source parts from potential for the highest cumulative range from $945 to $70,909 depending other manufacturers. energy savings through the analysis on equipment class. The fraction of Accordingly, the Secretary concludes period from 2020 through 2049. The consumers incurring a net cost ranges that at TSL 5 for commercial packaged estimated energy savings from TSL 5 are from 3 percent for the large oil-fired boilers, the benefits of energy savings, 2.11 quads of energy. TSL 5 has an steam CPB equipment class to 57 NPV of consumer benefits, emission estimated NPV of consumer benefit of percent for the large oil-fired hot water reductions, and the estimated monetary $1.966 billion using a 7-percent CPB equipment class. value of the CO2 emissions reductions At TSL 5, the projected change in will be outweighed by the negative LCC discount rate, and $9.36 billion using a INPV ranges from a decrease of $118.5 savings for consumers of small gas-fired 3-percent discount rate. million to a decrease of $42.3 million, hot water commercial packaged boilers, The cumulative emissions reductions which corresponds to a change in INPV the large number of consumers of small at TSL 5 are 119 million metric tons of of ¥42.7 percent to ¥15.2 percent, gas-fired hot water commercial CO2, 7.52 thousand tons of SO2, 300 respectively. The industry is expected to packaged boilers, large oil-fired hot thousand tons of NOX, 1,293 thousand incur $56.4 million in total conversion water commercial packaged boilers, and tons of CH4, 0.49 thousand ton of N2O, costs at this level. Approximately 98.6 small gas-fired steam commercial and an emissions increase of 0.0008 ton percent of industry equipment listings packaged boilers incurring a net cost, of Hg. The estimated monetary value of require redesign to meet this standard and the large negative change in INPV the CO2 emissions reductions at TSL 5 level today. At this level, manufacturers for manufacturers. Consequently, DOE

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has concluded that TSL 5 is not 3 are 0.80 quad of energy. TSL 3 has an monetary value of the CO2 emissions economically justified. estimated NPV of consumer benefit of reductions at TSL 2 ranges from $100 DOE then considered TSL 4, which $0.61 billion using a 7-percent discount million to $1,468 million. corresponds to the efficiency level rate, and $3.32 billion using a 3-percent At TSL 2, the average LCC savings within each equipment class that discount rate. range from $212 to $36,832, depending provides the highest consumer NPV at The cumulative emissions reductions on equipment class. The fraction of a 7-percent discount rate over the at TSL 3 are 45 million metric tons of consumers incurring a net cost ranges analysis period from 2020 through 2049. CO2, 2.74 thousand tons of SO2, 115 The estimated energy savings from TSL thousand tons of NO , 493 thousand from 1 percent for the large oil-fired X steam CPB equipment class to 41 4 are 2.096 quad of energy. TSL 4 has tons of CH4, and 0.19 thousand ton of percent for the small gas-fired steam an estimated NPV of consumer benefit N2O, and an emissions increase of of $2.0 billion using a 7-percent 0.0014 ton of Hg. The estimated CPB equipment class. discount rate, and $9.35 billion using a monetary value of the CO2 emissions At TSL 2, the projected INPV ranges 3-percent discount rate. reductions at TSL 3 ranges from $272 from a decrease of $18.5 million to a The cumulative emissions reductions million to $4,003 million. decrease of $10.3 million, which at TSL 4 are 118 million metric tons of At TSL 3, the average LCC savings corresponds to a change of ¥6.7 percent ¥ CO2, 7.1 thousand tons of SO2, 298 range from $2,267 to $36,832, to ¥3.7 percent, respectively. The thousand tons of NOX, 1,292 thousand depending on equipment class. The industry is expected to incur $21.2 tons of CH4, 0.48 thousand ton of N2O, fraction of consumers incurring a net million in total conversion costs at this and an emissions increase of 0.0008 ton cost ranges from 1 percent for the large level. Approximately 45.7 percent of of Hg. The estimated monetary value of oil-fired steam CPB equipment class to industry equipment listings require the CO2 emissions reductions at TSL 4 41 percent for the small gas-fired steam redesign to meet this standard level ranges from $703 million to $10,368 CPB equipment class. today. million. At TSL 3, the projected INPV ranges At TSL 4, the average LCC savings from a decrease of $50.0 million to a Accordingly, the Secretary concludes range from ¥$2,267 to $70,909 decrease of $25.5 million, which that at TSL 2 for commercial packaged depending on equipment class. The corresponds to a change of ¥18.0 boilers, the benefits of energy savings, fraction of consumers incurring a net percent to ¥9.2 percent, respectively. NPV of consumer benefits, emission cost ranges from 3 percent for the large The industry is expected to incur $40.5 reductions, and the estimated monetary oil-fired steam CPB equipment class to million in total conversion costs at this value of the CO2 emissions reductions 54 percent for the small gas-fired steam level. Approximately 70.5 percent of will outweigh the negative change in CPB equipment class. industry equipment listings require INPV for manufacturers. Consequently, At TSL 4, the projected change in redesign to meet this standard level DOE has concluded that TSL 2 is INPV ranges from a decrease of $116.7 today. economically justified. million to a decrease in $42.3 million, Accordingly, the Secretary concludes After carefully considering the which corresponds to a change of ¥42.0 that at TSL 3 for commercial packaged ¥ analysis results and weighing the percent to 15.2 percent, respectively. boilers, the benefits of energy savings, benefits and burdens of TSL 2, and The industry is expected to incur $55.2 NPV of consumer benefits, emission based on clear and convincing evidence, million in total conversion costs at this reductions, and the estimated monetary setting the standards for commercial level. Approximately 88.3 percent of value of the CO emissions reductions 2 packaged boilers at TSL 2 represents a industry equipment listings require will be outweighed by the large negative significant improvement in energy redesign to meet this standard level average life-cycle-cost savings (i.e., costs today. to the consumer) of the small gas-fired efficiency that is technologically Accordingly, the Secretary concludes hot water CPB equipment class feasible and economically justified, as that at TSL 4 for commercial packaged consumers and the large percentage of defined under EPCA at 42 U.S.C. boilers, the benefits of energy savings, industry listings requiring redesign to 6313(a). TSL 2 is technologically NPV of consumer benefits, emission meet this standard level today. feasible because the technologies reductions, and the estimated monetary Consequently, DOE has concluded that required to achieve these levels already exist in the current market and are value of the CO2 emissions reductions TSL 3 is not economically justified. will be outweighed by the negative LCC TSL 2 corresponds to the intermediate available from multiple manufacturers. savings for consumers of small gas-fired level with only non-condensing TSL 2 is economically justified because hot water commercial packaged boilers, standard levels and offers the potential the benefits to the Nation in the form of the large percentage of small gas-fired for significant cumulative energy energy savings, consumer NPV at 3- steam and small gas-fired hot water CPB savings over the analysis period from percent and 7-percent discount rates, consumers incurring a net cost, and the 2020 through 2049. The estimated and emissions reductions outweigh the reduction in INPV for manufacturers. energy savings from TSL 2 are 0.27 quad costs associated with reduced INPV. Consequently, DOE has concluded that of energy. TSL 2 has an estimated NPV This is the case for each of the low, TSL 4 is not economically justified. of consumer benefit of $0.56 billion primary and high economic cases DOE then considered TSL 3, which using a 7-percent discount rate, and examined, indicating even under the corresponds to the intermediate level $1.98 billion using a 3-percent discount conservative estimations used in the with both condensing and high rate. low economic case the standards are efficiency non-condensing standard The cumulative emissions reductions still economically justified. Therefore, levels, depending on equipment class, at TSL 2 are 16 million metric tons of DOE adopts amended energy and offers the potential for significant CO2, 3.1 thousand tons of SO2, 41 conservation standards for commercial cumulative energy savings over the thousand tons of NOX, 0.0003 ton of Hg, packaged boilers at the levels analysis period from 2020 through 2049. 139 thousand tons of CH4, and 0.14 established by TSL 2 and presented in The estimated energy savings from TSL thousand ton of N2O. The estimated Table V.43.

