[Federal Register Volume 81, Number 57 (Thursday, March 24, 2016)]
[Proposed Rules]
[Pages 15835-15921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06588]



[[Page 15835]]

Vol. 81

Thursday,

No. 57

March 24, 2016

Part III





Department of Energy





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10 CFR Part 431





Energy Conservation Program: Energy Conservation Standards for 
Commercial Packaged Boilers; Proposed Rule

Federal Register / Vol. 81 , No. 57 / Thursday, March 24, 2016 / 
Proposed Rules

[[Page 15836]]


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DEPARTMENT OF ENERGY

10 CFR Part 431

[Docket Number EERE-2013-BT-STD-0030]
RIN 1904-AD01


Energy Conservation Program: Energy Conservation Standards for 
Commercial Packaged Boilers

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

ACTION: Notice of proposed rulemaking and announcement of public 
meeting.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as 
amended, prescribes energy conservation standards for various consumer 
equipment and certain commercial and industrial equipment, including 
commercial packaged boilers. EPCA also requires the U.S. Department of 
Energy (DOE) to periodically determine whether more stringent standards 
would be technologically feasible and economically justified, and would 
save a significant amount of energy. DOE has tentatively concluded that 
more stringent standards are technologically feasible and economically 
justified, and would result in significant additional conservation of 
energy. Therefore, DOE proposes amended energy conservation standards 
for commercial packaged boilers. This document also announces a public 
meeting to receive comment on the proposed standards and associated 
analyses and results.

DATES: Meeting: DOE will hold a public meeting on Thursday, April 21, 
2016, from 9:30 a.m. to 3 p.m., in Washington, DC. The meeting will 
also be broadcast as a webinar. See section VII, Public Participation, 
for webinar registration information, participant instructions, and 
information about the capabilities available to webinar participants.
    Comments: DOE will accept comments, data, and information regarding 
this notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than May 23, 2016. See section VII, Public 
Participation, for details.
    Comments regarding the likely competitive impact of the proposed 
standard should be sent to the Department of Justice contact listed in 
the ADDRESSES section before April 25, 2016.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 1E-245, 1000 Independence Avenue SW., 
Washington, DC 20585. To register for the webinar and receive call-in 
information, please use this link: https://attendee.gotowebinar.com/register/6872804566336170753.
    Instructions: Any comments submitted must identify the NOPR on 
Energy Conservation Standards for Commercial Packaged Boilers, and 
provide docket number EERE-2013-BT-STD-0030 and/or regulatory 
information number (RIN) number 1904-AD01. Comments may be submitted 
using any of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: [email protected]. Include the docket 
number EERE-2013-BT-STD-0030 and/or RIN 1904-AD01 in the subject line 
of the message. Submit electronic comments in WordPerfect, Microsoft 
Word, PDF, or ASCII file format, and avoid the use of special 
characters or any form of encryption.
    3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue 
SW., Washington, DC 20585-0121. If possible, please submit all items on 
a CD, in which case it is not necessary to include printed copies.
    4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Office, 950 L'Enfant Plaza SW., Room 
6094, Washington, DC 20024. Telephone: (202) 586-2945. If possible, 
please submit all items on a compact disc (CD), in which case it is not 
necessary to include printed copies.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
[email protected].
    No telefacsimilies (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see section VII of this document (Public 
Participation).
    EPCA requires the Attorney General to provide DOE a written 
determination of whether the proposed standard is likely to lessen 
competition. The U.S. Department of Justice Antitrust Division invites 
input from market participants and other interested persons with views 
on the likely competitive impact of the proposed standard. Interested 
persons may contact the Division at [email protected] before 
April 25, 2016. Please indicate in the ``subject'' line of your email 
the title and Docket Number of this proposed rule.
    Docket: The docket, which includes Federal Register notices, public 
meeting attendee lists and transcripts, comments, and other supporting 
documents/materials, is available at www.regulations.gov. All documents 
in the docket are listed in the www.regulations.gov index. However, 
some documents listed in the index may not be publicly available, such 
as those containing information that is exempted from public 
disclosure.
    A link to the docket Web page can be found at http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=79. This Web page contains a link to the docket 
for this document on the www.regulations.gov site. The 
www.regulations.gov Web page contains simple instructions on how to 
access all documents, including public comments, in the docket. See 
section VII of this document for further information on how to submit 
comments through www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Mr. James Raba, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, 
DC 20585-0121. Telephone: (202) 586-8654. Email: [email protected].
    Mr. Peter Cochran, U.S. Department of Energy, Office of the General 
Counsel, GC-33 1000 Independence Avenue SW., Washington, DC 20585-0121. 
Telephone: (202) 586-9496. Email: [email protected].
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Ms. Brenda Edwards at (202) 586-2945 or by email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits and Costs
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Commercial Packaged 
Boilers
III. General Discussion
    A. Compliance Dates
    B. Test Procedure
    C. Technological Feasibility
    1. General

[[Page 15837]]

    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price
    c. Energy Savings
    d. Lessening of Utility or Performance of Equipment
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. General
    2. Scope of Coverage and Equipment Classes
    3. Technology Options
    B. Screening Analysis
    C. Engineering Analysis
    1. Methodology
    a. Overall Methodology and Extrapolation of Prices
    b. Large CPB Analysis and Representative Fuel Input Rate
    2. Data Collection and Categorization
    3. Baseline Efficiency
    4. Intermediate and Max-Tech Efficiency Levels
    5. Incremental Price and Price-Efficiency Curves
    D. Markups Analysis
    E. Energy Use Analysis
    1. Energy Use Characterization
    2. Building Sample Selection and Sizing Methodology
    3. Miscellaneous Energy Use
    F. Life-Cycle Cost and Payback Period Analysis
    1. Equipment Costs
    2. Installation Costs
    3. Annual Per-Unit Energy Consumption
    4. Energy Prices and Energy Price Trends
    5. Maintenance Costs
    6. Repair Costs
    7. Lifetime
    8. Discount Rate
    9. No-New-Standards-Case Market Efficiency Distribution
    10. Payback Period Inputs
    11. Rebuttable-Presumption Payback Period
    G. Shipments Analysis
    H. National Impact Analysis
    1. Equipment Efficiency in the No-New-Standards Case and 
Standards Cases
    2. National Energy Savings
    3. Net Present Value of Consumer Benefit
    a. Total Annual Installed Cost
    b. Total Annual Operating Cost Savings
    c. Discount Rate
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Government Regulatory Impact Model
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    2. Manufacturer Interviews
    a. Testing Burden
    b. Condensing Boilers Not Appropriate for Many Commercial 
Applications
    c. Not Many American Companies Produce Condensing Heat 
Exchangers
    d. Reduced Product Durability and Reliability
    3. Discussion of Comments
    a. Impacts on Condensing Technology
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Development of Social Cost of Carbon Values
    c. Current Approaches and Key Assumptions
    2. Social Cost of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Impacts on Direct Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    C. Conclusion
    1. Benefits and Burdens of Trial Standard Levels Considered for 
Commercial Packaged Boilers
    2. Summary of Benefits and Costs (Annualized) of the Proposed 
Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    1. Description on Estimated Number of Small Entities Regulated
    2. Description and Estimate of Compliance Requirements
    3. Duplication, Overlap, and Conflict With Other Rules and 
Regulations
    4. Significant Alternatives to the Rule
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Prepared General Statements For 
Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

    Title III, Part C \1\ of the Energy Policy and Conservation Act of 
1975 (42 U.S.C. 6291, et seq.; ``EPCA''), Public Law 94-163 (42 U.S.C. 
6311-6317, as codified), added by Public Law 95-619, Title IV, section 
441(a), establishes the Energy Conservation Program for Certain 
Industrial Equipment.\2\ These include commercial packaged boilers 
(``CPB''), the subject of this document. (42 U.S.C. 6311(1)(J)) 
Commercial packaged boilers are also covered under the American Society 
of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) 
Standard 90.1 (ASHRAE Standard 90.1), ``Energy Standard for Buildings 
Except Low-Rise Residential Buildings.'' \3\
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part C was redesignated Part A-1.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Energy Efficiency Improvement Act of 2015, 
Public Law 114-11 (April 30, 2015).
    \3\ ASHRAE Standard 90.1-2013 (i.e., the most recent version of 
ASHRAE Standard 90.1) did not amend the efficiency levels for 
commercial packaged boilers. Thus, DOE is undertaking this 
rulemaking under the 6-year review requirement in 42 U.S.C. 
6313(a)(6)(C), as opposed to the statutory provision regarding 
ASHRAE equipment (42 U.S.C. 6313(a)(6)(A). For more information on 
DOE's review of ASHRAE Standard 90.1-2013, see: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=108.
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    EPCA requires DOE to conduct an evaluation of its standards for CPB 
equipment every 6 years and to publish either a notice of determination 
that such standards do not need to be amended or a NOPR including 
proposed amended standards. (42 U.S.C. 6313(a)(6)(C)(i)) EPCA further 
requires that any new or amended energy conservation standards that DOE 
prescribes for covered equipment shall be designed to achieve the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II)) 
Furthermore, the new or amended standard must result in a significant 
additional conservation of energy. Id. Under the applicable statutory 
provisions, DOE must determine that there is clear and convincing 
evidence supporting the adoption of more stringent energy conservation 
standards than the ASHRAE level. Id. Once complete, this

[[Page 15838]]

rulemaking will satisfy DOE's statutory obligation under 42 U.S.C. 
6313(a)(6)(C).
    Pursuant to these and other statutory requirements discussed in 
this document, DOE initiated this rulemaking to evaluate CPB energy 
conservation standards and to determine whether new or amended 
standards are warranted. DOE has examined the existing CPB standards 
and has tentatively concluded that modifying and expanding the existing 
10 CPB equipment classes to 12 equipment classes is warranted. As 
discussed in detail in section IV.A.2 of this document, DOE proposes 
to: (1) Discontinue the use of draft type as a criteria for equipment 
classes; and (2) establish separate equipment classes for ``very 
large'' commercial packaged boilers. Eliminating the use of draft type 
as a distinguishing feature for equipment classes would consolidate the 
4 existing draft-specific equipment classes into 2 non-draft-specific 
equipment classes. Further, the proposed change to distinguish very 
large CPB as separate equipment classes would result in an additional 4 
equipment classes. As a result, the total number of equipment classes 
would increase from 10 to 12. DOE has tentatively concluded that there 
is clear and convincing evidence to support more stringent standards 
for 8 of the 12 equipment classes proposed in this NOPR, which includes 
all classes except for the newly proposed very large CPB classes. The 
proposed standards, which prescribe minimum thermal efficiencies 
(ET) or combustion efficiencies (EC), are shown 
in Table I.1. These proposed standards, if adopted, would apply to the 
applicable equipment classes listed in Table I.1 and manufactured in, 
or imported into, the United States on and after the date 3 years after 
the publication of the final rule.

                Table I.1--Proposed Energy Conservation Standards for Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                    Proposed energy           Compliance date
              Equipment                Size category (input)    conservation standard *          [dagger]
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial  >300,000 Btu/h and       85.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=2,500,000 Btu/h.                                  publication of final
                                                                                           rule].
Large Gas-Fired Hot Water Commercial  >2,500,000 Btu/h and     85.0% EC.................  [date 3 years after
 Packaged Boilers.                     <=10,000,000 Btu/h.                                 publication of final
                                                                                           rule].
Very Large Gas-Fired Hot Water        >10,000,000 Btu/h......  82.0% EC[dagger].........  March 2, 2012.
 Commercial Packaged Boilers.
Small Oil-Fired Hot Water Commercial  >300,000 Btu/h and       87.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=2,500,000 Btu/h.                                  publication of final
                                                                                           rule].
Large Oil-Fired Hot Water Commercial  >2,500,000 Btu/h and     88.0% EC.................  [date 3 years after
 Packaged Boilers.                     <=10,000,000 Btu/h.                                 publication of final
                                                                                           rule].
Very Large Oil-Fired Hot Water        >10,000,000 Btu/h......  84.0% EC[dagger].........  March 2, 2012.
 Commercial Packaged Boilers.
Small Gas-Fired Steam Commercial      >300,000 Btu/h and       81.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=2,500,000 Btu/h.                                  publication of final
                                                                                           rule].
Large Gas-Fired Steam Commercial      >2,500,000 Btu/h and     82.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=10,000,000 Btu/h.                                 publication of final
                                                                                           rule].
Very Large Gas-Fired Steam            >10,000,000 Btu/h......  79.0% ET[dagger].........  March 2, 2012.
 Commercial Packaged Boilers **.
Small Oil-Fired Steam Commercial      >300,000 Btu/h and       84.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=2,500,000 Btu/h.                                  publication of final
                                                                                           rule].
Large Oil-Fired Steam Commercial      >2,500,000 Btu/h and     85.0% ET.................  [date 3 years after
 Packaged Boilers.                     <=10,000,000 Btu/h.                                 publication of final
                                                                                           rule].
Very Large Oil-Fired Steam            >10,000,000 Btu/h......  81.0% ET[dagger].........  March 2, 2012.
 Commercial Packaged Boilers.
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* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''
** Prior to March 2, 2022, for natural draft very large gas-fired steam commercial packaged boilers, a minimum
  thermal efficiency level of 77% is permitted and meets Federal commercial packaged boiler energy conservation
  standards.
[dagger] For very large CPB equipment classes DOE proposes to retain the existing standards for such equipment,
  which had a compliance date of March 2, 2012, as shown.

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed energy conservation standards on consumers of commercial 
packaged boilers, as measured by the average life-cycle cost (LCC) 
savings and the simple payback period (PBP).\4\ The average LCC savings 
are positive for all equipment classes, and the PBP is less than the 
average lifetime of the equipment, which is estimated to be 24.8 years 
for all equipment classes evaluated in this NOPR.
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    \4\ The average LCC savings are measured relative to the no-new-
standards case efficiency distribution, which depicts the CPB market 
in the compliance year in the absence of amended standard levels 
(see section IV.F.9 of this document and chapter 8 of the NOPR 
technical support document (TSD)). The simple PBP, which is designed 
to compare specific efficiency levels for commercial packaged 
boilers, is measured relative to the baseline CPB equipment (see 
section IV.F.10 of this document and chapter 8 of the TSD).

     Table I.2--Impacts of Proposed Energy Conservation Standards on
                Consumers of Commercial Packaged Boilers
------------------------------------------------------------------------
                                            Average LCC
             Equipment class                  savings     Simple payback
                                              (2014$)     period (years)
------------------------------------------------------------------------
Small Gas-Fired Hot Water...............            $521             9.6

[[Page 15839]]

 
Large Gas-Fired Hot Water...............           3,647            11.0
Small Oil-Fired Hot Water...............           7,799             5.7
Large Oil-Fired Hot Water...............          30,834             4.7
Small Gas-Fired Steam...................           2,782             7.4
Large Gas-Fired Steam...................          16,802             4.7
Small Oil-Fired Steam...................           4,256             5.3
Large Oil-Fired Steam...................          36,128             2.8
------------------------------------------------------------------------

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

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the base year through the end of the 
analysis period (2014 to 2048). Using a real discount rate of 9.5 
percent, DOE estimates that the INPV for manufacturers of commercial 
packaged boilers is $180.1 million in 2014$. Under the proposed 
standards, DOE expects that INPV may reduce by $23.8 to $13.1 million, 
which is approximately 13.2 to 7.3 percent respectively. Under today's 
proposed standard, DOE expects the industry to incur $27.5 million in 
conversion costs.
    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this document.

C. National Benefits and Costs \5\
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    \5\ All monetary values in this section are expressed in 2014 
dollars and, where appropriate, are discounted to 2015.
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    DOE's analyses indicate that the proposed standards would save a 
significant amount of energy. The lifetime energy savings for 
commercial packaged boilers purchased in the 30-year period that begins 
in the anticipated first full year of compliance with amended standards 
(2019-2048), relative to the case without amended standards (referred 
to as the ``no-new-standards case''), amount to 0.39 quadrillion Btu 
(quads).\6\ This represents a savings of 0.8 percent relative to the 
energy use of this equipment in the no-new-standards case.\7\
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    \6\ A quad is equal to 10\15\ British thermal units (Btu). The 
quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy 
savings include the energy consumed in extracting, processing, and 
transporting primary fuels (i.e., coal, natural gas, petroleum 
fuels), and thus present a more complete picture of the impacts of 
energy efficiency standards. For more information on the FFC metric, 
see section IV.H.1 of this document.
    \7\ The no-new-standards case assumptions are described in 
section IV.F.9 of this document.
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    The cumulative net present value (NPV) of total consumer costs and 
savings of the proposed standards for commercial packaged boilers 
ranges from $0.414 billion (at a 7-percent discount rate) to $1.687 
billion (at a 3-percent discount rate). This NPV expresses the 
estimated total value of future operating-cost savings minus the 
estimated increased equipment and installation costs for commercial 
packaged boilers purchased in 2019-2048.
    In addition, the proposed CPB standards would have significant 
environmental benefits. The energy savings described in this section 
are estimated to result in cumulative emission reductions (over the 
same period as for energy savings) of 22 million metric tons (Mt) \8\ 
of carbon dioxide (CO2), 233 thousand tons of methane 
(CH4), 2.1 thousand tons of sulfur dioxide (SO2), 
162 thousand tons of nitrogen oxides (NOX), 0.1 thousand 
tons of nitrous oxide (N2O), and 0.0003 tons of mercury 
(Hg).\9\ The cumulative reduction in CO2 emissions through 
2030 amounts to 2.86 Mt, which is equivalent to the emissions resulting 
from the annual electricity use of 0.393 million homes.
---------------------------------------------------------------------------

    \8\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons 
(ton).
    \9\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy 
Outlook 2015 (AEO2015) Reference case. AEO2015 generally represents 
current legislation and environmental regulations for which 
implementing regulations were available as of October 31, 2014.
---------------------------------------------------------------------------

    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the Social Cost of Carbon, or SCC) developed by a recent Federal 
interagency process.\10\ The derivation of the SCC values is discussed 
in section IV.L of this document. Using discount rates appropriate for 
each set of SCC values (see Table I.3), DOE estimates the present 
monetary value of the CO2 emissions reduction is between 
$0.14 billion and $2.0 billion, with a value of $0.66 billion using the 
central SCC case represented by $40.0 per metric ton in 2015.\11\ DOE 
also estimates the present monetary value of the NOX 
emissions reduction is $0.16 billion at a 7-percent discount rate and 
$0.45 billion at a 3-percent discount rate.\12\ More detailed results 
can be found in chapter 14 of the NOPR TSD.
---------------------------------------------------------------------------

    \10\ Techincal Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866, Interagency 
Working Group on Social Cost of Carbon, United States Government 
(May 2013; revised July 2015) (Available at: www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
    \11\ The values only include CO2 emissions; 
CO2 equivalent emissions from other greenhouse gases are 
not included.
    \12\ DOE estimated the monetized value of 
NOXemissions reductions using benefits per ton estimates 
from the Regulatory Impact Analysis titled, ``Proposed Carbon 
Pollution Guidelines for Existing Power Plants and Emission 
Standards for Modified and Reconstructed Power Plants,'' published 
in June 2014 by EPA's Office of Air Quality Planning Standards. 
(Available at www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal10602.pdf.) See section IV.L.2 for further 
discussion. Note that the agency is presenting a national benefit-
per-ton estimate for particulate matter emitted from the Electricity 
Generating Unit sector based on an estimate of premature mortality 
derived from the ACS study (Krewski et al., 2009). If the benefit-
per-ton estimates were based on the Six Cities study (Lepuele et 
al., 2011), the values would be nearly two-and-a-half times larger. 
Because of the sensitivity of the benefit-per-ton estimate to the 
geographical considerations of sources and receptors of emissions by 
assessing the regional approach taken by EPA's Regulatory Impact 
Analysis of the Clean Power Plan Final Rule. Note the DOE is 
currently investigating valuation of avoided SO2 and 
Hg emissions.
---------------------------------------------------------------------------

    Table I.3 summarizes the national economic benefits and costs 
expected to result from the proposed standards for commercial packaged 
boilers.

[[Page 15840]]



 Table I.3--Summary of National Economic Benefits and Costs of Proposed
 Energy Conservation Standards for Commercial Packaged Boilers (TSL 2 *)
------------------------------------------------------------------------
                                      Present value
             Category                (million 2014$)   Discount rate (%)
------------------------------------------------------------------------
                                Benefits
------------------------------------------------------------------------
Operating Cost Savings............                925                  7
                                                2,550                  3
CO2 Reduction (using mean SCC at                  136                  5
 5% discount rate) **.............
CO2 Reduction (using mean SCC at                  655                  3
 3% discount rate) **.............
CO2 Reduction (using mean SCC at                1,054                2.5
 2.5% discount rate) **...........
CO2 Reduction (using 95th                       1,998                  3
 percentile SCC at 3% discount
 rate) **.........................
------------------------------------------------------------------------
NOX Reduction [dagger]............                158                  7
                                                  447                  3
------------------------------------------------------------------------
Total Benefits [dagger][dagger]...              1,738                  7
                                                3,653                  3
------------------------------------------------------------------------
                                  Costs
------------------------------------------------------------------------
Incremental Installed Costs.......                512                  7
                                                  863                  3
------------------------------------------------------------------------
                           Total Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX Reduction                 1,227                  7
 Monetized Value [dagger][dagger].
                                                2,789                  3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with commercial
  packaged boilers shipped in 2019-2048. These results include benefits
  to consumers that accrue after 2048 from the equipment purchased in
  2019-2048. The incremental installed costs include incremental
  equipment cost as well as installation costs. The CO2 reduction
  benefits are global benefits due to actions that occur nationally.
** The interagency group selected four sets of SCC values for use in
  regulatory analyses. Three sets of values are based on the average SCC
  from the integrated assessment models, at discount rates of 5, 3, and
  2.5 percent. For example, for 2015 emissions, these values are $12.2/
  metric ton, $40.0/metric ton, and $62.3/metric ton, in 2014$,
  respectively. The fourth set ($117 per metric ton in 2014$ for 2015
  emissions), which represents the 95th percentile of the SCC
  distribution calculated using SCC estimate across all three models at
  a 3-percent discount rate, is included to represent higher-than-
  expected impacts from temperature change further out in the tails of
  the SCC distribution. The SCC values are emission year specific. See
  section IV.L.1 for more details.
[dagger] The $/ton values used for NOX are described in section IV.L.
  DOE estimated the monetized value of NOX emissions reductions using
  benefit per ton estimates from the Regulatory Impact Analysis titled,
  ``Proposed Carbon Pollution Guidelines for Existing Power Plants and
  Emission Standards for Modified and Reconstructed Power Plants,''
  published in June 2014 by EPA's Office of Air Quality Planning and
  Standards. (Available at www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further
  discussion. Note that the agency is presenting a national benefit-per-
  ton estimate for particulate matter emitted from the Electric
  Generating Unit sector based on an estimate of premature mortality
  derived from the ACS study (Krewski et al., 2009). If the benefit-per-
  ton estimates were based on the Six Cities study (Lepuele et al.,
  2011), the values would be nearly two-and-a-half times larger. Because
  of the sensitivity of the benefit-per-ton estimate to the geographical
  considerations of sources and receptors of emissions, DOE intends to
  investigate refinements to the agency's current approach of one
  national estimate by assessing the regional approach taken by EPA's
  Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total benefits for both the 3-percent and 7-percent
  cases are presented using only the average SCC with 3-percent discount
  rate.

    The benefits and costs of this NOPR's proposed energy conservation 
standards, for covered commercial packaged boilers sold in 2019-2048, 
can also be expressed in terms of annualized values. The monetary 
values for the total annualized net benefits are the sum of: (1) The 
annualized national economic value of the benefits from consumer 
operation of the equipment that meets the proposed standards 
(consisting primarily of reduced operating costs minus increases in 
product purchase price and installation costs); and (2) the annualized 
value of the benefits of CO2 and NOX emission 
reductions.\13\
---------------------------------------------------------------------------

    \13\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2015, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(e.g., 2020 or 2030), and then discounted the present value from 
each year to 2015. The calculation uses discount rates of 3 and 7 
percent for all costs and benefits except for the value of 
CO2 reductions, for which DOE used case-specific discount 
rates, as shown in Table I.4. Using the present value, DOE then 
calculated the fixed annual payment over a 30-year period starting 
in the compliance year that yields the same present value.
---------------------------------------------------------------------------

    The national operating savings are domestic private U.S. consumer 
monetary savings that occur as a result of purchasing these equipment. 
The national operating cost savings is measured for the lifetime of 
commercial packaged boilers shipped in 2019-2048.
    The CO2 reduction is a benefit that accrues globally due 
to decreased domestic energy consumption that is expected to result 
from this proposed rule. Because CO2 emissions have a very 
long residence time in the atmosphere,\14\ the SCC values in future 
years reflect future CO2-emissions impacts that continue 
beyond 2100 through 2300.
---------------------------------------------------------------------------

    \14\ The atmospheric lifetime of CO2 is estimated to 
be on the order of 30-95 years. Jacobson, MZ, ``Correction to 
`Control of fossil-fuel particulate black carbon and organic matter, 
possibly the most effective method of slowing global warming,' '' J. 
Geophys. Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------

    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.4. The results under the primary 
estimate are as follows. Using a 7-percent discount rate for benefits 
and costs other than CO2 reduction, for which DOE used a 3-
percent discount rate along with the average SCC series that has a 
value of $40.0 per metric ton in 2015, the cost of the standards 
proposed in this rulemaking is $51 million per year in increased 
equipment costs, while the benefits are $91 million per year in reduced 
equipment operating costs, $37 million in CO2 reductions, 
and $16 million in reduced NOX emissions. In

[[Page 15841]]

this case, the net benefit amounts to $93 million per year. Using a 3-
percent discount rate for all benefits and costs and the average SCC 
series that has a value of $40.0 per metric ton in 2015, the estimated 
cost of the CPB standards proposed in this rulemaking is $48 million 
per year in increased equipment costs, while the benefits are $142 
million per year in reduced operating costs, $37 million in 
CO2 reductions, and $25 million in reduced NOX 
emissions. In this case, the net benefit amounts to $156 million per 
year.

                   Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                                                     -----------------------------------------------------------------------------------
                                              Discount rate                                       Low net benefits  estimate       High net benefits
                                                                          Primary  estimate *                  *                      estimate *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *.  7%..............................  91........................  84........................  101.
                                    3%..............................  142.......................  129.......................  160.
CO2 Reduction (using mean SCC at    5%..............................  10........................  10........................  11.
 5% discount rate) ***.
CO2 Reduction (using mean SCC at    3%..............................  37........................  34........................  39.
 3% discount rate) ***.
CO2 Reduction (using mean SCC at    2.5%............................  54........................  51........................  58.
 2.5% discount rate) ***.
CO2 Reduction (using 95th           3%..............................  111.......................  104.......................  119.
 percentile SCC at 3% discount
 rate) ***.
NOX Reduction [dagger]............  7%..............................  16........................  15........................  37.
                                    3%..............................  25........................  23........................  59.
Total Benefits [dagger][dagger]...  7% plus CO2 range...............  117 to 218................  108 to 203................  149 to 258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    7%..............................  143.......................  133.......................  177.
                                    3% plus CO2 range...............  177 to 278................  162 to 256................  230 to 338.
                                    3%..............................  204.......................  186.......................  258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment      7%..............................  51........................  54........................  47.
 Costs.
                                    3%..............................  48........................  52........................  45.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7% plus CO2 range...............  67 to 168.................  54 to 149.................  102 to 210.
                                    7%..............................  93........................  79........................  130.
                                    3% plus CO2 range...............  129 to 230................  110 to 205................  185 to 293.
                                    3%..............................  156.......................  135.......................  213.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2019-2048. These results include benefits
  to consumers that accrue after 2048 from the equipment purchased in 2019-2048. The incremental installed costs include incremental equipment cost as
  well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
  Benefits Estimates utilize projections of building stock and energy prices from the AEO2015 Reference case, Low Economic Growth case, and High
  Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
  manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1
  of this document and chapter 8 of the NOPR technical support document (TSD).
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the
  integrated assessment models, at discount rates of 5, 3, and 2.5 percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/
  metric ton, and $62.3/metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), which represents the 95th
  percentile of the SCC distribution calculated using SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-
  than-expected impacts from temperature change further out in the tails of the SCC distribution. The SCC values are emission year specific. See section
  IV.L for more details.
[dagger] The $/ton values used for NOX are described in section IV.L. DOE estimated the monetized value of NOX emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further discussion. Note that the agency is presenting a national benefit-
  per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the
  ACS study (Krewski et al., 2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al., 2011), the values would be
  nearly two-and-a-half times larger. Because of the sensitivity of the benefit-per-ton estimate to the geographical considerations of sources and
  receptors of emissions, DOE intends to investigate refinements to the agency's current approach of one national estimate by assessing the regional
  approach taken by EPA's Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total benefits for both the 3-percent and 7-percent cases are presented using only the average SCC with a 3-percent discount rate. In
  the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate,
  and those values are added to the full range of CO2 values.

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

D. Conclusion

    Based on clear and convincing evidence, DOE has tentatively 
concluded that the proposed standards represent the maximum improvement 
in energy efficiency that is technologically feasible and economically 
justified, and would result in the significant conservation of energy. 
DOE further notes that equipment achieving these standard levels is 
already commercially available for at least some, if not most, 
equipment classes covered by this

[[Page 15842]]

proposal.\15\ Based on the analyses described above, DOE has 
tentatively concluded that the benefits of the proposed standards to 
the Nation (energy savings, positive NPV of consumer benefits, consumer 
LCC savings, and emission reductions) would outweigh the burdens (loss 
of INPV for manufacturers and LCC increases for some consumers).
---------------------------------------------------------------------------

    \15\ See chapter 3 of the NOPR TSD for information about the 
efficiency ratings of equipment currently available on the market.
---------------------------------------------------------------------------

    DOE also considered more stringent energy efficiency levels as 
potential standards, and is considering them in this rulemaking. 
However, DOE has tentatively concluded that the potential burdens of 
the more stringent energy efficiency levels would outweigh the 
projected benefits. Based on consideration of the public comments that 
DOE receives in response to this document and related information 
collected and analyzed during the course of this rulemaking effort, DOE 
may adopt energy efficiency levels presented in this document that are 
either higher or lower than the proposed standards, or some combination 
of level(s) that incorporate the proposed standards in part.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposal, as well as some of the relevant historical 
background related to the establishment of standards for commercial 
packaged boilers.

A. Authority

    Title III, Part C \16\ of the Energy Policy and Conservation Act of 
1975 (``EPCA'' or ``the Act''), Public Law 94-163 (42 U.S.C. 6311-6317, 
as codified), added by Public Law 95-619, Title IV, section 441(a), 
sets forth a variety of provisions designed to improve energy 
efficiency.\17\ It established the ``Energy Conservation Program for 
Certain Industrial Equipment,'' which includes commercial packaged 
boilers that are the subject of this rulemaking. The energy 
conservation standards for commercial packaged boilers are codified in 
DOE's regulations under subpart E of Title 10 of the Code of Federal 
Regulations (CFR), Part 431.
---------------------------------------------------------------------------

    \16\ For editorial reasons, upon codification in the United 
States Code (U.S.C.), Part C was re-designated Part A-1.
    \17\ All references to EPCA in this document refer to the 
statute as amended through the Energy Efficiency Improvement Act of 
2015, Public Law 114-11 (April 30, 2015).
---------------------------------------------------------------------------

    The ASHRAE Standard 90.1, ``Energy Standard for Buildings Except 
Low-Rise Residential Buildings,'' sets industry energy efficiency 
levels for small, large, and very large commercial package air-
conditioning and heating equipment, packaged terminal air conditioners, 
packaged terminal heat pumps, warm air furnaces, packaged boilers, 
storage water heaters, instantaneous water heaters, and unfired hot 
water storage tanks (collectively ``ASHRAE equipment'').\18\ EPCA 
directs DOE to consider amending the existing Federal energy 
conservation standard for each type of covered ASHRAE equipment 
whenever ASHRAE amends the efficiency levels in Standard 90.1. (42 
U.S.C. 6313(a)(6)(A)) For each type of listed equipment, EPCA directs 
that if ASHRAE amends Standard 90.1, DOE must adopt amended standards 
at the new ASHRAE efficiency level, unless clear and convincing 
evidence supports a determination that adoption of a more stringent 
level would produce significant additional energy savings and would be 
technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the 
efficiency levels specified in the amended ASHRAE Standard 90.1, DOE 
must establish such standard not later than 18 months after publication 
of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) 
However, if DOE determines that a more stringent standard is justified, 
then it must establish such more stringent standard not later than 30 
months after publication of the amended ASHRAE Standard 90.1. (42 
U.S.C. 6313(a)(6)(B)(i))
---------------------------------------------------------------------------

    \18\ For more information, see www.ashrae.org.
---------------------------------------------------------------------------

    In the event that ASHRAE does not act to amend Standard 90.1, EPCA 
provides an alternative statutory mechanism for initiating such review. 
More specifically, EPCA requires that every six years, the Secretary of 
Energy (Secretary) shall consider amending the energy conservation 
standards for covered commercial equipment and shall publish either a 
notice of determination that those standards do not need to be amended, 
or a notice of proposed rulemaking for more stringent energy efficiency 
standards. (42 U.S.C. 6313(a)(6)(C))
    Pursuant to EPCA, DOE's energy conservation program for covered 
equipment consists essentially of four parts: (1) Testing, (2) 
labeling, (3) the establishment of Federal energy conservation 
standards, and (4) compliance certification and enforcement procedures. 
Subject to certain criteria and conditions, DOE has authority, as 
discussed above, to adopt amended energy conservation standards for 
commercial packaged boilers. In addition, DOE is required to develop 
test procedures to measure the energy efficiency, energy use, or 
estimated annual operating cost of covered equipment. (42 U.S.C. 
6314(a)(2)) Manufacturers of covered equipment must use the prescribed 
DOE test procedure as the basis for certifying to DOE that their 
equipment comply with the applicable energy conservation standards 
adopted under EPCA and when making representations to the public 
regarding the energy use or efficiency of such equipment. (42 U.S.C. 
6314(d)(1)) Similarly, DOE must use these test procedures to determine 
whether the equipment comply with standards adopted pursuant to EPCA. 
The DOE test procedures for commercial packaged boilers currently 
appear at 10 CFR 431.86.
    When setting standards for the ASHRAE equipment addressed by this 
document, EPCA, as amended, prescribes certain statutory criteria for 
DOE to consider. See generally 42 U.S.C. 6313(a)(6)(A)-(D). Any amended 
standard for covered equipment more stringent than the level contained 
in ASHRAE Standard 90.1 must be designed to achieve significant 
improvement in energy efficiency that is technologically feasible and 
economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i)) 
Furthermore, DOE may not adopt a more stringent standard that would not 
result in the significant additional conservation of energy. Id. In 
deciding whether a proposed standard is economically justified, DOE 
must determine whether the benefits of the standard exceed its burdens. 
DOE must make this determination after receiving comments on the 
proposed standard, and by considering, to the maximum extent 
practicable, the following seven factors:

    (1) The economic impact of the standard on manufacturers and 
consumers of products subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price, initial charges, or maintenance 
expenses for the covered equipment which are likely to result from 
the standard;
    (3) The total projected amount of energy savings likely to 
result directly from the standard;
    (4) Any lessening of the utility or the performance of the 
covered product likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;

[[Page 15843]]

    (6) The need for national energy conservation; and
    (7) Other factors the Secretary of Energy considers relevant.

(42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII))
    Subject to certain criteria and conditions, DOE is required to 
develop test procedures to measure the energy efficiency, energy use, 
or estimated annual operating cost of covered equipment. (42 U.S.C. 
6314) Specifically, EPCA requires that if a test procedure referenced 
in ASHRAE Standard 90.1 is updated, DOE must update its test procedure 
to be consistent with the amended test procedure in ASHRAE Standard 
90.1, unless DOE determines that the amended test procedure is not 
reasonably designed to produce test results that reflect the energy 
efficiency, energy use, or estimated operating costs of the ASHRAE 
equipment during a representative average use cycle. In addition, DOE 
must determine that the amended test procedure is not unduly burdensome 
to conduct. (42 U.S.C. 6314(a)(2) and (4)) Manufacturers of covered 
equipment must use the prescribed DOE test procedure as the basis for 
certifying to DOE that their equipment complies with the applicable 
energy conservation standards adopted under EPCA and when making 
representations to the public regarding the energy use or efficiency of 
such equipment. (42 U.S.C. 6314(d)) Similarly, DOE must use these test 
procedures to determine whether the equipment complies with standards 
adopted pursuant to EPCA. The DOE test procedure for commercial 
packaged boilers currently appear at 10 CFR 431.86.
    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard that either increases the maximum allowable energy 
use or decreases the minimum required energy efficiency of a covered 
product. (42 U.S.C. 6313(a)(6)(B)(iii)(I) and (C)(i)) Furthermore, the 
Secretary may not prescribe an amended or new standard if interested 
persons have established by a preponderance of the evidence that the 
standard is likely to result in the unavailability in the United States 
of any covered product type (or class) of performance characteristics 
(including reliability), features, sizes, capacities, and volumes that 
are substantially the same as those generally available in the United 
States at the time of the Secretary's finding. (42 U.S.C. 
6313(a)(6)(B)(iii)(II)(aa) and (C)(i))
    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy (and, as applicable, water) savings 
during the first year that the consumer will receive as a result of the 
standard, as calculated under the applicable test procedure. For this 
rulemaking, DOE considered the criteria for rebuttable presumption as 
part of its analysis.
    Additionally, when a type or class of covered equipment has two or 
more subcategories, DOE often specifies more than one standard level. 
DOE generally will adopt a different standard level than that which 
applies generally to such type or class of products for any group of 
covered products that have the same function or intended use if DOE 
determines that products within such group (A) consume a different kind 
of energy from that consumed by other covered products within such type 
(or class), or (B) have a capacity or other performance-related feature 
that other products within such type (or class) do not have and which 
justifies a higher or lower standard. In determining whether a 
performance-related feature justifies a different standard for a group 
of products, DOE generally considers such factors as the utility to the 
consumer of the feature and other factors DOE deems appropriate. In a 
rule prescribing such a standard, DOE includes an explanation of the 
basis on which such higher or lower level was established. DOE 
considered these criteria for this rulemaking.
    Because ASHRAE did not update its efficiency levels for commercial 
packaged boilers in any of its most recent updates to ASHRAE Standard 
90.1 (i.e., ASHRAE Standard 90.1-2010 and ASHRAE Standard 90.1-2013), 
DOE is analyzing amended standards consistent with the procedures 
defined under 42 U.S.C. 6313(a)(6)(C). Specifically, pursuant to 42 
U.S.C. 6313(a)(6)(C)(i)(II), DOE must use the procedures established 
under subparagraph (B) when issuing a NOPR.
    After carefully reviewing all commercial packaged boiler equipment 
classes, DOE has tentatively concluded that there is clear and 
convincing evidence that the proposed amended standards for eight of 
the twelve proposed commercial packaged boiler equipment classes (i.e., 
all commercial packaged boilers with fuel input rate <=10,000 kBtu/h) 
would result in significant additional conservation of energy and would 
be technologically feasible and economically justified, as mandated by 
42 U.S.C. 6313(a)(6).
    For the remaining four equipment classes, (i.e., all commercial 
packaged boilers with fuel input rate >10,000 kBtu/h) DOE proposes to 
maintain the existing standards because there is not sufficient data to 
provide clear and convincing evidence that more stringent standards 
would be technologically feasible and economically justified, and would 
result in significant additional energy savings.

B. Background

1. Current Standards
    DOE amended its energy conservation standards for commercial 
packaged boilers through a final rule published in the Federal Register 
on July 22, 2009 (July 2009 final rule). 74 FR 36312. More 
specifically, the July 2009 final rule updated the energy conservation 
standards for commercial packaged boilers to correspond to the levels 
in the 2007 revision of ASHRAE Standard 90.1 (i.e., ASHRAE Standard 
90.1-2007). Compliance with the amended standards was required 
beginning on March 2, 2012. These levels are shown in Table II.1. Also 
in the July 2009 final rule, DOE again followed ASHRAE's approach in 
Standard 90.1-2007 and adopted a second tier of energy conservation 
standards for two classes of commercial packaged boilers, which are 
shown in Table II.2. Compliance with the latter standards will be 
required beginning on March 2, 2022.

 Table II.1--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or after March
                                                     2, 2012
----------------------------------------------------------------------------------------------------------------
                                                               Size category       Efficiency level--effective
          Equipment type                 Subcategory              (input)             date:  March 2, 2012 *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged       Gas-fired............  >=300,000 Btu/h and   80.0% ET.
 Boilers.                                                   <=2,500,000 Btu/h.

[[Page 15844]]

 
Hot Water Commercial Packaged       Gas-fired............  >2,500,000 Btu/h....  82.0% EC.
 Boilers.
Hot Water Commercial Packaged       Oil-fired............  >=300,000 Btu/h and   82.0% ET.
 Boilers.                                                   <=2,500,000 Btu/h.
Hot Water Commercial Packaged       Oil-fired............  >2,500,000 Btu/h....  84.0% EC.
 Boilers.
Steam Commercial Packaged Boilers.  Gas-fired--All,        >=300,000 Btu/h and   79.0% ET.
                                     Except Natural Draft.  <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.  Gas-fired--All,        >2,500,000 Btu/h....  79.0% ET.
                                     Except Natural Draft.
Steam Commercial Packaged Boilers.  Gas-fired--Natural     >=300,000 Btu/h and   77.0% ET.
                                     Draft.                 <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.  Gas-fired--Natural     >2,500,000 Btu/h....  77.0% ET.
                                     Draft.
Steam Commercial Packaged Boilers.  Oil-fired............  >=300,000 Btu/h and   81.0% ET.
                                                            <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.  Oil-fired............  >2,500,000 Btu/h....  81.0% ET.
----------------------------------------------------------------------------------------------------------------
* ET means ``thermal efficiency.'' EC means ``combustion efficiency.''


 Table II.2--Federal Energy Efficiency Standards for Commercial Packaged Boilers Manufactured on or after March
                                                     2, 2022
----------------------------------------------------------------------------------------------------------------
                                                               Size category       Efficiency level--effective
          Equipment type                 Subcategory              (input)              date: March 2, 2022
----------------------------------------------------------------------------------------------------------------
Steam Commercial Packaged Boilers.  Gas-fired--Natural     >=300,000 Btu/h and   79.0% ET.
                                     Draft.                 <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers.  Gas-fired--Natural     >2,500,000 Btu/h....  79.0% ET.
                                     Draft.
----------------------------------------------------------------------------------------------------------------

2. History of Standards Rulemaking for Commercial Packaged Boilers
    DOE is conducting this rulemaking pursuant to 42 U.S.C. 
6313(a)(6)(C), which requires that every six years, DOE must publish 
either: (1) A notice of the determination that standards for the 
equipment do not need to be amended, or (2) a NOPR including proposed 
energy conservation standards. As noted above, DOE's last final rule 
for commercial packaged boilers was published on July 22, 2009, so as a 
result, DOE is required to act to publish one of the above two 
documents within 6 years. Once completed, this rulemaking will satisfy 
DOE's statutory obligation under 42 U.S.C. 6313(a)(6)(C). DOE must 
publish a final rule not later than two years after this NOPR is 
issued. (42 U.S.C. 6313(a)(6)(C)(iii)(I))
    In initiating this rulemaking, DOE prepared a Framework document, 
``Energy Conservation Standards Rulemaking Framework Document for 
Commercial Packaged Boilers,'' which describes the procedural and 
analytical approaches DOE anticipated using to evaluate energy 
conservation standards for commercial packaged boilers. DOE published a 
notice that announced both the availability of the Framework document 
and a public meeting to discuss the proposed analytical framework for 
the rulemaking. That notice also invited written comments from the 
public. 78 FR 54197 (Sept. 3, 2013). The Framework document is 
available at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
    DOE held a public meeting on October 1, 2013, at which it described 
the various analyses DOE would conduct as part of the rulemaking, such 
as the engineering analysis, the life-cycle cost (LCC) and payback 
period (PBP) analyses, and the national impact analysis (NIA). 
Representatives of manufacturers, trade associations, environmental and 
energy efficiency advocates, and other interested parties attended the 
meeting. The participants discussed the following major topics, among 
others: (1) The rulemaking scope (2) test procedures for commercial 
packaged boilers; and (3) various issues related to the planned 
analyses of amended energy conservation standards. Interested parties 
also provided comments on the Framework document, which DOE considered 
and responded to in chapter 2 of the preliminary analysis TSD.
    On November 20, 2014, DOE published a second notice, ``Energy 
Conservation Standards for Commercial Packaged Boilers: Public Meeting 
and Availability of the Preliminary Technical Support Document'' in the 
Federal Register to announce the availability of the preliminary 
analysis technical support document. 79 FR 69066. The preliminary 
analysis technical support document (TSD) provided preliminary results 
of the analyses that DOE conducted in support of the energy 
conservation standards rulemaking. DOE invited interested parties to 
comment on the preliminary analysis, and requested public comments on 
specific issues related to the TSD. These issues are listed in the 
Executive Summary chapter of the preliminary TSD. The preliminary TSD 
is available at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79.
    On December 9, 2014, DOE held a public meeting, at which it 
described the methodology and preliminary results of the various 
analyses it conducted as part of the rulemaking, such as the 
engineering analysis, the LCC and PBP analyses, and the NIA. 
Representatives of manufacturers, trade associations, environmental and 
energy efficiency advocates, and other interested parties attended the 
meeting. The public meeting provided an opportunity for the attendees 
to provide feedback and comments that would help improve DOE's analysis 
and results for the NOPR stage. In addition, DOE also received several 
written comments from interested parties and stakeholders, in response 
to the preliminary analysis TSD. Parties providing comments are shown 
in Table II.3. DOE considered the comments and feedback for the 
updating the analysis in preparation of

[[Page 15845]]

this document. Relevant comments and DOE's responses are provided in 
section III and section IV of this document.

                   Table II.3--Parties That Provided Comments on the Preliminary Analysis TSD
----------------------------------------------------------------------------------------------------------------
            Name of party                    Abbreviation           Source of comments             Type *
----------------------------------------------------------------------------------------------------------------
Air-Conditioning, Heating and          AHRI....................  Public Meeting, Written.  TA
 Refrigeration Institute.
American Boiler Manufacturers          ABMA....................  Public Meeting, Written.  TA
 Association.
American Council for Energy Efficient  ACEEE, ASAP & NRDC......  Written.................  EA
 Economy, Appliance Standards
 Awareness Project, National Resource
 Defense Council.
American Council for Energy Efficient  ACEEE...................  Public Meeting..........  EA
 Economy.
Lochinvar, LLC.......................  Lochinvar...............  Public Meeting, Written.  M
Raypak, Inc..........................  Raypak..................  Public Meeting, Written.  M
PVI Industries.......................  PVI.....................  Public Meeting..........  M
Plumbing, Heating and Cooling          PHCC....................  Public Meeting..........  C
 Contractors.
Appliance Standards Awareness Project  ASAP....................  Public Meeting..........  EA
Pacific Gas & Electric, Southern       PGE & SCE...............  Written.................  U
 California Edison.
----------------------------------------------------------------------------------------------------------------
* TA: Trade Association; EA: Efficiency/Environmental Advocate; M: Manufacturer; C: Contractor; U: Utility.

    In parallel to the energy conservation standards rulemaking, DOE 
published a notice of proposed determination on August 13, 2013 (August 
2013 NOPD), which initiated a coverage determination to explicitly 
clarify DOE's statutory authority under EPCA to cover natural draft 
commercial packaged boilers. DOE initiated this coverage determination 
because the existing definition of ``packaged boiler'' could have 
allowed for differing interpretations as to whether natural draft 
commercial packaged boilers are covered equipment. 78 FR 49202. In the 
August 2013 NOPD, DOE proposed a definition for natural draft 
commercial packaged boilers that would clarify its statutory authority 
to cover such equipment. DOE sought public comments in response to its 
proposed determination and definition for natural draft commercial 
packaged boilers, and received several written comments from interested 
parties. In addition, DOE also received several comments in response to 
the preliminary analysis TSD that are relevant to the issue of coverage 
determination of natural draft commercial packaged boilers.\19\ After 
carefully reviewing all of the comments received on the issue of 
coverage determination of natural draft commercial packaged boilers and 
determining that the comments indicated a common and long-standing 
understanding from interested parties that natural draft commercial 
packaged boilers are and have been covered equipment under part A-1 of 
Title III of EPCA, DOE decided to withdraw the August 2013 NOPD on 
August 25, 2015 (August 2015 withdrawal notice). 80 FR 51487.
---------------------------------------------------------------------------

    \19\ Comments with regards to the coverage determination of 
natural draft CPB from both the 2013 NOPD and the preliminary 
analysis TSD are discussed in detail in the 2015 withdrawal notice 
(80 FR 51487).
---------------------------------------------------------------------------

    Lastly, DOE is also currently conducting a separate test procedure 
rulemaking to consider an amended test procedure for commercial 
packaged boilers. On February 20, 2014, DOE published a request for 
information (RFI) in the Federal Register that sought comments and 
information from stakeholders on several issues pertaining to the CPB 
test procedure. 79 FR 9643. On February 22, 2016, DOE issued a NOPR, 
which proposed to update the test procedure for determining the 
efficiency of commercial packaged boilers (February 2016 test procedure 
NOPR).\20\ Through the proposed test procedure, DOE has sought to 
addresses some of the issues raised by DOE in the RFI and by interested 
parties in their comments. Section III.B of this document briefly 
discusses the changes proposed to the current test procedure and the 
potential impact on the energy conservation standards.\21\ The analyses 
conducted for this NOPR reflect the changes proposed in the February 
2016 test procedure NOPR.
---------------------------------------------------------------------------

    \20\ A link to the February 2016 test procedure NOPR issued by 
DOE can be found at: http://energy.gov/eere/buildings/downloads/issuance-2016-02-22-energy-conservation-program-certain-commercial-and.
    \21\ For detailed discussion on the test procedure including the 
comments and DOE's response please see the docket no. EERE-2014-BT-
TP-0006. The docket can also be accessed using the following link: 
http://www.regulations.gov/#!docketDetail;D=EERE-2014-BT-TP-0006.
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III. General Discussion

A. Compliance Dates

    In 42 U.S.C. 6313(a), EPCA prescribes a number of compliance dates 
for any resulting amended standards for commercial packaged boilers. 
These compliance dates vary depending on specific statutory authority 
under which DOE is conducting its review (i.e., whether DOE is 
triggered by a revision to ASHRAE Standard 90.1 or whether DOE is 
undertaking a 6-year review), and the action taken (i.e., whether DOE 
is adopting ASHRAE Standard 90.1 levels or more stringent levels). The 
discussion that follows explains the potential compliance dates as they 
pertain to this rulemaking.
    As discussed in section II.A of this document, EPCA requires that 
at least once every 6 years, DOE must review standards for commercial 
packaged boilers and publish either a notice of determination that 
standards for this type of equipment do not need to be amended or a 
NOPR for any equipment for which more than 6 years has elapsed since 
the issuance of the most recent final rule. (42 U.S.C. 
6313(a)(6)(C)(i)) EPCA requires that an amended standard prescribed 
under 42 U.S.C. 6313(a)(6)(C) must apply to products manufactured after 
the date that is the later of: (1) The date 3 years after publication 
of the final rule establishing a new standard or (2) the date 6 years 
after the effective date of the current standard for a covered product. 
(42 U.S.C. 6313(a)(6)(C)(iv)). For commercial packaged boilers, the 
final rule is scheduled to be published in 2016 and the current 
standards went into effect in 2012. Thus, the date 3 years after the 
publication of a final rule (2019) would be later than the date 6 years 
after the effective date of the current standard (2018) for this round 
of rulemaking. As a result, compliance with any amended energy 
conservation standards promulgated in the final rule would be required 
beginning on the date that is 3 years after the publication of the 
final rule.