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TABLE V.43—AMENDED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS (COMPLIANCE REQUIRED STARTING [DATE THREE YEARS AFTER PUBLICATION OF FINAL RULE])

Energy conservation standards Minimum Minimum Equipment thermal combustion efficiency efficiency (%) (%)

Small Gas-Fired Hot Water Commercial Packaged Boilers ...... 84 n/a Large Gas-Fired Hot Water Commercial Packaged Boilers ...... n/a 85 Small Oil-Fired Hot Water Commercial Packaged Boilers ...... 87 n/a Large Oil-Fired Hot Water Commercial Packaged Boilers ...... n/a 88 Small Gas-Fired Steam Commercial Packaged Boilers ...... 81 n/a Large Gas-Fired Steam Commercial Packaged Boilers ...... 82 n/a Small Oil-Fired Steam Commercial Packaged Boilers ...... 84 n/a Large Oil-Fired Steam Commercial Packaged Boilers ...... 85 n/a

2. Summary of Benefits and Costs Table V.44 shows the annualized year in reduced NOX emissions. In this (Annualized) of the Adopted Standards values for commercial packaged boilers case, the net benefit amounts to $85 under TSL 2, expressed in 2015$. The million per year. The benefits and costs of the adopted results under the primary estimate are Using a 3-percent discount rate for all standards can also be expressed in terms as follows. Using a 7-percent discount benefits and costs and the average SCC of annualized values. The annualized rate for benefits and costs other than series corresponding to a value of $40.6/ net benefit is the sum of (1) the CO2 reductions (for which DOE used a annualized national economic value 3-percent discount rate along with the t in 2015 (in 2015$), the estimated cost (expressed in 2015$) of the benefits average SCC series corresponding to a of the adopted standards for commercial from consumer operation of equipment value of $40.6/t in 2015 (2015$)), the packaged boilers is $34 million per year that meets the adopted standards estimated cost of the adopted standards in increased equipment costs, while the (consisting primarily of operating cost for CPB equipment is $35 million per estimated annual benefits are $144 savings from using less energy, minus year in increased equipment costs, million in reduced operating costs, $27 increases in equipment purchase and while the estimated benefits are $90 million in CO2 reductions, and $5.5 installation costs), and (2) the million per year in reduced equipment million in reduced NOX emissions. In annualized monetary value of the CO2 operating costs, $27 million per year in this case, the net benefit would amount 96 and NOX emission reductions. CO2 reductions, and $3.5 million per to $143 million per year.

TABLE V.44—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF ADOPTED STANDARDS (TSL 2) FOR COMMERCIAL PACKAGED BOILERS *

Low net High net Discount rate Primary benefits benefits estimate estimate estimate

(million 2015$/year)

Benefits

Consumer Operating Cost Savings * ...... 7% ...... 90 ...... 80 ...... 98. 3% ...... 144 ...... 128 ...... 160. CO2 Reduction Monetized Value (using mean SCC at 5% dis- 5% ...... 8 ...... 7 ...... 8. count rate) * **. CO2 Reduction Monetized Value (using mean SCC at 3% dis- 3% ...... 27 ...... 24 ...... 29. count rate) * **. CO2 Reduction Monetized Value (using mean SCC at 2.5% dis- 2.5% ...... 40 ...... 36 ...... 43. count rate) * **. CO2 Reduction Monetized Value (using 95th percentile SCC at 3% ...... 82 ...... 74 ...... 89. 3% discount rate) * **. † NOX Reduction Value ...... 7% ...... 3 ...... 3 ...... 9. 3% ...... 5 ...... 5 ...... 12. ‡ Total Benefits ...... 7% plus CO2 range ...... 101 to 175 ..... 90 to 158 ...... 115 to 196. 7% ...... 120 ...... 108 ...... 136. 3% plus CO2 range ...... 157 to 231 ..... 140 to 208 ..... 180 to 261. 3% ...... 177 ...... 158 ...... 201.

96 To convert the time-series of costs and benefits with each year’s shipments in the year in which the value of CO2 reductions, for which DOE used case- into annualized values, DOE calculated a present shipments occur (2020, 2030, etc.), and then specific discount rates. Using the present value, value in 2016, the year used for discounting the discounted the present value from each year to DOE then calculated the fixed annual payment over NPV of total consumer costs and savings. For the 2016. The calculation uses discount rates of 3 and a 30-year period, starting in the compliance year benefits, DOE calculated a present value associated 7 percent for all costs and benefits except for the that yields the same present value.

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TABLE V.44—SELECTED CATEGORIES OF ANNUALIZED BENEFITS AND COSTS OF ADOPTED STANDARDS (TSL 2) FOR COMMERCIAL PACKAGED BOILERS *—Continued

Low net High net Discount rate Primary benefits benefits estimate estimate estimate

(million 2015$/year)

Costs

Consumer Incremental ...... 7% ...... 35 ...... 31 ...... 37.

Equipment Costs 3% ...... 34 ...... 31 ...... 37.

Net Benefits

Total ‡ ...... 7% plus CO2 range ...... 66 to 140 ...... 59 to 127 ...... 78 to 158. 7% ...... 85 ...... 77 ...... 99. 3% plus CO2 range ...... 123 to 198 ..... 109 to 177 ..... 144 to 224. 3% ...... 143 ...... 127 ...... 165. * This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2020–2049. These results in- clude benefits to consumers that accrue after 2049 from the equipment purchased in 2020–2049. The incremental installed costs include incre- mental equipment cost as well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Pri- mary, Low Benefits, and High Benefits Estimates utilize projections of building stock and energy prices from the AEO2016 No-CPP case, a Low Economic Growth case, and a High Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1 of this document and chapter 8 of the NOPR technical support document (TSD). In addition, DOE used estimates for equipment efficiency distribution in its analysis based on national data supplied by industry. Purchases of higher efficiency equip- ment are a result of many different factors unique to each consumer including boiler heating loads, installation costs, site environmental consider- ation, and others. For each consumer, all other factors being the same, it would be anticipated that higher efficiency purchases in the baseline would correlate positively with higher energy prices. To the extent that this occurs, it would be expected to result in some lowering of the con- sumer operating cost savings from those calculated in this rule. ** The CO2 reduction benefits are calculated using 4 different sets of SCC values. The first three use the average SCC calculated using 5-per- cent, 3-percent, and 2.5-percent discount rates, respectively. The fourth represents the 95th percentile of the SCC distribution calculated using a 3-percent discount rate. The SCC values are emission year specific. See section IV.L.1 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.2 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 only the average SCC with 3-percent discount rate.

VI. Procedural Issues and Regulatory contractor or building owner who does regulatory action and an explanation of Review not pay the energy costs. how the regulatory action will meet that need; and (ii) An assessment of the A. Review Under Executive Orders (3) There are external benefits potential costs and benefits of the 12866 and 13563 resulting from improved energy efficiency of commercial packaged regulatory action, including an Section 1(b)(1) of Executive Order boilers that are not captured by the explanation of the manner in which the 12866, ‘‘Regulatory Planning and users of such equipment. These benefits regulatory action is consistent with a Review,’’ 58 FR 51735 (Oct. 4, 1993), include externalities related to public statutory mandate. DOE has included requires each agency to identify the health, environmental protection and these documents in the rulemaking problem that it intends to address, national energy security that are not record. including, where applicable, the failures reflected in energy prices, such as In addition, the Administrator of of private markets or public institutions reduced emissions of air pollutants and OIRA has determined that the regulatory that warrant new agency action, as well greenhouse gases that impact human action is an ‘‘economically significant as to assess the significance of that health and global warming. DOE regulatory action’’ under section (3)(f)(1) problem. The problems that this attempts to qualify some of the external of Executive Order 12866. Accordingly, standards address are as follows: benefits through use of social cost of pursuant to section 6(a)(3)(C) of the (1) Insufficient information and the carbon values. Order, DOE has provided to OIRA an high costs of gathering and analyzing The Administrator of the Office of assessment, including the underlying relevant information leads some Information and Regulatory Affairs analysis, of benefits and costs consumers to miss opportunities to (OIRA) in the OMB has determined that anticipated from the regulatory action, make cost-effective investments in the regulatory action in this document together with, to the extent feasible, a energy efficiency. is a significant regulatory action under quantification of those costs; and an (2) In some cases the benefits of more Executive Order 12866. Accordingly, assessment, including the underlying efficient equipment are not realized due pursuant to section 6(a)(3)(B) of the analysis, of costs and benefits of to misaligned incentives between Order, DOE has provided to OIRA: (i) potentially effective and reasonably purchasers and users. An example of The text of the draft regulatory action, feasible alternatives to the planned such a case is when the equipment together with a reasonably detailed regulation, and an explanation why the purchase decision is made by a building description of the need for the planned regulatory action is preferable