[[Page 15846]]

B. Test Procedure

    The current test procedure for commercial packaged boilers is found 
at 10 CFR 431.86, and incorporates by reference the Hydronics Institute 
(HI) BTS-2000 (Rev 06.07) testing standard, Method to Determine 
Efficiency of Commercial Space Heating Boilers. As stated previously, 
on February 22, 2016, DOE issued a notice of proposed rulemaking that 
proposes several amendments to the CPB test procedure. The changes that 
are proposed in the new test procedure include: (1) Clarify the 
coverage for field-constructed commercial packaged boilers and the 
applicability of DOE's test procedure and standards for this category 
of commercial packaged boilers, (2) provide an optional field test for 
commercial packaged boilers with fuel input rate greater than 5,000,000 
Btu/h, (3) provide a conversion method to calculate thermal efficiency 
based on combustion efficiency testing for steam commercial packaged 
boilers with fuel input rate greater than 5,000,000 Btu/h, (4) modify 
the inlet and outlet water temperatures during tests of hot water 
commercial packaged boilers, (5) establish limits on the ambient 
temperature and relative humidity conditions during testing, (6) modify 
setup and instrumentation requirements to remove ambiguity, and (7) 
standardize terminology and provisions for ``fuel input rate.'' \22\
---------------------------------------------------------------------------

    \22\ In this notice and the NOPR TSD, DOE uses ``fuel input 
rate,'' to refer to the maximum rate at which a commercial packaged 
boiler uses energy, in order to be consistent with Test Procedure 
definition and language. The industry also uses terms such as input 
capacity, input ratings, capacity, and rating, and any such 
instances should be considered synonymous with fuel input rate.
---------------------------------------------------------------------------

    In the comments received on the preliminary analysis TSD for the 
energy conservation standards rulemaking, DOE received several comments 
that are specifically related to the current test procedure for 
commercial packaged boilers. Comments related to the technical aspects 
of the test procedure development were considered and addressed in the 
test procedure NOPR.
    In addition, DOE received several comments related to the timing of 
the test procedure and energy conservation standard. AHRI stated that 
it appreciates DOE's effort to finalize the test procedure revisions in 
advance of the standards revisions and that it is critical that the 
revised test procedures be finalized so that the analysis for the 
revised standard is based properly on the test procedures that will be 
applied to products to establish their compliance with the revised 
efficiency standard. AHRI also stated that there must be sufficient 
time between the completion of the revised test procedure and the NOPR 
for the efficiency standard to allow all parties to assess the effect 
of test procedure revisions on potential increased efficiency 
standards, and encouraged DOE to continue its efforts to minimize the 
burden. (AHRI, No. 37 at p. 2) \23\ Raypak stated that it is concerned 
about the lack of a finalized efficiency test procedure, and argued 
that this will adversely affect the capability of DOE to properly 
evaluate potential efficiency standard changes. (Raypak, No. 35 at p. 
1) At the preliminary analysis public meeting, AHRI commented regarding 
the need to finalize both the test procedure and the coverage 
determination prior to the NOPR for the energy conservation standards 
rulemaking. (AHRI, Public Meeting Transcript, No. 39 at p. 16 and pp. 
209-211) In the meeting, ACEEE acknowledged the challenges in 
compliance, certification, and enforcement for large commercial 
packaged boilers and asked whether DOE is likely to have regulation 
without enforcement or whether the Department is planning ahead now for 
enforcement of large (e.g., 10 million Btu/h) commercial packaged 
boilers. (ACEEE, Public Meeting Transcript, No. 39 at p. 21)
---------------------------------------------------------------------------

    \23\ A notation in this form provides a reference for 
information that is in the docket of DOE's rulemaking to develop 
energy conservation standards for commercial packaged boilers 
(Docket No. EERE-2013-BT-STD-0030, which is maintained at http://www.regulations.gov/#!docketDetail;D=EERE-2013-BT-STD-0030). This 
particular notation refers to a comment: (1) Submitted by AHRI; (2) 
appearing in document number 0035; and (3) appearing on page 3 of 
that document.
---------------------------------------------------------------------------

    As noted previously, the test procedure NOPR for commercial 
packaged boilers was issued by DOE on February 22, 2016. Although the 
test procedure has not yet been finalized, DOE believes the proposed 
test method updates give enough insight as to the changes under 
consideration that amended standard levels can reasonably be considered 
in this rulemaking. DOE conducted analyses for this NOPR based on the 
amended test procedure proposed in the February 2016 test procedure 
NOPR. However, DOE notes its final rule analyses will be based on DOE's 
most recently adopted CPB test procedure available at the time of the 
analyses. EPCA requires that, at least once every 7 years, the 
Secretary of Energy shall evaluate each type of covered equipment, 
including packaged boilers, to determine whether amended test 
procedures would more accurately or fully comply with the requirements 
for the test procedures to be reasonably designed to produce test 
results which reflect energy efficiency, energy use, and estimated 
operating costs during a representative average use cycle; and would 
not be unduly burdensome to conduct. (42 U.S.C. 6314(a)(1)-(2)) DOE 
adopted its latest amendments to its CPB test procedure in a final rule 
published on July 22, 2009. 74 FR 36312. Pursuant to EPCA's provision 
at 42 U.S.C. 6314(a)(1)-(2), DOE is conducting a concurrent test 
procedure rulemaking to evaluate its current CPB test procedure.
    Regarding the effect of the amended test procedure on efficiency 
ratings, DOE notes that it tested several commercial packaged boilers 
with both the previous and the proposed test procedure to observe the 
variation in efficiency ratings as a result of the amended test 
procedure. As explained in the February 2016 test procedure NOPR, based 
on the results of this testing, DOE has tentatively determined that the 
proposed amendments, in aggregate, would not result in an overall 
measurable impact on ratings.

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE conducts a 
market and technology assessment that develops a list of technology 
options for consideration in consultation with manufacturers, design 
engineers, and other interested parties. DOE then determines which of 
those means for improving efficiency are technologically feasible. DOE 
considers technologies incorporated in commercially available products 
or in working prototypes to be technologically feasible. 10 CFR part 
430, subpart C, appendix A, section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; and (3) adverse impacts on 
health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii) through (iv). Additionally, DOE notes that these screening 
criteria do not directly address the proprietary status of design 
options. DOE only

[[Page 15847]]

considers efficiency levels achieved through the use of proprietary 
designs in the engineering analysis if they are not part of a unique 
path to achieve that efficiency level (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency). DOE 
believes the proposed standards for the equipment covered in this 
rulemaking would not mandate the use of any proprietary technologies, 
and that all manufacturers would be able to achieve the proposed levels 
through the use of non-proprietary designs. Section IV.B of this 
document discusses the results of the screening analysis for commercial 
packaged boilers, particularly the designs DOE considered, those it 
screened out, and those that are the basis for the TSLs in this 
rulemaking. For further details on the screening analysis for this 
rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such equipment. Accordingly, in the engineering analysis, 
DOE determined the maximum technologically feasible (``max-tech'') 
improvements in energy efficiency for commercial packaged boilers, 
using the design parameters for the most efficient equipment available 
on the market or in working prototypes. The max-tech levels that DOE 
determined for this rulemaking are described in section IV.C.4 of this 
document and in chapter 5 of the NOPR TSD.

D. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from the commercial 
packaged boilers that are the subject of this rulemaking purchased in 
the 30-year period that begins in the year of compliance with amended 
standards (2019-2048).\24\ The savings are measured over the entire 
lifetime of commercial packaged boilers purchased in the 30-year 
analysis period. DOE quantified the energy savings attributable to each 
TSL as the difference in energy consumption between each standards case 
and the no-new-standards-case. The no-new-standards case represents a 
projection of energy consumption in the absence of amended efficiency 
standards, and it considers market forces and policies that may affect 
future demand for more-efficient equipment.
---------------------------------------------------------------------------

    \24\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE uses its NIA spreadsheet models to estimate energy savings from 
potential amended standards. The NIA spreadsheet model (described in 
section IV.H of this document) calculates energy savings in site 
energy, which is the energy directly consumed by equipment at the 
locations where they are used. For electricity, DOE calculates national 
energy savings in terms of primary energy savings, which is the savings 
in the energy that is used to generate and transmit the site 
electricity. For electricity and natural gas and oil, DOE also 
calculates full-fuel-cycle (FFC) energy savings. As discussed in DOE's 
statement of policy and notice of policy amendment, the FFC metric 
includes the energy consumed in extracting, processing, and 
transporting primary fuels (i.e., coal, natural gas, petroleum fuels), 
and thus presents a more complete picture of the impacts of energy 
efficiency standards. 76 FR 51281 (Aug. 18, 2011), as amended at 77 FR 
49701 (Aug. 17, 2012).
    To calculate primary energy savings, DOE derives annual conversion 
factors from the model used to prepare the Energy Information 
Administration's (EIA's) most recent Annual Energy Outlook. For FFC 
energy savings, DOE's approach is based on the calculation of an FFC 
multiplier for each of the energy types used by covered products or 
equipment. For more information, see section IV.H.2 of this document.
2. Significance of Savings
    To amend standards for commercial packaged boilers, DOE must 
determine with clear and convincing evidence that the standards would 
result in ``significant'' additional energy savings. (42 U.S.C. 
6313(a)(6)(A)(ii)(II) and (C)(i)) Although the term ``significant'' is 
not defined in the Act, the U.S. Court of Appeals for the District of 
Columbia Circuit, in Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended 
``significant'' energy savings in the context of EPCA to be savings 
that were not ``genuinely trivial.'' DOE has tentatively concluded the 
energy savings for the proposed standards (presented in section V.B.3.a 
of this document) are ``significant'' as required by 42 U.S.C. 
6313(a)(6)(A)(ii)(II) and (C)(i).

E. Economic Justification

1. Specific Criteria
    EPCA provides seven factors to be evaluated in determining whether 
a potential energy conservation standard is economically justified. (42 
U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i)) The following sections 
discuss how DOE has addressed each of those seven factors in this 
rulemaking.
a. Economic Impact on Manufacturers and Consumers
    EPCA requires DOE to consider the economic impact of a standard on 
manufacturers and the commercial consumers of the products subject to 
the standard. (42 U.S.C. 6313(a)(6)(B)(I) and (C)(i)) In determining 
the impacts of a potential amended standard on manufacturers, DOE 
conducts a manufacturer impact analysis (MIA), as discussed in section 
IV.J of this document. DOE first uses an annual cash-flow approach to 
determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include: (1) INPV, which 
values the industry based on expected future cash flows; (2) cash flows 
by year; (3) changes in revenue and income; and (4) other measures of 
impact, as appropriate. Second, DOE analyzes and reports the impacts on 
different types of manufacturers, including impacts on small 
manufacturers. Third, DOE considers the impact of standards on domestic 
manufacturer employment and manufacturing capacity, as well as the 
potential for standards to result in plant closures and loss of capital 
investment. Finally, DOE takes into account cumulative impacts of 
various DOE regulations and other regulatory requirements on 
manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and PBP associated with new or amended standards. These 
measures are discussed further in the following section. For consumers 
in the aggregate, DOE also calculates the national NPV of the economic 
impacts applicable to a particular rulemaking. DOE also evaluates the 
LCC impacts of potential standards on identifiable subgroups of 
consumers that may be affected disproportionately by a national 
standard.

[[Page 15848]]

b. Savings in Operating Costs Compared to Increase in Price
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered equipment in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered equipment 
that are likely to result from an amended standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(II) and (C)(i)) DOE conducts this comparison in its 
LCC and PBP analysis.
    The LCC is the sum of the purchase price of the equipment 
(including installation cost and sales tax) and the operating expense 
(including energy, maintenance, and repair expenditures) discounted 
over the lifetime of the equipment. The LCC analysis requires a variety 
of inputs, such as equipment prices, equipment energy consumption, 
energy prices, maintenance and repair costs, equipment lifetime, and 
consumer discount rates. To account for uncertainty and variability in 
specific inputs, such as equipment lifetime and discount rate, DOE uses 
a distribution of values, with probabilities attached to each value. 
For its analysis, DOE assumes that consumers will purchase the covered 
equipment in the first year of compliance with amended standards.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    The LCC savings for the considered efficiency levels are calculated 
relative to a no-new-standards-case that reflects projected market 
trends in the absence of amended standards. DOE identifies the 
percentage of consumers estimated to receive LCC savings or experience 
an LCC increase, in addition to the average LCC savings associated with 
a particular standard level. DOE's LCC and PBP analysis is discussed in 
further detail in section IV.F of this document.
c. Energy Savings
    EPCA requires DOE, in determining the economic justification of a 
standard, to consider the total projected energy savings that are 
expected to result directly from the standard. (42 U.S.C. 
6313(a)(6)(B)(ii)(III) As discussed in section III.D.1 and section IV.E 
of this document and chapter 10 of the NOPR TSD, DOE uses spreadsheet 
models to project national energy savings.
d. Lessening of Utility or Performance of Equipment
    In determining whether a proposed standard is economically 
justified, DOE evaluates any lessening of the utilities or performance 
of the considered equipment. (42 U.S.C. 6313(a)(6)(B)(ii)(IV) and 
(C)(i)) Based on data available to DOE, the standards proposed in this 
document would not reduce the utility or performance of the equipment 
under consideration in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General of the 
United States that is likely to result from a proposed standard. (42 
U.S.C. 6313(a)(6)(B)(ii)(V) and (C)(i)) DOE will transmit a copy of 
this proposed rule to the Attorney General with a request that the 
Department of Justice (DOJ) provide its determination on this issue. 
DOE will publish and respond to the Attorney General's determination in 
the final rule.
f. Need for National Energy Conservation
    In considering new or amended energy conservation standards, EPCA 
also directs DOE to consider the need for the national energy 
conservation. (42 U.S.C. 6313(a)(6)(B)(ii)(VII) and (C)(i)) The 
proposed standards are likely to improve the security and reliability 
of the nation's energy system. Reductions in the demand for electricity 
also may result in reduced costs for maintaining the reliability of the 
nation's electricity system. DOE conducts a utility impact analysis to 
estimate how standards may affect the nation's needed power generation 
capacity, as discussed in section IV.M of this document.
    The proposed standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production and use. DOE 
conducts an emissions analysis to estimate how standards may affect 
these emissions, as discussed in section IV.K of this document. DOE 
reports the emissions impacts from each TSL it considered in section 
V.B.6 of this document. DOE also estimates the economic value of 
emissions reductions resulting from the considered TSLs, as discussed 
in section IV.L of this document.
g. Other Factors
    EPCA allows the Secretary of Energy, in determining whether a 
standard is economically justified, to consider any other factors that 
the Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII) 
and (C)(i)) To the extent interested parties submit any relevant 
information regarding economic justification that does not fit into the 
other categories described above, DOE could consider such information 
under ``other factors.''
2. Rebuttable Presumption
    EPCA creates a rebuttable presumption that an energy conservation 
standard is economically justified if the additional cost to the 
consumer of the equipment that meets the standard is less than three 
times the value of the first year's energy savings resulting from the 
standard, as calculated under the applicable DOE test procedure. DOE's 
LCC and PBP analyses generate values used to calculate the effects that 
proposed energy conservation standards would have on the PBP for 
consumers. These analyses include, but are not limited to, the 3-year 
PBP contemplated under the rebuttable-presumption test.
    In addition, DOE routinely conducts an economic analysis that 
considers the full range of impacts to consumers, manufacturers, the 
Nation, and the environment, as required under 42 U.S.C. 
6313(a)(6)(B)(ii) and (C)(i). The results of this analysis serve as the 
basis for DOE's evaluation of the economic justification for a 
potential standard level (thereby supporting or rebutting the results 
of any preliminary determination of economic justification). The 
rebuttable presumption payback calculation is discussed in section 
IV.F.11 of this document.

IV. Methodology and Discussion of Related Comments

    DOE used three analytical tools to estimate the impact of the 
proposed standards. The first tool is a spreadsheet that calculates 
LCCs and PBPs of potential new energy conservation standards. The 
second tool is a spreadsheet that calculates national energy savings 
and net present value resulting from potential amended energy 
conservation standards.\25\ The third spreadsheet tool, the Government

[[Page 15849]]

Regulatory Impact Model (GRIM), helped DOE to assess manufacturer 
impacts of potential standards. These tools are available on the DOE 
Web site for this rulemaking: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=79.
---------------------------------------------------------------------------

    \25\ The shipments model was developed as a Microsoft Excel 
spreadsheet, which is integrated into the spreadsheet for the NIA. 
The ``shipment forecast'' and ``historical shipments'' worksheets of 
the NIA model present the scope of the shipment analysis and the 
total shipments in units for the commercial packaged boilers in 
scope.
---------------------------------------------------------------------------

    Additionally, DOE estimated the impacts of energy conservation 
standards for commercial packaged boilers on utilities and the 
environment. DOE used a version of EIA's National Energy Modeling 
System (NEMS) for the utility and environmental analyses. The NEMS 
model simulates the energy sector of the U.S. economy. EIA uses NEMS to 
prepare its Annual Energy Outlook (AEO), a widely known energy forecast 
for the United States. The version of NEMS used for appliance standards 
analysis is called NEMS-BT and is based on the AEO version with minor 
modifications.\26\ The NEMS-BT model offers a sophisticated picture of 
the effect of standards, because it accounts for the interactions 
between the various energy supply and demand sectors and the economy as 
a whole.
---------------------------------------------------------------------------

    \26\ The EIA allows the use of the name ``NEMS'' to describe 
only an AEO version of the model without any modification to code or 
data. Because the present analysis entails some minor code 
modifications and runs the model under various policy scenarios that 
deviate from AEO assumptions, the name ``NEMS-BT'' refers to the 
model as used here. For more information on NEMS, refer to The 
National Energy Modeling System: An Overview, DOE/EIA-0581 (98) 
(Feb.1998), available at: http://tonto.eia.doe.gov/FTPROOT/forecasting/058198.pdf.
---------------------------------------------------------------------------

A. Market and Technology Assessment

1. General
    For the market and technology assessment, DOE develops information 
that provides an overall snapshot of the market for the equipment 
considered, including the nature of the equipment, market 
characteristics, industry structure, and technologies that improve 
energy efficiency. The analysis carried out under this chapter is 
broadly divided into two categories: (1) Market assessment and (2) 
technology assessment. The purpose of the market assessment is to 
develop a qualitative and quantitative characterization of the CPB 
industry and market structure, based on information that is publicly 
available and on data submitted by manufacturers and other interested 
parties. Issues addressed include CPB characteristics, market share and 
equipment classes; existing regulatory and non-regulatory efficiency 
improvement initiatives; overview of historical equipment shipments and 
lifetimes and trends in the equipment markets. The purpose of the 
technology assessment is to investigate technologies that will improve 
the energy efficiency of commercial packaged boilers, and results in a 
preliminary list of technology options that can improve the thermal 
and/or combustion efficiency of commercial packaged boilers. Chapter 3 
of the NOPR TSD contains all the information related to the market and 
technology assessment. The chapter also provides additional details on 
the methodology used, information gathered and results. DOE typically 
uses the information gathered in this chapter in the various downstream 
analyses such as engineering analysis, shipment analysis, and 
manufacturer impact analyses.
    In this NOPR, DOE also explored the market to identify 
manufacturers of commercial packaged boilers. As per the definition set 
forth in 10 CFR 431.82, a manufacturer of a commercial packaged boiler 
is any person who: (1) Manufactures, produces, assembles or imports a 
commercial packaged boiler in its entirety; (2) manufactures, produces, 
assembles or imports a commercial packaged boiler in part, and 
specifies or approves the boiler's components, including burners or 
other components produced by others, as for example by specifying such 
components in a catalogue by make and model number or parts number; or 
(3) is any vendor or installer who sells a commercial packaged boiler 
that consists of a combination of components that is not specified or 
approved by a person described in the two previous definitions.
    Through extensive search of publicly available information, 
including ABMA's and AHRI's Web sites, DOE identified 45 CPB 
manufacturers that meet this definition. The complete list of 
manufacturers can be found in chapter 3 of the NOPR TSD.
    DOE requests comment on the number and names of manufacturers that 
qualify as CPB manufacturers according to the list of manufacturers in 
chapter 3 of the NOPR TSD.
2. Scope of Coverage and Equipment Classes
    EPCA lists ``packaged boilers'' as a type of covered equipment. (42 
U.S.C 6311(1)). EPCA defines the term ``packaged boiler'' as ``a boiler 
that is shipped complete with heating equipment, mechanical draft 
equipment, and automatic controls; usually shipped in one or more 
sections.'' (42 U.S.C. 6311(11)(B)) In its regulations, DOE clarifies 
the term ``packaged boiler'' to exclude a boiler that is ``custom 
designed and field constructed,'' and it further provides that if the 
boiler is shipped in more than one section, the sections may be 
produced by more than one manufacturer and may be originated or shipped 
at different times and from more than one location. 10 CFR 431.82.
    DOE's regulations also define the term ``commercial packaged 
boiler'' as ``a type of packaged low pressure boiler that is industrial 
equipment with a capacity (rated maximum input) of 300,000 Btu per hour 
(Btu/h) or more which, to any significant extent, is distributed in 
commerce (1) for heating or space conditioning applications in 
buildings; or (2) for service water heating in buildings but does not 
meet the definition of `hot water supply boiler' in [10 CFR part 
431].'' A ``packaged low pressure boiler'' means, ``a packaged boiler 
that is (1) a steam boiler designed to operate below a steam pressure 
of 15 psig; or (2) a hot water boiler designed to operate at or below a 
water pressure of 160 psig and a temperature of 250[deg]F or (3) a 
boiler that is designed to be capable of supplying either steam or hot 
water, and designed to operate under the conditions in paragraphs (1) 
and (2) of this definition.'' 10 CFR 431.82.
    As noted above, the current definition of ``packaged boiler'' 
refers to a boiler that is shipped complete with heating equipment, 
mechanical draft equipment, and automatic controls. The definition does 
not explicitly include natural draft equipment. However, as discussed 
in the August 2015 withdrawal notice, DOE interprets the definitions in 
the statute to include natural draft commercial packaged boilers. After 
considering written comments on the August 2013 NOPD and comments on 
the preliminary analysis TSD related to the coverage of natural draft 
equipment, DOE concluded that natural draft commercial packaged boilers 
are and have been covered equipment subject to DOE's energy 
conservation standards. Therefore, DOE concluded it was unnecessary to 
publish a determination to clarify its statutory authority to cover 
natural draft commercial packaged boilers. Accordingly, DOE has 
included natural draft commercial packaged boilers under the scope of 
the rulemaking.
    In the preliminary analysis, DOE specifically sought public comment 
on its tentative decision not to set an upper limit to the fuel input 
rate for commercial packaged boilers. This issue was first raised in 
the Framework document (Item 2-4 at page 12), where DOE requested 
feedback on whether there were any size related issues that may render 
energy conservation

[[Page 15850]]

standards infeasible for very large commercial packaged boilers. DOE 
received several comments in response to the Framework document that 
included suggestions of input capacities at which the scope of the 
standards rulemaking could be capped. AHRI recommended that the scope 
of the rulemaking should be capped at 5,000 kBtu/h. (AHRI, No.17 at pp. 
1-2) ABMA, Burnham Holdings, and Cleaver Brooks suggested that the 
scope should be capped at 2,500 kBtu/h, citing high testing costs and 
practicability concerns. (ABMA, No. 14 at pp. 2-3; Cleaver-Brooks, No. 
12 at p. 1; Burnham, No. 15 at p. 2) HTP recommended three commercial 
packaged boiler classifications: ``small,'' with fuel input rates >=300 
kBtu/h to <2,500 kBtu/h; ``medium,'' with fuel input rates >=2,500 
kBtu/h and <5,000 kBtu/h; and ``large,'' with fuel input rates >=5,000 
kBtu/h. (HTP, No. 18 at pp. 1-2) DOE provided responses to all these 
comments in chapter 2 of the preliminary analysis TSD. In its response, 
DOE acknowledged the difficulty of testing and rating very large 
commercial packaged boilers. However, DOE pointed out that defining a 
fuel input rate upper limit above which standards will not apply could 
violate EPCA's anti-backsliding provision. As a result, in the 
preliminary analysis TSD, DOE analyzed all equipment classes for 
commercial packaged boilers that fit EPCA's definition and have a fuel 
input rate of 300 kBtu/h or more with no upper limit. DOE also 
requested further public comment from interested parties on its 
tentative decision to not set an upper limit.
    Several interested parties and stakeholders commented on this issue 
in response to the preliminary analysis TSD. Lochinvar commented in 
support of DOE's decision, stating that the inclusion of commercial 
packaged boilers with very large fuel input rate is needed to ensure a 
level playing field and accurate product ratings. Lochinvar further 
commented that many concerns regarding the test burden are addressed by 
the revised Alternative Efficiency Determination Methods (AEDM) rules. 
(Lochinvar, No. 34 at p. 1) ABMA stated that DOE's decision not to set 
an upper limit on input capacity for commercial packaged boilers is 
causing significant concern among their member boiler manufacturers. 
ABMA reported that boilers can approach capacities as high as 80,000 
kBtu/h with the testing cost approaching one million dollars, which 
imposes a prohibitively high financial burden on companies 
manufacturing large institutional sized space heating boilers. ABMA 
also argued that their member manufacturers have been offering 
efficiency guarantees since the late 1970s on the large space heating 
commercial and institutional packaged boilers and have been capable of 
meeting current efficiency requirements since 1970. Further, ABMA 
stated that there exists significant difference between smaller boilers 
that are built in large quantities to a standard specification and 
large custom engineered boilers manufactured to specifications for a 
particular installation. ABMA recommended that DOE cap the efficiency 
certification requirements for commercial packaged boilers at 2,500 
kBtu/h. (ABMA, No. 33 at pp. 1-2) AHRI stated that the commercial 
boilers that have input rates in the high millions of Btu/h are very 
different products and that many factors that are considered in DOE's 
analysis and the associated conclusions cannot be extrapolated up to 
characterize very large commercial packaged boilers. (AHRI, No. 37 at 
p. 1) AHRI also stated that when going from 3,000 kBtu/h to tens of 
millions of Btu/h, a whole different price structure should be employed 
and there may be an upper limit at which the price structure changes 
completely. (AHRI, Public Meeting Transcript, No. 39 at p. 45) During 
the public meeting, ABMA also expressed concern on how DOE would 
extrapolate prices for an 80 million Btu/h boiler using a 3 million 
Btu/h boiler as the representative unit. (ABMA, Public Meeting 
Transcript, No. 39 at pp. 64-65)
    DOE considered the comments received from interested parties. 
Comments regarding testing large commercial packaged boilers were 
addressed separately in the ongoing test procedure rulemaking 
(discussed further in section III.B of this document). DOE also 
acknowledges other issues with regards to the compliance burden of very 
large commercial packaged boilers, particularly those that are 
engineered-to-order. Some stakeholders suggested capping the scope of 
the energy conservation standards as an option to resolve this issue. 
However, as discussed previously, setting an upper limit to the scope 
of DOE's energy conservation standards for commercial packaged boilers 
could violate EPCA's anti-backsliding provision. Therefore, DOE has not 
set an upper limit for fuel input rate above which the standards will 
not be applicable. However, as discussed in further detail below, DOE 
proposes a separate equipment class for ``very large'' commercial 
packaged boilers with input capacities greater than 10 million Btu/h.
    When evaluating and establishing energy conservation standards, DOE 
typically divides covered equipment into equipment classes based on the 
type of energy used, capacity, or performance-related features that 
justify a different standard. In making a determination whether a 
performance-related feature justifies a different standard, DOE 
considers such factors as the utility to the consumer of the feature 
and other factors DOE determines are appropriate.
    The current regulations for commercial packaged boilers list 10 
equipment classes with corresponding energy efficiency levels for 
each.\27\ 10 CFR 431.87. These equipment classes are based on (1) size 
(fuel input rate), (2) heating media (hot water or steam), and (3) type 
of fuel used (oil or gas).\28\ The gas-fired steam commercial packaged 
boilers are further classified according to draft type (thereby 
creating two additional equipment classes). Table IV.1 shows equipment 
classes that are set forth in the current regulations at 10 CFR 431.87.
---------------------------------------------------------------------------

    \27\ These standard levels were adopted in the July 2009 final 
rule.
    \28\ Under subpart E of 10 CFR part 431, commercial packaged 
boilers are divided into equipment classes based on fuel input rate 
(i.e., size category). Throughout this document, DOE refers to units 
with an fuel input rate of >=300,000 Btu/h and <=2,500,000 Btu/h as 
``small'' and units with an fuel input rate >2,500,000 Btu/h as 
``large.'' See 10 CFR 431.87.

             Table IV.1--CPB Equipment Classes Set Forth in the Current Regulations at 10 CFR 431.87
----------------------------------------------------------------------------------------------------------------
                                                         Size category                         Energy efficiency
         Equipment type               Subcategory           (input)         Equipment class         metric
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged     Gas-fired.........  >=300,000 Btu/h     Small Gas Hot       Thermal
 Boilers.                                              and <=2,500,000     Water.              Efficiency.
                                                       Btu/h.

[[Page 15851]]

 
Hot Water Commercial Packaged     Gas-fired.........  >2,500,000 Btu/h..  Large Gas Hot       Combustion
 Boilers.                                                                  Water.              Efficiency.
Hot Water Commercial Packaged     Oil-fired.........  >=300,000 Btu/h     Small Oil Hot       Thermal
 Boilers.                                              and <=2,500,000     Water.              Efficiency.
                                                       Btu/h.
Hot Water Commercial Packaged     Oil-fired.........  >2,500,000 Btu/h..  Large Oil Hot       Combustion
 Boilers.                                                                  Water.              Efficiency.
Steam Commercial Packaged         Gas-fired--all      >=300,000 Btu/h     Small Gas           Thermal
 Boilers.                          except natural      and <=2,500,000     Mechanical Draft    Efficiency.
                                   draft.              Btu/h.              Steam.
Steam Commercial Packaged         Gas-fired--all      >2,500,000 Btu/h..  Large Gas           Thermal
 Boilers.                          except natural                          Mechanical Draft    Efficiency.
                                   draft.                                  Steam.
Steam Commercial Packaged         Gas-fired--natural  >=300,000 Btu/h     Small Gas Natural   Thermal
 Boilers.                          draft.              and <=2,500,000     Draft Steam.        Efficiency.
                                                       Btu/h.
Steam Commercial Packaged         Gas-fired--natural  >2,500,000 Btu/h..  Large Gas Natural   Thermal
 Boilers.                          draft.                                  Draft Steam.        Efficiency.
Steam Commercial Packaged         Oil-fired.........  >=300,000 Btu/h     Small Oil Steam...  Thermal
 Boilers.                                              and <=2,500,000                         Efficiency.
                                                       Btu/h.
Steam Commercial Packaged         Oil-fired.........  >2,500,000 Btu/h..  Large Oil Steam...  Thermal
 Boilers.                                                                                      Efficiency.
----------------------------------------------------------------------------------------------------------------

    In the preliminary analysis, DOE divided commercial packaged 
boilers into 16 equipment classes, based on size, fuel, heating medium, 
and type of draft. DOE sought public comment on its tentative decision 
to classify commercial packaged boilers into 16 equipment classes.
    In response to the request, ACEEE, ASAP, and NRDC recommended that 
DOE adopt a single equipment class for natural draft and mechanical 
draft commercial packaged boilers, citing that natural draft commercial 
packaged boilers are inherently less efficient and that this will 
ensure maximum energy efficiency improvement. The commenters also 
stated that they are unaware of any distinct utility that is offered by 
natural draft commercial packaged boilers that is different from 
mechanical draft commercial packaged boilers. (ACEEE, ASAP, and NRDC, 
No. 36 at p. 2) PG&E and SCE noted that natural draft commercial 
packaged boilers have much lower part-load efficiency and are rapidly 
becoming obsolete due to changes in consumer buying behavior. The 
commenters argued against the separation of the equipment classes, 
specifically hot water commercial packaged boilers and stated that both 
mechanical draft and natural draft systems have the same utility and, 
therefore, should be considered in the same equipment class. (PG&E and 
SCE, No. 38 at p. 3) Raypak recommended DOE to revert back to the 10 
equipment classes that are set forth in the current energy conservation 
standards at 10 CFR 431.87. (Raypak, No. 35 at p. 2) Raypak noted that 
non-condensing boilers are still a significant part of the market and 
offer several advantages such as simple operation and maintenance, 
higher design water temperature, lower costs, and higher lifetimes, and 
encouraged DOE to maintain the natural draft boiler equipment classes. 
Raypak further encouraged DOE not to amend energy conservation 
standards to a level that would not support natural draft commercial 
packaged boilers. (Raypak, No. 35 at pp. 6-7) Lochinvar encouraged DOE 
to maintain the 10 equipment classes that are set forth in the current 
energy conservation standards at 10 CFR 431.87 and stated that the 
division of the classes will lead to different minimum ratings for 
natural draft and mechanical draft boilers and competitive inequality. 
Lochinvar also cited commercial water heaters as an example, stating 
that commercial water heaters are available with mechanical and natural 
draft systems, but the energy conservation standards are applicable to 
all types of equipment irrespective of the draft type (Lochinvar, No. 
34 at p. 1) AHRI argued that natural draft commercial packaged boilers 
are covered equipment subject to DOE's efficiency standards, but this 
does not extend to creating separate equipment classes for such 
products in the efficiency standards. AHRI further stated that the 
current 10 equipment classes set forth in 10 CFR 431.87 are 
appropriate. (AHRI, No. 37 at p. 2) AHRI also commented during the 
preliminary analysis public meeting that the 16 equipment classes used 
in the preliminary analysis were a good starting point, but that the 
classes can be squeezed together. (AHRI, Public Meeting Transcript, No. 
39 at p. 26) ASAP questioned DOE's rationale for adopting separate 
equipment classes for mechanical and natural draft commercial packaged 
boilers. (ASAP, Public Meeting Transcript, No. 39 at p. 39)
    DOE agrees with comments stating that both natural draft and 
mechanical draft commercial packaged boilers provide the same utility. 
Based on DOE's understanding, there appears to be no distinct 
performance related utility that is provided by natural draft 
commercial packaged boilers that justifies a separate equipment class 
for such equipment. Consequently, there appears to be no justification 
to maintain separate equipment classes for natural draft commercial 
packaged boilers. Therefore, in this document, DOE proposes to 
consolidate CPB equipment classes that are currently divided by draft 
type.\29\ Specifically, DOE proposes to combine the small (>=300,000 
Btu/h and <=2,500,000 Btu/h), gas fired--all except natural draft, 
steam and small (>=300,000 Btu/h and <=2,500,000 Btu/h), gas fired--
natural draft, steam classes; and the large (>2,500,000 Btu/h and 
<=10,000,000 Btu/h), gas fired--all except natural draft, steam and 
large (>=2,500,000 Btu/h and <=10,000,000 Btu/h), gas fired--natural 
draft, steam classes.
---------------------------------------------------------------------------

    \29\ Because DOE has not proposed amended standards for 
commercial packaged boilers with input ratings above 10,000,000 Btu/
h, the standards for equipment in this class will remain unchanged. 
Thus, although DOE is consolidating this equipment into a single 
class, an allowance will still be made for natural draft units to 
have a lower minimum efficiency until March 2, 2022, as is allowed 
under the current standards.
---------------------------------------------------------------------------

    In addition, based on the concerns expressed by interested parties 
regarding the complexities of regulating very large commercial packaged 
boilers discussed earlier in this section, DOE has tentatively decided 
to propose

[[Page 15852]]

separate equipment classes for commercial packaged boilers with fuel 
input rates above 10,000 kBtu/h. In order to determine the fuel input 
rate at which to separate the proposed large CPB equipment classes 
(i.e., equipment classes with a fuel input rate >2,500 kBtu/h) and the 
proposed new equipment class for ``very large'' commercial packaged 
boilers, DOE performed a calculation to estimate the energy savings 
potential for very large CPB equipment classes at various minimum fuel 
input rate thresholds. DOE estimated the potential for energy savings 
for commercial packaged boilers with fuel input rates above 10,000 
kBtu/h to be between 0.014 and 0.025 quads based on the range of TSLs 
considered in the NOPR, by assigning the same efficiency level to the 
very large equipment classes as was considered for the corresponding 
large equipment classes. Further, DOE examined the price data collected 
for the engineering analysis and noticed a smooth linear trend in 
prices as they vary with fuel input rate, from 300 kBtu/h up to 
approximately 9,500 kBtu/h. The smooth trend created by the data 
appears to indicate that commercial packaged boilers below 10,000 kBtu/
h do not have a separate price structure; this linear price trend is 
discussed further in the engineering analysis, section IV.C of this 
document. Despite extensive efforts, DOE was unable to obtain pricing 
data for commercial packaged boilers with fuel input rate above 10,000 
kBtu/h. Based on these assessments, including the lack of available 
data, DOE is proposing to classify commercial packaged boiler with fuel 
input rate above 10,000 kBtu/h as very large equipment classes. As 
commercial packaged boilers with fuel input rate above 10,000 kBtu/h 
are currently covered equipment, the existing standards at 10 CFR 
431.87 are still applicable. DOE proposes to maintain the existing 
standards for commercial packaged boilers with fuel input rate above 
10,000 kBtu/h (referred to as very large commercial package boilers in 
this notice) because there is not sufficient data to provide clear and 
convincing evidence that more stringent standards would be 
technologically feasible and economically justified, and would result 
in significant additional energy savings.
    DOE requests data on manufacturer selling prices, shipments and 
conversion costs of very large commercial packaged boilers with fuel 
input rate above 10,000 kBtu/h that can be used to supplement the 
analyses of such equipment in this rulemaking.
    See section VII.E for a list of issues on which DOE seeks comment.
    DOE also believes that creating separate equipment classes for very 
large commercial packaged boilers would reduce the overall compliance 
burden of manufacturers.
    In summary, DOE proposes the following changes to the equipment 
classes: (1) Separating the equipment classes for commercial packaged 
boilers that have a fuel input rate above 10,000 kBtu/h, and (2) 
consolidating the equipment classes for small and large gas-fired steam 
boilers that are currently divided based on draft type into equipment 
classes that are not draft specific. Thus, in total, DOE proposes 12 
equipment classes \30\ for this NOPR. These classes are categorized 
based on three performance parameters: (1) Size; (2) heating medium; 
and (3) fuel type. Table IV.2 shows all of the proposed CPB equipment 
classes, including the eight equipment classes for which DOE proposes 
amended standards and four equipment classes for which DOE did not 
propose to amend standards. In subsequent sections of this document, 
DOE uses the designated name of equipment classes given in the first 
column of Table IV.2 to explain various aspects of the rulemaking 
analyses.
---------------------------------------------------------------------------

    \30\ Consolidating the 4 draft-specific classes into 2 non-
draft-specific classes reduces the number of equipment classes from 
10 to 8, and creating separate equipment classes for very large CPB 
equipment adds 4 equipment classes. These changes result in a total 
of 12 equipment classes.

                                         Table IV.2--Proposed Equipment Classes for Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Propose amended
          Equipment class                     Size                    Fuel               Heating medium            Acronym               standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small Gas-fired Hot Water..........  >=300kBtu/h to          Gas...................  Hot Water............  SGHW.................  Yes.
                                      <=2,500kBtu/h.
Small Gas-fired Steam\*\...........  >=300kBtu/h to          Gas...................  Steam................  SGST.................  Yes.
                                      <=2,500kBtu/h.
Small Oil-fired Hot Water..........  >=300kBtu/h to          Oil...................  Hot Water............  SOHW.................  Yes.
                                      <=2,500kBtu/h.
Small Oil-fired Steam..............  >=300kBtu/h to          Oil...................  Steam................  SOST.................  Yes.
                                      <=2,500kBtu/h.
Large Gas-fired Hot Water..........  >2,500kBtu/h to         Gas...................  Hot Water............  LGHW.................  Yes.
                                      <=10,000kBtu/h.
Large Gas-fired Steam\*\...........  >2,500kBtu/h to         Gas...................  Steam................  LGST.................  Yes.
                                      <=10,000kBtu/h.
Large Oil-fired Hot Water..........  >2,500kBtu/h to         Oil...................  Hot Water............  LOHW.................  Yes.
                                      <=10,000kBtu/h.
Large Oil-fired Steam..............  >2,500kBtu/h to         Oil...................  Steam................  LOST.................  Yes.
                                      <=10,000kBtu/h.
Very Large Gas-fired Hot Water\**\.  >10,000kBtu/h.........  Gas...................  Hot Water............  VLGHW................  No.
Very Large Gas-fired Steam\**\.....  >10,000kBtu/h.........  Gas...................  Steam................  VLGST................  No.
Very Large Oil-fired Hot Water\**\.  >10,000kBtu/h.........  Oil...................  Hot Water............  VLOHW................  No.
Very Large Oil-fired Steam\**\.....  >10,000kBtu/h.........  Oil...................  Steam................  VLOST................  No
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The existing small, gas-fired, steam, natural draft equipment classes and small, gas-fired steam, all except natural draft equipment classes are
  proposed to be consolidated into a single small gas-fired, steam equipment class. Similarly, the existing large, gas-fired, steam, natural draft
  equipment classes and large, gas-fired steam, all except natural draft equipment classes are proposed to be consolidated into a single large, gas-
  fired, steam equipment class.
** DOE proposes to establish separate equipment classes for CPB with fuel input rate above 10,000kBtu/h.

    In addition to the two issues discussed previously in this section, 
DOE received several comments in response to the preliminary analysis 
related to standby mode and off mode energy consumption. In chapter 2 
of the preliminary analysis TSD, DOE reported that standby mode and off 
mode energy consumption is a negligible proportion of the total energy 
consumption of the commercial packaged boiler (about 0.02 percent of 
total energy used). Consequently, DOE decided in the preliminary 
analysis not to analyze standards for commercial packaged boilers to 
regulate their standby mode and off mode energy consumption. AHRI, 
Raypak, and Lochinvar supported DOE's preliminary findings on the 
standby mode and off mode energy consumption and discouraged DOE from 
pursuing the development of standards for these modes of operation. 
(AHRI, No. 37 at p. 2; Raypak, No. 35 at p. 2; Lochinvar, No. 34 at p. 
2) Lochinvar stated that the data on standby mode and off mode is very

[[Page 15853]]

limited because its measurement is not required and based on 
measurements conducted on their commercial hot water boilers, the 
standby mode power consumption was found to be 0.007 percent of the 
total power consumed by the boiler. (Lochinvar, No. 34 at p. 2) ABMA 
urged DOE not to consider standby and off cycles or the energy consumed 
in different operational modes, stating that there are multiple 
variables related to system design, set-up, and operation for a one-
size fits all rule. (ABMA, No. 33 at p. 2) No interested parties 
commented in support of standby mode and off mode standards, and DOE 
did not receive any new standby loss or off mode energy consumption 
data that would cause DOE to reverse its previous tentative conclusion. 
Therefore, DOE has not conducted any further analysis of potential 
standby mode and off mode energy conservation standards for commercial 
packaged boilers.
3. Technology Options
    As part of the rulemaking analysis, DOE identifies technology 
options that are currently used in commercial packaged boilers at 
different efficiency levels available on the market. This helps DOE to 
assess the technology changes that would be required to increase the 
efficiency of a commercial packaged boiler from baseline to other 
higher efficiency levels. Initially, these technologies encompass all 
those DOE believes are technologically feasible.
    As a starting point, DOE typically uses information relating to 
existing and past technology options as inputs to determine what 
technologies manufacturers use to attain higher performance levels. DOE 
also researches emerging technologies that have been demonstrated in 
prototype designs. DOE developed its list of technologically feasible 
design options for the considered equipment through consultation with 
manufacturers, including manufacturers of components and systems, and 
from trade publications and technical papers.
    In the preliminary analysis, DOE presented a list of technologies 
for improving the efficiency of commercial packaged boilers. Based on 
comments received in response to the preliminary analysis (discussed in 
detail in section IV.B of this document), DOE retained all the 
technology options that were identified in the preliminary analysis. 
However, for ``pulse combustion burners,'' DOE is now considering the 
technology as a path to achieve condensing operation and categorizing 
it as a condensing boiler design. Additionally, in research for the 
NOPR, DOE identified a new technology option: oxygen trim system. The 
technology options that DOE identified for this NOPR analysis are 
listed in Table IV.3:

  Table IV.3--Technology Options That Improve Combustion Efficiency or
   Thermal Efficiency That are Considered in the Market and Technology
                               Assessment
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Jacket Insulation.
Heat Exchanger Improvements (Including Condensing Heat Exchanger).
Burner Derating.
Improved Burner Technology.
Combustion Air Preheaters.
Economizers.
Blowdown Waste Heat Recovery.
Oxygen Trim Systems.
Integrated, High-Efficiency Steam Boilers.
------------------------------------------------------------------------

B. Screening Analysis

    After DOE identified the technologies that might improve the energy 
efficiency of commercial packaged boilers, DOE conducted a screening 
analysis. The goal of the screening analysis is to identify technology 
options that will be considered further, and those that will be 
eliminated from further consideration, in the rulemaking analyses. DOE 
applied the following set of screening criteria to each of the 
technologies identified in the technology assessment to determine which 
technology options are unsuitable for further consideration in the 
rulemaking:

     Technological feasibility: DOE will consider 
technologies incorporated in commercial products or in working 
prototypes to be technologically feasible.
     Practicability to manufacture, install, and service: If 
mass production and reliable installation and servicing of a 
technology in commercial products could be achieved on the scale 
necessary to serve the relevant market at the time the standard 
comes into effect, then DOE will consider that technology 
practicable to manufacture, install, and service.
     Adverse impacts on product utility or equipment 
availability: If DOE determines a technology would have a 
significant adverse impact on the utility of the product to 
significant subgroups of consumers, or would result in the 
unavailability of any covered product type with performance 
characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the United States at the time, it will not 
consider this technology further.
     Adverse impacts on health or safety: If DOE determines 
that a technology will have significant adverse impacts on health or 
safety, it will not consider this technology further.

(10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))
    Additionally, DOE notes that these screening criteria do not 
directly address the propriety status of design options. DOE only 
considers efficiency levels achieved through the use of proprietary 
designs in the engineering analysis if they are not part of a unique 
path to achieve that efficiency level (i.e., if there are other non-
proprietary technologies capable of achieving the same efficiency).
    In the preliminary analysis TSD, DOE applied the screening criteria 
to the technology options that were considered in the market and 
technology assessment and sought comments and feedback on the 
technology options that passed the screening analysis.
    DOE received several general comments on the options that passed 
the screening analysis in the preliminary analysis TSD chapter. 
Lochinvar agreed with technology options that passed the screening 
test, noting that the options identified are technologically feasible. 
(Lochinvar, No. 34 at p. 2) AHRI and Raypak agreed with the technology 
options that successfully passed the screening analysis, with the 
exception of pulse combustion (as discussed in further detail later in 
this section). (AHRI, No. 37 at p. 3; Raypak No. 35 at p. 2)
    ACEEE commented that the deficiencies in the current test procedure 
have led to the exclusion of modulating gas burners as an efficiency 
improving technology. (ACEEE, Public Meeting Transcript, No. 39 at p. 
29)
    Regarding modulating boilers, DOE notes that in the equipment 
database it found several CPB models at baseline and near baseline 
efficiency levels that utilize a modulating burner. As noted by ACEEE, 
the test procedure currently does not provide an efficiency advantage 
for modulating burners. DOE notes that the February 2016 test procedure 
NOPR also does not provide an efficiency benefit for the inclusion of a 
modulating burner for reasons explained further in that notice. As a 
result, DOE did not consider modulating burners as a technology option 
for improving the efficiency of commercial packaged boilers for this 
NOPR.
    The technology options that were identified in the market and 
technology assessment are presented immediately below, along with 
whether or not the technology was ultimately considered further in the 
analysis.
Jacket Insulation
    Optimizing jacket insulation thickness reduces the heat loss from 
commercial packaged boiler to the

[[Page 15854]]

outside air. However, most manufacturers already use this technology 
option and the potential benefits of using this option are a minimal 
increase in thermal efficiency. Consequently, DOE did not consider this 
technology option further.
Heat Exchanger Improvements (Including Condensing Heat Exchanger)
    DOE considered several heat exchanger improvement options that can 
increase thermal and combustion efficiencies of commercial packaged 
boilers. These options include incorporation of baffles and 
turbulators; improved fin designs such as micro-fins and louvered fins; 
improved tube designs such as corrugated tubes and internally rifled 
tubes; and addition of a condensing heat exchanger. In response to 
these technology options, Lochinvar commented that options such as 
increased heat exchanger surface area, baffles and creative pin/fin 
arrangements are all viable options for natural draft boilers and have 
been implemented by manufacturers for decades. Lochinvar also stated 
that DOE needs to consider that design changes are complex and often 
involve significant redesign to achieve efficiency targets without 
sacrificing safety and reliability. (Lochinvar, No. 34 at p. 2) Raypak 
commented that consideration of any additional restrictions of the heat 
exchanger must be balanced with the need to ensure safe operation and 
venting. (Raypak No. 35 at p. 2) AHRI commented that DOE must avoid 
considering heat exchanger designs that are so restrictive that they 
adversely affect safe operation and venting of the boiler. (AHRI, No. 
37 at p. 3)
    DOE reviewed the comments and examined whether the extent of heat 
exchanger improvements considered are restrictive such that any of 
these options would potentially adversely impact safe operation and 
venting of the commercial packaged boiler. In considering improved heat 
exchanger designs, DOE focused on technology options that are currently 
being used by commercial packaged boilers available on the market, as a 
vast array of heat exchanger designs and efficiencies was observed. DOE 
examined product literature and operation manuals and is not aware of 
potential safety concerns for commercial packaged boilers with heat 
exchanger designs that achieve the efficiency levels analyzed in this 
NOPR. Where upgraded venting is required for potential condensate 
formation in the vent piping, DOE considered such cost in its analysis 
of installation costs (see section IV.F.2 of this document). 
Consequently, the technology option of heat exchanger improvements 
passed the screening analysis and is considered as a design option to 
improve CPB thermal or combustion efficiency.
Burner Derating
    Burner derating increases the ratio of the heat transfer area to 
fuel input by reducing the burner input rating while maintaining the 
same heat exchanger, which can increase the thermal efficiency of 
commercial packaged boilers. In the preliminary analysis public 
meeting, AHRI commented that burner derating has already been used by 
the industry to achieve the current efficiency standards, so there is 
not much more potential for this option to further improve efficiency. 
(AHRI, Public Meeting Transcript, No. 39 at pp. 25-26)
    As in the preliminary analysis, DOE proposes to screen out burner 
derating as it reduces the usable heat output, and would reduce 
utility. Therefore, DOE did not consider this technology option further 
in the analysis.
Improved Burner Technology
    Burner technologies that were considered under this technology 
option include pulse combustion, premix burners and low pressure, air 
atomized oil burners. In the preliminary analysis TSD, all three burner 
technology options passed the screening analysis and were considered as 
options to improve thermal and combustion efficiency. In response to 
the inclusion of the three burner technologies, AHRI and Raypak 
commented that they do not consider pulse combustion as a technology 
option. Raypak stated that it views pulse combustion more as a 
fundamental aspect of the boiler design comparable to whether the 
boiler is water tube or fire tube. (Raypak No. 35 at p. 2) AHRI also 
stated pulse combustion is one way to create a boiler that condenses. 
(AHRI, No. 37 at p. 3)
    After considering the comments discussed above, DOE has re-
classified pulse combustion as a type of condensing boiler technology, 
rather than a design option that would be applied to a less efficient 
boiler to make it more efficient. In the screening analysis of the NOPR 
TSD, DOE included pulse combustion under heat exchanger improvement 
technology options and premix burners and low pressure air atomized oil 
burners under improved burner technology options. All three technology 
options passed the screening analysis.
Combustion Air Preheaters
    Combustion air pre heaters use a gas to gas heat exchanger to 
transfer heat from the flue gases to the incoming combustion air. 
Although this option can increase the operating efficiency of a 
commercial packaged boiler in the field, this efficiency is not 
measured by the current test procedure, because the current test 
procedure requires inlet air to be within  5[deg]F of the 
room ambient temperature. Therefore, DOE did not consider this 
technology option further in its analysis.
Economizers
    Economizers are gas to water heat exchangers that are used to 
transfer residual heat in the flue gases to the inlet water to the 
commercial packaged boiler. Unlike a condensing commercial packaged 
boiler that operates on the same principle, economizers are used as an 
add-on to the existing commercial packaged boilers and improve 
efficiency by pre heating the incoming water before it enters the 
primary heat exchanger. Although this technology option has the 
potential to improve efficiency by reducing the fuel input required to 
heat the water, the improvement in efficiency is not measured by the 
current test procedure, because the current test procedure requires the 
inlet water to have a set temperature before it enters the primary heat 
exchanger of the commercial packaged boiler. Therefore, DOE did not 
consider economizers as a technology option for improving commercial 
packaged boiler efficiency ratings.
Blowdown Waste Heat Recovery
    Some large commercial steam boilers require a blowdown operation to 
remove dissolved solids and salts that are left behind after the 
boiling process. These solids are usually dissolved in water that is 
hot and can be utilized to pre heat incoming water before it enters the 
primary heat exchanger of the commercial packaged boiler. Although this 
option can improve operating efficiency, measurement of the improvement 
in efficiency can only occur is there is sufficient deposit left behind 
in the boiler after continuous boiler operation. The current DOE test 
procedure is a laboratory based test that uses a commercial packaged 
boiler that is not previously installed or commissioned. During the 
test, the commercial packaged boiler will not be able to extract the 
waste heat from a blowdown operation. Therefore, DOE did not consider 
blowdown waste heat recovery further in the analysis.