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to the identified potential alternatives. that by law must be proposed for public information from the ABMA trade These assessments can be found in comment, unless the agency certifies association website, company websites, chapter 17 of the technical support that the rule, if promulgated, will not and market research tools to identify document for this rulemaking.97 have a significant economic impact on small manufacturers. For the final rule DOE has also reviewed this regulation a substantial number of small entities. analysis, DOE did not rely on AHRI data pursuant to Executive Order 13563. 76 As required by Executive Order 13272, for the quantitative analysis behind this FR 3281 (Jan. 21, 2011). Executive Order ‘‘Proper Consideration of Small Entities FRFA. Rather, DOE based its analysis on 13563 is supplemental to and explicitly in Agency Rulemaking,’’ 67 FR 53461 listings in the Compliance Certification reaffirms the principles, structures, and (August 16, 2002), DOE published Database,98 which is the database that definitions governing regulatory review procedures and policies on February 19, houses certified values submitted by established in Executive Order 12866. 2003, to ensure that the potential manufacturers of covered equipment To the extent permitted by law, agencies impacts of its rules on domestic small subject to Federal energy conservation are required by Executive Order 13563 entities are properly considered during standards. The equipment information to: (1) Propose or adopt a regulation the rulemaking process. 68 FR 7990. in the Compliance Certification only upon a reasoned determination DOE has made its procedures and Database represents the entire market of that its benefits justify its costs policies available on the Office of the covered equipment that is legally sold (recognizing that some benefits and General Counsel’s website (http:// in the United States. costs are difficult to quantify); (2) tailor energy.gov/gc/office-general-counsel). AHRI commented that utility data on regulations to impose the least burden DOE published an IRFA in a notice of rebate programs would be useful for the on society, consistent with obtaining proposed rule published on March 24, Regulatory Impact Analysis (RIA). regulatory objectives, taking into 2016. 81 FR 15836. The Department (AHRI, Public Meeting Transcript, No. account, among other things, and to the requested comment on the IRFA and has 61 at p. 215) PG&E commented that they extent practicable, the costs of prepared the following FRFA: could provide data on the effectiveness cumulative regulations; (3) select, in of utility rebate programs. (PG&E, Public 1. Need for, Objectives of, and Legal choosing among alternative regulatory Meeting Transcript, No. 61 at p. 215) Basis for, the Rule approaches, those approaches that Raypak noted that rebates on high maximize net benefits (including A statement of the need for, objectives efficiency boilers might encourage potential economic, environmental, of, and legal basis for, the rule is stated people to use them even in applications public health and safety, and other in section II.A and not repeated here. where such boilers are not operating at advantages; distributive impacts; and 2. Significant Issues Raised In Response the high efficiency. (Raypak, Public equity); (4) to the extent feasible, specify to the IRFA Meeting Transcript, No. 61 at pp. 216– performance objectives, rather than 217) specifying the behavior or manner of As part of the IRFA, DOE requested DOE notes that it does consider rebate compliance that regulated entities must comment on financial, sales, and market programs as an alternative to amended adopt; and (5) identify and assess share data from small manufacturers. In standards in its RIA. While it did not available alternatives to direct response to the request for comment, receive data on the effectiveness of regulation, including providing ABMA stated that it believes that the utility rebates programs, rebates are still economic incentives to encourage the proposed standards included in the considered in this final rule among March 2016 NOPR, if adopted, will have desired behavior, such as user fees or other alternatives evaluated. More an adverse effect on the financial well- marketable permits, or providing information regarding the RIA may be being of all boiler manufacturing information upon which choices can be found in chapter 17 of the final rule companies, with a proportionally made by the public. TSD. DOE also notes that the method of DOE emphasizes as well that greater impact on the smaller evaluating the impact of these non- Executive Order 13563 requires agencies companies, operating in what is a very regulatory alternatives considers that to use the best available techniques to competitive marketplace. (ABMA, No. certain purchases of high efficiency/ quantify anticipated present and future 64 at p. 3) However, ABMA did not condensing boilers may not operate at, benefits and costs as accurately as provide any additional data regarding or near, their rated efficiencies. possible. In its guidance, the OIRA has the finances, sales, or market share of small manufacturers that would allow 3. Description and Estimate of the emphasized that such techniques may Number of Small Entities Affected include identifying changing future DOE to refine its analysis. Lochinvar compliance costs that might result from recommended DOE consult with AHRI a. Methodology for Estimating the technological innovation or anticipated on whether or not small manufacturers Number of Small Entities behavioral changes. For the reasons are accurately covered by its directory For manufacturers of CPB equipment, stated in the preamble, DOE concludes or other available sources. (Lochinvar, the Small Business Administration that this final rule is consistent with No. 70 at p. 6) DOE used AHRI’s (SBA) has set a size threshold, which these principles, including the equipment directory and discussions defines those entities classified as requirement that, to the extent with the manufacturers of the ‘‘small businesses’’ for the purposes of permitted by law, benefits justify costs. equipment as a resources to compile its the statute. DOE used the SBA’s small small manufacturer list for the IRFA. business size standards to determine B. Review Under the Regulatory Additionally, DOE asked all participants whether any small entities would be Flexibility Act at the NOPR public meeting, including subject to the requirements of the rule. The Regulatory Flexibility Act (5 AHRI, for additional information on (See 13 CFR part 121.) The size U.S.C. 601 et seq.) requires preparation small manufacturers. Raypak noted that standards are listed by North American of an initial regulatory flexibility the 11 small manufacturers that are not Industry Classification System (NAICS) analysis (IRFA) and a final regulatory part of AHRI or ABMA comprise 25 code and industry description and are flexibility analysis (FRFA) for any rule percent of the total marketplace. (Raypak, No. 72 at p. 3) 98 DOE Compliance Certification Database. 97 See https://www.regulations.gov/document? During the NOPR stage DOE used https://www.regulations.doe.gov/certification-data/ D=EERE-2013-BT-STD-0030-0044. equipment listings from AHRI, #q=Product_Group_s%3A*.