[[Page 15855]]

Oxygen Trim Systems
    DOE added this technology option in the market and technology 
assessment chapter at the NOPR stage of the rulemaking. An oxygen 
``trim'' system is a control strategy that can be used to minimize 
excess combustion air and optimize the air-to-fuel ratio. These systems 
can increase efficiencies by 1 to 2 percentage points. This option 
passed the screening analysis.
    For this NOPR the following technology options were found to have 
an impact on the rated efficiency metric and passed the screening 
analysis to be considered further in the downstream analyses: (1) Heat 
exchanger improvements (including condensing heat exchanger), (2) 
improvement in burner technology, and (3) oxygen trim systems.

C. Engineering Analysis

    The engineering analysis establishes the relationship between 
manufacturer selling prices (MSP) and energy-efficiency of commercial 
packaged boilers. This price-efficiency relationship serves as a basis 
for subsequent cost-benefit calculations for individual consumers, 
manufacturers, and the nation.
    To determine this price-efficiency relationship, DOE uses data from 
the market and technology assessment, publicly available equipment 
literature and research reports, and information from manufacturers, 
distributors, and contractors. For this rulemaking, DOE first used 
information from the market and technology assessment to identify 
efficiency levels and representative equipment for analysis. In the 
market assessment DOE compiled a set of data containing the rated 
performance information and various characteristics of all CPB 
equipment available on the market. In the engineering analysis DOE 
refers to this as the ``equipment database''. The equipment database 
contains all commercial packaged boilers that are listed in AHRI's 
Directory of Certified Product Performance \31\ and commercial packaged 
boilers that are manufactured by members of ABMA. In the engineering 
analysis, DOE collected CPB prices primarily from manufacturers, 
mechanical contractors, and equipment distributors. DOE tabulated all 
of the price data in a separate database, which is referred to as the 
``prices database.''
---------------------------------------------------------------------------

    \31\ AHRI's Directory of Certified Product Performance can be 
found at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx.
---------------------------------------------------------------------------

1. Methodology
    DOE has identified three basic methods for developing price-
efficiency curves: (1) The design-option approach, which provides the 
incremental manufacturing costs of adding design options to a baseline 
model that will improve its efficiency; (2) the efficiency-level 
approach, which provides the incremental price of moving to higher 
efficiency levels without regard to any particular design option; (3) 
the reverse-engineering (or cost-assessment) approach, which provides 
``bottom-up'' manufacturing cost assessments for achieving various 
levels of increased efficiency based on teardown analyses (or physical 
teardowns) providing detailed data on costs for parts and material, 
labor, shipping/packaging, and investment for models that operate at 
particular efficiency levels.\32\
---------------------------------------------------------------------------

    \32\ The term `cost' refers to the manufacturing cost, while the 
term `price' refers to the manufacturer selling price. In some of 
the engineering analysis approaches DOE calculates the manufacturing 
cost which is multiplied with the appropriate markups to get the 
manufacturer selling price.
---------------------------------------------------------------------------

    For this rulemaking, DOE has decided to use the efficiency-level 
approach to conduct the engineering analysis. This methodology 
generally involves calculating prices of commercial packaged boilers 
for a given fuel input rate (representative fuel input rate) for each 
manufacturer at different efficiency levels spanning from the minimum 
allowable standard (i.e., baseline level) to the maximum 
technologically feasible efficiency level. The primary output of the 
analysis is a set of price-efficiency relationships that represent the 
average change in manufacturer selling price for higher efficiency 
equipment (i.e., ``incremental price''). In the subsequent markups 
analysis (chapter 6 in the NOPR TSD), DOE determines customer prices by 
applying additional distribution chain markups and sales tax to the 
manufacturer selling prices developed in the engineering analysis. 
After applying these markups, the data serve as inputs to the life-
cycle cost and payback period analyses (chapter 8 in the NOPR TSD).
    In the preliminary analysis, as noted previously, DOE classified 
commercial packaged boilers into sixteen equipment classes and analyzed 
each class separately. DOE received CPB price information for several 
mechanical draft equipment classes that was sufficient to develop a 
price-efficiency trend. However, DOE was unable to collect sufficient 
pricing data to develop a price-efficiency trend for the condensing 
efficiency levels, and the large mechanical draft steam and all natural 
draft equipment classes, and instead relied on alternate methodologies.
    In the preliminary analysis for the classes that had sufficient 
price data, DOE calculated the incremental increase in price at each 
efficiency level analyzed for each manufacturer at the representative 
fuel input rate, and then took an average of these price at each 
efficiency level to get the final price efficiency curve for all 
equipment classes. For the other equipment classes that did not have 
adequate pricing information, DOE used alternate methods of calculating 
incremental prices. These methods include extrapolation of price 
efficiency curves or actual pricing data to other equipment classes. 
DOE requested comments and feedback from interested parties on various 
aspects of the engineering analysis performed for the preliminary 
analysis, and specifically on the methodology and results. In response, 
DOE received several comments, which are discussed further in the 
following applicable sections.
    For the NOPR, as discussed in section IV.C.2 of this document, DOE 
was able to obtain more pricing information than it had for the 
preliminary analysis. As a result, DOE updated its approach for several 
equipment classes to include a direct analysis of that class using only 
pricing data obtained for that class. DOE also improved its methodology 
to account for the difference in equipment price as a function of 
capacity.
    In the NOPR analysis, for each price obtained, DOE first calculated 
the ratio of the price of the commercial packaged boiler with respect 
to its fuel input rate to obtain all prices on a per unit fuel input 
rate basis (dollars per kBtu/h). DOE then used its equipment database 
to determine and apply appropriate weights to individual prices (on a 
per fuel input rate basis) based on the distribution of input 
capacities on the market. The weight given to each CPB price per fuel 
input rate represents the number of commercial packaged boilers of that 
fuel input rate available in the market. Thus, price per fuel input 
rate of models that are similar in capacity to higher numbers of models 
on the market were weighted more heavily than price per fuel input rate 
of models at a fuel input rate for which relatively few models are 
available. DOE applied these weights to calculate the weighted average 
price per fuel input rate and the weighted average fuel input rate for 
each efficiency level analyzed.
    Next, DOE scaled the weighted average price (on a per fuel input 
rate basis) at each efficiency level from the weighted average fuel 
input rate (at

[[Page 15856]]

which the price was calculated in the previous step) to the 
representative fuel input rate for a given equipment class. To do this, 
DOE plotted the price per input as a function of fuel input rate and 
applied a non-linear regression model that best represented the trend. 
In these plots, it is apparent that for lower input capacities the 
price on a per input basis is higher, and as the fuel input rate 
increases, the price per input decreases. In addition, the rate of 
change of the price on a per-unit input basis with respect to fuel 
input rate also decreases considerably as the fuel input rate 
increases. The result is a scatter plot that appears to resemble a 
decreasing exponential curve. DOE applied the regression equation to 
determine the weighted average price per input at the representative 
fuel input rate.
    DOE performed a regression analysis on the weighted average price 
per input results at the representative fuel input rate and the 
efficiency levels to deduce the equation that best represents the 
price-efficiency relationship. Using the regression equation, DOE 
calculated the predicted weighted average price per input at the 
representative fuel input rate for all efficiency levels that were 
analyzed in each equipment class. DOE then multiplied the predicted 
weighted average price per input at the representative fuel input rate 
by the representative fuel input rate to get the manufacturer selling 
price at each efficiency level. As a final step, DOE calculated the 
incremental prices by subtracting the baseline price from the 
manufacturer selling price of each efficiency level above the baseline. 
Further details on the methodology and results are provided in the 
chapter 5 of the NOPR TSD.
    DOE requests feedback on the methodology used to analyze all 
equipment classes and the results obtained. In particular DOE is 
interested in comments on whether the results are appropriate and 
representative of the current market prices for such type of equipment.
    See section VII.E for a list of issues on which DOE seeks comment.
    a. Overall Methodology and Extrapolation of Prices
    DOE received several comments from interested parties in response 
to DOE's preliminary analyses on the overall methodology that was used 
to develop the price-efficiency relationships.
    ACEEE, ASAP, and NRDC noted that in other rulemakings, DOE 
typically constructs cost estimates by conducting teardowns and 
generating a Bill of Materials (BOMs); however, for the current 
rulemaking, DOE has not conducted any teardowns for commercial packaged 
boilers. The commenters stated that in contractor-installed systems 
such as commercial packaged boilers, prices are highly variable and may 
be based on factors other than efficiency (e.g. labor costs). (ACEEE, 
ASAP, and NRDC, No. 36 at p. 2) ASAP asked if DOE looked at the 
incremental costs, as opposed to incremental prices and that in looking 
at the incremental prices, the actual costs to improve efficiency are 
overestimated. (ASAP, Public Meeting Transcript No. 39 at p. 60)
    As discussed previously, DOE has decided to use the efficiency-
level approach to conduct the engineering analysis. In this approach 
DOE collects prices at various efficiency levels and estimates the 
incremental price for higher efficiency models as an average or 
weighted average of the commercial packaged boilers available on the 
market. Although DOE commonly uses a reverse-engineering approach, DOE 
decided not to use this approach for commercial packaged boilers due to 
practical concerns involved in tearing down commercial packaged 
boilers, especially those belonging to large equipment classes. 
Commercial packaged boilers exhibit a large variety of designs 
depending on a number of factors including, size, efficiency, fuel 
used, heating medium, draft type, heat exchanger design/material, and 
whether it is fire-tube or water-tube. In the analysis for this 
rulemaking, DOE collected pricing information for 584 commercial 
packaged boilers, which covered a range of different types of CPB 
equipment. Tearing down enough units to perform a reverse-engineering 
analysis would be extremely time intensive given the large number of 
CPB designs at each efficiency level and within each equipment class, 
and the physical size of some commercial packaged boilers. In addition, 
there are several practical issues involved with tearing down large 
commercial packaged boilers, given the size and weight of this 
equipment, which can require upgraded infrastructure for handling the 
equipment. In view of these issues, DOE felt that a pricing survey to 
collect information on actual CPB prices at various efficiency levels 
for each equipment class is a more practical methodology for conducting 
the engineering analysis for commercial packaged boilers.
    ACEEE, ASAP, and NRDC also encouraged DOE to ensure that the 
estimates of incremental prices only include the incremental price 
associated with the technology options required to meet a given 
efficiency level, and not the cost of auxiliary options that are often 
associated with premium products but are not associated with 
efficiency. (ACEEE, ASAP, and NRDC, No. 36 at pp. 3-4)
    DOE shares the commenters' concerns regarding the incremental price 
options being influence by auxiliary options that are not associated 
with energy efficiency. To the extent possible, DOE normalized optional 
features when gathering pricing by specifying the same options for all 
CPB prices collected. For example, DOE noticed that in several CPB 
series, prices of burner systems are listed separately and the price of 
the burner system that is selected is added to the basic model trade 
price for the total price for the commercial packaged boiler. For such 
cases, DOE chose the same type of burner for all CPB models where a 
choice is offered. While selecting the prices DOE also encountered 
scenarios where (1) a feature that DOE has consistently selected for 
all CPB models is not offered for a particular series; and (2) a 
particular feature becomes inapplicable for commercial packaged boilers 
of higher capacity within the same CPB series. In such cases DOE 
selected a similar feature that would offer similar functionality. DOE 
believes this approach helped to minimize the effects of optional 
auxiliary components.
    At the preliminary analysis public meeting ACEEE argued that the 
level field for comparing purchase options would be output capacity, 
and as a result it is time to migrate to output capacities, rather than 
input capacities, that are comparable across classes. (ACEEE, Public 
Meeting Transcript No. 39 at p. 44) DOE notes that in EPCA, commercial 
packaged boilers are defined as having ``capacity (rated maximum 
input)'' greater than or equal to 300 kBtu/h, and CPB equipment classes 
are currently divided based on fuel input rate. DOE notes that in 
adopting the existing equipment class divisions based on fuel input 
rate, DOE followed the approach in ASHRAE Standard 90.1 for dividing 
equipment based on fuel input rate. Moreover, while DOE agrees many 
purchasers would consider output capacity when purchasing a replacement 
commercial packaged boiler, DOE believes there is also a contingent of 
CPB purchasers that may only look at the fuel input rate for comparison 
purposes when choosing a new commercial packaged boiler, as both 
ratings are featured prominently in product literature. Therefore, DOE 
believes it appropriate to continue to use rated fuel input rate as the 
performance parameter for carrying out the analyses.

[[Page 15857]]

b. Large CPB Analysis and Representative Fuel Input Rate
    Another topic on which DOE received comments and feedback is 
related to large CPB pricing and its representative fuel input rate for 
analysis. AHRI commented that most of the analysis appears to be based 
on information for models with input rates of 5,000,000 Btu/h or less, 
and commercial packaged boilers that have input rates in the high 
millions of Btu per hour are very different products. AHRI stated that 
many factors that have been considered in the engineering analysis and 
the associated conclusions cannot be simply extrapolated up to 
characterize the particular factor as it applies to those very large 
commercial packaged boiler. (AHRI, No. 37 at p. 1) AHRI also commented 
that DOE should not assume a linear relationship between boiler size 
and component costs and encouraged DOE to review the data it has 
collected so far on the relationship and extrapolation between input 
rate and price, or obtain additional data for the analysis. (AHRI, No. 
37 at p. 3 and p. 5) Raypak stated that DOE should not assume a linear 
relationship between commercial packaged boiler size and component 
costs and that as a commercial packaged boiler gets larger in input the 
cost of gas burner and blower components rises exponentially. (Raypak, 
No. 35 at pp. 2-4) Raypak also provided comments during the preliminary 
analysis public meeting stating that made-to-order units will be priced 
higher due to the engineering work necessary to create a custom boiler. 
(Raypak, Public Meeting Transcript, No. 39 at p. 49)
    ABMA provided written comments on the methodology used for 
analyzing large commercial packaged boilers. In particular, ABMA 
expressed concern over the large commercial packaged boilers 
representative fuel input rate being 3,000 kBtu/h. ABMA argued that the 
representative fuel input rate of 3,000 kBtu/h is one of the smallest 
size boilers manufactured by ABMA member manufacturers and that it does 
not accurately represent the large boiler market. (ABMA, No. 33 at p. 
2) ABMA advocated capping the scope of the analysis to 2.5 million Btu/
h. (ABMA, No. 33 at p. 2; ABMA, Public Meeting Transcript, No. 39 at p. 
65)
    PGE & SCE commented that the comparison of small and large sized 
custom made boilers is not linear and DOE should look at methods for 
estimating very large equipment other than simply extrapolation. 
Further, PGE and SCE stated their concern that the methods used to 
estimate energy use, equipment classes and prices for medium sized 
commercial boilers are not appropriate for extrapolation to large 
commercial custom engineered boilers. (PGE & SCE, No. 38 at p. 3)
    As discussed in section IV.A.2, DOE has proposed to establish 
separate equipment classes for very large commercial packaged boilers 
with input capacities of greater than10,000 kBtu/h, and DOE is not 
considering amended standards for the proposed very large equipment 
classes in this rulemaking. Instead, DOE's current energy conservation 
standards that are set forth at 10 CFR 431.87 for commercial packaged 
boilers with a fuel input rate greater than 2,500 kBtu/h would continue 
to apply to all commercial packaged boilers that have a fuel input rate 
above 10,000 kBtu/h. DOE believes this addresses many concerns that the 
analysis does not apply to very large commercial packaged boilers. As 
discussed previously, DOE noticed a smooth increase in prices (devoid 
of any inflection) from the low fuel input rate commercial packaged 
boilers (i.e., near 300 kBtu/h) to the maximum fuel input rate 
commercial packaged boiler for which prices are available (~9,500 kBtu/
h). DOE did not observe any sudden change in the price structure within 
this range of fuel input rate and, based on this observation, believes 
its analysis would be applicable for input capacities ranging from 300 
kBtu/h to 10,000 kBtu/h.
    DOE chose the representative fuel input rate in the preliminary 
analysis as 3,000 kBtu/h by considering CPB models offered in the 
market and information received during manufacturer interviews. Several 
commenters suggested that a fuel input rate of 3,000 kBtu/h would not 
be appropriate for representing very large commercial packaged boilers. 
However, as discussed above, for this NOPR DOE proposes to consider 
commercial packaged boilers with fuel input rate above 10,000 kBtu/h 
separately from the commercial packaged boilers in the large (i.e., > 
2,500 and <= 10,000 kBtu/h) equipment class (which would be represented 
by the 3,000 kBtu/h fuel input rate). Further, the analysis of prices 
included data points for prices of commercial packaged boilers with 
input capacities up to 9,500 kBtu/h, and DOE did not observe any step 
change in the price-efficiency trend up to that point. DOE did not 
receive any new data that would justify choosing a different 
representative fuel input rate for large equipment classes, and 
therefore has maintained the 3,000 kBtu/h representative fuel input 
rate for this NOPR analysis.
    In the preliminary analysis, DOE used the price of two small 
commercial packaged boilers at 1,500 kBtu/h as a proxy for the price of 
one large 3,000 kBtu/h commercial packaged boiler, because DOE did not 
have sufficient price data in certain large CPB equipment classes to 
accurately establish the relationship between boiler size and price. In 
response to the preliminary analysis, DOE received comments from ACEEE, 
ASAP, and NRDC, questioning the accuracy of this approach. ACEEE, ASAP, 
and NRDC encouraged DOE to collect additional data to validate its 
assumption that the price of two 1,500 kBtu/h boilers is an accurate 
proxy for the price of a 3,000 kBtu/h boiler. The commenters elaborated 
that a large boiler will have only one burner, one heat exchanger, one 
shell, and one set of controls, possibly reducing prices for large 
boilers in comparison to two smaller boilers; however, there are far 
fewer 3,000 kBtu/h boilers sold than 1,500 kBtu/h boilers, so the 
allocation of design, testing, certification and other common costs 
will be much higher. (ACEEE, ASAP, and NRDC, No. 36 at pp. 2-3) The 
commenters also argued that DOE's methodology related to slope and 
inflection points of the efficiency curves for small gas-fired 
mechanical draft hot water boilers raises questions about the overall 
accuracy of the analysis. (ACEEE, ASAP, and NRDC, No. 36 at p. 3)
    For the NOPR analysis, as discussed in section IV.C.2, DOE was able 
to collect an additional 258 CPB prices. Despite the additional data, 
there were still certain efficiency levels for large CPB equipment 
classes where DOE lacked enough data to perform a robust analysis. 
Generally these were levels where there are few models available on the 
market to begin with. In these cases, DOE again leveraged the pricing 
collected for the small CPB equipment classes to estimate the price of 
a large commercial packaged boiler. However, in the NOPR analysis, to 
address the concerns expressed by stakeholders, DOE used a modified 
approach to calculate the price of a large commercial packaged boiler 
based on two or more smaller sized boilers. In this approach, DOE first 
combined the price data of each small and large equipment classes that 
have the same characteristics (e.g., small oil fired hot water and 
large oil fired hot water classes). DOE then performed a regression 
analysis of the entire dataset to find an equation that represents the 
relationship between equipment price and fuel input rate for the given 
type of equipment. DOE then

[[Page 15858]]

used the equation to estimate the price of a commercial packaged boiler 
when its size is scaled up to 3,000 kBtu/h. DOE used this modified 
approach for three equipment classes: (1) Large, oil-fired, hot water; 
(2) large, oil-fired, steam and (3) large, gas-fired, steam. The 
detailed methodology for the engineering analysis including the plots 
that show the variation of CPB price with fuel input rate are included 
in chapter 5 of the NOPR TSD. The new methodology adopted by DOE 
addresses the concerns expressed by stakeholders in their comments as 
it considers pricing data across a range of input capacities to 
estimate the change in price as input increases.
2. Data Collection and Categorization
    As part of the engineering analysis, DOE collected CPB prices from 
manufacturers, wholesalers, distributors and contractors. In the 
preliminary analysis, DOE collected pricing data, but as discussed 
previously was able to conduct a direct analysis of only six equipment 
classes: (1) Small, gas-fired, mechanical draft hot water; (2) large, 
gas-fired, mechanical draft hot water; (3) small, oil-fired, mechanical 
draft, hot water; (4) large, oil-fired, mechanical draft, hot water; 
(5) small, gas-fired, mechanical draft, steam; and (6) small, oil-
fired, mechanical draft, steam. For the remaining classes, DOE did not 
have enough data to analyze the equipment directly, and consequently 
relied upon extrapolation of results from the equipment classes with 
adequate pricing information. In response to the preliminary analysis, 
DOE received several comments urging DOE to collect additional data for 
the NOPR stage.
    ACEEE, ASAP, and NRDC commented that the limited amount of price 
data available for classes other than small, gas-fired, mechanical 
draft boilers forces DOE to rely on very uncertain extrapolations. The 
commenters encouraged DOE to collect additional price data to 
supplement its analysis, as they are concerned that the price-
efficiency curves in the preliminary TSD were developed using a limited 
data set that may yield inaccurate results. Further the commenters also 
expressed concern that the analysis does not contain any information 
about the number of individuals surveyed, number of useful results, 
etc. (ACEEE, ASAP, and NRDC, No. 36 at p. 2) ACEEE, ASAP, and NRDC 
encouraged DOE to collect additional price data through interviews with 
and surveys of those who write specifications (consulting engineers and 
others) and those who bid on projects (mechanical contractors). The 
commenters also suggested DOE could obtain data on CPB purchases by the 
Federal government. Finally, ACEEE, ASAP, and NRDC stated that DOE 
should ensure that the data reflects the prices that consumers are 
actually paying as opposed to the ``list'' price that are widely 
discounted in actual bids (ACEEE, ASAP, and NRDC, No. 36 at p. 3) AHRI 
and Raypak encouraged DOE to contact additional contractors and others 
involved in selling and installing commercial packaged boilers to 
obtain more prices for natural draft models. (AHRI, No. 37 at p. 3; 
Raypak, No. 35 at p. 2) PGE and SCE recommended that DOE pursue other 
options for obtaining sales and price figures for commercial boilers 
that will generate more accurate results, and suggested the use of use 
market surveys or working with industry to gain insight into costs for 
larger boiler equipment. PGE and SCE also recommended that DOE explore 
California's Database of Energy Efficiency Resources for incremental 
costs of commercial boilers. (PGE & SCE, No. 38 at p. 3) ACEEE 
commented during the public meeting that the Building Services Research 
and Information Association (BSRIA) is a resource that has done cost 
comparisons, including condensing boilers, and various commercial 
sizes. ACEEE also suggested reviewing the comments from the transcripts 
of negotiated rulemaking of 2013 on certification, compliance, and 
enforcement (CCE) where many CPB manufacturers were represented. 
(ACEEE, Public Meeting Transcript No. 39 at p. 54)
    DOE explored the suggestions provided by stakeholders, and found 
that the most reliable and complete price information was obtained 
directly from manufacturers, contractors, and distributors. DOE was 
able to collect a significant number of additional CPB prices in the 
NOPR stage, which were used to conduct a direct analysis of each 
equipment class. This eliminated the need to extrapolate price results 
between two different equipment classes, addressing the concerns of 
ACEEE, ASAP, and NRDC.
    DOE agrees with ACEEE, ASAP, and NRDC that the list price is 
different from the actual manufacturer selling price and that this 
should be accounted for in the analysis. DOE accounted for this in both 
the preliminary analysis and in this NOPR analysis. A distributor or 
wholesaler is usually the first consumer in the distribution chain and 
typically receives a discount compared to the list price when 
purchasing equipment from the manufacturer. This discount varies by 
manufacturer and also depends on the business relationship between the 
manufacturer and the purchaser (i.e., the discount may vary depending 
on the volume of units that a distributor or contractor purchases). 
While collecting price data, DOE also obtained information on typical 
discounts given from the list pricing, and applied the average discount 
to list prices to obtain the actual manufacturer selling price. All 
manufacturer selling prices used in the engineering analysis include 
the appropriate discount to the list prices.
    In the NOPR analysis, DOE used prices collected in the preliminary 
analysis stage with additional CPB prices that were collected in the 
NOPR stage.\33\ In total, DOE was able to obtain prices for a variety 
of commercial packaged boilers. These commercial packaged boilers 
included mechanical draft, natural (or atmospheric) draft, condensing 
boilers and non-condensing boilers. And their input capacities ranged 
from 300 kBtu/h to 9,500 kBtu/h. In aggregate, DOE used 584 CPB prices 
for its analysis. The 584 prices include 326 CPB prices that were used 
in the preliminary analysis stage and 258 that were collected in the 
NOPR stage of the rulemaking. The Table IV.4 shows the number of CPB 
prices that DOE used in the engineering analysis in each equipment 
class.
---------------------------------------------------------------------------

    \33\ For the prices used from the preliminary analysis stage, 
DOE first confirmed the models were still active and then updated 
the price to account for inflation.

     Table IV.4--Number of Prices Collected for Engineering Analysis
------------------------------------------------------------------------
                                                             Number of
                     Equipment class                      prices used in
                                                             analysis
------------------------------------------------------------------------
SGHW....................................................             203
LGHW....................................................              52
SHOW....................................................              70
LOHW....................................................              44
SGST....................................................              72
LGST....................................................              76
SOST....................................................              24
LOST....................................................              43
    Total...............................................             584
------------------------------------------------------------------------

3. Baseline Efficiency
    DOE selects baseline efficiency levels as reference points for each 
equipment class, against which DOE calculates potential changes in 
energy use, cost, and utility that could result from an amended energy 
conservation standard. A baseline unit is one that meets, but does not 
exceed, the required existing energy conservation standard, as 
applicable, and provides basic consumer utility. A CPB model that has a 
rated efficiency equal to its applicable

[[Page 15859]]

baseline efficiency is referred to as a ``baseline model.'' DOE uses 
the baseline model for comparison in several phases of the analyses, 
including the engineering analysis, life-cycle cost (LCC) analysis, 
payback period (PBP) analysis and national impacts analysis (NIA). For 
the engineering analysis, DOE used the current energy conservation 
standards that are set forth in CFR 431.87 as baseline efficiency 
levels.
    As discussed previously in section IV.A.2 of this document, DOE has 
proposed to modify the equipment classes for commercial packaged 
boilers for this analysis. If the proposed equipment classes are 
ultimately adopted in the final rule, then the equipment classes that 
are set forth in the current regulations would be consolidated such 
that the current draft-specific classes (i.e., those identified as 
being ``natural draft'' and ``all except natural draft'') would be 
merged into non-draft-specific classes. For the remaining equipment 
classes, DOE retained the current standards in 10 CFR 431.87 as the 
baseline efficiency levels in the engineering analysis. For the four 
draft-specific classes, DOE used the natural draft equipment class 
efficiency standard as the baseline efficiency level. The baseline 
efficiency levels for each equipment class are presented in Table IV.5.

Table IV.5--Baseline Efficiencies Considered in the Engineering Analysis
------------------------------------------------------------------------
                                                             Baseline
                     Equipment class                        efficiency*
                                                                (%)
------------------------------------------------------------------------
Small Gas fired Hot Water...............................              80
Large Gas fired Hot Water...............................              82
Small Oil fired Hot Water...............................              82
Large Oil fired Hot Water...............................              84
Small Gas fired Steam...................................         \**\ 77
Large Gas fired Steam...................................         \**\ 77
Small Oil fired Steam...................................              81
Large Oil fired Steam...................................              81
------------------------------------------------------------------------
*Efficiency levels represent thermal efficiency for all equipment
  classes except for Large Gas Hot Water and Large Oil Hot Water, for
  which the efficiency levels are in terms of combustion efficiency.
**Mechanical draft equipment within this class currently has a minimum
  standard of 79 percent thermal efficiency. (10 CFR 431.87) All
  equipment analyzed below 79 percent is natural draft equipment.

4. Intermediate and Max-tech Efficiency Levels
    As part of its engineering analysis, DOE determined the maximum 
technologically feasible (``max-tech'') improvement in energy 
efficiency for each equipment class of commercial packaged boilers. DOE 
surveyed the CPB market and the research literature relevant to 
commercial packaged boilers to determine the max-tech efficiency 
levels. Additionally, for each equipment class, DOE generally 
identifies several intermediate efficiency levels between the baseline 
efficiency level and max-tech efficiency level. These efficiency levels 
typically represent the most common efficiencies available on the 
market or a major design change (e.g., switching to a condensing heat 
exchanger). In the analysis, DOE uses the intermediate and max-tech 
efficiency levels as target efficiencies for conducting the cost-
benefit analysis of achieving increased efficiency levels.
    During the market assessment, DOE conducted an extensive review of 
publicly available CPB equipment literature. DOE used the equipment 
database compiled during the market assessment to identify intermediate 
and max-tech efficiency levels for analysis. The efficiency levels for 
each equipment class that DOE considered in the NOPR TSD are presented 
in Table IV.6

    Table IV.6--Baseline, Intermediate and Max Tech Efficiency Levels
                  Analyzed in the Engineering Analysis
------------------------------------------------------------------------
                                Efficiency*        Efficiency level
       Equipment class              (%)               identifier
------------------------------------------------------------------------
Small Gas Hot Water.........              80  EL-0 Baseline.
                                          81  EL-1.
                                          82  EL-2.
                                          84  EL-3.
                                          85  EL-4.
                                          93  EL-5.
                                          95  EL-6.
                                          99  EL-7 Max Tech.
Large Gas Hot Water.........              82  EL-0 Baseline.
                                          83  EL-1.
                                          84  EL-2.
                                          85  EL-3.
                                          94  EL-4.
                                          97  EL-5 Max Tech.
Small Oil Hot Water.........              82  EL-;0 Baseline.
                                          83  EL-1.
                                          84  EL-2.
                                          85  EL-3.
                                          87  EL-4.
                                          88  EL-5.
                                          97  EL-6 Max Tech.
Large Oil Hot Water.........              84  EL-0 Baseline.
                                          86  EL-1.
                                          88  EL-2.
                                          89  EL-3.
                                          97  EL-4 Max Tech.
Small Gas Steam.............              77  EL-0 Baseline.
                                          78  EL-1.
                                          79  EL-2.
                                          80  EL-3.
                                          81  EL-4.
                                          83  EL-5 Max Tech.
Large Gas Steam.............              77  EL-0 Baseline.
                                          78  EL-1.

[[Page 15860]]

 
                                          79  EL-2.
                                          80  EL-3.
                                          81  EL-4.
                                          82  EL-5.
                                          84  EL-6 Max Tech.
Small Oil Steam.............              81  EL-0 Baseline.
                                          83  EL-1.
                                          84  EL-2.
                                          86  EL-3 Max Tech.
Large Oil Steam.............              81  EL-0 Baseline.
                                          83  EL-1.
                                          85  EL-2.
                                          87  EL-3 Max Tech.
------------------------------------------------------------------------
*Efficiency levels represent thermal efficiency for all equipment
  classes except for Large Gas Hot Water and Large Oil Hot Water, for
  which the efficiency levels are in terms of combustion efficiency.

    In the preliminary analysis, DOE selected several efficiency levels 
for consideration in the analysis, many of which were retained in this 
NOPR. In response to the preliminary analysis, ACEEE, ASAP, and NRDC 
encouraged DOE to evaluate at the least one additional condensing level 
for the small, oil-fired, mechanical draft, hot water and the large, 
oil-fired, mechanical draft, hot water equipment classes at a level 
that could be considered ``baseline'' condensing equipment (i.e., 
efficiency levels at or just above 90%). (ACEEE, ASAP, and NRDC, No. 36 
at p. 4) During the preliminary analysis public meeting, AHRI also 
noted the absence of an interim point for some classes, particularly 
referring to the small oil mechanical draft hot water class. However, 
in continuation, AHRI also noted that making a condensing oil boiler 
has many challenges. (AHRI, Public Meeting Transcript, No. 39 at p. 41) 
In the public meeting ACEEE also commented that the inclusion of low-
level condensing product in the analysis will illustrate the challenges 
faced in marketing such a product, at a cost-effective price and 
encouraged DOE to explore additional intermediate levels for this 
reason. (ACEEE, Public Meeting Transcript, No. 39 at p. 43) DOE notes 
that in the preliminary analysis for small oil fired mechanical draft 
hot water equipment class there was an eleven percentage point jump 
between the efficiency level just below max-tech and max tech. 
Similarly, for the large oil-fired mechanical draft hot water equipment 
class, there was a 9 percentage point jump.
    DOE considered these comments carefully and examined whether there 
is a need to add interim condensing efficiency levels between max-tech 
and the level below max tech in the oil-fired hot water CPB equipment 
classes. While selecting intermediate efficiency levels for this 
rulemaking, DOE examined the distribution of commercial packaged 
boilers available in the market at all efficiency levels.\34\ DOE then, 
selected several intermediate efficiency levels that have a substantial 
representation of commercial packaged boilers in the market. In the 
case of oil-fired hot water equipment classes, the large equipment 
class has three commercial packaged boilers and the small equipment 
class has one commercial packaged boiler that achieve efficiencies that 
require condensing operation. The one small condensing boiler has a 
thermal efficiency of 96.8% while the three large condensing boilers 
have combustion efficiencies of 95.8%, 96.9% and 97%. Based on this 
assessment, there appears to be no oil-fired hot water condensing 
boilers in the market with efficiency less than 95% that could 
potentially serve as a baseline for condensing efficiency levels. In 
addition, DOE also agrees with the commenters that there are 
significant challenges involved in designing and operating oil-fired 
condensing boilers.
---------------------------------------------------------------------------

    \34\ The efficiency levels refer to combustion efficiency for 
large hot water equipment classes and thermal efficiency for all 
other equipment classes.
---------------------------------------------------------------------------

    Given the absence of such boilers available in the market and the 
challenges and uncertainties inherent to analyzing a product that does 
not exist, DOE has decided not to analyze additional interim condensing 
efficiency levels below max-tech for the oil-fired hot water equipment 
classes. DOE believes the consideration of the max-tech levels in these 
classes, which include condensing technology, are adequate for 
determining the cost-effectiveness of condensing designs.
    DOE notes that for the small gas-fired hot water equipment class, 
efficiency levels of 93 percent and 95 percent were included in the 
analysis and represent interim condensing efficiency levels. Similarly, 
for the large gas-fired hot water equipment class, DOE has analyzed 94 
percent as an interim condensing efficiency level below the max-tech. 
For these classes, the availability of commercial packaged boilers at 
these efficiency levels in the dataset in sufficiently large numbers 
justifies DOE's selection of intermediate efficiency levels.
5. Incremental Price and Price-Efficiency Curves
    The final results of the engineering analysis are a set of price-
efficiency curves that represent the manufacturer selling price for 
higher efficiency models. DOE uses these results as inputs to the 
downstream analyses such as the life cycle cost analysis.
    DOE received several comments on the incremental price results and 
the price-efficiency curves published in the preliminary analysis TSD. 
Lochinvar commented that the variation in manufacturing cost and the 
markup at each stage of distribution makes an accurate projection of 
incremental costs difficult, but that the methodology seems sound. 
Lochinvar also stated that the projected cost to the consumer appears 
to be a little high (5[hyphen]10%) across the board and suggested a 
modest underestimation of markup as a reason. (Lochinvar, No. 34 at p. 
2) ACEEE, ASAP, and NRDC commented that DOE's results for condensing 
efficiency levels of small gas mechanical draft hot water equipment 
class appear to be inconsistent with DOE's statements that

[[Page 15861]]

there is generally a step change in price from a non-condensing boiler 
to a condensing boiler. (ACEEE, ASAP, and NRDC, No. 36 at p. 3).
    DOE appreciates Lochinvar's comments comparing the results to their 
own pricing, but also notes that the analysis performed covered a wide 
variety of manufacturers and CPB models. Thus, DOE does not believe 
that a 5- to 10-percent variation from Lochinvar's results would be 
unexpected, as each individual manufacturer will set its prices 
differently.
    DOE also examined the issue regarding the step change in prices of 
condensing boilers. More specifically, DOE investigated why there 
exists a relatively flatter trend in the incremental prices when going 
from non-condensing efficiency levels to condensing efficiency levels 
given the step change in technology from non-condensing to condensing. 
From the pricing data collected for small gas-fired hot water 
commercial packaged boilers, it is evident that the price of a 
commercial packaged boiler generally increases as it approaches the 
highest non-condensing efficiency levels, then displays a relatively 
flat trend to achieve lower condensing levels. The prices then increase 
as the efficiency approaches the mid-condensing efficiency levels, 
suggesting that achieving lower condensing levels is only slightly more 
costly than achieving the highest non-condensing levels.
    There could be several reasons for this trend. First, commercial 
packaged boilers achieving efficiencies at the highest end of the non-
condensing range sometimes incorporate designs that anticipate 
formation of condensate under certain conditions, such as high-grade 
stainless steel vent connectors, which will increase the cost and price 
of the commercial packaged boiler. DOE also notes from the market and 
technology assessment that only about 5 percent of all the small gas 
hot water boilers have a thermal efficiency that is greater than 86 
percent and less than 90 percent. The comparatively lower production 
volumes of these commercial packaged boilers could also contribute to 
the higher prices. In this NOPR, DOE is analyzing the efficiency levels 
93% and 95% for the small gas hot water equipment class. These 
efficiency levels represent the mid-level condensing levels that are a 
step higher than the other non-condensing and low condensing efficiency 
levels. As explained in section IV.A.2 of this document, these levels 
were chosen due to the high number of models already available on the 
market at these efficiencies. The price-efficiency curves for all 
equipment classes including small gas hot water are shown in chapter 5 
of the NOPR TSD. Table IV.7 shows the incremental manufacturer selling 
price results for all eight equipment classes along with the baseline 
prices.

                            Table IV.7--Manufacturer Selling Price-Efficiency Results
----------------------------------------------------------------------------------------------------------------
                                                                                    Incremental
           Equipment class                        Efficiency level (%)                  MSP        Baseline MSP
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water..................  Baseline--80.............................              $0          $6,928
                                       81.......................................             472
                                       82.......................................             977
                                       84.......................................           2,759
                                       85.......................................           3,561
                                       93.......................................          10,027
                                       95.......................................          10,494
                                       Max Tech--99.............................          13,966
Large Gas Hot Water..................  Baseline--82.............................               0          21,244
                                       83.......................................           2,534
                                       84.......................................           5,370
                                       85.......................................           8,544
                                       94.......................................          32,796
                                       Max Tech--97.............................          36,904
Small Oil Hot Water..................  Baseline--82.............................               0           8,404
                                       83.......................................             634
                                       84.......................................           1,315
                                       85.......................................           2,048
                                       87.......................................           3,683
                                       88.......................................           4,594
                                       Max Tech--97.............................          17,687
Large Oil Hot Water..................  Baseline--84.............................               0          18,915
                                       86.......................................           4,785
                                       88.......................................          10,781
                                       89.......................................          14,326
                                       Max Tech--97.............................          49,923
Small Gas Steam......................  Baseline--77.............................               0           6,659
                                       78.......................................             540
                                       79.......................................           1,124
                                       80.......................................           1,756
                                       81.......................................           2,439
                                       Max Tech--83.............................           3,975
Large Gas Steam......................  Baseline--77.............................               0          19,122
                                       78.......................................           1,097
                                       79.......................................           2,256
                                       80.......................................           3,483
                                       81.......................................           4,779
                                       82.......................................           6,150
                                       Max Tech--84.............................           9,132
Small Oil Steam......................  Baseline--81.............................               0           7,294
                                       83.......................................           1,722
                                       84.......................................           2,730

[[Page 15862]]

 
                                       Max Tech--86.............................           5,097
Large Oil Steam......................  Baseline--81.............................               0          18,702
                                       83.......................................           3,017
                                       85.......................................           6,521
                                       Max Tech--87.............................          10,590
----------------------------------------------------------------------------------------------------------------

D. Markups Analysis

    The markups analysis develops appropriate markups in the 
distribution chain (e.g., retailer markups, distributer markups, 
contractor markups, and sales taxes) to convert the estimates of 
manufacturer selling price derived in the engineering analysis to 
consumer prices (``consumer'' refers to purchasers of the equipment 
being regulated), which are then used in the LCC and PBP analysis and 
in the manufacturer impact analysis. DOE develops baseline and 
incremental markups based on the equipment markups at each step in the 
distribution chain. For this rulemaking, DOE developed distribution 
chain markups in the form of multipliers that represent increases above 
equipment purchase costs for key market participants, including CPB 
wholesalers/distributors, and mechanical contractors and general 
contractors working on behalf of CPB consumers. The baseline markup 
relates the change in the manufacturer selling price of baseline models 
to the change in the consumer purchase price. The incremental markup 
relates the change in the manufacturer selling price of higher 
efficiency models (the incremental cost increase) to the change in the 
consumer purchase price.
    Four different markets exist for commercial packaged boilers: (1) 
New construction in the residential buildings sector, (2) new 
construction in the commercial buildings sector, (3) replacements in 
the residential buildings sector, and (4) replacements in the 
commercial buildings sector. In the preliminary analyses, DOE 
characterized eight distribution channels to address these four 
markets.
    For both the residential and commercial buildings sectors, DOE 
characterizes the replacement distribution channels as follows:
     Manufacturer [rarr] Wholesaler [rarr] Mechanical 
Contractor [rarr] Consumer
     Manufacturer [rarr] Manufacturer Representative [rarr] 
Mechanical Contractor [rarr] Consumer
    DOE characterizes the new construction distribution channels for 
both the residential and commercial buildings sectors as follows:
     Manufacturer [rarr] Wholesaler [rarr] Mechanical 
Contractor [rarr] General Contractor [rarr] Consumer
     Manufacturer [rarr] Manufacturer Representative [rarr] 
Mechanical Contractor [rarr] General Contractor [rarr] Consumer
    In addition to these distribution channels, there are scenarios in 
which manufacturers sell commercial packaged boilers directly to a 
consumer through a national account (assumed as 17.5% of sales in the 
preliminary analysis; other distribution channels previously discussed 
make up the remaining 82.5% market share). These scenarios occur in 
both new construction and replacements markets and in both the 
residential and commercial sectors. The relative shares for these are 
dependent on product class and details may be found in chapter 6 of the 
TSD. In these instances, installation is typically accomplished by site 
personnel. These distribution channels are depicted as follows:
     Manufacturer [rarr] Commercial Consumer (National Account)
    To develop markups for the parties involved in the distribution of 
the commercial packaged boilers, DOE utilized several sources, 
including (1) the Heating, Air-Conditioning & Refrigeration 
Distributors International (HARDI) 2013 Profit Report \35\ to develop 
wholesaler markups, (2) the 2005 Air Conditioning Contractors of 
America's (ACCA) financial analysis for the heating, ventilation, air-
conditioning, and refrigeration (HVACR) contracting industry \36\ to 
develop mechanical contractor markups, and (3) U.S. Census Bureau's 
2007 Economic Census data \37\ for the commercial and institutional 
building construction industry to develop general contractor markups. 
In addition to the markups, DOE derived State and local taxes from data 
provided by the Sales Tax Clearinghouse.\38\ These data represent 
weighted-average taxes that include county and city rates. DOE derived 
shipment-weighted-average tax values for each region considered in the 
analysis.
---------------------------------------------------------------------------

    \35\ Heating, Air Conditioning & Refrigeration Distributors 
International 2013 Profit Report. Available at http://www.hardinet.org/Profit-Report.
    \36\ Air Conditioning Contractors of America (ACCA). Financial 
Analysis for the HVACR Contracting Industry: 2005. Available at 
http://www.acca.org/store/.
    \37\ Census Bureau, 2007 Economic Census Data (2007) (Available 
at: http://www.census.gov/econ/)
    \38\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along 
with Combined Average City and County Rates, 2013 (Available at: 
http://thestc.com/STrates.stm).
---------------------------------------------------------------------------

    During the preliminary analysis public meeting and in written 
comments responding to DOE's preliminary analyses, DOE received 
feedback regarding distribution channels and market share of equipment 
through different channels. Lochinvar, Plumbing-Heating-Cooling 
Contractors National Association (PHCC), and Raypak commented that 
DOE's considered distribution channels seem accurate. Lochinvar 
estimates that commercial sales for all CPB sizes are primarily (80% or 
more) through manufacturer's representatives. (Lochinvar, No. 34 at p. 
2) PHCC noted that boilers below 4,000,000 Btu/h are likely to have 
wholesaler presence, but anything larger would most likely be sold 
through a manufacturer's representative. (PHCC, Public Meeting 
Transcript, No. 39 at p. 79) Raypak stated that, due to complexity of 
installation of commercial packaged boilers, sales are done primarily 
through a manufacturer's representative that provides additional 
equipment and expertise needed, and that wholesalers do not really 
apply to commercial packaged boilers. (Raypak, Public Meeting 
Transcript, No. 39 at p. 81)
    DOE received contradictory comments from stakeholders regarding the 
presence of wholesalers in the distribution chain for commercial 
packaged boilers. However, for the NOPR analysis, consistent with the 
preliminary analysis, the impact on markups from sales through 
wholesalers and sales through manufacturer's representatives are 
assumed to be equal. As a result, the distinction would not result in 
any impact on the overall markups. For its NOPR analysis DOE retained 
the distribution channels, and the assumed share of equipment

[[Page 15863]]

through these channels, as established in the preliminary analysis.
    In addition, DOE received comments on the value of the markups, the 
applicability of the markups to small businesses, and tax exemption for 
commercial packaged boilers used for manufacturing purposes. Lochinvar 
suggested that DOE's markups in the preliminary analysis were 5-10% 
higher than they expected, resulting in overestimation of consumer 
price of the same order. (Lochinvar, No. 34 at pp. 2-3) PVI Industries, 
LLC (PVI) noted that the markups established from publicly traded 
companies are not reflective of smaller manufacturers that may not 
benefit from higher volume sales and economies of scale. (PVI, Public 
Meeting Transcript, No. 39 at p. 82) PHCC noted that, in some states, a 
tax exemption may exist for commercial packaged boilers if they are 
used for manufacturing purposes, citing Indiana and Michigan as states 
where such tax exemptions exist. (PHCC, Public Meeting Transcript, No. 
39 at p. 77)
    Based on these comments, DOE reexamined the markups and encountered 
errors in its preliminary analysis calculations resulting in overly 
high markups. DOE has corrected this issue in the NOPR markups 
analysis. With respect to adequately representing markups for small 
businesses that may not benefit from high volume sales, and thus 
certain economies of scale, DOE is not generally privy to financial 
data for non-publically traded firms and cannot assess the likely 
impact, or magnitude of impact, on overall markups of smaller firms 
with reduced sales. With respect to tax exemptions that may exist for 
commercial packaged boilers used for manufacturing purposes, this 
rulemaking does not cover process boilers that are not used for space 
heating. In addition, based on the information available to DOE, DOE 
did not identify any tax exemptions available for the commercial 
packaged boilers covered in this rulemaking. As such, DOE did not 
consider tax exemptions in its NOPR analyses for this rulemaking.
    Chapter 6 of the NOPR TSD provides further detail on the estimation 
of markups.
    DOE requests information or insight that can better inform its 
markups analysis.
    See section VII.E for a list of issues on which DOE seeks comment.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of commercial packaged boilers in use in the United 
States and assess the energy savings potential of increases in 
efficiency (thermal efficiency (ET) or combustion efficiency 
(EC)). In contrast to the CPB test procedure under title 10 
of the Code of Federal Regulations part 431, which uses fixed operating 
conditions in a laboratory setting, the energy use analysis for 
commercial packaged boilers seeks to estimate the range of energy 
consumption of the equipment in the field. DOE estimates the annual 
energy consumption of commercial packaged boilers at specified energy 
efficiency levels across a range of climate zones, building 
characteristics, and space and water heating applications. The annual 
energy consumption includes natural gas, liquid petroleum gas (LPG), 
oil, and/or electricity use by the commercial packaged boiler for space 
and water heating. The annual energy consumption of commercial packaged 
boilers is used in subsequent analyses, including the LCC and PBP 
analysis and the national impact analysis.
    In its preliminary analyses, DOE estimated the energy consumption 
of commercial packaged boilers in commercial buildings and multi-family 
housing units by developing building samples for each of eight 
equipment classes examined based on the Energy Information 
Administration's (EIA) 2003 Commercial Building Energy Consumption 
Survey \39\ (CBECS 2003) and EIA's 2009 Residential Energy Consumption 
Survey (RECS 2009), respectively. In their written comments in response 
to DOE's preliminary analyses, Raypak and AHRI expressed concern 
regarding the use of 2003 CBECS data, noting that it would not properly 
reflect the energy use of commercial packaged boilers being installed 
in 2019 and beyond, and urged DOE to await the release of CBECS 2012. 
(Raypak, No. 35 at p. 1; AHRI, No. 37 at p. 2)
---------------------------------------------------------------------------

    \39\ U.S. Energy Information Administration (EIA). 2003 
Commercial Building Energy Consumption Survey (CBECS) Data. 2003. 
Available at http://www.eia.gov/consumption/commercial/data/2003/.
---------------------------------------------------------------------------

    DOE acknowledges there is benefit to the use of more recent CBECS 
data. However, EIA, so far, has released only a single microdata file 
(``Building Characteristics Public Use Microdata,'' June 25, 2015) 
covering the ``building characteristics'' portion of the 2012 CBECS 
survey sample results.\40\ In its NOPR analysis, DOE used this data for 
updating the equipment class distributions in the analysis period, the 
shipment analysis, and the national impact analysis. To use the CBECS 
sample data for the LCC analysis, DOE requires the microdata file 
covering consumption and expenditure data. Since CBECS 2003 is the 
latest survey, with complete microdata available for the purpose of 
DOE's energy use analysis, DOE continued to use CBECS 2003 in the LCC 
analysis.
---------------------------------------------------------------------------

    \40\ U.S. Energy Information Administration (EIA). 2012 
Commercial Building Energy Consumption Survey (CBECS) Data. 2012. 
Available at http://www.eia.gov/consumption/commercial/data/2012/index.cfm?view=microdata.
---------------------------------------------------------------------------

1. Energy Use Characterization
    DOE's energy characterization modeling approach calculates CPB 
energy use based on rated thermal efficiency and building heat load 
(BHL), accounting for the conversion from combustion efficiency to 
thermal efficiency when applicable, part-load operation (in the case of 
multi-stage equipment), and cycling losses (for single-stage 
equipment), as well as return water temperature (RWT) and climate 
zones. In the preliminary analyses, DOE analyzed CPB annual energy use 
based on the building sample, equipment efficiency characteristics, and 
equipment performance at part-load conditions.
    In the preliminary analyses, in determining building heat load, DOE 
adjusted the building heat load to reflect the expectation that 
buildings in 2019 would have a somewhat different building heat load 
than buildings in the CBECS 2003 and RECS 2009 building sample. The 
adjustment involved multiplying the calculated BHL for each CBECS 2003 
or RECS 2009 building by the building shell efficiency index from 
AEO2014. This factor differs for commercial and residential buildings 
as well as new construction and replacement buildings. Additionally, 
DOE also adjusted the building heat load reported in CBECS 2003 and 
RECS 2009 for each building using the ratio of the historical National 
Oceanic and Atmospheric Administration (NOAA) average heating degree 
day data for the specific region each CBECS or RECS building sampled is 
in to the 2003 or 2009 heating degree days value, respectively, for the 
same region, to reflect the heating load under historical average 
climate conditions.
    DOE requests feedback on the methodology and assumptions used for 
the building heat load adjustment.
    See section VII.E for a list of issues on which DOE seeks comment.
    For its preliminary analyses, DOE adjusted the rated thermal 
efficiency of evaluated commercial packaged boilers based on RWT, 
cycling losses, and part-load operation. High RWT is applied to all 
non-condensing boiler installations. For condensing boiler 
installations, low

[[Page 15864]]

RWT is applied to all commercial packaged boilers in the new 
construction market, 25 percent of replacement boilers in buildings 
built after 1990, and 5 percent of replacement boilers in buildings 
built before 1990. DOE assumed that all other condensing boiler 
installations are high RWT applications. The efficiency adjustment for 
low and high RWT is dependent on climate, with low RWT values resulting 
in the condensing CPB equipment operating in condensing mode, on 
average, and high RWT values resulting in the condensing CPB equipment 
operating in non-condensing mode, on average. See appendix 7B of the 
NOPR TSD for the adjustment factors used for RWT, part-load operation, 
and cycling by climate zone. For commercial packaged boilers rated in 
combustion efficiency, DOE converted combustion efficiency to thermal 
efficiency. DOE used combustion and thermal efficiency data from the 
AHRI database to create a conversion factor that is representative of 
the range of commercial packaged boilers on the market.
    DOE received comments on the preliminary analysis regarding the 
energy modeling approach. Regarding DOE's approach to converting 
combustion efficiency to thermal efficiency, Lochinvar suggested that, 
in order to avoid confusion, DOE should not convert one to the other. 
(Lochinvar, No. 34 at p. 7) Relative to adjusting rated thermal 
efficiency of commercial packaged boilers using return water 
temperature, Lochinvar urged DOE not to attempt correcting the 
efficiency of hot water commercial packaged boilers based on expected 
return water temperature conditions, noting that certain aspects of the 
BTS-2000 test procedure are being overlooked, such as the use of a 
recirculating loop used in some instances allowing for higher return 
water temperature into the boiler. Lochinvar also noted that efficiency 
curves over a wide range of return water temperatures used to derive 
conversion factors in the analysis are not based on BTS-2000 
methodology, and using data created without a consistent test procedure 
is certain to introduce errors. (Lochinvar, No. 34 at p. 3) Similarly, 
AHRI expressed concerns regarding DOE's decision to try to adjust rated 
thermal efficiency and annual energy consumption estimates of 
commercial packaged boilers to account for differences in return and 
supply water temperatures, noting the lack of field data and the use of 
outdoor reset in many installations, a field condition variable that 
adjusts return water temperature based on building heating load and 
ambient air temperature. AHRI furthered stated that such efficiency 
adjustment would be an estimate not supported by adequate field data. 
(AHRI, No. 37 at p. 4) Raypak noted that return water temperature is 
unique to every boiler application, building design, and engineering 
plans for building operation. Raypak stated that there is no 
representative profile of return water temperature in the field. 
(Raypak, No. 35 at p. 3)
    AHRI commented that, given the trends toward multiple boilers, the 
energy use calculations in buildings where multiple boilers are 
installed should be considered in DOE's energy use analysis. (AHRI, 
Public Meeting Transcript, No. 39 at pp. 95-96) DOE's analysis of non-
condensing boilers considers cycling loss curves that reflect staging 
with multiple boilers, where multiple boilers exist, reducing the 
cycling adjustment factor based on the modulation capability of 
multiple-boiler systems. For condensing boilers, the part-load curves 
do not consider effects of multiple boilers but instead consider impact 
on efficiency due to modulation.
    With respect to the adjustments made to CPB efficiencies and annual 
energy use based on return water temperature conditions, DOE 
understands that field conditions may be variable but recognizes that 
one of the key drivers impacting CPB efficiency is return water 
temperature. In its analysis, DOE sought to estimate the energy use of 
equipment in the field and, as such, considered factors that may impact 
CPB efficiency, including return water temperature conditions. DOE's 
energy use analysis has been designed to reflect conditions in the 
field, considering the expectations for existing buildings and the 
potential in new construction, as well as the proposed testing 
conditions in DOE's concurrent test procedure rulemaking.\41\
---------------------------------------------------------------------------

    \41\ A link to the February 2016 test procedure NOPR issued by 
DOE can be found at: http://energy.gov/eere/buildings/downloads/issuance-2016-02-22-energy-conservation-program-certain-commercial-and.
---------------------------------------------------------------------------

    Regarding DOE's approach to converting combustion efficiency to 
thermal efficiency, Lochinvar stated that DOE's conversion factor where 
every 1 percent increase in combustion efficiency equates to a 1.0867 
percent increase in thermal efficiency could be misleading when 
reversing the conversion factor to prescribe new minimum combustion 
standards. Lochinvar believes such reversed conversions would require 
DOE to justify a greater energy savings for large commercial packaged 
boilers in order to justify an increase in combustion efficiency. 
Lochinvar suggested that, in order to avoid confusion, DOE should not 
convert one to the other. (Lochinvar, No. 34 at p. 7)
    DOE disagrees that its method of converting combustion efficiency 
to thermal efficiency for applicable large commercial packaged boilers 
is misleading. As detailed in chapter 7 of the NOPR TSD, DOE calculated 
annual energy use of covered commercial packaged boilers based on the 
thermal efficiency of the equipment while accounting for cycling loss, 
part load operating conditions, and return water temperature. For 
equipment classes rated in combustion efficiency, DOE converted the 
combustion efficiency levels defined in the engineering analysis to 
thermal efficiency levels in order to appropriately characterize the 
energy use of the equipment. However, DOE did not reverse the 
conversion when establishing standard levels in combustion efficiency. 
Rather, DOE identified combustion efficiency levels through its 
engineering analysis by evaluating technologically feasible options. 
DOE then calculated energy use and associated operating cost savings 
through converting combustion efficiency to thermal efficiency when 
determining economic justification of each identified combustion 
efficiency level. As such, DOE disagrees with Lochinvar's point that 
the conversion from combustion efficiency to thermal efficiency is 
misleading or will create confusion. DOE did review the conversion 
factor that DOE developed in the preliminary analysis and adjusted it 
to ensure the NOPR analysis does not result in a conversion where the 
thermal efficiency value is higher than the combustion efficiency. DOE 
applied the same methodology to convert combustion efficiency to 
thermal efficiency to determine energy use of equipment rated in 
combustion efficiency in its energy analysis for the NOPR.
    DOE also received comments related to system considerations that 
may impact return water temperature conditions, and the resulting 
impact on the expected performance of condensing units that replace 
non-condensing commercial packaged boilers. ABMA commented that unless 
the boiler sizing closely follows the seasonal load profile, and the 
control system is capable of selecting the correct boiler for the 
prevailing load, the efficiency savings will not be maximized. (ABMA, 
No. 33 at p. 3) Raypak similarly commented that DOE should be aware of 
the distribution system considerations for ensuring proper operation 
with lower boiler water temperatures, as needed for

[[Page 15865]]

a condensing system to yield the maximum energy savings, and that it is 
aware of many condensing boiler installations that have not realized 
the desired savings due to system considerations that prevent 
condensation from taking place. (Raypak, No. 35 at p. 4) Raypak and PVI 
commented that installing a high efficiency condensing commercial 
packaged boiler in a system that operates with return water 
temperatures that do not allow for high efficiency operation will yield 
little or no cost/energy savings. (Raypak, No. 35 at p. 4; PVI, Public 
Meeting Transcript, No. 39 at p. 183) PVI further noted that the 
analysis assumes that a high efficiency condensing commercial packaged 
boiler operates at high efficiency all the time but that, anecdotally, 
the vast majority of buildings in the United States today have return 
water temperatures of between 140 and 160 degrees that do not allow for 
condensing, and that a system redesign would be required to allow for 
condensing to take place. (PVI, Public Meeting Transcript, No. 39 at 
pp. 182-183) AHRI and Raypak stated that the costs associated with a 
system retrofit in such cases should be considered in the model. 
(Raypak, Public Meeting Transcript, No. 39 at p. 186; AHRI, Public 
Meeting Transcript, No. 39 at pp. 119-120) PHCC inquired as to the 
fraction of commercial packaged boilers that the preliminary analysis 
assumed are condensing boilers operating in condensing mode and noted 
that water temperature requirements for a system are more a function of 
system conditions than sizing of the boiler and that a minimum water 
temperature may be required to transfer heat from the emitter to the 
space being heated. (PHCC, Public Meeting Transcript, No. 39 at pp. 121 
and 133) PHCC commented that in new installations, it is important to 
note that when using high-efficiency products, a system must be 
designed such that you obtain lower return water temperatures to 
operate in the effective part of the boiler efficiency curve. (PHCC, 
Public Meeting Transcript, No. 39 at p. 98) ACEEE, however, noted that 
field experience has demonstrated system conversions to high efficiency 
commercial packaged boilers to be feasible, despite assertions to the 
contrary based on designed-in system temperatures. (ACEEE, Public 
Meeting Transcript, No. 39 at pp. 183-184) ACEEE commented on the 
potential impact that oversizing practices in the field may have on 
system efficiencies, stating that it expects substantial oversizing for 
the actual peak draws that would be expected in a facility, and 
inquired as to how this may impact the amount of time a condensing 
boiler spends in condensing mode. (ACEEE, Public Meeting Transcript, 
No. 39 at pp. 93-94 and 132-133) ACEEE also commented that the DOE is 
focusing too much on the CPB costs and not enough on other system 
costs, recommending Vermont Efficiency Community as a source of 
information and interactions with design engineers to obtain a better 
understanding of design considerations and to obtain relevant case 
studies. (ACEEE, Public Meeting Transcript, No. 39 at p. 127) PVI also 
commented that interacting with the engineering community is essential 
to understanding what is involved in converting a system designed for 
high water temperature to use low water temperature. (PVI, Public 
Meeting Transcript, No. 39 at p. 126-127) AHRI and Lochinvar identified 
the Centre of Energy Efficiency at Minneapolis (MNCEE) as a possible 
source of useful information and suggested that DOE should contact 
them. (AHRI No. 37 at p. 4; Lochinvar No. 34 at p. 3) DOE reviewed 
relevant published literature from the MNCEE Web site, and after 
contacting them learned about an ongoing study on ``Condensing Boiler 
Optimization in Commercial Buildings.''
    DOE acknowledges that there are system considerations that can 
negatively impact the performance of a condensing commercial packaged 
boiler, resulting in less than optimum CPB efficiency. The analysis 
considered the return water temperature's effect on condensing boiler 
efficiency and took into account climate zone data to account for 
expected differences in operation and performance between different 
climates. DOE's analysis developed a heating load-weighted average 
return water temperature for two scenarios. In one scenario, a low 
return water temperature is provided for commercial packaged boilers 
that are installed in a system that would allow for condensation to 
occur. In a second scenario, a high return water temperature is 
provided for commercial packaged boilers that are installed in a system 
that does not allow for condensation to occur. For buildings in new 
construction, DOE assumed that all buildings will be designed to allow 
for condensing boilers to condense for a significant part of the 
heating season and therefore used low return water temperatures for its 
analysis. For buildings built after 1990, DOE assumed that 25% of 
buildings will be capable of low return water temperatures to allow 
condensing during part of the heating season. For buildings built 
before 1990, DOE assumed that 5% of buildings will be capable of low 
return water temperatures to allow condensing during part of the 
heating season. For the remainder of buildings, DOE's analysis used the 
average high return water temperature scenario. DOE tentatively 
concluded that it has appropriately considered the building hot water 
and steam distribution systems to appropriately account for the 
performance impact on commercial packaged boilers resulting from return 
water temperature conditions in the field.
    DOE received feedback from Lochinvar, AHRI, ABMA, and PHCC relative 
to the various control options for commercial packaged boilers, 
particularly those used in multiple-boiler installations. Some of these 
controls may include fixed thermostats, fixed lead/lag thermostats with 
rotation on lead, individual thermistors with modulation, individual 
modulation with rotating lead, and group modulation. Lochinvar notes 
that some of the control options may be integral or external to the 
CPB, a point also echoed by AHRI, which commented on the variety of 
control systems and that some (e.g., building energy management 
systems) are independent of the control system provided on the boiler. 
PHCC further noted that contractors specializing in building management 
systems may be used to install and integrate such control systems. PHCC 
also noted that multiple-boiler staging may be accomplished with 
aftermarket products that are designed to communicate with boilers or 
between boilers, and that a contractor may perform the installation but 
a different control contractor may integrate the boiler control to a 
building management program. (Lochinvar, No. 34 at p. 4; AHRI, No. 37 
at p. 4; PHCC, Public Meeting Transcript, No. 39 at pp. 99-101) AHRI 
noted that in CPB installations with mixed efficiency levels, the 
control system usually calls on the secondary (i.e., less efficient) 
boiler to operate only in increased load situations. AHRI also noted 
that it would be useful to understand how many commercial boiler 
installations include a system control panel that adds sophistication 
to controlling the boiler and system. (AHRI, No. 37 at p. 4; AHRI, 
Public Meeting Transcript, No. 39 at p. 100) AHRI also notes that 
ASHRAE Standard 90 requires load-sensing controls for boiler-based 
heating systems. (AHRI, Public Meeting Transcript, No. 39 at pp. 32-33) 
ABMA

[[Page 15866]]

noted that unless the boiler sizing closely follows the seasonal load 
profile, and the control system is capable of selecting the correct 
boiler for the prevailing load, the efficiency savings will not be 
maximized. In consideration of these comments, DOE notes that while the 
analysis does not specifically apply any individual controls for 
multiple-boiler situations, it does consider the impact on the 
efficiency of a boiler on a multiple-boiler installation (through 
providing for differing part load/cycling adjustment where staging of 
multiple-boilers is possible). The analysis does not consider multiple-
boiler installations where commercial packaged boilers of different 
fuel input rate are used; nor does it consider hybrid systems that may 
use condensing and non-condensing boilers together and controlled in 
sequence as part of its no-new-standards case. For more information on 
this part of the analysis, refer to chapter 7 and appendix 7B of the 
TSD.
    For the NOPR, DOE modified the energy use characterization 
conducted in the preliminary analysis to improve the modeling of 
equipment performance. The modifications that DOE performed included 
changes to the cycling loss factors for individual commercial packaged 
boilers, improved accounting for estimating performance of multiple-
boiler installations, and improving the return water temperature 
efficiency adjustment factors.
    A more detailed description of the energy use characterization 
approach can be found in appendix 7B of the NOPR TSD.
2. Building Sample Selection and Sizing Methodology
    In its energy analysis for this NOPR, DOE's estimation of the 
annual energy savings of commercial packaged boilers from higher 
efficiency equipment alternatives relies on building sample data from 
CBECS 2003, RECS 2009, and CBECS 2012.\42\ CBECS 2003 includes energy 
consumption and building characteristic data for 5,215 commercial 
buildings representing 4.9 million commercial buildings. RECS 2009 
includes similar data from 12,083 housing units that represent almost 
113.6 million residential households.
---------------------------------------------------------------------------

    \42\ EIA released only building characteristic micro-data tables 
for CBECS 2012 in June 2015. These buildings could not be used as 
sample buildings for this rulemaking because they did not have 
energy consumption details. However this partial set of data in 
CBECS 2012 was used to determine useful trends for developing the 
final sample distribution across various equipment classes during 
the analysis period.
---------------------------------------------------------------------------

    The subset of CBECS 2003 and RECS 2009 building records used in the 
analysis met the following criteria. The CPB application
     used commercial packaged boiler(s) as one of the main 
heating equipment components in the building,
     used a heating fuel that is natural gas (including propane 
and LPG) or fuel oil or a dual fuel combination of natural gas and fuel 
oil,
     served a building with estimated design condition building 
heating load exceeding the lower limit of CPB qualifying size (300,000 
Btu/hr), and
     had a non-trivial consumption of heating fuel allocable to 
the commercial packaged boiler.
    DOE analyzed commercial packaged boilers in the qualifying building 
samples. DOE disaggregated the selected sample set of commercial 
packaged boilers into subsets based on the fuel types (gas or oil), 
fuel input rate (small or large), heating medium (steam or hot water). 
DOE then used these CPB subsets to group the sample buildings equipped 
with the same class of equipment evaluated in its NOPR analysis. In the 
LCC analysis, DOE used the ratio of the weighted floor space of the 
groups of commercial and residential building samples associated with 
each equipment class to determine the respective sample weights for the 
commercial and residential sectors. In absence of the newer sample data 
from CBECS 2012, DOE's new construction sample was based on the same 
selection algorithms as the replacement sample but included only 
buildings built after 1990, which DOE tentatively concluded would have 
building characteristics more similar to the new construction buildings 
in the start of the analysis period in 2019 (e.g., building insulation, 
regional distribution of the buildings, etc.).
    To disaggregate a selected set of commercial packaged boilers into 
large and small equipment classes, DOE uses a sizing methodology to 
determine the sizes of the commercial packaged boilers installed in the 
building. In the preliminary analysis, DOE used a rule-based sizing 
methodology (i.e., predetermined number of commercial packaged boilers 
for a building with a given sizing heating load) with key threshold 
size parameters estimated from the AHRI directory model counts. In the 
NOPR analysis, DOE used a statistical sizing approach described in this 
section.
    First, the total sizing of the heating equipment is determined from 
the heated square footage of the building, the percentage of area 
heated, a uniform heating load requirement of 30 Btu/h per square foot 
of heated area, and an assumed equipment efficiency mapped to the 
construction year. DOE's sizing methodology also takes outdoor design 
conditions into consideration. The outdoor design condition for the 
building is based on the specific weather location of the building. The 
estimated total CPB sizing (MMBtu/h) is the aggregate heating equipment 
sizing prorated using the area fraction heated by the commercial 
packaged boilers and multiplied by an oversize factor of 1.1. For the 
sample of residential multi-family buildings, the heating equipment 
sizing methodology for commercial buildings is modified to calculate 
the heating load for each residential unit of the multi-family 
buildings and this value is multiplied by the number of units, assuming 
each unit to have identical area and design heating load. The modified 
methodology for residential multi-family buildings further assumes that 
a centrally located single or a multiple-boiler installation would meet 
the entire design heating load of the building.
    DOE computed the size of each commercial packaged boiler in each 
sample building by dividing the aggregate CPB sizing heating load 
(MMBtu/hr) by an estimated number of boilers of equal capacity. To 
estimate the number of commercial packaged boilers in a given sample 
building, DOE established a CPB count distribution for a given sizing 
load range in a set of sample buildings from CBECS data of 1979 and 
1983--the only two CBECS surveys where the CPB count data were 
available for the sample buildings. DOE assigned the number of 
commercial packaged boilers to all the qualified sample buildings of 
2003 CBECS based on this distribution. The number of commercial 
packaged boilers in each sample building was multiplied by the 
respective building sample weights in CBECS to obtain an estimate of 
the overall CPB population and their respective capacities. The CPB 
size distributions obtained by this method were compared with the size 
distribution of the space heating boilers obtained in an EPA database 
\43\ having size information of over 120,000 space heating boilers. The 
comparison from these two different datasets did not reveal any 
significant differences. Minor tweaks were made to the statistical 
assignment of the number of commercial packaged boilers so as to 
maximize the utility of the sampled buildings used for the NOPR 
analysis;

[[Page 15867]]

i.e., the number of commercial packaged boilers assigned to very large 
buildings in cold climates with large design sizing loads were high 
enough to ensure that the capacity of a single unit of the multiple-
boiler installation was lower than 10 MMBtu/h, the maximum CPB size for 
the equipment classes analyzed. At the lower end of the heating load 
spectrum, the number of commercial packaged boilers assigned to the 
installation were matched to ensure that any commercial packaged boiler 
in the installation has a capacity higher than 300,000 Btu/h--the 
minimum size for a covered commercial packaged boiler.
---------------------------------------------------------------------------

    \43\ Environmental Protection Agency. 13 State Boiler Inspector 
Inventory Database with Projections (Area Sources). EPA-HQ-OAR-2006-
0790-0013 (April 2010) (Available at http://www.epa.gov/ttnatw01/boiler/boilerpg.html).
---------------------------------------------------------------------------

    DOE received several comments pertaining to its sizing methodology 
used in the preliminary analyses--i.e., its use of a rule-based sizing 
methodology, oversize factors used in the aggregate sizing calculation, 
and number of commercial packaged boilers used to meet a given design 
load. Raypak commented that there is no such thing as typical CPB 
sizing practice and that engineers and architects are responsible for 
creating the buildings the way the owner wants it. (Raypak, No. 35 at 
p. 3) PHCC commented that the design heating load is not the only 
criterion for sizing, but ``connected load'' is an important 
determinant of the sizing practice, especially for steam systems. 
(PHCC, Public Meeting Transcript, No. 39 at p. 97) Sizes of individual 
commercial packaged boilers in any installation depend on the aggregate 
design condition heating load and the number of commercial packaged 
boilers in the installation. DOE recognizes that the number of 
commercial packaged boilers assigned to meet the system heating load of 
a given building and to create some degree of redundancy varies in 
current HVAC system design practice. DOE's approach to sizing is based 
on CPB counts distributions from previous CBECS surveys and statistics 
gathered from the EPA database of space heating boilers. This 
methodology does not use a set number of commercial packaged boilers 
for a given design heating load but assigns the number of commercial 
packaged boilers within a range of counts based on previous 
observations from CBECS surveys. Regarding PHCC's comment on impact of 
connected load on CPB sizing, since DOE is not aware of any currently 
available data on the heat distribution equipment in commercial 
buildings, it was unable to make reasonable assumptions that could be 
incorporated in its sizing methodology. DOE welcomes comments on 
improving this sizing methodology and any other data that may assist 
DOE to establish a correlation between a given building heating load 
and the number of commercial packaged boilers in the installation.
    The CBECS 2003 and RECS 2009 weightings for each building sample 
indicate how frequently each commercial building or household unit 
occurs on the national level in 2003 and 2009, respectively. DOE used 
these weightings from CBECS 2003 and RECS 2009 buildings for estimation 
of individual equipment class sample weights. Appendix 7A of the NOPR 
TSD presents the variables included and their definitions, as well as 
further information about the derivation of the building samples, the 
adjustments to the CPB weights, and sampling fractions for each of the 
four samples: Commercial and residential, each divided between new 
construction and retrofit.
    DOE received multiple comments regarding the sizing methodology and 
other assumptions used in estimation of the equipment sample weights. 
PHCC pointed out that in the retrofit situation, though there are 
contractors who just replace the boilers on ``like for like'' basis, 
most contractors look at the overall system load and then size the 
installation appropriately considering the design heating load, 
particularly when a higher efficiency system is being considered. 
(PHCC, Public Meeting Transcript, No. 39 at p. 98) AHRI noted that it 
is not unusual to have a backup boiler in installations of some 
building types, creating some redundancy, in particular where absence 
of heating is unacceptable. (AHRI, Public Meeting Transcript, No. 39 at 
p. 94-95) AHRI further observed that this has been a historical 
practice, and current design practice mostly provides for multiple-
boiler installations. ACEEE commented that installations needing 100-
percent backup may use a second large boiler, or some may opt for 
having various small boilers that together cover 130 or 120 percent of 
the peak load. (ACEEE, Public Meeting Transcript, No. 39 at pp. 101-
103). DOE's use of data-driven boiler count distributions to estimate 
the number of boilers in a given installation obviates the need for 
assumptions on the percent of the sample buildings requiring redundancy 
in the boiler installation and the extent of redundancy. For example, 
DOE estimated that 30% of the sample buildings having design heating 
loads between 570,000 and 865,000 Btu/hr would have two commercial 
packaged boilers, the rest being single boiler installations. While the 
capacity of the single commercial packaged boiler is based on an 
oversize factor of 110%, in the two-boiler situation each commercial 
packaged boiler has half the capacity of the single large commercial 
packaged boiler. The two-boiler situation creates redundancy only to 
the extent of 55% of the design load but has no provision for 100% 
redundancy under design heating condition. In the NOPR analysis, the 
maximum number of commercial packaged boilers assigned to any sample 
building is eight, implying redundancy of 96% of the design heating 
load. PHCC commented that fully redundant boilers are less frequent now 
than it has been in the past. (PHCC, Public Meeting Transcript, No. 39 
at pp. 103-104) PHCC further noted that reasonable degree of redundancy 
can be created even when only 100% of the design load is shared by 
multiple boilers in an installation. PHCC observed that presently 
building owners are unwilling to spend a significant amount of 
additional funds to ensure redundancy as there are acceptable and safe 
alternatives. (PHCC, Public Meeting Transcript, No. 39 at p. 104) DOE's 
NOPR analysis assumes an average oversize factor of 110%, which appear 
reasonable.
    The issues of redundant, modular, and multiple-boiler use in a 
given installation are intertwined, and DOE received several comments 
in this area. AHRI, Lochinvar, and Raypak noted that ASHRAE Standard 
90.1-2013 requires a 3:1 turndown ratio for boiler systems with an 
input rate of 1 MMBtu/hr or more (accomplished with a modulating boiler 
or multiple boilers) to provide some measure of load following. (AHRI, 
No. 37 at p. 4; Lochinvar, No. 34 at p. 4; Raypak, No. 35 at p. 3). 
Raypak commented that trends show that more buildings, new and 
existing, are being provided with multiple smaller boilers instead of a 
single large boiler, and that buildings such as hospitals, hotels, 
colleges, and prisons are examples where redundant equipment may be 
used, though not necessarily providing 100% coverage. ACEEE also 
commented that there is some shift away from larger boilers to multiple 
smaller boilers. (ACEEE No. 39 at p. 33)
    DOE notes that one of the key drivers of the trend toward 
installation of multiple or modular commercial packaged boilers in any 
installation would be ASHRAE standard 90.1-2013, \44\ which requires 
CPB systems with an input rate of 1 MMBtu/hour or more to have a 
turndown ratios of 3:1 or more. As this can be achieved either by 
staging of multiple smaller

[[Page 15868]]

commercial packaged boilers or having large commercial packed boilers 
with modular heat exchangers and turndown capability, greater usage of 
multiple boilers or modular boilers are mutually offsetting. In the 
NOPR analysis, DOE has considered that commercial packaged boilers at 
the high end of the efficiency spectrum do have built-in turndown 
capability. Further in its NOPR analysis, DOE assumed that all 
commercial packaged boilers installed in new buildings will be part of 
a system with at least 3:1 turndown ratio and calculated the adjusted 
thermal efficiency of commercial packaged boilers in such systems 
accordingly. DOE could not quantify a definitive impact of ASHRAE 
standard 90.1-2013 on future CPB sizing practices because the standard 
is yet to be incorporated in most state building codes. However it 
modified future sizing methodology in the analysis period (2019-2048) 
to have a minimum count of at least two commercial packaged boilers of 
the same size for design heating loads exceeding 1 MM Btu/hr for new 
constructions.
---------------------------------------------------------------------------

    \44\ ANSI/ASHRAE/IESNA Standard 90.1-2013, Energy Standard for 
Buildings Except Low-Rise Residential Buildings, American Society of 
Heating, Refrigerating and Air-conditioning Engineers, Inc., 
Atlanta, GA 30329.
---------------------------------------------------------------------------

    Raypak noted that DOE's assumption in the preliminary analysis that 
all multiple boilers are of the same size and type when installed in 
the same building is incorrect. Raypak stated that it is seeing more 
``hybrid'' systems that include both condensing and non-condensing 
boilers on the same system, with some of these hybrid systems having 
the ability to monitor the return water temperature and initiate 
condensing boiler operation. (Raypak, No. 35 at p. 3) PHCC commented 
that use of one low-efficiency and one high-efficiency boiler in a new 
installation could be rare but may happen in retrofit scenarios. (PHCC, 
Public Meeting Transcript, No. 39 at p. 104) DOE agrees with PHCC that 
hybrid installations are possible in retrofit situations where new 
condensing boiler(s) operating in the ``base load mode'' combine with 
the pre-existing non-condensing boilers to meet the design load. In new 
construction, DOE's analysis can be limited only to single efficiency 
levels for all commercial packaged boilers as any mandated efficiency 
standards stipulate a single minimum efficiency level only. It is 
likely that operation in the hybrid configuration may improve the 
economics of the ``condensing boiler'' efficiency option in DOE's NOPR 
analysis because of higher utilization of the condensing boilers in the 
hybrid retrofitted systems vis-[agrave]-vis utilizations currently 
estimated in the sample buildings under a ``uniform configuration.'' 
However to quantify this impact, DOE needs to develop a reasonable 
baseline assumption regarding the current degree of adoption of the 
hybrid configuration practice in retrofit situations.
    DOE requests information on what constitutes a reasonable baseline 
assumption about the current degree of adoption of hybrid boiler 
configurations in retrofit situations and on other related parameters 
such as percentage of total installed capacity typically assigned to 
the new condensing boilers, climate zones where it may be more 
prevalent and any other supporting documentation.
    See section VII.E for a list of issues on which DOE seeks comment.
    Building sampling methodology is detailed in NOPR TSD appendix 7A.
3. Miscellaneous Energy Use
    The annual energy used by commercial packaged boilers, in some 
cases, may include energy used for non-space heating use such as water 
heating. In the preliminary analysis, DOE assumed that if the CBECS 
data indicates that the CPB fuel is the same as the fuel used for water 
heating then in 50% of the sample buildings, the same commercial 
packaged boiler is also used for water heating. Several stakeholders 
commented on the reasonableness and validity of this assumption. AHRI 
stated that in the collective opinion of its members, the fraction of 
boilers used for both space heating and hot water in commercial 
building is far less than the 50% assumed in the preliminary analysis. 
(AHRI, No. 37 at p. 5) Raypak agreed with AHRI's comment and further 
pointed out that this practice, though common in Europe for condensing 
boilers in residential applications, is not commonly observed in 
commercial buildings in the United States. (Raypak, No. 35 at p. 4) 
Lochinvar expressed that possibly a greater percentage of residential 
boilers are used for both space and water heating than boilers in 
commercial buildings. ACEEE pointed out that using packaged boilers 
also for hot water heating is a wasteful practice because of the 
presence of long recirculating loops, which are restricted in the new 
building codes. (ACEEE, Public Meeting Transcript, No. 39 at p. 113) 
ACEEE further pointed out that the current system design practice is 
moving away from having dual-use installations in commercial buildings. 
DOE agrees with the previous comments and consequently limited the 
fraction of occurrence of dual-use boilers to 20% of the samples in the 
NOPR analysis compared to the previously considered level of 50%.
    Other associated energy consumption is due to electricity use by 
electrical components of commercial packaged boilers including 
circulating pump, draft inducer, igniter, and other auxiliary equipment 
such as condensate pumps. In evaluating electricity use, DOE considered 
electricity consumed by commercial packaged boilers both in active mode 
as well as in standby and off modes in the preliminary analysis.
    DOE received several comments regarding energy use by pumps. AHRI 
noted that there has been significant progress on ASHRAE 90.1 in 
requiring or specifying more efficient mode of pumps for the 
circulating pumps and that there is a parallel rulemaking on commercial 
industrial pumps, and the impact of such rulemaking should be 
considered in this analysis and rulemaking as it relates to pumps used 
in commercial packaged boilers. (AHRI, Public Meeting Transcript, No. 
39 at pp. 108-109 and 114) PHCC noted that the analysis should be clear 
as to whether pump power refers to a system pump, boiler pump, or both, 
and commented that small boilers are probably all provided with a 
system circulating pump, but, as systems get larger, the pumps may be 
field selected, and coming up with an average efficiency would be 
complicated given the various pump options available out there. (PHCC, 
Public Meeting Transcript, No. 39 at pp. 109-110 and 112-113) 
Similarly, Raypak noted that boiler pumps may not be included with the 
commercial packaged boiler but rather be a purchase decision made by 
the manufacturer's representative or contractor to meet the CPB flow 
and head requirements, and that care should be taken when taking this 
energy consumption into consideration. (Raypak, Public Meeting 
Transcript, No. 39 at pp. 115-116) ACEEE noted that care must be taken 
in the analysis to include only energy use for pumps integral to the 
operation of the boiler and not for those that are used for 
distribution to the system. (ACEEE, Public Meeting Transcript, No. 39 
at p. 111)
    With respect to the electricity use of pumps, DOE wishes to clarify 
that the current analysis only considered the electricity use of pumps 
needed for proper operation of the commercial packaged boiler, but not 
the electricity use of additional pumps that may be necessary used for 
distributing water throughout a system since the circulating pumps are 
not part of the commercial packaged boiler itself and inclusion of its 
energy consumption would not be appropriate to the development of the 
standard.

[[Page 15869]]

    In its NOPR analysis, DOE maintained the electricity use analysis 
method used for the preliminary analysis.

F. Life-Cycle Cost and Payback Period Analysis

    The purpose of the LCC and PBP analysis is to analyze the effects 
of potential amended energy conservation standards on consumers of 
commercial packaged boilers by determining how a potential amended 
standard affects their operating expenses (usually decreased) and their 
total installed costs (usually increased).
    The LCC is the total consumer cost of owning and operating an 
appliance or equipment, generally over its lifetime. The LCC 
calculation includes total installed cost (equipment manufacturer 
selling price, distribution chain markups, sales tax, and installation 
costs), operating costs (energy, repair, and maintenance costs), 
equipment lifetime, and discount rate. Future operating costs are 
discounted to the time of purchase and summed over the lifetime of the 
appliance or equipment. The PBP is the amount of time (in years) it 
takes consumers to recover the assumed higher purchase price of more 
energy-efficient equipment through reduced operating costs. DOE 
calculates the PBP by dividing the change in total installed cost 
(normally higher) due to a standard by the change in annual operating 
cost (normally lower) that result from the standard.
    For any given efficiency level, DOE measures the PBP and the change 
in LCC relative to an estimate of the no-new-standards efficiency 
distribution. The no-new-standards estimate reflects the market in the 
absence of amended energy conservation standards, including market 
trends for equipment that exceed the current energy conservation 
standards.
    DOE analyzed the net effect of potential amended CPB standards on 
consumers by calculating the LCC and PBP for each efficiency level of 
each sample building using the engineering performance data, the 
energy-use data, and the markups. DOE performed the LCC and PBP 
analyses using a spreadsheet model combined with Crystal Ball (a 
commercially available software program used to conduct stochastic 
analysis using Monte Carlo simulation and probability distributions) to 
account for uncertainty and variability among the input variables 
(e.g., energy prices, installation cost, and repair and maintenance 
costs). The spreadsheet model uses weighting factors to account for 
distributions of shipments to different building types and different 
states to generate LCC savings by efficiency level. Each Monte Carlo 
simulation consists of 10,000 LCC and PBP calculations using input 
values that are either sampled from probability distributions and 
building samples or characterized with single point values. The 
analytical results include a distribution of 10,000 data points showing 
the range of LCC savings and PBPs for a given efficiency level relative 
to the no-new-standards case efficiency forecast. In performing an 
iteration of the Monte Carlo simulation for a given consumer, product 
efficiency is chosen based on its probability. If the chosen product 
efficiency is greater than or equal to the efficiency of the standard 
level under consideration, the LCC and PBP calculation reveals that a 
consumer is not impacted by the standard level. By accounting for 
consumers that already purchase more-efficient products, DOE avoids 
overstating the potential benefits from increasing product efficiency.
    EPCA establishes a rebuttable presumption that a standard is 
economically justified if the Secretary finds that the additional cost 
to the consumer of purchasing a product complying with an energy 
conservation standard level will be less than three times the value of 
the energy (and, as applicable, water) savings during the first year 
that the consumer will receive as a result of the standard, as 
calculated under the test procedure in place for that standard. For 
each considered efficiency level, DOE determines the value of the first 
year's energy savings by calculating the quantity of those savings in 
accordance with the applicable DOE test procedure and then multiplying 
that amount by the average energy price forecast for the year in which 
compliance with the amended standards would be required.
    DOE calculated the LCC and PBP for all consumers of commercial 
packaged boilers as if each were to purchase new equipment in the year 
that compliance with amended standards is required. The projected 
compliance date for amended standards is early 2019. Therefore, for 
purposes of its analysis, DOE used January 1, 2019 as the beginning of 
compliance with potential amended energy standards for commercial 
packaged boilers.
    As noted in this section, DOE's LCC and PBP analysis generates 
values that calculate the payback period for consumers of potential 
energy conservation standards, which includes, but is not limited to, 
the 3-year payback period contemplated under the rebuttable presumption 
test. However, DOE routinely conducts a full economic analysis that 
considers the full range of impacts, including those to the consumer, 
manufacturer, Nation, and environment. The results of the full economic 
analysis serve as the basis for DOE to definitively evaluate the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification).
    Inputs to the LCC and PBP analysis are categorized as (1) inputs 
for establishing the purchase cost, otherwise known as the total 
installed cost, and (2) inputs for calculating the operating cost 
(i.e., energy, maintenance, and repair costs). The following sections 
contain brief discussions of comments on the inputs and key assumptions 
of DOE's LCC and PBP analysis and explain how DOE took these comments 
into consideration.
1. Equipment Costs
    For each distribution channel, DOE derives the consumer equipment 
cost for the baseline equipment by multiplying the baseline equipment 
manufacturer production cost and the baseline overall markup (including 
any applicable sales tax). For each efficiency level above the 
baseline, DOE derives the consumer equipment cost by adding baseline 
equipment consumer cost to the product of incremental manufacturer cost 
and the appropriate incremental overall markup (including any 
applicable sales tax). This consumer equipment cost is reflective of 
the representative equipment size analyzed for each equipment class in 
the engineering analysis. Since the LCC analysis considers consumers 
whose CPB capacities vary from the representative equipment size, the 
consumer equipment cost is adjusted to account for this.
    DOE examined whether CPB equipment prices changed over time. DOE 
tentatively determined that there is no clear historical price trend 
for CPB equipment and used costs established in the engineering 
analysis directly for determining 2019 equipment prices for the LCC and 
PBP analysis.
2. Installation Costs
    The installation cost is the cost incurred by the consumer for 
installing the commercial packaged boiler. The cost of installation 
covers all labor and material costs associated with the replacement of 
an existing commercial packaged boiler for replacements or the 
installation of a commercial packaged boiler in a new building, removal 
of the existing boiler, and any applicable permit fees. DOE estimates 
the

[[Page 15870]]

installation costs at each considered efficiency level using a variety 
of sources, including RS Means 2015 facilities construction cost data, 
manufacturer literature, and information from expert consultants.\45\ 
Appendix 8D of the NOPR TSD contains a detailed discussion of the 
development of installation costs.
---------------------------------------------------------------------------

    \45\ RS Means, Facilities Maintenance & Repair Cost Data 2015, 
73rd ed. (2014).
---------------------------------------------------------------------------

    DOE received feedback regarding installation costs for commercial 
packaged boilers, including comments related to installation locations 
within buildings, venting materials and sizes, and common venting. AHRI 
commented that boilers located within buildings are usually in the 
basement or penthouse, and in high-rise buildings, they are often 
located in intermediate floors, and that vertical vent termination is 
most common. (AHRI, No. 37 at p. 6) Raypak commented that there is no 
``typical'' boiler installation, and that boilers may be located in 
basements, mechanical rooms, penthouses, or outdoors and, in high-rise 
buildings, boilers are often located in intermediate floors due to 
other system limitations. (Raypak, No. 35 at p. 6) PHCC also noted that 
likely places for boiler installations are boiler rooms, equipment 
rooms, basements of hotels, and powerhouses in hospitals. Venting in 
these installations could be through sidewalls, roofs, masonry, 
chimneys, or stainless steel vents. (PHCC, No. 39 at p. 138) Lochinvar 
noted that they do not have specific information but speculate that 
less than 10% of installations will require significant additional 
installation expenses, and that most likely this expense would occur 
for condensing boilers with long vent runs that require custom-designed 
common vent systems with modulating draft control systems. (Lochinvar, 
No. 34 at p. 5) ACEEE suggested getting in touch with ASHRAE technical 
committees to obtain more specific information on design practices, and 
engaging the engineering community, system designers, and contractors 
to get a better handle on installation costs. (ACEEE, No. 39 at pp. 105 
and 128) PHCC suggested that information on this topic may be more 
succinctly gathered from a survey sent to contractors, engineers, and 
manufacturers. (PHCC, No. 39 at p. 135)
    Regarding costs associated with venting, AHRI, Lochinvar, and 
Raypak noted that venting material selection is a function of system 
design, but generally vents 8 inches and larger are metal, 4 inches and 
smaller are PVC/CPVC/PP,\46\ and that 6-inch vents may be either, with 
Raypak also noting that plastic vent materials that are ULC S636 
certified are not readily available in larger sizes. (AHRI, No. 37 at 
p. 5; Lochinvar, No. 34 at p. 5; Raypak, No. 35 at p. 5) PHCC's comment 
agreed with the general trend identified as PHCC commented that plastic 
venting is more common in small-capacity installations, but stainless 
steel is more typical in larger boilers with an input of 1 MM Btu/h 
sizes and higher. (PHCC, No. 39 at p. 130) AHRI further noted that 
stainless steel is rarely used in existing CPB installations with 
efficiencies in the low 80 percent range. (AHRI, No. 37 at p. 6) 
However, Raypak noted that the same boiler, when designed to use a 
Category I vent in a vertical vent situation, may be required to use a 
Category III stainless steel vent if vented horizontally, but noted 
that manufacturers have limited knowledge of the final installation and 
whether a particular boiler will be vented horizontally or 
vertically.\47\ (Raypak, No. 39 at p. 136 and No. 35 at p. 5) PHCC 
proposed that most of the time condensing boilers are direct vented but 
noted that they have no specific data to support that opinion. (PHCC, 
No. 39 at p. 130) Lochinvar commented that almost all condensing 
commercial packaged boilers have the option of direct venting, and that 
the majority of non-condensing commercial packaged boilers sold do not 
have the direct vent option. They further noted that there is a small 
fraction of near condensing commercial packaged boilers that require 
stainless steel venting, but almost all are designed for either non-
condensing conventional venting or condensing with PVC or stainless 
steel venting, noting the selection of PVC versus stainless steel being 
based on size rather than efficiency. (Lochinvar, No. 34 at p. 5) 
Lochinvar commented that vent termination has historically been 
vertical, but that direct venting options have caused a trend toward 
side wall venting, and in some instances that has resulted in 
functional problems. The trend is currently reverting to vertical 
venting for all products, with side wall venting currently applied in 
less than 20% of cases and this percentage is declining. (Lochinvar, 
No. 34 at p. 5) Raypak stated that direct venting has nothing to do 
with boiler efficiency, and that many mechanical draft boilers and some 
natural draft boilers are designed to accommodate standard venting or 
direct venting, depending on the installation requirements. Raypak 
commented that stainless steel venting is rarely used in existing 
installations of commercial packaged boilers with efficiencies below 
condensing, and that stainless steel venting is much more costly than 
standard ``B-vent'' which is used for most non-condensing boilers 
vented in Category I venting configurations. Raypak also commented that 
venting configuration for outdoor installations is not addressed by the 
DOE analysis. (Raypak, No. 35 at p. 5) In the public meeting, AHRI 
commented that venting approaches may differ between small and large 
boilers, and that DOE's analysis focuses on fairly small boilers. AHRI 
offered to discuss this perspective with their members and provide 
additional information. (AHRI, No. 39 at p. 132)
---------------------------------------------------------------------------

    \46\ Plastic polymers: Polyvinyl chloride (PVC), chlorinated 
polyvinyl chloride (CPVC), polypropylene (PP).
    \47\ DOE interprets the referenced Category III venting 
requirement to relate to the lack of flue gas buoyancy in 
horizontally vented equipment, and that venting designed to maintain 
a positive internal pressure is therefore utilized in these 
installations.
---------------------------------------------------------------------------

    With respect to common venting, Lochinvar commented that multiple-
boiler installations are often commonly vented (10% and growing), but 
that common venting commercial packaged boilers with water heaters is 
rare, and they advise against mixing unlike product types when venting. 
(Lochinvar, No. 34 at p. 6) AHRI noted that the National Fuel Gas Code 
(NFGC) requires condensing boilers to be separately vented, and that it 
is customary to commonly vent non-condensing boilers, but that 
commercial water heaters are usually not commonly vented with 
commercial packaged boilers. (AHRI, No. 37 at p. 6) AHRI further 
elaborated on this point during the public meeting, stating that common 
venting may become problematic for the water heater when the boiler is 
not firing and the vent size is very large. (AHRI, No. 39 at p. 141) 
Raypak, in their comments submitted in response to the public meeting, 
also noted that the NFGC addresses common venting of non-condensing 
Category I equipment, but when it comes to common venting of condensing 
boilers or other category boilers, the NFGC calls for ``Engineered Vent 
Systems,'' resulting in additional costs for the design, including a 
Registered Professional Engineer's stamp (approving the venting system 
design), and equipment over and above the cost of the vent materials 
alone. (Raypak, No. 35 at p. 6) Similarly, PVI noted that non-
condensing boilers are commonly vented together; condensing boilers are 
most commonly vented individually, but some (research) projects are 
investigating what it would

[[Page 15871]]

take to common vent condensing boilers. (PVI, No. 39 at p. 140) Raypak 
further notes that boilers designed for Category III, if vented 
horizontally, would use stainless steel to comply with categorization 
requirements for boilers. (Raypak, No. 35 at p. 6)
    DOE acknowledges that the number of possible variations in venting 
arrangements is significant and has utilized this input in a logic 
sequence based upon probability distribution of venting conditions to 
provide representative venting costs for the range of products 
analyzed. See chapter 8 and appendix 8D of the NOPR TSD for details on 
DOE's analysis of installation costs including venting costs.
    DOE seeks input on its characterization and development of 
representative installation costs, including venting costs, in new and 
replacement commercial package boiler installations, including data to 
support assumptions on vent sizing, vent length distributions, and vent 
materials.
    See section VII.E for a list of issues on which DOE seeks comment.
3. Annual Per-Unit Energy Consumption
    DOE estimated annual natural gas, fuel oil, and electricity 
consumed by each class of CPB equipment, at each considered efficiency 
level, based on the energy use analysis described in section IV.E of 
this document and in chapter 7 of the NOPR TSD.
    DOE conducted a literature review on the direct rebound effect in 
commercial buildings, and found very few studies, especially with 
regard to space heating and cooling. In a paper from 1993, Nadel 
describes several studies on takeback in the wake of utility lighting 
efficiency programs in the commercial and industrial sectors.\48\ The 
findings suggest that in general the rebound associated with lighting 
efficiency programs in the commercial and industrial sectors is very 
small. In a 1995 paper, Eto et al.\49\ state that changes in energy 
service levels after efficiency programs have been implemented have not 
been studied systematically for the commercial sector. They state that 
while pre-/post-billing analyses can implicitly pick up the energy use 
impacts of amenity changes resulting from program participation, the 
effect is usually impossible to isolate. A number of programs attempted 
to identify changes in energy service levels through customer surveys. 
Five concluded that there was no evidence of takeback, while two 
estimated small amounts of takeback for specific end uses, usually less 
than 10-percent. A recent paper by Qiu,\50\ which describes a model of 
technology adoption and subsequent energy demand in the commercial 
building sector, does not present specific rebound percentages, but the 
author notes that compared with the residential sector, rebound effects 
are smaller in the commercial building sector. An important reason for 
this is that in contrast to residential heating and cooling, HVAC 
operation adjustment in commercial buildings is driven primarily by 
building managers or owners. The comfort conditions are already 
established in order to satisfy the occupants, and they are unlikely to 
change due to installation of higher-efficiency equipment. While it is 
possible that a small degree of rebound could occur for higher-
efficiency CPBs, e.g., building managers may choose to increase the 
operation time of these heating units, there is no basis to select a 
specific value. Because the available information suggests that any 
rebound would be small to negligible, DOE did not include a rebound 
effect for this proposed rule.
---------------------------------------------------------------------------

    \48\ S. Nadel (1993). The Takeback Effect: Fact or Fiction? 
Conference paper: American Council for an Energy-Efficient Economy.
    \49\ Eto et al. (1995). Where Did the Money Go? The Cost and 
Performance of the Largest Commercial Sector DSM Programs. LBL-3820. 
Lawrence Berkeley National Laboratory, Berkeley, CA.
    \50\ Qui, Y. (2014). Energy Efficiency and Rebound Effects: An 
Econometric Analysis of Energy Demand in the Commercial Building 
Sector. Environmental and Resource Economics, 59(2): 295-335.
---------------------------------------------------------------------------

    EIA includes a rebound effect for several end-uses in the 
commercial sector, including heating and cooling, as well as 
improvements in building shell efficiency in its AEO reports.\51\ The 
DOE analysis presented here does not include either the rebound effect 
for building shell efficiency or the rebound effect for equipment 
efficiency as is included in the AEO, and therefore cannot definitively 
assess what the impact of including the rebound effect would have on 
this analysis. For example, if the building shell efficiency 
improvements included in the AEO reduced heating and cooling load by 10 
percent and the rebound effect on building shell efficiency was assumed 
to be 10 percent, the total impact would be to reduce heating and 
cooling loads by 9 percent. The DOE analysis presented here includes 
only the building shell improvements from the AEO but not the rebound 
effect on the building shell efficiency improvements. For illustrative 
purposes, DOE estimates that a rebound effect of 10 percent on CPB 
efficiency for heating improvements could reduce the energy savings by 
0.04 quads (10 percent) over the analysis period. However, this ignores 
that the proposed rule would have saved more than 0.39 quads if the 
building shell efficiency rebound effect included in the AEO was also 
included in DOE's analysis.
---------------------------------------------------------------------------

    \51\ Energy Information Administration, Commercial Demand Module 
of the National Energy Modeling System: Model Documentation 2013, 
Washington, DC, November 2013, page 57. The building shell 
efficiency improvement index in the AEO accounts for reductions in 
heating and cooling load due to building code enhancements and other 
improvements that could reduce the buildings need for heating and 
cooling.
---------------------------------------------------------------------------

    DOE requests comment and seeks data on the assumption that a 
rebound effect is unlikely to occur for these commercial applications.
    See section VII.E for a list of issues on which DOE seeks comment.
4. Energy Prices and Energy Price Trends
    DOE derives average monthly energy prices for a number of 
geographic areas in the United States using the latest data from EIA 
and monthly energy price factors that it develops. The process then 
assigns an appropriate energy price to each commercial building and 
household in the sample, depending on its type (commercial or 
residential), and its location. DOE derives 2014 annual electricity 
prices from EIA Form 826 data.\52\ DOE obtains the data for natural gas 
prices from EIA's Natural Gas Navigator, which includes monthly natural 
gas prices by state for residential, commercial, and industrial 
commercial consumers.\53\ DOE collects 2013 average commercial fuel oil 
prices from EIA's State Energy Consumption, Price, and Expenditure 
Estimates (SEDS) and adjusts it using CPI inflation factors to reflect 
2014 prices.\54\
---------------------------------------------------------------------------

    \52\ U.S. Energy Information Administration. Form EIA-826 
Monthly Electric Utility Sales and Revenue Report with State 
Distributions (EIA-826 Sales and Revenue Spreadsheets) (Available at 
http://www.eia.gov/electricity/data/eia826/).
    \53\ U.S. Energy Information Administration, Natural Gas Prices 
(Available at: http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm).
    \54\ Source: CPI factors derived from U.S. Department of Labor, 
Bureau of Labor Statistics, Consumer Price Index (CPI) (Available 
at: www.bls.gov/cpi/cpifiles/cpiai.txt).
---------------------------------------------------------------------------

    To arrive at prices in future years, DOE multiplies the prices by 
the forecasts of annual average price changes in AEO2015. To estimate 
the trend after 2040, DOE uses the average rate of change during 2030-
2040. Appendix 8C of the NOPR TSD includes more details on energy 
prices and trends.