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available at https://www.sba.gov/sites/ do not manufacture the covered manufacturer have no models that are default/files/files/Size_Standards_ equipment in the United States. able to meet the evaluated levels. Table Table.pdf. Manufacturing of commercial DOE identified 45 manufacturers of VI.1 shows the number of small packaged boilers is classified under CPBs affected by this rulemaking. Of business manufacturers that have NAICS 333414, ‘‘Heating Equipment these, DOE identified 21 as small equipment on the market today that (except Warm Air Furnaces) manufacturers that met the screening could meet the trial standard levels. Manufacturing.’’ The SBA sets a requirements. Table VI.1 illustrates that as the threshold of 500 employees or fewer for DOE attempted to contact all the standard level increases, smaller an entity to be considered as a small small business manufacturers of CPB manufacturers, as a group, may have a business for this category. equipment it had identified. Five of the harder time meeting the energy 21 identified small businesses agreed to conservation standard. To identify and estimate the total take part in an MIA interview. DOE also number of companies that could be obtained information about small small business manufacturers of TABLE VI.1—NUMBER OF SMALL MAN- business impacts while interviewing UFACTURERS WITH COMPLIANT equipment covered by this rulemaking, large manufacturers. DOE conducted a market survey using MODEL LISTINGS publicly available information to 4. Description and Estimate of identify potential small manufacturers. Compliance Requirements, Including Number Differences in Cost, If Any, for Different Standard level of small DOE’s research involved its Compliance manufacturers Certification Database, the AHRI Groups of Small Entities Directory,99 individual company and The Compliance Certification No-New STD ...... 8 trade association websites, and market Database, which provided quantitative TSL 1 ...... 8 research tools (e.g., Hoovers reports) to data for the basis of this FRFA, TSL 2 ...... 8 create a list of companies that contained equipment information for TSL 3 ...... 8 manufacture or sell equipment covered only 8 small manufacturers of CPBs in TSL 4 ...... 7 by this rulemaking. DOE also asked the market. The equipment distribution TSL 5 ...... 2 stakeholders and industry in the Compliance Certification representatives if they were aware of Database is representative of the all CPB Additionally, DOE performed a more any other small manufacturers during equipment legally sold in the United detail examination of impacts by manufacturer interviews and at DOE States and is the basis for the equipment class. Table VI.2 shows the public meetings. DOE screened out quantitative analysis of small number of manufacturers in each companies that do not offer equipment businesses. equipment class able to meet trial covered by this rulemaking, do not meet At higher trial standard levels, an standard levels with existing equipment the definition of a ‘‘small business,’’ or increasing number of small offerings.

TABLE VI.2—NUMBER OF SMALL MANUFACTURERS WITH LISTINGS COMPLIANT AT THE ANALYZED STANDARD LEVELS

Number of small business manufacturers with compliant equipment Standard level SGHW LGHW SOHW LOHW SGST LGST SOST LOST

No-New STD ...... 8 4 3 3 4 1 3 2 TSL 1 ...... 8 2 1 1 2 1 3 2 TSL 2 ...... 8 2 1 1 2 1 3 2 TSL 3 ...... 7 2 1 1 2 1 3 2 TSL 4 ...... 7 0 0 1 1 0 0 0 TSL 5 ...... 0 0 0 1 1 0 0 0

At TSL 5, there are multiple offerings meeting the efficiency level for would have conversion costs totaling equipment classes where no small every equipment class analyzed. $4.5 million. This averages out to $0.56 manufacturers currently offer To estimate the maximum potential million in conversion costs per small equipment that meets the efficiency costs to the industry, DOE’s conversion manufacturer. Using publicly available level. Specifically, no small cost model assumes manufacturers will information from Hoovers, Manta, and manufacturers have designs that could choose to redesign all non-compliant Glassdoor, DOE estimated revenues for meet TSL in the small gas hot water, models. Manufacturers, including small small manufacturers listed in the large gas hot water, small oil hot water, manufacturers, with no equipment Compliance Certification Database. The large gas steam, small oil steam, or large compliant with the amended standard average annual revenue was $29.6 oil steam equipment classes. Similarly would redesign all models to offer a full million. Based on this information, DOE at TSL 4, small manufacturers do not suite of equipment. DOE used model estimated conversion costs to be 0.63 currently have product offerings counts to disaggregate conversion costs percent of revenue over the three-year conversion period. meeting the levels for most equipment for the small manufacturers in the For gas-fired commercial packaged classes. At TSL 3, TSL 2, and TSL 1, the Compliance Certification Database. boilers, DOE’s engineering analysis number of small manufacturers that Small manufacturers accounted for 21 concludes that no proprietary currently have compliant listings is percent of models. At the adopted standard, small manufacturers in the technology is required to meet today’s reduced, but there are small Compliance Certification Database amended standard level. Manufacturers manufacturers with existing equipment would likely need to adopt one or a 99 See www.ahridirectory.org/ahriDirectory/ combination of different technology pages/home.aspx. options: (1) Heat exchanger