[[Page 15872]]

5. Maintenance Costs
    The maintenance cost is the routine cost incurred by the consumer 
for maintaining equipment operation. The maintenance cost depends on 
CPB capacity and heating medium (hot water or steam). DOE used the most 
recent ``RS Means Facility Maintenance and Repair Cost Data'' to 
determine labor and materials costs and maintenance frequency 
associated with each maintenance task for each CPB equipment class 
analyzed.\55\ Within an equipment class, DOE assumed that the 
maintenance cost is the same at all non-condensing efficiency levels, 
and that the maintenance cost at condensing efficiency levels is 
slightly higher.
---------------------------------------------------------------------------

    \55\ RS Means, 2015 Facilities Maintenance & Repair Cost Data 
(Available at: http://rsmeans.com).
---------------------------------------------------------------------------

    DOE requested comments regarding the frequency and typical cost of 
maintenance of minimum- and high-efficiency commercial packaged 
boilers. ABMA commented that the maintenance costs shown in the 
analysis seem low and more along the lines of residential maintenance 
costs. (ABMA, Public Meeting Transcript, No. 39 at p. 65) Similarly, 
Raypak believes that DOE should not assume that there is a linear 
relationship between the size of the boiler and the cost of its 
components. (Raypak, No. 35 at p. 4) Additionally, Raypak commented 
that the frequency and cost of maintenance, major repairs, etc. 
presented in the analysis is representative of older technology 
boilers, but newer technology boilers have a higher cost of service/
repair since they require a higher level of expertise from technicians 
and specialized equipment. Raypak also added that, although they do not 
have specific data, Raypak believes that the vast majority of 
maintenance/service is performed by manufacturer factory-trained 
personnel due to the specialized equipment and expertise required to 
properly diagnose and repair current commercial packaged boilers. 
However, Raypak noted there may be some general maintenance items such 
as checking for blockages in vent/air intake, looking at burner flame, 
and maintaining or adjusting water quality that may be accomplished by 
on-site staff. (Raypak, No. 35 at p. 5) AHRI similarly noted that the 
industry trend for boiler maintenance is toward using external 
contractors who specialize in servicing advance design boilers or 
boiler systems. (AHRI, No. 37 at p. 5) PHCC, on the contrary, noted 
that maintenance estimates seem adequate. (PHCC, Public Meeting 
Transcript, No. 39 at p. 146) PHCC also noted that hospitals, larger 
apartment buildings, and other sites with competent maintenance staff 
are likely to use on-site staff for general boiler maintenance but 
resort to external contractors for repair work. Large boiler 
installations are likely to use external contractors for maintenance 
and repairs. (PHCC, Public Meeting Transcript, No. 39 at p. 147)
    Two stakeholders proposed that DOE implement additional data 
collection techniques. ACEEE encouraged DOE to look at international 
experience/comparisons relative to maintenance, maintenance contracts, 
incremental costs, and lifetime estimates, especially where it related 
to condensing technology where other regions have more history of 
condensing technology use. (ACEEE, Public Meeting Transcript, No. 39 at 
p. 209) PVI suggested that surveying boiler service companies regarding 
maintenance and frequency of repairs, as well as self-service versus 
external, may help provide some answers for the analysis. (PVI, No. 39 
at p. 153) DOE appreciates the recommendations made by commenters. 
However, DOE considers the information it was able to collect and 
examine through publically available sources to be sufficient to 
perform the NOPR analyses.
    With respect to adherence to a maintenance schedule on commercial 
packaged boilers, Lochinvar noted that CPB manufacturers recommend 
annual maintenance, but evidence supports that it is often neglected. 
(Lochinvar, No. 34 at p. 4) Raypak also noted the lack of maintenance 
requirements on boilers and the impact that lack of maintenance can 
have on boiler lifetime. (Raypak, Public Meeting Transcript, No. 39 at 
p. 208)
    DOE appreciates the stakeholder comments received regarding CPB 
equipment maintenance frequency and costs. DOE notes that for the NOPR, 
DOE is not changing the maintenance cost calculation methodology used 
in the preliminary analysis as it risks oversimplifying the maintenance 
cost estimating methodology, which may result in costs that are not 
reflective of the recommended preventive maintenance tasks performed in 
the facilities and boiler plants, and not significantly different from 
one equipment class to another.
    The cost estimates used in the analysis are specific to preventive 
maintenance tasks performed by the in-plant engineer/technician. DOE 
notes that RS Means is a representative, well-documented, and widely 
accepted data resource specifically developed for cost estimating 
purposes depicting typical preventive maintenance tasks and associated 
costs at different CPB capacities, which is the requirement for the 
purposes of the LCC analysis. Furthermore, the version of RS Means used 
for the LCC purposes specifically looked at facilities that used CPB 
plants and larger commercial packaged boilers to ensure that the costs 
used are appropriate.
6. Repair Costs
    The repair cost is the cost to the commercial consumer for 
replacing or repairing components that have failed in the commercial 
packaged boiler (such as the ignition, controls, heat exchanger, 
mechanical vent damper, or power vent blower). In its preliminary 
analysis, DOE used the latest version of the ``RS Means Facility 
Maintenance and Repair Cost Data'' to determine labor and materials 
costs associated with repairing each CPB equipment class analyzed.
    DOE received comments regarding repair costs for commercial 
packaged boilers. AHRI commented that DOE should not assume a linear 
relationship between boiler size and component costs, and both AHRI and 
Raypak noted that repair costs shown in the analysis may be 
representative of historical models, but newer commercial models 
require more specialized equipment and technicians, resulting in an 
underestimation of repair costs in the analysis for higher efficiency 
equipment. (AHRI, No. 37 at p. 5; Raypak, No. 35 at p. 4) With respect 
to heat exchanger repairs, Raypak notes that a replacement heat 
exchanger would show up simply in replacement parts orders and a 
replacement boiler would show up as a boiler shipment, but it has no 
knowledge of the instances of heat exchanger replacements versus boiler 
replacements in repair/replace decisions. (Raypak, No. 35 at p. 5) 
Lochinvar comments that in cases where they are involved in the 
decision to repair or replace a heat exchanger, about 80% of the times 
the heat exchanger is replaced, and that it is consistent for 
condensing and non-condensing commercial packaged boilers they 
manufacture. Lochinvar has no data on repair or replacement percentages 
for cases in which they are not involved in the decision-making 
process. (Lochinvar, No. 34 at p. 5) Lochinvar further notes that the 
type of boiler impacts whether heat exchanger failure will result in 
replacement rather than repair. (Lochinvar, No. 34 at p. 4) PHCC opines 
that for smaller boilers, it is likely that the entire boiler would be 
replaced if there is a heat exchanger failure, but for larger boilers, 
it is more likely that the heat exchanger would be

[[Page 15873]]

repaired or replaced. (PHCC, Public Meeting Transcript, No. 39 at p. 
148)
    DOE appreciates the comments it received regarding repair costs for 
commercial packaged boilers. Regarding the comments noting an 
underestimation of repair costs, DOE notes that it used ``RS Means 
Facility Maintenance and Repair Cost Data'' \56\ to determine repair 
costs, a well-documented and widely accepted data resource specifically 
developed for cost estimating purposes. With respect to heat exchanger 
repairs, DOE considered comments it received and adjusted the repair 
methodology to allow for noncondensing and condensing heat exchangers 
to be treated separately in the analysis to account for the impacts of 
condensation on heat exchanger surfaces.
---------------------------------------------------------------------------

    \56\ RS Means, 2015 Facilities Maintenance & Repair Cost Data 
(Available at: http://rsmeans.com/60305.aspx).
---------------------------------------------------------------------------

    In the NOPR, DOE used the latest ``RS Means Facility Maintenance 
and Repair Cost Data'' to determine labor and materials costs 
associated with repairing each CPB equipment class analyzed. DOE 
assumes that all commercial packaged boilers have a 1-year warranty for 
parts and labor and a 10-year warranty on the heat exchanger. For a 
detailed discussion of the development of repair costs, see appendix 8E 
of the NOPR TSD.
    DOE requests comments on the representativeness of using 1-year as 
warranty for parts and labor, and 10-years as warranty for the heat 
exchanger.
    See section VII.E for a list of issues on which DOE seeks comment.
7. Lifetime
    Equipment lifetime is defined as the age at which equipment is 
retired from service. DOE uses national survey data, published studies, 
and projections based on manufacturer shipment data to calculate the 
distribution of CPB lifetimes. DOE based equipment lifetime on a 
retirement function, which was based on the use of a Weibull 
probability distribution, with a resulting mean lifetime of 24.8 years. 
DOE assumed that the lifetime of a commercial packaged boiler is the 
same across the different equipment classes and efficiency levels. For 
a detailed discussion of CPB lifetime, see appendix 8F of the NOPR TSD. 
In the Framework and preliminary analysis documents, DOE sought comment 
on how it characterized equipment lifetime. DOE also requested any data 
or information regarding the accuracy of its 24.8-year lifetime and 
whether equipment lifetime varies based on equipment class.
    DOE received various comments regarding CPB lifetime. ABMA, AHRI, 
and Raypak commented that the average life assumption developed by DOE 
in the analysis for both condensing and non-condensing boilers is 
incorrect, noting that condensing boilers have only been on the market 
for about 15 years, so using an average life of 24.8 years for them in 
the analysis is unwarranted. ABMA further notes that the preliminary 
analysis TSD Table 8-F.2.1 shows condensing boilers listed as having 
10-15 year life, but the analysis sets lifetime as 24.8 years 
regardless of CPB technology. ABMA, and Raypak believe the average life 
of condensing boilers to be in the neighborhood of 15 years, and 
Lochinvar suggested that condensing product life should be in the range 
of 19 to 20 years. (ABMA, Public Meeting Transcript, No. 39 at p. 152; 
Lochinvar, No. 34 at p. 6; Raypak, No. 35 at p. 6; Raypak, Public 
Meeting Transcript, No. 39 at p. 208) PHCC stated that 25 year lifetime 
is high for condensing technology. (PHCC, Public Meeting Transcript, 
No. 39 at p. 149) Lochinvar commented that non-condensing product 
lifetime estimates are consistent with their experience, but that 
lifetime calculations must not aggregate condensing and non-condensing 
products for average lifetime cost calculations. (Lochinvar, No. 34 at 
p. 6) ACEEE commented that the material the heat exchanger is made of 
is likely to be as relevant as the condensing versus non-condensing 
operation of the boiler. (ACEEE, No. 39 at p. 154) AHRI also suggested 
that lifetime for condensing commercial packaged boilers be determined 
differently based on their limited history. (AHRI, No. 37 at p. 6) PVI 
agreed that there is insufficient historical data on condensing boilers 
to confirm that their lifetime is similar to traditional boilers, but 
that early evidence suggests they have shorter lives. (PVI, Public 
Meeting Transcript, No. 39 at p. 151) ABMA and PVI suggested that the 
life-cycle cost of a condensing boiler installation should consider 
accelerated replacement of commercial packaged boilers, with ABMA 
noting that calculations using this proposed lifetime is highly suspect 
unless the life cycle cost of a condensing boiler installation includes 
the cost of two condensing boilers, rather than one. (ABMA, No. 33 at 
p. 2)
    In response, DOE notes that in developing the residential Boilers 
Specification Version 3.0 for the ENERGY STAR[supreg] program in 2013, 
the Environmental Protection Agency (EPA) held numerous discussions 
with manufacturers and technical experts to explore the concern that 
condensing boilers may have a shorter lifetime. In the absence of data 
showing otherwise, EPA concluded that if condensing boilers are 
properly installed and maintained, the life expectancy should be 
similar to noncondensing boilers.\57\
---------------------------------------------------------------------------

    \57\ Stakeholder Comments on Draft 1 Version 3.0 Boilers 
Specification (August 5, 2013) (Available at http://www.energystar.gov/products/spec/boilers_specification_version_3_0_pd.).
---------------------------------------------------------------------------

    EPA also discussed boiler life expectancy with the Department for 
Environment, Food & Rural Affairs (DEFRA) in the United Kingdom, and 
stated that DEFRA has no data which contradict EPA's conclusion that 
with proper maintenance, condensing and non-condensing modern boilers 
have similar life expectancy.\58\ Regarding the preliminary analysis 
TSD Table 8-F.2.1 showing condensing boilers listed as having 10-15 
year life, DOE agrees with commenters that it is difficult to estimate 
lifetime of a technology that has only been broadly available on the 
market for about 15 years, and DOE believes that the values captured in 
those survey results may be more representative of early experience 
based on new technology or installation issues. DOE expects that, as 
condensing boiler technology matures and installers become better 
trained at installing and maintaining condensing boilers, lifetime of 
condensing commercial packaged boilers sold and installed in 2019 and 
beyond would be expected to be similar to their noncondensing 
counterparts. While commenters opined on a shorter life for condensing 
products, no commenters provided definitive data that illustrate a 
shorter life for condensing boilers relative to their noncondensing 
counterparts. For the NOPR, DOE did not apply different lifetimes for 
non-condensing and condensing commercial packaged boilers. However, as 
noted in the discussion of repair costs in section IV.F.6 of this 
document, commenters noted the option for and higher likelihood of heat 
exchanger replacements for commercial packaged boilers instead of 
boiler replacement. DOE did consider the potential impact of condensate 
on heat exchangers in commercial packaged boilers that operate in 
condensing mode and established a higher likelihood and sooner time-to-
failure for CPB heat

[[Page 15874]]

exchangers that are exposed to such condensate.
---------------------------------------------------------------------------

    \58\ Energy Efficiency Best Practice in Housing, Domestic 
Condensing Boilers--`The Benefits and the Myths' (2003) (Available 
at http://www.west-norfolk.gov.uk/pdf/CE52.pdf.).
---------------------------------------------------------------------------

    Details on how DOE adjusted the repair costs for heat exchangers 
may be found in appendix 8E of the NOPR TSD. For more details on how 
DOE derived the CPB lifetime, see appendix 8F of the NOPR TSD.
8. Discount Rate
    The discount rate is the rate at which future expenditures and 
savings are discounted to establish their present value. DOE estimates 
discount rates separately for commercial and residential end users. For 
commercial end users, DOE calculates commercial discount rates as the 
weighted average cost of capital (WACC), using the Capital Asset 
Pricing Model (CAPM). For residential end users, DOE calculates 
discount rates as the weighted average real interest rate across 
consumer debt and equity holdings.
    DOE derived the discount rates by estimating the cost of capital of 
companies that purchase commercial packaged boilers. Damodaran Online 
is a widely used source of information about company debt and equity 
financing for most types of firms, and was the primary source of data 
for the commercial discount rate analysis.\59\ To derive discount rates 
for residential applications, DOE used publicly available data (the 
Federal Reserve Board's ``Survey of Consumer Finances'') to estimate a 
consumer's opportunity cost of funds related to appliance energy cost 
savings and maintenance costs.\60\ More details regarding DOE's 
estimates of consumer discount rates are provided in chapter 8 of the 
NOPR TSD.
---------------------------------------------------------------------------

    \59\ Damodaran Online, The Data Page: Cost of Capital by 
Industry Sector, (2004-2013) (Available at: http://
pages.stern.nyu.edu/~adamodar/).
    \60\ The Federal Reserve Board, Survey of Consumer Finances, 
(1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010) (Available at: 
http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html).
---------------------------------------------------------------------------

9. No-New-Standards-Case Market Efficiency Distribution
    For the LCC analysis, DOE analyzes the considered efficiency levels 
relative to a no-new-standards-case (i.e., the case without amended 
energy efficiency standards). This analysis requires an estimate of the 
distribution of equipment efficiencies in the no-new-standards-case 
(i.e., what consumers would have purchased in the compliance year in 
the absence of amended standards). DOE refers to this distribution of 
equipment energy efficiencies as the no-new-standards-case efficiency 
distribution.
    In its preliminary analysis, DOE used the AHRI directory to analyze 
trends in product classes and efficiency levels from 2007 to 2014 to 
determine the anticipated no-new-standards-case efficiency distribution 
in 2019, the assumed compliance year for amended standards. The trends 
show the market moving toward higher efficiency commercial packaged 
boilers, and DOE accounted for the trend in its no-new-standards-case 
projection.
    In the preliminary analysis, DOE requested data on current CPB 
efficiency market shares (of shipments) by equipment class, and also 
similar historical data. DOE also requested information on expected 
trends in efficiency over the next five years.
    DOE received various comments regarding the data contained in the 
AHRI database and its use in the analysis. PVI commented that there is 
no link between the number of listings in the AHRI directory and sales 
volumes of any particular product type. (PVI, Public Meeting 
Transcript, No. 39 at pp. 158-159) Raypak noted that the trend toward 
condensing technologies for some product classes is evident in the 
number of series of boilers now in their catalog that are condensing, 
compared to 10 years ago when only one single system was available. 
(Raypak, No. 35 at p. 4) AHRI similarly noted the continuing growth in 
condensing boilers and improvements in overall efficiencies and offered 
to provide additional data related to distribution of equipment by 
efficiencies. (AHRI, Public Meeting Transcript, No. 39 at p. 158) 
Relative to trends in condensing oil boilers, AHRI commented that oil 
condensing products are rare and there may not be a big enough sample 
to establish any trends in the technology. (AHRI, Public Meeting 
Transcript, No. 39 at pp. 176-177)
    DOE recognizes that the AHRI directory of commercial packaged 
boilers is not an indicator of shipments in the industry, but it does 
reflect the general trends taken by manufacturers to meet their 
consumer's needs. Due to the lack of any other data source documenting 
the historical trend for product efficiency and condensing technology, 
the NOPR analysis used the AHRI directory to analyze trends in product 
classes and efficiency levels from 2007 to 2015 to determine the 
anticipated no-new-standards-case efficiency distribution in 2019, the 
assumed compliance year for amended standards. The trends show the 
market moving toward higher efficiency commercial packaged boilers, and 
DOE accounted for the trend in its no-new-standards-case projection. As 
it relates to condensing oil boilers, DOE observed, as a result of 
incorporating 2015 AHRI directory data, that for a second year in a row 
(in 2014 and 2015), the number of condensing oil boilers in the AHRI 
directory was lower than in previous years. As a result, DOE adjusted 
the condensing boiler trends for small and large oil commercial 
packaged boilers. DOE considered alternatives to estimate sales, and 
the shipments methodology has been updated to not depend on the AHRI 
directory. An overview of the shipments methodology is provided in 
section IV.G of this document.
    Table IV.8 presents the estimated no-new-standards-case efficiency 
market shares for each analyzed CPB equipment class in 2019.

    Table IV.8--Estimated No-New-Standards Case Boiler Efficiency Distribution * of Analyzed Commercial Packaged Boiler Equipment Classes ** in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Efficiency                       SGHW (%)     LGHW (%)     SOHW (%)     LOHW (%)     SGST (%)     LGST (%)     SOST (%)     LOST (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
77..............................................  ...........  ...........  ...........  ...........           47           13  ...........  ...........
78..............................................  ...........  ...........  ...........  ...........            7           31  ...........  ...........
79..............................................  ...........  ...........  ...........  ...........           16           13  ...........  ...........
80..............................................            7  ...........  ...........  ...........           16           21  ...........  ...........
81..............................................            8  ...........  ...........  ...........           10            5           34           41
82..............................................           12           17           35  ...........  ...........           11  ...........  ...........
83..............................................  ...........           21           24  ...........            4  ...........           51           39
84..............................................           11            6            9           44  ...........            7           10  ...........
85..............................................           22           16           16  ...........  ...........  ...........  ...........           19

[[Page 15875]]

 
86..............................................  ...........  ...........  ...........           42  ...........  ...........            5  ...........
87..............................................  ...........  ...........           11  ...........  ...........  ...........  ...........   [dagger] 0
88..............................................  ...........  ...........            3            9  ...........  ...........  ...........  ...........
89..............................................  ...........  ...........  ...........            1  ...........  ...........  ...........  ...........
90..............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
91..............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
92..............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
93..............................................           19  ...........  ...........  ...........  ...........  ...........  ...........  ...........
94..............................................  ...........           37  ...........  ...........  ...........  ...........  ...........  ...........
95..............................................           19  ...........  ...........  ...........  ...........  ...........  ...........  ...........
96..............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
97..............................................  ...........            3            3            4  ...........  ...........  ...........  ...........
98..............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ...........
99..............................................            3  ...........  ...........  ...........  ...........  ...........  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Results may not add up to 100% due to rounding.
** SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
  Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.
[dagger] Result is zero due to rounding.

    DOE calculated the LCC and PBP for all consumers as if each were to 
purchase new equipment in the year that compliance with amended 
standards is required. EPCA directs DOE to publish a final rule 
amending the standard for the equipment covered by this NOPR not later 
than 2 years after a notice of proposed rulemaking is issued. (42 
U.S.C. 6313(a)(6)(C)(iii)) As discussed previously in section III.A of 
this document, for purposes of its analysis, DOE used 2019 as the first 
year of compliance with amended standards.
10. Payback Period Inputs
    The payback period is the amount of time it takes the consumer to 
recover the additional installed cost of more-efficient equipment, 
compared to baseline equipment, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the equipment mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation are the total installed cost of 
the equipment to the consumer for each efficiency level and the average 
annual operating expenditures for each efficiency level. The PBP 
calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
11. Rebuttable-Presumption Payback Period
    EPCA establishes a rebuttable presumption that a standard is 
economically justified if the Secretary finds that the additional cost 
to the consumer of purchasing equipment complying with an energy 
conservation standard level will be less than three times the value of 
the energy (and, as applicable, water) savings during the first year 
that the consumer will receive as a result of the standard, as 
calculated under the test procedure in place for that standard. For 
each considered efficiency level, DOE determines the value of the first 
year's energy savings by calculating the quantity of those savings in 
accordance with the applicable DOE test procedure and multiplying that 
amount by the average energy price forecast for the year in which 
compliance with the amended standards would be required. The rebuttable 
presumption criteria of less than 3-year payback was not achieved for 
any of the equipment classes analyzed for this rulemaking. More details 
on this may be found in Table V.27.

G. Shipments Analysis

    In its shipments analysis, DOE developed shipment projections for 
commercial packaged boilers and, in turn, calculated equipment stock 
over the course of the analysis period. DOE uses the shipments 
projection and the equipment stock to calculate the national impacts of 
potential amended energy conservation standards on energy use, NPV, and 
future manufacturer cash flows. DOE develops shipment projections based 
on estimated historical shipment and an analysis of key market drivers 
for each kind of equipment.
    In the preliminary analysis, DOE estimated historical shipments of 
commercial packaged boilers based on historical shipments of 
residential boilers and percent share of equipment classes in the AHRI 
model directory. During the preliminary public meeting and in written 
comments in response to DOE's preliminary analysis, the stakeholders 
questioned the data sources DOE used in its shipment analysis. PVI 
commented that the number of listings in the AHRI model directory and 
sales volumes of any particular equipment class are not correlated. 
(PVI, Public Meeting Transcript, No. 39 at pp. 158-159)
    DOE recognizes that the AHRI directory of commercial packaged 
boilers is not an indicator of shipments in the industry and DOE 
modified its analysis approach to project shipments from 2014 through 
the end of the thirty year analysis period 2018-2047. DOE estimated 
historical shipments in its NOPR analysis from stock estimates based on 
the CBECS data series from 1979 to 2012. Since no CBECS survey was 
conducted prior to 1979, DOE used the trends in historical shipment 
data for residential boilers to estimate the historical shipments for 
the 1960-1978 time period. For estimation of stocks of gas and oil 
boilers, DOE used the data on growth of commercial building floor space 
for nine building types from AEO reports, percent floor space heated by 
CPB data from CBECS for these building types, and estimated saturations 
of commercial packaged boilers in these building types. From these 
stock estimates, DOE derived the shipments of gas-fired and oil-fired 
commercial packaged boilers using separate correlations between stock 
and shipment for gas and oil boilers. As noted in section IV.E.2 of 
this document, to obtain individual equipment class shipments from the 
aggregate values, DOE used the steam to

[[Page 15876]]

hot water and oil to gas shift trends DOE derived from the EPA database 
for space heating boilers. The equipment class shipments were further 
disaggregated between shipment to new construction and replacement/
switch shipments.
    To project equipment class shipments for new construction, DOE 
relied on building stock and floor space data obtained from the 
AEO2015. DOE assumes that CPB equipment is used in both commercial and 
residential multi-family dwellings. DOE estimated a total saturation 
rate for each equipment class based on prior CBECS data and size 
distribution of space heating boilers in an EPA database. For 
estimation of saturation rates in the new construction, DOE compared 
the area heated by boilers in commercial buildings for two different 
nine year periods (i.e., 2000-2012 covered in CBECS 2012 and 1995-2003 
covered in CBECS 2003). The new construction saturation rates were 
derived from the calculated saturation rate averaged over the 1995-2003 
period and adjusted for the trends in the area heated by boilers, as 
well as oil to gas shift trends in CBECS 2012. The new construction 
saturation rates were projected into the future considering currently 
observed trends from CBECS 2012 and AEO2015 (for oil to gas shifts). 
For residential multi-family units, DOE used RECS 2009 data and 
considered multi-family buildings constructed in the 9 year period from 
2001 to 2009 as new construction for calculating the new construction 
saturation. DOE assumed that the new construction saturation trend in 
multi-family buildings for the period of analysis is identical to that 
for commercial buildings. DOE applied these new construction saturation 
rates to new building additions in each year over the analysis period 
(2018-2049), yielding shipments to new buildings. The building stock 
and additions projections from the AEO2015 are shown in Table IV.9.
    In addition, DOE received several comments on results of the 
preliminary shipment analysis. Lochinvar commented that the flat 
shipment projection from 2020 shown in the preliminary analysis is 
unrealistic under the growing national economy. (Lochinvar, No.34 at p. 
6) Lochinvar further commented that the rapid decline of natural draft 
boilers assumed in the preliminary shipment analysis is highly 
overstated and the impact of any proposed efficiency standard on 
shipment of non-condensing, natural draft and steam boilers would be 
insignificant under less stringent efficiency standards, but could be 
significant under very stringent standards. (Lochinvar, No.34 at pp. 6 
and 7) In the NOPR analysis, DOE analyzed eight equipment classes that 
are no longer separated by different draft types. Consequently, DOE's 
shipment projections were made on an aggregate basis including both 
natural draft and mechanical draft equipment for each equipment class 
examined. As to the impact of the stringency of standards on shipments 
of lower efficiency boilers like natural draft and steam boilers, DOE 
notes that its method of analysis takes how consumers and manufacturers 
are impacted by the proposed standards into full consideration.
    AHRI commented that DOE should make an effort to determine the 
trend for numbers of boilers installed in new building construction in 
order to improve the shipments projection. (AHRI, Public Meeting 
Transcript, No. 39 at p. 168-169) In the NOPR shipment analysis, DOE 
used a different methodology that takes into consideration the current 
trends of usage of commercial packaged boilers for heating in 
commercial buildings as evidenced in CBECS 2012. This analysis could be 
refined further as more data from CBECS 2012 become available. AHRI 
also indicated that it is in discussions with its members to estimate 
shipments in different efficiency bins and historical shipment weighted 
efficiency levels. (AHRI, Public Meeting Transcript No. 39 at p. 96) 
DOE has not received this data from AHRI. ACEEE commented that it would 
like to see capacity class shipment estimates. (ACEEE, No. 39 at p. 50) 
DOE estimated percent share of different capacity bins across the 
equipment classes as detailed in the TSD chapter 9 of this document.

                                     Table IV.9--Building Stock Projections
----------------------------------------------------------------------------------------------------------------
                                                   Commercial building
            Year                Total commercial        floorspace       Total residential       Residential
                              building floorspace       additions          building stock     building additions
                                  million sq. ft.      million sq. ft.    millions of units    millions of units
----------------------------------------------------------------------------------------------------------------
2014........................               81,879                1,546               114.80                 1.06
2019........................               85,888                2,077               119.41                 1.67
2020........................               86,938                2,089               120.51                 1.69
2025........................               92,037                2,027               125.82                 1.70
2030........................               96,380                1,987               131.09                 1.66
2035........................              100,920                2,302               136.04                 1.62
2040........................              106,649                2,408               140.96                 1.62
2045........................              112,186                2,651               146.22                 1.73
2048........................              115,646                2,808               149.48                 1.77
----------------------------------------------------------------------------------------------------------------
Source: EIA AEO2015.

    DOE seeks feedback on the assumptions used to develop historical 
and projected shipments of commercial packaged boilers and the 
representativeness of its estimates of projected shipments. DOE also 
requests information on historical shipments of commercial packaged 
boilers including shipments by equipment class for small, large, and 
very large commercial packaged boilers.
    See section VII.E for a list of issues on which DOE seeks comment.
    Commercial consumer purchase decisions are influenced by the 
purchase price and operating cost of the equipment, and therefore may 
be different across standards levels. To estimate the impact of the 
increase in relative price from a particular standard level on CPB 
shipments, DOE assumes that a portion of affected commercial consumers 
are more price-sensitive and would repair equipment purchased prior to 
enactment of the standard (in 2019) rather than replace it, extending 
the life of the equipment by 6 years. DOE models this impact using a 
relative price elasticity approach. When the extended repaired units 
fail after 6 more years, DOE assumes they will be replaced with new 
ones. A detailed description of the extended repair

[[Page 15877]]

calculations is provided in chapter 9 of the NOPR TSD.
    In response to the extrapolation of a residential product price 
elasticity to commercial packaged boilers used in the preliminary 
analyses, interested parties noted concerns regarding the application 
of residential data to commercial equipment. Specifically, AHRI noted 
that residential and commercial boiler consumers have a different 
pricing structure and consumer relationship, and expressed concern over 
the use of residential data for commercial packaged boilers. (AHRI, 
Public Meeting Transcript, No. 39 at p. 169-170)
    AHRI also noted that, because of the higher installation costs and 
time involved, commercial boiler owners would be more likely to repair 
an existing boiler than to replace it. (AHRI, No. 37 at p. 6) 
Similarly, ACEEE expressed concerns regarding price sensitivity and the 
application of a residential price elasticity to a commercial equipment 
and how the resulting numbers will be interpreted in downstream 
analyses. (ACEEE, Public Meeting Transcript, No. 39 at p. 172-173) Both 
AHRI and Raypak remarked that while an incremental increase in the cost 
associated with a new standard would not be expected to have a 
significant effect on shipments, larger increases associated with the 
cost of the standard would result in lower shipments as existing 
consumers would be more likely to repair an existing boiler rather than 
replace it. (AHRI, No. 37 at p. 7; Raypak, No. 35 at p. 7)
    Given the AHRI and Raypak comments regarding the impact of 
increased repairs on shipments, DOE determined that use of price 
elasticity to model the extended repair option should be maintained for 
the NOPR analysis. In response to the AHRI and ACEEE comments, DOE 
revised the price elasticity from a residential product study to use 
sales and price data for commercial unitary air conditioners \61\ to 
more closely approximate an elasticity for commercial equipment (data 
specific to commercial packaged boilers were not available). DOE notes 
that it performed two sensitivity analyses--one without the use of the 
price elasticity, and one in which the price elasticity was increased 
ten-fold. The results of the sensitivity analyses are presented in 
appendix 10D of the NOPR TSD.
---------------------------------------------------------------------------

    \61\ U.S. Department of Energy, Technical Support Document: 
Energy Efficiency Program for Consumer Products and Commercial and 
Industrial Equipment: Distribution Transformers, Chapter 9 Shipments 
Analysis (April 2013).
---------------------------------------------------------------------------

    The resulting shipment projection is shown in Table IV.10.

                                             Table IV.10--Shipments of Commercial Packaged Boiler Equipment
                                                                       [Thousands]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Year                         SGHW CPB *    LGHW CPB     SOHW CPB     LOHW CPB     SGST CPB     LGST CPB     SOST CPB     LOST CPB
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014............................................       14,270        2,282          792          114        1,933          251          416           97
2019............................................       16,907        2,707          868          119        1,854          240          399           93
2020............................................       17,201        2,754          877          121        1,838          238          396           92
2025............................................       18,512        2,963          910          125        1,663          216          380           88
2030............................................       19,066        3,052          932          129        1,406          182          364           85
2035............................................       21,025        3,365          969          133        1,135          147          349           81
2040............................................       22,953        3,674        1,014          139          846          110          335           78
2045............................................       24,363        3,900        1,053          144          522           68          321           75
2048............................................       25,409        4,067        1,076          147          312           40          313           73
--------------------------------------------------------------------------------------------------------------------------------------------------------
* SGHW = Small Gas-fired Hot Water; LGHW = Large Gas-fired Hot Water; SOHW = Small Oil-fired Hot Water; LOHW = Large Oil-fired Hot Water; SGST = Small
  Gas-fired Steam; LGST = Large Gas-fired Steam; SOST = Small Oil-fired Steam; LOST = Large Oil-fired Steam.

    Because the estimated energy usage of CPB equipment differs by 
commercial and residential setting, the NIA employs the same fractions 
of shipments (or sales) to commercial and to residential commercial 
consumers as is used in the LCC analysis. The fraction of shipments by 
type of commercial consumer is shown in Table IV.11.

       Table IV.11--Shipment Shares by Type of Commercial Consumer
------------------------------------------------------------------------
                                                            Residential
             Equipment class              Commercial (%)        (%)
------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial                  85              15
 Packaged Boiler........................
Large Gas-Fired Hot Water Commercial                  85              15
 Packaged Boiler........................
Small Oil-Fired Hot Water Commercial                  85              15
 Packaged Boiler........................
Large Oil-Fired Hot Water Commercial                  85              15
 Packaged Boiler........................
Small Gas-Fired Steam Commercial                      85              15
 Packaged Boiler........................
Large Gas-Fired Steam Commercial                      85              15
 Packaged Boiler........................
Small Oil-Fired Steam Commercial                      85              15
 Packaged Boiler........................
Large Oil-Fired Steam Commercial                      85              15
 Packaged Boiler........................
------------------------------------------------------------------------

    DOE requests feedback on the assumptions used to estimate the 
impact of relative price increases on commercial packaged boiler 
shipments due to proposed standards.
    See section VII.E for a list of issues on which DOE seeks comment.

H. National Impact Analysis

    The national impact analysis (NIA) analyzes the effects of a 
potential energy conservation standard from a national perspective. The 
NIA assesses the national energy savings (NES) and the national NPV of 
total consumer costs and savings that would be expected to result from 
amended standards at specific efficiency levels. The NES and NPV are 
analyzed at specific efficiency levels (i.e., TSLs) for each equipment 
class of CPB equipment. DOE calculates the NES and NPV based on 
projections

[[Page 15878]]

of annual equipment shipments, along with the annual energy consumption 
and total installed cost data from the LCC analysis. For the NOPR 
analysis, DOE forecasted the energy savings, operating cost savings, 
equipment costs, and NPV of commercial consumer benefits for equipment 
sold from 2019 through 2048--the year in which the last standards-
compliant equipment would be shipped during the 30-year analysis 
period.
    To make the analysis more accessible and transparent to all 
interested parties, DOE uses a computer spreadsheet model to calculate 
the energy savings and the national consumer costs and savings from 
each TSL.\62\ Chapter 10 and appendix 10A of the NOPR TSD explain the 
models and how to use them, and interested parties can review DOE's 
analyses by interacting with these spreadsheets. The models and 
documentation are available on DOE's Web site.\63\ The NIA calculations 
are based on the annual energy consumption and total installed cost 
data from the energy use analysis and the LCC analysis. DOE forecasted 
the lifetime energy savings, energy cost savings, equipment costs, and 
NPV of consumer benefits for each equipment class for equipment sold 
from 2019 through 2048--the year in which the last standards-compliant 
equipment would be shipped during the 30-year analysis period.
---------------------------------------------------------------------------

    \62\ DOE understands that MS Excel is the most widely used 
spreadsheet calculation tool in the United States and there is 
general familiarity with its basic features. Thus, DOE's use of MS 
Excel as the basis for the spreadsheet models provides interested 
parties with access to the models within a familiar context.
    \63\ DOE's Web page on commercial packaged boiler equipment is 
available at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/74.
---------------------------------------------------------------------------

    DOE evaluated the impacts of potential new and amended standards 
for commercial packaged boilers by comparing no-new-standards-case 
projections with standards-case projections. The no-new-standards-case 
projections characterize energy use and consumer costs for each 
equipment class in the absence of new and amended energy conservation 
standards. DOE compared these projections with those characterizing the 
market for each equipment class if DOE were to adopt amended standards 
at specific energy efficiency levels (i.e., the standards cases) for 
that class. For the standards cases, DOE assumed a ``roll-up'' scenario 
in which equipment at efficiency levels that do not meet the standard 
level under consideration would ``roll up'' to the efficiency level 
that just meets the proposed standard level, and equipment already 
being purchased at efficiency levels at or above the proposed standard 
level would remain unaffected.
    Unlike the LCC analysis, the NES analysis does not use 
distributions for inputs or outputs, but relies on national average 
equipment costs and energy costs. DOE used the NES spreadsheet to 
perform calculations of energy savings and NPV using the annual energy 
consumption, maintenance and repair costs, and total installed cost 
data from the LCC analysis. The NIA also uses projections of energy 
prices and building stock and additions from the AEO2015 Reference 
case. Additionally, DOE analyzed scenarios that used inputs from the 
AEO2015 Low Economic Growth and High Economic Growth cases. These cases 
have lower and higher energy price trends, respectively, compared to 
the reference case. NIA results based on these cases are presented in 
appendix 10D of the NOPR TSD.
    A detailed description of the procedure to calculate NES and NPV 
and inputs for this analysis are provided in chapter 10 of the NOPR 
TSD. Table IV.12 summarizes the inputs and methods DOE used for the NIA 
analysis.

   Table IV.12--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
              Inputs                               Method
------------------------------------------------------------------------
Shipments.........................  Annual shipments from shipments
                                     model.
First Year of Analysis Period.....  2019.
No-New-Standards Case Forecasted    Efficiency distributions are
 Efficiencies.                       forecasted based on historical
                                     efficiency data.
Standards Case Forecasted           Used a ``roll-up'' scenario.
 Efficiencies.
Annual Energy Consumption per Unit  Annual weighted-average values are a
                                     function of energy use at each TSL.
Total Installed Cost per Unit.....  Annual weighted-average values are a
                                     function of cost at each TSL.
                                    Incorporates forecast of future
                                     product prices based on historical
                                     data.
Annual Energy Cost per Unit.......  Annual weighted-average values as a
                                     function of the annual energy
                                     consumption per unit, and energy
                                     prices.
Energy Prices.....................  AEO2015 forecasts (to 2040) and
                                     extrapolation through 2110.
Energy Site-to-Source Conversion    Varies yearly and is generated by
 Factors.                            NEMS-BT.
Discount Rate.....................  3 and 7 percent real.
Present Year......................  Future expenses discounted to 2015,
                                     when the NOPR will be published.
------------------------------------------------------------------------

1. Equipment Efficiency in the No-New-Standards Case and Standards 
Cases
    As described in section IV.F.9 of this document, DOE uses a no-new-
standards-case distribution of efficiency levels to project what the 
CPB equipment market would look like in the absence of amended 
standards. DOE applied the percentages of models within each efficiency 
range to the total unit shipments for a given equipment class to 
estimate the distribution of shipments for the no-new-standards case. 
Then, from those market shares and projections of shipments by 
equipment class, DOE extrapolated future equipment efficiency trends 
both for a no-new-standards-case scenario and for standards-case 
scenarios.
    For each efficiency level analyzed, DOE used a ``roll-up'' scenario 
to establish the market shares by efficiency level for the year that 
compliance would be required with amended standards. The analysis 
starts with the no-new-standards-case distributions wherein shipments 
are assumed to be distributed across efficiency levels. When potential 
standard levels above the base level are analyzed, as the name implies, 
the shipments in the no-new-standards case that did not meet the 
efficiency standard level being considered would roll up to meet the 
amended standard level. This information also suggests that equipment 
efficiencies in the no-new-standards case that were above the standard 
level under consideration would not be affected.

[[Page 15879]]

    The estimated efficiency trends in the no-new-standards-case and 
standards cases are described in chapter 10 of the NOPR TSD.
2. National Energy Savings
    For each year in the forecast period, DOE calculates the national 
energy savings for each standard level by multiplying the shipments of 
commercial packaged boilers by the per-unit annual energy savings. 
Cumulative energy savings are the sum of the annual energy savings over 
the lifetime of all equipment shipped during 2019-2048.
    The inputs for determining the NES are (1) annual energy 
consumption per unit, (2) shipments, (3) equipment stock, and (4) site-
to-source and full-fuel-cycle conversion factors.
    DOE calculated the NES associated with the difference between the 
per-unit energy use under a standards-case scenario and the per-unit 
energy use in the no-new-standards case. The average energy per unit 
used by the CPB equipment stock gradually decreases in the standards 
case relative to the no-new-standards case as more-efficient CPB units 
gradually replaces less-efficient units.
    Unit energy consumption values for each equipment class are taken 
from the LCC spreadsheet for each efficiency level and weighted based 
on market efficiency distributions. To estimate the total energy 
savings for each efficiency level, DOE first calculated the per-unit 
energy reduction (i.e., the difference between the energy directly 
consumed by a unit of equipment in operation in the no-new-standards 
case and the standards case) for each class of CPB equipment for each 
year of the analysis period. The analysis period begins with the 
expected compliance date of amended energy conservation standards 
(i.e., 2019, or 3 years after the publication of a final rule issued as 
a result of this rulemaking). Second, DOE determined the annual site 
energy savings by multiplying the stock of each equipment class by 
vintage (i.e., year of shipment) by the per-unit energy reduction for 
each vintage (from step one). Third, DOE converted the annual site 
electricity savings into the annual amount of energy saved at the 
source of electricity generation (the source or primary energy), using 
a time series of conversion factors derived from the latest version of 
EIA's National Energy Modeling System (NEMS). Finally, DOE summed the 
annual primary energy savings for the lifetime of units shipped over a 
30-year period to calculate the total NES. DOE performed these 
calculations for each efficiency level considered for CPB equipment in 
this rulemaking.
    DOE has historically presented NES in terms of primary energy 
savings. In the case of electricity use and savings, primary energy 
savings includes the energy lost in the power system in the form of 
losses as well as the energy input required at the electric generation 
station in order to convert and deliver the energy required at the site 
of consumption. DOE uses a multiplicative factor called ``site-to-
source conversion factor'' to convert site energy consumption to 
primary energy consumption. In response to the recommendations of a 
committee on ``Point-of-Use and Full- Fuel-Cycle Measurement Approaches 
to Energy Efficiency Standards'' appointed by the National Academy of 
Sciences, DOE announced its intention to use full-fuel-cycle (FFC) 
measures of energy use and greenhouse gas and other emissions in the 
national impact analyses and emissions analyses included in future 
energy conservation standards rulemakings. 76 FR 51281 (August 18, 
2011). While DOE stated in that notice that it intended to use the 
Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation 
(GREET) model to conduct the analysis, it also said it would review 
alternative methods, including the use of EIA's NEMS. After evaluating 
both models and the approaches discussed in the August 18, 2011 notice, 
DOE published a statement of amended policy in the Federal Register, in 
which DOE explained its determination that NEMS is a more appropriate 
tool for its FFC analysis as well as its intention to use NEMS for that 
purpose. 77 FR 49701 (August 17, 2012). DOE received one comment, which 
was supportive of the use of NEMS for DOE's FFC analysis.\64\ The 
approach used for this NOPR analysis, the site-to-source ratios, and 
the FFC multipliers that were applied, are described in appendix 10B of 
the NOPR TSD. NES results are presented in both primary and FFC savings 
in section V.B.3 of this document.
---------------------------------------------------------------------------

    \64\ Docket ID: EERE-2010-BT-NOA-0028-0048, comment by Kirk 
Lundblade. Available at http://www.regulations.gov/#!docketDetail;D=EERE-2010-BT-NOA-0028.
---------------------------------------------------------------------------

3. Net Present Value of Consumer Benefit
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers of the considered equipment are (1) total 
annual installed cost, (2) total annual savings in operating costs, and 
(3) a discount factor. DOE calculates the lifetime net savings for 
equipment shipped each year as the difference between total operating 
cost savings and increases in total installed costs. DOE calculates 
lifetime operating cost savings over the life of each commercial 
packaged boiler shipped during the forecast period.
a. Total Annual Installed Cost
    DOE determined the difference between the equipment costs under the 
standard-level case and the no-new-standards case in order to obtain 
the net equipment cost increase resulting from the higher standard 
level. As noted in section IV.F.1 of this document, DOE used a constant 
real price assumption as the default price projection; the cost to 
manufacture a given unit of higher efficiency neither increases nor 
decreases over time.
b. Total Annual Operating Cost Savings
    DOE determined the difference between the no-new-standards-case 
operating costs and the standard-level operating costs in order to 
obtain the net operating cost savings from each higher efficiency 
level. DOE determined the difference between the net operating cost 
savings and the net equipment cost increase in order to obtain the net 
savings (or expense) for each year.
c. Discount Rate
    DOE discounted the annual net savings (or expenses) to 2015 for CPB 
equipment bought on or after 2019 and summed the discounted values to 
provide the NPV for an efficiency level.
    In accordance with the OMB's guidelines on regulatory analysis,\65\ 
DOE calculated NPV using both a 7-percent and a 3-percent real discount 
rate. The 7-percent rate is an estimate of the average before-tax rate 
of return on private capital in the U.S. economy. DOE used this 
discount rate to approximate the opportunity cost of capital in the 
private sector, because recent OMB analysis has found the average rate 
of return on capital to be near this rate. DOE used the 3-percent rate 
to capture the potential effects of standards on private consumption 
(e.g., through higher prices for products and reduced purchases of 
energy). This rate represents the rate at which society discounts 
future consumption flows to their present value. This rate can be 
approximated by the real rate of return on long-term government debt 
(i.e., yield on United States Treasury notes minus annual rate of 
change in the

[[Page 15880]]

Consumer Price Index), which has averaged about 3 percent on a pre-tax 
basis for the past 30 years.
---------------------------------------------------------------------------

    \65\ Office of Management and Budget, section E in OMB Circular 
A-4 (Sept. 17, 2003) (Available at: www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impacts of new or amended standards, DOE 
evaluates impacts on identifiable groups (i.e., subgroups) that may be 
disproportionately affected by a national energy conservation standard. 
DOE received comments from manufacturers regarding identification of 
subgroups. Lochinvar and AHRI suggested that DOE talk to mechanical 
contractors, design engineers, and the Association of Facilities 
Engineers to determine appropriate consumer subgroups. (Lochinvar, No. 
34 at p. 7; AHRI, No. 37 at p. 7) For the NOPR analysis, DOE identified 
`low-income households for residential and small businesses for 
commercial sectors as subgroups and evaluated impacts using the LCC 
spreadsheet model. The consumer subgroup analysis is discussed in 
detail in chapter 11 of the NOPR TSD.

J. Manufacturer Impact Analysis

    DOE performed an MIA to determine the financial impact of amended 
energy conservation standards on manufacturers of commercial packaged 
boilers and to estimate the potential impact of such standards on 
employment and manufacturing capacity. The MIA has both quantitative 
and qualitative aspects. The quantitative part of the MIA primarily 
relies on the Government Regulatory Impact Model (GRIM), an industry 
cash-flow model with inputs specific to this rulemaking. The key GRIM 
inputs are industry cost structure data, shipment data, product costs, 
and assumptions about markups and conversion costs. The key output is 
the industry net present value (INPV). DOE used the GRIM to calculate 
cash flows using standard accounting principles and to compare changes 
in INPV between a no-new-standards case and various TSLs (the standards 
case). The difference in INPV between the no-new-standards case and 
standards cases represents the financial impact of amended energy 
conservation standards on CPB manufacturers. DOE used different sets of 
assumptions (markup scenarios) to represent the uncertainty surrounding 
potential impacts on prices and manufacturer profitability as a result 
of amended standards. These different assumptions produce a range of 
INPV results. The qualitative part of the MIA addresses the proposed 
standard's potential impacts on manufacturing capacity and industry 
competition, as well as any differential impacts the proposed standard 
may have on any particular subgroup of manufacturers. The qualitative 
aspect of the analysis also addresses product characteristics, as well 
as any significant market or product trends. The complete MIA is 
outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared an industry characterization based on the 
market and technology assessment, preliminary manufacturer interviews, 
and publicly available information. As part of its profile of the 
residential boilers industry, DOE also conducted a top-down cost 
analysis of manufacturers in order to derive preliminary financial 
inputs for the GRIM (e.g., sales, general, and administration (SG&A) 
expenses; research and development (R&D) expenses; and tax rates). DOE 
used public sources of information, including company SEC 10-K 
filings,\66\ corporate annual reports, the U.S. Census Bureau's 
Economic Census,\67\ and Hoover's reports \68\ to conduct this 
analysis.
---------------------------------------------------------------------------

    \66\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: http://www.sec.gov/edgar/searchedgar/companysearch.html).
    \67\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (2013) 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
    \68\ Hoovers Inc. Company Profiles, Various Companies (Available 
at: http://www.hoovers.com).
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis 
to quantify the potential impacts of amended energy conservation 
standards. In general, energy conservation standards can affect 
manufacturer cash flow in three distinct ways. These include: (1) 
Creating a need for increased investment; (2) raising production costs 
per unit; and (3) altering revenue due to higher per-unit prices and 
possible changes in sales volumes. DOE estimated industry cash flows in 
the GRIM at various potential standard levels using industry financial 
parameters derived in Phase 1.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with a variety of manufacturers that represent approximately 
40 percent of domestic CPB product offerings covered by this 
rulemaking. During these interviews, DOE discussed engineering, 
manufacturing, procurement, and financial topics to validate 
assumptions used in the GRIM. DOE also solicited information about 
manufacturers' views of the industry as a whole and their key concerns 
regarding this rulemaking. See section IV.J.3 for a description of the 
key issues manufacturers raised during the interviews.
    Additionally, in Phase 3, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
standards or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash-flow analysis. For 
example, small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that largely differs from the industry 
average could be more negatively affected by amended energy 
conservation standards. DOE identified one subgroup (small 
manufacturers) for a separate impact analysis.
    To identify small businesses for this analysis, DOE applied the 
small business size standards published by the Small Business 
Administration (SBA) to determine whether a company is considered a 
small business. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 
53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. To be 
categorized as a small business under North American Industry 
Classification System (NAICS) code 333414, ``Heating Equipment (except 
Warm Air Furnaces) Manufacturing,'' a residential boiler manufacturer 
and its affiliates may employ a maximum of 500 employees. The 500-
employee threshold includes all employees in a business's parent 
company and any other subsidiaries. Based on this classification, DOE 
identified 34 CPB companies that qualify as small businesses. The CPB 
small manufacturer subgroup is discussed in section 0 of this document 
and in chapter 12 of the NOPR TSD.
1. Government Regulatory Impact Model
    DOE uses the GRIM to analyze the financial impacts of amended 
energy conservation standards on the CPB industry. Standards will 
potentially require additional investments, raise production costs, and 
affect revenue through higher prices and, possibly, lower sales. The 
GRIM is designed to take into account several factors as it calculates 
a series of annual cash flows for the year standards take effect and 
for several years after implementation. These factors include annual 
expected revenues, costs of sales, increases in labor and assembly 
expenditures, selling and general administration costs, and taxes, as 
well as capital expenditures, depreciation and maintenance related to 
new standards. Inputs to the GRIM include manufacturing costs, 
shipments forecasts, and price forecasts developed in other analyses. 
DOE also uses

[[Page 15881]]

industry financial parameters as inputs for the GRIM analysis, which it 
develops by collecting and analyzing publically available industry 
financial information. The GRIM spreadsheet uses the inputs to arrive 
at a series of annual cash flows, beginning in 2014 (the base year of 
the analysis) and continuing to 2048 (the end of the analysis period). 
DOE calculated INPVs by summing the stream of annual discounted cash 
flows during this period. For CPB manufacturers, DOE used a real 
discount rate of 9.5 percent, which was derived from industry 
financials and then modified according to feedback received during 
manufacturer interviews. DOE also used the GRIM to model changes in 
costs, shipments, investments, and manufacturer margins that could 
result from amended energy conservation standards.
    After calculating industry cash flows and INPV, DOE compared 
changes in INPV between the no new standards case and each standard 
level. The difference in INPV between the no new standards case and a 
standards case represents the financial impact of the amended energy 
conservation standard on manufacturers at a particular TSL. As 
discussed previously, DOE collected this information on GRIM inputs 
from a number of sources, including publically-available data and 
confidential interviews with a number of manufacturers. GRIM inputs are 
discussed in more detail in the next section. The GRIM results are 
discussed in section V.B.2. Additional details about the GRIM, discount 
rate, and other financial parameters can be found in chapter 12 of the 
NOPR TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing a higher-efficiency product is typically more 
expensive than manufacturing a baseline product due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the manufacturer production cost (MPC) of 
the analyzed products can affect the revenues, gross margins, and cash 
flow of the industry, making these product cost data key GRIM inputs 
for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
that were calculated using product pricing found in the engineering 
analysis, as described in section IV.C and further detailed in chapter 
5 of the NOPR TSD. In addition, DOE used information from its teardown 
analysis (described in chapter 5 of the TSD) to disaggregate the MPCs 
into material, labor, and overhead costs. To determine the industry 
manufacturer selling price-efficiency relationship, DOE used data from 
the market and technology assessment, publicly available equipment 
literature and research reports, and information from manufacturers, 
distributors, and contractors. Using these resources, DOE calculated 
manufacturer selling prices of commercial packaged boilers for a given 
fuel input rate (representative fuel input rate) for each manufacturer 
at different efficiency levels spanning from the minimum allowable 
standard (i.e., baseline level) to the maximum technologically feasible 
efficiency level. DOE then used product markups along with the product 
pricing to determine MPCs for each efficiency level. These cost 
breakdowns and product markups were validated and revised with input 
from manufacturers during manufacturer interviews.
Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis from 2015 (the base year) to 2048 (the end year of the 
analysis period). The shipments model divides the shipments of 
commercial packaged boilers into specific market segments. The model 
starts from a historical base year and calculates retirements and 
shipments by market segment for each year of the analysis period. This 
approach produces an estimate of the total product stock, broken down 
by age or vintage, in each year of the analysis period. In addition, 
the product stock efficiency distribution is calculated for the no-new-
standards case and for each standards case for each product class. The 
NIA shipments forecasts are, in part, based on a roll-up scenario. The 
forecast assumes that a product in the no-new-standards case that does 
not meet the standard under consideration would ``roll up'' to meet the 
amended standard beginning in the compliance year of 2019. See section 
IV.G of this document and chapter 9 of the NOPR TSD for additional 
details.
Equipment and Capital Conversion Costs
    Amended energy conservation standards would cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and product designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each product class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Capital conversion costs; and (2) product conversion costs. Capital 
conversion costs are one-time investments in property, plant, and 
equipment necessary to adapt or change existing production facilities 
such that new compliant product designs can be fabricated and 
assembled. Product conversion costs are one-time investments in 
research, development, testing, marketing, and other non-capitalized 
costs necessary to make product designs comply with amended energy 
conservation standards.
    To evaluate the level of capital conversion expenditures, 
manufacturers would likely incur to comply with amended energy 
conservation standards, DOE used manufacturer interviews to gather data 
on the anticipated level of capital investment that would be required 
at each efficiency level. Based on equipment listings provided by AHRI 
and ABMA, DOE developed a market-share-weighted manufacturer average 
capital expenditure which it then scaled up and applied to the entire 
industry. DOE supplemented manufacturer comments and tailored its 
analyses with information obtained during engineering analysis 
described in chapter 5 of the TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
estimate product conversion costs (e.g., R&D expenditures, 
certification costs). DOE combined this information with product 
listings to estimate how much manufacturers would have to spend on 
product development and product testing at each efficiency level. 
Manufacturer data was aggregated to better reflect the industry as a 
whole and to protect confidential information.
    In general, DOE assumes that all conversion-related investments 
occur between the year of publication of the final rule and the year by 
which manufacturers must comply with the amended standards. The 
conversion cost figures used in the GRIM can be found in section V.B.2 
of this notice. For additional information on the estimated product and 
capital conversion costs, see chapter 12 of the NOPR TSD.

[[Page 15882]]

    DOE received limited information on the conversion costs for oil-
fired products in interviews. Using product listing counts, DOE scaled 
the feedback on gas-fired equipment to estimate the conversion cost for 
oil-fired equipment.
    DOE requests additional information from manufacturers regarding 
conversion costs for oil-fired products. Specifically, DOE is 
interested in estimates of capital conversion costs at each TSL and the 
change in manufacturing equipment associated with those costs.
    See section VII.E for a list of issues on which DOE seeks comment.
b. Government Regulatory Impact Model Scenarios
Markup Scenarios
    As discussed in the previous section, MSPs include direct 
manufacturing production costs (i.e., labor, materials, and overhead 
estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, 
and interest), along with profit. To calculate the MSPs in the GRIM, 
DOE applied non-production cost markups to the MPCs estimated in the 
engineering analysis for each product class and efficiency level. 
Modifying these markups in the standards case yields different sets of 
impacts on manufacturers. For the MIA, DOE modeled two standards-case 
markup scenarios to represent the uncertainty regarding the potential 
impacts on prices and profitability for manufacturers following the 
implementation of amended energy conservation standards: (1) A 
preservation of gross margin percentage markup scenario; and (2) a 
preservation of per-unit operating profit markup scenario. These 
scenarios lead to different markup values that, when applied to the 
inputted MPCs, result in varying revenue and cash-flow impacts.
    Under the preservation of gross margin percentage markup scenario, 
DOE applied a single uniform ``gross margin percentage'' markup across 
all efficiency levels, which assumes that following amended standards, 
manufacturers would be able to maintain the same amount of profit as a 
percentage of revenue at all efficiency levels within a product class. 
As production costs increase with efficiency, this scenario implies 
that the absolute dollar markup will increase as well. Based on 
publicly-available financial information for manufacturers of 
commercial packaged boilers, as well as comments from manufacturer 
interviews, DOE assumed the average non-production cost markup--which 
includes SG&A expenses, R&D expenses, interest, and profit--to be 1.41 
for small gas-fired hot water, small gas-fired steam boilers, large 
gas-fired hot water boilers, and large oil-fired hot water boilers; 
1.40 for small oil-fired hot water boilers; 1.38 for small oil-fired 
steam boilers; and 1.37 for large gas-fired and oil-fired steam 
boilers. This markup scenario represents the upper bound of the CPB 
industry's profitability in the standards case because manufacturers 
are able to fully pass through additional costs due to standards to 
consumers.
    DOE decided to include the preservation of per-unit operating 
profit scenario in its analysis because manufacturers stated that they 
do not expect to be able to mark up the full cost of production in the 
standards case, given the highly competitive nature of the CPB market. 
In this scenario, manufacturer markups are set so that operating profit 
one year after the compliance date of amended energy conservation 
standards is the same as in the no-new-standards case on a per-unit 
basis. In other words, manufacturers are not able to garner additional 
operating profit from the higher production costs and the investments 
that are required to comply with the amended standards; however, they 
are able to maintain the same operating profit in the standards case 
that was earned in the no-new-standards case. Therefore, operating 
margin in percentage terms is reduced between the no-new-standards case 
and standards case. DOE adjusted the manufacturer markups in the GRIM 
at each TSL to yield approximately the same earnings before interest 
and taxes in the standards case as in the no-new-standards case. The 
preservation of per-unit operating profit markup scenario represents 
the lower bound of industry profitability in the standards case. This 
is because manufacturers are not able to fully pass through to 
consumers the additional costs necessitated by CPB standards, as they 
are able to do in the preservation of gross margin percentage markup 
scenario.
2. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 95 percent 
of the CPB market by revenue. DOE contractors endeavor to conduct 
interviews with a representative cross section of manufacturers 
(including large and small manufacturers, covering all equipment 
classes and product offerings). DOE contractors reached out to all the 
small business manufacturers that were identified as part of the 
analysis, as well as larger manufacturers that have significant market 
share in the CPB market. These interviews were in addition to those DOE 
conducted as part of the engineering analysis. The information gathered 
during these interviews enabled DOE to tailor the GRIM to reflect the 
unique financial characteristics of the CPB industry. The information 
gathered during these interviews enabled DOE to tailor the GRIM to 
reflect the unique financial characteristics of the CPB industry. All 
interviews provided information that DOE used to evaluate the impacts 
of potential amended energy conservation standards on manufacturer cash 
flows, manufacturing capacities, and employment levels.
    In interviews, DOE asked manufacturers to describe their major 
concerns with potential standards arising from a rulemaking involving 
commercial packaged boilers. Manufacturer interviews are conducted 
under non-disclosure agreements (NDAs), so DOE does not document these 
discussions in the same way that it does public comments in the comment 
summaries and DOE's responses throughout the rest of this notice. The 
following sections highlight the most significant manufacturers' 
statements that helped shape DOE's understanding of potential impacts 
of an amended standard on the industry. Manufacturers raised a range of 
general issues for DOE to consider, including a diminished ability to 
serve the replacement market, concerns that condensing boilers may not 
perform as rated without heating system modifications, and concerns 
about reduced product durability. Below, DOE summarizes these issues, 
which were raised in manufacturer interviews, in order to obtain public 
comment and related data.
a. Testing Burden
    Several manufacturers expressed concern regarding the testing 
burden associated with amended energy conservation standards. 
Manufacturers noted that amended standards and an altered test 
procedure will result in them having to retest all of their equipment, 
which they pointed out is a costly and logistically challenging process 
due to the large size of the equipment and the fact that a lot of 
commercial packaged boilers are customized for particular customers. 
Manufacturers stated that retesting all of their models would put a 
strain on their lab resources and would be financially burdensome.
b. Condensing Boilers Not Appropriate for Many Commercial Applications
    Several manufacturers expressed concern that they would only be 
able to

[[Page 15883]]

meet certain efficiency levels with condensing technology in gas-fired 
hot water equipment. They argued that this technology would not be 
effective in many commercial applications. Several manufacturers 
pointed out that that condensing boilers will not operate in condensing 
mode in larger applications and they will not realize any efficiency 
gains when buildings and heat distribution systems are not designed 
around condensing technology. Manufacturers noted that it is very 
difficult to sell condensing boilers in the replacement market (which, 
according to manufacturers, comprises about 90% of boiler sales) 
because customers would have to make expensive retrofit changes to 
venting and distribution systems.
    Manufacturers also pointed out that condensing boilers may not save 
energy in commercial applications, even if they were to operate in 
condensing mode. Several manufacturers argued that condensing equipment 
requires higher pump force power and higher horsepower blower motors, 
and thus they consume more electricity. They noted that even if the 
boiler were operating in condensing mode, the fuel savings could be 
partially offset by higher electricity use.
c. Not Many American Companies Produce Condensing Heat Exchangers
    Several manufacturers expressed concern that if DOE were to mandate 
efficiency levels that could only be achieved with condensing 
technology for gas-fired hot water equipment, companies would likely 
face high conversion costs. While many companies in the U.S. currently 
produce condensing equipment, most condensing heat exchangers are 
sourced from European or Asian companies. American companies would have 
to decide whether to develop their own condensing heat exchanger 
production capacity or assemble a baseline product around a condensing 
heat exchanger. Developing condensing heat exchanger production 
capacity would require large capital investments in new production 
lines and new equipment to handle the different metals that are 
required. Companies that are currently heavily invested in lower-
efficiency products may not be able to make these investments. The 
other option would be for companies to drop their noncondensing 
equipment and assemble equipment around a sourced heat exchanger. In 
this scenario, companies would lose a significant piece of the value 
chain.
d. Reduced Product Durability and Reliability
    Several manufacturers commented that higher-efficiency condensing 
boilers on the market have not demonstrated the same level of 
durability and reliability as lower-efficiency products. Manufacturers 
stated that condensing products require more upkeep and maintenance and 
generally do not last as long as non-condensing products. Several 
manufacturers pointed out that they generally incur large after-sale 
costs with their condensing products because of additional warranty 
claims. Maintenance calls for these boilers require more skilled 
technicians and occur more frequently than they do with non-condensing 
boilers.
3. Discussion of Comments
    During the preliminary analysis public meeting, interested parties 
commented on the assumptions and results of the preliminary analysis. 
Oral and written comments addressed several topics, including concerns 
regarding the impact condensing technology has on the industry.
a. Impacts on Condensing Technology
    In written comments, Lochinvar expressed concern that setting a 
stringent standard, specifically at condensing levels, will cause 
significant impacts to the CPB industry. If a condensing level is 
adopted by DOE, it is possible that natural draft boilers and steam 
boilers will become obsolete in the CPB industry. To limit 
significantly negative industry impacts on manufacturers and product 
offerings, Lochinvar recommends that DOE does not set a standard that 
requires condensing technology. (Lochinvar, No. 31 at p. 6)
    Additionally, Lochinvar states that a majority of heat exchangers 
for condensing technology are imported. Lochinvar believes overhead and 
equipment used to produce non-condensing heat exchangers may become 
obsolete if condensing technology is effectively mandated. (Lochinvar, 
Public Meeting Transcript, No. 39 at p. 205)
    While DOE acknowledges that a stringent standard, specifically 
condensing technology, may negatively impact INPV and limit industry 
product offerings, the proposed standards in this document do not 
mandate condensing technology. Moreover, EPCA requires DOE to set forth 
energy conservation standards that are technologically feasible and 
economically justified and would result in significant additional 
energy conservation, supported by clear and convincing evidence. 42 
U.S.C. 6313(a)(6)(A)(ii)(II) and (C)(i). In determining whether a 
standard is economically justified, DOE considers, to the greatest 
extent practicable, the following factors: (1) The economic impact of 
the standard on the manufacturers and on the consumers of the products 
subject to such standard; (2) the savings in operating costs throughout 
the estimated average life of the covered products in the type (or 
class) compared to any increase in the price, or in the initial charges 
for, or maintenance expenses of the covered products which are likely 
to result from the imposition of the standard; (3) the total projected 
amount of energy (or as applicable, water) savings likely to result 
directly from the imposition of the standard; (4) any lessening of the 
utility or performance of the covered products likely to result 
directly from the imposition of the standard; (5) the impact of any 
lessening competition, as determined in the writing by the Attorney 
General, that is likely to result from the imposition of the standard; 
(6) the need for national energy and water conservation; and (7) other 
factors the Secretary considers relevant.
    As such, DOE assesses impacts on competition, manufacturing 
capacity, employment, cumulative regulatory burden and impacts on INPV 
in the Manufacturer Impact Analysis, which is discussed in greater 
detail in chapter 12 of the CPB NOPR TSD.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions to emissions of all species 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion. The associated emissions are referred 
to as upstream emissions.
    The analysis of power sector emissions uses marginal emissions 
factors that were derived from data in AEO2015, as described in section 
IV.M of this document. The analysis of power sector emissions uses 
marginal emissions factors that were derived from data in AEO2015, as 
described in section IV.M of this document. The

[[Page 15884]]

methodology is described in chapter 13 and chapter 15 of the NOPR TSD.
    Combustion emissions of CH4 and N2O are 
estimated using emissions intensity factors published by the EPA, GHG 
Emissions Factors Hub.\69\ The FFC upstream emissions are estimated 
based on the methodology described in appendix 10D of the NOPR TSD. The 
upstream emissions include both emissions from fuel combustion during 
extraction, processing, and transportation of fuel, and ``fugitive'' 
emissions (direct leakage to the atmosphere) of CH4 and 
CO2.
---------------------------------------------------------------------------

    \69\ Available at: http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.
---------------------------------------------------------------------------

    The emissions intensity factors are expressed in terms of physical 
units per MWh or MMBtu of site energy savings. Total emissions 
reductions are estimated using the energy savings calculated in the 
national impact analysis.
    For CH4 and N2O, DOE calculated emissions 
reduction in tons and also in terms of units of carbon dioxide 
equivalent (CO2eq). Gases are converted to CO2eq 
by multiplying each ton of gas by the gas' global warming potential 
(GWP) over a 100-year time horizon. Based on the Fifth Assessment 
Report of the Intergovernmental Panel on Climate Change,\70\ DOE used 
GWP values of 28 for CH4 and 265 for N2O.
---------------------------------------------------------------------------

    \70\ Intergovernmental Panel on Climate Change. Anthropogenic 
and Natural Radiative Forcing. Chapter 8 in Climate Change 2013: The 
Physical Science Basis. Contribution of Working Group I to the Fifth 
Assessment Report of the Intergovernmental Panel on Climate Change. 
Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. 
Boschung, A. Nauels, Y. Xia, V. Bex, and P.M. Midgley, Editors. 
2013. Cambridge University Press: Cambridge, United Kingdom and New 
York, NY, USA.
---------------------------------------------------------------------------

    Because the on-site operation of commercial packaged boilers 
requires use of fossil fuels and results in emissions of 
CO2, NOX, and SO2 at the sites where 
these appliances are used, DOE also accounted for the reduction in 
these site emissions and the associated upstream emissions due to 
potential standards. Site emissions were estimated using emissions 
intensity factors from an EPA publication.\71\
---------------------------------------------------------------------------

    \71\ U.S. Environmental Protection Agency, Compilation of Air 
Pollutant Emission Factors, AP-42, Fifth Edition, Volume I: 
Stationary Point and Area Sources (1998). Available at: http://www.epa.gov/ttn/chief/ap42/index.html).
---------------------------------------------------------------------------

    The AEO incorporates the projected impacts of existing air quality 
regulations on emissions. AEO2015 generally represents current 
legislation and environmental regulations, including recent government 
actions, for which implementing regulations were available as of 
October 31, 2014. DOE's estimation of impacts accounts for the presence 
of the emissions control programs discussed in the following 
paragraphs.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous states and the 
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2 
emissions from 28 eastern states and DC were also limited under the 
Clean Air Interstate Rule (CAIR). 70 FR 25162 (May 12, 2005). CAIR 
created an allowance-based trading program that operates along with the 
Title IV program. In 2008, CAIR was remanded to EPA by the U.S. Court 
of Appeals for the DC Circuit, but it remained in effect.\72\ In 2011, 
EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule 
(CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the DC 
Circuit issued a decision to vacate CSAPR,\73\ and the court ordered 
EPA to continue administering CAIR. On April 29, 2014, the U.S. Supreme 
Court reversed the judgment of the DC Circuit and remanded the case for 
further proceedings consistent with the Supreme Court's opinion.\74\ On 
October 23, 2014, the DC Circuit lifted the stay of CSAPR.\75\ Pursuant 
to this action, CSAPR went into effect (and CAIR ceased to be in 
effect) as of January 1, 2015. On July 28, 2015, the DC Circuit issued 
its opinion regarding CSAPR on remand from the Supreme Court. The court 
largely upheld CSAPR, but remanded to EPA without vacateur certain 
states' emissions budgets for reconsideration.\76\
---------------------------------------------------------------------------

    \72\ See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); 
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
    \73\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
    \74\ See EPA v. EME Homer City Generation, 134 S. Ct. 1584, 1610 
(U.S. 2014). The Supreme Court held in part that EPA's methodology 
for quantifying emissions that must be eliminated in certain States 
due to their impacts in other downwind States was based on a 
permissible, workable, and equitable interpretation of the Clean Air 
Act provision that provides statutory authority for CSAPR.
    \75\ See Georgia v. EPA, Order (D. C. Cir. filed October 23, 
2014) (No. 11-1302).
    \76\ See EME Homer City Generation, LP v. EPA 795 F.3d 118 (D.C. 
Cir. 2015).
---------------------------------------------------------------------------

    EIA was not able to incorporate CSAPR into AEO2015, so DOE's 
analysis used emissions factors that assume that CAIR, not CSAPR, is 
the regulation in force. However, the difference between CAIR and CSAPR 
is not significant for the purpose of DOE's analysis of emissions 
impacts from energy conservation standards.
    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an efficiency standard could be used to permit 
offsetting increases in SO2 emissions by any regulated EGU. 
In past rulemakings, DOE recognized that there was uncertainty about 
the effects of efficiency standards on SO2 emissions covered 
by the existing cap-and-trade system, but it concluded that negligible 
reductions in power sector SO2 emissions would occur as a 
result of standards.
    Beginning in 2016, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants. 
77 FR 9304 (Feb. 16, 2012). In the MATS rule, EPA established a 
standard for hydrogen chloride as a surrogate for acid gas hazardous 
air pollutants (HAP), and also established a standard for 
SO2 (a non-HAP acid gas) as an alternative equivalent 
surrogate standard for acid gas HAP. The same controls are used to 
reduce HAP and non-HAP acid gas; thus, SO2 emissions will be 
reduced as a result of the control technologies installed on coal-fired 
power plants to comply with the MATS requirements for acid gas. AEO2015 
assumes that, in order to continue operating, coal plants must have 
either flue gas desulfurization or dry sorbent injection systems 
installed by 2016. Both technologies, which are used to reduce acid gas 
emissions, also reduce SO2 emissions. Under the MATS, 
emissions will be far below the cap established by CAIR, so it is 
unlikely that excess SO2 emissions allowances resulting from 
the lower electricity demand would be needed or used to permit 
offsetting increases in SO2 emissions by any regulated 
EGU.\77\ Therefore, DOE believes that energy conservation standards 
will generally reduce SO2 emissions in 2016 and beyond.
---------------------------------------------------------------------------

    \77\ DOE notes that the Supreme Court remanded EPA's 2012 rule 
regarding national emission standards for hazardous air pollutants 
from certain electric utility steam generating units. See Michigan 
v. EPA (Case No. 14-46, 2015). DOE has tentatively determined that 
the remand of the MATS rule does not change the assumptions 
regarding the impact of energy efficiency standards on 
SO2 emissions (see chapter 13 of the NOPR TSD for further 
discussion). Further, while the remand of the MATS rule may have an 
impact on the overall amount of mercury emitted by power plants, it 
does not change the impact of the energy efficiency standards on 
mercury emissions. DOE will continue to monitor developments related 
to this case and respond to them as appropriate.

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

[[Page 15885]]

    CAIR established a cap on NOX emissions in 28 eastern 
states and the District of Columbia.\78\ Energy conservation standards 
are expected to have little effect on NOX emissions in those 
states covered by CAIR because excess NOX emissions 
allowances resulting from the lower electricity demand could be used to 
permit offsetting increases in NOX emissions from other 
facilities. However, standards would be expected to reduce 
NOX emissions in the states not affected by the caps, so DOE 
estimated NOX emissions reductions from the standards 
considered in this document for these states.
---------------------------------------------------------------------------

    \78\ CSAPR also applies to NOX and it would supersede 
the regulation of NOX under CAIR. As stated previously, 
the current analysis assumes that CAIR, not CSAPR, is the regulation 
in force. The difference between CAIR and CSAPR with regard to DOE's 
analysis of NOX emissions is slight.
---------------------------------------------------------------------------

    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would likely reduce Hg emissions. DOE estimated mercury 
emissions reduction using emissions factors based on AEO2015, which 
incorporates the MATS.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this proposed rule, DOE considered 
the estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the TSLs considered. In order to make this calculation analogous to 
the calculation of the NPV of consumer benefit, DOE considered the 
reduced emissions expected to result over the lifetime of products 
shipped in the forecast period for each TSL. This section summarizes 
the basis for the monetary values used for each of these emissions and 
presents the values considered in this document.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services. Estimates of the SCC are provided 
in dollars per metric ton of CO2. A domestic SCC value is 
meant to reflect the value of damages in the United States resulting 
from a unit change in CO2 emissions, while a global SCC 
value is meant to reflect the value of damages worldwide.
    Under section 1(b)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, assess both the costs and the benefits of 
the intended regulation and, recognizing that some costs and benefits 
are difficult to quantify, propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs. The purpose of the SCC estimates presented here is 
to allow agencies to incorporate the monetized social benefits of 
reducing CO2 emissions into cost-benefit analyses of 
regulatory actions. The estimates are presented with an acknowledgement 
of the many uncertainties involved and with a clear understanding that 
they should be updated over time to reflect increasing knowledge of the 
science and economics of climate impacts.
    As part of the interagency process that developed the SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    When attempting to assess the incremental economic impacts of 
CO2 emissions, the analyst faces a number of challenges. A 
recent report from the National Research Council \79\ points out that 
any assessment will suffer from uncertainty, speculation, and lack of 
information about (1) future emissions of greenhouse gases, (2) the 
effects of past and future emissions on the climate system, (3) the 
impact of changes in climate on the physical and biological 
environment, and (4) the translation of these environmental impacts 
into economic damages. As a result, any effort to quantify and monetize 
the harms associated with climate change will raise questions of 
science, economics, and ethics and should be viewed as provisional.
---------------------------------------------------------------------------

    \79\ National Research Council, Hidden Costs of Energy: Unpriced 
Consequences of Energy Production and Use, National Academies Press: 
Washington, DC (2009).
---------------------------------------------------------------------------

    Despite the limits of both quantification and monetization, SCC 
estimates can be useful in estimating the social benefits of reducing 
CO2 emissions. The agency can estimate the benefits from 
reduced (or costs from increased) emissions in any future year by 
multiplying the change in emissions in that year by the SCC value 
appropriate for that year. The net present value of the benefits can 
then be calculated by multiplying the future benefits by an appropriate 
discount factor and summing across all affected years.
    It is important to emphasize that the interagency process is 
committed to updating these estimates as the science and economic 
understanding of climate change and its impacts on society improves 
over time. In the meantime, the interagency group will continue to 
explore the issues raised by this analysis and consider public comments 
as part of the ongoing interagency process.
b. Development of Social Cost of Carbon Values
    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing CO2 emissions. To ensure consistency in how 
benefits are evaluated across agencies, the Administration sought to 
develop a transparent and defensible method, specifically designed for 
the rulemaking process, to quantify avoided climate change damages from 
reduced CO2 emissions. The interagency group did not 
undertake any original analysis. Instead, it combined SCC estimates 
from the existing literature to use as interim values until a more 
comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approaches and Key Assumptions
    After the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specifically, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC--the FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and

[[Page 15886]]

were used in the last assessment of the Intergovernmental Panel on 
Climate Change (IPCC). Each model was given equal weight in the SCC 
values that were developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models--climate sensitivity, socio-economic and emissions 
trajectories, and discount rates. A probability distribution for 
climate sensitivity was specified as an input into all three models. In 
addition, the interagency group used a range of scenarios for the 
socio-economic parameters and a range of values for the discount rate. 
All other model features were left unchanged, relying on the model 
developers' best estimates and judgments.
    In 2010, the interagency group selected four sets of SCC values for 
use in regulatory analyses. Three sets of values are based on the 
average SCC from three integrated assessment models, at discount rates 
of 2.5 percent, 3 percent, and 5 percent. The fourth set, which 
represents the 95th-percentile SCC estimate across all three models at 
a 3-percent discount rate, is included to represent higher than 
expected impacts from climate change further out in the tails of the 
SCC distribution. The values grow in real terms over time.
    Additionally, the interagency group determined that a range of 
values from 7 percent to 23 percent should be used to adjust the global 
SCC to calculate domestic effects,\80\ although preference is given to 
consideration of the global benefits of reducing CO2 
emissions. Table IV.13 presents the values in the 2010 interagency 
group report,\81\ which is reproduced in appendix 14A of the NOPR TSD.
---------------------------------------------------------------------------

    \80\ It is recognized that this caculation for domestic values 
is approximate, provisional, and highly speculative. There is no a 
priori reason why domestic benefits should be a constant fraction of 
net global damages over time.
    \81\ Interagency Working Group on Social Cost of Carbon, United 
States Government, Social Cost of Carbon for Regulatory Impact 
Analysis Under Executive Order 12866 (February 2010) (Available at: 
http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

                     Table IV.13--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................             4.7            21.4            35.1            64.9
2015............................................             5.7            23.8            38.4            72.8
2020............................................             6.8            26.3            41.7            80.7
2025............................................             8.2            29.6            45.9            90.4
2030............................................             9.7            32.8            50.0           100.0
2035............................................            11.2            36.0            54.2           109.7
2040............................................            12.7            39.2            58.4           119.3
2045............................................            14.2            42.1            61.7           127.8
2050............................................            15.7            44.9            65.0           136.2
----------------------------------------------------------------------------------------------------------------

    The SCC values used for this NOPR analysis were generated using the 
most recent versions of the three integrated assessment models that 
have been published in the peer-reviewed literature, as described in 
the 2013 update from the interagency working group (revised July 
2015).\82\
---------------------------------------------------------------------------

    \82\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866, Interagency 
Working Group on Social Cost of Carbon, United States Government 
(May 2013; revised July 2015) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/scc-tsd-final-july-2015.pdf).
---------------------------------------------------------------------------

    Table IV.14 shows the updated sets of SCC estimates from the latest 
interagency update in five-year increments from 2010 to 2050. Appendix 
14B of the NOPR TSD provides the full set of values and a discussion of 
the revisions made in 2015. The central value that emerges is the 
average SCC across models at a 3-percent discount rate. However, for 
purposes of capturing the uncertainties involved in regulatory impact 
analysis, the interagency group emphasizes the importance of including 
all four sets of SCC values.

           Table IV.14--Annual SCC Values From 2013 Interagency Update (Revised July 2015), 2010-2050
                                           [2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                           Discount rate
                                                 ---------------------------------------------------------------
                                                        5%              3%             2.5%             3%
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              10              31              50              86
2015............................................              11              36              56             105
2020............................................              12              42              62             123
2025............................................              14              46              68             138
2030............................................              16              50              73             152
2035............................................              18              55              78             168
2040............................................              21              60              84             183
2045............................................              23              64              89             197

[[Page 15887]]

 
2050............................................              26              69              95             212
----------------------------------------------------------------------------------------------------------------

    It is important to recognize that a number of key uncertainties 
remain, and that current SCC estimates should be treated as provisional 
and revisable since they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned above points out that there is tension between 
the goal of producing quantified estimates of the economic damages from 
an incremental ton of carbon and the limits of existing efforts to 
model these effects. There are a number of analytic challenges that are 
being addressed by the research community, including research programs 
housed in many of the Federal agencies participating in the interagency 
process to estimate the SCC. The interagency group intends to 
periodically review and reconsider those estimates to reflect 
increasing knowledge of the science and economics of climate impacts, 
as well as improvements in modeling. Although uncertainties remain, the 
revised estimates used for this NOPR are based on the best available 
scientific information on the impacts of climate change. The current 
estimates of the SCC have been developed over many years, and with 
input from the public. In November 2013, OMB announced a new 
opportunity for public comments on the interagency technical support 
document underlying the revised SCC estimates. 78 FR 70586 (Nov. 26, 
2013). In July 2015, OMB published a detailed summary and formal 
response to the many comments that were received.\83\ It also stated 
its intention to seek independent expert advice on opportunities to 
improve the estimates, including many of the approaches suggested by 
commenters. DOE stands ready to work with OMB and the other members of 
the interagency working group on further review and revision of the SCC 
estimates as appropriate.
---------------------------------------------------------------------------

    \83\ Available at: https://www.whitehouse.gov/blog/2015/07/02/estimating-benefits-carbon-dioxide-emissions-reductions.
---------------------------------------------------------------------------

    In summary, in considering the potential global benefits resulting 
from reduced CO2 emissions resulting from this proposed 
rule, DOE used the values from the 2013 interagency report, adjusted to 
2014$ using the implicit price deflator for gross domestic product 
(GDP) from the Bureau of Economic Analysis. For each of the four SCC 
cases specified, the values used for emissions in 2015 were $12.2, 
$40.0, $62.3, and $117 per metric ton avoided (values expressed in 
2014$). DOE derived values after 2050 using the relevant growth rates 
for the 2040-2050 period in the interagency update.
    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SCC value for that year in each of the four cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the four cases using the specific 
discount rate that had been used to obtain the SCC values in each case.
2. Social Cost of Other Air Pollutants
    As noted previously, DOE has estimated how the considered energy 
conservation standards would reduce site NOX emissions 
nationwide and decrease power sector NOX emissions in those 
22 states not affected by the CAIR. DOE estimated the monetized value 
of NOX emissions reductions using benefit per ton estimates 
from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution 
Guidelines for Existing Power Plants and Emission Standards for 
Modified and Reconstructed Power Plants,'' published in June 2014 by 
EPA's Office of Air Quality Planning and Standards. The report includes 
high and low values for NOX (as PM2.5) for 2020, 
2025, and 2030 discounted at 3 percent and 7 percent (see chapter 14 of 
the NOPR TSD).\84\ DOE assigned values for 2021-2024 and 2026-2029 
using, respectively, the values for 2020 and 2025. DOE assigned values 
after 2030 using the 2030 value. DOE multiplied the emissions reduction 
in each year by the associated $/ton values, and then discounted each 
series using discount rates of 3 percent and 7 percent as appropriate. 
DOE will continue to evaluate the monetization of avoided 
NOX emissions and will make appropriate updates of the 
current analysis for the final rulemaking. DOE is evaluating 
appropriate monetization of avoided SO2 and Hg emissions in 
energy conservation standards rulemakings. DOE has not included 
monetization of those emissions in the current analysis.
---------------------------------------------------------------------------

    \84\ U.S. Environmental Protection Agency, Sector-based 
PM2.5 Benefit Per Ton Estimates (Available at: http://www2.epa.gov/benmap/sector-based-pm25-benefit-ton-estimates.
---------------------------------------------------------------------------

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the 
electric power industry that would result from the adoption of new or 
amended energy conservation standards. The utility impact analysis 
estimates the changes in installed electrical capacity and generation 
that would result for each TSL. The analysis is based on published 
output from the NEMS associated with AEO2015. NEMS produces the AEO 
Reference case, as well as a number of side cases that estimate the 
economy-wide impacts of changes to energy supply and demand. DOE uses 
published side cases to estimate the marginal impacts of reduced energy 
demand on the utility sector. These marginal factors are estimated 
based on the changes to electricity sector generation, installed 
capacity, fuel consumption and emissions in the AEO Reference case and 
various side cases.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity, and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of new or amended 
energy conservation standards. See chapter 15 of the NOPR TSD for 
further details regarding the utility impact analysis.

N. Employment Impact Analysis

    Employment impacts from new or amended energy conservation 
standards include direct and indirect impacts. Direct employment 
impacts are any changes in the number of employees of manufacturers of 
the equipment subject

[[Page 15888]]

to standards; the MIA addresses those impacts. Indirect employment 
impacts are changes in national employment that occur due to the shift 
in expenditures and capital investment caused by the purchase and 
operation of more efficient equipment. Indirect employment impacts from 
standards consist of the jobs created or eliminated in the national 
economy, other than in the manufacturing sector being regulated, due to 
(1) reduced spending by end users on energy, (2) reduced spending on 
new energy supply by the utility industry, (3) increased consumer 
spending on the purchase of new equipment, and (4) the effects of those 
three factors throughout the economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. Data from BLS indicate that 
expenditures in the utility sector generally create fewer jobs (both 
directly and indirectly) than expenditures in other sectors of the 
economy. There are many reasons for these differences, including wage 
differences and the fact that the utility sector is more capital 
intensive and less labor intensive than other sectors. Energy 
conservation standards have the effect of reducing consumer utility 
bills. Because reduced consumer expenditures for energy likely lead to 
increased expenditures in other sectors of the economy, the general 
effect of efficiency standards is to shift economic activity from a 
less labor intensive sector (e.g., the utility sector) to more labor 
intensive sectors (e.g., the retail and service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase because of shifts in economic activity resulting from amended 
standards.
    For the standard levels considered in this document, DOE estimated 
indirect national employment impacts using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies, Version 3.1.1 
(ImSET). ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among the 187 
sectors. ImSET's national economic I-O structure is based on a 2002 
U.S. benchmark table specially aggregated to the 187 sectors most 
relevant to industrial, commercial, and residential building energy 
use. DOE notes that ImSET is not a general equilibrium forecasting 
model and understands the uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run. For the NOPR analysis, DOE used ImSET only 
to estimate short-term employment impacts.
    For more details on the employment impact analysis, see chapter 16 
of the NOPR TSD.

V. Analytical Results

    The following sections address the results from DOE's analyses with 
respect to potential amended energy conservation standards for the CPB 
equipment that is the subject of this rulemaking. They address the TSLs 
examined by DOE, the projected impacts of each of these levels if 
adopted as energy conservation standards for CPB equipment, and the 
standard levels that DOE is proposing in this NOPR. Additional details 
regarding DOE's analyses are contained in the relevant TSD chapters 
supporting this NOPR.

A. Trial Standard Levels

    At the NOPR stage, DOE develops trial standard levels (TSLs) for 
consideration. DOE established TSLs for this document by grouping 
different efficiency levels, which are potential standard levels for 
each equipment class. DOE analyzed the benefits and burdens of the TSLs 
developed for this proposed rule. DOE examined five TSLs for commercial 
packaged boilers.
    Table V.1 and Table V.2 present the TSLs analyzed and the 
corresponding efficiency levels for each equipment class. The 
efficiency levels in each TSL can be characterized as follows:
     TSL 5 corresponds to the max-tech efficiency level for 
each equipment class.
     TSL 4 is composed of the efficiency levels corresponding 
to the maximum NPV at a 7% discount rate for each equipment class.
     TSL 3 is composed of a mixture of condensing and non-
condensing efficiency levels.
     TSL 2 and TSL 1 are each composed of a mixture of non-
condensing efficiency levels only.
    A more detailed description of TSLs may be found in appendix 10C of 
the TSD.

              Table V.1--Trial Standard Levels for Commercial Packaged Boilers by Efficiency Level
----------------------------------------------------------------------------------------------------------------
                                                               Trial standard level
                                 -------------------------------------------------------------------------------
         Equipment class                 1               2               3               4               5
                                 -------------------------------------------------------------------------------
                                        EL              EL              EL              EL              EL
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water                      3               4               6               7               7
 Commercial Packaged Boilers....
Large Gas-Fired Hot Water                      2               3               3               5               5
 Commercial Packaged Boilers....
Small Oil-Fired Hot Water                      4               4               4               5               6
 Commercial Packaged Boilers....
Large Oil-Fired Hot Water                      1               2               2               3               4
 Commercial Packaged Boilers....
Small Gas-Fired Steam Commercial               3               4               4               5               5
 Packaged Boilers...............
Large Gas-Fired Steam Commercial               4               5               5               6               6
 Packaged Boilers...............
Small Oil-Fired Steam Commercial               1               2               2               3               3
 Packaged Boilers...............
Large Oil-Fired Steam Commercial               1               2               2               3               3
 Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------


[[Page 15889]]


Table V.2--Trial Standard Levels for Commercial Packaged Boilers by Thermal Efficiency and Combustion Efficiency
----------------------------------------------------------------------------------------------------------------
                                                              Trial standard level *
                                 -------------------------------------------------------------------------------
         Equipment class                 1               2               3               4               5
                                 -------------------------------------------------------------------------------
                                    ET      EC      ET      EC      ET      EC      ET      EC      ET      EC
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water            84%     n/a     85%     n/a     95%     n/a     99%     n/a     99%     n/a
 Commercial Packaged Boilers....
Large Gas-Fired Hot Water            n/a     84%     n/a     85%     n/a     85%     n/a     97%     n/a     97%
 Commercial Packaged Boilers....
Small Oil-Fired Hot Water            87%     n/a     87%     n/a     87%     n/a     88%     n/a     97%     n/a
 Commercial Packaged Boilers....
Large Oil-Fired Hot Water            n/a     86%     n/a     88%     n/a     88%     n/a     89%     n/a     97%
 Commercial Packaged Boilers....
Small Gas-Fired Steam Commercial     80%     n/a     81%     n/a     81%     n/a     83%     n/a     83%     n/a
 Packaged Boilers...............
Large Gas-Fired Steam Commercial     81%     n/a     82%     n/a     82%     n/a     84%     n/a     84%     n/a
 Packaged Boilers...............
Small Oil-Fired Steam Commercial     83%     n/a     84%     n/a     84%     n/a     86%     n/a     86%     n/a
 Packaged Boilers...............
Large Oil-Fired Steam Commercial     83%     n/a     85%     n/a     85%     n/a     87%     n/a     87%     n/a
 Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------
* ET stands for thermal efficiency, and EC stands for combustion efficiency.

B. Economic Justification and Energy Savings

    As discussed in section II.A of this document, EPCA provides seven 
factors to be evaluated in determining whether a more stringent 
standard for commercial packaged boilers is economically justified. (42 
U.S.C. 6313(a)(6)(B)(ii) and (C)(i)) The following sections generally 
discuss how DOE is addressing each of those factors in this rulemaking.
1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on CPB consumers by looking at 
the effects standards would have on the LCC and PBP. DOE also examined 
the impacts of potential standards on consumer subgroups. These 
analyses are discussed below.
a. Life-Cycle Cost and Payback Period
    To evaluate the net economic impact of proposed standards on CPB 
consumers, DOE conducted LCC and PBP analyses for each TSL. In general, 
higher-efficiency equipment would affect consumers in two ways: (1) 
Annual operating expense would decrease, and (2) purchase price would 
increase. LCC and PBP include total installed costs (i.e., product 
price plus installation costs), and operating costs (i.e., annual 
energy cost, repair costs, and maintenance costs). The LCC calculation 
also uses product lifetime and a discount rate. Chapter 8 of the NOPR 
TSD and section IV.F of this document discuss the detailed information 
on the LCC and PBP analysis.
    DOE's LCC and PBP analyses provided key outputs for each efficiency 
level above the baseline for each equipment class, as reported in Table 
V.3 to Table V.18. Two tables are presented for each equipment class. 
The first table presents the results of the LCC analysis by efficiency 
levels and TSLs and shows installed costs, first year's operating cost, 
lifetime operating cost, and mean LCC, as well as simple PBP. The 
second table presents the percentage of consumers who experience a net 
cost, as well as the mean LCC savings for all commercial consumers.

               Table V.3--Average LCC and Simple PBP Results by Efficiency Level for Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Average costs (2014$)
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $25,571         $12,551        $218,155        $243,727  ..............
                                                                       1          26,427          12,420         215,863         242,290             6.5
                                                                       2          27,350          12,292         213,627         240,977             6.9
1.......................................................               3          30,302          12,046         209,326         239,627             9.4
2.......................................................               4          31,573          11,927         207,252         238,826             9.6
                                                                       5          40,896          11,587         202,027         242,924            15.9
3.......................................................               6          41,637          11,371         198,263         239,901            13.6
4, 5....................................................               7          47,145          10,969         191,355         238,500            13.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the
  baseline equipment.


[[Page 15890]]


Table V.4--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Gas-Fired
                                      Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                      Thermal          % of
                               TSL                                  efficiency      commercial     Average life-
                                                                    (ET) level    consumers that    cycle cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
                                                                               1               2            $106
                                                                               2               4             318
1...............................................................               3              20             223
2...............................................................               4              23             521
                                                                               5              46          -2,031
3...............................................................               6              42             302
4, 5............................................................               7              56           1,656
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                  Table V.5--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Average costs (2014$)
                                                            Combustion   ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (EC) level       Installed       operating       operating          LCC        period years
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $94,053         $49,620        $842,932        $936,985  ..............
                                                                       1          99,700          49,025         832,857         932,556             9.5
1.......................................................               2         106,020          48,445         823,055         929,074            10.2
2, 3....................................................               3         113,093          47,881         813,516         926,609            11.0
                                                                       4         169,571          45,655         779,745         949,315            19.0
4, 5....................................................               5         178,725          44,197         755,202         933,927            15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


Table V.6--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-Fired
                                      Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                      Life-cycle cost savings
                                                                                 -------------------------------
                                                                    Combustion         % of
                               TSL                                  efficiency      commercial     Average life-
                                                                    (EC) level    consumers that    cycle  cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
                                                                               1              10            $924
1...............................................................               2              21           2,419
2, 3............................................................               3              27           3,647
                                                                               4              57         -13,074
4, 5............................................................               5              56           2,062
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                  Table V.7--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Average costs (2014$)
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET)  level      Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $27,566         $17,797        $323,016        $350,583  ..............
                                                                       1          28,457          17,607         319,481         347,938             4.7
                                                                       2          29,414          17,422         316,032         345,447             4.9
                                                                       3          30,444          17,242         312,666         343,110             5.2

[[Page 15891]]

 
1, 2, 3.................................................               4          32,742          16,893         306,170         338,912             5.7
4.......................................................               5          34,666          16,724         303,036         337,701             6.6
5.......................................................               6          51,938          16,087         292,517         344,455            14.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


Table V.8--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-Fired
                                      Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost  savings
                                                                                 -------------------------------
                                                                                       % of
                                                                      Thermal       commercial     Average life-
                               TSL                                  efficiency       consumers      cycle  cost
                                                                    (ET) level         that          savings *
                                                                                   experience a       (2014$)
                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
                                                                               1               8          $1,040
                                                                               2              13           2,544
                                                                               3              16           4,208
1, 2, 3.........................................................               4              20           7,799
4...............................................................               5              26           8,939
5...............................................................               6              56           2,333
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                  Table V.9--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs  (2014$)
                                                            Combustion   ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (EC) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $66,053        $101,507      $1,804,595      $1,870,649  ..............
1.......................................................               1          74,942          99,348       1,766,049       1,840,992             4.1
2, 3....................................................               2          86,080          97,281       1,729,192       1,815,272             4.7
4.......................................................               3          92,980          96,281       1,711,365       1,804,345             5.2
5.......................................................               4         159,031          93,901       1,670,295       1,829,325            12.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


  Table V.10--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
                                   Fired Hot Water Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost savings
                                                                                 -------------------------------
                                                                                       % of
                                                                    Combustion      commercial     Average life-
                               TSL                                  efficiency       consumers      cycle  cost
                                                                    (EC) level         that          savings *
                                                                                   experience a       (2014$)
                                                                                     net cost
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
1...............................................................               1               1         $10,108
2, 3............................................................               2               5          30,834
4...............................................................               3               7          40,983

[[Page 15892]]

 
5...............................................................               4              46          17,076
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                    Table V.11--Average LCC and PBP Results by Efficiency Level for Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs  (2014$)
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $22,540         $12,354        $212,456        $234,996  ..............
                                                                       1          23,330          12,228         210,244         233,574             6.3
                                                                       2          24,183          12,106         208,090         232,274             6.6
1.......................................................               3          25,107          11,987         205,992         231,098             7.0
2, 3....................................................               4          26,105          11,871         203,946         230,051             7.4
4, 5....................................................               5          28,350          11,647         200,010         228,360             8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


  Table V.12--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Gas-
                                     Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost  savings
                                                                                 -------------------------------
                                                                      Thermal          % of
                               TSL                                  efficiency      commercial     Average life-
                                                                    (ET) level    consumers that    cycle  cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
                                                                               1              10            $600
                                                                               2              12           1,205
1...............................................................               3              18           1,933
2, 3............................................................               4              26           2,782
4, 5............................................................               5              34           4,383
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                    Table V.13--Average LCC and PBP Results by Efficiency Level for Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs  (2014$)
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $82,527         $53,362        $926,128      $1,008,655  ..............
                                                                       1          84,898          52,735         915,193       1,000,091             3.8
                                                                       2          87,405          52,125         904,540         991,946             3.9
                                                                       3          90,056          51,529         894,159         984,215             4.1
1.......................................................               4          92,859          50,949         884,039         976,898             4.3
2, 3....................................................               5          96,563          50,383         874,171         970,734             4.7

[[Page 15893]]

 
4, 5....................................................               6         103,011          49,292         855,155         958,165             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


  Table V.14--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Gas-
                                     Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost  savings
                                                                                 -------------------------------
                                                                      Thermal          % of
                               TSL                                  efficiency      commercial     Average life-
                                                                    (ET) level    consumers that    cycle cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
                                                                               1               1             880
                                                                               2               5           3,528
                                                                               3               7           7,059
1...............................................................               4              12          12,255
2, 3............................................................               5              15          16,802
4, 5............................................................               6              19          28,295
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


                    Table V.15--Average LCC and PBP Results by Efficiency Level for Small Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Average costs 2014$
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $21,965         $20,964        $375,253        $397,218  ..............
1.......................................................               1          24,212          20,513         366,987         391,199             5.0
2, 3....................................................               2          25,527          20,296         363,005         388,532             5.3
4, 5....................................................               3          28,615          19,876         355,328         383,942             6.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


  Table V.16--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Small Oil-
                                     Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost  savings
                                                                                 -------------------------------
                                                                      Thermal          % of
                               TSL                                  efficiency      commercial     Average life-
                                                                    (ET) level    consumers that    cycle cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
1...............................................................               1               4           1,985
2, 3............................................................               2              12           4,256
4, 5............................................................               3              16           8,637
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).


[[Page 15894]]


                    Table V.17--Average LCC and PBP Results by Efficiency Level for Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Average costs 2014$
                                                              Thermal    ----------------------------------------------------------------     Simple
                           TSL                              efficiency                     First year's      Lifetime                         payback
                                                            (ET) level       Installed       operating       operating          LCC       period (years)
                                                                               cost            cost            cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.......................................................               0         $67,991         $99,776      $1,738,018      $1,806,009  ..............
1.......................................................               1          73,849          97,444       1,697,166       1,771,014             2.5
2, 3....................................................               2          80,651          95,223       1,658,263       1,738,914             2.8
4, 5....................................................               3          88,551          93,105       1,621,176       1,709,727             3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use equipment at that efficiency level. The PBP is measured relative to the
  baseline equipment.


  Table V.18--Average LCC Savings Relative to the No-New-Standards-Case Efficiency Distribution for Large Oil-
                                     Fired Steam Commercial Packaged Boilers
----------------------------------------------------------------------------------------------------------------
                                                                                     Life-cycle  cost savings
                                                                                 -------------------------------
                                                                      Thermal          % of
                               TSL                                  efficiency      commercial    Average  life-
                                                                    (ET) level    consumers that    cycle  cost
                                                                                    experience a     savings *
                                                                                     net cost         (2014$)
----------------------------------------------------------------------------------------------------------------
0...............................................................               0               0  ..............
1...............................................................               1               0          13,243
2, 3............................................................               2               1          36,128
4, 5............................................................               3               1          65,128
----------------------------------------------------------------------------------------------------------------
* The calculation includes consumers with zero LCC savings (no impact).

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

           Table V.19--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1            $185             $86            $106             4.2             6.9             6.5
                                                       2             549             252             318             4.4             7.2             6.9
1.......................................               3           1,126             -27             223             6.2             9.8             9.4
2.......................................               4           1,839             152             521             6.3            10.1             9.6
                                                       5           1,011          -2,933          -2,031            11.0            16.6            15.9
3.......................................               6           4,554            -960             302             9.2            14.3            13.6
4, 5....................................               7           9,657            -532           1,656             9.0            14.3            13.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


[[Page 15895]]


           Table V.20--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                            Combustion   -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (EC) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1          $1,634            $671            $924             7.9             9.5             9.5
1.......................................               2           4,456           1,639           2,419             8.5            10.2            10.2
2, 3....................................               3           7,172           2,265           3,647             9.1            11.0            11.0
                                                       4          -2,683         -17,455         -13,074            17.1            19.1            19.0
4, 5....................................               5          18,622          -5,178           2,062            13.6            15.7            15.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


           Table V.21--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1          $2,045            $562          $1,040             2.7             6.5             4.7
                                                       2           5,065           1,355           2,544             2.8             6.8             4.9
                                                       3           8,466           2,189           4,208             3.0             7.2             5.2
1, 2, 3.................................               4          16,048           3,832           7,799             3.3             7.9             5.7
4.......................................               5          18,773           4,172           8,939             4.2             8.8             6.6
5.......................................               6          22,248          -7,130           2,333             8.4            19.3            14.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


           Table V.22--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Oil-Fired Hot Water Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                            Combustion   -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (EC) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               1         $16,193          $8,602         $10,108             2.9             4.3             4.1
2, 3....................................               2          50,146          25,900          30,834             3.3             4.9             4.7
4.......................................               3          67,827          34,104          40,983             3.6             5.3             5.2
5.......................................               4          49,517           6,596          17,076             9.5            12.5            12.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


             Table V.23--Comparison of Impacts for Consumer Subgroups With All Consumers, Small Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1            $930            $503            $600             4.5             6.5             6.3
                                                       2           1,897           1,004           1,205             4.8             6.8             6.6
1.......................................               3           3,084           1,597           1,933             5.0             7.2             7.0
2, 3....................................               4           4,556           2,277           2,782             5.3             7.6             7.4
4, 5....................................               5           7,591           3,507           4,383             5.9             8.4             8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


[[Page 15896]]


             Table V.24--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1            $877            $795            $880             3.6             3.8             3.8
                                                       2           3,433           3,161           3,528             3.8             3.9             3.9
                                                       3           6,930           6,308           7,059             3.9             4.1             4.1
1.......................................               4          12,169          10,892          12,255             4.1             4.3             4.3
2, 3....................................               5          16,849          14,792          16,802             4.5             4.7             4.7
4, 5....................................               6          28,667          24,796          28,295             4.8             5.0             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


             Table V.25--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Gas-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               1          $3,135          $1,687          $1,985             3.7             5.2             5.0
2, 3....................................               2           6,704           3,577           4,256             4.0             5.5             5.3
4, 5....................................               3          13,943           7,123           8,637             4.5             6.3             6.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


             Table V.26--Comparison of Impacts for Consumer Subgroups With All Consumers, Large Oil-Fired Steam Commercial Packaged Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average LCC savings (2014$) *                   Simple payback period (years)
                                              Thermal    -----------------------------------------------------------------------------------------------
                   TSL                      efficiency      Residential     Commercial                      Residential     Commercial
                                            (ET) level      low-income    small business        All         low-income    small business        All
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               1         $19,961         $11,806         $13,243             1.7             2.5             2.5
2, 3....................................               2          54,869          32,079          36,128             1.9             2.8             2.8
4, 5....................................               3         100,020          57,562          65,128             2.1             3.1             3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

c. Rebuttable Presumption Payback
    As discussed in section III.E.2 of this document, EPCA provides a 
rebuttable presumption that an energy conservation standard is 
economically justified if the increased purchase cost for equipment 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. DOE calculated a 
rebuttable-presumption PBP for each TSL to determine whether DOE could 
presume that a standard at that level is economically justified.
    DOE calculated a rebuttable presumption payback period for each TSL 
using average installed cost to the commercial consumers and first year 
energy savings. As a result, DOE calculated a single rebuttable-
presumption payback value, and not a distribution of PBPs, for each 
TSL. Table V.27 shows the rebuttable-presumption PBPs for the 
considered TSLs. The rebuttable presumption is fulfilled in those cases 
where the PBP is three years or less. However, DOE routinely conducts 
an economic analysis that considers the full range of impacts to the 
consumer, manufacturer, Nation, and environment, as required by EPCA. 
The results of that analysis serve as the basis for DOE to definitively 
evaluate the economic justification for a potential standard level 
(thereby supporting or rebutting the results of any three-year PBP 
analysis). Section V.C of this document addresses how DOE considered 
the range of impacts to select the proposed standards.