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improvements (including upgrading manufacturers, including small business that collection of information displays a mechanical draft or condensing heat manufacturers. currently valid OMB Control Number. exchangers); (2) improvements in burner Additional compliance flexibilities D. Review Under the National technology; or (3) using oxygen trim may be available through other means. Environmental Policy Act of 1969 systems. EPCA provides that a manufacturer DOE notes that the market for oil-fired whose annual gross revenue from all of Pursuant to the National commercial packaged boilers is its operations does not exceed $8 Environmental Policy Act (NEPA) of shrinking. Some manufacturers, both million may apply for an exemption 1969, DOE has determined that this rule small and large, may choose not to from all or part of an energy fits within the category of actions invest in equipment redesign given the conservation standard for a period not included in Categorical Exclusion (CX) small market size and projected decline longer than 24 months after the effective B5.1 and otherwise meets the in shipments. For manufacturers that do date of a final rule establishing the requirements for application of a CX. stay in the oil-fired market, DOE’s standard. Additionally, section 504 of (See 10 CFR part 1021, App. B, B5.1(b); analysis indicates that there are no the Department of Energy Organization 1021.410(b) and Appendix B, B(1)–(5).) proprietary technologies required to Act, 42 U.S.C. 7194, provides authority The rule fits within the category of meet TSL 2. Manufacturers would likely for the Secretary to adjust a rule issued actions because it is a rulemaking that need to adopt one or a combination of under EPCA in order to prevent ‘‘special establishes energy conservation different technology options: (1) Heat hardship, inequity, or unfair standards for consumer equipment or industrial equipment, and for which exchanger improvements (including distribution of burdens’’ that may be none of the exceptions identified in CX upgrading to mechanical draft heat imposed on that manufacturer as a B5.1(b) apply. Therefore, DOE has made exchangers); (2) improvements in burner result of such rule. Manufacturers a CX determination for this rulemaking, technology; or (3) using oxygen trim should refer to 10 CFR part 430, subpart and DOE does not need to prepare an systems. E, and 10 CFR part 1003 for additional details. Environmental Assessment or 5. Significant Alternatives to the Rule Environmental Impact Statement for C. Review Under the Paperwork this rule. DOE’s CX determination for The discussion above analyzes Reduction Act this rule is available at http:// impacts on small businesses that would Manufacturers of commercial energy.gov/nepa/categorical-exclusion- result from the adopted standards. In packaged boilers must certify to DOE cx-determinations-cx. addition to considering other TSLs in that their equipment comply with any this rulemaking, DOE considered applicable energy conservation E. Review Under Executive Order 13132 several policy alternatives in lieu of standards. In certifying compliance, Executive Order 13132, ‘‘Federalism,’’ standards that could potentially result manufacturers must test their 64 FR 43255 (Aug. 10, 1999), imposes in energy savings while reducing equipment according to the DOE test certain requirements on Federal burdens on small businesses. DOE procedures for commercial packaged agencies formulating and implementing considered the following policy boilers, including any amendments policies or regulations that preempt alternatives: (1) No change in standard; adopted for those test procedures. DOE State law or that have Federalism (2) commercial consumer rebates; (3) has established regulations for the implications. The Executive Order commercial consumer tax credits; (4) certification and recordkeeping requires agencies to examine the voluntary energy efficiency targets; and requirements for all covered consumer constitutional and statutory authority (5) early replacement. While these equipment and commercial equipment, supporting any action that would limit alternatives may mitigate to some including commercial packaged boilers. the policymaking discretion of the varying extent the economic impacts on 76 FR 12422 (March 7, 2011). The States and to carefully assess the small entities compared to the collection-of-information requirement necessity for such actions. The standards, DOE determined that the for the certification and recordkeeping Executive Order also requires agencies energy savings of these alternatives are is subject to review and approval by to have an accountable process to significantly smaller than those that OMB under the Paperwork Reduction ensure meaningful and timely input by would be expected to result from the Act (PRA). This requirement has been State and local officials in the adopted standard levels. Accordingly, approved by OMB under OMB control development of regulatory policies that DOE is declining to adopt any of these number 1910–1400. DOE requested have Federalism implications. On alternatives and is adopting the OMB approval of an extension of this March 14, 2000, DOE published a standards set forth in this rulemaking. information collection for three years, statement of policy describing the (See chapter 17 of the final rule TSD for specifically including the collection of intergovernmental consultation process further detail on the policy alternatives information proposed in the present it will follow in the development of DOE considered.) rulemaking, and estimated that the such regulations. 65 FR 13735. DOE has In reviewing alternatives to the final annual number of burden hours under examined this rule and has determined rule, DOE examined energy this extension is 30 hours per company. that it would not have a substantial conservation standards set at other trial In response to DOE’s request, OMB direct effect on the States, on the standard levels. At levels above TSL 2, approved DOE’s information collection relationship between the national the impacts to small manufacturers requirements covered under OMB government and the States, or on the would be more severe. While TSL 1 control number 1910–1400 through distribution of power and would reduce the impacts on small November 30, 2017. 80 FR 5099 responsibilities among the various business manufacturers, it would come (January 30, 2015). levels of government. EPCA governs and at the expense of a reduction in energy Notwithstanding any other provision prescribes Federal preemption of State savings. DOE concludes that of the law, no person is required to regulations as to energy conservation for establishing standards at TSL 2 balances respond to, nor shall any person be the equipment that is the subject of this the benefits of the energy savings at TSL subject to a penalty for failure to comply final rule. States can petition DOE for 2 with the potential burdens placed on with, a collection of information subject exemption from such preemption to the commercial packaged boiler to the requirements of the PRA, unless extent, and based on criteria, set forth in