       Table V.27--Rebuttable Presumption Payback Periods for Commercial Packaged Boiler Equipment Classes
----------------------------------------------------------------------------------------------------------------
                                                      Rebuttable presumption payback (years)
         Equipment class         -------------------------------------------------------------------------------
                                       TSL 1           TSL 2           TSL 3           TSL 4           TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water                    8.0             8.2            11.4            11.5            11.5
 Commercial Packaged Boilers....
Large Gas-Fired Hot Water                    8.3             9.0             9.0            12.7            12.7
 Commercial Packaged Boilers....
Small Oil-Fired Hot Water                   11.2            11.2            11.2            12.9            27.4
 Commercial Packaged Boilers....
Large Oil-Fired Hot Water                    7.6             8.8             8.8             9.5            22.7
 Commercial Packaged Boilers....

[[Page 15897]]

 
Small Gas-Fired Steam Commercial             6.0             6.3             6.3             7.1             7.1
 Packaged Boilers...............
Large Gas-Fired Steam Commercial             3.6             3.9             3.9             4.2             4.2
 Packaged Boilers...............
Small Oil-Fired Steam Commercial             9.2             9.8             9.8            11.3            11.3
 Packaged Boilers...............
Large Oil-Fired Steam Commercial             4.6             5.1             5.1             5.6             5.6
 Packaged Boilers...............
----------------------------------------------------------------------------------------------------------------

2. Economic Impacts on Manufacturers
    As noted above, DOE performed an MIA to estimate the impact of 
amended energy conservation standards on manufacturers of commercial 
packaged boilers. The following section describes the expected impacts 
on manufacturers at each considered TSL. Chapter 12 of the NOPR TSD 
explains the analysis in further detail.
a. Industry Cash-Flow Analysis Results
    Table V.28 and Table V.29 depict the estimated financial impacts 
(represented by changes in INPV) of amended energy conservation 
standards on manufacturers of commercial packaged boilers, as well as 
the conversion costs that DOE expects manufacturers would incur for all 
product classes at each TSL. To evaluate the range of cash-flow impacts 
on the CPB industry, DOE modeled two different markup scenarios using 
different assumptions that correspond to the range of anticipated 
market responses to amended energy conservation standards: (1) The 
preservation of gross margin percentage scenario; and (2) the 
preservation of per-unit operating profit scenario. Each of these 
scenarios is discussed immediately below.
    To assess the upper (less severe) bound of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the lower (more severe) bound of the range of potential 
impacts, DOE modeled the preservation of operating profit markup 
scenario, which assumes that manufacturers would not be able to 
generate greater operating profit on a per-unit basis in the standards 
case as compared to the no-new-standards case. Rather, as manufacturers 
make the necessary investments required to convert their facilities to 
produce new standards-compliant products and incur higher costs of 
goods sold, their percentage markup decreases. Operating profit does 
not change in absolute dollars and decreases as a percentage of 
revenue.
    As noted in the MIA methodology discussion (see IV.J.1), in 
addition to markup scenarios, the MPC, shipments, and conversion cost 
assumptions also affect INPV results.
    The results in Table V.28 and Table V.29 show potential INPV 
impacts for CPB manufacturers, Table V.28 reflects the upper bound of 
impacts, and Table V.29 represents the lower bound.
    Each of the modeled scenarios in the analysis results in a unique 
set of cash flows and corresponding industry values at each TSL. In the 
following discussion, the INPV results refer to the difference in 
industry value between the no-new-standards case and each standards 
case that results from the sum of discounted cash flows from the base 
year 2014 through 2048, the end of the analysis period.
    To provide perspective on the short-run cash flow impact, DOE 
discusses the change in free cash flow between the no-new-standards 
case and the standards case at each TSL in the year before new 
standards would take effect. These figures provide an understanding of 
the magnitude of the required conversion costs at each TSL relative to 
the cash flow generated by the industry in the no-new-standards case.

           Table V.28--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Gross Margin Percentage Markup Scenario*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-                          Trial standard level
                                                         Units               standards  ----------------------------------------------------------------
                                                                                case          1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$ millions...............        180.1        173.7        167.0        157.7        145.9        146.7
Change in INPV.............................  2014$ millions...............  ...........        (6.4)       (13.1)       (22.4)       (34.3)       (33.4)
                                             %............................  ...........        (3.6)        (7.3)       (12.4)       (19.0)       (18.6)
Product Conversion Costs...................  2014$ millions...............  ...........         10.7         18.2         19.3         20.8         21.4
Capital Conversion Costs...................  2014$ millions...............  ...........          4.8          9.3         20.8         33.9         35.2
Total Conversion Costs.....................  2014$ millions...............  ...........         15.5         27.5         40.1         54.7         56.6
Free Cash Flow (no-new-standards case =      2014$ millions...............         12.8          7.2          2.7        (2.8)        (9.2)        (9.9)
 2019).
Decrease in Free Cash Flow (change from no-  2014$ millions...............  ...........          5.6         10.1         15.6         22.0         22.8
 new-standards case).
                                             %............................  ...........         43.9         78.7        121.7        171.5        177.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


[[Page 15898]]


              Table V.29--Manufacturer Impact Analysis for Commercial Packaged Boilers--Preservation of Operating Profit Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              No-new-                          Trial standard level
                                                         Units               standards  ----------------------------------------------------------------
                                                                                case          1            2            3            4            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV.......................................  2014$ millions...............        180.1        166.8        156.3        116.2         56.1         51.2
Change in INPV.............................  2014$ millions...............  ...........       (13.4)       (23.8)       (64.0)      (124.1)      (128.9)
                                             %............................  ...........        (7.4)       (13.2)       (35.5)       (68.9)       (71.6)
Product Conversion Costs...................  2014$ millions...............  ...........         10.7         18.2         19.3         20.8         21.4
Capital Conversion Costs...................  2014$ millions...............  ...........          4.8          9.3         20.8         33.9         35.2
Total Conversion Costs.....................  2014$ millions...............  ...........         15.5         27.5         40.1         54.7         56.6
Free Cash Flow (2018)......................  2014$ millions...............         12.8          7.2          2.7        (2.8)        (9.2)        (9.9)
Decrease in Free Cash Flow (2018)..........  2014$ millions...............  ...........          5.6         10.1         15.6         22.0         22.8
                                             %............................  ...........         43.9         78.7        121.7        171.5        177.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    TSL 1 represents EL 3 (84%) for small gas-fired hot water boilers, 
EL 2 (84%) for large gas-fired hot water boilers, EL 4 (87%) for small 
oil-fired hot water boilers, EL 1 (86%) for large oil-fired hot water 
boilers, EL 3 (80%) for small gas-fired steam boilers, EL 4 (81%) for 
large gas-fired steam boilers, EL 1 (83%) for small oil-fired steam 
boilers, and EL 1 (83%) for large oil-fired steam boilers. At TSL 1, 
DOE estimates impacts on INPV for CPB manufacturers to range from -7.4 
percent to -3.6 percent, or a change in INPV of -$13.4 million to -$6.4 
million. At this potential standard level, industry free cash flow 
would be estimated to decrease by approximately 43.9 percent to $7.2 
million, compared to the no-new-standards case value of $12.8 million 
in 2018, the year before the compliance date. Overall, DOE expects 
industry to incur product conversion costs of $10.7 million and capital 
conversion costs of $4.8 million to reach this standard level.
    TSL 2 sets the efficiency level at EL 4 (85%) for small gas-fired 
hot water boilers, EL 3 (85%) for large gas-fired hot water boilers, EL 
4 (87%) for small oil-fired hot water boilers, EL 2 (88%) for large 
oil-fired hot water, EL 4 (81%) for small gas-fired steam boilers, EL 5 
(82%) for large gas-fired steam boilers, EL 2 (84%) for small oil-fired 
steam boilers, and EL 2 (85%) for large oil-fired steam boilers. At TSL 
2, DOE estimates impacts on INPV for commercial packaged boilers 
manufacturers to range from -13.2 percent to -7.3 percent, or a change 
in INPV of -$23.8 million to -$13.1 million. At this potential standard 
level, industry free cash flow would be estimated to decrease by 
approximately 78.7 percent to $2.7 million, compared to the no-new-
standards case value of $12.8 million in 2018, the year before the 
compliance date. Overall, DOE estimates manufactures would incur 
product conversion costs of $18.2 million and capital conversion costs 
of $9.3 million at this standard level.
    TSL 3 represents EL 6 (95%) for small gas-fired hot water boilers, 
EL 5 (85%) for large gas-fired hot water boilers, EL 4 (87%) for small 
oil-fired hot water boilers, EL 2 (88%) for large oil-fired hot water 
boilers, EL 4 (81%) for small gas-fired steam boilers, EL 5 (82%) for 
large gas-fired steam boilers, EL 2 (84%) for small oil-fired steam 
boilers, and EL 2 (85%) for large oil-fired steam boilers. At TSL 3, 
DOE estimates impacts on INPV for CPB manufacturers to range from -35.5 
percent to -12.4 percent, or a change in INPV of -$64.0 million to -
$22.4 million. At this potential standard level, industry free cash 
flow would be estimated to decrease by approximately 121.7 percent in 
2018, the year before compliance to -$2.8 million compared to the no-
new-standards case value of $12.8 million. DOE estimates manufactures 
would incur product conversion costs of $19.3 million and capital 
conversion costs of 20.8 million to reach this standard level.
    TSL 4 represents EL 7 (99%) for small gas-fired hot water boilers, 
EL 5 (97%) for large gas-fired hot water boilers, EL 5 (88%) for small 
oil-fired hot water boilers, EL 3 (89%) for large oil-fired hot water 
boilers, EL 5 (83%) for small gas-fired steam boilers, EL 6 (84%) for 
large gas-fired steam boilers, EL 3 (86%) for small oil-fired steam 
boilers, and EL 3 (87%) for large oil-fired steam boilers. At TSL 4, 
DOE estimates impacts on INPV for CPB manufacturers to range from -68.9 
percent to -19.0 percent, or a change in INPV of -$124.1 million to -
$34.3 million. At this potential standard level, industry free cash 
flow would be estimated to decrease by approximately 171.5 percent in 
the year before compliance (2018) to -$9.2 million relative to the no-
new-standards case value of $12.8 million. DOE estimates that 
manufacturers would incur product conversion costs of $20.8 million and 
capital conversion costs of $33.9 million to reach this standard level.
    TSL 5 represents EL 7 (99%) for small gas-fired hot water boilers, 
EL 5 (97%) for large gas-fired hot water boilers, EL 6 (97%) for small 
oil-fired hot water boilers, EL 4 (97%) for large oil-fired hot water 
boilers, EL 5 (83%) for small gas-fired steam boilers, EL 6 (84%) for 
large gas-fired steam boilers, EL 3 (86%) for small oil-fired steam 
boilers, and EL 3 (87%) for large oil-fired steam boilers. TSL 5 
represents max-tech for all product classes. At TSL 5, DOE estimates 
impacts on INPV for CPB manufacturers to range from -71.6 percent to -
18.6 percent, or a change in INPV of -$128.9 million to -$33.4 million. 
At this potential standard level, industry free cash flow would be 
estimated to decrease by approximately 177.4 percent in the year before 
compliance (2018) to -$9.9 million relative to the no-new-standards 
case value of $12.8 million. DOE estimates manufacturers would incur 
product conversion costs of $21.4 million and capital conversion costs 
of $35.2 million to reach this standard level.
b. Impacts on Direct Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the CPB industry, DOE used the GRIM 
to estimate the domestic labor expenditures and number of employees in 
the no-new-standards case and at each TSL in 2019. DOE used statistical 
data from the U.S. Census Bureau's 2013 Annual Survey of Manufacturers 
(ASM) \85\, the results of the engineering analysis, and interviews 
with manufacturers to determine the inputs necessary to calculate 
industry-

[[Page 15899]]

wide labor expenditures and domestic employment levels. Labor 
expenditures related to manufacturing of the product are a function of 
the labor intensity of the product, the sales volume, and an assumption 
that wages remain fixed in real terms over time. The total labor 
expenditures in each year are calculated by multiplying the MPCs by the 
labor percentage of MPCs.
---------------------------------------------------------------------------

    \85\ U.S. Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (2013) 
(Available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM are converted to domestic 
production employment levels by dividing production labor expenditures 
by the annual payment per production worker (production worker hours 
times the labor rate found in the U.S. Census Bureau's 2013 ASM). The 
estimates of production workers in this section cover workers, 
including line-supervisors who are directly involved in fabricating and 
assembling a product within the manufacturing facility. Workers 
performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking. The total direct employment impacts calculated in the 
GRIM are the sum of the changes in the number of production workers 
resulting from the amended energy conservation standards for commercial 
packaged boilers, as compared to the no-new-standards case. In general, 
more-efficient commercial packaged boilers are more complex and more 
labor intensive and require specialized knowledge about control 
systems, electronics, and the different metals needed for the heat 
exchanger. Per-unit labor requirements and production time requirements 
increase with higher energy conservation standards. As a result, the 
total labor calculations described in this paragraph (which are 
generated by the GRIM) are considered an upper bound to direct 
employment forecasts.
    DOE estimates that in the absence of amended energy conservation 
standards, there would be 464 domestic production workers in the CPB 
industry in 2019, the year of compliance. DOE estimates that 80 percent 
of commercial packaged boilers sold in the United States are 
manufactured domestically. Table V.30 shows the range of the impacts of 
potential amended energy conservation standards on U.S. production 
workers of commercial packaged boilers.

   Table V.30--Potential Changes in the Total Number of Commercial Packaged Boilers Production Workers in 2019
----------------------------------------------------------------------------------------------------------------
                                      No-new-                        Trial standard level\*\
                                     standards  ----------------------------------------------------------------
                                        case          1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
Total Number of Domestic                    464          371          292          232          130           32
 Production Workers in 2019                               to           to           to           to           to
 (without changes in production                          495          516          522          608          629
 locations).......................
Potential Changes in Domestic       ...........         (93)        (172)     (232) to        (334)        (431)
 Production Workers in 2019.......                        to           to           58           to           to
                                                          31           52                       144          165
----------------------------------------------------------------------------------------------------------------
* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative numbers.

    At the upper end of the range, all examined TSLs show positive 
impacts on domestic employment levels. Producing more-efficient 
commercial packaged boilers tends to require more labor, and DOE 
estimates that if CPB manufacturers chose to keep their current 
production in the U.S., domestic employment could increase at each TSL. 
In interviews, some manufacturers who produce high-efficiency boiler 
products stated that a standard that went to condensing levels could 
cause them to hire more employees to increase their production 
capacity.
    To establish a lower bound end of production worker employment, DOE 
assumes no manufacturer chooses to invest in redesign of products that 
do not meet the proposed standard. Production worker employment drops 
in proportion with the percentage of products which are retired. Since 
this is a lower bound, DOE does not account for additional production 
labor needed for higher efficiency products. Several manufacturers 
expressed that they could lose a significant number of employees at TSL 
3, TSL 4 and TSL 5, due to the fact that these TSLs contain condensing 
efficiency levels for the gas-fired hot water boiler product classes 
and oil-fired hot water boiler product classes. These manufacturers 
have employees who work on production lines that produce cast iron 
sections and carbon steel or copper heat exchangers for lower to mid-
efficiency products. If amended energy conservation standards were to 
require condensing efficiency levels, these employees would no longer 
be needed for that function, and manufacturers would have to decide 
whether to develop their own condensing heat exchanger production, 
source heat exchangers from Asia or Europe and assemble higher-
efficiency products, or leave the market entirely.
    DOE notes that the employment impacts discussed here are 
independent of the indirect employment impacts to the broader U.S. 
economy, which are documented in chapter 15 of the NOPR TSD.
c. Impacts on Manufacturing Capacity
    Most CPB manufacturers stated that their current production is only 
running at 50-percent to 75-percent capacity and that any standard that 
does not propose efficiency levels where manufacturers would use 
condensing technology for hot water boilers would not have a large 
effect on capacity. The impacts of a potential condensing standard on 
manufacturer capacity are difficult to quantify. Some manufacturers who 
are already making condensing products with a sourced heat exchanger 
said they would likely be able to increase production using the 
equipment they already have by utilizing a second shift. Others said a 
condensing standard would idle a large portion of their business, 
causing stranded assets and decreased capacity. These manufacturers 
would have to determine how to best increase their condensing boiler 
production capacity. DOE believes that some larger domestic 
manufacturers may choose to add production capacity for a condensing 
heat exchanger production line.
    Manufacturers stated that in a scenario where a potential standard 
would require efficiency levels at which manufacturers would use 
condensing

[[Page 15900]]

technology, there is concern about the level of technical resources 
required to redesign and test all products. The engineering analysis 
shows that increasingly complex components and control strategies are 
required as standard levels increase. Manufacturers commented in 
interviews that the industry would need to add electrical engineering 
and control systems engineering talent beyond current staffing to meet 
the redesign requirements of higher TSLs. Additional training might be 
needed for manufacturing engineers, laboratory technicians, and service 
personnel if condensing products were broadly adopted. However, because 
TSL 2 (the proposed level) would not require condensing standards, DOE 
does not expect manufacturers to face long-term capacity constraints 
due to the standard levels proposed in this notice.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. Using 
average cost assumptions developed for an industry cash-flow estimate 
is inadequate to assess differential impacts among manufacturer 
subgroups.
    For the CPB industry, DOE identified and evaluated the impact of 
amended energy conservation standards on one subgroup--small 
manufacturers. The SBA defines a ``small business'' as having 500 
employees or less for NAICS 333414, ``Heating Equipment (except Warm 
Air Furnaces) Manufacturing.'' Based on this definition, DOE identified 
34 manufacturers in the CPB industry that qualify as small businesses. 
For a discussion of the impacts on the small manufacturer subgroup, see 
the regulatory flexibility analysis in section 0 of this document and 
chapter 12 of the NOPR TSD.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or impending regulations 
may have serious consequences for some manufacturers, groups of 
manufacturers, or an entire industry. Assessing the impact of a single 
regulation may overlook this cumulative regulatory burden. In addition 
to energy conservation standards, other regulations can significantly 
affect manufacturers' financial operations. Multiple regulations 
affecting the same manufacturer can strain profits and lead companies 
to abandon product lines or markets with lower expected future returns 
than competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
equipment efficiency.
    For the cumulative regulatory burden analysis, DOE looks at other 
regulations that could affect CPB manufacturers that will take effect 
approximately three years before or after the 2019 compliance date of 
amended energy conservation standards for these products. In 
interviews, manufacturers cited Federal regulations on equipment other 
than commercial packaged boilers that contribute to their cumulative 
regulatory burden. The compliance years and expected industry 
conversion costs of relevant amended energy conservation standards are 
indicated in Table V.31. Included in the table are Federal regulations 
that have compliance dates beyond the six year range of DOE's analysis.

      Table V.31--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Commercial Packaged Boilers
                                                                      Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Comm. Air                                                                      Res. Central
                                Conditioners/   Comm. Warm      Res.     Comm. Water      Res.         Res.           Air        Res. Water   Res. Pool
         Regulation *            Heat Pumps        Air        Furnace       Heaters     Boilers      Furnaces    Conditioners/    Heaters      Heaters
                                (Air-Cooled)     Furnaces       Fans                                              Heat Pumps
--------------------------------------------------------------------------------------------------------------------------------------------------------
Approximate Compliance Date..           2018         2018         2019         2019         2020         2021            2021         2021         2021
Industry Conversion Costs           226.4 **      19.9 **         40.6          TBD          4.3   ...........  ..............  ...........  ...........
 ($M)........................
Ace Heating Solutions LLC....  ..............  ...........  ...........           x   ...........  ...........  ..............  ...........  ...........
ACV International NV           ..............  ...........  ...........           x            x   ...........  ..............           x   ...........
 (Triangle Tube/Phase III
 Co.)........................
AESYS Technologies, LLC......
AO Smith (Lochinvar).........  ..............  ...........  ...........           x            x   ...........  ..............           x            x
Axeman-Anderson..............  ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
Bradford White (Laars Heating  ..............  ...........  ...........           x            x   ...........  ..............           x   ...........
 Systems)....................
Burnham Holdings.............  ..............           x            x            x            x            x               x            x   ...........
Camus Hydronics..............  ..............  ...........  ...........           x            x   ...........  ..............           x   ...........
Dennison Holdings Ltd (NY      ..............  ...........  ...........  ...........           x   ...........  ..............  ...........  ...........
 Thermal)....................
ECR International............  ..............  ...........           x            x            x            x               x            x   ...........
E-Z Rect Manufacturing         ..............  ...........  ...........  ...........           x   ...........  ..............  ...........  ...........
 (Allied Engineering Company)
Fulton Heating Solutions.....
Gasmaster Industries.........  ..............  ...........  ...........           x   ...........  ...........  ..............  ...........  ...........
Hamilton Engineering.........  ..............  ...........  ...........           x            x   ...........  ..............  ...........  ...........
Harbour Group Industries
 (Cleaver-Brooks)............
Harsco Industrial, Patterson-
 Kelley......................
HTP, Inc.....................  ..............  ...........  ...........           x            x   ...........  ..............  ...........  ...........
Hurst Boiler & Welding
 Company.....................
IBC Technologies, Inc........  ..............  ...........  ...........  ...........           x   ...........  ..............  ...........  ...........
Lanair Holdings, LLC (Clean    ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
 Burn, LLC)..................
Mestek.......................  ..............  ...........  ...........  ...........           x   ...........              x            x   ...........
National Combustion Co, Inc..  ..............  ...........  ...........           x   ...........  ...........  ..............  ...........  ...........
Paloma Co, Ltd (Raypak, Inc).              x            x            x            x   ...........           x               x            x            x
Parker Boiler Company........  ..............  ...........  ...........           x   ...........  ...........  ..............  ...........  ...........
Peerless Boilers (PB Heat      ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
 LLC)........................
Rite Engineering &
 Manufacturing Corp (Rite
 Boiler).....................
Robert Bosch (Bosch            ..............  ...........  ...........           x            x   ...........  ..............  ...........  ...........
 Thermotechnology Corp)......
SIME (SIME North America)....  ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
Slant/Fin Corporation........  ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
SPX..........................  ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
Stichting Aandelen Remeha      ..............  ...........  ...........  ...........           x   ...........  ..............  ...........  ...........
 (Baxi S.P.A.)...............
Superior Holdings, Inc.......
Tennessee Valley Ventures LP
 (Precision Boiler)..........
Unilux Advanced Manufacturing
Vari Corp....................  ..............  ...........  ...........  ...........           x   ...........  ..............           x   ...........
Watts Water Technologies, Inc  ..............  ...........  ...........           x   ...........  ...........  ..............  ...........  ...........
 (AERCO International, Inc)..
Williams & Davis Boilers.....
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The final rule for this energy conversation standard has not been published. The compliance date and analysis of conversion costs have not been
  finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the NOPR.)


[[Page 15901]]

    In addition to Federal energy conservation standards, DOE 
identified other regulatory burdens that would affect manufacturers of 
commercial packaged boilers:
DOE Certification, Compliance, and Enforcement (CC&E) Rule
    Any amended standard that DOE establishes would also impose 
accompanying CC&E requirements for manufacturers of commercial packaged 
boilers. DOE conducted a rulemaking to expand AEDM coverage to 
commercial HVAC, including commercial packaged boilers, and issued a 
final rule on December 31, 2013. (78 FR 79579) An AEDM is a computer 
modeling or mathematical tool that predicts the performance of non-
tested basic models. In the final rule, DOE is allowing manufacturers 
of commercial packaged boilers to rate basic models using AEDMs, 
reducing the need for sample units and reducing burden on 
manufacturers. The final rule establishes revised verification 
tolerances CPB manufacturers. More information can be found at http://www1.eere.energy.gov/buildings/appliance_standards/implement_cert_and_enforce.html.
3. National Impact Analysis
a. Significance of Energy Savings
    For each TSL, DOE projected energy savings for commercial packaged 
boilers purchased in the 30-year period that begins in the year of 
anticipated compliance with amended standards (2019-2048). The savings 
are measured over the entire lifetime of equipment purchased in the 30-
year period. DOE quantified the energy savings attributable to each TSL 
as the difference in energy consumption between each standards case and 
the no-new-standards-case. Table V.32 presents the estimated primary 
energy savings for each considered TSL, and Table V.33 presents the 
estimated FFC energy savings for each TSL. Table V.34 shows cumulative 
primary national energy savings by TSL as a percentage of the no-new-
standards-case primary energy usage. The approach for estimating 
national energy savings is further described in section IV.H of this 
document.

  Table V.32--Cumulative National Primary Energy Savings for Commercial Packaged Boilers Purchased in 2019-2048
                                                     [Quads]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.138        0.199        0.708        1.332        1.332
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.043        0.075        0.075        0.617        0.617
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.019        0.019        0.019        0.023        0.043
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.004        0.012        0.012        0.017        0.029
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.009        0.018        0.018        0.038        0.038
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.009        0.014        0.014        0.026        0.026
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.002        0.004        0.004        0.010        0.010
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.003        0.008        0.008        0.014        0.014
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.226        0.349        0.859        2.077        2.108
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


Table V.33--Cumulative National Full-Fuel-Cycle Energy Savings for Commercial Packaged Boilers Purchased in 2019-
                                                      2048
                                                     [Quads]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.155        0.223        0.797        1.497        1.497
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.049        0.085        0.085        0.693        0.693
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.022        0.022        0.022        0.027        0.050
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.004        0.015        0.015        0.020        0.033
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.010        0.020        0.020        0.042        0.042
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.010        0.016        0.016        0.029        0.029
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.002        0.005        0.005        0.011        0.011
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.003        0.009        0.009        0.017        0.017
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.255        0.394        0.967        2.336        2.373
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


[[Page 15902]]


  Table V.34--Cumulative Primary National Energy Savings by TSL as a Percentage of Cumulative No-New-Standards-
                     Case Energy Usage of Commercial Packaged Boilers Purchased in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                      No-new-        TSL savings as  percent of no-new-standards-case usage *
                                     standards- ----------------------------------------------------------------
          Equipment class           case energy
                                       usage        TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
                                       quads
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water                21.053          0.7          0.9          3.4          6.3          6.3
 Commercial Packaged Boilers......
Large Gas-Fired Hot Water                15.097          0.3          0.5          0.5          4.1          4.1
 Commercial Packaged Boilers......
Small Oil-Fired Hot Water                 0.807          2.3          2.3          2.3          2.9          5.4
 Commercial Packaged Boilers......
Large Oil-Fired Hot Water                 0.782          0.5          1.6          1.6          2.2          3.7
 Commercial Packaged Boilers......
Small Gas-Fired Steam Commercial          1.633          0.5          1.1          1.1          2.3          2.3
 Packaged Boilers.................
Large Gas-Fired Steam Commercial          1.035          0.8          1.3          1.3          2.5          2.5
 Packaged Boilers.................
Small Oil-Fired Steam Commercial          0.453          0.4          1.0          1.0          2.2          2.2
 Packaged Boilers.................
Large Oil-Fired Steam Commercial          0.551          0.5          1.4          1.4          2.6          2.6
 Packaged Boilers.................
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total.........................       41.411          0.5          0.8          2.1          5.0          5.1
----------------------------------------------------------------------------------------------------------------
* Components may not sum to total due to rounding.

    Circular A-4 requires agencies to present analytical results, 
including separate schedules of the monetized benefits and costs that 
show the type and timing of benefits and costs.\86\ Circular A-4 also 
directs agencies to consider the variability of key elements underlying 
the estimates of benefits and costs. For this rulemaking, DOE undertook 
a sensitivity analysis using 9 years rather than 30 years of equipment 
shipments. The choice of a 9-year period is a proxy for the timeline in 
EPCA for the review of certain energy conservation standards and 
potential revision of and compliance with such revised standards.\87\ 
The review timeframe established in EPCA is generally not synchronized 
with the equipment lifetime, equipment manufacturing cycles, or other 
factors specific to commercial packaged boilers. Thus, such results are 
presented for informational purposes only and are not indicative of any 
change in DOE's analytical methodology. The estimated national primary 
and full-fuel-cycle energy savings results based on a nine-year 
analytical period are presented in Table V.35 and Table V.36, 
respectively. The impacts are counted over the lifetime of equipment 
purchased in 2019-2027.
---------------------------------------------------------------------------

    \86\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis'' (Sept. 17, 2003) (Available at: http://www.whitehouse.gov/omb/circulars_a004_a-4/).
    \87\ EPCA requires DOE to review its standards at least once 
every 6 years, and requires, for certain equipment, a 3-year period 
after any new standard is promulgated before compliance is required, 
except that in no case may any new standards be required within 6 
years of the compliance date of the previous standards. (42 U.S.C. 
6313(a)(6)(C)) While adding a 6-year review to the 3-year compliance 
period adds up to 9 years, DOE notes that it may undertake reviews 
at any time within the 6-year period and that the 3-year compliance 
date may yield to the 6-year backstop. A 9-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some commercial 
equipment, the compliance period is 5 years rather than 3 years.

  Table V.35--Cumulative National Primary Energy Savings for Commercial Packaged Boiler Equipment Purchased in
                                                    2019-2027
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                              quads
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Small Gas-Fired Hot Water Commercial Packaged          0.045        0.065        0.223        0.392        0.392
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.022        0.038        0.038        0.226        0.226
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.005        0.005        0.005        0.007        0.013
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.001        0.003        0.003        0.005        0.008
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.005        0.009        0.009        0.018        0.018
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.004        0.006        0.006        0.012        0.012
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.001        0.001        0.001        0.003        0.003
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.001        0.003        0.003        0.005        0.005
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.084        0.131        0.289        0.667        0.676
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


[[Page 15903]]


     Table V.36--Cumulative Full-Fuel-Cycle National Energy Savings for Commercial Packaged Boiler Equipment
                                             Purchased in 2019-2027
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                              quads
                                                ----------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.050        0.073        0.251        0.441        0.441
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.025        0.043        0.043        0.254        0.254
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.006        0.006        0.006        0.008        0.015
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.001        0.004        0.004        0.006        0.010
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.005        0.010        0.010        0.020        0.020
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.005        0.007        0.007        0.013        0.013
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.001        0.002        0.002        0.004        0.004
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.001        0.003        0.003        0.005        0.005
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.094        0.148        0.326        0.750        0.761
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for commercial 
packaged boilers. In accordance with OMB's guidelines on regulatory 
analysis,\88\ DOE calculated the NPV using both a 7-percent and a 3-
percent real discount rate. The 7-percent rate is an estimate of the 
average before tax rate of return on private capital in the U.S. 
economy, and reflects the returns on real estate and small business 
capital as well as corporate capital. This discount rate approximates 
the opportunity cost of capital in the private sector (OMB analysis has 
found the average rate of return on capital to be near this rate). The 
3-percent rate reflects the potential effects of standards on private 
consumption (e.g., through higher prices for equipment and reduced 
purchases of energy). This rate represents the rate at which society 
discounts future consumption flows to their present value. It can be 
approximated by the real rate of return on long-term government debt 
(i.e., yield on United States Treasury notes), which has averaged about 
3 percent for the past 30 years.
---------------------------------------------------------------------------

    \88\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at: 
www.whitehouse.gov/omb/circulars_a004_a-4).
---------------------------------------------------------------------------

    Table V.37 and Table V.38 show the consumer NPV results at 3-
percent and 7-percent discount rates respectively for each TSL 
considered for commercial packaged boilers covered in this rulemaking. 
In each case, the impacts cover the lifetime of equipment purchased in 
2019-2048.

    Table V.37--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 3-Percent
                               Discount Rate for Equipment Purchased in 2019-2048
                                                 [Billion 2014$]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.463        0.665        1.570        3.187        3.187
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.129        0.208        0.208        1.446        1.446
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.278        0.278        0.278        0.337        0.372
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.063        0.199        0.199        0.271        0.331
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.038        0.074        0.074        0.145        0.145
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.039        0.060        0.060        0.110        0.110
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.032        0.070        0.070        0.148        0.148
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.048        0.134        0.134        0.244        0.244
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        1.090        1.687        2.593        5.888        5.982
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


    Table V.38--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 7-Percent
                               Discount Rate for Equipment Purchased in 2019-2048
                                                 [Billion 2014$]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.092        0.132        0.052        0.209        0.209
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.027        0.036        0.036        0.089        0.089
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.080        0.080        0.080        0.093        0.040
 Boilers.......................................

[[Page 15904]]

 
Large Oil-Fired Hot Water Commercial Packaged          0.019        0.059        0.059        0.080        0.067
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.012        0.022        0.022        0.038        0.038
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.013        0.020        0.020        0.035        0.035
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.010        0.021        0.021        0.044        0.044
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.016        0.044        0.044        0.079        0.079
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.269        0.414        0.334        0.668        0.603
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.

    The NPV results based on the aforementioned nine-year analytical 
period are presented in Table V.39 and Table V.40. The impacts are 
counted over the lifetime of commercial packaged boilers purchased in 
2019-2027. As mentioned previously, this information is presented for 
informational purposes only and is not indicative of any change in 
DOE's analytical methodology or decision criteria.

    Table V.39--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 3-Percent
                               Discount Rate for Equipment Purchased in 2019-2027
                                                 [Billion 2014$]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.153        0.220        0.417        0.829        0.829
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.066        0.105        0.105        0.375        0.375
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.082        0.082        0.082        0.099        0.096
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.018        0.057        0.057        0.078        0.089
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.022        0.038        0.038        0.071        0.071
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.020        0.029        0.029        0.053        0.053
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.011        0.024        0.024        0.050        0.050
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.017        0.046        0.046        0.084        0.084
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.389        0.602        0.799        1.639        1.647
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.


    Table V.40--Cumulative Net Present Value of Consumer Benefit for CPB Trial Standard Levels at a 7-Percent
                               Discount Rate for Equipment Purchased in 2019-2027
                                                 [Billion 2014$]
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level *
                Equipment class                 ----------------------------------------------------------------
                                                    TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged          0.038        0.054       -0.044       -0.020       -0.020
 Boilers.......................................
Large Gas-Fired Hot Water Commercial Packaged          0.015        0.020        0.020       -0.058       -0.058
 Boilers.......................................
Small Oil-Fired Hot Water Commercial Packaged          0.032        0.032        0.032        0.038        0.006
 Boilers.......................................
Large Oil-Fired Hot Water Commercial Packaged          0.008        0.024        0.024        0.032        0.023
 Boilers.......................................
Small Gas-Fired Steam Commercial Packaged              0.008        0.014        0.014        0.023        0.023
 Boilers.......................................
Large Gas-Fired Steam Commercial Packaged              0.008        0.012        0.012        0.021        0.021
 Boilers.......................................
Small Oil-Fired Steam Commercial Packaged              0.005        0.010        0.010        0.020        0.020
 Boilers.......................................
Large Oil-Fired Steam Commercial Packaged              0.007        0.021        0.021        0.037        0.037
 Boilers.......................................
                                                ----------------------------------------------------------------
    Total......................................        0.122        0.186        0.089        0.093        0.052
----------------------------------------------------------------------------------------------------------------
* Numbers may not add to totals, due to rounding.

c. Indirect Impacts on Employment
    DOE expects energy conservation standards for commercial packaged 
boilers to reduce energy costs for equipment owners, and the resulting 
net savings to be redirected to other forms of economic activity. Those 
shifts in spending and economic activity could affect the demand for 
labor. As described in section IV.N of this document, DOE used an 
input/output model of the U.S. economy to estimate indirect employment 
impacts of the TSLs that DOE considered in this rulemaking. DOE 
understands that there are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term time frames 
(2019-

[[Page 15905]]

2025), where these uncertainties are reduced.
    The results suggest that the proposed standards are likely to have 
negligible impact on the net demand for labor in the economy. The net 
change in jobs is so small that it would be imperceptible in national 
labor statistics and might be offset by other, unanticipated effects on 
employment. Chapter 16 of the NOPR TSD presents detailed results.
4. Impact on Utility or Performance
    DOE has tentatively concluded that the standards it is proposing in 
this document would not lessen the utility or performance of commercial 
packaged boilers.
5. Impact of Any Lessening of Competition
    DOE considers any lessening of competition that is likely to result 
from amended standards. The Attorney General determines the impact, if 
any, of any lessening of competition likely to result from a proposed 
standard, and transmits such determination to the Secretary, together 
with an analysis of the nature and extent of such impact. (42 U.S.C. 
6313(a)(6)(B)(ii)(V) and (C)(i))
    To assist the Attorney General in making such determination, DOE 
has provided DOJ with copies of this document and the TSD for review. 
DOE will consider DOJ's comments on the proposed rule in preparing the 
final rule, and DOE will publish and respond to DOJ's comments in that 
document.
6. Need of the Nation to Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. As a measure of this reduced 
demand, chapter 15 in the NOPR TSD presents the estimated reduction in 
generating capacity, relative to the no-new-standards case, for the 
TSLs that DOE considered in this rulemaking.
    Potential energy savings from the proposed amended standards for 
the considered CPB equipment classes could also produce environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases. Table V.41 provides DOE's estimate of cumulative 
emissions reductions expected to result from the TSLs considered in 
this rulemaking. The table includes both power sector emissions and 
upstream emissions. The upstream emissions were calculated using the 
multipliers discussed in section IV.K of this document. DOE reports 
annual CO2, NOX, and Hg emissions reductions for 
each TSL in chapter 13 of the NOPR TSD.

  Table V.41--Cumulative Emissions Reduction for Potential Standards of Commercial Packaged Boilers Shipped in
                                                    2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                               TSL
                                                ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                         Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................        12.66        19.61        46.61       111.89       114.33
NOX (thousand tons)............................        74.66       118.07       156.81       294.40       366.68
Hg (tons)......................................       0.0002       0.0002      (0.002)      (0.002)      (0.002)
N2O (thousand tons)............................         0.07         0.11         0.15         0.32         0.37
CH4 (thousand tons)............................         0.29         0.45         0.95         2.34         2.41
SO2 (thousand tons)............................         1.24         1.96         1.49         2.87         4.18
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................         1.84         2.85         6.84        16.28        16.66
NOX (thousand tons)............................        28.43        43.99       108.03       258.23       263.07
Hg (tons)......................................      0.00003       0.0001      0.00003       0.0001       0.0001
N2O (thousand tons)............................         0.01         0.01         0.02         0.03         0.04
CH4 (thousand tons)............................       150.66       232.21       616.94     1,502.56     1,507.48
SO2 (thousand tons)............................         0.08         0.13         0.14         0.25         0.34
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................        14.50        22.46        53.45       128.17       130.99
NOX (thousand tons)............................       103.09       162.06       264.84       552.63       629.75
Hg (tons)......................................       0.0002       0.0003      (0.002)      (0.002)      (0.002)
N2O (thousand tons)............................         0.07         0.12         0.17         0.36         0.41
N2O (thousand tons CO2eq) *....................        19.42        30.55        44.39        94.37       109.42
CH4 (thousand tons)............................       150.95       232.66       617.89     1,504.90     1,509.89
CH4 (thousand tons CO 2eq) *...................     4,226.55     6,514.58    17,300.87    42,137.12    42,276.97
SO2 (thousand tons)............................         1.32         2.10         1.63         3.12         4.53
----------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
Note: Parentheses indicate negative values.

    As part of the analysis for this NOPR, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX estimated for each of the TSLs considered for 
commercial packaged boilers. As discussed in section IV.L of this 
document, for CO2, DOE used values for the SCC developed by 
an interagency process. The interagency group selected four sets of SCC 
values for use in regulatory analyses. The four SCC values for 
CO2 emissions reductions in 2015, expressed in 2014$, are 
$12.2 per metric ton (the average value from a distribution that uses a 
5-percent discount rate), $40.0 per metric ton (the average value from 
a distribution that uses a 3-percent

[[Page 15906]]

discount rate), $62.3 per metric ton (the average value from a 
distribution that uses a 2.5-percent discount rate), and $117 per 
metric ton (the 95th-percentile value from a distribution that uses a 
3-percent discount rate). The fourth set, which represents the 95th-
percentile SCC estimate across all three models at a 3-percent discount 
rate, is included to represent higher-than-expected impacts from 
temperature change further out in the tails of the SCC distribution. 
The values for later years are higher due to increasing emissions-
related costs as the magnitude of projected climate change increases.
    Table V.42 presents the global value of CO2 emissions 
reductions at each TSL. For each of the four cases, DOE calculated a 
present value of the stream of annual values using the same discount 
rate as was used in the studies upon which the dollar-per-ton values 
are based. DOE calculated domestic values as a range from 7 percent to 
23 percent of the global values, and these results are presented in 
chapter 14 of the NOPR TSD.

  Table V.42--Estimate of Global Present Value of CO2 Emissions Reduction for Potential Standards of Commercial
                                      Packaged Boilers Shipped in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                        SCC Scenario\*\  million 2014$
                                                             ---------------------------------------------------
                                                                                            2.5%
                             TSL                              5% discount  3% discount    discount   3% discount
                                                                 rate,        rate,        rate,      rate, 95th
                                                                average      average      average     percentile
----------------------------------------------------------------------------------------------------------------
                                         Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
1...........................................................           76          369          594        1,125
2...........................................................          118          572          920        1,744
3...........................................................          275        1,343        2,165        4,096
4...........................................................          655        3,208        5,175        9,784
5...........................................................          670        3,278        5,287        9,996
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...........................................................           11           54           86          163
2...........................................................           17           83          134          254
3...........................................................           40          197          318          602
4...........................................................           95          467          753        1,424
5...........................................................           98          478          770        1,457
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
1...........................................................           87          423          680        1,288
2...........................................................          136          655        1,054        1,998
3...........................................................          316        1,540        2,483        4,697
4...........................................................          751        3,675        5,928       11,208
5...........................................................          767        3,755        6,057       11,452
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $40.0, $62.3 and $117
  per metric ton (2014$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).

    DOE is well aware that scientific and economic knowledge continues 
to evolve rapidly regarding the contribution of CO2 and 
other greenhouse gas (GHG) emissions to changes in the future global 
climate and the potential resulting damages to the world economy. Thus, 
any value placed in this rulemaking on reducing CO2 
emissions is subject to change. DOE, together with other Federal 
agencies, will continue to review various methodologies for estimating 
the monetary value of reductions in CO2 and other GHG 
emissions. This ongoing review will consider the comments on this 
subject that are part of the public record for this and other 
rulemakings, as well as other methodological assumptions and issues. 
However, consistent with DOE's legal obligations, and taking into 
account the uncertainty involved with this particular issue, DOE has 
included in this NOPR the most recent values and analyses resulting 
from the interagency review process.
    DOE also estimated the cumulative monetary value of the economic 
benefits associated with NOX emissions reductions 
anticipated to result from the considered TSLs for commercial packaged 
boilers. The dollar-per-ton values that DOE used are discussed in 
section IV.L of this document. Table V.43 presents the cumulative 
present value for NOX emissions for each TSL calculated 
using 7-percent and 3-percent discount rates. This table presents 
values that use the low dollar-per-ton values, which reflect DOE's 
primary estimate. Results that reflect the range of NOX 
dollar-per-ton values are presented in Table V.45. Detailed discussions 
on NOX emissions reductions are available in chapter 14 of 
the NOPR TSD.

[[Page 15907]]



   Table V.43--Present Value of NOX Emissions Reduction for Potential
                Standards for Commercial Packaged Boilers
------------------------------------------------------------------------
                                                     3%           7%
                      TSL                         Discount     Discount
                                                    rate         rate
------------------------------------------------------------------------
                                                      million 2014$
------------------------------------------------------------------------
                     Power Sector and Site Emissions
------------------------------------------------------------------------
1.............................................          203           71
2.............................................          322          112
3.............................................          428          149
4.............................................          802          279
5.............................................          997          346
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.............................................           80           29
2.............................................          125           46
3.............................................          299          106
4.............................................          708          248
5.............................................          721          253
------------------------------------------------------------------------
                             Total Emissions
------------------------------------------------------------------------
1.............................................          284          100
2.............................................          447          158
3.............................................          727          255
4.............................................        1,510          527
5.............................................        1,718          599
------------------------------------------------------------------------

    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.44 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced CO2 
and NOX emissions in each of four valuation scenarios to the NPV of 
consumer savings calculated for each TSL considered in this rulemaking, 
at both a 7-percent and 3-percent discount rate. The CO2 
values used in the columns correspond to the four sets of SCC values 
discussed in section IV.L.1 of this document.

  Table V.44--Commercial Packaged Boilers TSLs: Net Present Value of Consumer Savings Combined With Net Present
                        Value of Monetized Benefits From CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% Discount Rate added with:
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                     SCC at 5%       SCC at 3%      SCC at 2.5%   percentile SCC
                       TSL                        discount rate*  discount rate*  discount rate*  at 3% discount
                                                  and 3% low NOX  and 3% low NOX  and 3% low NOX   rate* and 3%
                                                       value           value           value       low NOX value
 
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2014$)
----------------------------------------------------------------------------------------------------------------
1...............................................           1.461           1.797           2.054           2.662
2...............................................           2.269           2.789           3.188           4.132
3...............................................           3.635           4.860           5.802           8.017
4...............................................           8.148          11.073          13.325          18.605
5...............................................           8.467          11.455          13.757          19.152
----------------------------------------------------------------------------------------------------------------


 
                                                           Consumer NPV at 7% Discount Rate added with:
                                                 ---------------------------------------------------------------
                                                                                                       95th
                                                     SCC at 5%       SCC at 3%      SCC at 2.5%   percentile SCC
                       TSL                        discount rate*  discount rate*  discount rate*  at 3% discount
                                                  and 7% low NOX  and 7% low NOX  and 7% low NOX   rate * and 7%
                                                       value           value           value       low NOX value
 
----------------------------------------------------------------------------------------------------------------
                                                                          (billion 2014$)
----------------------------------------------------------------------------------------------------------------
1...............................................           0.456           0.792           1.049           1.658
2...............................................           0.707           1.227           1.625           2.569
3...............................................           0.905           2.129           3.072           5.286
4...............................................           1.946           4.870           7.123          12.403

[[Page 15908]]

 
5...............................................           1.969           4.957           7.259          12.654
----------------------------------------------------------------------------------------------------------------
* The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values
  are based on the average SCC from the integrated assessment models, at discount rates of 5, 3, and 2.5
  percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/metric ton, and $62.3/
  metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), which
  represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, is included
  to represent higher-than-expected impacts from temperature change further out in the tails of the SCC
  distribution. The SCC values are emission year specific.

    In considering the above results, two issues are relevant. First, 
the national operating cost savings are domestic U.S. commercial 
consumer monetary savings that occur as a result of market 
transactions, while the value of CO2 reductions is based on 
a global value. Second, the assessments of operating cost savings and 
the SCC are performed with different methods that use quite different 
time frames for analysis. The national operating cost savings is 
measured for the lifetime of products shipped in 2019-2048. Because 
CO2 emissions have a very long residence time in the 
atmosphere,\89\ the SCC values in future years reflect future 
CO2 emissions impacts that continue beyond 2100.
---------------------------------------------------------------------------

    \89\ The atmospheric lifetime of CO2 is estimated of 
the order of 30-95 years. Jacobson, MZ, ``Correction to `Control of 
fossil-fuel particulate black carbon and organic matter, possibly 
the most effective method of slowing global warming,' '' J. Geophys. 
Res. 110. pp. D14105 (2005).
---------------------------------------------------------------------------

7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6313(a)(6)(B)(ii)(VII)) No 
other factors were considered in this analysis.

C. Conclusion

    To adopt national standards more stringent than the current 
standards for commercial packaged boilers, DOE must determine that such 
action would result in significant additional conservation of energy 
and is technologically feasible and economically justified. (42 U.S.C. 
6313(a)(6)(A)(ii) and (C)(i)) In determining whether a standard is 
economically justified, the Secretary must determine whether the 
benefits of the standard exceed its burdens by, to the greatest extent 
practicable, considering the seven statutory factors discussed 
previously. (42 U.S.C. 6313(a)(6)(B)(ii)(I)-(VII) and (C)(i))
    For this NOPR, DOE considered the impacts of amended standards for 
commercial packaged boilers at each TSL, beginning with the maximum 
technologically feasible level, to determine whether that level was 
economically justified. Where the max-tech level was not justified, DOE 
then considered the next most efficient level and undertook the same 
evaluation until it reached the highest efficiency level that is both 
technologically feasible and economically justified and saves a 
significant amount of energy.
    To aid the reader in understanding the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard.
1. Benefits and Burdens of Trial Standard Levels Considered for 
Commercial Packaged Boilers
    Table V.45, Table V.46, and Table V.47 summarize the quantitative 
impacts estimated for each TSL for commercial packaged boilers. The 
national impacts are measured over the lifetime of commercial packaged 
boilers purchased in the 30-year period that begins in the year of 
compliance with amended standards (2019-2048). The energy savings, 
emissions reductions, and value of emissions reductions refer to full-
fuel-cycle results.

                               Table V.45--Summary of Analytical Results for Commercial Packaged Boilers: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Category                      TSL 1                    TSL 2                   TSL 3                   TSL 4                   TSL 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
National FFC Energy Savings      0.25...................  0.39..................  0.97..................  2.34..................  2.37.
 (quads).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   NPV of Commercial consumer Benefits (billion 2014$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate...............  1.09...................  1.69..................  2.59..................  5.89..................  5.98.
7% discount rate...............  0.27...................  0.41..................  0.33..................  0.67..................  0.60.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (2014$ million)...  166.8 to 173.7.........  156.3 to 167.0........  116.2 to 157.7........  56.1 to 145.9.........  51.2 to 146.7.
Change in Industry NPV (%).....  (7.4) to (3.6).........  (13.2) to (7.3).......  (35.5) to (12.4)......  (68.9) to (19.0)......  (71.6) to (18.6).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Cumulative Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......  15.....................  22....................  53....................  128...................  131

[[Page 15909]]

 
NOX (thousand tons)............  103....................  162...................  265...................  553...................  630
Hg (tons)......................  0.0002.................  0.0003................  (0.002)...............  (0.002)...............  (0.002)
N2O (thousand tons)............  0.07...................  0.12..................  0.17..................  0.36..................  0.41
N2O (thousand tons CO2eq)......  19.....................  31....................  44....................  94....................  109
CH4 (thousand tons)............  151....................  233...................  618...................  1,505.................  1,510
CH4 (thousand tons CO2eq)......  4,227..................  6,515.................  17,301................  42,137................  42,277
SO2 (thousand tons)............  1.3....................  2.1...................  1.6...................  3.1...................  4.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Value of Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (2014$ million)\*\.........  87 to 1,288............  136 to 1,998..........  316 to 4,697..........  751 to 11,208.........  767 to 11,452
NOX--3% discount rate (2014$     284 to 627.............  447 to 988............  727 to 1,605..........  1,510 to 3,335........  1,718 to 3,794
 million).
NOX--7% discount rate (2014$     100 to 223.............  158 to 353............  255 to 570............  527 to 1,177..........  599 to 1,338.
 million).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.
Note: Parentheses indicate negative values.


                       Table V.46--NPV of Commercial Consumer Benefits by Equipment Class
----------------------------------------------------------------------------------------------------------------
                                                                 Trial standard level (billion 2014$)
             Equipment class               Discount  -----------------------------------------------------------
                                            rate %         1           2           3           4           5
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial               3       0.463       0.665       1.570       3.187       3.187
 Packaged Boilers.......................
                                                   7       0.092       0.132       0.052       0.209       0.209
Large Gas-Fired Hot Water Commercial               3       0.129       0.208       0.208       1.446       1.446
 Packaged Boilers.......................
                                                   7       0.027       0.036       0.036       0.089       0.089
Small Oil-Fired Hot Water Commercial               3       0.278       0.278       0.278       0.337       0.372
 Packaged Boilers.......................
                                                   7       0.080       0.080       0.080       0.093       0.040
Large Oil-Fired Hot Water Commercial               3       0.063       0.199       0.199       0.271       0.331
 Packaged Boilers.......................
                                                   7       0.019       0.059       0.059       0.080       0.067
Small Gas-Fired Steam Commercial                   3       0.038       0.074       0.074       0.145       0.145
 Packaged Boilers.......................
                                                   7       0.012       0.022       0.022       0.038       0.038
Large Gas-Fired Steam Commercial                   3       0.039       0.060       0.060       0.110       0.110
 Packaged Boilers.......................
                                                   7       0.013       0.020       0.020       0.035       0.035
Small Oil-Fired Steam Commercial                   3       0.032       0.070       0.070       0.148       0.148
 Packaged Boilers.......................
                                                   7       0.010       0.021       0.021       0.044       0.044
Large Oil-Fired Steam Commercial                   3       0.048       0.134       0.134       0.244       0.244
 Packaged Boilers.......................
                                                   7       0.016       0.044       0.044       0.079       0.079
    Total--All Classes..................           3       1.090       1.687       2.593       5.888       5.982
                                                   7       0.269       0.414       0.334       0.668       0.603
----------------------------------------------------------------------------------------------------------------


                       Table V.47--Summary of Analytical Results for CPB Consumer Impacts
----------------------------------------------------------------------------------------------------------------
                                                         TSL 1       TSL 2       TSL 3       TSL 4       TSL 5
----------------------------------------------------------------------------------------------------------------
                                   Commercial Consumer Mean LCC Savings 2014$
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged               $223        $521        $302      $1,656      $1,656
 Boilers............................................
Large Gas-Fired Hot Water Commercial Packaged              2,419       3,647       3,647       2,062       2,062
 Boilers............................................
Small Oil-Fired Hot Water Commercial Packaged              7,799       7,799       7,799       8,939       2,333
 Boilers............................................
Large Oil-Fired Hot Water Commercial Packaged             10,108      30,834      30,834      40,983      17,076
 Boilers............................................
Small Gas-Fired Steam Commercial Packaged Boilers...       1,933       2,782       2,782       4,383       4,383
Large Gas-Fired Steam Commercial Packaged Boilers...      12,255      16,802      16,802      28,295      28,295
Small Oil-Fired Steam Commercial Packaged Boilers...       1,985       4,256       4,256       8,637       8,637
Large Oil-Fired Steam Commercial Packaged Boilers...      13,243      36,128      36,128      65,128      65,128
----------------------------------------------------------------------------------------------------------------
                                      Commercial Consumer Simple PBP Years
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged                9.4         9.6        13.6        13.6        13.6
 Boilers............................................
Large Gas-Fired Hot Water Commercial Packaged               10.2        11.0        11.0        15.6        15.6
 Boilers............................................
Small Oil-Fired Hot Water Commercial Packaged                5.7         5.7         5.7         6.6        14.3
 Boilers............................................
Large Oil-Fired Hot Water Commercial Packaged                4.1         4.7         4.7         5.2        12.2
 Boilers............................................
Small Gas-Fired Steam Commercial Packaged Boilers...         7.0         7.4         7.4         8.2         8.2
Large Gas-Fired Steam Commercial Packaged Boilers...         4.3         4.7         4.7         5.0         5.0
Small Oil-Fired Steam Commercial Packaged Boilers...         5.0         5.3         5.3         6.1         6.1
Large Oil-Fired Steam Commercial Packaged Boilers...         2.5         2.8         2.8         3.1         3.1
----------------------------------------------------------------------------------------------------------------

[[Page 15910]]

 
                                 Distribution of Commercial Consumer LCC Impacts
----------------------------------------------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial Packaged                20%         23%         42%         56%         56%
 Boilers Net Cost (%)
Large Gas-Fired Hot Water Commercial Packaged                21%         27%         27%         56%         56%
 Boilers Net Cost (%)...............................
Small Oil-Fired Hot Water Commercial Packaged                20%         20%         20%         26%         56%
 Boilers Net Cost (%)...............................
Large Oil-Fired Hot Water Commercial Packaged                 1%          5%          5%          7%         46%
 Boilers Net Cost (%)...............................
Small Gas-Fired Steam Commercial Packaged Boilers            18%         26%         26%         34%         34%
 Net Cost (%).......................................
Large Gas-Fired Steam Commercial Packaged Boilers            12%         15%         15%         19%         19%
 Net Cost (%).......................................
Small Oil-Fired Steam Commercial Packaged Boilers             4%         12%         12%         16%         16%
 Net Cost (%).......................................
Large Oil-Fired Steam Commercial Packaged Boilers             0%          1%          1%          1%          1%
 Net Cost (%).......................................
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

    TSL 5 corresponds to the max-tech level for all the equipment 
classes and offers the potential for the highest cumulative energy 
savings through the analysis period from 2019 through 2048. The 
estimated energy savings from TSL 5 are 2.37 quads of energy. TSL 5 has 
an estimated NPV of consumer benefit of $0.60 billion using a 7-percent 
discount rate, and $6.0 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 5 are 131 million metric 
tons of CO2, 4.53 thousand tons of SO2, 630 
thousand tons of NOX, 1,510 thousand tons of CH4, 
and 0.41 thousand tons of N2O, and an emissions increase of 
0.002 tons of Hg. The estimated monetary value of the CO2 
emissions reductions at TSL 5 ranges from $767 million to $11,452 
million.
    At TSL 5, the average LCC savings range from $1,656 to $65,128 
depending on equipment class. The fraction of consumers incurring a net 
cost range from 1 percent for large oil-fired steam CPB equipment class 
to 56 percent for small gas-fired hot water CPB equipment class.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$128.9 million to a decrease of $33.4 million, which corresponds to a 
change in INPV of -71.6 percent to -18.6 percent, respectively. The 
industry is expected to incur $56.6 million in total conversion costs 
at this level. Approximately 98.7 percent of industry equipment 
listings would require additional engineering expertise and production 
lines, or possibly source parts from other manufacturers.
    Accordingly, the Secretary tentatively concludes that at TSL 5 for 
commercial packaged boilers, the benefits of energy savings, NPV of 
consumer benefits, emission reductions, and the estimated monetary 
value of the CO2 emissions reductions would be outweighed by 
the very large negative change in INPV for manufacturers. Consequently, 
DOE has tentatively concluded that TSL 5 is not economically justified.
    TSL 4 corresponds to the efficiency level within each equipment 
class that provides the highest consumer NPV at a 7% discount rate over 
the analysis period from 2019 through 2048. The estimated energy 
savings from TSL 4 are 2.34 quads of energy. TSL 4 has an estimated NPV 
of consumer benefit of $0.67 billion using a 7-percent discount rate, 
and $5.9 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 4 are 128 million metric 
tons of CO2, 3.1 thousand tons of SO2, 553 
thousand tons of NOX, 1,505 thousand tons of CH4, 
and 0.36 thousand tons of N2O, and an emissions increase of 
0.002 tons of Hg. The estimated monetary value of the CO2 
emissions reductions at TSL 4 ranges from $751 million to $11,208 
million.
    At TSL 4, the average LCC savings range from $1,656 to $65,128 
depending on equipment class. The fraction of consumers incurring a net 
cost range from 1 percent for large oil-fired steam CPB equipment class 
to 56 percent for small gas-fired hot water CPB equipment class.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$124.1 million to a decrease in $34.3 million, which corresponds to a 
change of -68.9 percent to -19.0 percent, respectively. The industry is 
expected to incur $54.7 million in total conversion costs at this 
level. Approximately 98.4 percent of industry equipment listings 
require redesign to meet this standard level today.
    Accordingly, the Secretary tentatively concludes that at TSL 4 for 
commercial packaged boilers, the benefits of energy savings, NPV of 
consumer benefits, emission reductions, and the estimated monetary 
value of the CO2 emissions reductions would be outweighed by 
the negative change in INPV for manufacturers. Consequently, DOE has 
tentatively concluded that TSL 4 is not economically justified.
    TSL 3 corresponds to the intermediate level with both condensing 
and high efficiency noncondensing standard levels, depending on 
equipment class, and offers the potential for significant cumulative 
energy savings over the analysis period from 2019 through 2048. The 
estimated energy savings from TSL 3 are 0.97 quads of energy. TSL 3 has 
an estimated NPV of consumer benefit of $0.33 billion using a 7-percent 
discount rate, and $2.6 billion using a 3-percent discount rate.
    The cumulative emissions reductions at TSL 3 are 53 million metric 
tons of CO2, 1.63 thousand tons of SO2, 265 
thousand tons of NOX, 618 thousand tons of CH4, 
and 0.17 thousand tons of N2O, and an emissions increase of 
0.002 tons of Hg. The estimated monetary value of the CO2 
emissions reductions at TSL 3 ranges from $316 million to $4,698 
million.
    At TSL 3, the average LCC savings range from $302 to $36,128 
depending on equipment class. The fraction of consumers incurring a net 
cost range from 1 percent for large oil-fired steam CPB equipment class 
to 42 percent for small gas-fired hot water CPB equipment class.
    At TSL 3, the projected INPV ranges from a decrease of $64.0 
million to a decrease of $22.4 million, which corresponds to a change 
of -35.5 percent to -12.4 percent, respectively. The industry is 
expected to incur $40.1 million in total conversion costs at this 
level. Approximately 73.8 percent of industry equipment listings 
require redesign to meet this standard level today.
    The Secretary carefully considered proposing TSL 3. However, in 
weighing the benefits of energy savings, NPV of consumer benefits, 
emission reductions, and the estimated monetary value of the 
CO2 emissions reductions against the negative change in INPV 
for manufacturers, DOE has tentatively concluded that TSL 3 is not 
economically justified. DOE may

[[Page 15911]]

reexamine this decision based on the public comments received in 
response to this NOPR.
    TSL 2 corresponds to the highest noncondensing efficiency level 
analyzed for the gas-fired hot water equipment classes and efficiency 
levels for oil-fired hot water equipment classes that are 2 or 3 
percentage points above the equivalent size gas-fired hot water 
equipment classes, depending on equipment class, and one level below 
max tech for all steam CPB equipment classes and offers the potential 
for significant energy savings through the analysis period from 2019 
through 2048. The estimated energy savings from TSL 2 are 0.39 quads of 
energy. TSL 2 has an estimated NPV of consumer benefit of $0.41 billion 
using a 7-percent discount rate, and $1.69 billion using a 3-percent 
discount rate.
    The cumulative emissions reductions at TSL 2 are 22 million metric 
tons of CO2, 2.1 thousand tons of SO2, 162 
thousand tons of NOX, 0.0003 tons of Hg, 233 thousand tons 
of CH4, and 0.12 thousand tons of N2O. The 
estimated monetary value of the CO2 emissions reductions at 
TSL 2 ranges from $136 million to $1,998 million.
    At TSL 2, the average LCC savings range from $521 to $36,128 
depending on equipment class. The fraction of consumers incurring a net 
cost range from 1 percent for large oil-fired steam CPB equipment class 
to 27 percent for large gas-fired hot water CPB equipment class.
    At TSL 2, the projected INPV ranges from a decrease of $23.8 
million to a decrease of $13.1 million, which corresponds to a change 
of -13.2 percent to -7.3 percent, respectively. The industry is 
expected to incur $27.5 million in total conversion costs at this 
level. Approximately 52.5 percent of industry equipment listings 
require redesign to meet this standard level today.
    Accordingly, the Secretary tentatively concludes that at TSL 2 for 
commercial packaged boilers, the benefits of energy savings, NPV of 
consumer benefits, emission reductions, and the estimated monetary 
value of the CO2 emissions reductions would outweigh the 
negative change in INPV for manufacturers. Consequently, DOE has 
tentatively concluded that TSL 2 is economically justified.
    After carefully considering the analysis results and weighing the 
benefits and burdens of TSL 2, DOE believes that setting the standards 
for commercial packaged boilers at TSL 2 represents the maximum 
improvement in energy efficiency that is technologically feasible and 
economically justified. TSL 2 is technologically feasible because the 
technologies required to achieve these levels already exist in the 
current market and are available from multiple manufacturers. TSL 2 is 
economically justified because the benefits to the nation in the form 
of energy savings, consumer NPV at 3 percent and at 7 percent, and 
emissions reductions outweigh the costs associated with reduced INPV. 
Therefore, DOE proposes to adopt amended energy conservation standards 
for commercial packaged boilers at the levels established by TSL 2 and 
presented in
    However, the only difference between TSL 2 and TSL 3 is in the 
small gas-fired hot water CPB equipment class. TSL 3 includes the 95% 
TE level while TSL 2 includes the 85% TE level for that equipment 
class. TSL 3 results in energy savings that are 250 percent greater 
than TSL 2. Approximately 72 percent of small gas-fired hot water CPB 
equipment manufacturers offer at least one product that meets TSL 3.
    DOE requests comment on whether DOE should adopt TSL 3.
    See section VII.E for a list of issues on which DOE seeks comment.
    Table V.48.
    However, the only difference between TSL 2 and TSL 3 is in the 
small gas-fired hot water CPB equipment class. TSL 3 includes the 95% 
TE level while TSL 2 includes the 85% TE level for that equipment 
class. TSL 3 results in energy savings that are 250 percent greater 
than TSL 2. Approximately 72 percent of small gas-fired hot water CPB 
equipment manufacturers offer at least one product that meets TSL 3.
    DOE requests comment on whether DOE should adopt TSL 3.
    See section VII.E for a list of issues on which DOE seeks comment.

    Table V.48--Proposed Energy Conservation Standards for Commercial
                 Packaged Boilers Evaluated in This NOPR
  [Compliance required starting (date three years after publication of
                              final rule)]
------------------------------------------------------------------------
                                           Energy conservation standards
                                         -------------------------------
                                              Minimum         Minimum
                Equipment                     thermal       combustion
                                            efficiency      efficiency
                                                (%)             (%)
------------------------------------------------------------------------
Small Gas-Fired Hot Water Commercial                  85             n/a
 Packaged Boilers.......................
Large Gas-Fired Hot Water Commercial                 n/a              85
 Packaged Boilers.......................
Small Oil-Fired Hot Water Commercial                  87             n/a
 Packaged Boilers.......................
Large Oil-Fired Hot Water Commercial                 n/a              88
 Packaged Boilers.......................
Small Gas-Fired Steam Commercial                      81             n/a
 Packaged Boilers.......................
Large Gas-Fired Steam Commercial                      82             n/a
 Packaged Boilers.......................
Small Oil-Fired Steam Commercial                      84             n/a
 Packaged Boilers.......................
Large Oil-Fired Steam Commercial                      85             n/a
 Packaged Boilers.......................
------------------------------------------------------------------------

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards
    The benefits and costs of this NOPR's proposed energy conservation 
standards, for covered commercial packaged boilers sold in 2019-2048, 
can also be expressed in terms of annualized values. The monetary 
values for the total annualized net benefits are the sum of: (1) The 
annualized national economic value (expressed in 2014$) of the benefits 
from consumer operation of equipment that meets the proposed standards 
(consisting primarily of operating cost savings from using less energy, 
minus increases in equipment purchase and installation costs), and (2) 
the annualized value of the benefits of CO2 and 
NOX emission reductions.\90\
---------------------------------------------------------------------------

    \90\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2015, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(2020, 2030, etc.), and then discounted the present value from each 
year to 2015. The calculation uses discount rates of 3 and 7 percent 
for all costs and benefits except for the value of CO2 
reductions, for which DOE used case-specific discount rates. Using 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period, starting in the compliance year that yields the 
same present value.

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

[[Page 15912]]

    The national operating savings are domestic private U.S. consumer 
monetary savings that occur as a result of purchasing these equipment. 
The national operating cost savings is measured for the lifetime of 
commercial packaged boilers shipped in 2019-2048.
    The CO2 reduction is a benefit that accrues globally due 
to decreased domestic energy consumption that is expected to result 
from this proposed rule. Because CO2 emissions have a very 
long residence time in the atmosphere, the SCC values in future years 
reflect future CO2-emissions impacts that continue beyond 
2100 through 2300.
    Estimates of annualized benefits and costs of the proposed 
standards for commercial packaged boilers under TSL 2 are shown in 
Table V.49. The results under the primary estimate are as follows. 
Using a 7-percent discount rate for benefits and costs other than 
CO2 reduction, for which DOE used a 3-percent discount rate 
along with the average SCC series that uses a 3-percent discount rate, 
the cost of the standards proposed in this rulemaking is $51 million 
per year in increased equipment costs; while the estimated benefits are 
$91 million per year in reduced equipment operating costs, $37 million 
in CO2 reductions, and $16 million in reduced NOX 
emissions. In this case, the net benefit would amount to $93 million 
per year. Using a 3-percent discount rate for all benefits and costs 
and the average SCC series, the estimated cost of the standards 
proposed in this rulemaking is $48 million per year in increased 
equipment costs; while the estimated benefits are $142 million per year 
in reduced operating costs, $37 million in CO2 reductions, 
and $25 million in reduced NOX emissions. In this case, the 
net benefit would amount to approximately $156 million per year.

                        Table V.49--Annualized Benefits and Costs of Proposed Standards (TSL 2) for Commercial Packaged Boilers *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Million 2014$/year
                                              Discount rate          -----------------------------------------------------------------------------------
                                                                           Primary estimate        Low net benefits estimate  High net benefits estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings *.  7%..............................  91........................  84........................  101.
                                    3%..............................  142.......................  129.......................  160.
CO2 Reduction (using mean SCC at    5%..............................  10........................  10........................  11.
 5% discount rate) * **.
CO2 Reduction (using mean SCC at    3%..............................  37........................  34........................  39.
 3% discount rate) * **.
CO2 Reduction (using mean SCC at    2.5%............................  54........................  51........................  58.
 2.5% discount rate) * **.
CO2 Reduction (using 95th           3%..............................  111.......................  104.......................  119.
 percentile SCC at 3% discount
 rate) * **.
NOX Reduction [dagger]............  7%..............................  16........................  15........................  37.
                                    3%..............................  25........................  23........................  59.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total Benefits                  7% plus CO2 range...............  117 to 218................  108 to 203................  149 to 258.
     [dagger][dagger].
                                    7%..............................  143.......................  133.......................  177.
                                    3% plus CO2 range...............  177 to 278................  162 to 256................  230 to 338.
                                    3%..............................  204.......................  186.......................  258.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consumer Incremental Equipment      7%..............................  51........................  54........................  47.
 Costs.
                                    3%..............................  48........................  52........................  45.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Net Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Total [dagger][dagger]........  7% plus CO2 range...............  67 to 168.................  54 to 149.................  102 to 210.
                                    7%..............................  93........................  79........................  130.
                                    3% plus CO2 range...............  129 to 230................  110 to 205................  185 to 293.
                                    3%..............................  156.......................  135.......................  213.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with commercial packaged boilers shipped in 2019-2048. These results include benefits
  to consumers which accrue after 2048 from the equipment purchased in 2019-2048. The incremental installed costs include incremental equipment cost as
  well as installation costs. The CO2 reduction benefits are global benefits due to actions that occur nationally. The Primary, Low Benefits, and High
  Benefits Estimates utilize projections of building stock and energy prices from the AEO2015 Reference case, Low Economic Growth case, and High
  Economic Growth case, respectively. In addition, DOE used a constant equipment price assumption as the default price projection; the cost to
  manufacture a given unit of higher efficiency neither increases nor decreases over time. The equipment price projection is described in section IV.F.1
  of this document and chapter 8 of the NOPR TSD.
** The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the
  integrated assessment models, at discount rates of 5, 3, and 2.5 percent. For example, for 2015 emissions, these values are $12.2/metric ton, $40.0/
  metric ton, and $62.3/metric ton, in 2014$, respectively. The fourth set ($117 per metric ton in 2014$ for 2015 emissions), which represents the 95th
  percentile of the SCC distribution calculated using SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-
  than-expected impacts from temperature change further out in the tails of the SCC distribution. The SCC values are emission year specific.

[[Page 15913]]

 
[dagger] The $/ton values used for NOX are described in section IV.L. DOE estimated the monetized value of NOX emissions reductions using benefit per
  ton estimates from the Regulatory Impact Analysis titled, ``Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for
  Modified and Reconstructed Power Plants,'' published in June 2014 by EPA's Office of Air Quality Planning and Standards. (Available at www3.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.) See section IV.L.2 for further discussion. Note that the agency is presenting a national benefit-
  per-ton estimate for particulate matter emitted from the Electric Generating Unit sector based on an estimate of premature mortality derived from the
  ACS study (Krewski et al., 2009). If the benefit-per-ton estimates were based on the Six Cities study (Lepuele et al., 2011), the values would be
  nearly two-and-a-half times larger. Because of the sensitivity of the benefit-per-ton estimate to the geographical considerations of sources and
  receptors of emissions, DOE intends to investigate refinements to the agency's current approach of one national estimate by assessing the regional
  approach taken by EPA's Regulatory Impact Analysis for the Clean Power Plan Final Rule.
[dagger][dagger] Total Benefits for both the 3-percent and 7-percent cases are presented using only the average SCC with a 3-percent discount rate. In
  the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate,
  and those values are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems that this standards address are as follows:
    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information leads some consumers to miss 
opportunities to make cost-effective investments in energy efficiency.
    (2) In some cases the benefits of more efficient equipment are not 
realized due to misaligned incentives between purchasers and users. An 
example of such a case is when the equipment purchase decision is made 
by a building contractor or building owner who does not pay the energy 
costs.
    (3) There are external benefits resulting from improved energy 
efficiency of appliances that are not captured by the users of such 
equipment. These benefits include externalities related to public 
health, environmental protection, and national security that are not 
reflected in energy prices, such as reduced emissions of air pollutants 
and greenhouse gases that impact human health and global warming.
    The Administrator of the Office of Information and Regulatory 
Affairs (OIRA) in the OMB has determined that the proposed regulatory 
action is a significant regulatory action under Executive Order 12866. 
Accordingly, pursuant to section 6(a)(3)(B) of the Order, DOE has 
provided to OIRA: (i) The text of the draft regulatory action, together 
with a reasonably detailed description of the need for the regulatory 
action and an explanation of how the regulatory action will meet that 
need; and (ii) An assessment of the potential costs and benefits of the 
regulatory action, including an explanation of the manner in which the 
regulatory action is consistent with a statutory mandate. DOE has 
included these documents in the rulemaking record.
    In addition, the Administrator of OIRA has determined that the 
proposed regulatory action is an ``economically significant regulatory 
action'' under section (3)(f)(1) of Executive Order 12866. Accordingly, 
pursuant to section 6(a)(3)(C) of the Order, DOE has provided to OIRA 
an assessment, including the underlying analysis, of benefits and costs 
anticipated from the regulatory action, together with, to the extent 
feasible, a quantification of those costs; and an assessment, including 
the underlying analysis, of costs and benefits of potentially effective 
and reasonably feasible alternatives to the planned regulation, and an 
explanation why the planned regulatory action is preferable to the 
identified potential alternatives. These assessments can be found in 
the technical support document for this rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563. 76 FR 3281 (Jan. 21, 2011). Executive Order 13563 is 
supplemental to and explicitly reaffirms the principles, structures, 
and definitions governing regulatory review established in Executive 
Order 12866. To the extent permitted by law, agencies are required by 
Executive Order 13563 to: (1) Propose or adopt a regulation only upon a 
reasoned determination that its benefits justify its costs (recognizing 
that some benefits and costs are difficult to quantify); (2) tailor 
regulations to impose the least burden on society, consistent with 
obtaining regulatory objectives, taking into account, among other 
things, and to the extent practicable, the costs of cumulative 
regulations; (3) select, in choosing among alternative regulatory 
approaches, those approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity); (4) to the extent 
feasible, specify performance objectives, rather than specifying the 
behavior or manner of compliance that regulated entities must adopt; 
and (5) identify and assess available alternatives to direct 
regulation, including providing economic incentives to encourage the 
desired behavior, such as user fees or marketable permits, or providing 
information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, the OIRA has emphasized that such techniques may include 
identifying changing future compliance costs that might result from 
technological innovation or anticipated behavioral changes. For the 
reasons stated in the preamble, DOE believes that this NOPR is 
consistent with these principles, including the requirement that, to 
the extent permitted by law, benefits justify costs and that net 
benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (IRFA) for 
any rule that by law must be proposed for public comment, unless the 
agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by Executive Order 13272, ``Proper Consideration of Small 
Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE 
published procedures and policies on February 19, 2003, to ensure that 
the potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's Web site (http://energy.gov/gc/office-general-counsel). DOE 
has prepared the following IRFA for the products that are the subject 
of this rulemaking. DOE will transmit a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business

[[Page 15914]]

Administration (SBA) for review under 5 U.S.C 605(b).
    The Small Business Administration (SBA) considers a business entity 
to be a small business, if, together with its affiliates, it employs 
less than a threshold number of workers specified in 13 CFR part 121. 
These size standards and codes are established by the North American 
Industry Classification System (NAICS). The threshold number for NAICS 
classification code 333414, which applies to ``heating equipment 
(except warm air furnaces) manufacturing'' and includes commercial 
packaged boilers, is 500 employees.
1. Statement of the Need for, Objectives of, and Legal Basis for, the 
Rule
    A statement of the need for, objectives of, and legal basis for, 
the proposed rule is stated elsewhere in the preamble and not repeated 
here.
2. Description on Estimated Number of Small Entities Regulated
    To estimate the number of companies that could be small business 
manufacturers of products covered by this rulemaking, DOE conducted a 
market survey using publically-available information to identify 
potential small manufacturers. DOE's research involved industry trade 
association membership directories (including AHRI), public databases 
(e.g., AHRI Directory,\91\ ABMA Directory \92\), individual company Web 
sites, and market research tools (e.g., Hoovers reports) to create a 
list of companies that manufacture or sell products covered by this 
rulemaking. DOE also asked stakeholders and industry representatives if 
they were aware of any other small manufacturers during manufacturer 
interviews and at DOE public meetings. DOE reviewed publicly-available 
data and contacted companies on its list, as necessary, to determine 
whether they met the SBA's definition of a small business manufacturer 
of covered commercial packaged boilers. DOE screened out companies that 
do not offer products covered by this rulemaking, do not meet the 
definition of a ``small business,'' or are foreign owned and operated.
---------------------------------------------------------------------------

    \91\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
    \92\ See http://www.abma.com/.
---------------------------------------------------------------------------

    DOE initially identified 45 potential manufacturers of commercial 
packaged boilers sold in the U.S. DOE then determined that 15 are large 
manufacturers, manufacturers that are foreign owned and operated. DOE 
was able to determine that 30 manufacturers meet the SBA's definition 
of a ``small business.'' Of these 30 small businesses, DOE estimates 
that 23 domestically manufacture commercial packaged boilers covered by 
this rulemaking.
    Before issuing this NOPR, DOE attempted to contact all the small 
business manufacturers of commercial packaged boilers it had 
identified. Six small businesses agreed to take part in an MIA 
interview. DOE also obtained information about small business impacts 
while interviewing large manufacturers.
3. Description and Estimate of Compliance Requirements
    In the engineering analysis, DOE compiled an equipment database 
based on equipment listing information provided by the AHRI and ABMA 
trade associations. However, DOE notes that it does not have product 
listings data for 11 of the identified 30 small manufacturers since 
they are not AHRI or ABMA trade association members. The following 
discussion reflects the available data provided by AHRI and ABMA and 
assumes the distribution of equipment efficiencies data to be 
representative of the industry. Additionally, despite extensive 
interviews with small and large companies, DOE was not able to obtain 
sufficient financial or sales data to determine typical small 
manufacturer revenue, operating profit and market share. The small 
manufacturers provided insufficient data to determine the effect these 
standards will have on small business revenue or operating profit.
    However, in an effort to gauge the relative impacts of this 
rulemaking on small manufacturers, DOE has conducted a detailed product 
availability analysis. The analysis investigates the portion of small 
manufacturers that are currently able to meet the proposed standard. 
Additionally, it looks that number of equipment models small 
manufacturers must redesign or eliminate relative to the industry-at-
large.
    DOE identified 18 small manufacturers and 13 large manufactures 
that produce gas-fired equipment covered by this rulemaking based on 
companies included in DOE's equipment database. Roughly 56% of gas-
fired equipment listings in the database already meet the proposed 
standard at TSL 2. This would suggest that TSL 2 already has a strong 
market presence. DOE's engineering analysis concludes that no 
proprietary technology is required to meet today's proposed standard 
level. Manufacturers would likely need to adopt one or a combination of 
different technology options: (1) Switch from natural or atmospheric 
draft systems to mechanical draft boilers; (2) improve heat exchanger 
design using tabulators, fins and multi-pass designs; (3) use high 
efficiency burner technology such as pulse combustion; or (4) increase 
jacket insulation (e.g. 3-4 inches of fiberglass wool).
    Assuming the equipment database used in the engineering analysis is 
representative of the industry as a whole, small manufacturers have 
similar portions of product listings at TSL 2 as their larger 
competitors in the gas-fired sector. Industry conversion costs for gas-
fired product at TSL 2 total $18.3 million. This results in an average 
conversion cost of approximately $0.42 million per manufacturer.\93\
---------------------------------------------------------------------------

    \93\ This estimate was derived by taking total conversion costs 
for gas-fired equipment divided by total gas-fired equipment 
manufacturers.
---------------------------------------------------------------------------

    Table VI.1 and Table VI.2 looks at the differential impacts of the 
standard on small manufacturers versus the industry at large. Table 
VI.1 estimates the percent of small manufacturers and their listings 
that currently comply with TSL 2. Table VI.2 estimates the percent of 
all manufacturers, both large and small, and their listings that 
currently comply with TSL 2.

[[Page 15915]]



               Table VI.1--Small Gas-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
                                                Small
                                           manufacturers:                           Small             Small
                                            manufacturers         Small        manufacturers:    manufacturers:
              Product class                 with products    manufacturers:       listings          listings
                                            compliant at     total listings     compliant at      compliant at
                                              TSL 2 (%)                             TSL 2           TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water.....................               100               433               348                80
Large Gas Hot Water.....................                67               220               120                55
Small Gas Steam.........................                50               106                26                25
Large Gas Steam.........................                71               127                46                36
----------------------------------------------------------------------------------------------------------------


              Table VI.2--Industry Gas-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
                                                Small
                                           manufacturers:                           Small             Small
                                            manufacturers         Small        manufacturers:    manufacturers:
              Product class                 with products    manufacturers:       listings          listings
                                            compliant at     total listings     compliant at      compliant at
                                              TSL 2 (%)                             TSL 2           TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Gas Hot Water.....................                97             1,149               712                62
Large Gas Hot Water.....................                78               373               188                50
Small Gas Steam.........................                67               252                72                29
Large Gas Steam.........................                82               186                80                43
----------------------------------------------------------------------------------------------------------------

    Using product listings as representative market data, DOE estimates 
average conversion costs of $0.63 million for large manufacturers and 
$0.31 million for small manufacturers of gas-fired equipment. Since 
this is a relatively low volume market where most products are built-
to-order, DOE assumes that capital conversion costs do not vary 
significantly between large and small manufacturers.\94\
---------------------------------------------------------------------------

    \94\ The amount of engineering effort is proportional to the 
number of models that require redesign. For this estimate, DOE used 
its product database to determine what portion of industry models 
would need to be redesigned for large and small manufacturers to 
determine the values for each. DOE used the number of models 
requiring redesign to scale large versus small product conversion 
costs. For gas-fired equipment, DOE used gas-fired model listings.
---------------------------------------------------------------------------

    In the market for oil-fired equipment, DOE identified seven small 
manufacturers and six large manufacturers producing equipment covered 
by this rulemaking based on the equipment database. Combined, they sell 
roughly 1,000 units per year, or 5% of the total annual market for CPB 
equipment. Due to the small size of the oil-fired market, DOE expects 
that the manufacturing processes and production costs to be similar for 
both small and large manufacturers. DOE notes that the market for oil-
fired commercial packaged boilers is shrinking. Some manufacturers, 
both small and large, may choose not to invest in product redesign 
given the small market size and projected decline in shipments. For 
manufacturers that do stay in the oil-fired market, DOE's analysis 
indicates that there are no proprietary technologies required to meet 
TSL 2. Manufacturers would likely need to adopt one or a combination of 
different technology options: (1) Integrate oxygen trimmers; (2) 
improve heat exchanger design; (3) use high efficiency burner 
technology such as pulse combustion; or (4) increase jacket insulation. 
Thus, DOE would expect similar conversion costs for small and large 
manufacturers on a per product basis.
    Table VI.3 estimates the percent of small manufacturers and their 
listings that currently comply with TSL 2.
    Table VI.4 estimates the percent of all manufacturers, both large 
and small, and their listings that currently comply with TSL 2.

               Table VI.3--Small Oil-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
                                                Small
                                           manufacturers:                           Small             Small
                                            manufacturers         Small        manufacturers:    manufacturers:
              Product class                 with products    manufacturers:       listings          listings
                                            compliant at     total listings     compliant at      compliant at
                                              TSL 2 (%)                             TSL 2           TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Oil Hot Water.....................                33                31                 1                 3
Large Oil Hot Water.....................                25                24                 3                13
Small Oil Steam.........................                25                49                 5                10
Large Oil Steam.........................                17                45                 6                13
----------------------------------------------------------------------------------------------------------------


[[Page 15916]]


              Table VI.4--Industry Oil-Fired Manufacturers Compliant at the Proposed Standard Level
----------------------------------------------------------------------------------------------------------------
                                                Small
                                           manufacturers:                           Small             Small
                                            manufacturers         Small        manufacturers:    manufacturers:
              Product class                 with products    manufacturers:       listings          listings
                                            compliant at     total listings     compliant at      compliant at
                                              TSL 2 (%)                             TSL 2           TSL 2 (%)
----------------------------------------------------------------------------------------------------------------
Small Oil Hot Water.....................                36               124                17                14
Large Oil Hot Water.....................                20                83                 5                 6
Small Oil Steam.........................                44               127                32                25
Large Oil Steam.........................                40               109                36                33
----------------------------------------------------------------------------------------------------------------

    Using product listings as representative market data, DOE estimates 
average conversion costs of $0.90 million for large manufacturers and 
$0.28 million for small manufacturers of oil-fired equipment. Since 
this is a relatively low volume market where most products are built-
to-order, DOE assumes that capital conversion costs do not vary 
significantly between large and small manufacturers.\95\
---------------------------------------------------------------------------

    \95\ The amount of engineering effort is proportional to the 
number of models that require redesign. For this estimate, DOE used 
its product database to determine what portion of industry models 
would need to be redesigned for large and small manufacturers to 
determine the values for each. DOE used the number of models 
requiring redesign to scale large versus small product conversion 
costs. For oil-fired equipment, DOE used oil-fired model listings to 
scale product conversion costs.
---------------------------------------------------------------------------

    DOE assumed the data for small manufacturer's products in the AHRI 
and ABMA databases are representative of all small manufacturers.
    DOE requests comment on the appropriateness of the Manufacturer 
Impact Analysis' assumption that the AHRI and ABMA equipment databases 
are representative of all small manufacturers.
    DOE also requests product listing data from small manufacturers 
that are not AHRI or ABMA trade association members--including model 
numbers, capacity, and efficiency ratings.
    DOE also continues to seek financial, sales, and market share data 
from small manufacturers to better understand and analyze the impact of 
these proposed standards and conversion costs on the revenue and 
operating profit of a small business.
    See section VII.E for a list of issues on which DOE seeks comment.
4. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the rulemaking being proposed today.
5. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from DOE's proposed rule. In addition to considering other 
TSLs in this rulemaking, DOE considered several policy alternatives in 
lieu of standards that could potentially result in energy savings while 
reducing burdens on small businesses. DOE considered the following 
policy alternatives: (1) No change in standard; (2) consumer rebates; 
(3) consumer tax credits; (4) voluntary energy efficiency targets; and 
(5) bulk government purchases. While these alternatives may mitigate to 
some varying extent the economic impacts on small entities compared to 
the standards, DOE determined that the energy savings of these 
alternatives are significantly smaller than those that would be 
expected to result from adoption of the proposed standard levels. 
Accordingly, DOE is declining to adopt any of these alternatives and is 
proposing the standards set forth in this rulemaking. (See chapter 17 
of the NOPR TSD for further detail on the policy alternatives DOE 
considered.)
    Additional compliance flexibilities may be available through other 
means. For example, individual manufacturers may petition for a waiver 
of the applicable test procedure. (See 10 CFR 431.401) Further, EPCA 
provides that a manufacturer whose annual gross revenue from all of its 
operations does not exceed $8 million may apply for an exemption from 
all or part of an energy conservation standard for a period not longer 
than 24 months after the effective date of a final rule establishing 
the standard. Additionally, section 504 of the Department of Energy 
Organization Act, 42 U.S.C. 7194, provides authority for the Secretary 
to adjust a rule issued under EPCA in order to prevent ``special 
hardship, inequity, or unfair distribution of burdens'' that may be 
imposed on that manufacturer as a result of such rule. Manufacturers 
should refer to 10 CFR part 430, subpart E, and Part 1003 for 
additional details.

C. Review Under the Paperwork Reduction Act

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

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act (NEPA) of

[[Page 15917]]

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

E. Review Under Executive Order 13132

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

F. Review Under Executive Order 12988

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

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Pub. L. 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed regulatory action likely to result in a rule that may 
cause the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect small governments. On March 18, 1997, 
DOE published a statement of policy on its process for 
intergovernmental consultation under UMRA. 62 FR 12820. DOE's policy 
statement is also available at http://energy.gov/gc/office-general-counsel.
    Although this proposed rule does not contain a Federal 
intergovernmental mandate, it may require expenditures of $100 million 
or more on the private sector. Specifically, the proposed rule will 
likely result in a final rule that could require expenditures of $100 
million or more. Such expenditures may include (1) investment in 
research and development and in capital expenditures by commercial 
packaged boilers manufacturers in the years between the final rule and 
the compliance date for the new standards, and (2) incremental 
additional expenditures by consumers to purchase higher-efficiency 
commercial packaged boilers, starting at the compliance date for the 
applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. 2 U.S.C. 1532(c). The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory 
Impact Analysis'' section of the TSD for this proposed rule respond to 
those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. 2 U.S.C. 1535(a). DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6313(a), 
this proposed rule would establish energy conservation standards for 
commercial packaged boilers that are designed to achieve the maximum 
improvement in energy efficiency that DOE has determined to be both 
technologically feasible and economically justified. A full discussion 
of the alternatives considered by DOE is presented in the ``Regulatory 
Impact Analysis'' section of the TSD for this proposed rule.

[[Page 15918]]

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

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This proposed rule would not have any impact on the autonomy or 
integrity of the family as an institution. Accordingly, DOE has 
concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

I. Review Under Executive Order 12630

    DOE has determined, under Executive Order 12630, ``Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights'' 53 FR 8859 (Mar. 15, 1988), that this regulation would not 
result in any takings that might require compensation under the Fifth 
Amendment to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to 
review most disseminations of information to the public under 
guidelines established by each agency pursuant to general guidelines 
issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 
2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 
2002). DOE has reviewed this NOPR under the OMB and DOE guidelines and 
has concluded that it is consistent with applicable policies in those 
guidelines.

K. Review Under Executive Order 13211

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

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as scientific information the 
agency reasonably can determine will have, or does have, a clear and 
substantial impact on important public policies or private sector 
decisions. 70 FR 2667.
    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. Generation of this 
report involved a rigorous, formal, and documented evaluation using 
objective criteria and qualified and independent reviewers to make a 
judgment as to the technical/scientific/business merit, the actual or 
anticipated results, and the productivity and management effectiveness 
of programs and/or projects. The ``Energy Conservation Standards 
Rulemaking Peer Review Report'' dated February 2007 has been 
disseminated and is available at the following Web site: http://energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report.

VII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this document. If 
you plan to attend the public meeting, please notify Ms. Brenda Edwards 
at (202) 586-2945 or [email protected].
    Please note that foreign nationals participating in the public 
meeting are subject to advance security screening procedures which 
require advance notice prior to attendance at the public meeting. If a 
foreign national wishes to participate in the public meeting, please 
inform DOE as soon as possible by contacting Ms. Regina Washington at 
(202) 586-1214 or by email: [email protected] so that the 
necessary procedures can be completed.
    DOE requires visitors to have laptops and other devices, such as 
tablets, checked upon entry into the building. Any person wishing to 
bring these devices into the Forrestal Building will be required to 
obtain a property pass. Visitors should avoid bringing these devices, 
or allow an extra 45 minutes to check in. Please report to the 
visitor's desk to have devices checked before proceeding through 
security.
    Due to the REAL ID Act implemented by the Department of Homeland 
Security (DHS), there have been recent changes regarding ID 
requirements for individuals wishing to enter Federal buildings from 
specific states and U.S. territories. Driver's licenses from the 
following states or territory will not be accepted for building entry 
and one of the alternate forms of ID listed below will be required. DHS 
has determined that regular driver's licenses (and ID cards) from the 
following jurisdictions are not acceptable for entry into DOE 
facilities: Alaska, American Samoa, Arizona, Louisiana, Maine, 
Massachusetts, Minnesota, New York, Oklahoma, and Washington. 
Acceptable alternate forms of Photo-ID include: U.S. Passport or 
Passport Card; an Enhanced Driver's License or Enhanced ID-Card issued 
by the states of Minnesota, New York or Washington (Enhanced licenses 
issued by these states are clearly marked Enhanced or Enhanced Driver's 
License); a military ID or other Federal government issued Photo-ID 
card.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar

[[Page 15919]]

participants will be published on DOE's Web site at: https://attendee.gotowebinar.com/register/6872804566336170753.
    Participants are responsible for ensuring their systems are 
compatible with the webinar software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

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

C. Conduct of the Public Meeting

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

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov Web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the Web site will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section below.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery, or mail also 
will be posted to www.regulations.gov. If you do not want your personal 
contact information to be publicly viewable, do not include it in your 
comment or any accompanying documents. Instead, provide your contact 
information in a cover letter. Include your first and last names, email 
address, telephone number, and optional mailing address. The cover 
letter will not be publicly viewable as long as it does not include any 
comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No 
telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.

[[Page 15920]]

    Confidential Business Information. According to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked confidential including all the 
information believed to be confidential, and one copy of the document 
marked non-confidential with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential 
status of the information and treat it according to its determination.
    Factors of interest to DOE when evaluating requests to treat 
submitted information as confidential include: (1) A description of the 
items; (2) whether and why such items are customarily treated as 
confidential within the industry; (3) whether the information is 
generally known by or available from other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person which would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    (1) DOE requests data on manufacturer selling prices, shipments and 
conversion costs of very large commercial packaged boilers with fuel 
input rate above 10,000 kBtu/h that can be used to supplement the 
analyses of such equipment in this rulemaking.
    (2) DOE requests feedback on the methodology used to analyze all 
equipment classes and the results obtained. In particular DOE is 
interested in comments on whether the results are appropriate and 
representative of the current market prices for such type of equipment.
    (3) DOE requests information or insight that can better inform its 
markups analysis.
    (4) DOE requests feedback on the methodology and assumptions used 
for the building heat load adjustment.
    (5) DOE requests information on what constitutes a reasonable 
baseline assumption about the current degree of adoption of hybrid 
boiler configurations in retrofit situations and on other related 
parameters such as percentage of total installed capacity typically 
assigned to the new condensing boilers, climate zones where it may be 
more prevalent and any other supporting documentation.
    (6) DOE seeks input on its characterization and development of 
representative installation costs, including venting costs, in new and 
replacement commercial package boiler installations, including data to 
support assumptions on vent sizing, vent length distributions, and vent 
materials.
    (7) DOE requests comment and seeks data on the assumption that a 
rebound effect is unlikely to occur for these commercial applications.
    (8) DOE requests comments on the representativeness of using 1-year 
as warranty for parts and labor, and 10-years as warranty for the heat 
exchanger.
    (9) DOE seeks feedback on the assumptions used to develop 
historical and projected shipments of commercial packaged boilers and 
the representativeness of its estimates of projected shipments. DOE 
also requests information on historical shipments of commercial 
packaged boilers including shipments by equipment class for small, 
large, and very large commercial packaged boilers.
    (10) DOE requests feedback on the assumptions used to estimate the 
impact of relative price increases on commercial packaged boiler 
shipments due to proposed standards.
    (11) DOE requests additional information from manufacturers 
regarding conversion costs for oil-fired products. Specifically, DOE is 
interested in estimates of capital conversion costs at each TSL and the 
change in manufacturing equipment associated with those costs.
    (12) DOE requests comment on whether DOE should adopt TSL 3.
    (13) DOE requests comment on the appropriateness of the 
Manufacturer Impact Analysis' assumption that the AHRI and ABMA 
equipment databases are representative of all small manufacturers.
    (14) DOE also requests product listing data from small 
manufacturers that are not AHRI or ABMA trade association members--
including model numbers, capacity, and efficiency ratings.
    (15) DOE also continues to seek financial, sales, and market share 
data from small manufacturers to better understand and analyze the 
impact of these proposed standards and conversion costs on the revenue 
and operating profit of a small business.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this proposed 
rule.

List of Subjects in 10 CFR Part 431

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Reporting and recordkeeping requirements, 
and Small businesses.

    Issued in Washington, DC, on March 11, 2016.
David Friedman,
Principal Deputy Assistant Secretary, Energy Efficiency and Renewable 
Energy.
    For the reasons set forth in the preamble, DOE proposes to amend 
part 431 of chapter II, subchapter D, of title 10 of the Code of 
Federal Regulations, as set forth below:

PART 431--ENERGY EFFICIENCY PROGRAM FOR CERTAIN COMMERCIAL AND 
INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 431 continues to read as follows:

    Authority: 42 U.S.C. 6291-6317.

0
3. Section 431.87 is revised to read as follows:


Sec.  431.87  Energy conservation standards and their effective dates.

    (a) Each commercial packaged boilers listed in Table 1 to Sec.  
431.87 and manufactured on or after March 2, 2012 and prior to [DATE 3 
YEARS AFTER PUBLICATION IN THE FEDERAL REGISTER OF THE FINAL RULE 
ESTABLISHING AMENDED ENERGY CONSERVATION STANDARDS FOR COMMERCIAL 
PACKAGED BOILERS], must meet the applicable energy conservation 
standard levels in Table 1.

[[Page 15921]]



               Table 1 to Sec.   431.87--Commercial Packaged Boiler Energy Conservations Standards
----------------------------------------------------------------------------------------------------------------
                                                                 Size category (fuel       Energy conservation
              Equipment                     Subcategory              input rate)               standard *
----------------------------------------------------------------------------------------------------------------
Hot Water Commercial Packaged         Gas-fired..............  >=300,000 Btu/h and      80.0% ET
 Boilers.                                                       <=2,500,000 Btu/h.
Hot Water Commercial Packaged         Gas-fired..............  >2,500,000 Btu/h.......  82.0% EC
 Boilers.
Hot Water Commercial Packaged         Oil-fired..............  >=300,000 Btu/h and      82.0% ET
 Boilers.                                                       <=2,500,000 Btu/h.
Hot Water Commercial Packaged         Oil-fired..............  >2,500,000 Btu/h.......  84.0% EC
 Boilers.
Steam Commercial Packaged Boilers...  Gas-fired--all, except   >=300,000 Btu/h and      79.0% ET
                                       natural draft.           <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers...  Gas-fired--all, except   >2,500,000 Btu/h.......  79.0% ET
                                       natural draft.
Steam Commercial Packaged Boilers...  Gas-fired--natural       >=300,000 Btu/h and      77.0% ET
                                       draft.                   <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers...  Gas-fired--natural       >2,500,000 Btu/h.......  77.0% ET
                                       draft.
Steam Commercial Packaged Boilers...  Oil-fired..............  >=300,000 Btu/h and      81.0% ET
                                                                <=2,500,000 Btu/h.
Steam Commercial Packaged Boilers...  Oil-fired..............  >2,500,000 Btu/h.......  81.0% ET
----------------------------------------------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion efficiency'' as defined in 10 CFR 431.82

    (b) Each commercial packaged boilers listed in Table 2 to Sec.  
431.87 and manufactured on or after [DATE 3 YEARS AFTER PUBLICATION IN 
THE FEDERAL REGISTER OF THE FINAL RULE ESTABLISHING AMENDED ENERGY 
CONSERVATION STANDARDS FOR COMMERCIAL PACKAGED BOILERS], must meet the 
applicable energy conservation standard levels in Table 2.

       Table 2 to Sec.   431.87--Commercial Packaged Boiler Energy
                         Conservations Standards
------------------------------------------------------------------------
                                    Size category    Energy conservation
           Equipment              (fuel input rate)       standard *
------------------------------------------------------------------------
Small Gas-Fired Hot Water        >300,000 Btu/h and  85.0% ET
 Commercial Packaged Boilers.     <=2,500,000 Btu/h.
Large Gas-Fired Hot Water        >2,500,000 Btu/h    85.0% EC
 Commercial Packaged Boilers.     and <=10,000,000
                                  Btu/h.
Very Large Gas-Fired Hot Water   >10,000,000 Btu/h.  82.0% EC
 Commercial Packaged Boilers.
Small Oil-Fired Hot Water        >300,000 Btu/h and  87.0% ET
 Commercial Packaged Boilers.     <=2,500,000 Btu/h.
Large Oil-Fired Hot Water        >2,500,000 Btu/h    88.0% EC
 Commercial Packaged Boilers.     and <=10,000,000
                                  Btu/h.
Very Large Oil-Fired Hot Water   >10,000,000 Btu/h.  84.0% EC
 Commercial Packaged Boilers.
Small Gas-Fired Steam            >300,000 Btu/h and  81.0% ET
 Commercial Packaged Boilers.     <=2,500,000 Btu/h.
Large Gas-Fired Steam            >2,500,000 Btu/h    82.0% ET
 Commercial Packaged Boilers.     and <=10,000,000
                                  Btu/h.
Very Large Gas-Fired Steam       >10,000,000 Btu/h.  79.0% ET
 Commercial Packaged Boilers **.
Small Oil-Fired Steam            >300,000 Btu/h and  84.0% ET
 Commercial Packaged Boilers.     <=2,500,000 Btu/h.
Large Oil-Fired Steam            >2,500,000 Btu/h    85.0% ET
 Commercial Packaged Boilers.     and <=10,000,000
                                  Btu/h.
Very Large Oil-Fired Steam       >10,000,000 Btu/h.  81.0% ET
 Commercial Packaged Boilers.
------------------------------------------------------------------------
* Where ET means ``thermal efficiency'' and EC means ``combustion
  efficiency'' as defined in 10 CFR 431.82
** Prior to March 2, 2022, for natural draft very large gas-fired steam
  commercial packaged boilers, a minimum thermal efficiency level of 77%
  is permitted and meets Federal commercial packaged boiler energy
  conservation standards.

[FR Doc. 2016-06588 Filed 3-23-16; 8:45 am]
 BILLING CODE 6450-01-P