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EPCA. (42 U.S.C. 6297) No further local, and Tribal governments on a H. Review Under the Treasury and action is required by Executive Order ‘‘significant intergovernmental General Government Appropriations 13132. mandate,’’ and requires an agency plan Act, 1999 for giving notice and opportunity for F. Review Under Executive Order 12988 Section 654 of the Treasury and timely input to potentially affected General Government Appropriations With respect to the review of existing small governments before establishing Act, 1999 (Pub. L. 105–277) requires regulations and the promulgation of any requirements that might Federal agencies to issue a Family new regulations, section 3(a) of significantly or uniquely affect them. On Policymaking Assessment for any rule Executive Order 12988, ‘‘Civil Justice March 18, 1997, DOE published a that may affect family well-being. This Reform,’’ imposes on Federal agencies statement of policy on its process for rule would not have any impact on the the general duty to adhere to the intergovernmental consultation under autonomy or integrity of the family as following requirements: (1) Eliminate UMRA. 62 FR 12820. DOE’s policy an institution. Accordingly, DOE has drafting errors and ambiguity, (2) write statement is also available at http:// concluded that it is not necessary to regulations to minimize litigation, and energy.gov/sites/prod/files/gcprod/ prepare a Family Policymaking (3) provide a clear legal standard for _ documents/umra 97.pdf. Assessment. affected conduct rather than a general DOE has concluded that this final rule standard and promote simplification may require expenditures of $100 I. Review Under Executive Order 12630 and burden reduction. 61 FR 4729 (Feb. million or more by the private sector. DOE has determined, under Executive 7, 1996). Section 3(b) of Executive Order Such expenditures may include (1) Order 12630, ‘‘Governmental Actions 12988 specifically requires that investment in research and and Interference with Constitutionally Executive agencies make every development and in capital Protected Property Rights,’’ 53 FR 8859 reasonable effort to ensure that the expenditures by commercial packaged (Mar. 15, 1988), that this regulation regulation (1) clearly specifies the boilers manufacturers in the years would not result in any takings that preemptive effect, if any, (2) clearly between the final rule and the might require compensation under the specifies any effect on existing Federal compliance date for the new standards, Fifth Amendment to the U.S. law or regulation, (3) provides a clear and (2) incremental additional Constitution. legal standard for affected conduct expenditures by consumers to purchase while promoting simplification and higher-efficiency commercial packaged J. Review Under the Treasury and burden reduction, (4) specifies the boilers, starting at the compliance date General Government Appropriations retroactive effect, if any, (5) adequately for the applicable standard. Act, 2001 defines key terms, and (6) addresses Section 202 of UMRA authorizes a Section 515 of the Treasury and other important issues affecting clarity Federal agency to respond to the content General Government Appropriations and general draftsmanship under any requirements of UMRA in any other Act, 2001 (44 U.S.C. 3516, note) guidelines issued by the Attorney statement or analysis that accompanies provides for Federal agencies to review General. Section 3(c) of Executive Order the final rule. (2 U.S.C. 1532(c)) The most disseminations of information to 12988 requires Executive agencies to content requirements of section 202(b) the public under guidelines established review regulations in light of applicable of UMRA relevant to a private sector by each agency pursuant to general standards in section 3(a) and section mandate substantially overlap the guidelines issued by OMB. OMB’s 3(b) to determine whether they are met economic analysis requirements that guidelines were published at 67 FR or it is unreasonable to meet one or apply under section 325(o) of EPCA and 8452 (Feb. 22, 2002), and DOE’s more of them. DOE has completed the Executive Order 12866. The guidelines were published at 67 FR required review and determined that, to SUPPLEMENTARY INFORMATION section of 62446 (Oct. 7, 2002). DOE has reviewed the extent permitted by law, this final the final rule and TSD for this rule this final rule under the OMB and DOE rule meets the relevant standards of respond to those requirements. guidelines and has concluded that it is Executive Order 12988. Under section 205 of UMRA, the consistent with applicable policies in Department is obligated to identify and G. Review Under the Unfunded those guidelines. consider a reasonable number of Mandates Reform Act of 1995 regulatory alternatives before K. Review Under Executive Order 13211 Title II of the Unfunded Mandates promulgating a rule for which a written Executive Order 13211, ‘‘Actions Reform Act of 1995 (UMRA) requires statement under section 202 is required. Concerning Regulations That each Federal agency to assess the effects (2 U.S.C. 1535(a)) DOE is required to Significantly Affect Energy Supply, of Federal regulatory actions on State, select from those alternatives the most Distribution, or Use,’’ 66 FR 28355 (May local, and Tribal governments and the cost-effective and least burdensome 22, 2001), requires Federal agencies to private sector. Public Law 104–4, sec. alternative that achieves the objectives prepare and submit to OIRA at OMB, a 201 (codified at 2 U.S.C. 1531). For a of the rule unless DOE publishes an Statement of Energy Effects for any regulatory action likely to result in a explanation for doing otherwise, or the significant energy action. A ‘‘significant rule that may cause the expenditure by selection of such an alternative is energy action’’ is defined as any action State, local, and Tribal governments, in inconsistent with law. As required by by an agency that promulgates or is the aggregate, or by the private sector of EPCA in 42 U.S.C. 6313(a), this final expected to lead to promulgation of a $100 million or more in any one year rule establishes amended energy final rule, and that (1) is a significant (adjusted annually for inflation), section conservation standards for commercial regulatory action under Executive Order 202 of UMRA requires a Federal agency packaged boilers that are designed to 12866, or any successor order, and (2) to publish a written statement that achieve a significant improvement in is likely to have a significant adverse estimates the resulting costs, benefits, energy efficiency that DOE has effect on the supply, distribution, or use and other effects on the national determined to be both technologically of energy, or (3) is designated by the economy. (2 U.S.C. 1532(a), (b)) The feasible and economically justified. A Administrator of OIRA as a significant UMRA also requires a Federal agency to full discussion of the alternatives energy action. For any significant energy develop an effective process to permit considered by DOE is presented in action, the agency must give a detailed timely input by elected officers of State, chapter 17 of the TSD for this final rule. statement of any adverse effects on

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energy supply, distribution, or use that are typically used and prepared a Perry, Case No. 17–cv–03404–VC, as affirmed should the proposal be implemented, report describing that peer review.100 by the U.S. Court of Appeals for the Ninth and of reasonable alternatives to the Generation of this report involved a Circuit in the consolidated cases Nos. 18– action and their expected benefits on rigorous, formal, and documented 15380 and 18–15475. DOE reaffirmed the energy supply, distribution, and use. evaluation using objective criteria and original signature and date in the Energy Conservation Standards implementation of DOE has concluded that this qualified and independent reviewers to the court order published elsewhere in this regulatory action, which sets forth make a judgment as to the technical/ issue of the Federal Register. This document amended energy conservation standards scientific/business merit, the actual or is substantively identical to the signed for commercial packaged boilers, is not anticipated results, and the productivity document. DOE had previously posted to its a significant energy action because the and management effectiveness of website. In response to an error correction standards are not likely to have a programs and/or projects. DOJ has request, DOE revised two tables in the significant adverse effect on the supply, determined that the peer-reviewed document that inadvertently listed the lower distribution, or use of energy, nor has it bound of several equipment classes as analytical process continues to reflect ≥ been designated as such by the current practice, and the Department >300,000 Btu/h, instead of 300,000 Btu/h. Administrator at OIRA. Accordingly, The document has also been edited and followed that process for developing formatted in conformance with the DOE has not prepared a Statement of energy conservation standards in the publication requirements for the Federal Energy Effects on the final rule. case of the present rulemaking. Register and CFR to ensure the document can L. Review Under the Information M. Congressional Notification be given legal effect. Quality Bulletin for Peer Review As required by 5 U.S.C. 801, DOE will Editorial Note: This document was On December 16, 2004, OMB, in report to Congress on the promulgation received for publication by the Office of the consultation with the Office of Science of this rule prior to its effective date. Federal Register on December 3, 2019. and Technology Policy (OSTP), issued The report will state that it has been For the reasons set forth in the its Final Information Quality Bulletin determined that the rule is a ‘‘major preamble, DOE amends part 431 of for Peer Review (the Bulletin). 70 FR rule’’ as defined by 5 U.S.C. 804(2). chapter II, subchapter D, of title 10 of 2664 (Jan. 14, 2005). The Bulletin VII. Approval of the Office of the the Code of Federal Regulations, to read establishes that certain scientific as set forth below: information shall be peer reviewed by Secretary qualified specialists before it is The Secretary of Energy has approved PART 431—ENERGY EFFICIENCY disseminated by the Federal publication of this final rule. PROGRAM FOR CERTAIN Government, including influential COMMERCIAL AND INDUSTRIAL List of Subject in 10 CFR Part 431 scientific information related to agency EQUIPMENT regulatory actions. The purpose of the Administrative practice and bulletin is to enhance the quality and procedure, Confidential business ■ 1. The authority citation for Part 431 credibility of the Government’s information, Energy conservation, Test continues to read as follows: scientific information. Under the procedures, and Reporting and recordkeeping requirements. Authority: 42 U.S.C. 6291–6317; 28 U.S.C. Bulletin, the energy conservation 2461 note. standards rulemaking analyses are Issued in Washington, DC, on December ‘‘influential scientific information,’’ 28, 2016. ■ 2. Section 431.87 is revised to read as which the Bulletin defines as ‘‘scientific David J. Friedman, follows: information the agency reasonably can Acting Assistant Secretary, Energy Efficiency determine will have, or does have, a § 431.87 Energy and water conservation and Renewable Energy. standards and their effective dates. clear and substantial impact on important public policies or private Note: DOE is publishing this document (a) Each commercial packaged boiler concerning commercial packaged boilers to listed in Table 1 to § 431.87 and sector decisions.’’ Id. 70 FR 2667. comply with an order from the U.S. District In response to OMB’s Bulletin, DOE Court for the Northern District of California manufactured on or after March 2, 2012 conducted formal peer reviews of the in the consolidated cases of Natural and prior to January 10, 2023, must energy conservation standards Resources Defense Council, et al. v. Perry and meet the applicable energy conservation development process and the analyses People of the State of California et al. v. standard levels as follows: TABLE 1 TO § 431.87—COMMERCIAL PACKAGED BOILER ENERGY CONSERVATIONS STANDARDS

Efficiency level— Equipment Subcategory Size category effective date: (input) March 2, 2012 *

Hot Water Commercial Packaged Boilers ...... Gas-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 80.0% ET. Hot Water Commercial Packaged Boilers ...... Gas-fired ...... >2,500,000 Btu/h ...... 82.0% EC. Hot Water Commercial Packaged Boilers ...... Oil-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 82.0% ET. Hot Water Commercial Packaged Boilers ...... Oil-fired ...... >2,500,000 Btu/h ...... 84.0% EC. Steam Commercial Packaged Boilers ...... Gas-fired—all, except natural draft ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 79.0% ET. Steam Commercial Packaged Boilers ...... Gas-fired—all, except natural draft ...... >2,500,000 Btu/h ...... 79.0% ET. Steam Commercial Packaged Boilers ...... Gas-fired—natural draft ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 77.0% ET. Steam Commercial Packaged Boilers ...... Gas-fired—natural draft ...... >2,500,000 Btu/h ...... 77.0% ET. Steam Commercial Packaged Boilers ...... Oil-fired ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 81.0% ET. Steam Commercial Packaged Boilers ...... Oil-fired ...... >2,500,000 Btu/h ...... 81.0% ET.

* Where ET means ‘‘thermal efficiency’’ and EC means ‘‘combustion efficiency’’ as defined in 10 CFR 431.82.

100 The 2007 ‘‘Energy Conservation Standards following website: http://energy.gov/eere/buildings/ downloads/energy-conservation-standards- Rulemaking Peer Review Report’’ is available at the rulemaking-peer-review-report-0.

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(b) Each commercial packaged boiler 2023, must meet the applicable energy listed in Table 2 to § 431.87 and conservation standard levels as follows: manufactured on or after January 10,

TABLE 2 TO § 431.87—COMMERCIAL PACKAGED BOILER ENERGY CONSERVATIONS STANDARDS

Energy Equipment Size category conservation (rated input) standard

Small Gas-Fired Hot Water Commercial Packaged Boilers .. ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 84.0% ET. Large Gas-Fired Hot Water Commercial Packaged Boilers .. >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 85.0% EC. Very Large Gas-Fired Hot Water Commercial Packaged >10,000,000 Btu/h ...... 82.0% EC. Boilers. Small Oil-Fired Hot Water Commercial Packaged Boilers .... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 87.0% ET. Large Oil-Fired Hot Water Commercial Packaged Boilers .... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 88.0% EC. Very Large Oil-Fired Hot Water Commercial Packaged Boil- >10,000,000 Btu/h ...... 84.0% EC. ers. Small Gas-Fired Steam Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 81.0% ET. Large Gas-Fired Steam Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 82.0% ET. Very Large Gas-Fired Steam Commercial Packaged Boil- >10,000,000 Btu/h ...... 79.0% ET. ers **. Small Oil-Fired Steam Commercial Packaged Boilers ...... ≥300,000 Btu/h and ≤2,500,000 Btu/h ...... 84.0% ET. Large Oil-Fired Steam Commercial Packaged Boilers ...... >2,500,000 Btu/h and ≤10,000,000 Btu/h ...... 85.0% ET. Very Large Oil-Fired Steam Commercial Packaged Boilers >10,000,000 Btu/h ...... 81.0% ET.

* Where ET means ‘‘thermal efficiency’’ and EC means ‘‘combustion efficiency’’ as defined in 10 CFR 431.82. ** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum thermal efficiency level of 77 percent is permitted and meets Federal commercial packaged boiler energy conservation standards.

[FR Doc. 2019–26356 Filed 1–9–20; 8:45 am] BILLING CODE 6450–01–P

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